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First Business Bank Reports First Quarter 2024 Net Income of $8.6 Million

Continued solid loan and core deposit growth supports ongoing tangible book value expansion

First Business Financial Services, Inc. (the “Company,” the “Bank,” or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income available to common shareholders of $8.6 million, or earnings per share of $1.04 on a diluted basis. This compares to net income available to common shareholders of $9.6 million, or $1.15 per share, in the fourth quarter of 2023 and $8.8 million, or $1.05 per share, in the first quarter of 2023.

“Solid first quarter performance is a testament to our team’s consistent execution in a persistently challenging interest rate environment,” said Corey Chambas, Chief Executive Officer. “Our operating model produced 13% tangible book value growth this quarter. We continued to deliver strong profitability and quality growth through the addition and retention of valuable client relationships — successes that are deeply rooted in our culture of excellence and consistency. The cornerstone of our new five-year plan is the confluence of the future of talent and technology. Executing on this will drive continued double-digit growth in loans, deposits, fee income, and top line revenue, which ultimately delivers double-digit annual tangible book value growth for our shareholders.”

“While deposit rates remain competitive, we continue to run a match-funded balance sheet that we believe is effective in delivering a stable net interest margin. With interest rates outside of our control, we focus on executing our long-held relationship-based approach to deposit generation, adding clients and balances for the long term.” Chambas added, “In addition, we continue to focus on growing our higher-yielding, niche commercial and industrial loan portfolio, which we expect will support a higher baseline net interest margin.”

Quarterly Highlights

  • Solid Loan Growth. Loans increased $60.6 million, or 8.5% annualized, from the fourth quarter of 2023, and $371.5 million, or 14.6%, from the first quarter of 2023, reflecting ongoing expansion across the Company’s products and geographies.
  • Core Deposit Growth Continues. Average core deposits grew to a record $2.346 billion, up $98.8 million, or 17.6% annualized, from the fourth quarter of 2023 and $345.9 million, or 17.3%, from the first quarter of 2023. The linked-quarter decline in period-end balances reflects the timing of a significant deposit inflow that typically recurs on at the end of the month but was delayed until April 1. New relationships also contributed to increased gross Treasury Management service charges, which grew 9.2% to $1.5 million, compared to $1.4 million in the first quarter of 2023.
  • Stable Net Interest Income. Net interest income remained consistent with the linked quarter and grew 10.5% from the prior year quarter. The Company’s continued success in driving loan and deposit growth was partially offset by the ongoing impact of industry-wide net interest margin compression.
  • Tangible Book Value Growth. The Company’s strong earnings generation and sound balance sheet management continued to grow tangible book value per share growth, producing a 12.9% annualized increase compared to the linked quarter and a 13.0% increase compared to the prior year quarter. 
 
 

Quarterly Financial Results 

 

(Unaudited)

 

As of and for the Three Months Ended

(Dollars in thousands, except per share amounts)

 

March 31,

2024

 

December 31,

2023

 

March 31,

2023

Net interest income

 

$

29,511

 

 

$

29,540

 

 

$

26,705

 

Adjusted non-interest income (1)

 

 

6,765

 

 

 

7,094

 

 

 

8,410

 

Operating revenue (1)

 

 

36,276

 

 

 

36,634

 

 

 

35,115

 

Operating expense (1)

 

 

23,130

 

 

 

21,374

 

 

 

21,779

 

Pre-tax, pre-provision adjusted earnings (1)

 

 

13,146

 

 

 

15,260

 

 

 

13,336

 

Less:

 

 

 

 

 

 

Provision for credit losses

 

 

2,326

 

 

 

2,573

 

 

 

1,561

 

Net loss on repossessed assets

 

 

86

 

 

 

4

 

 

 

6

 

SBA recourse provision

 

 

126

 

 

 

210

 

 

 

(18

)

Add:

 

 

 

 

 

 

Net loss on sale of securities

 

 

(8

)

 

 

 

 

 

 

Income before income tax expense

 

 

10,600

 

 

 

12,473

 

 

 

11,787

 

Income tax expense

 

 

1,752

 

 

 

2,703

 

 

 

2,808

 

Net income

 

$

8,848

 

 

$

9,770

 

 

$

8,979

 

Preferred stock dividends

 

 

219

 

 

 

219

 

 

 

219

 

Net income available to common shareholders

 

$

8,629

 

 

$

9,551

 

 

$

8,760

 

Earnings per share, diluted

 

$

1.04

 

 

$

1.15

 

 

$

1.05

 

Book value per share

 

$

34.41

 

 

$

33.39

 

 

$

30.65

 

Tangible book value per share (1)

 

$

32.97

 

 

$

31.94

 

 

$

29.19

 

 

 

 

 

 

 

 

Net interest margin (2)

 

 

3.58

%

 

 

3.69

%

 

 

3.86

%

Adjusted net interest margin (1)(2)

 

 

3.43

%

 

 

3.50

%

 

 

3.74

%

Fee income ratio (non-interest income / total revenue)

 

 

18.63

%

 

 

19.36

%

 

 

23.95

%

Efficiency ratio (1)

 

 

63.76

%

 

 

58.34

%

 

 

62.02

%

Return on average assets (2)

 

 

0.98

%

 

 

1.11

%

 

 

1.17

%

Pre-tax, pre-provision adjusted return on average assets (1)(2)

 

 

1.49

%

 

 

1.77

%

 

 

1.79

%

Return on average common equity (2)

 

 

12.24

%

 

 

13.99

%

 

 

13.96

%

 

 

 

 

 

 

 

Period-end loans and leases receivable

 

$

2,910,864

 

 

$

2,850,261

 

 

$

2,539,363

 

Average loans and leases receivable

 

$

2,887,454

 

 

$

2,810,793

 

 

$

2,481,200

 

Period-end core deposits

 

$

2,297,843

 

 

$

2,339,071

 

 

$

2,054,752

 

Average core deposits

 

$

2,346,453

 

 

$

2,247,639

 

 

$

2,000,602

 

Allowance for credit losses, including unfunded commitment reserves

 

$

34,629

 

 

$

32,997

 

 

$

27,550

 

Non-performing assets

 

$

20,146

 

 

$

20,844

 

 

$

3,501

 

Allowance for credit losses as a percent of total gross loans and leases

 

 

1.19

%

 

 

1.16

%

 

 

1.08

%

Non-performing assets as a percent of total assets

 

 

0.57

%

 

 

0.59

%

 

 

0.11

%

(1)

This is a non-GAAP financial measure. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate financial performance, provide greater understanding of ongoing operations, and enhance comparability of results with prior periods. See the section titled Non-GAAP Reconciliations at the end of this release for a reconciliation of GAAP financial measures to non-GAAP financial measures.

(2)

Calculation is annualized.

 
 

First Quarter 2024 Compared to Fourth Quarter 2023

Net interest income decreased $29,000, or 0.1%, to $29.5 million.

  • The decrease in net interest income was driven by a decrease in net interest margin and fees in lieu of interest, partially offset by an increase in average loans and leases receivable. Average loans and leases receivable increased $76.7 million, or 10.9% annualized, to $2.887 billion. Fees in lieu of interest, which vary from quarter to quarter based on client-driven activity, totaled $793,000, compared to $1.1 million in the prior quarter. Excluding fees in lieu of interest, net interest income increased $254,000, or 0.9%.
  • The yield on average interest-earning assets decreased 8 basis points to 6.77% from 6.85%. Excluding fees in lieu of interest, the yield earned on average interest-earning assets decreased 3 basis points to 6.68% from 6.71%. The cumulative adjusted interest-earning asset beta2 since December 31, 2021 was 59.8%.
  • The rate paid for average interest-bearing, core deposits increased 5 basis points to 4.04% from 3.99% due to ongoing competition for deposits. Conversely, the rate paid for average wholesale deposits decreased 12 basis points to 4.03% from 4.15%. The cumulative bank funding beta since December 31, 2021 was 56.8%. Total bank funding is defined as total deposits plus Federal Home Loan Bank (“FHLB”) advances.
  • Net interest margin was 3.58%, down 11 basis points compared to 3.69% in the linked quarter. Adjusted net interest margin1 was 3.43%, down 7 basis points compared to 3.50% in the linked quarter. The decrease in adjusted net interest margin was driven by an increase in the rate paid on interest-bearing core deposits, partially offset by a decrease in rate paid on wholesale funding.
  • Management believes net interest margin is nearing a floor. In the current interest rate environment, we expect net interest margin will approach our previous long-term target of 3.50%. Over time, we expect our net interest margin to increase towards our new long-term target range of 3.60% to 3.65%.

The Bank reported a provision expense of $2.3 million, compared to $2.6 million in the fourth quarter of 2023. Provision expense was lower due to an improved economic forecast and fewer new specific reserves in the Equipment Finance loan portfolio. The $2.3 million expense consists of a general reserve increase of $740,000 due to qualitative factor changes, net charge-offs of $694,000, $629,000 in additional specific reserves, and $354,000 due to loan growth, partially offset by a $199,000 reduction in general reserves due to an improved economic outlook in our model forecast compared to the prior period. The increase in qualitative factors was primarily driven by above target growth in several loan portfolios. Similar to the second half of 2023, the additional specific reserves and charge-offs were primarily related to defaults by transportation and logistics borrowers in our Equipment Finance loan portfolio, which management believes is consistent with the cyclical nature of this industry. Given current conditions in the industry, the Company expects continued stress within this group of borrowers in 2024.

Non-interest income decreased $337,000, or 4.8%, to $6.8 million.

  • Private Wealth and Company Retirement Plan (“Private Wealth”) fee income increased $178,000, or 6.1% to $3.1 million. Private Wealth assets under management and administration measured a record $3.320 billion on March 31, 2024, up $198.7 million, or 25.5% annualized from the prior quarter.
  • Service charges on deposits increased $92,000, or 10.8%, to $940,000, driven by new core deposit relationships.
  • Gains on sale of SBA loans decreased $89,000, or 31.3%, to $195,000. Management expects the SBA loan sales pipeline to build throughout the year as production increases and previously closed commitments fully fund and become eligible for sale.
  • Commercial loan swap fee income of $198,000 decreased by $240,000, or 54.8%. Swap fee income varies from period to period based on loan activity and the interest rate environment.
  • Other fee income decreased $248,000 to $1.5 million, compared to $1.7 million in the prior quarter. The decrease was primarily due to lower returns on the Company’s investments in mezzanine funds in the first quarter. Income from mezzanine funds was $653,000 in the first quarter, compared to $860,000 in the linked quarter. Income from mezzanine funds varies from period to period based on changes in the realized and unrealized fair value of underlying investments.
_____________________________________

1

Adjusted net interest margin is a non-GAAP measure representing net interest income excluding fees in lieu of interest and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less other recurring, but volatile, components of average interest-earning assets.

2

The change in yield of the respective interest-earning asset or the rate paid on interest-bearing liability compared to the change in short-term market rates is commonly referred to as a beta.

Non-interest expense increased $1.8 million, or 8.1%, to $23.3 million, while operating expense increased $1.8 million, or 8.2%, to $23.1 million.

  • Compensation expense was $16.2 million, reflecting an increase of $1.7 million, or 11.8%, from the linked quarter primarily due to higher seasonal payroll taxes, 401k match contributions paid in the quarter on the annual cash bonus payout, annual merit increases reflecting a competitive job market, and an expanded workforce. These increases were partially offset by a decrease in incentive compensation. Average full-time equivalents (“FTEs”) for the first quarter of 2024 were 346, up from 343 in the linked quarter. Management believes compensation expense will continue at this level in 2024 as opportunistic investment in talent will offset the reduction in payroll taxes throughout the year.
  • Professional fees were $1.6 million, increasing $258,000, or 19.6%, from the linked quarter primarily due to an increase in recruiting expenses and legal fees related to the sale of state tax credits.
  • Computer software expense increased $101,000, or 7.7%, from the linked quarter primarily due to continued investment in technology to support the Company’s growth initiatives.
  • Marketing expense increased $94,000, or 13.0%, from the linked quarter primarily due to an increase in business development efforts and advertising projects commensurate with the Company’s growth initiatives.
  • Other non-interest expense decreased $554,000, or 41.0%, to $798,000 from the linked quarter primarily due to decreases in liquidation expense, loan-related expenses, donations, travel expenses, and SBA recourse provision.

Income tax expense decreased $951,000, or 35.2%, to $1.8 million. The effective tax rate was 16.5% for the three months ended March 31, 2024, compared to 21.7% for the linked quarter. The decrease reflects the impact of lower state taxes due to legislative change, recognition of a valuation allowance on state deferred tax in the prior quarter, and new federal tax credit projects. Based on expected earnings, reduction in state tax, and future tax credit investments, the Company expects to report an effective tax rate between 17% and 19% for 2024.

Total period-end loans and leases receivable increased $60.6 million, or 8.5% annualized, to $2.911 billion. Management expects to manage loan growth towards our long-term target of 10%. The average rate earned on average loans and leases receivable was 7.14%, down 7 basis points from 7.21% in the prior quarter. Excluding fees in lieu of interest, the average rate earned on average loans and leases receivable was 7.03%, down 3 basis points from 7.06% in the prior quarter. Additionally, $197.2 million of new and renewed loans were originated in the quarter at a weighted average yield of 7.95%.

  • Commercial Real Estate (“CRE”) loans increased by $39.9 million, or 9.4% annualized, to $1.740 billion. The increase was primarily due to an increase in non-owner occupied CRE and owner-occupied CRE, in the Wisconsin market.
  • Commercial & Industrial (“C&I”) loans increased $14.9 million, or 5.6% annualized, to $1.121 billion. The increase was due to growth across all categories.

Total period-end core deposits decreased $41.2 million to $2.298 billion, compared to $2.339 billion. The average rate paid was 3.28%, up 8 basis points from 3.20% in the prior quarter.

  • The decline in period-end balances is due to the delayed receipt of a significant core deposit which typically occurs near the end of the month. Including this recurring deposit inflow received by the Bank on April 1, period-end core deposits increased $24.2 million, or 4.1% annualized. New non-maturity deposit balances of $102.6 million were added at a weighted average rate of 4.31%. The increase in new accounts was partially offset by a $81.0 million reduction in existing accounts at a weighted average rate of 2.99%, compared to 2.86% in the linked quarter. Certificate of deposit maturities of $190.3 million at a weighted average rate of 4.38% were replaced by new and renewed certificates of deposit of $170.2 million at a weighted average rate of 4.38%.

Period-end wholesale funding, including FHLB advances, brokered deposits, and deposits gathered through internet deposit listing services, increased $50.6 million, or 27.2% annualized, to $789.8 million. The increase reflects the temporary funding need due to the delayed recurring core deposit inflow the Bank did not receive until April 1. To cover this timing difference, the Bank utilized short-term FHLB advances. Consistent with the Bank’s long-held philosophy to manage interest rate risk, management will continue to utilize the most efficient and cost-effective source of wholesale funds to match-fund fixed-rate loans as necessary.

  • Wholesale deposits decreased $145,000 to $457.6 million, compared to $457.7 million. The average rate paid on wholesale deposits decreased 12 basis points to 4.03% and the weighted average original maturity was 4.4 years for both periods.
  • FHLB advances increased $50.8 million to $332.3 million. The average rate paid on FHLB advances decreased 6 basis points to 2.39% and the weighted average original maturity decreased to 4.5 years from 5.2 years.

Non-performing assets decreased $698,000 to $20.1 million, or 0.57% of total assets, down from 0.59% in the prior quarter. While we continue to expect full repayment of the one asset-based lending (ABL) loan that defaulted during the second quarter of 2023, the liquidation process has transitioned into Chapter 7 bankruptcy, likely delaying final resolution until late 2024 or potentially 2025. Excluding this ABL loan, non-performing assets totaled $12.7 million, or 0.36% of total assets in the current quarter and $12.0 million, or 0.34% of total assets in the linked quarter.

The allowance for credit losses, including the unfunded credit commitments reserve, increased $1.6 million, or 4.9%, as increases in specific reserves, the general reserve from loan growth, and qualitative factors were partially offset by charge-offs and an improved economic outlook in our model forecast. The allowance for credit losses, including unfunded credit commitment reserves, as a percent of total gross loans and leases was 1.19% compared to 1.16% in the prior quarter.

First Quarter 2024 Compared to First Quarter 2023

Net interest income increased $2.8 million, or 10.5%, to $29.5 million.

  • The increase in net interest income primarily reflects an increase in average gross loans and leases and an increase in fees in lieu of interest, partially offset by net interest margin compression. Fees in lieu of interest increased to $793,000 from $651,000. Excluding fees in lieu of interest, net interest income increased $2.7 million, or 10.2%.
  • The yield on average interest-earning assets measured 6.77% compared to 6.09%. Excluding fees in lieu of interest, the yield on average interest-earning assets measured 6.68%, compared to 5.99%. This increase in yield was primarily due to the increase in short-term market rates and the reinvestment of cash flows from the securities and fixed-rate loan portfolios in a rising rate environment. The daily average effective federal funds rate increased 82 basis points compared to the prior year quarter, which equates to an average adjusted interest-earning asset beta of 83.6% for the three months ended March 31, 2024, compared to the prior year period.
  • The rate paid for average interest-bearing core deposits increased 126 basis points to 4.04% from 2.78%. The rate paid for average total bank funding increased 101 basis points to 3.31% from 2.30%. The total bank funding beta was 122.0% for the three months ended March 31, 2024, compared to the prior year period.
  • Net interest margin decreased 28 basis points to 3.58% from 3.86%. Adjusted net interest margin decreased 31 basis points to 3.43% from 3.74%.

The Company reported a credit loss provision expense of $2.3 million, compared an expense of $1.6 million in the first quarter of 2023. The increase compared to the prior year quarter is mainly due to an increase in specific reserves related to the Equipment Finance lending portfolio.

Non-interest income of $6.8 million decreased by $1.7 million, or 19.7%, from $8.4 million in the prior year period.

  • Private Wealth fee income increased $457,000, or 17.2%, to $3.1 million. Private Wealth assets under management and administration measured $3.320 billion at March 31, 2024, up $516.1 million, or 18.4%.
  • Commercial loan swap fee income decreased by $359,000, or 64.5%, to $198,000. Swap fee income varies from period to period based on loan activity and the interest rate environment.
  • Gain on sale of SBA loans decreased $281,000, or 59.0%, to $195,000. Management expects the SBA loan sales pipeline to build throughout the year as production increases and previously closed commitments fully fund and become eligible for sale.
  • Service charges on deposits increased $258,000, or 37.8%, to $940,000, driven by new core deposit relationships.
  • Other fee income decreased $1.8 million, or 54.5%, to $1.5 million. The decrease was primarily due to lower returns on the Company’s investments in mezzanine funds in the first quarter. Income from mezzanine funds was $653,000 in the first quarter, compared to $2.4 million in the prior year quarter. Income from mezzanine funds varies from period to period based on changes in the realized and unrealized fair value of underlying investments.

Non-interest expense increased $1.6 million, or 7.2%, to $23.3 million. Operating expense increased $1.4 million, or 6.2%, to $23.1 million.

  • Compensation expense increased $249,000, or 1.6%, to $16.2 million. The increase in compensation expense was primarily due to an increase in average FTEs and annual merit increases and promotions. These increases were partially offset by a decrease in incentive compensation due to slower production and a decrease in 401k expense. Average FTEs increased 2% to 346 in the first quarter of 2024, compared to 340 in the first quarter of 2023, as a result of expanded hiring efforts that have successfully driven growth while maintaining positive operating leverage on an annual basis.
  • Computer software expense increased $235,000, or 19.9%, to $1.4 million, primarily due to continued investment in technology to support the Company’s growth initiatives.
  • Professional fees expense increased $228,000, or 17.0%, to $1.6 million, primarily due to an increase in recruiting expense and a general increase in other professional consulting services for various projects.
  • FDIC insurance increased $216,000, or 54.8%, to $610,000, primarily due to an increase in the assessable base.
  • Marketing expense increased $190,000, or 30.3%, to $818,000, primarily due to an increase in business development efforts and advertising projects commensurate with the Company’s growth initiatives.
  • Data processing expense increased $143,000, or 16.3%, to $1.0 million, primarily due to an increase in core processing costs commensurate with loan and deposit account growth, as well as various project implementations.
  • Other expenses increased $288,000, or 56.5%, to $798,000, primarily due to increases in SBA recourse provision, travel expenses, and other loan-related costs, partially offset by a decrease in liquidation expense.

Total period-end loans and leases receivable increased $371.5 million, or 14.6%, to $2.911 billion.

  • CRE loans increased $210.6 million, or 13.8%, to $1.740 billion, primarily due to increases in non-owner occupied CRE and owner occupied CRE loans in the Wisconsin market.
  • C&I loans increased $157.5 million, or 16.3%, to $1.121 billion, due to growth across the majority of the Bank’s products and geographies.

Total period-end core deposits grew $243.1 million, or 11.8%, to $2.298 billion, and the average rate paid increased 119 basis points to 3.28%. The increase in average rate paid on core deposits was primarily due to a change in product mix. Total average core deposits grew $345.9 million, or 17.3%, to $2.346 billion.

Period-end wholesale funding increased $60.2 million to $789.8 million.

  • Wholesale deposits increased $35.5 million to $457.6 million, as the Bank utilized more wholesale deposits in lieu of FHLB advances to build excess liquidity and to match-fund fixed rate assets. The average rate paid on wholesale deposits increased 18 basis points to 4.03% and the weighted average effective maturity increased to 4.4 years from 1.8 years. Consistent with our balance sheet strategy to use the most efficient and cost-effective source of wholesale funding, the Company has entered into several derivative contracts hedging a portion of the wholesale deposits to reduce the fixed rate funding costs.
  • FHLB advances increased $24.8 million to $332.3 million. The average rate paid on FHLB advances increased 8 basis points to 2.39% and the weighted average original maturity decreased to 4.5 years from 4.7 years.

Non-performing assets increased to $20.1 million, or 0.57% of total assets, compared to $3.5 million, or 0.11% of total assets, driven by the ABL and Equipment Finance loan portfolios within the C&I portfolio. Excluding one ABL loan for which we expect full repayment, non-performing assets totaled $12.7 million, or 0.36% of total assets.

The allowance for credit losses, including unfunded commitment reserves, increased $7.1 million to $34.6 million, compared to $26.1 million primarily due to an increase in specific reserves and loan growth, partially offset by an improvement in economic forecast. The allowance for credit losses as a percent of total gross loans and leases was 1.19%, compared 1.08% in the prior year.

Investor Presentation

The Company has prepared investor presentation materials that management intends to use from time to time in discussions about the Company’s operations and performance. The presentation will be available for viewing in the Investor Relations section of the Company’s website at firstbusiness.bank and will also be furnished to the U.S. Securities and Exchange Commission on April 26, 2024.

About First Business Bank

First Business Bank® specializes in Business Banking, including Commercial Banking and Specialty Finance, Private Wealth, and Bank Consulting services, and through its refined focus delivers unmatched expertise, accessibility, and responsiveness. Specialty Finance solutions are delivered through First Business Bank’s wholly owned subsidiary First Business Specialty Finance, LLC®. First Business Bank is a wholly owned subsidiary of First Business Financial Services, Inc®. (Nasdaq: FBIZ). For additional information, visit firstbusiness.bank.

This release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect First Business Bank’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:

  • Adverse changes in the economy or business conditions, either nationally or in our markets including, without limitation, inflation, supply chain issues, economic downturn, labor shortages, wage pressures, and the adverse effects of public health events on the global, national, and local economy.
  • Competitive pressures among depository and other financial institutions nationally and in the Company’s markets.
  • Increases in defaults by borrowers and other delinquencies.
  • Management’s 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 the Company and its 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 the Company’s internet banking activities.
  • Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portion of SBA loans.
  • Ongoing volatility in the banking sector may result in new legislation, regulations or policy changes that could subject the Company and the Bank to increased government regulation and supervision.
  • The proportion of the Company’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk.
  • The Company may be subject to increases in FDIC insurance assessments as a result of bank failures that occurred in 2023.

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, 2023 and other filings with the Securities and Exchange Commission.

 
 
 

SELECTED FINANCIAL CONDITION DATA 

 

(Unaudited)

 

As of

(in thousands)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

72,040

 

 

$

139,510

 

 

$

132,915

 

 

$

112,809

 

 

$

185,973

 

Securities available-for-sale, at fair value

 

 

314,114

 

 

 

297,006

 

 

 

272,163

 

 

 

253,626

 

 

 

236,989

 

Securities held-to-maturity, at amortized cost

 

 

8,131

 

 

 

8,503

 

 

 

8,689

 

 

 

9,830

 

 

 

11,461

 

Loans held for sale

 

 

4,855

 

 

 

4,589

 

 

 

4,168

 

 

 

2,191

 

 

 

2,697

 

Loans and leases receivable

 

 

2,910,864

 

 

 

2,850,261

 

 

 

2,764,014

 

 

 

2,674,583

 

 

 

2,539,363

 

Allowance for credit losses

 

 

(32,799

)

 

 

(31,275

)

 

 

(29,331

)

 

 

(28,115

)

 

 

(26,140

)

Loans and leases receivable, net

 

 

2,878,065

 

 

 

2,818,986

 

 

 

2,734,683

 

 

 

2,646,468

 

 

 

2,513,223

 

Premises and equipment, net

 

 

6,268

 

 

 

6,190

 

 

 

6,157

 

 

 

5,094

 

 

 

4,933

 

Repossessed assets

 

 

317

 

 

 

247

 

 

 

61

 

 

 

65

 

 

 

89

 

Right-of-use assets

 

 

6,297

 

 

 

6,559

 

 

 

6,800

 

 

 

7,049

 

 

 

7,355

 

Bank-owned life insurance

 

 

55,948

 

 

 

55,536

 

 

 

55,123

 

 

 

54,747

 

 

 

54,383

 

Federal Home Loan Bank stock, at cost

 

 

13,326

 

 

 

12,042

 

 

 

13,528

 

 

 

14,482

 

 

 

13,088

 

Goodwill and other intangible assets

 

 

11,950

 

 

 

12,023

 

 

 

12,110

 

 

 

12,073

 

 

 

12,160

 

Derivatives

 

 

69,703

 

 

 

55,597

 

 

 

93,702

 

 

 

70,440

 

 

 

54,612

 

Accrued interest receivable and other assets

 

 

90,344

 

 

 

91,058

 

 

 

78,751

 

 

 

76,864

 

 

 

67,448

 

Total assets

 

$

3,531,358

 

 

$

3,507,846

 

 

$

3,418,850

 

 

$

3,265,738

 

 

$

3,164,411

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

Core deposits

 

$

2,297,843

 

 

$

2,339,071

 

 

$

2,189,264

 

 

$

2,073,744

 

 

$

2,054,752

 

Wholesale deposits

 

 

457,563

 

 

 

457,708

 

 

 

467,743

 

 

 

455,108

 

 

 

422,088

 

Total deposits

 

 

2,755,406

 

 

 

2,796,779

 

 

 

2,657,007

 

 

 

2,528,852

 

 

 

2,476,840

 

Federal Home Loan Bank advances and other borrowings

 

 

381,718

 

 

 

330,916

 

 

 

363,891

 

 

 

370,113

 

 

 

341,859

 

Lease liabilities

 

 

8,664

 

 

 

8,954

 

 

 

9,236

 

 

 

9,499

 

 

 

9,822

 

Derivatives

 

 

61,133

 

 

 

51,949

 

 

 

78,696

 

 

 

61,147

 

 

 

49,012

 

Accrued interest payable and other liabilities

 

 

26,649

 

 

 

29,660

 

 

 

29,262

 

 

 

23,495

 

 

 

20,297

 

Total liabilities

 

 

3,233,570

 

 

 

3,218,258

 

 

 

3,138,092

 

 

 

2,993,106

 

 

 

2,897,830

 

Total stockholders’ equity

 

 

297,788

 

 

 

289,588

 

 

 

280,758

 

 

 

272,632

 

 

 

266,581

 

Total liabilities and stockholders’ equity

 

$

3,531,358

 

 

$

3,507,846

 

 

$

3,418,850

 

 

$

3,265,738

 

 

$

3,164,411

 

 
 
 
 

STATEMENTS OF INCOME 

 

(Unaudited)

 

As of and for the Three Months Ended

(Dollars in thousands, except per share amounts)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Total interest income

 

$

55,783

 

 

$

54,762

 

$

50,941

 

$

47,161

 

 

$

42,064

Total interest expense

 

 

26,272

 

 

 

25,222

 

 

22,345

 

 

19,414

 

 

 

15,359

Net interest income

 

 

29,511

 

 

 

29,540

 

 

28,596

 

 

27,747

 

 

 

26,705

Provision for credit losses

 

 

2,326

 

 

 

2,573

 

 

1,817

 

 

2,231

 

 

 

1,561

Net interest income after provision for credit losses

 

 

27,185

 

 

 

26,967

 

 

26,779

 

 

25,516

 

 

 

25,144

Private wealth management service fees

 

 

3,111

 

 

 

2,933

 

 

2,945

 

 

2,893

 

 

 

2,654

Gain on sale of SBA loans

 

 

195

 

 

 

284

 

 

851

 

 

444

 

 

 

476

Service charges on deposits

 

 

940

 

 

 

848

 

 

835

 

 

766

 

 

 

682

Loan fees

 

 

847

 

 

 

869

 

 

786

 

 

905

 

 

 

803

Loss on sale of securities

 

 

(8

)

 

 

 

 

 

 

(45

)

 

 

Swap fees

 

 

198

 

 

 

438

 

 

992

 

 

977

 

 

 

557

Other non-interest income

 

 

1,474

 

 

 

1,722

 

 

2,021

 

 

1,434

 

 

 

3,238

Total non-interest income

 

 

6,757

 

 

 

7,094

 

 

8,430

 

 

7,374

 

 

 

8,410

Compensation

 

 

16,157

 

 

 

14,450

 

 

15,573

 

 

15,129

 

 

 

15,908

Occupancy

 

 

607

 

 

 

571

 

 

575

 

 

603

 

 

 

631

Professional fees

 

 

1,571

 

 

 

1,313

 

 

1,429

 

 

1,240

 

 

 

1,343

Data processing

 

 

1,018

 

 

 

936

 

 

953

 

 

1,061

 

 

 

875

Marketing

 

 

818

 

 

 

724

 

 

758

 

 

779

 

 

 

628

Equipment

 

 

345

 

 

 

340

 

 

349

 

 

355

 

 

 

295

Computer software

 

 

1,418

 

 

 

1,317

 

 

1,289

 

 

1,197

 

 

 

1,183

FDIC insurance

 

 

610

 

 

 

585

 

 

680

 

 

580

 

 

 

394

Other non-interest expense

 

 

798

 

 

 

1,352

 

 

1,583

 

 

1,087

 

 

 

510

Total non-interest expense

 

 

23,342

 

 

 

21,588

 

 

23,189

 

 

22,031

 

 

 

21,767

Income before income tax expense

 

 

10,600

 

 

 

12,473

 

 

12,020

 

 

10,859

 

 

 

11,787

Income tax expense

 

 

1,752

 

 

 

2,703

 

 

2,079

 

 

2,522

 

 

 

2,808

Net income

 

$

8,848

 

 

$

9,770

 

$

9,941

 

$

8,337

 

 

$

8,979

Preferred stock dividends

 

 

219

 

 

 

219

 

 

218

 

 

219

 

 

 

219

Net income available to common shareholders

 

$

8,629

 

 

$

9,551

 

$

9,723

 

$

8,118

 

 

$

8,760

Per common share:

 

 

 

 

 

 

 

 

 

 

Basic earnings

 

$

1.04

 

 

$

1.15

 

$

1.17

 

$

0.98

 

 

$

1.05

Diluted earnings

 

 

1.04

 

 

 

1.15

 

 

1.17

 

 

0.98

 

 

 

1.05

Dividends declared

 

 

0.2500

 

 

 

0.2275

 

 

0.2275

 

 

0.2275

 

 

 

0.2275

Book value

 

 

34.41

 

 

 

33.39

 

 

32.32

 

 

31.34

 

 

 

30.65

Tangible book value

 

 

32.97

 

 

 

31.94

 

 

30.87

 

 

29.89

 

 

 

29.19

Weighted-average common shares outstanding(1)

 

 

8,125,319

 

 

 

8,110,462

 

 

8,107,641

 

 

8,061,841

 

 

 

8,148,525

Weighted-average diluted common shares outstanding(1)

 

 

8,125,319

 

 

 

8,110,462

 

 

8,107,641

 

 

8,061,841

 

 

 

8,148,525

(1)

Excluding participating securities.

 
 
 
 

NET INTEREST INCOME ANALYSIS 

 

(Unaudited)

 

For the Three Months Ended

(Dollars in thousands)

 

March 31, 2024

 

December 31, 2023

 

March 31, 2023

 

 

Average

Balance

 

Interest

 

Average

Yield/Rate(4)

 

Average

Balance

 

Interest

 

Average

Yield/Rate(4)

 

Average

Balance

 

Interest

 

Average

Yield/Rate(4)

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate and other mortgage loans(1)

 

$

1,721,186

 

$

28,120

 

6.54

%

 

$

1,675,926

 

$

27,359

 

6.53

%

 

$

1,518,053

 

$

21,717

 

5.72

%

Commercial and industrial loans(1)

 

 

1,115,724

 

 

22,724

 

8.15

%

 

 

1,089,558

 

 

22,751

 

8.35

%

 

 

916,457

 

 

17,557

 

7.66

%

Consumer and other loans(1)

 

 

50,544

 

 

705

 

5.58

%

 

 

45,309

 

 

577

 

5.09

%

 

 

46,690

 

 

540

 

4.63

%

Total loans and leases receivable(1)

 

 

2,887,454

 

 

51,549

 

7.14

%

 

 

2,810,793

 

 

50,687

 

7.21

%

 

 

2,481,200

 

 

39,814

 

6.42

%

Mortgage-related securities(2)

 

 

241,940

 

 

2,276

 

3.76

%

 

 

221,708

 

 

2,061

 

3.72

%

 

 

182,494

 

 

1,270

 

2.78

%

Other investment securities(3)

 

 

67,980

 

 

518

 

3.05

%

 

 

67,444

 

 

541

 

3.21

%

 

 

55,722

 

 

320

 

2.30

%

FHLB stock

 

 

12,271

 

 

282

 

9.19

%

 

 

12,960

 

 

279

 

8.61

%

 

 

17,125

 

 

327

 

7.64

%

Short-term investments

 

 

85,072

 

 

1,158

 

5.44

%

 

 

86,580

 

 

1,193

 

5.51

%

 

 

28,546

 

 

333

 

4.67

%

Total interest-earning assets

 

 

3,294,717

 

 

55,783

 

6.77

%

 

 

3,199,485

 

 

54,761

 

6.85

%

 

 

2,765,087

 

 

42,064

 

6.09

%

Non-interest-earning assets

 

 

233,224

 

 

 

 

 

 

255,167

 

 

 

 

 

 

219,513

 

 

 

 

Total assets

 

$

3,527,941

 

 

 

 

 

$

3,454,652

 

 

 

 

 

$

2,984,600

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction accounts

 

$

862,896

 

 

8,447

 

3.92

%

 

$

785,480

 

 

7,657

 

3.90

%

 

$

567,435

 

 

3,840

 

2.71

%

Money market

 

 

761,893

 

 

7,565

 

3.97

%

 

 

734,903

 

 

7,145

 

3.89

%

 

 

699,314

 

 

4,497

 

2.57

%

Certificates of deposit

 

 

278,248

 

 

3,210

 

4.61

%

 

 

278,438

 

 

3,160

 

4.54

%

 

 

236,083

 

 

2,117

 

3.59

%

Wholesale deposits

 

 

457,536

 

 

4,615

 

4.03

%

 

 

450,880

 

 

4,682

 

4.15

%

 

 

187,784

 

 

1,976

 

4.21

%

Total interest-bearing deposits

 

 

2,360,573

 

 

23,837

 

4.04

%

 

 

2,249,701

 

 

22,644

 

4.03

%

 

 

1,690,616

 

 

12,430

 

2.94

%

FHLB advances

 

 

287,307

 

 

1,717

 

2.39

%

 

 

301,773

 

 

1,851

 

2.45

%

 

 

398,109

 

 

2,461

 

2.47

%

Other borrowings

 

 

49,457

 

 

718

 

5.81

%

 

 

49,394

 

 

727

 

5.89

%

 

 

36,794

 

 

468

 

5.09

%

Total interest-bearing liabilities

 

 

2,697,337

 

 

26,272

 

3.90

%

 

 

2,600,868

 

 

25,222

 

3.88

%

 

 

2,125,519

 

 

15,359

 

2.89

%

Non-interest-bearing demand deposit accounts

 

 

443,416

 

 

 

 

 

 

448,818

 

 

 

 

 

 

497,770

 

 

 

 

Other non-interest-bearing liabilities

 

 

93,307

 

 

 

 

 

 

119,833

 

 

 

 

 

 

98,347

 

 

 

 

Total liabilities

 

 

3,234,060

 

 

 

 

 

 

3,169,519

 

 

 

 

 

 

2,721,636

 

 

 

 

Stockholders’ equity

 

 

293,881

 

 

 

 

 

 

285,133

 

 

 

 

 

 

262,964

 

 

 

 

Total liabilities and stockholders’ equity

 

$

3,527,941

 

 

 

 

 

$

3,454,652

 

 

 

 

 

$

2,984,600

 

 

 

 

Net interest income

 

 

 

$

29,511

 

 

 

 

 

$

29,539

 

 

 

 

 

$

26,705

 

 

Interest rate spread

 

 

 

 

 

2.88

%

 

 

 

 

 

2.97

%

 

 

 

 

 

3.19

%

Net interest-earning assets

 

$

597,380

 

 

 

 

 

$

598,617

 

 

 

 

 

$

639,568

 

 

 

 

Net interest margin

 

 

 

 

 

3.58

%

 

 

 

 

 

3.69

%

 

 

 

 

 

3.86

%

(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. 

 
 
 
 

ASSET AND LIABILITY BETA ANALYSIS 

 

 

For the Three Months Ended

(Unaudited)

March 31,

2024

 

December 31,

2023

 

 

 

March 31,

2023

 

 

 

December 31,

2021

 

 

 

Average

Yield/Rate (3)

 

Average

Yield/Rate (3)

 

Increase

(Decrease)

 

Average

Yield/Rate (3)

 

Increase

(Decrease)

 

Average

Yield/Rate (3)

 

Increase

(Decrease)

Total loans and leases receivable (a)

7.14

%

 

7.21

%

 

(0.07

)%

 

6.42

%

 

0.72

%

 

4.13

%

 

3.01

%

Total interest-earning assets(b)

6.77

%

 

6.85

%

 

(0.08

)%

 

6.09

%

 

0.68

%

 

3.81

%

 

2.96

%

Adjusted total loans and leases receivable (1)(c)

7.03

%

 

7.06

%

 

(0.03

)%

 

6.31

%

 

0.72

%

 

3.82

%

 

3.21

%

Adjusted total interest-earning assets (1)(d)

6.68

%

 

6.71

%

 

(0.03

)%

 

5.99

%

 

0.69

%

 

3.54

%

 

3.14

%

Total core deposits(e)

3.28

%

 

3.20

%

 

0.08

%

 

2.09

%

 

1.19

%

 

0.13

%

 

3.15

%

Total bank funding(f)

3.31

%

 

3.27

%

 

0.04

%

 

2.30

%

 

1.01

%

 

0.33

%

 

2.98

%

Net interest margin(g)

3.58

%

 

3.69

%

 

(0.11

)%

 

3.86

%

 

(0.28

)%

 

3.39

%

 

0.19

%

Adjusted net interest margin(h)

3.43

%

 

3.50

%

 

(0.07

)%

 

3.74

%

 

(0.31

)%

 

3.18

%

 

0.25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective fed funds rate (2)(i)

5.33

%

 

5.33

%

 

%

 

4.51

%

 

0.82

%

 

0.08

%

 

5.25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beta Calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases receivable(a)/(i)

 

 

 

 

 

 

 

 

88.1

%

 

 

 

57.3

%

Total interest-earning assets(b)/(i)

 

 

 

 

 

 

 

 

83.8

%

 

 

 

56.4

%

Adjusted total loans and leases receivable (1)(c)/(i)

 

 

 

 

 

 

 

 

87.5

%

 

 

 

61.1

%

Adjusted total interest-earning assets (1)(d)/(i)

 

 

 

 

 

 

 

 

83.6

%

 

 

 

59.8

%

Total core deposits(e/i)

 

 

 

 

 

 

 

 

145.1

%

 

 

 

60.0

%

Total bank funding(f)/(i)

 

 

 

 

 

 

 

 

122.0

%

 

 

 

56.8

%

Net interest margin(g/i)

 

 

 

 

 

 

 

 

(34.1

)%

 

 

 

3.6

%

Adjusted net interest margin(h/i)

 

 

 

 

 

 

 

 

(37.8

)%

 

 

 

4.8

%

(1)

Excluding fees in lieu of interest.

(2)

Board of Governors of the Federal Reserve System (US), Effective Federal Funds Rate [DFF]. Retrieved from FRED, Federal Reserve Bank of St. Louis. Represents average daily rate.

(3)

Represents annualized yields/rates.

 
 
 

PROVISION FOR CREDIT LOSS COMPOSITION 

 

(Unaudited)

 

For the Three Months Ended

(Dollars in thousands)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Change due to qualitative factor changes

 

$

740

 

 

$

(432

)

 

$

506

 

 

$

(50

)

 

$

9

 

Change due to quantitative factor changes

 

 

(199

)

 

 

(260

)

 

 

(1,372

)

 

 

(295

)

 

 

474

 

Charge-offs

 

 

921

 

 

 

724

 

 

 

562

 

 

 

329

 

 

 

166

 

Recoveries

 

 

(227

)

 

 

(114

)

 

 

(84

)

 

 

(245

)

 

 

(107

)

Change in reserves on individually evaluated loans, net

 

 

629

 

 

 

2,008

 

 

 

1,265

 

 

 

1,093

 

 

 

(36

)

Change due to loan growth, net

 

 

354

 

 

 

629

 

 

 

817

 

 

 

1,227

 

 

 

979

 

Change in unfunded commitment reserves

 

 

108

 

 

 

17

 

 

 

123

 

 

 

172

 

 

 

76

 

Total provision for credit losses

 

$

2,326

 

 

$

2,572

 

 

$

1,817

 

 

$

2,231

 

 

$

1,561

 

 
 
 

PERFORMANCE RATIOS 

 

 

 

For the Three Months Ended

(Unaudited)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Return on average assets (annualized)

 

0.98

%

 

1.11

%

 

1.19

%

 

1.04

%

 

1.17

%

Return on average common equity (annualized)

 

12.24

%

 

13.99

%

 

14.62

%

 

12.58

%

 

13.96

%

Efficiency ratio

 

63.76

%

 

58.34

%

 

61.96

%

 

61.68

%

 

62.02

%

Interest rate spread

 

2.88

%

 

2.97

%

 

3.07

%

 

3.15

%

 

3.19

%

Net interest margin

 

3.58

%

 

3.69

%

 

3.76

%

 

3.81

%

 

3.86

%

Average interest-earning assets to average interest-bearing liabilities

 

122.15

%

 

123.02

%

 

123.59

%

 

124.82

%

 

130.09

%

 
 
 
ASSET QUALITY RATIOS
 

(Unaudited)

 

As of

(Dollars in thousands)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Non-accrual loans and leases

 

$

19,829

 

 

$

20,597

 

 

$

17,628

 

 

$

15,721

 

 

$

3,412

 

Repossessed assets

 

 

317

 

 

 

247

 

 

 

61

 

 

 

65

 

 

 

89

 

Total non-performing assets

 

$

20,146

 

 

$

20,844

 

 

$

17,689

 

 

$

15,786

 

 

$

3,501

 

 

 

 

 

 

 

 

 

 

 

 

Non-accrual loans and leases as a percent of total gross loans and leases

 

 

0.68

%

 

 

0.72

%

 

 

0.64

%

 

 

0.59

%

 

 

0.13

%

Non-performing assets as a percent of total gross loans and leases plus repossessed assets

 

 

0.69

%

 

 

0.73

%

 

 

0.64

%

 

 

0.59

%

 

 

0.14

%

Non-performing assets as a percent of total assets

 

 

0.57

%

 

 

0.59

%

 

 

0.52

%

 

 

0.48

%

 

 

0.11

%

Allowance for credit losses as a percent of total gross loans and leases

 

 

1.19

%

 

 

1.16

%

 

 

1.12

%

 

 

1.11

%

 

 

1.08

%

Allowance for credit losses as a percent of non-accrual loans and leases

 

 

174.64

%

 

 

160.21

%

 

 

176.06

%

 

 

188.90

%

 

 

807.44

%

 
 
 

NET CHARGE-OFFS (RECOVERIES) 

 

(Unaudited)

 

For the Three Months Ended

(Dollars in thousands)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Charge-offs

 

$

921

 

 

$

724

 

 

$

562

 

 

$

329

 

 

$

166

 

Recoveries

 

 

(227

)

 

 

(114

)

 

 

(84

)

 

 

(245

)

 

 

(107

)

Net charge-offs (recoveries)

 

$

694

 

 

$

610

 

 

$

478

 

 

$

84

 

 

$

59

 

Net charge-offs (recoveries) as a percent of average gross loans and leases (annualized)

 

 

0.10

%

 

 

0.09

%

 

 

0.07

%

 

 

0.01

%

 

 

0.01

%

 
 
 

CAPITAL RATIOS 

 

 

 

As of and for the Three Months Ended

(Unaudited)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Total capital to risk-weighted assets

 

11.36

%

 

11.19

%

 

11.20

%

 

10.70

%

 

11.04

%

Tier I capital to risk-weighted assets

 

8.86

%

 

8.74

%

 

8.74

%

 

8.70

%

 

9.01

%

Common equity tier I capital to risk-weighted assets

 

8.51

%

 

8.38

%

 

8.37

%

 

8.32

%

 

8.61

%

Tier I capital to adjusted assets

 

8.45

%

 

8.43

%

 

8.65

%

 

8.80

%

 

9.00

%

Tangible common equity to tangible assets

 

7.78

%

 

7.60

%

 

7.53

%

 

7.64

%

 

7.69

%

 
 
 

LOAN AND LEASE RECEIVABLE COMPOSITION 

 

(Unaudited)

 

As of

(in thousands)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

Commercial real estate - owner occupied

 

$

263,748

 

 

$

256,479

 

 

$

236,058

 

 

$

244,039

 

 

$

233,725

 

Commercial real estate - non-owner occupied

 

 

792,858

 

 

 

773,494

 

 

 

753,517

 

 

 

715,309

 

 

 

675,087

 

Construction

 

 

202,382

 

 

 

193,080

 

 

 

211,828

 

 

 

217,069

 

 

 

212,916

 

Multi-family

 

 

453,321

 

 

 

450,529

 

 

 

409,714

 

 

 

392,297

 

 

 

384,043

 

1-4 family

 

 

27,482

 

 

 

26,289

 

 

 

24,235

 

 

 

23,063

 

 

 

23,404

 

Total commercial real estate

 

 

1,739,791

 

 

 

1,699,871

 

 

 

1,635,352

 

 

 

1,591,777

 

 

 

1,529,175

 

Commercial and industrial

 

 

1,120,779

 

 

 

1,105,835

 

 

 

1,083,698

 

 

 

1,036,921

 

 

 

963,328

 

Consumer and other

 

 

50,020

 

 

 

44,312

 

 

 

44,808

 

 

 

45,743

 

 

 

46,773

 

Total gross loans and leases receivable

 

 

2,910,590

 

 

 

2,850,018

 

 

 

2,763,858

 

 

 

2,674,441

 

 

 

2,539,276

 

Less:

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

 

32,799

 

 

 

31,275

 

 

 

29,331

 

 

 

28,115

 

 

 

26,140

 

Deferred loan fees

 

 

(274

)

 

 

(243

)

 

 

(156

)

 

 

(142

)

 

 

(87

)

Loans and leases receivable, net

 

$

2,878,065

 

 

$

2,818,986

 

 

$

2,734,683

 

 

$

2,646,468

 

 

$

2,513,223

 

 
 
 

DEPOSIT COMPOSITION 

(Unaudited)

 

As of

(in thousands)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Non-interest-bearing transaction accounts

 

$

400,267

 

 

$

445,376

 

 

$

430,011

 

 

$

419,294

 

 

$

471,904

 

Interest-bearing transaction accounts

 

 

818,080

 

 

 

895,319

 

 

 

779,789

 

 

 

719,198

 

 

 

612,500

 

Money market accounts

 

 

813,467

 

 

 

711,245

 

 

 

694,199

 

 

 

641,969

 

 

 

662,157

 

Certificates of deposit

 

 

266,029

 

 

 

287,131

 

 

 

285,265

 

 

 

293,283

 

 

 

308,191

 

Wholesale deposits

 

 

457,563

 

 

 

457,708

 

 

 

467,743

 

 

 

455,108

 

 

 

422,088

 

Total deposits

 

$

2,755,406

 

 

$

2,796,779

 

 

$

2,657,007

 

 

$

2,528,852

 

 

$

2,476,840

 

 

 

 

 

 

 

 

 

 

 

 

Uninsured deposits

 

$

995,428

 

 

$

994,687

 

 

$

916,083

 

 

$

867,397

 

 

$

974,242

 

Less: uninsured deposits collateralized by pledged assets

 

 

16,622

 

 

 

17,051

 

 

 

28,873

 

 

 

37,670

 

 

 

32,468

 

Total uninsured, net of collateralized deposits

 

 

978,806

 

 

 

977,636

 

 

 

887,210

 

 

 

829,727

 

 

 

941,774

 

% of total deposits

 

 

35.5

%

 

 

35.0

%

 

 

33.4

%

 

 

32.8

%

 

 

38.0

%

 
 
 

SOURCES OF LIQUIDITY 

 

(Unaudited)

 

As of

(in thousands)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Short-term investments

 

$

46,984

 

$

107,162

 

$

109,612

 

$

80,510

 

$

159,859

Collateral value of unencumbered pledged loans

 

 

340,639

 

 

367,471

 

 

315,067

 

 

265,884

 

 

296,393

Market value of unencumbered securities

 

 

288,965

 

 

259,791

 

 

236,618

 

 

217,074

 

 

200,332

Readily accessible liquidity

 

 

676,588

 

 

734,424

 

 

661,297

 

 

563,468

 

 

656,584

 

 

 

 

 

 

 

 

 

 

 

Fed fund lines

 

 

45,000

 

 

45,000

 

 

45,000

 

 

45,000

 

 

45,000

Excess brokered CD capacity(1)

 

 

1,166,661

 

 

1,231,791

 

 

1,090,864

 

 

1,017,590

 

 

1,027,869

Total liquidity

 

$

1,888,249

 

$

2,011,215

 

$

1,797,161

 

$

1,626,058

 

$

1,729,453

Total uninsured, net of collateralized deposits

 

 

978,806

 

 

977,636

 

 

887,210

 

 

829,727

 

 

941,774

(1)

Bank internal policy limits brokered CDs to 50% of total bank funding when combined with FHLB advances.

 
 
 

PRIVATE WEALTH OFF-BALANCE SHEET COMPOSITION 

(Unaudited)

 

As of

(in thousands)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Trust assets under management

 

$

3,080,951

 

$

2,898,516

 

$

2,715,801

 

$

2,707,390

 

$

2,615,670

Trust assets under administration

 

 

239,249

 

 

223,013

 

 

198,864

 

 

199,729

 

 

188,458

Total trust assets

 

$

3,320,200

 

$

3,121,529

 

$

2,914,665

 

$

2,907,119

 

$

2,804,128

 
 
 
 

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)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Common stockholders’ equity

 

$

285,796

 

 

$

277,596

 

 

$

268,766

 

 

$

260,640

 

 

$

254,589

 

Less: Goodwill and other intangible assets

 

 

(11,950

)

 

 

(12,023

)

 

 

(12,110

)

 

 

(12,073

)

 

 

(12,160

)

Tangible common equity

 

$

273,846

 

 

$

265,573

 

 

$

256,656

 

 

$

248,567

 

 

$

242,429

 

Common shares outstanding

 

 

8,306,573

 

 

 

8,314,778

 

 

 

8,315,186

 

 

 

8,315,465

 

 

 

8,306,270

 

Book value per share

 

$

34.41

 

 

$

33.39

 

 

$

32.32

 

 

$

31.34

 

 

$

30.65

 

Tangible book value per share

 

 

32.97

 

 

 

31.94

 

 

 

30.87

 

 

 

29.89

 

 

 

29.19

 

 
 
 

TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS

“Tangible common equity to tangible assets” (“TCE”) 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. Adjusted TCE ratio is defined as TCE adjusted for net fair value adjustments of financial assets and liabilities. For more information on fair value adjustments please refer to Note 19 - Fair Value Disclosures in the annual report on Form 10-K for the year ended December 31, 2023. 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)

 

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Common stockholders’ equity

 

$

285,796

 

 

$

277,596

 

 

$

268,766

 

 

$

260,640

 

 

$

254,589

 

Less: Goodwill and other intangible assets

 

 

(11,950

)

 

 

(12,023

)

 

 

(12,110

)

 

 

(12,073

)

 

 

(12,160

)

Tangible common equity (a)

 

$

273,846

 

 

$

265,573

 

 

$

256,656

 

 

$

248,567

 

 

$

242,429

 

Total assets

 

$

3,531,358

 

 

$

3,507,846

 

 

$

3,418,850

 

 

$

3,265,738

 

 

$

3,164,411

 

Less: Goodwill and other intangible assets

 

 

(11,950

)

 

 

(12,023

)

 

 

(12,110

)

 

 

(12,073

)

 

 

(12,160

)

Tangible assets (b)

 

$

3,519,408

 

 

$

3,495,823

 

 

$

3,406,740

 

 

$

3,253,665

 

 

$

3,152,251

 

Tangible common equity to tangible assets

 

 

7.78

%

 

 

7.60

%

 

 

7.53

%

 

 

7.64

%

 

 

7.69

%

 

 

 

 

 

 

 

 

 

 

 

Fair Value Adjustments:

 

 

 

 

 

 

 

 

 

 

Financial assets - MTM (c)

 

$

(29,019

)

 

$

(29,136

)

 

$

(45,489

)

 

$

(43,403

)

 

$

(24,764

)

Financial liabilities - MTM (d)

 

$

12,560

 

 

$

11,945

 

 

$

23,436

 

 

$

21,916

 

 

$

17,334

 

Net MTM, after-tax e = (c-d)*(1-21%)

 

$

(13,003

)

 

$

(13,581

)

 

$

(17,422

)

 

$

(16,975

)

 

$

(5,870

)

 

 

 

 

 

 

 

 

 

 

 

Adjusted tangible equity f = (a-e)

 

$

260,843

 

 

$

251,992

 

 

$

239,234

 

 

$

231,592

 

 

$

236,559

 

Adjusted tangible assets g = (b-c)

 

$

3,490,389

 

 

$

3,466,687

 

 

$

3,361,251

 

 

$

3,210,262

 

 

$

3,127,487

 

Adjusted TCE ratio (f/g)

 

 

7.47

%

 

 

7.27

%

 

 

7.12

%

 

 

7.21

%

 

 

7.56

%

 
 
 

EFFICIENCY RATIO & PRE-TAX, PRE-PROVISION ADJUSTED EARNINGS

“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 repossessed assets, 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. “Pre-tax, pre-provision adjusted earnings” is defined as operating revenue less operating expense. In the judgment of the Company’s management, the adjustments made to non-interest expense and non-interest income 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 and pre-tax, pre-provision adjusted earnings to its most comparable GAAP measure.

(Unaudited)

For the Three Months Ended

(Dollars in thousands)

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Total non-interest expense

$

23,342

 

 

$

21,588

 

 

$

23,189

 

 

$

22,031

 

 

$

21,767

 

Less:

 

 

 

 

 

 

 

 

 

Net loss (gain) on repossessed assets

 

86

 

 

 

4

 

 

 

4

 

 

 

(2

)

 

 

6

 

SBA recourse provision (benefit)

 

126

 

 

 

210

 

 

 

242

 

 

 

341

 

 

 

(18

)

Total operating expense (a)

$

23,130

 

 

$

21,374

 

 

$

22,943

 

 

$

21,692

 

 

$

21,779

 

Net interest income

$

29,511

 

 

$

29,540

 

 

$

28,596

 

 

$

27,747

 

 

$

26,705

 

Total non-interest income

 

6,757

 

 

 

7,094

 

 

 

8,430

 

 

 

7,374

 

 

 

8,410

 

Less:

 

 

 

 

 

 

 

 

 

Net loss on sale of securities

 

(8

)

 

 

 

 

 

 

 

 

(45

)

 

 

 

Adjusted non-interest income

 

6,765

 

 

 

7,094

 

 

 

8,430

 

 

 

7,419

 

 

 

8,410

 

Total operating revenue (b)

$

36,276

 

 

$

36,634

 

 

$

37,026

 

 

$

35,166

 

 

$

35,115

 

Efficiency ratio

 

63.76

%

 

 

58.34

%

 

 

61.96

%

 

 

61.68

%

 

 

62.02

%

 

 

 

 

 

 

 

 

 

 

Pre-tax, pre-provision adjusted earnings (b - a)

$

13,146

 

 

$

15,260

 

 

$

14,083

 

 

$

13,474

 

 

$

13,336

 

Average total assets

$

3,527,941

 

 

$

3,454,652

 

 

$

3,276,240

 

 

$

3,127,234

 

 

$

2,984,600

 

Pre-tax, pre-provision adjusted return on average assets

 

1.49

%

 

 

1.77

%

 

 

1.72

%

 

 

1.72

%

 

 

1.79

%

 
 
 

ADJUSTED NET INTEREST MARGIN

“Adjusted Net Interest Margin” is a non-GAAP measure representing net interest income excluding the fees in lieu of interest and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less other recurring, but volatile, components of average interest-earning assets. Fees in lieu of interest are defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortization. In the judgment of the Company’s management, the adjustments made to net interest income allow investors and analysts to better assess the Company’s net interest income in relation to its core client-facing loan and deposit rate changes by removing the volatility that is associated with these recurring but volatile components. The information provided below reconciles the net interest margin to its most comparable GAAP measure.

(Unaudited)

For the Three Months Ended

(Dollars in thousands)

March 31,

2024

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

Interest income

$

55,783

 

 

$

54,762

 

 

$

50,941

 

 

$

47,161

 

 

$

42,064

 

Interest expense

 

26,272

 

 

 

25,222

 

 

 

22,345

 

 

 

19,414

 

 

 

15,359

 

Net interest income (a)

 

29,511

 

 

 

29,540

 

 

 

28,596

 

 

 

27,747

 

 

 

26,705

 

Less:

 

 

 

 

 

 

 

 

 

Fees in lieu of interest

 

793

 

 

 

1,075

 

 

 

582

 

 

 

936

 

 

 

651

 

FRB interest income and FHLB dividend income

 

1,436

 

 

 

1,466

 

 

 

870

 

 

 

1,064

 

 

 

656

 

Adjusted net interest income (b)

$

27,282

 

 

$

26,999

 

 

$

27,144

 

 

$

25,747

 

 

$

25,398

 

Average interest-earning assets (c)

$

3,294,717

 

 

$

3,199,485

 

 

$

3,038,776

 

 

$

2,913,751

 

 

$

2,765,087

 

Less:

 

 

 

 

 

 

 

 

 

Average FRB cash and FHLB stock

 

97,036

 

 

 

99,118

 

 

 

54,677

 

 

 

76,678

 

 

 

45,150

 

Average non-accrual loans and leases

 

20,540

 

 

 

18,602

 

 

 

15,775

 

 

 

3,781

 

 

 

3,536

 

Adjusted average interest-earning assets (d)

$

3,177,141

 

 

$

3,081,765

 

 

$

2,968,324

 

 

$

2,833,292

 

 

$

2,716,401

 

Net interest margin (a / c)

 

3.58

%

 

 

3.69

%

 

 

3.76

%

 

 

3.81

%

 

 

3.86

%

Adjusted net interest margin (b / d)

 

3.43

%

 

 

3.50

%

 

 

3.66

%

 

 

3.63

%

 

 

3.74

%

 
 

 

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