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First Business Bank Reports Third Quarter 2022 Net Income of $10.6 Million

-- Net interest margin expansion and balance sheet growth drive record top line revenue and tangible book value growth --

First Business Financial Services, Inc. (the “Company”, the “Bank”, or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income available to common shareholders of $10.6 million, or $1.25 diluted earnings per share. This compares to net income available to common shareholders of $11.0 million, or $1.29 per share, in the second quarter of 2022 and $9.2 million, or $1.07 per share, in the third quarter of 2021.

“In the third quarter, loan and deposit growth and net interest margin expansion helped generate a 12% increase in top line revenue compared to the second quarter of 2022. In addition, the Bank’s exceptional asset quality continued, as we reported our lowest percentage of non-performing assets to total assets in nearly 20 years at just 0.13%,” President and Chief Executive Officer Corey Chambas said. “We were also very pleased to see significant deposit growth during the quarter, increasing 16% annualized, more than fully funding our 8% annualized loan growth,” Chambas added. “Our capital base remains strong and, unlike many of our peers, we have continued to increase tangible book value and maintain tangible common equity in excess of 8%.”

Quarterly Highlights

  • Strong Profitability Metrics. Pre-tax, pre-provision adjusted (“PTPP”) earnings, excluding Paycheck Protection Program (“PPP”) interest and fee income, grew to a record $14.1 million, increasing $3.5 million, or 32.6%, from the linked quarter and $6.3 million, or 80.4%, from the prior year quarter. Continued improvement in profitability was driven by an increase in top line revenue, which rose $3.7 million, or 12.2%, from the linked quarter and $7.7 million, or 29.1%, from the prior year quarter. With continued positive operating leverage, the Company increased PTPP return on average assets to 2.05% in the third quarter of 2022, compared to 1.57% in linked quarter and 1.24% in the prior year quarter.
  • Record Top Line Revenue and Net Interest Margin Expansion. Net interest income grew to a record $25.9 million, increasing $2.2 million, or 9.4%, from the linked quarter and $4.7 million, or 22.0%, from the prior year quarter. This increase was primarily due to a 30 and 56 basis point expansion in net interest margin compared to the linked and prior year quarters, respectively. The net interest margin expansion resulted from rising rates on variable-rate loans and lower deposit betas on in-market deposits during the third quarter of 2022. Average loans and leases receivable increased $43.7 million, or 7.7% annualized, and $185.5, or 8.71%, compared to the linked and prior year quarters, respectively.
  • Deposit Growth. Enhanced focus on relationship-based deposit generation and the return of cyclical deposits following second quarter client utilization led to in-market deposit growth of $72.2 million, or 15.6% annualized, from the second quarter of 2022.
  • Exceptional Asset Quality. Continued positive asset quality trends resulted in the decline of non-performing assets to $3.8 million, or 0.13% of total assets, improving from 0.29% of total assets on September 30, 2021. The Company recorded a loan loss provision of $12,000, compared to a provision benefit of $3.7 million in the second quarter of 2022 and $2.3 million in the third quarter of 2021.
  • Tangible Book Value Growth. The Company’s strong earnings continued to offset the interest-rate-driven market value decline in the investment portfolio, producing a 7.5% annualized increase in tangible book value compared to the linked quarter and 8.0% compared to the prior year quarter.

Quarterly Financial Results

(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,

2022

 

June 30,

2022

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Net interest income

 

$

25,884

 

 

$

23,660

 

 

$

21,223

 

 

$

70,971

 

 

$

63,738

 

Adjusted non-interest income (1)

 

 

8,197

 

 

 

6,872

 

 

 

7,015

 

 

 

22,455

 

 

 

20,502

 

Operating revenue (1)

 

 

34,081

 

 

 

30,532

 

 

 

28,238

 

 

 

93,426

 

 

 

84,240

 

Operating expense (1)

 

 

19,925

 

 

 

19,685

 

 

 

18,546

 

 

 

58,497

 

 

 

53,928

 

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

 

 

14,156

 

 

 

10,847

 

 

 

9,692

 

 

 

34,929

 

 

 

30,312

 

Less:

 

 

 

 

 

 

 

 

 

 

Provision for loan and lease losses

 

 

12

 

 

 

(3,727

)

 

 

(2,269

)

 

 

(4,569

)

 

 

(5,295

)

Net loss on foreclosed properties

 

 

7

 

 

 

8

 

 

 

6

 

 

 

27

 

 

 

7

 

Amortization of other intangible assets

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

23

 

SBA recourse provision (benefit)

 

 

96

 

 

 

114

 

 

 

(69

)

 

 

134

 

 

 

45

 

Tax credit investment impairment recovery

 

 

 

 

 

(351

)

 

 

 

 

 

(351

)

 

 

 

Add:

 

 

 

 

 

 

 

 

 

 

Net gain on sale of securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

Income before income tax expense

 

 

14,041

 

 

 

14,803

 

 

 

12,017

 

 

 

39,688

 

 

 

35,561

 

Income tax expense

 

 

3,215

 

 

 

3,599

 

 

 

2,819

 

 

 

8,986

 

 

 

8,396

 

Net income

 

$

10,826

 

 

$

11,204

 

 

$

9,198

 

 

$

30,702

 

 

$

27,165

 

Preferred stock dividends

 

 

218

 

 

 

246

 

 

 

 

 

 

464

 

 

 

 

Net income available to common shareholders

 

$

10,608

 

 

$

10,958

 

 

$

9,198

 

 

$

30,238

 

 

$

27,165

 

Earnings per share, diluted

 

$

1.25

 

 

$

1.29

 

 

$

1.07

 

 

$

3.57

 

 

$

3.15

 

Book value per share

 

$

28.58

 

 

$

28.08

 

 

$

26.56

 

 

$

28.58

 

 

$

26.56

 

Tangible book value per share (1)

 

$

27.13

 

 

$

26.63

 

 

$

25.11

 

 

$

27.13

 

 

$

25.11

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (2)

 

 

4.01

%

 

 

3.71

%

 

 

3.45

%

 

 

3.71

%

 

 

3.46

%

Adjusted net interest margin (1)(2)

 

 

3.89

%

 

 

3.45

%

 

 

3.22

%

 

 

3.53

%

 

 

3.21

%

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

 

 

24.05

%

 

 

22.51

%

 

 

24.84

%

 

 

24.04

%

 

 

24.36

%

Efficiency ratio (1)

 

 

58.46

%

 

 

64.47

%

 

 

65.68

%

 

 

62.61

%

 

 

64.02

%

Return on average assets (2)

 

 

1.57

%

 

 

1.65

%

 

 

1.41

%

 

 

1.49

%

 

 

1.39

%

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

 

 

2.05

%

 

 

1.60

%

 

 

1.49

%

 

 

1.72

%

 

 

1.55

%

Return on average common equity (2)

 

 

16.97

%

 

 

18.27

%

 

 

16.39

%

 

 

16.59

%

 

 

16.63

%

 

 

 

 

 

 

 

 

 

 

 

Period-end loans and leases receivable

 

$

2,330,700

 

 

$

2,290,100

 

 

$

2,123,306

 

 

$

2,330,700

 

 

$

2,123,306

 

Average loans and leases receivable

 

$

2,316,621

 

 

$

2,272,946

 

 

$

2,131,099

 

 

$

2,278,333

 

 

$

2,178,947

 

Period-end in-market deposits

 

$

1,929,224

 

 

$

1,857,010

 

 

$

1,829,644

 

 

$

1,929,224

 

 

$

1,829,644

 

Average in-market deposits

 

$

1,930,995

 

 

$

1,900,842

 

 

$

1,810,948

 

 

$

1,921,465

 

 

$

1,756,475

 

Allowance for loan and lease losses

 

$

24,143

 

 

$

24,104

 

 

$

24,676

 

 

$

24,143

 

 

$

24,676

 

Non-performing assets

 

$

3,796

 

 

$

5,709

 

 

$

7,605

 

 

$

3,796

 

 

$

7,605

 

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

 

 

1.04

%

 

 

1.05

%

 

 

1.16

%

 

 

1.04

%

 

 

1.16

%

Non-performing assets as a percent of total assets

 

 

0.13

%

 

 

0.21

%

 

 

0.29

%

 

 

0.13

%

 

 

0.29

%

(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.

Quarterly Financial Results - Excluding PPP Loans, Interest Income, and Fees

(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,

2022

 

June 30,

2022

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Net interest income

 

$

25,812

 

 

$

23,435

 

 

$

19,336

 

 

$

70,373

 

 

$

55,928

 

Adjusted non-interest income (1)

 

 

8,197

 

 

 

6,872

 

 

 

7,015

 

 

 

22,455

 

 

 

20,502

 

Operating revenue (1)

 

 

34,009

 

 

 

30,307

 

 

 

26,351

 

 

 

92,828

 

 

 

76,430

 

Operating expense (1)

 

 

19,925

 

 

 

19,685

 

 

 

18,546

 

 

 

58,497

 

 

 

53,928

 

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

 

$

14,084

 

 

$

10,622

 

 

$

7,805

 

 

$

34,331

 

 

$

22,502

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (2)

 

 

4.00

%

 

 

3.69

%

 

 

3.26

%

 

 

3.69

%

 

 

3.28

%

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

 

 

24.10

%

 

 

22.67

%

 

 

26.62

%

 

 

24.19

%

 

 

26.85

%

Efficiency ratio (1)

 

 

58.59

%

 

 

64.95

%

 

 

70.38

%

 

 

63.02

%

 

 

70.56

%

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

 

 

2.05

%

 

 

1.57

%

 

 

1.24

%

 

 

1.69

%

 

 

1.24

%

 

 

 

 

 

 

 

 

 

 

 

Period-end loans and leases receivable

 

$

2,328,376

 

 

$

2,281,928

 

 

$

2,058,852

 

 

$

2,328,376

 

 

$

2,058,852

 

Specialized lending as a percent of total loans and leases

 

 

22.24

%

 

 

20.76

%

 

 

18.33

%

 

 

22.24

%

 

 

18.33

%

Average loans and leases receivable

 

$

2,312,116

 

 

$

2,261,296

 

 

$

2,043,582

 

 

$

2,266,030

 

 

$

1,993,206

 

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

 

 

1.04

%

 

 

1.06

%

 

 

1.20

%

 

 

1.04

%

 

 

1.20

%

Non-performing assets as a percent of total assets

 

 

0.13

%

 

 

0.21

%

 

 

0.30

%

 

 

0.13

%

 

 

0.30

%

(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.

Third Quarter 2022 Compared to Second Quarter 2022

Net interest income increased $2.2 million, or 9.4%, to $25.9 million.

  • Net interest income growth was driven by an increase in average loans and leases and net interest margin expansion, partially offset by a decrease in fees in lieu of interest. Average loans and leases receivable increased $43.7 million, or 7.7% annualized, to $2.3 billion. Fees in lieu of interest, which can vary from quarter to quarter based on client-driven activity, totaled $807,000, compared to $1.9 million, as the prior quarter included a significant non-accrual interest recovery. Excluding fees in lieu of interest and interest income from PPP loans, net interest income increased $3.3 million, or 15.2%.
  • The yield on average interest-earning assets increased 68 basis points to 4.92% from 4.24%. Excluding average net PPP loans, PPP loan interest income, and fees in lieu of interest, the yield earned on average interest-earning assets increased 84 basis points to 4.80% from 3.96%.
  • The rate paid for average interest-bearing, in-market deposits increased 59 basis points to 0.88% from 0.29%. The rate paid for average total bank funding increased 43 basis points to 0.89% from 0.46%. Total bank funding is defined as total deposits plus Federal Home Loan Bank (“FHLB”) advances. The daily average effective federal funds rate increased 141 basis points compared to the linked quarter, which equates to an in-market, interest-bearing deposit beta of 41.9% for the three months ended September 30, 2022.
  • Net interest margin was 4.01%, up 30 basis points compared to 3.71% in the linked quarter. Adjusted net interest margin1 was 3.89%, up 44 basis points compared to 3.45% in the linked quarter. Net interest margin expansion resulted from rising rates on variable-rate loans and lower deposit betas on in-market deposits, as the federal funds target rate reached its highest point since the Great Recession.
  • The Bank continues to maintain an asset-sensitive balance sheet and ended the quarter positioned for net interest income to continue to benefit from rising rates. However, the Bank anticipates deposit betas will rise at a greater rate with further increases expected in the federal funds rate during the fourth quarter, which will slow the pace of net interest margin expansion.
____________________

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 average net PPP loans and other recurring, but volatile, components of average interest-earning assets.

The Company reported provision expense of $12,000, compared to a $3.7 million benefit in the second quarter of 2022 due to a large loan recovery.

  • The provision expense in the third quarter of 2022 was primarily due to an increase in the general reserve of $400,000 related to loan growth and a $132,000 increase due to qualitative factor changes, as well as a $447,000 net increase in specific reserves, partially offset by a $940,000 reduction in general reserve from change in loss factors derived from historical look-back period.

Non-interest income increased $1.3 million, or 19.3%, to $8.2 million.

  • Other fee income increased $1.8 million to $2.7 million, compared to $860,000 in the second quarter. The increase was primarily due to strong returns on the Company’s investments in mezzanine funds and gains recognized on end-of-term buyout agreements related to the Company’s equipment financing business line.
  • Loan fees increased $117,000, or 16.8% to $814,000 from the increase in loans as well as an increase in commercial and industrial activity (“C&I”) generating additional service fee income.
  • Private Wealth management fee income decreased $234,000, or 8.2% to $2.6 million. Private Wealth and trust assets under management and administration measured $2.493 billion at September 30, 2022, down $61.1 million from the second quarter. The decrease in fee income and assets under management and administration was due to a decrease in market valuations.
  • Gains on sale of Small Business Administration (“SBA”) loans decreased $219,000, or 23.0%, to $732,000. Premiums on the sale and notional value of SBA loans sold decreased compared to prior quarter.
  • Commercial loan swap fee income decreased $130,000, or 27.6%, to $341,000. Swap fee income can vary from period to period based on loan activity and the interest rate environment.

Non-interest expense increased $572,000, or 2.9%, to $20.0 million, while operating expense increased $240,000, or 1.2%, to $19.9 million.

  • Compensation expense was $14.8 million, reflecting an increase of $797,000, or 5.7%, from the linked quarter due to a $441,000 one-time increase to the annual cash incentive bonus program accrual, as well as expanded hiring to support the Bank’s growth plans. Management believes there will be upward pressure on compensation throughout the remainder of the year as the Bank continues to opportunistically invest in new talent and retain existing talent in the competitive market. Average FTEs for the third quarter of 2022 were 333, up twelve from 321 in the linked quarter.
  • Professional fees decreased $95,000, or 7.3%, to $1.2 million from the linked quarter primarily due to a decrease in recruiting expense.
  • Marketing expense decreased $127,000, or 19.0%, to $543,000 from the linked quarter primarily due to seasonally higher spending in the second quarter related to sponsorships.
  • Data processing expense decreased $173,000, or 19.4%, to $719,000 from the linked quarter primarily due to the decrease in recurring annual expense related to tax processing on behalf of the Bank’s Private Wealth management clients in the second quarter.

Income tax expense decreased $384,000, or 10.7%, to $3.2 million. The effective tax rate was 22.9% for the three months ended September 30, 2022, compared to 23.5% for the same period in 2021. The three months ended September 30, 2022 included a $155,000 net benefit from a low income housing tax credit investment; no tax credits were recognized in the second quarter of 2022. For 2022, the Company expects to report an effective tax rate less than 22.5% as management continues to actively pursue tax credit opportunities.

Total period-end loans and leases receivable increased $40.6 million, or 7.1% annualized, to $2.331 billion. Excluding net PPP loans, total period-end loans and leases receivable increased $46.4 million, or 8.1% annualized, to $2.328 billion.

  • C&I loans increased $47.6 million, or 25.6% annualized, to $789.0 million, compared to $741.4 million. Excluding PPP loans, C&I loans increased $53.5 million, or 29.2% annualized, due to an increase in Equipment Finance and Asset-Based Lending.
  • Commercial real estate (“CRE”) loans decreased by $3.5 million, or 1.0% annualized, to $1.485 billion, compared to $1.488 billion. A decrease in construction loans reflected migration to other CRE categories.

Total period-end in-market deposits increased $72.2 million, or 15.6% annualized, to $1.929 billion, compared to $1.857 billion. The average rate paid was 0.61%, up 41 basis points from 0.20% in the second quarter.

Period-end wholesale funding, including FHLB advances, brokered deposits, and deposits gathered through internet deposit listing services, decreased $30.3 million to $536.1 million.

  • Wholesale deposits increased $146.0 million to $158.3 million, compared to $12.3 million as the Bank replaced FHLB advances with wholesale deposits. This shift in wholesale funding is consistent with our funding philosophy to manage interest rate risk by utilizing the most efficient and cost-effective source of wholesale funds to match-fund our fixed-rate loan portfolio. The average rate paid on wholesale deposits decreased 52 basis points to 2.46% and the weighted average original maturity decreased to 0.3 years from 4.8 years.
  • FHLB advances decreased $176.3 million to $377.8 million. The average rate paid on FHLB advances increased 53 basis points to 2.01% and the weighted average original maturity increased to 4.8 years from 3.2 years.

Non-performing assets decreased to $3.8 million, or 0.13% of total assets, compared to $5.7 million, or 0.21% of total assets, primarily due to the payoff of a non-accrual loan.

The allowance for loan and lease losses increased $39,000, or 0.2%, as increases in the general reserve from loan growth, changes in qualitative factors, and an increase in specific reserves were partially offset by a decrease in the general reserve due to a change in loss factors derived from the historical look-back period.

The allowance for loan and lease losses as a percent of total gross loans and leases was 1.04% compared to 1.05%.

Third Quarter 2022 Compared to Third Quarter 2021

Net interest income increased $4.7 million, or 22.0%, to $25.9 million.

  • The increase in net interest income primarily reflects an increase in average gross loans and leases and net interest margin expansion, partially offset by lower fees in lieu of interest. Fees in lieu of interest decreased from $2.8 million to $807,000, primarily due to a $1.6 million reduction in PPP loan fee amortization. Excluding fees in lieu of interest and interest income from PPP loans, net interest income increased $6.9 million, or 38.0%. Excluding net PPP loans, average gross loans and leases increased $268.5 million, or 13.1%.
  • Net interest margin increased 56 basis points to 4.01% from 3.45%. Adjusted net interest margin increased 67 basis points to 3.89% from 3.22%.
  • The yield on average interest-earning assets measured 4.92% compared to 3.90%. Excluding fees in lieu of interest, PPP loan interest income, and net PPP loans, the yield on average interest-earning assets measured 4.80%, compared to 3.53%. 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 rate paid for average interest-bearing in-market deposits increased 68 basis points to 0.88% from 0.20%. The rate paid for average total bank funding increased 53 basis points to 0.89% from 0.36%.

The Company reported provision expense of $12,000, compared to a provision benefit of $2.3 million in the third quarter of 2021 due to large loan recoveries in the prior year.

Non-interest income of $8.2 million increased by $1.2 million, or 16.8%, from $7.0 million in the prior year period.

  • Other fee income increased $806,000, or 53.4%, to $2.3 million, due to above-average returns on the Company’s investments in mezzanine funds and gains recognized on end-of-term buyout agreements related to the Company’s equipment financing business line.
  • Commercial loan swap fee income was $341,000. There was no swap fee activity in the prior year quarter. Swap fee income varies from period to period based on loan activity and the interest rate environment.
  • Loan fees of $814,000 increased by $101,000, or 14.2%, primarily due to an increase in C&I lending activity.
  • Service charges on deposits increased $62,000, or 6.5%, to $1.0 million, due to an increase in existing and new deposit client relationships.
  • Private Wealth management fee income decreased $141,000, or 5.1%, to $2.6 million, due to a decline in market values. Private Wealth and trust assets under management and administration measured $2.493 billion at September 30, 2022, down $255.1 million, or 9.3%.

Non-interest expense increased $1.5 million, or 8.3%, to $20.0 million. Operating expense increased $1.4 million, or 7.4%, to $19.9 million.

  • Compensation expense increased $1.5 million, or 11.0%, to $14.8 million. Average FTEs were 333 in the third quarter of 2022, compared to 311 in the third quarter of 2021. The increase in compensation expense is consistent with the explanations discussed above in the linked quarter analysis.
  • Professional fees increased $179,000, or 17.5%, to $1.2 million, primarily due to an increase in recruiting expense, audit expenses, and a general increase in other professional consulting services for various projects.
  • Computer software expense increased $129,000, or 12.9%, to $1.1 million, primarily due to an increase in technology costs driven by higher headcount.
  • Other non-interest expense decreased $134,000, or 19.1%, to $569,000 mainly due to higher deferred loan origination costs driven by loan volume increases in our Equipment Finance business line.

Total period-end loans and leases receivable increased $207.4 million, or 9.8%, to $2.331 billion. Excluding net PPP loans, total period-end loans and leases receivable increased $269.5 million, or 13.1%, to $2.328 billion.

  • C&I loans increased $107.9 million, or 15.8% to $789.0 million. Excluding PPP loans, C&I loans increased $171.4 million, or 27.9%, to $786.6 million due to expansion of existing markets and products.
  • CRE loans increased $97.2 million, or 7.0%, due to increases in all CRE categories.

Total period-end in-market deposits increased $99.6 million, or 5.4%, to $1.929 billion and the average rate paid increased 47 basis points to 0.61%. This increase in deposits was principally due to a $103.1 million increase in certificates of deposit, partially offset by a $17.3 million decrease in transaction accounts.

Period-end wholesale funding increased $103.7 million to $536.1 million.

  • Wholesale deposits increased $83.7 million, or 112.1%, to $158.3 million, as the Bank utilized more wholesale deposits in lieu of short-term FHLB advances. The average rate paid on brokered certificates of deposit increased 154 basis points to 2.46% and the weighted average original maturity decreased to 0.3 years from 3.5 years.
  • FHLB advances increased $20.0 million to $377.8 million. The average rate paid on FHLB advances increased 72 basis points to 2.01% and the weighted average original maturity decreased to 4.8 years from 6.1 years.

Non-performing assets decreased to $3.8 million, or 0.13% of total assets, compared to $7.6 million, or 0.29% of total assets.

The allowance for loan and lease losses decreased $533,000 to $24.1 million, compared to $24.7 million.

  • The allowance for loan and lease losses as a percent of total gross loans and leases was 1.04% compared to 1.16%.

Paycheck Protection Program

As of September 30, 2022, the Company had $2.4 million in gross PPP loans outstanding and deferred processing fees outstanding of $52,000. The processing fees are deferred and recognized over the contractual life of the loan, or accelerated at forgiveness, as an adjustment of yield using the interest method. During the three months ended September 30, 2022, the Company recognized $61,000 of PPP processing fees in interest income. The SBA provides a guaranty to the lender of 100% of principal and interest unless the lender violated an obligation under the agreement.

Share Repurchase Program Update

As previously announced, effective March 4, 2022, the Company’s Board of Directors authorized the repurchase by the Company of shares of its common stock with a maximum aggregate purchase price of $5.0 million, effective March 4, 2022 through March 4, 2023. As of October 25, 2022, the Company had repurchased a total of 88,735 shares for approximately $2.9 million at an average cost of $33.17 per share.

About First Business Financial Services, Inc.

First Business Financial Services, Inc., (Nasdaq: FBIZ) is the parent company of First Business Bank. First Business Bank specializes in business banking, including commercial banking and specialized lending, private wealth, and bank consulting services, and through its refined focus, delivers unmatched expertise, accessibility, and responsiveness. Specialized lending solutions are delivered through First Business Bank’s wholly owned subsidiary First Business Specialty Finance, LLC. 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, labor shortages, and the adverse effects of the COVID-19 pandemic 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.

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, 2021 and other filings with the Securities and Exchange Commission.

SELECTED FINANCIAL CONDITION DATA

(Unaudited)

 

As of

(in thousands)

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

110,965

 

 

$

95,484

 

 

$

95,603

 

 

$

57,110

 

 

$

110,624

 

Securities available-for-sale, at fair value

 

 

196,566

 

 

 

208,643

 

 

 

223,631

 

 

 

205,702

 

 

 

194,056

 

Securities held-to-maturity, at amortized cost

 

 

13,531

 

 

 

13,968

 

 

 

17,267

 

 

 

19,746

 

 

 

21,196

 

Loans held for sale

 

 

773

 

 

 

2,256

 

 

 

2,418

 

 

 

3,570

 

 

 

5,603

 

Loans and leases receivable

 

 

2,330,700

 

 

 

2,290,100

 

 

 

2,251,249

 

 

 

2,239,408

 

 

 

2,123,306

 

Allowance for loan and lease losses

 

 

(24,143

)

 

 

(24,104

)

 

 

(23,669

)

 

 

(24,336

)

 

 

(24,676

)

Loans and leases receivable, net

 

 

2,306,557

 

 

 

2,265,996

 

 

 

2,227,580

 

 

 

2,215,072

 

 

 

2,098,630

 

Premises and equipment, net

 

 

3,143

 

 

 

1,899

 

 

 

1,621

 

 

 

1,694

 

 

 

1,700

 

Foreclosed properties

 

 

151

 

 

 

124

 

 

 

117

 

 

 

164

 

 

 

172

 

Right-of-use assets

 

 

5,424

 

 

 

5,772

 

 

 

6,118

 

 

 

4,910

 

 

 

5,263

 

Bank-owned life insurance

 

 

54,683

 

 

 

54,324

 

 

 

53,974

 

 

 

53,600

 

 

 

53,244

 

Federal Home Loan Bank stock, at cost

 

 

15,701

 

 

 

22,959

 

 

 

12,863

 

 

 

13,336

 

 

 

12,351

 

Goodwill and other intangible assets

 

 

12,218

 

 

 

12,262

 

 

 

12,184

 

 

 

12,268

 

 

 

12,229

 

Derivatives

 

 

73,718

 

 

 

44,461

 

 

 

26,890

 

 

 

26,343

 

 

 

28,678

 

Accrued interest receivable and other assets

 

 

57,372

 

 

 

48,868

 

 

 

43,816

 

 

 

39,390

 

 

 

40,664

 

Total assets

 

$

2,850,802

 

 

$

2,777,016

 

 

$

2,724,082

 

 

$

2,652,905

 

 

$

2,584,410

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

In-market deposits

 

$

1,929,224

 

 

$

1,857,010

 

 

$

2,011,373

 

 

$

1,928,285

 

 

$

1,829,644

 

Wholesale deposits

 

 

158,321

 

 

 

12,321

 

 

 

12,321

 

 

 

29,638

 

 

 

74,638

 

Total deposits

 

 

2,087,545

 

 

 

1,869,331

 

 

 

2,023,694

 

 

 

1,957,923

 

 

 

1,904,282

 

Federal Home Loan Bank advances and other borrowings

 

 

420,297

 

 

 

596,642

 

 

 

414,487

 

 

 

403,451

 

 

 

394,090

 

Junior subordinated notes

 

 

 

 

 

 

 

 

 

 

 

10,076

 

 

 

10,072

 

Lease liabilities

 

 

6,827

 

 

 

7,207

 

 

 

7,580

 

 

 

5,406

 

 

 

5,780

 

Derivatives

 

 

66,162

 

 

 

40,357

 

 

 

24,961

 

 

 

28,283

 

 

 

31,890

 

Accrued interest payable and other liabilities

 

 

16,967

 

 

 

13,556

 

 

 

8,309

 

 

 

15,344

 

 

 

13,016

 

Total liabilities

 

 

2,597,798

 

 

 

2,527,093

 

 

 

2,479,031

 

 

 

2,420,483

 

 

 

2,359,130

 

Total stockholders’ equity

 

 

253,004

 

 

 

249,923

 

 

 

245,051

 

 

 

232,422

 

 

 

225,280

 

Total liabilities and stockholders’ equity

 

$

2,850,802

 

 

$

2,777,016

 

 

$

2,724,082

 

 

$

2,652,905

 

 

$

2,584,410

 

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,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Total interest income

 

$

31,786

 

$

27,031

 

 

$

24,235

 

 

$

23,576

 

 

$

24,014

 

 

$

83,053

 

 

$

72,420

 

Total interest expense

 

 

5,902

 

 

3,371

 

 

 

2,809

 

 

 

2,652

 

 

 

2,791

 

 

 

12,082

 

 

 

8,682

 

Net interest income

 

 

25,884

 

 

23,660

 

 

 

21,426

 

 

 

20,924

 

 

 

21,223

 

 

 

70,971

 

 

 

63,738

 

Provision for loan and lease losses

 

 

12

 

 

(3,727

)

 

 

(855

)

 

 

(508

)

 

 

(2,269

)

 

 

(4,569

)

 

 

(5,295

)

Net interest income after provision for loan and lease losses

 

 

25,872

 

 

27,387

 

 

 

22,281

 

 

 

21,432

 

 

 

23,492

 

 

 

75,540

 

 

 

69,033

 

Private wealth management service fees

 

 

2,618

 

 

2,852

 

 

 

2,841

 

 

 

2,874

 

 

 

2,759

 

 

 

8,311

 

 

 

7,910

 

Gain on sale of SBA loans

 

 

732

 

 

951

 

 

 

585

 

 

 

1,042

 

 

 

721

 

 

 

2,269

 

 

 

3,002

 

Service charges on deposits

 

 

1,018

 

 

1,041

 

 

 

999

 

 

 

1,023

 

 

 

956

 

 

 

3,058

 

 

 

2,814

 

Loan fees

 

 

814

 

 

697

 

 

 

652

 

 

 

679

 

 

 

713

 

 

 

2,163

 

 

 

1,828

 

Net gain on sale of securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

Swap fees

 

 

341

 

 

471

 

 

 

225

 

 

 

684

 

 

 

 

 

 

1,038

 

 

 

684

 

Other non-interest income

 

 

2,674

 

 

860

 

 

 

2,084

 

 

 

1,267

 

 

 

1,866

 

 

 

5,616

 

 

 

4,264

 

Total non-interest income

 

 

8,197

 

 

6,872

 

 

 

7,386

 

 

 

7,569

 

 

 

7,015

 

 

 

22,455

 

 

 

20,531

 

Compensation

 

 

14,817

 

 

14,020

 

 

 

13,638

 

 

 

12,447

 

 

 

13,351

 

 

 

42,475

 

 

 

39,263

 

Occupancy

 

 

566

 

 

568

 

 

 

555

 

 

 

551

 

 

 

544

 

 

 

1,689

 

 

 

1,628

 

Professional fees

 

 

1,203

 

 

1,298

 

 

 

1,170

 

 

 

933

 

 

 

1,024

 

 

 

3,671

 

 

 

2,803

 

Data processing

 

 

719

 

 

892

 

 

 

780

 

 

 

773

 

 

 

746

 

 

 

2,391

 

 

 

2,315

 

Marketing

 

 

543

 

 

670

 

 

 

500

 

 

 

548

 

 

 

572

 

 

 

1,713

 

 

 

1,474

 

Equipment

 

 

253

 

 

235

 

 

 

244

 

 

 

223

 

 

 

260

 

 

 

732

 

 

 

767

 

Computer software

 

 

1,128

 

 

1,117

 

 

 

1,082

 

 

 

1,017

 

 

 

999

 

 

 

3,327

 

 

 

3,244

 

FDIC insurance

 

 

230

 

 

296

 

 

 

313

 

 

 

210

 

 

 

291

 

 

 

840

 

 

 

933

 

Other non-interest expense

 

 

569

 

 

360

 

 

 

541

 

 

 

829

 

 

 

703

 

 

 

1,469

 

 

 

1,576

 

Total non-interest expense

 

 

20,028

 

 

19,456

 

 

 

18,823

 

 

 

17,531

 

 

 

18,490

 

 

 

58,307

 

 

 

54,003

 

Income before income tax expense

 

 

14,041

 

 

14,803

 

 

 

10,844

 

 

 

11,470

 

 

 

12,017

 

 

 

39,688

 

 

 

35,561

 

Income tax expense

 

 

3,215

 

 

3,599

 

 

 

2,172

 

 

 

2,879

 

 

 

2,819

 

 

 

8,986

 

 

 

8,396

 

Net income

 

$

10,826

 

$

11,204

 

 

$

8,672

 

 

$

8,591

 

 

$

9,198

 

 

$

30,702

 

 

$

27,165

 

Preferred stock dividends

 

 

218

 

 

246

 

 

 

 

 

 

 

 

 

 

 

 

464

 

 

 

 

Net income available to common shareholders

 

$

10,608

 

$

10,958

 

 

$

8,672

 

 

$

8,591

 

 

$

9,198

 

 

$

30,238

 

 

$

27,165

 

Per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings

 

$

1.25

 

$

1.29

 

 

$

1.02

 

 

$

1.01

 

 

$

1.07

 

 

$

3.57

 

 

$

3.15

 

Diluted earnings

 

 

1.25

 

 

1.29

 

 

 

1.02

 

 

 

1.01

 

 

 

1.07

 

 

 

3.57

 

 

 

3.15

 

Dividends declared

 

 

0.1975

 

 

0.1975

 

 

 

0.1975

 

 

 

0.18

 

 

 

0.18

 

 

 

0.5925

 

 

 

0.54

 

Book value

 

 

28.58

 

 

28.08

 

 

 

27.46

 

 

 

27.48

 

 

 

26.56

 

 

 

28.58

 

 

 

26.56

 

Tangible book value

 

 

27.13

 

 

26.63

 

 

 

26.02

 

 

 

26.03

 

 

 

25.11

 

 

 

27.13

 

 

 

25.11

 

Weighted-average common shares outstanding(1)

 

 

8,230,902

 

 

8,225,838

 

 

 

8,232,142

 

 

 

8,228,311

 

 

 

8,340,042

 

 

 

8,237,879

 

 

 

8,380,591

 

Weighted-average diluted common shares outstanding(1)

 

 

8,230,902

 

 

8,225,838

 

 

 

8,232,142

 

 

 

8,228,311

 

 

 

8,340,042

 

 

 

8,237,879

 

 

 

8,380,591

 

(1)

Excluding participating securities.

NET INTEREST INCOME ANALYSIS

(Unaudited)

 

For the Three Months Ended

(Dollars in thousands)

 

September 30, 2022

 

June 30, 2022

 

September 30, 2021

 

 

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)

 

$

1,486,530

 

$

17,280

 

4.65

%

 

$

1,472,075

 

$

15,343

 

4.17

%

 

$

1,388,236

 

$

13,090

 

3.77

%

Commercial and industrial loans(1)

 

 

765,440

 

 

12,266

 

6.41

%

 

 

734,299

 

 

9,710

 

5.29

%

 

 

680,563

 

 

9,259

 

5.44

%

Direct financing leases(1)

 

 

15,093

 

 

160

 

4.24

%

 

 

15,527

 

 

176

 

4.53

%

 

 

18,611

 

 

207

 

4.45

%

Consumer and other loans(1)

 

 

49,558

 

 

468

 

3.78

%

 

 

51,045

 

 

458

 

3.59

%

 

 

43,689

 

 

391

 

3.58

%

Total loans and leases receivable(1)

 

 

2,316,621

 

 

30,174

 

5.21

%

 

 

2,272,946

 

 

25,687

 

4.52

%

 

 

2,131,099

 

 

22,947

 

4.31

%

Mortgage-related securities(2)

 

 

168,433

 

 

915

 

2.17

%

 

 

176,747

 

 

804

 

1.82

%

 

 

154,372

 

 

659

 

1.71

%

Other investment securities(3)

 

 

51,812

 

 

250

 

1.93

%

 

 

54,591

 

 

260

 

1.91

%

 

 

45,196

 

 

196

 

1.73

%

FHLB stock

 

 

18,167

 

 

289

 

6.36

%

 

 

17,355

 

 

226

 

5.21

%

 

 

13,279

 

 

167

 

5.03

%

Short-term investments

 

 

27,912

 

 

158

 

2.26

%

 

 

29,541

 

 

54

 

0.73

%

 

 

116,621

 

 

45

 

0.15

%

Total interest-earning assets

 

 

2,582,945

 

 

31,786

 

4.92

%

 

 

2,551,180

 

 

27,031

 

4.24

%

 

 

2,460,567

 

 

24,014

 

3.90

%

Non-interest-earning assets

 

 

176,016

 

 

 

 

 

 

165,527

 

 

 

 

 

 

147,631

 

 

 

 

Total assets

 

$

2,758,961

 

 

 

 

 

$

2,716,707

 

 

 

 

 

$

2,608,198

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction accounts

 

$

486,704

 

 

1,005

 

0.83

%

 

$

502,763

 

 

343

 

0.27

%

 

$

509,089

 

 

251

 

0.20

%

Money market

 

 

746,227

 

 

1,610

 

0.86

%

 

 

767,433

 

 

509

 

0.27

%

 

 

703,460

 

 

306

 

0.17

%

Certificates of deposit

 

 

113,529

 

 

340

 

1.20

%

 

 

73,560

 

 

114

 

0.62

%

 

 

42,370

 

 

71

 

0.67

%

Wholesale deposits

 

 

36,702

 

 

226

 

2.46

%

 

 

12,350

 

 

92

 

2.98

%

 

 

89,135

 

 

206

 

0.92

%

Total interest-bearing deposits

 

 

1,383,162

 

 

3,181

 

0.92

%

 

 

1,356,106

 

 

1,058

 

0.31

%

 

 

1,344,054

 

 

834

 

0.25

%

FHLB advances

 

 

432,528

 

 

2,173

 

2.01

%

 

 

449,599

 

 

1,666

 

1.48

%

 

 

381,061

 

 

1,228

 

1.29

%

Other borrowings

 

 

42,800

 

 

548

 

5.12

%

 

 

51,018

 

 

647

 

5.07

%

 

 

32,630

 

 

449

 

5.50

%

Junior subordinated notes

 

 

 

 

 

%

 

 

 

 

 

%

 

 

10,070

 

 

280

 

11.12

%

Total interest-bearing liabilities

 

 

1,858,490

 

 

5,902

 

1.27

%

 

 

1,856,723

 

 

3,371

 

0.73

%

 

 

1,767,815

 

 

2,791

 

0.63

%

Non-interest-bearing demand deposit accounts

 

 

584,535

 

 

 

 

 

 

557,086

 

 

 

 

 

 

556,029

 

 

 

 

Other non-interest-bearing liabilities

 

 

60,705

 

 

 

 

 

 

57,615

 

 

 

 

 

 

59,865

 

 

 

 

Total liabilities

 

 

2,503,730

 

 

 

 

 

 

2,471,424

 

 

 

 

 

 

2,383,709

 

 

 

 

Stockholders’ equity

 

 

255,231

 

 

 

 

 

 

245,283

 

 

 

 

 

 

224,489

 

 

 

 

Total liabilities and stockholders’ equity

 

$

2,758,961

 

 

 

 

 

$

2,716,707

 

 

 

 

 

$

2,608,198

 

 

 

 

Net interest income

 

 

 

$

25,884

 

 

 

 

 

$

23,660

 

 

 

 

 

$

21,223

 

 

Interest rate spread

 

 

 

 

 

3.65

%

 

 

 

 

 

3.51

%

 

 

 

 

 

3.27

%

Net interest-earning assets

 

$

724,455

 

 

 

 

 

$

694,457

 

 

 

 

 

$

692,752

 

 

 

 

Net interest margin

 

 

 

 

 

4.01

%

 

 

 

 

 

3.71

%

 

 

 

 

 

3.45

%

(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, 2022

 

September 30, 2021

 

 

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)

 

$

1,472,930

 

$

45,969

 

4.16

%

 

$

1,377,302

 

$

38,704

 

3.75

%

Commercial and industrial loans(1)

 

 

739,540

 

 

31,077

 

5.60

%

 

 

736,623

 

 

28,759

 

5.21

%

Direct financing leases(1)

 

 

15,714

 

 

526

 

4.46

%

 

 

20,242

 

 

673

 

4.43

%

Consumer and other loans(1)

 

 

50,149

 

 

1,362

 

3.62

%

 

 

44,780

 

 

1,197

 

3.56

%

Total loans and leases receivable(1)

 

 

2,278,333

 

 

78,934

 

4.62

%

 

 

2,178,947

 

 

69,333

 

4.24

%

Mortgage-related securities(2)

 

 

176,654

 

 

2,479

 

1.87

%

 

 

155,617

 

 

1,955

 

1.67

%

Other investment securities(3)

 

 

52,324

 

 

725

 

1.85

%

 

 

42,992

 

 

569

 

1.76

%

FHLB stock

 

 

16,523

 

 

688

 

5.55

%

 

 

13,308

 

 

496

 

4.97

%

Short-term investments

 

 

29,509

 

 

227

 

1.03

%

 

 

65,769

 

 

67

 

0.14

%

Total interest-earning assets

 

 

2,553,343

 

 

83,053

 

4.34

%

 

 

2,456,633

 

 

72,420

 

3.93

%

Non-interest-earning assets

 

 

160,966

 

 

 

 

 

 

145,714

 

 

 

 

Total assets

 

$

2,714,309

 

 

 

 

 

$

2,602,347

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Transaction accounts

 

$

507,402

 

 

1,602

 

0.42

%

 

$

509,709

 

 

749

 

0.20

%

Money market

 

 

765,839

 

 

2,458

 

0.43

%

 

 

674,858

 

 

862

 

0.17

%

Certificates of deposit

 

 

80,093

 

 

509

 

0.85

%

 

 

48,540

 

 

360

 

0.99

%

Wholesale deposits

 

 

21,838

 

 

436

 

2.66

%

 

 

139,205

 

 

825

 

0.79

%

Total interest-bearing deposits

 

 

1,375,172

 

 

5,005

 

0.49

%

 

 

1,372,312

 

 

2,796

 

0.27

%

FHLB advances

 

 

422,576

 

 

4,875

 

1.54

%

 

 

384,581

 

 

3,761

 

1.30

%

Other borrowings

 

 

44,719

 

 

1,698

 

5.06

%

 

 

30,811

 

 

1,293

 

5.60

%

Junior subordinated notes(5)

 

 

3,247

 

 

504

 

20.69

%

 

 

10,066

 

 

832

 

11.02

%

Total interest-bearing liabilities

 

 

1,845,714

 

 

12,082

 

0.87

%

 

 

1,797,770

 

 

8,682

 

0.64

%

Non-interest-bearing demand deposit accounts

 

 

568,131

 

 

 

 

 

 

523,368

 

 

 

 

Other non-interest-bearing liabilities

 

 

53,685

 

 

 

 

 

 

63,366

 

 

 

 

Total liabilities

 

 

2,467,530

 

 

 

 

 

 

2,384,504

 

 

 

 

Stockholders’ equity

 

 

246,779

 

 

 

 

 

 

217,843

 

 

 

 

Total liabilities and stockholders’ equity

 

$

2,714,309

 

 

 

 

 

$

2,602,347

 

 

 

 

Net interest income

 

 

 

$

70,971

 

 

 

 

 

$

63,738

 

 

Interest rate spread

 

 

 

 

 

3.46

%

 

 

 

 

 

3.29

%

Net interest-earning assets

 

$

707,629

 

 

 

 

 

$

658,863

 

 

 

 

Net interest margin

 

 

 

 

 

3.71

%

 

 

 

 

 

3.46

%

(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.

(5)

The calculation for the nine months ended September 30, 2022 includes $236,000 in accelerated amortization of debt issuance costs.

ASSET AND LIABILITY BETA ANALYSIS

 

For the Three Months Ended

For the Nine Months Ended

(Unaudited)

September 30,

2022

 

June 30,

2022

 

 

 

September 30,

2021

 

 

 

September 30,

2022

 

September 30,

2021

 

 

 

Average

Yield/

Rate (3)

 

Average

Yield/

Rate (3)

 

Increase

(Decrease)

 

Average

Yield/

Rate (3)

 

Increase

(Decrease)

 

Average

Yield/

Rate (3)

 

Average

Yield/

Rate (3)

 

Increase

(Decrease)

Total loans and leases receivable (a)

5.21

%

 

4.52

%

 

0.69

%

 

4.31

%

 

0.90

%

 

4.62

%

 

4.24

%

 

0.38

%

Total interest-earning assets(b)

4.92

%

 

4.24

%

 

0.68

%

 

3.90

%

 

1.02

%

 

4.34

%

 

3.93

%

 

0.41

%

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

5.08

%

 

4.21

%

 

0.87

%

 

3.89

%

 

1.19

%

 

4.40

%

 

3.91

%

 

0.49

%

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

4.80

%

 

3.96

%

 

0.84

%

 

3.53

%

 

1.27

%

 

4.14

%

 

3.61

%

 

0.53

%

Interest-bearing in-market deposits(e)

0.88

%

 

0.29

%

 

0.59

%

 

0.20

%

 

0.68

%

 

0.45

%

 

0.21

%

 

0.24

%

Interest-bearing deposits(f)

0.92

%

 

0.31

%

 

0.61

%

 

0.25

%

 

0.67

%

 

0.49

%

 

0.27

%

 

0.22

%

Interest-bearing liabilities(g)

1.27

%

 

0.73

%

 

0.54

%

 

0.63

%

 

0.64

%

 

0.87

%

 

0.64

%

 

0.23

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective fed funds rate (2)(h)

2.18

%

 

0.77

%

 

1.41

%

 

0.09

%

 

2.09

%

 

1.03

%

 

0.08

%

 

0.95

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beta Calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

48.90

%

 

 

 

43.20

%

 

 

 

 

 

39.66

%

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

 

 

 

 

48.53

%

 

 

 

48.74

%

 

 

 

 

 

42.77

%

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

 

 

 

 

61.70

%

 

 

 

56.75

%

 

 

 

 

 

51.96

%

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

 

 

 

 

59.92

%

 

 

 

60.87

%

 

 

 

 

 

55.80

%

Interest-bearing in-market deposits(e)/(h)

 

 

 

 

41.87

%

 

 

 

32.43

%

 

 

 

 

 

24.94

%

Interest-bearing deposits(f)/(h)

 

 

 

 

43.11

%

 

 

 

32.14

%

 

 

 

 

 

22.48

%

Interest-bearing liabilities(g)/(h)

 

 

 

 

38.59

%

 

 

 

30.56

%

 

 

 

 

 

24.09

%

(1)

Excluding average net PPP loans, PPP loan interest income, and 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 LOAN AND LEASE LOSS COMPOSITION

(Unaudited)

 

For the Three Months Ended

 

For the Nine Months Ended

(Dollars in thousands)

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Change in general reserve due to qualitative factor changes

 

$

132

 

 

$

(185

)

 

$

(416

)

 

$

(805

)

 

$

(51

)

 

$

(469

)

 

$

379

 

Change in general reserve due to historical loss factor changes

 

 

(940

)

 

 

64

 

 

 

(206

)

 

 

(862

)

 

 

(923

)

 

 

(1,082

)

 

 

(3,594

)

Charge-offs

 

 

54

 

 

 

85

 

 

 

22

 

 

 

106

 

 

 

364

 

 

 

161

 

 

 

3,402

 

Recoveries

 

 

(81

)

 

 

(4,247

)

 

 

(210

)

 

 

(274

)

 

 

(1,634

)

 

 

(4,537

)

 

 

(4,852

)

Change in specific reserves on impaired loans, net

 

 

447

 

 

 

29

 

 

 

(280

)

 

 

(64

)

 

 

(451

)

 

 

196

 

 

 

(2,111

)

Change due to loan growth, net

 

 

400

 

 

 

527

 

 

 

235

 

 

 

1,391

 

 

 

426

 

 

 

1,162

 

 

 

1,481

 

Total provision for loan and lease losses

 

$

12

 

 

$

(3,727

)

 

$

(855

)

 

$

(508

)

 

$

(2,269

)

 

$

(4,569

)

 

$

(5,295

)

PERFORMANCE RATIOS

 

 

For the Three Months Ended

 

For the Nine Months Ended

(Unaudited)

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Return on average assets (annualized)

 

1.57

%

 

1.65

%

 

1.30

%

 

1.32

%

 

1.41

%

 

1.49

%

 

1.39

%

Return on average equity (annualized)

 

16.97

%

 

18.27

%

 

14.47

%

 

15.04

%

 

16.39

%

 

16.59

%

 

16.63

%

Return on average tangible common equity (annualized)

 

17.88

%

 

19.27

%

 

15.05

%

 

15.44

%

 

16.85

%

 

17.40

%

 

17.12

%

Efficiency ratio

 

58.46

%

 

64.47

%

 

65.55

%

 

61.92

%

 

65.68

%

 

62.61

%

 

64.02

%

Interest rate spread

 

3.65

%

 

3.51

%

 

3.22

%

 

3.21

%

 

3.27

%

 

3.46

%

 

3.29

%

Net interest margin

 

4.01

%

 

3.71

%

 

3.39

%

 

3.39

%

 

3.45

%

 

3.71

%

 

3.46

%

Average interest-earning assets to average interest-bearing liabilities

 

138.98

%

 

137.40

%

 

138.64

%

 

141.19

%

 

139.19

%

 

138.34

%

 

136.65

%

ASSET QUALITY RATIOS

(Unaudited)

 

As of

(Dollars in thousands)

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Non-accrual loans and leases

 

$

3,645

 

 

$

5,585

 

 

$

5,617

 

 

$

6,358

 

 

$

7,433

 

Foreclosed properties

 

 

151

 

 

 

124

 

 

 

117

 

 

 

164

 

 

 

172

 

Total non-performing assets

 

 

3,796

 

 

 

5,709

 

 

 

5,734

 

 

 

6,522

 

 

 

7,605

 

Performing troubled debt restructurings

 

 

172

 

 

 

188

 

 

 

203

 

 

 

217

 

 

 

53

 

Total impaired assets

 

$

3,968

 

 

$

5,897

 

 

$

5,937

 

 

$

6,739

 

 

$

7,658

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

0.16

%

 

 

0.24

%

 

 

0.25

%

 

 

0.28

%

 

 

0.35

%

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

 

 

0.16

%

 

 

0.25

%

 

 

0.25

%

 

 

0.29

%

 

 

0.36

%

Non-performing assets as a percent of total assets

 

 

0.13

%

 

 

0.21

%

 

 

0.21

%

 

 

0.25

%

 

 

0.29

%

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

 

 

1.04

%

 

 

1.05

%

 

 

1.05

%

 

 

1.09

%

 

 

1.16

%

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

 

 

662.36

%

 

 

431.58

%

 

 

421.38

%

 

 

382.76

%

 

 

331.98

%

 

ASSET QUALITY RATIOS - EXCLUDING NET PPP LOANS

(Unaudited)

 

As of

(Dollars in thousands)

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

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

 

 

0.16

%

 

 

0.24

%

 

 

0.25

%

 

 

0.29

%

 

 

0.36

%

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

 

 

0.16

%

 

 

0.25

%

 

 

0.26

%

 

 

0.29

%

 

 

0.37

%

Non-performing assets as a percent of total assets

 

 

0.13

%

 

 

0.21

%

 

 

0.21

%

 

 

0.25

%

 

 

0.30

%

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

 

 

1.04

%

 

 

1.06

%

 

 

1.06

%

 

 

1.10

%

 

 

1.20

%

PPP loans outstanding, net

 

$

2,324

 

 

$

8,172

 

 

$

18,206

 

 

$

27,297

 

 

$

64,454

 

NET CHARGE-OFFS (RECOVERIES)

(Unaudited)

 

For the Three Months Ended

 

For the Nine Months Ended

(Dollars in thousands)

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Charge-offs

 

$

54

 

 

$

85

 

 

$

22

 

 

$

106

 

 

$

364

 

 

$

161

 

 

$

3,402

 

Recoveries

 

 

(81

)

 

 

(4,247

)

 

 

(210

)

 

 

(274

)

 

 

(1,634

)

 

 

(4,537

)

 

 

(4,852

)

Net (recoveries) charge-offs

 

$

(27

)

 

$

(4,162

)

 

$

(188

)

 

$

(168

)

 

$

(1,270

)

 

$

(4,376

)

 

$

(1,450

)

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

 

 

%

 

 

(0.73

)%

 

 

(0.03

)%

 

 

(0.03

)%

 

 

(0.24

)%

 

 

(0.26

)%

 

 

(0.09

)%

Annualized (recoveries) charge-offs as a percent of average gross loans and leases, excluding average net PPP loans

 

 

%

 

 

(0.74

)%

 

 

(0.03

)%

 

 

(0.03

)%

 

 

(0.25

)%

 

 

(0.26

)%

 

 

(0.10

)%

Average PPP loans outstanding, net

 

$

4,505

 

 

$

11,650

 

 

$

20,935

 

 

$

52,923

 

 

$

87,517

 

 

$

12,303

 

 

$

185,742

 

CAPITAL RATIOS

 

 

As of and for the Three Months Ended

(Unaudited)

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Total capital to risk-weighted assets

 

11.66

%

 

11.56

%

 

11.87

%

 

10.82

%

 

11.14

%

Tier I capital to risk-weighted assets

 

9.48

%

 

9.34

%

 

9.27

%

 

8.94

%

 

9.14

%

Common equity tier I capital to risk-weighted assets

 

9.04

%

 

8.90

%

 

8.81

%

 

8.55

%

 

8.73

%

Tier I capital to adjusted assets

 

9.34

%

 

9.19

%

 

9.09

%

 

8.94

%

 

8.69

%

Tangible common equity to tangible assets

 

8.06

%

 

8.16

%

 

8.14

%

 

8.34

%

 

8.28

%

Tangible common equity to tangible assets, excluding net PPP loans

 

8.07

%

 

8.19

%

 

8.20

%

 

8.42

%

 

8.50

%

LOAN AND LEASE RECEIVABLE COMPOSITION

(Unaudited)

 

As of

(in thousands)

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

Commercial real estate - owner occupied

 

$

265,989

 

$

258,375

 

$

254,237

 

$

235,589

 

$

241,977

Commercial real estate - non-owner occupied

 

 

657,975

 

 

651,920

 

 

656,185

 

 

661,423

 

 

639,423

Land development

 

 

49,458

 

 

42,545

 

 

40,092

 

 

42,792

 

 

39,119

Construction

 

 

162,051

 

 

203,913

 

 

200,472

 

 

179,841

 

 

139,933

Multi-family

 

 

332,782

 

 

314,392

 

 

302,494

 

 

320,072

 

 

313,787

1-4 family

 

 

16,678

 

 

17,335

 

 

16,198

 

 

14,911

 

 

13,487

Total commercial real estate

 

 

1,484,933

 

 

1,488,480

 

 

1,469,678

 

 

1,454,628

 

 

1,387,726

Commercial and industrial

 

 

788,983

 

 

741,363

 

 

720,695

 

 

730,819

 

 

681,065

Direct financing leases, net

 

 

11,109

 

 

13,718

 

 

14,551

 

 

15,743

 

 

16,810

Consumer and other:

 

 

 

 

 

 

 

 

 

 

Home equity and second mortgages

 

 

5,413

 

 

5,132

 

 

4,523

 

 

4,223

 

 

4,576

Other

 

 

40,710

 

 

42,387

 

 

43,066

 

 

35,518

 

 

35,645

Total consumer and other

 

 

46,123

 

 

47,519

 

 

47,589

 

 

39,741

 

 

40,221

Total gross loans and leases receivable

 

 

2,331,148

 

 

2,291,080

 

 

2,252,513

 

 

2,240,931

 

 

2,125,822

Less:

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses

 

 

24,143

 

 

24,104

 

 

23,669

 

 

24,336

 

 

24,676

Deferred loan fees

 

 

448

 

 

980

 

 

1,264

 

 

1,523

 

 

2,516

Loans and leases receivable, net

 

$

2,306,557

 

$

2,265,996

 

$

2,227,580

 

$

2,215,072

 

$

2,098,630

DEPOSIT COMPOSITION

(Unaudited)

 

As of

(in thousands)

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Non-interest-bearing transaction accounts

 

$

564,141

 

$

544,507

 

$

600,987

 

$

589,559

 

$

526,047

Interest-bearing transaction accounts

 

 

461,883

 

 

466,785

 

 

539,492

 

 

530,225

 

 

517,248

Money market accounts

 

 

742,545

 

 

731,718

 

 

806,917

 

 

754,410

 

 

728,751

Certificates of deposit

 

 

160,655

 

 

114,000

 

 

63,977

 

 

54,091

 

 

57,598

Wholesale deposits

 

 

158,321

 

 

12,321

 

 

12,321

 

 

29,638

 

 

74,638

Total deposits

 

$

2,087,545

 

$

1,869,331

 

$

2,023,694

 

$

1,957,923

 

$

1,904,282

TRUST ASSETS COMPOSITION

(Unaudited)

 

As of

(in thousands)

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Trust assets under management

 

$

2,332,448

 

$

2,386,637

 

$

2,636,896

 

$

2,711,760

 

$

2,545,089

Trust assets under administration

 

 

160,171

 

 

167,095

 

 

197,160

 

 

208,954

 

 

202,657

Total trust assets

 

$

2,492,619

 

$

2,553,732

 

$

2,834,056

 

$

2,920,714

 

$

2,747,746

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,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Common stockholders’ equity

 

$

241,012

 

 

$

237,931

 

 

$

233,059

 

 

$

232,422

 

 

$

225,280

 

Goodwill and other intangible assets

 

 

(12,218

)

 

 

(12,262

)

 

 

(12,184

)

 

 

(12,268

)

 

 

(12,229

)

Tangible common equity

 

$

228,794

 

 

$

225,669

 

 

$

220,875

 

 

$

220,154

 

 

$

213,051

 

Common shares outstanding

 

 

8,432,048

 

 

 

8,474,699

 

 

 

8,488,585

 

 

 

8,457,564

 

 

 

8,483,099

 

Book value per share

 

$

28.58

 

 

$

28.08

 

 

$

27.46

 

 

$

27.48

 

 

$

26.56

 

Tangible book value per share

 

 

27.13

 

 

 

26.63

 

 

 

26.02

 

 

 

26.03

 

 

 

25.11

 

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,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Common stockholders’ equity

 

$

241,012

 

 

$

237,931

 

 

$

233,059

 

 

$

232,422

 

 

$

225,280

 

Goodwill and other intangible assets

 

 

(12,218

)

 

 

(12,262

)

 

 

(12,184

)

 

 

(12,268

)

 

 

(12,229

)

Tangible common equity

 

$

228,794

 

 

$

225,669

 

 

$

220,875

 

 

$

220,154

 

 

$

213,051

 

Total assets

 

$

2,850,802

 

 

$

2,777,016

 

 

$

2,724,082

 

 

$

2,652,905

 

 

$

2,584,410

 

Goodwill and other intangible assets

 

 

(12,218

)

 

 

(12,262

)

 

 

(12,184

)

 

 

(12,268

)

 

 

(12,229

)

Tangible assets

 

$

2,838,584

 

 

$

2,764,754

 

 

$

2,711,898

 

 

$

2,640,637

 

 

$

2,572,181

 

Tangible common equity to tangible assets

 

 

8.06

%

 

 

8.16

%

 

 

8.14

%

 

 

8.34

%

 

 

8.28

%

Period-end net PPP loans

 

 

2,324

 

 

 

8,172

 

 

 

18,206

 

 

 

27,297

 

 

 

64,454

 

Tangible assets, excluding net PPP loans

 

$

2,836,260

 

 

$

2,756,582

 

 

$

2,693,692

 

 

$

2,613,340

 

 

$

2,507,727

 

Tangible common equity to tangible assets, excluding net PPP loans

 

 

8.07

%

 

 

8.19

%

 

 

8.20

%

 

 

8.42

%

 

 

8.50

%

RETURN ON AVERAGE TANGIBLE COMMON EQUITY

“Return on average tangible common equity” is defined as net income less earnings allocated to participating shares and preferred stock dividends, if any, divided by average equity reduced by intangible assets and average preferred stock, 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 earnings allocated to common shareholders and average tangible equity, each exclusive of changes in intangible assets and preferred stock. The information below reconciles net income allocated to Common Shares and average tangible common equity to their most comparable GAAP measures.

(Unaudited)

 

For the Three Months Ended

 

For the Nine Months Ended

(Dollars in thousands)

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Net income

 

$

10,826

 

 

$

11,204

 

 

$

8,672

 

 

$

8,591

 

 

$

9,198

 

 

$

30,702

 

 

$

27,165

 

Earnings allocated to participating shares

 

 

(281

)

 

 

(310

)

 

 

(255

)

 

 

(245

)

 

 

(252

)

 

 

(834

)

 

 

(744

)

Preferred Dividends

 

 

(218

)

 

 

(246

)

 

 

 

 

 

 

 

 

 

 

 

(464

)

 

 

 

Net income allocated to Common Shares

 

$

10,327

 

 

$

10,648

 

 

$

8,417

 

 

$

8,346

 

 

$

8,946

 

 

$

29,404

 

 

$

26,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Equity

 

$

255,231

 

 

$

245,283

 

 

$

239,651

 

 

$

228,427

 

 

$

224,489

 

 

$

246,779

 

 

$

217,843

 

Average preferred stock

 

 

(11,992

)

 

 

(11,992

)

 

 

(3,731

)

 

 

 

 

 

 

 

 

(9,269

)

 

 

 

Goodwill and other intangible assets

 

 

(12,218

)

 

 

(12,210

)

 

 

(12,240

)

 

 

(12,248

)

 

 

(12,180

)

 

 

(12,237

)

 

 

(12,130

)

Average tangible common equity

 

$

231,021

 

 

$

221,081

 

 

$

223,680

 

 

$

216,179

 

 

$

212,309

 

 

$

225,273

 

 

$

205,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average tangible common equity (annualized)

 

 

17.88

%

 

 

19.27

%

 

 

15.05

%

 

 

15.44

%

 

 

16.85

%

 

 

17.40

%

 

 

17.12

%

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 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. “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

 

For the Nine Months Ended

(Dollars in thousands)

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Total non-interest expense

$

20,028

 

 

$

19,456

 

 

$

18,823

 

 

$

17,531

 

 

$

18,490

 

 

$

58,307

 

 

$

54,003

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss on foreclosed properties

 

7

 

 

 

8

 

 

 

12

 

 

 

7

 

 

 

6

 

 

 

27

 

 

 

7

 

Amortization of other intangible assets

 

 

 

 

 

 

 

 

 

 

2

 

 

 

7

 

 

 

 

 

 

23

 

SBA recourse provision (benefit)

 

96

 

 

 

114

 

 

 

(76

)

 

 

(122

)

 

 

(69

)

 

 

134

 

 

 

45

 

Tax credit investment impairment recovery

 

 

 

 

(351

)

 

 

 

 

 

 

 

 

 

 

 

(351

)

 

 

 

Total operating expense (a)

$

19,925

 

 

$

19,685

 

 

$

18,887

 

 

$

17,644

 

 

$

18,546

 

 

$

58,497

 

 

$

53,928

 

Net interest income

$

25,884

 

 

$

23,660

 

 

$

21,426

 

 

$

20,924

 

 

$

21,223

 

 

$

70,971

 

 

$

63,738

 

Total non-interest income

 

8,197

 

 

 

6,872

 

 

 

7,386

 

 

 

7,569

 

 

 

7,015

 

 

 

22,455

 

 

 

20,531

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain on sale of securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

Adjusted non-interest income

 

8,197

 

 

 

6,872

 

 

 

7,386

 

 

 

7,569

 

 

 

7,015

 

 

 

22,455

 

 

 

20,502

 

Total operating revenue (b)

$

34,081

 

 

$

30,532

 

 

$

28,812

 

 

$

28,493

 

 

$

28,238

 

 

$

93,426

 

 

$

84,240

 

Efficiency ratio

 

58.46

%

 

 

64.47

%

 

 

65.55

%

 

 

61.92

%

 

 

65.68

%

 

 

62.61

%

 

 

64.02

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

14,156

 

 

$

10,847

 

 

$

9,925

 

 

$

10,849

 

 

$

9,692

 

 

$

34,929

 

 

$

30,312

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

PPP fee income

 

61

 

 

 

196

 

 

 

249

 

 

 

892

 

 

 

1,666

 

 

 

506

 

 

 

6,419

 

PPP loan interest income

 

11

 

 

 

29

 

 

 

52

 

 

 

134

 

 

 

221

 

 

 

92

 

 

 

1,391

 

Pre-tax, pre-provision adjusted earnings, excluding PPP

$

14,084

 

 

$

10,622

 

 

$

9,624

 

 

$

9,823

 

 

$

7,805

 

 

$

34,331

 

 

$

22,502

 

Average total assets

$

2,758,961

 

 

$

2,716,707

 

 

$

2,666,241

 

 

$

2,612,905

 

 

$

2,608,198

 

 

$

2,714,309

 

 

$

2,602,347

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Average net PPP loans

 

4,505

 

 

 

11,650

 

 

 

20,935

 

 

 

52,923

 

 

 

87,517

 

 

 

12,303

 

 

 

185,742

 

Adjusted average total assets

$

2,754,456

 

 

$

2,705,057

 

 

$

2,645,306

 

 

$

2,559,982

 

 

$

2,520,681

 

 

$

2,702,006

 

 

$

2,416,605

 

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

 

2.05

%

 

 

1.60

%

 

 

1.49

%

 

 

1.66

%

 

 

1.49

%

 

 

1.72

%

 

 

1.55

%

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