First Business Financial Services, Inc. (the “Company” or “First Business”) (Nasdaq:FBIZ) reported third quarter 2019 net income of $5.1 million, primarily driven by diversified fee income sources, relatively stable operating expenses, and a net benefit in the SBA recourse provision.
Summary results for the quarter ended September 30, 2019 include:
- Net income totaled $5.1 million, compared to $6.6 million for the linked quarter and $5.3 million for the third quarter of 2018.
- Diluted earnings per common share measured $0.59, compared to $0.75 and $0.60 for the linked and prior year quarters, respectively.
- Annualized return on average assets and annualized return on average equity measured 0.97% and 10.68%, respectively, compared to 1.30% and 14.09% for the linked quarter and 1.11% and 12.06% for the third quarter of 2018.
- Net interest margin was 3.40%, compared to 3.52% for the linked quarter and 3.75% for the third quarter of 2018.
- Net interest income was $16.8 million, compared to $16.9 million for the linked quarter and $17.1 million for the third quarter of 2018.
- Top line revenue, the sum of net interest income and non-interest income, totaled $22.6 million, compared to $22.7 million for the linked quarter and $22.0 million for the third quarter of 2018.
- Provision for loan and lease losses was $1.3 million, compared to net benefits of $784,000 and $546,000 for the linked and prior year quarters, respectively.
- SBA recourse provision was a net benefit $427,000, compared to recourse provision expense of $113,000 for the linked quarter and $314,000 for the third quarter of 2018.
- Efficiency ratio improved to 66.41%, compared to 67.41% for the linked quarter and 69.55% for the third quarter of 2018.
- Period-end gross loans and leases receivable of $1.721 billion were flat during the third quarter of 2019 and grew $121.9 million, or 7.6%, from $1.599 billion at September 30, 2018. Average gross loans and leases of $1.731 billion increased by $37.1 million, or 8.8% annualized, from the linked quarter and $129.9 million, or 8.1%, compared to the third quarter of 2018.
- Non-performing assets were $25.7 million, or 1.23% of total assets, compared to $28.5 million, or 1.38%, at June 30, 2019 and $32.1 million, or 1.69%, at September 30, 2018.
- Record period-end in-market deposits of $1.321 billion increased $30.7 million, or 9.5% annualized, during the third quarter of 2019 and $244.1 million, or 22.7%, from September 30, 2018. Record average in-market deposits of $1.298 billion increased $51.6 million, or 16.6% annualized, during the third quarter of 2019 and $232.7 million, or 21.8%, from September 30, 2018.
“We are pleased to report another quarter of solid results, led by improved asset quality, strong in-market deposit growth, robust and diversified fee income, and continued positive operating leverage,” said Corey Chambas, President and Chief Executive Officer. “Aligned with First Business’s strategic priorities, our relationship-based business model continued to generate significant in-market deposit growth. While we did see compression in our net interest margin during the quarter, we believe our exceptional deposit growth, combined with the ongoing success of our higher yielding specialty finance business lines, will help stabilize margin going forward and continue to deliver solid financial results for our shareholders.”
Results of Operations
Net interest income of $16.8 million decreased by $76,000, or 0.5%, compared to the linked quarter and $318,000, or 1.9%, compared to the third quarter of 2018. Net interest income reflected higher average loans and leases outstanding offset by net interest margin compression, a decrease in loan fees received in lieu of interest, and one-time expense related to exercising call options on subordinated debt and brokered deposits. The one-time expense related to subordinated debt and brokered deposits totaled $261,000 and $47,000, respectively. The decision to exercise call options on subordinated debt and brokered deposits will benefit net interest margin moving forward as the funding was replaced at lower rates. Fees in lieu of interest, defined as prepayment fees, asset-based loan fees, and non-accrual interest, which can be variable from quarter to quarter, totaled $1.1 million, compared to $1.2 million for the linked quarter and $1.4 million for the third quarter of 2018. Excluding the one-time expense and fees collected in lieu of interest, net interest income increased $334,000, or 2.1%, compared to the linked quarter and $356,000, or 2.3%, compared to the third quarter of 2018. Average gross loans and leases of $1.731 billion increased by $37.1 million, or 8.8% annualized, from the linked quarter and $129.9 million, or 8.1%, compared to the third quarter of 2018.
The yield on average loans and leases was 5.53% for the third quarter of 2019, down from 5.64% and 5.56% in the linked and prior year quarters, respectively. Excluding the impact of fees collected in lieu of interest, the yield on average loans and leases measured 5.28%, down from 5.37% in the linked quarter and up from 5.20% in the prior year quarter.
The yield on average interest-earning assets was 5.16% for the third quarter of 2019, compared to 5.29% in the linked quarter and 5.17% in the prior year quarter. Excluding fees collected in lieu of interest, the yield on average earning assets measured 4.94%, down from 5.05% in the linked quarter and up from 4.85% in the prior year quarter.
The Company’s cost of average interest-bearing liabilities increased to 2.21% for the third quarter of 2019 from 2.19% and 1.75% in the linked and prior year quarters, respectively. Excluding the one-time expense related to subordinated debt and brokered deposits, the cost of average interest-bearing liabilities for the third quarter of 2019 was 2.13%. The cost of average interest-bearing deposits for the third quarter of 2019 was 1.96%, down from 2.01% in the linked quarter and up from 1.47% in the prior year quarter.
Net interest margin measured 3.40% for the third quarter of 2019, compared to 3.52% in the linked quarter and 3.75% in the third quarter of 2018. Net interest margin reflected an increase in the rate paid on average interest-bearing liabilities, combined with the aforementioned one-time expense and a decrease in fees collected in lieu of interest. Excluding the one-time expense and fees collected in lieu of interest, net interest margin measured 3.25% for the third quarter of 2019, compared to 3.28% in the linked quarter and 3.44% in the third quarter of 2018. Management expects the execution of its strategies will allow the Company to return to a net interest margin, including fees collected in lieu of interest, at or above its target of 3.50% as short-term rates stabilize.
“Our net interest margin contracted slightly during the quarter primarily due to the decrease in target fed funds rate,” said Chambas. “The yield on our variable-rate loans tied to LIBOR dropped in anticipation of the Fed’s decision to decrease the target fed funds rate, while the reduction in deposit rates generally coincided with the timing of the actual fed funds rate decrease. We believe this decrease is temporary given our active balance sheet management, expected continued reduction in deposit costs, and improved loan mix driven by strong production in our higher yielding specialty finance business lines.”
The Company recorded a provision for loan and lease loss of $1.3 million in the third quarter of 2019, compared to benefits of $784,000 and $546,000 in the linked quarter and prior year quarters, respectively. The increase in provision for the third quarter of 2019 was in large part due to increases in specific reserves related to the impaired legacy SBA portfolio. Net charge-offs were $998,000 in the third quarter of 2019, compared to net recoveries of $154,000 in the linked quarter and $69,000 in the prior year quarter. The increase in net charge-offs was related to an existing impaired legacy SBA loan and offset by a reduction in the previously established specific reserve.
The legacy on-balance sheet SBA portfolio, defined as SBA loans originated prior to 2017, has been a source of elevated non-performing assets. Total non-performing on-balance sheet legacy loans were $14.7 million at September 30, 2019, compared to $16.9 million and $11.9 million at June 30, 2019 and September 30, 2018, respectively. Total performing on-balance sheet legacy loans were $21.8 million at September 30, 2019, compared to $23.4 million and $29.3 million at June 30, 2019 and September 30, 2018, respectively. As of September 30, 2019, total on-balance sheet legacy loans were $36.5 million, down from $40.3 million and $41.2 million at June 30, 2019 and September 30, 2018, respectively.
Non-interest income totaled $5.8 million, or 25.7% of total revenue, for the third quarter of 2019, surpassing the Company’s goal of 25% of total revenue, compared to 5.8 million, or 25.6% of total revenue, in the linked quarter and $4.9 million, or 22.2% of total revenue, in the prior year quarter.
Trust and investment services fee income, which remained the Company’s largest source of non-interest income, totaled $2.1 million in the current and linked quarters compared to $1.9 million in the prior year quarter. Trust assets under management and administration measured a record $1.801 billion at September 30, 2019, up $45.5 million, or 10.4% annualized, from the linked quarter and up $79.6 million, or 4.6%, from September 30, 2018. Management expects new business development efforts to remain strong throughout 2019 and beyond as the Company continues to expand the private wealth management business outside its Madison, Wisconsin market.
Gains on sale of SBA loans totaled $454,000 in the third quarter of 2019, compared to $297,000 in the linked quarter and $641,000 in the third quarter of 2018. Based on the Company’s enhanced business development team and growing pipeline of new business, management believes the gain on sale of SBA loans will continue to increase at a measured pace moving forward.
Commercial loan interest rate swap fee income totaled $374,000 in the third quarter of 2019, compared to $1.1 million in the linked quarter and $306,000 in the third quarter of 2018. Interest rate swaps continue to be an attractive product for the Company’s commercial borrowers, although associated fee income can be variable from period to period based on client demand and the interest rate environment in any given quarter.
Other fee income totaled $1.7 million in the third quarter of 2019, compared to $1.1 million in the linked quarter and $736,000 in the prior year quarter. The increase is primarily due to above average returns on investments in mezzanine funds totaling $770,000 and a $206,000 gain from the sale of a state tax credit. The linked quarter includes $501,000 in gains recognized on end-of-term buyout agreements related to the Company’s equipment financing business line.
Non-interest expense was $14.7 million for the third quarter of 2019, compared to $17.5 million for the linked quarter and $15.7 million in the third quarter of 2018. Operating expense, which excludes certain one-time and discrete items as defined in the Efficiency Ratio table included in the Non-GAAP Reconciliations at the end of this release, totaled $15.0 million in the third quarter of 2019 and $15.3 million in the linked quarter and prior year quarters.
Relatively stable operating expenses coupled with strong operating revenue resulted in a reduction in the Company’s third quarter 2019 efficiency ratio to 66.41%, compared to 67.41% for the linked quarter and 69.55% for the prior year quarter. Compensation expense for the three months ended September 30, 2019 was $10.3 million, a decrease of $179,000 compared to the linked quarter and an increase of $505,000 compared to the prior year quarter. The decrease in compensation expense compared to the linked quarter reflects a decrease in incentive compensation tied to individual and Company performance, offset slightly by an increase in employees. Compared to the prior year, performance-based incentive compensation increased to reflect achievement of production and performance targets in 2019. Full-time equivalent employees were 281 at September 30, 2019, compared to 275 at June 30, 2019 and September 30, 2018. The producers hired over the past 18 months are now generating new business, and as a result, management believes operating revenue will continue to increase at a greater rate than operating expense, generating positive operating leverage and moving the efficiency ratio back toward the Company’s long-term operating goal of 58%-62%.
Operating expense during the third quarter of 2019 also benefited from a reduction in FDIC insurance expense as the Deposit Insurance Fund (“DIF”) reached 1.38%, exceeding the statutorily required minimum ratio of 1.35% and requiring the FDIC to distribute assessment credits to small banks for their portion of their assessments that contributed to the growth in the reserve ratio. The Company received a credit of $315,000 in the third quarter of 2019 and management expects another reduction in FDIC insurance, but to a lesser extent, during the fourth quarter of 2019 due to the remaining portion of the Company’s assessment credit.
Non-interest expense includes SBA recourse provision for estimated losses in the outstanding guaranteed portion of SBA loans sold. SBA recourse provision was a net benefit of $427,000 in the third quarter of 2019, compared to provision of $113,000 and $314,000 in the linked and prior year quarters, respectively. The net benefit in the current quarter was primarily due to the declining balance of the outstanding legacy SBA loan sold portfolio, a reduction in the loss rate applied to the portfolio, and payments received resulting in a reduction in specific recourse reserves required. The total recourse reserve balance was $1.6 million, or 2.2% of total sold SBA loans outstanding, at September 30, 2019, compared to $2.1 million, or 2.7%, in the linked quarter, and $2.7 million, or 3.0%, in the prior year quarter. Total sold legacy SBA loans at September 30, 2019 were $47.6 million, down from $52.7 million and $72.1 million at June 30, 2019 and September 30, 2018, respectively. Total performing sold legacy SBA loans were $40.3 million at September 30, 2019, compared to $44.4 million and $54.6 million at June 30, 2019 and September 30, 2018, respectively. Total non-performing sold legacy SBA loans were $7.3 million at September 30, 2019, compared to $8.3 million and $17.5 million at June 30, 2019 and September 30, 2018, respectively. Changes to SBA recourse reserves may be a source of non-interest expense volatility in future quarters, though the magnitude of this volatility should diminish over time as the outstanding balance of sold legacy SBA loans continues to decline.
During the third quarter of 2019, we benefited from a recovery in tax credit investments as a result of discounts received on previously impaired tax credit investments. During the second quarter of 2019, the Company recognized $2.0 million in expense due to the impairment of federal historic tax credit investments, which corresponded with the recognition of $2.4 million in federal tax credits during the quarter. The Company’s historic tax credit program contributed $446,000, $0.05 per share, to second quarter 2019 earnings. Third quarter 2018 earnings did not benefit from historic tax credit investments. Management intends to continue actively pursuing relationship-based tax credit opportunities throughout 2019 and beyond.
Balance Sheet
Period-end gross loans and leases receivable totaled $1.721 billion at September 30, 2019, increasing $566,000 from June 30, 2019 and increasing $121.9 million, or 7.6%, from September 30, 2018. Average gross loans and leases receivable totaled a record $1.731 billion at September 30, 2019, increasing $37.1 million, or 8.8% annualized, from June 30, 2019 and increasing $129.9 million, or 8.1%, from September 30, 2018.
“Although period-end loan growth was muted by loan payoffs late in the quarter, strong production early in the quarter resulted in average loan balances increasing 8.8% annualized compared to the second quarter,” said Chambas. “We continue to remain confident in our ability to generate high single-digit loan growth throughout 2019 and 2020.”
Period-end in-market deposits increased to $1.321 billion, or 72.7% of total bank funding at September 30, 2019, compared to $1.290 billion, or 71.6%, at June 30, 2019 and $1.077 billion, or 64.6%, at September 30, 2018. Total bank funding is defined as total deposits plus FHLB advances. Money market accounts, the largest contributors to in-market deposit growth, increased $82.5 million compared to the linked quarter, partially due to some inflows from transaction accounts, which in turn decreased by $59.2 million compared to the linked quarter.
“In-market deposit growth of 22.7% over the past year is the result of our company-wide focus on deposits, investments in people, and successful execution of our strategies,” Chambas commented. “Importantly, we continue to achieve this above average growth while maintaining pricing discipline and limiting our deposit rates to those at or below our alternative sources of wholesale funding.”
Period-end wholesale funding was $496.4 million at September 30, 2019, including FHLB advances of $308.5 million, brokered certificates of deposit of $186.9 million, and deposits gathered through internet deposit listing services of $1.0 million, compared to period-end wholesale funding of $512.9 million at June 30, 2019 and $589.1 million at September 30, 2018.
Consistent with the Company’s longstanding funding strategy to manage interest rate risk and use the most efficient and cost-effective source of wholesale funds, management intends to maintain a ratio of in-market deposits to total bank funding sources in line with the Company’s target range of 60%-75%.
Asset Quality
Non-performing assets were $25.7 million, or 1.23% of total assets, at September 30, 2019, compared to $28.5 million, or 1.38% of total assets, and $32.1 million, or 1.69% of total assets, at the end of the linked quarter and third quarter of 2018, respectively. The decrease from the linked quarter was primarily due to payments received and current quarter charge-offs of $1.1 million, the majority of which related to one legacy SBA relationship previously classified as impaired for which we were fully reserved.
Capital Strength
As of September 30, 2019, total capital to risk-weighted assets was 11.90%, tier 1 capital to risk-weighted assets was 9.62%, tier 1 leverage capital to adjusted average assets was 9.18%, and common equity tier 1 capital to risk-weighted assets was 9.11%. In addition, as of September 30, 2019, tangible common equity to tangible assets was 8.59%.
Share Repurchases
In August 2019, the Company completed a $5 million share repurchase program initiated in December 2018, repurchasing 223,149 shares at an average price of $22.36 per share.
In September 2019, the Company’s Board of Directors approved a new share repurchase program authorizing the repurchase of up to $5 million of its total outstanding shares of common stock over a period of approximately 12 months, ending on September 30, 2020. As of October 23, 2019, the Company had repurchased 37,205 shares of its common stock at a weighted average price of $24.10 per share, for a total value of $897,000.
Quarterly Dividend
As previously announced, during the third quarter of 2019, the Company’s Board of Directors declared a regular quarterly dividend of $0.15 per share. The dividend was paid on August 15, 2019 to stockholders of record at the close of business on August 5, 2019. Measured against third quarter 2019 diluted earnings per share of $0.59, the dividend represents a 25.4% payout ratio. The Board of Directors routinely considers dividend declarations as part of its normal course of business.
About First Business Financial Services, Inc.
First Business Financial Services, Inc. (Nasdaq:FBIZ) is a Wisconsin-based bank holding company focused on the unique needs of businesses, business executives, and high net worth individuals. First Business offers commercial banking, specialty finance, and private wealth management solutions, and because of its niche focus, is able to provide its clients with unmatched expertise, accessibility, and responsiveness. For additional information, visit www.firstbusiness.com or call 608-238-8008.
This release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect First Business’s current views with respect to future events and financial performance. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results, or other developments. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, uncertainties, and other factors that may cause actual results to differ materially from the views, beliefs, and projections expressed in such statements. Such statements are subject to risks and uncertainties, including among other things:
- Competitive pressures among depository and other financial institutions nationally and in our markets.
- Adverse changes in the economy or business conditions, either nationally or in our markets.
- Increases in defaults by borrowers and other delinquencies.
- Our ability to manage growth effectively, including the successful expansion of our client service, administrative infrastructure, and internal management systems.
- Fluctuations in interest rates and market prices.
- Changes in legislative or regulatory requirements applicable to us and our subsidiaries.
- Changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations.
- Fraud, including client and system failure or breaches of our network security, including our internet banking activities.
- Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portion of SBA loans.
For further information about the factors that could affect the Company’s future results, please see the Company’s annual report on Form 10-K for the year ended December 31, 2018 and other filings with the Securities and Exchange Commission.
SELECTED FINANCIAL CONDITION DATA
(Unaudited) | As of | |||||||||||||||||||
(in thousands) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| |||||||||||||||
Assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 60,958 | $ | 45,875 | $ | 56,335 | $ | 86,546 | $ | 40,293 | ||||||||||
Securities available-for-sale, at fair value | 160,665 | 158,933 | 156,783 | 138,358 | 134,995 | |||||||||||||||
Securities held-to-maturity, at amortized cost | 33,400 | 34,519 | 35,914 | 37,731 | 39,950 | |||||||||||||||
Loans held for sale | 3,070 | 4,786 | 5,447 | 5,287 | 4,712 | |||||||||||||||
Loans and leases receivable | 1,720,542 | 1,719,976 | 1,656,646 | 1,617,655 | 1,598,607 | |||||||||||||||
Allowance for loan and lease losses | (20,170 | ) | (19,819 | ) | (20,449 | ) | (20,425 | ) | (20,455 | ) | ||||||||||
Loans and leases receivable, net | 1,700,372 | 1,700,157 | 1,636,197 | 1,597,230 | 1,578,152 | |||||||||||||||
Premises and equipment, net | 2,740 | 2,866 | 3,043 | 3,284 | 3,247 | |||||||||||||||
Foreclosed properties | 2,902 | 2,660 | 2,547 | 2,547 | 1,454 | |||||||||||||||
Right-of-use assets | 7,524 | 7,853 | 8,180 | — | — | |||||||||||||||
Bank-owned life insurance | 42,432 | 42,127 | 41,830 | 41,538 | 41,212 | |||||||||||||||
Federal Home Loan Bank stock, at cost | 8,315 | 6,720 | 6,635 | 7,240 | 6,890 | |||||||||||||||
Goodwill and other intangible assets | 11,946 | 12,000 | 12,017 | 12,045 | 12,132 | |||||||||||||||
Accrued interest receivable and other assets | 58,469 | 51,808 | 40,714 | 34,651 | 31,293 | |||||||||||||||
Total assets | $ | 2,092,793 | $ | 2,070,304 | $ | 2,005,642 | $ | 1,966,457 | $ | 1,894,330 | ||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||||||
In-market deposits | $ | 1,320,957 | $ | 1,290,258 | $ | 1,239,494 | $ | 1,179,448 | $ | 1,076,851 | ||||||||||
Wholesale deposits | 187,859 | 239,387 | 262,212 | 275,851 | 332,052 | |||||||||||||||
Total deposits | 1,508,816 | 1,529,645 | 1,501,706 | 1,455,299 | 1,408,903 | |||||||||||||||
Federal Home Loan Bank advances and other borrowings | 332,897 | 297,972 | 269,958 | 298,944 | 281,430 | |||||||||||||||
Junior subordinated notes | 10,044 | 10,040 | 10,037 | 10,033 | 10,029 | |||||||||||||||
Lease liabilities | 7,866 | 8,187 | 8,504 | — | — | |||||||||||||||
Accrued interest payable and other liabilities | 42,378 | 35,605 | 30,337 | 21,474 | 16,426 | |||||||||||||||
Total liabilities | 1,902,001 | 1,881,449 | 1,820,542 | 1,785,750 | 1,716,788 | |||||||||||||||
Total stockholders’ equity | 190,792 | 188,855 | 185,100 | 180,707 | 177,542 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 2,092,793 | $ | 2,070,304 | $ | 2,005,642 | $ | 1,966,457 | $ | 1,894,330 | ||||||||||
STATEMENTS OF INCOME
(Unaudited) | As of and for the Three Months Ended | As of and for the Nine Months Ended | ||||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| September 30,
| September 30,
| |||||||||||||||||||||
Total interest income | $ | 25,438 | $ | 25,309 | $ | 25,679 | $ | 24,522 | $ | 23,563 | $ | 76,427 | $ | 66,754 | ||||||||||||||
Total interest expense | 8,662 | 8,457 | 7,925 | 7,407 | 6,469 | 25,045 | 16,527 | |||||||||||||||||||||
Net interest income | 16,776 | 16,852 | 17,754 | 17,115 | 17,094 | 51,382 | 50,227 | |||||||||||||||||||||
Provision for loan and lease losses | 1,349 | (784 | ) | 49 | 983 | (546 | ) | 613 | 4,508 | |||||||||||||||||||
Net interest income after provision for loan and lease losses | 15,427 | 17,636 | 17,705 | 16,132 | 17,640 | 50,769 | 45,719 | |||||||||||||||||||||
Trust and investment service fees | 2,060 | 2,138 | 1,927 | 1,919 | 1,941 | 6,125 | 5,826 | |||||||||||||||||||||
Gain on sale of SBA loans | 454 | 297 | 242 | 267 | 641 | 993 | 1,184 | |||||||||||||||||||||
Service charges on deposits | 795 | 743 | 777 | 770 | 788 | 2,314 | 2,292 | |||||||||||||||||||||
Loan fees | 439 | 464 | 414 | 408 | 459 | 1,316 | 1,375 | |||||||||||||||||||||
Net loss on sale of securities | (4 | ) | — | — | (4 | ) | — | (5 | ) | — | ||||||||||||||||||
Swap fees | 374 | 1,051 | 473 | 662 | 306 | 1,898 | 1,009 | |||||||||||||||||||||
Other non-interest income | 1,674 | 1,112 | 805 | 626 | 736 | 3,593 | 1,833 | |||||||||||||||||||||
Total non-interest income | 5,792 | 5,805 | 4,638 | 4,648 | 4,871 | 16,234 | 13,519 | |||||||||||||||||||||
Compensation | 10,324 | 10,503 | 10,165 | 9,432 | 9,819 | 30,991 | 28,006 | |||||||||||||||||||||
Occupancy | 580 | 559 | 590 | 560 | 560 | 1,730 | 1,632 | |||||||||||||||||||||
Professional fees | 751 | 784 | 1,210 | 879 | 1,027 | 2,745 | 2,990 | |||||||||||||||||||||
Data processing | 654 | 689 | 581 | 614 | 512 | 1,923 | 1,748 | |||||||||||||||||||||
Marketing | 548 | 581 | 482 | 617 | 593 | 1,611 | 1,518 | |||||||||||||||||||||
Equipment | 277 | 272 | 389 | 345 | 403 | 938 | 1,089 | |||||||||||||||||||||
Computer software | 859 | 827 | 799 | 780 | 814 | 2,485 | 2,235 | |||||||||||||||||||||
FDIC insurance | 1 | 302 | 293 | 353 | 457 | 595 | 1,125 | |||||||||||||||||||||
Collateral liquidation costs | 110 | 89 | (91 | ) | 193 | 230 | 108 | 454 | ||||||||||||||||||||
Net loss (gain) on foreclosed properties | 262 | (21 | ) | — | 337 | 30 | 241 | 30 | ||||||||||||||||||||
Tax credit investment (recovery) impairment | (120 | ) | 2,088 | 2,014 | 1,529 | 113 | 3,982 | 554 | ||||||||||||||||||||
SBA recourse (benefit) provision | (427 | ) | 113 | 481 | 1,795 | 314 | 167 | 118 | ||||||||||||||||||||
Other non-interest expense | 897 | 678 | 829 | 810 | 874 | 2,406 | 2,621 | |||||||||||||||||||||
Total non-interest expense | 14,716 | 17,464 | 17,742 | 18,244 | 15,746 | 49,922 | 44,120 | |||||||||||||||||||||
Income before income tax expense (benefit) | 6,503 | 5,977 | 4,601 | 2,536 | 6,765 | 17,081 | 15,118 | |||||||||||||||||||||
Income tax expense (benefit) | 1,418 | (595 | ) | (1,298 | ) | (1,528 | ) | 1,464 | (475 | ) | 2,879 | |||||||||||||||||
Net income | $ | 5,085 | $ | 6,572 | $ | 5,899 | $ | 4,064 | $ | 5,301 | $ | 17,556 | $ | 12,239 | ||||||||||||||
Per common share: | ||||||||||||||||||||||||||||
Basic earnings | $ | 0.59 | $ | 0.75 | $ | 0.67 | $ | 0.46 | $ | 0.60 | $ | 2.01 | $ | 1.40 | ||||||||||||||
Diluted earnings | 0.59 | 0.75 | 0.67 | 0.46 | 0.60 | 2.01 | 1.40 | |||||||||||||||||||||
Dividends declared | 0.15 | 0.15 | 0.15 | 0.14 | 0.14 | 0.45 | 0.42 | |||||||||||||||||||||
Book value | 22.09 | 21.71 | 21.12 | 20.57 | 20.19 | 22.09 | 20.19 | |||||||||||||||||||||
Tangible book value | 20.71 | 20.33 | 19.75 | 19.20 | 18.81 | 20.71 | 18.81 | |||||||||||||||||||||
Weighted-average common shares outstanding(1) | 8,492,445 | 8,569,581 | 8,621,221 | 8,662,025 | 8,650,057 | 8,546,192 | 8,634,890 | |||||||||||||||||||||
Weighted-average diluted common shares outstanding(1) | 8,492,445 | 8,569,581 | 8,621,221 | 8,662,025 | 8,650,057 | 8,546,192 | 8,634,890 | |||||||||||||||||||||
(1) | Excluding participating securities. |
NET INTEREST INCOME ANALYSIS
(Unaudited) | For the Three Months Ended | ||||||||||||||||||||||||||||||||
(Dollars in thousands) | September 30, 2019 | June 30, 2019 | September 30, 2018 | ||||||||||||||||||||||||||||||
Average Balance | Interest | Average Yield/Rate(4) | Average
| Interest | Average Yield/Rate(4) | Average Balance | Interest | Average Yield/Rate(4) | |||||||||||||||||||||||||
Interest-earning assets | |||||||||||||||||||||||||||||||||
Commercial real estate and other mortgage loans(1) | $ | 1,153,591 | $ | 14,568 | 5.05 | % | $ | 1,139,036 | $ | 14,755 | 5.18 | % | $ | 1,085,315 | $ | 13,755 | 5.07 | % | |||||||||||||||
Commercial and industrial loans(1) | 517,043 | 8,697 | 6.73 | % | 493,093 | 8,477 | 6.88 | % | 455,242 | 7,865 | 6.91 | % | |||||||||||||||||||||
Direct financing leases(1) | 29,600 | 316 | 4.27 | % | 31,610 | 324 | 4.10 | % | 31,197 | 313 | 4.01 | % | |||||||||||||||||||||
Consumer and other loans(1) | 31,195 | 341 | 4.37 | % | 30,555 | 348 | 4.56 | % | 29,798 | 333 | 4.47 | % | |||||||||||||||||||||
Total loans and leases receivable(1) | 1,731,429 | 23,922 | 5.53 | % | 1,694,294 | 23,904 | 5.64 | % | 1,601,552 | 22,266 | 5.56 | % | |||||||||||||||||||||
Mortgage-related securities(2) | 167,113 | 1,060 | 2.54 | % | 161,827 | 1,024 | 2.53 | % | 140,227 | 833 | 2.38 | % | |||||||||||||||||||||
Other investment securities(3) | 24,755 | 134 | 2.17 | % | 28,723 | 151 | 2.10 | % | 34,140 | 169 | 1.98 | % | |||||||||||||||||||||
FHLB stock | 7,692 | 85 | 4.42 | % | 6,875 | 86 | 5.00 | % | 7,722 | 89 | 4.61 | % | |||||||||||||||||||||
Short-term investments | 40,707 | 237 | 2.33 | % | 22,570 | 144 | 2.55 | % | 40,201 | 206 | 2.05 | % | |||||||||||||||||||||
Total interest-earning assets | 1,971,696 | 25,438 | 5.16 | % | 1,914,289 | 25,309 | 5.29 | % | 1,823,842 | 23,563 | 5.17 | % | |||||||||||||||||||||
Non-interest-earning assets | 121,589 | 110,516 | 91,359 | ||||||||||||||||||||||||||||||
Total assets | $ | 2,093,285 | $ | 2,024,805 | $ | 1,915,201 | |||||||||||||||||||||||||||
Interest-bearing liabilities | |||||||||||||||||||||||||||||||||
Transaction accounts | $ | 217,870 | 919 | 1.69 | % | $ | 234,241 | 989 | 1.69 | % | $ | 263,928 | 785 | 1.19 | % | ||||||||||||||||||
Money market | 642,385 | 2,857 | 1.78 | % | 593,431 | 2,850 | 1.92 | % | 472,866 | 1,413 | 1.20 | % | |||||||||||||||||||||
Certificates of deposit | 154,095 | 983 | 2.55 | % | 164,537 | 1,025 | 2.49 | % | 88,903 | 384 | 1.73 | % | |||||||||||||||||||||
Wholesale deposits | 211,528 | 1,247 | 2.36 | % | 251,060 | 1,394 | 2.22 | % | 327,146 | 1,650 | 2.02 | % | |||||||||||||||||||||
Total interest-bearing deposits | 1,225,878 | 6,006 | 1.96 | % | 1,243,269 | 6,258 | 2.01 | % | 1,152,843 | 4,232 | 1.47 | % | |||||||||||||||||||||
FHLB advances | 307,060 | 1,673 | 2.18 | % | 266,137 | 1,511 | 2.27 | % | 292,465 | 1,546 | 2.11 | % | |||||||||||||||||||||
Other borrowings | 27,545 | 703 | 10.21 | % | 24,463 | 411 | 6.72 | % | 24,420 | 411 | 6.73 | % | |||||||||||||||||||||
Junior subordinated notes | 10,041 | 280 | 11.15 | % | 10,038 | 277 | 11.04 | % | 10,027 | 280 | 11.17 | % | |||||||||||||||||||||
Total interest-bearing liabilities | 1,570,524 | 8,662 | 2.21 | % | 1,543,907 | 8,457 | 2.19 | % | 1,479,755 | 6,469 | 1.75 | % | |||||||||||||||||||||
Non-interest-bearing demand deposit accounts | 283,675 | 254,177 | 239,594 | ||||||||||||||||||||||||||||||
Other non-interest-bearing liabilities | 48,688 | 40,110 | 19,989 | ||||||||||||||||||||||||||||||
Total liabilities | 1,902,887 | 1,838,194 | 1,739,338 | ||||||||||||||||||||||||||||||
Stockholders’ equity | 190,398 | 186,611 | 175,863 | ||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 2,093,285 | $ | 2,024,805 | $ | 1,915,201 | |||||||||||||||||||||||||||
Net interest income | $ | 16,776 | $ | 16,852 | $ | 17,094 | |||||||||||||||||||||||||||
Interest rate spread | 2.95 | % | 3.10 | % | 3.42 | % | |||||||||||||||||||||||||||
Net interest-earning assets | $ | 401,172 | $ | 370,382 | $ | 344,087 | |||||||||||||||||||||||||||
Net interest margin | 3.40 | % | 3.52 | % | 3.75 | % | |||||||||||||||||||||||||||
(1) | The average balances of loans and leases include non-accrual loans and leases and loans held for sale. Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees collected in lieu of interest. |
(2) | Includes amortized cost basis of assets available for sale and held to maturity. |
(3) | Yields on tax-exempt municipal obligations are not presented on a tax-equivalent basis in this table. |
(4) | Represents annualized yields/rates. |
NET INTEREST INCOME ANALYSIS
| (Unaudited) | For the Nine Months Ended | |||||||||||||||||||||
(Dollars in thousands) | September 30, 2019 | September 30, 2018 | ||||||||||||||||||||
Average
| Interest | Average Yield/Rate(4) | Average Balance | Interest | Average Yield/Rate(4) | |||||||||||||||||
Interest-earning assets | ||||||||||||||||||||||
Commercial real estate and other mortgage loans(1) | $ | 1,135,596 | $ | 44,012 | 5.17 | % | $ | 1,068,605 | $ | 39,360 | 4.91 | % | ||||||||||
Commercial and industrial loans(1) | 492,247 | 26,012 | 7.05 | % | 443,188 | 21,915 | 6.59 | % | ||||||||||||||
Direct financing leases(1) | 31,143 | 967 | 4.14 | % | 30,789 | 929 | 4.02 | % | ||||||||||||||
Consumer and other loans(1) | 31,391 | 1,042 | 4.43 | % | 29,693 | 967 | 4.34 | % | ||||||||||||||
Total loans and leases receivable(1) | 1,690,377 | 72,033 | 5.68 | % | 1,572,275 | 63,171 | 5.36 | % | ||||||||||||||
Mortgage-related securities(2) | 158,407 | 3,022 | 2.54 | % | 135,135 | 2,295 | 2.26 | % | ||||||||||||||
Other investment securities(3) | 27,849 | 442 | 2.12 | % | 34,966 | 501 | 1.91 | % | ||||||||||||||
FHLB and FRB stock | 7,210 | 261 | 4.83 | % | 7,614 | 203 | 3.55 | % | ||||||||||||||
Short-term investments | 36,139 | 669 | 2.47 | % | 47,592 | 584 | 1.64 | % | ||||||||||||||
Total interest-earning assets | 1,919,982 | 76,427 | 5.31 | % | 1,797,582 | 66,754 | 4.95 | % | ||||||||||||||
Non-interest-earning assets | 109,395 | 91,657 | ||||||||||||||||||||
Total assets | $ | 2,029,377 | $ | 1,889,239 | ||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||
Transaction accounts | $ | 222,513 | 2,779 | 1.67 | % | $ | 278,042 | 1,821 | 0.87 | % | ||||||||||||
Money market | 597,487 | 8,231 | 1.84 | % | 487,395 | 3,331 | 0.91 | % | ||||||||||||||
Certificates of deposit | 159,390 | 2,965 | 2.48 | % | 80,630 | 862 | 1.43 | % | ||||||||||||||
Wholesale deposits | 243,254 | 4,085 | 2.24 | % | 302,262 | 4,257 | 1.88 | % | ||||||||||||||
Total interest-bearing deposits | 1,222,644 | 18,060 | 1.97 | % | 1,148,329 | 10,271 | 1.19 | % | ||||||||||||||
FHLB advances | 280,538 | 4,629 | 2.20 | % | 277,866 | 4,186 | 2.01 | % | ||||||||||||||
Other borrowings | 25,497 | 1,524 | 7.97 | % | 24,571 | 1,238 | 6.72 | % | ||||||||||||||
Junior subordinated notes | 10,038 | 832 | 11.05 | % | 10,023 | 832 | 11.07 | % | ||||||||||||||
Total interest-bearing liabilities | 1,538,717 | 25,045 | 2.17 | % | 1,460,789 | 16,527 | 1.51 | % | ||||||||||||||
Non-interest-bearing demand deposit accounts | 265,121 | 236,208 | ||||||||||||||||||||
Other non-interest-bearing liabilities | 42,276 | 21,055 | ||||||||||||||||||||
Total liabilities | 1,846,114 | 1,718,052 | ||||||||||||||||||||
Stockholders’ equity | 183,263 | 171,187 | ||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 2,029,377 | $ | 1,889,239 | ||||||||||||||||||
Net interest income | $ | 51,382 | $ | 50,227 | ||||||||||||||||||
Interest rate spread | 3.14 | % | 3.44 | % | ||||||||||||||||||
Net interest-earning assets | $ | 381,265 | $ | 336,793 | ||||||||||||||||||
Net interest margin | 3.57 | % | 3.73 | % | ||||||||||||||||||
(1) | The average balances of loans and leases include non-accrual loans and leases and loans held for sale. Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees collected in lieu of interest. |
(2) | Includes amortized cost basis of assets available for sale and held to maturity. |
(3) | Yields on tax-exempt municipal obligations are not presented on a tax-equivalent basis in this table. |
(4) | Represents annualized yields/rates. |
PERFORMANCE RATIOS
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||
(Unaudited) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| September 30,
| September 30,
| ||||||||||||||
Return on average assets (annualized) | 0.97 | % | 1.30 | % | 1.20 | % | 0.83 | % | 1.11 | % | 1.15 | % | 0.86 | % | |||||||
Return on average equity (annualized) | 10.68 | % | 14.09 | % | 13.67 | % | 9.06 | % | 12.06 | % | 12.77 | % | 9.53 | % | |||||||
Efficiency ratio | 66.41 | % | 67.41 | % | 68.04 | % | 66.95 | % | 69.55 | % | 67.29 | % | 68.05 | % | |||||||
Interest rate spread | 2.95 | % | 3.10 | % | 3.37 | % | 3.30 | % | 3.42 | % | 3.14 | % | 3.44 | % | |||||||
Net interest margin | 3.40 | % | 3.52 | % | 3.79 | % | 3.69 | % | 3.75 | % | 3.57 | % | 3.73 | % | |||||||
Average interest-earning assets to average interest-bearing liabilities | 125.54 | % | 123.99 | % | 124.78 | % | 124.65 | % | 123.25 | % | 124.78 | % | 123.06 | % | |||||||
ASSET QUALITY RATIOS
(Unaudited) | As of | |||||||||||||||||||
(Dollars in thousands) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| |||||||||||||||
Non-accrual loans and leases | $ | 22,789 | $ | 25,864 | $ | 23,540 | $ | 25,301 | $ | 30,613 | ||||||||||
Foreclosed properties | 2,902 | 2,660 | 2,547 | 2,547 | 1,454 | |||||||||||||||
Total non-performing assets | 25,691 | 28,524 | 26,087 | 27,848 | 32,067 | |||||||||||||||
Performing troubled debt restructurings | 146 | 151 | 169 | 180 | 187 | |||||||||||||||
Total impaired assets | $ | 25,837 | $ | 28,675 | $ | 26,256 | $ | 28,028 | $ | 32,254 | ||||||||||
Non-accrual loans and leases as a percent of total gross loans and leases | 1.32 | % | 1.50 | % | 1.42 | % | 1.56 | % | 1.91 | % | ||||||||||
Non-performing assets as a percent of total gross loans and leases plus foreclosed properties | 1.49 | % | 1.66 | % | 1.57 | % | 1.72 | % | 2.00 | % | ||||||||||
Non-performing assets as a percent of total assets | 1.23 | % | 1.38 | % | 1.30 | % | 1.42 | % | 1.69 | % | ||||||||||
Allowance for loan and lease losses as a percent of total gross loans and leases | 1.17 | % | 1.15 | % | 1.23 | % | 1.26 | % | 1.28 | % | ||||||||||
Allowance for loan and lease losses as a percent of non-accrual loans and leases | 88.51 | % | 76.64 | % | 86.87 | % | 80.73 | % | 66.82 | % | ||||||||||
NET CHARGE-OFFS (RECOVERIES)
(Unaudited) | For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||
(Dollars in thousands) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| September 30,
| September 30,
| |||||||||||||||||||||
Charge-offs | $ | 1,099 | $ | 15 | $ | 48 | $ | 1,197 | $ | 1,914 | $ | 1,162 | $ | 4,904 | ||||||||||||||
Recoveries | (101 | ) | (169 | ) | (23 | ) | (184 | ) | (1,983 | ) | (294 | ) | (2,088 | ) | ||||||||||||||
Net charge-offs (recoveries) | $ | 998 | $ | (154 | ) | $ | 25 | $ | 1,013 | $ | (69 | ) | $ | 868 | $ | 2,816 | ||||||||||||
Net charge-offs (recoveries) as a percent of average gross loans and leases (annualized) | 0.23 | % | (0.04 | )% | 0.01 | % | 0.25 | % | (0.02 | )% | 0.07 | % | 0.24 | % | ||||||||||||||
CAPITAL RATIOS
As of and for the Three Months Ended | |||||||||||||||
(Unaudited) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| ||||||||||
Total capital to risk-weighted assets | 11.90 | % | 11.92 | % | 12.18 | % | 11.85 | % | 12.05 | % | |||||
Tier I capital to risk-weighted assets | 9.62 | % | 9.60 | % | 9.69 | % | 9.41 | % | 9.54 | % | |||||
Common equity tier I capital to risk-weighted assets | 9.11 | % | 9.09 | % | 9.17 | % | 8.89 | % | 9.00 | % | |||||
Tier I capital to adjusted assets | 9.18 | % | 9.36 | % | 9.45 | % | 9.33 | % | 9.34 | % | |||||
Tangible common equity to tangible assets | 8.59 | % | 8.59 | % | 8.68 | % | 8.63 | % | 8.79 | % | |||||
LOAN AND LEASE RECEIVABLE COMPOSITION
(Unaudited) | As of | |||||||||||||||||||
(in thousands) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| |||||||||||||||
Commercial real estate: | ||||||||||||||||||||
Commercial real estate - owner occupied | $ | 226,307 | $ | 210,471 | $ | 212,698 | $ | 203,476 | $ | 203,733 | ||||||||||
Commercial real estate - non-owner occupied | 503,102 | 477,740 | 479,061 | 484,427 | 487,842 | |||||||||||||||
Land development | 49,184 | 49,000 | 47,503 | 42,666 | 45,009 | |||||||||||||||
Construction | 111,848 | 185,347 | 169,894 | 161,562 | 132,271 | |||||||||||||||
Multi-family | 227,330 | 195,363 | 184,490 | 167,868 | 174,664 | |||||||||||||||
1-4 family | 31,226 | 31,656 | 33,255 | 34,340 | 35,729 | |||||||||||||||
Total commercial real estate | 1,148,997 | 1,149,577 | 1,126,901 | 1,094,339 | 1,079,248 | |||||||||||||||
Commercial and industrial | 513,672 | 510,448 | 466,277 | 462,321 | 457,932 | |||||||||||||||
Direct financing leases, net | 28,987 | 30,365 | 32,724 | 33,170 | 31,090 | |||||||||||||||
Consumer and other: | ||||||||||||||||||||
Home equity and second mortgages | 7,373 | 7,513 | 8,377 | 8,438 | 8,388 | |||||||||||||||
Other | 22,140 | 22,896 | 23,367 | 20,789 | 23,451 | |||||||||||||||
Total consumer and other | 29,513 | 30,409 | 31,744 | 29,227 | 31,839 | |||||||||||||||
Total gross loans and leases receivable | 1,721,169 | 1,720,799 | 1,657,646 | 1,619,057 | 1,600,109 | |||||||||||||||
Less: | ||||||||||||||||||||
Allowance for loan and lease losses | 20,170 | 19,819 | 20,449 | 20,425 | 20,455 | |||||||||||||||
Deferred loan fees | 627 | 823 | 1,000 | 1,402 | 1,502 | |||||||||||||||
Loans and leases receivable, net | $ | 1,700,372 | $ | 1,700,157 | $ | 1,636,197 | $ | 1,597,230 | $ | 1,578,152 | ||||||||||
DEPOSIT COMPOSITION
(Unaudited) | As of | |||||||||||||||||||
(in thousands) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| |||||||||||||||
Non-interest-bearing transaction accounts | $ | 280,990 | $ | 301,914 | $ | 286,345 | $ | 280,769 | $ | 233,915 | ||||||||||
Interest-bearing transaction accounts | 206,267 | 244,608 | 206,360 | 229,612 | 256,303 | |||||||||||||||
Money market accounts | 678,993 | 596,520 | 579,539 | 516,045 | 475,322 | |||||||||||||||
Certificates of deposit | 154,707 | 147,216 | 167,250 | 153,022 | 111,311 | |||||||||||||||
Wholesale deposits | 187,859 | 239,387 | 262,212 | 275,851 | 332,052 | |||||||||||||||
Total deposits | $ | 1,508,816 | $ | 1,529,645 | $ | 1,501,706 | $ | 1,455,299 | $ | 1,408,903 | ||||||||||
TRUST ASSETS COMPOSITION
(Unaudited) | As of | |||||||||||||||||||
(in thousands) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| |||||||||||||||
Trust assets under management | $ | 1,651,809 | $ | 1,590,508 | $ | 1,564,821 | $ | 1,452,911 | $ | 1,534,395 | ||||||||||
Trust assets under administration | 148,711 | 164,517 | 167,124 | 177,416 | 186,530 | |||||||||||||||
Total trust assets | $ | 1,800,520 | $ | 1,755,025 | $ | 1,731,945 | $ | 1,630,327 | $ | 1,720,925 | ||||||||||
NON-GAAP RECONCILIATIONS
Certain financial information provided in this release is determined by methods other than in accordance with generally accepted accounting principles (United States) (“GAAP”). Although the Company’s management believes that these non-GAAP financial measures provide a greater understanding of its business, these measures are not necessarily comparable to similar measures that may be presented by other companies.
TANGIBLE BOOK VALUE
“Tangible book value per share” is a non-GAAP measure representing tangible common equity divided by total common shares outstanding. “Tangible common equity” itself is a non-GAAP measure representing common stockholders’ equity reduced by intangible assets, if any. The Company’s management believes that this measure is important to many investors in the marketplace who are interested in period-to-period changes in book value per common share exclusive of changes in intangible assets. The information provided below reconciles tangible book value per share and tangible common equity to their most comparable GAAP measures.
(Unaudited) | As of | |||||||||||||||||||
(Dollars in thousands, except per share amounts) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| |||||||||||||||
Common stockholders’ equity | $ | 190,792 | $ | 188,855 | $ | 185,100 | $ | 180,707 | $ | 177,542 | ||||||||||
Goodwill and other intangible assets | (11,946 | ) | (12,000 | ) | (12,017 | ) | (12,045 | ) | (12,132 | ) | ||||||||||
Tangible common equity | $ | 178,846 | $ | 176,855 | $ | 173,083 | $ | 168,662 | $ | 165,410 | ||||||||||
Common shares outstanding | 8,636,085 | 8,699,456 | 8,765,136 | 8,785,480 | 8,793,941 | |||||||||||||||
Book value per share | $ | 22.09 | $ | 21.71 | $ | 21.12 | $ | 20.57 | $ | 20.19 | ||||||||||
Tangible book value per share | 20.71 | 20.33 | 19.75 | 19.20 | 18.81 | |||||||||||||||
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS
“Tangible common equity to tangible assets’’ is defined as the ratio of common stockholders’ equity reduced by intangible assets, if any, divided by total assets reduced by intangible assets, if any. The Company’s management believes that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. The information below reconciles tangible common equity and tangible assets to their most comparable GAAP measures.
(Unaudited) | As of | |||||||||||||||||||
(Dollars in thousands) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| |||||||||||||||
Common stockholders’ equity | $ | 190,792 | $ | 188,855 | $ | 185,100 | $ | 180,707 | $ | 177,542 | ||||||||||
Goodwill and other intangible assets | (11,946 | ) | (12,000 | ) | (12,017 | ) | (12,045 | ) | (12,132 | ) | ||||||||||
Tangible common equity | $ | 178,846 | $ | 176,855 | $ | 173,083 | $ | 168,662 | $ | 165,410 | ||||||||||
Total assets | $ | 2,092,793 | $ | 2,070,304 | $ | 2,005,642 | $ | 1,966,457 | $ | 1,894,330 | ||||||||||
Goodwill and other intangible assets | (11,946 | ) | (12,000 | ) | (12,017 | ) | (12,045 | ) | (12,132 | ) | ||||||||||
Tangible assets | $ | 2,080,847 | $ | 2,058,304 | $ | 1,993,625 | $ | 1,954,412 | $ | 1,882,198 | ||||||||||
Tangible common equity to tangible assets | 8.59 | % | 8.59 | % | 8.68 | % | 8.63 | % | 8.79 | % | ||||||||||
EFFICIENCY RATIO
“Efficiency ratio” is a non-GAAP measure representing non-interest expense excluding the effects of the SBA recourse provision, impairment of tax credit investments, losses or gains on foreclosed properties, amortization of other intangible assets and other discrete items, if any, divided by operating revenue, which is equal to net interest income plus non-interest income less realized gains or losses on securities, if any. In the judgment of the Company’s management, the adjustments made to non-interest expense and operating revenue allow investors and analysts to better assess the Company’s operating expenses in relation to its core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items. The information provided below reconciles the efficiency ratio to its most comparable GAAP measure.
(Unaudited) | For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||
(Dollars in thousands) | September 30,
| June 30,
| March 31,
| December 31,
| September 30,
| September 30,
| September 30,
| |||||||||||||||||||||
Total non-interest expense | $ | 14,716 | $ | 17,464 | $ | 17,742 | $ | 18,244 | $ | 15,746 | $ | 49,922 | $ | 44,120 | ||||||||||||||
Less: | ||||||||||||||||||||||||||||
Net loss (gain) on foreclosed properties | 262 | (21 | ) | — | 337 | 30 | 241 | 30 | ||||||||||||||||||||
Amortization of other intangible assets | 11 | 11 | 11 | 11 | 12 | 33 | 36 | |||||||||||||||||||||
SBA recourse (benefit) provision | (427 | ) | 113 | 481 | 1,795 | 314 | 167 | 118 | ||||||||||||||||||||
Tax credit investment (recovery) impairment | (120 | ) | 2,088 | 2,014 | 1,529 | 113 | 3,982 | 554 | ||||||||||||||||||||
Total operating expense | $ | 14,990 | $ | 15,273 | $ | 15,236 | $ | 14,572 | $ | 15,277 | $ | 45,499 | $ | 43,382 | ||||||||||||||
Net interest income | $ | 16,776 | $ | 16,852 | $ | 17,754 | $ | 17,115 | $ | 17,094 | $ | 51,382 | $ | 50,227 | ||||||||||||||
Total non-interest income | 5,792 | 5,805 | 4,638 | 4,648 | 4,871 | 16,234 | 13,519 | |||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||
Net loss on sale of securities | (4 | ) | (1 | ) | — | (4 | ) | — | (5 | ) | — | |||||||||||||||||
Total operating revenue | $ | 22,572 | $ | 22,658 | $ | 22,392 | $ | 21,767 | $ | 21,965 | $ | 67,621 | $ | 63,746 | ||||||||||||||
Efficiency ratio | 66.41 | % | 67.41 | % | 68.04 | % | 66.95 | % | 69.55 | % | 67.29 | % | 68.05 | % | ||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20191024005944/en/
Contacts:
Edward G. Sloane, Jr.
Chief Financial Officer
608-232-5970
esloane@firstbusiness.com
