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First Business Bank Reports Second Quarter 2023 Net Income of $8.1 Million

-- Strong performance driven by robust loan growth, sustained deposit growth, and positive operating leverage --

First Business Financial Services, Inc. (the “Company,” the “Bank,” or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income available to common shareholders of $8.1 million, or $0.98 diluted earnings per share. This compares to net income available to common shareholders of $8.8 million, or $1.05 per share, in the first quarter of 2023 and $11.0 million, or $1.29 per share, in the second quarter of 2022.

“First Business Bank’s focus on fundamentals drove outstanding core performance for the quarter, continuing our success in achieving our strategic objectives,” Chief Executive Officer Corey Chambas said. “Net interest income grew more than 17% from the second quarter of 2022, and we continued to expand in-market deposits, up 11.0% annualized from year end. Strong client activity also drove loan growth, which exceeded 20% annualized for the quarter, and capped off an outstanding first half, well above the Company’s mid-year loan growth expectations. The revenue expansion accompanying this growth contributed to excellent pre-tax, pre-provision earnings, a key measure we use to track ongoing earnings power. Our ability to execute on strategic priorities in a volatile first half of 2023 for the banking industry underscores the strength of our business model and reinforces our capacity to deliver for our stakeholders.”

“Exceptional loan growth is a testament to our team’s solid strategic planning and outstanding execution,” Chambas added. “We’ve thoughtfully built robust asset-generating business lines in response to client needs and our desire for balance sheet diversification and growth. That, along with our strategic focus on Treasury Management, has allowed us to grow both loans and deposits in excess of 10% over the last two years. We expect this growth rate to moderate as we manage to our long-term target of 10%.”

“We are pleased with the continuation of First Business Bank’s positive asset quality in the first half of 2023,” Chambas continued. “The increase in non-performing assets during the second quarter was the result of one default that occurred in our Asset-Based Lending (“ABL”) portfolio. While defaults and liquidations are not atypical for ABL loans, these loans are fully collateralized and therefore, as usual, we do not expect any loss. Further, we do not believe it to be reflective of portfolio or industry stress. Excluding this credit, non-performing assets totaled less than $5 million.”

Quarterly Highlights

  • Robust Loan Growth. Loans grew $135.2 million, or 21.3% annualized, from the first quarter of 2023, reflecting broad-based expansion across the Company’s products and geographies in the second quarter. Similar expansion across the Company’s portfolios drove loan growth totaling $384.5 million, or 16.8%, from the second quarter of 2022.
  • Continued Deposit Growth. Total deposits grew to $2.529 billion, increasing 8.4% annualized from the linked quarter and 35.3% from the second quarter of 2022. In-market deposits grew to a record $2.074 billion, up $19.0 million, or 3.7% annualized, from the linked quarter and 11.7% from the second quarter of 2022. Importantly, gross treasury management service charges grew to $1.4 million in the quarter, expanding 15% compared to the second quarter of 2022.
  • Net Interest Income Expansion. Net interest income grew 3.9% from the linked quarter and 17.3% from the prior year quarter. Consistent execution of the Company’s strategy to drive diversified portfolio growth supported this outcome. Net interest margin of 3.81% declined five basis points from the linked quarter and increased 10 basis points compared to second quarter of 2022.
  • Strong Pre-tax, Pre-Provision (“PTPP”) Income. PTPP income grew to $13.5 million, up 1.0% from the prior quarter and 24.2% from the second quarter of 2022. This performance reflects solid growth across the Company’s balance sheet and diversified sources of non-interest income, which outpaced non-interest expense expansion in support of the Company’s growth initiatives. PTPP adjusted return on average assets measured 1.72%, compared to 1.79% for the linked quarter and up from 1.60% for the second quarter of 2022.
  • Tangible Book Value Growth. The Company’s strong earnings generation produced a 9.7% annualized increase in tangible book value per share compared to the linked quarter and 12.3% compared to the prior year quarter.

Quarterly Financial Results

(Unaudited)

 

As of and for the Three Months Ended

 

As of and for the Year Ended

(Dollars in thousands, except per share amounts)

 

June 30,

2023

 

March 31,

2023

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

Net interest income

 

$

27,747

 

 

$

26,705

 

 

$

23,660

 

 

$

54,453

 

 

$

45,087

 

Adjusted non-interest income (1)

 

 

7,419

 

 

 

8,410

 

 

 

6,872

 

 

 

15,829

 

 

 

14,258

 

Operating revenue (1)

 

 

35,166

 

 

 

35,115

 

 

 

30,532

 

 

 

70,282

 

 

 

59,345

 

Operating expense (1)

 

 

21,692

 

 

 

21,779

 

 

 

19,685

 

 

 

43,471

 

 

 

38,573

 

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

 

 

13,474

 

 

 

13,336

 

 

 

10,847

 

 

 

26,811

 

 

 

20,772

 

Less:

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

2,231

 

 

 

1,561

 

 

 

(3,727

)

 

 

3,793

 

 

 

(4,582

)

Net (gain) loss on repossessed assets

 

 

(2

)

 

 

6

 

 

 

8

 

 

 

4

 

 

 

20

 

SBA recourse provision (benefit)

 

 

341

 

 

 

(18

)

 

 

114

 

 

 

323

 

 

 

38

 

Tax credit investment impairment recovery

 

 

 

 

 

 

 

 

(351

)

 

 

 

 

 

(351

)

Add:

 

 

 

 

 

 

 

 

 

 

Net loss on sale of securities

 

 

(45

)

 

 

 

 

 

 

 

 

(45

)

 

 

 

Income before income tax expense

 

 

10,859

 

 

 

11,787

 

 

 

14,803

 

 

 

22,646

 

 

 

25,647

 

Income tax expense

 

 

2,522

 

 

 

2,808

 

 

 

3,599

 

 

 

5,330

 

 

 

5,771

 

Net income

 

$

8,337

 

 

$

8,979

 

 

$

11,204

 

 

$

17,316

 

 

$

19,876

 

Preferred stock dividends

 

 

219

 

 

 

219

 

 

 

246

 

 

 

438

 

 

 

246

 

Net income available to common shareholders

 

$

8,118

 

 

$

8,760

 

 

$

10,958

 

 

$

16,878

 

 

$

19,630

 

Earnings per share, diluted

 

$

0.98

 

 

$

1.05

 

 

$

1.29

 

 

$

2.02

 

 

$

2.31

 

Book value per share

 

$

31.34

 

 

$

30.65

 

 

$

28.08

 

 

$

31.34

 

 

$

28.08

 

Tangible book value per share (1)

 

$

29.89

 

 

$

29.19

 

 

$

26.63

 

 

$

29.89

 

 

$

26.63

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (2)

 

 

3.81

%

 

 

3.86

%

 

 

3.71

%

 

 

3.83

%

 

 

3.55

%

Adjusted net interest margin (1)(2)

 

 

3.63

%

 

 

3.74

%

 

 

3.44

%

 

 

3.69

%

 

 

3.33

%

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

 

 

21.00

%

 

 

23.95

%

 

 

22.51

%

 

 

22.47

%

 

 

24.03

%

Efficiency ratio (1)

 

 

61.68

%

 

 

62.02

%

 

 

64.47

%

 

 

61.85

%

 

 

65.00

%

Return on average assets (2)

 

 

1.04

%

 

 

1.17

%

 

 

1.61

%

 

 

1.10

%

 

 

1.46

%

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

 

 

1.72

%

 

 

1.79

%

 

 

1.60

%

 

 

1.75

%

 

 

1.54

%

Return on average common equity (2)

 

 

12.58

%

 

 

13.96

%

 

 

18.79

%

 

 

13.26

%

 

 

16.74

%

 

 

 

 

 

 

 

 

 

 

 

Period-end loans and leases receivable

 

$

2,674,583

 

 

$

2,539,363

 

 

$

2,290,100

 

 

$

2,674,583

 

 

$

2,290,100

 

Average loans and leases receivable

 

$

2,583,237

 

 

$

2,481,200

 

 

$

2,272,946

 

 

$

2,532,500

 

 

$

2,258,872

 

Period-end in-market deposits

 

$

2,073,744

 

 

$

2,054,752

 

 

$

1,857,010

 

 

$

2,073,744

 

 

$

1,857,010

 

Average in-market deposits

 

$

2,035,856

 

 

$

2,000,602

 

 

$

1,900,842

 

 

$

2,018,327

 

 

$

1,916,622

 

Allowance for credit losses, including unfunded commitment reserves

 

$

29,697

 

 

$

27,550

 

 

$

24,104

 

 

$

29,697

 

 

$

24,104

 

Non-performing assets

 

$

15,786

 

 

$

3,501

 

 

$

5,709

 

 

$

15,786

 

 

$

5,709

 

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

 

 

1.11

%

 

 

1.08

%

 

 

1.05

%

 

 

1.11

%

 

 

1.05

%

Non-performing assets as a percent of total assets

 

 

0.48

%

 

 

0.11

%

 

 

0.21

%

 

 

0.48

%

 

 

0.21

%

(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.

Second Quarter 2023 Compared to First Quarter 2023

Net interest income increased $1.0 million, or 3.9%, to $27.7 million.

  • The increase in net interest income was driven by an increase in both average loans and leases receivable and fees in lieu of interest, partially offset by a decrease in net interest margin. Average loans and leases receivable increased $102.0 million, or 16.4% annualized, to $2.583 billion. Fees in lieu of interest, which vary from quarter to quarter based on client-driven activity, totaled $936,000, compared to $651,000 in the prior quarter. Excluding fees in lieu of interest, net interest income increased $757,000, or 11.6% annualized.
  • The yield on average interest-earning assets increased 38 basis points to 6.47% from 6.09%. Excluding fees in lieu of interest, the yield earned on average interest-earning assets increased 36 basis points to 6.35% from 5.99%. The daily average effective federal funds rate increased 48 basis points compared to the linked quarter, which equates to an average adjusted interest-earning asset beta of 73.9% for the three months ended June 30, 2023, compared to 47.0% in the linked quarter. The cumulative adjusted interest earning asset beta since December 31, 2021 was 57.2%. 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.
  • The rate paid for average interest-bearing, in-market deposits increased 47 basis points to 3.25% from 2.78% due to the acceleration of exception pricing and the shift of client balances from non-interest bearing deposits to certificates of deposit and interest bearing demand deposit accounts. Similarly, the rate paid for average total bank funding increased 48 basis points to 2.78% from 2.30%. Total bank funding is defined as total deposits plus Federal Home Loan Bank (“FHLB”) advances. The total bank funding beta was 98.9% for the three months ended June 30, 2023, compared to 73.3% in the linked quarter. The cumulative bank funding beta since December 31, 2021 was 49.9%.
  • Net interest margin was 3.81%, down 5 basis points compared to 3.86% in the linked quarter. Adjusted net interest margin1 was 3.63%, down 11 basis points compared to 3.74% in the linked quarter. The decline in net interest margin was due to an increase in the rate paid on total bank funding, partially offset by an increase in the yield on average adjusted interest earning assets.
  • The Bank anticipates deposit betas may continue to rise and net interest margin may continue to decline at a gradual pace in coming quarters as the Federal Open Market Committee approaches a terminal federal funds rate. Based on current trends, we believe our net interest margin should stabilize meaningfully above our strategic plan goal of 3.50%.

The Bank reported a provision expense of $2.2 million, compared to $1.6 million in the first quarter of 2023. The second quarter provision expense included $1.2 million due to exceptional loan growth and $1.1 million of additional specific reserves. The increase in specific reserves was related to the equipment finance and SBA loan portfolios.

Non-interest income decreased $1.0 million, or 12.3%, to $7.4 million.

  • Private Wealth and Retirement assets (“Private Wealth”) fee income increased $239,000, or 9.0% to $2.9 million. Private Wealth assets under management and administration measured $2.907 billion at June 30, 2023, up $103.0 million from the prior quarter.
  • Commercial loan swap fee income increased $420,000, or 75.4%, to $977,000. Swap fee income varies from period to period based on loan activity and the interest rate environment.
  • Other fee income decreased $1.8 million to $1.4 million, compared to $3.2 million in the prior quarter. The decrease was primarily due to higher returns on the Company’s investments in mezzanine funds in the first quarter. Income from mezzanine funds was $389,000 in the second quarter, compared to $2.4 million in the linked quarter. Income from mezzanine funds varies from period to period based on changes in the value of underlying investments.

Non-interest expense increased $264,000, or 1.2%, to $22.0 million, while operating expense decreased $87,000, or 0.4%, to $21.7 million.

  • Compensation expense was $15.1 million, reflecting a decrease of $779,000, or 4.9%, from the linked quarter primarily due to 401(k) employer match and payroll taxes paid in the prior quarter on the annual cash bonus payout. Average full-time equivalents (FTEs) for the first quarter of 2023 were 341, up from 340 in the linked quarter.
  • Professional fees were $1.2 million, decreasing $103,000, or 7.7%, from the linked quarter primarily due to expenses related to an office relocation in the prior quarter.
  • Data processing expense was $1.1 million, increasing $186,000, or 21.3%, from the linked quarter primarily due to the recurring, annual expense related to tax processing on behalf of the Bank’s Private Wealth clients.
  • Marketing expenses were $779,000, increasing $151,000, or 24.0%, from the linked quarter primarily due to seasonal increases in client entertainment and sponsorships.
  • FDIC insurance expense was $580,000, increasing $186,000, or 47.2%, from the linked quarter primarily due to an increase in the assessment rate and the assessable base.
  • Other non-interest expense increased $577,000, or 113.1%, to $1.1 million from the linked quarter primarily due to a $359,000 increase in SBA recourse provision, a loss on disposal of fixed assets, and an increase in travel expenses related to normal business development activities.
______________________________

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.

Income tax expense decreased $286,000, or 10.2%, to $2.5 million. The effective tax rate was 23.2% for the three months ended June 30, 2023, compared to 23.8% for the linked quarter. Both quarters benefited from low-income housing tax credits. Based on expected earnings and future tax credit investments, the Company expects to report an effective tax rate between 21% and 22% for 2023.

Total period-end loans and leases receivable increased $135.2 million, or 21.3% annualized, to $2.675 billion. Management does not believe this level of loan growth is sustainable and expects growth to moderate in subsequent quarters. Additionally, management expects to evaluate loan sale strategies as a means of adding to and further diversifying fee income. The average rate earned on average loans and leases receivable was 6.86%, up 44 basis points from 6.42% in the prior quarter.

  • Commercial Real Estate (“CRE”) loans increased by $62.6 million, or 16.4% annualized, to $1.592 billion. The increase was primarily due to an increase in non-owner occupied CRE loans.
  • Commercial & Industrial (“C&I”) loans increased $73.6 million, or 30.4% annualized, to $1.037 billion. The increase was due to growth across the majority of the Bank’s C&I products and geographies.

Total period-end in-market deposits increased $19.0 million, or 3.7% annualized, to $2.074 billion, compared to $2.055 billion. The average rate paid was 2.56%, up 47 basis points from 2.09% in the prior quarter.

  • Growth in interest-bearing transaction accounts, driven in part by client movement into extended insurance products, was partially offset by a decrease in non-interest bearing transaction accounts, money market accounts, and certificates of deposit.

Period-end wholesale funding, including FHLB advances, brokered deposits, and deposits gathered through internet deposit listing services, increased $61.2 million to $790.8 million.

  • Wholesale deposits increased $33.0 million to $455.1 million, compared to $422.1 million as the Bank continued to replace FHLB advances with wholesale deposits consistent with the Company’s long-held philosophy to manage interest rate risk by utilizing the most efficient and cost-effective source of wholesale funds to match-fund fixed-rate loans. The average rate paid on wholesale deposits increased three basis points to 4.24% and the weighted average original maturity increased to 3.7 years from 1.8 years.
  • FHLB advances decreased $28.2 million to $335.7 million. The average rate paid on FHLB advances increased 20 basis points to 2.67% and the weighted average original maturity increased to 5.2 years from 4.7 years.

Non-performing assets increased $12.3 million to $15.8 million, or 0.48% of total assets, up from 0.11% in the prior quarter. The increase was primarily due to the default of one $10.9 million fully collateralized ABL credit, for which the Company expects full repayment. Excluding this credit, non-performing assets totaled $4.9 million, or 0.15% of total assets.

The allowance for credit losses, including unfunded credit commitments reserve, increased $2.1 million, or 7.8%, primarily driven by loan growth and an increase in specific reserves. The allowance for credit losses, including unfunded credit commitment reserves, as a percent of total gross loans and leases was 1.11% compared to 1.08% in the prior quarter.

Second Quarter 2023 Compared to Second Quarter 2022

Net interest income increased $4.1 million, or 17.3%, to $27.7 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 $1.9 million to $936,000, primarily due to a decrease in non-accrual interest recovery and loan fee amortization related to Paycheck Protection Program loans. Excluding fees in lieu of interest, net interest income increased $5.0 million, or 23.0%.
  • The yield on average interest-earning assets measured 6.47% compared to 4.24%. Excluding fees in lieu of interest, the yield on average interest-earning assets measured 6.35%, compared to 3.95%. 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 422 basis points compared to the prior year quarter, which equates to an average adjusted interest-earning asset beta of 56.9% for the three months ended June 30, 2023, compared to the prior year period.
  • The rate paid for average interest-bearing in-market deposits increased 296 basis points to 3.25% from 0.29%. The rate paid for average total bank funding increased 232 basis points to 2.78% from 0.46%. The total bank funding beta was 55.0% for the three months ended June 30, 2023, compared to the prior year period.
  • Net interest margin increased 10 basis points to 3.81% from 3.71%. Adjusted net interest margin increased 19 basis points to 3.63% from 3.44%.

The Company reported a provision expense of $2.2 million, compared to a provision benefit of $3.7 million in the second quarter of 2022, primarily due to loan growth and an increase in specific reserves. The prior year quarter benefited from net recoveries of $4.2 million.

Non-interest income of $7.4 million increased by $502,000, or 7.3%, from $6.9 million in the prior year period.

  • Private Wealth fee income increased $41,000, or 1.4%, to $2.9 million. Private Wealth assets under management and administration measured $2.907 billion at June 30, 2023, up $353.4 million, or 13.8%.
  • Gain on sale of SBA loans decreased $507,000, or 53.3%, to $444,000. The decrease was driven by lower premiums and a decrease in loan originations compared to prior year quarter. In addition, the Company elected to hold a higher number of SBA loans on its balance sheet in the current interest rate environment.
  • Service charges on deposits decreased $275,000, or 26.4%, to $766,000, driven by an increase in the earnings credit rate commensurate with the rising rate environment.
  • Loan fees of $905,000 increased by $208,000, or 29.8%, primarily due to an increase in C&I lending activity.
  • Other fee income increased $574,000, or 66.7%, to $1.4 million, mainly due to higher returns on the Company’s investments in mezzanine funds and a gain on customer lease restructuring. Income from mezzanine funds was $389,000 in the second quarter, compared to $115,000 in the prior year quarter. Income on mezzanine funds varies from period to period based on changes in the value of underlying investments.

Non-interest expense increased $2.6 million, or 13.2%, to $22.0 million. Operating expense increased $2.0 million, or 10.2%, to $21.7 million.

  • Compensation expense increased $1.1 million, or 7.9%, to $15.1 million. The increase in compensation expense was mainly due to an increase in average FTEs, annual merit increases and promotions, and an increase in incentive compensation due to outstanding production. Average FTEs increased 6% to 341 in the second quarter of 2023, compared to 321 in the second quarter of 2022, as a result of expanded hiring efforts that have successfully driven growth while maintaining positive operating leverage.
  • FDIC insurance increased $284,000, or 95.9%, to $580,000, primarily due to an increase in the assessment rate and the assessable base.
  • Marketing expense increased $109,000, or 16.3%, to $779,000, primarily due to an increase in business development efforts and advertising projects commensurate with our expanded sales force.
  • Equipment expense increased $120,000, or 51.1%, to $355,000, primarily due to equipment needs for an increasing workforce and increased depreciation expense related to new office locations.

Total period-end loans and leases receivable increased $384.5 million, or 16.8%, to $2.675 billion.

  • C&I loans increased $281.8 million, or 37.3% to $1.037 billion, due to growth across all categories and geographies.
  • CRE loans increased $103.3 million, or 6.9%, to $1.592 billion, due to increases in most CRE categories and geographies.

Total period-end in-market deposits increased $216.7 million, or 11.7%, to $2.074 billion, and the average rate paid increased 236 basis points to 2.56%. The increase in in-market deposits was principally due to a $252.4 million and $179.3 million increase in interest bearing transaction accounts and certificates of deposits, respectively. This increase was partially offset by a $125.2 million and $89.7 million decrease in non-interest bearing deposit accounts and money market accounts, respectively.

Period-end wholesale funding increased $224.4 million to $790.8 million.

  • Wholesale deposits increased $442.8 million to $455.1 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 brokered certificates of deposit increased 126 basis points to 4.24% and the weighted average original maturity decreased to 3.7 years from 4.8 years.
  • FHLB advances decreased $218.4 million to $335.7 million. The average rate paid on FHLB advances increased 119 basis points to 2.67% and the weighted average original maturity increased to 5.2 years from 3.2 years.

Non-performing assets increased to $15.8 million, or 0.48% of total assets, compared to $5.7 million, or 0.21% of total assets.

The allowance for credit losses, including unfunded commitment reserves, increased $5.6 million to $29.7 million, compared to $24.1 million. The allowance for credit losses as a percent of total gross loans and leases was 1.11%, compared to the allowance for loan losses of 1.05% under the incurred loss model.

Share Repurchase Program Update

As previously announced, effective January 27, 2023, 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 January 31, 2023 through January 31, 2024. As of June 30, 2023, the Company had repurchased a total of 65,112 shares for approximately $2.0 million at an average cost of $30.72 per share. The Company expects to continue its pause of the repurchase program, instead allocating capital to support continued exceptional balance sheet growth.

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 July 28, 2023.

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, labor shortages, or any future public health epidemics.
  • 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.
  • Recent volatility in the banking sector may result in new legislation, regulations or policy changes that could subject the Corporation and the Bank to increased government regulation and supervision.
  • The proportion of the Corporation’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk.
  • The Corporation may be subject to increases in FDIC insurance assessments as a result of the recent bank failures.

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, 2022 and other filings with the Securities and Exchange Commission.

SELECTED FINANCIAL CONDITION DATA

(Unaudited)

 

As of

(in thousands)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

Assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

112,809

 

 

$

185,973

 

 

$

102,682

 

 

$

110,965

 

 

$

95,484

 

Securities available-for-sale, at fair value

 

 

253,626

 

 

 

236,989

 

 

 

212,024

 

 

 

196,566

 

 

 

208,643

 

Securities held-to-maturity, at amortized cost

 

 

9,830

 

 

 

11,461

 

 

 

12,635

 

 

 

13,531

 

 

 

13,968

 

Loans held for sale

 

 

2,191

 

 

 

2,697

 

 

 

2,632

 

 

 

773

 

 

 

2,256

 

Loans and leases receivable

 

 

2,674,583

 

 

 

2,539,363

 

 

 

2,443,066

 

 

 

2,330,700

 

 

 

2,290,100

 

Allowance for credit losses

 

 

(28,115

)

 

 

(26,140

)

 

 

(24,230

)

 

 

(24,143

)

 

 

(24,104

)

Loans and leases receivable, net

 

 

2,646,468

 

 

 

2,513,223

 

 

 

2,418,836

 

 

 

2,306,557

 

 

 

2,265,996

 

Premises and equipment, net

 

 

5,094

 

 

 

4,933

 

 

 

4,340

 

 

 

3,143

 

 

 

1,899

 

Repossessed assets

 

 

65

 

 

 

89

 

 

 

95

 

 

 

151

 

 

 

124

 

Right-of-use assets

 

 

7,049

 

 

 

7,355

 

 

 

7,690

 

 

 

5,424

 

 

 

5,772

 

Bank-owned life insurance

 

 

54,747

 

 

 

54,383

 

 

 

54,018

 

 

 

54,683

 

 

 

54,324

 

Federal Home Loan Bank stock, at cost

 

 

14,482

 

 

 

13,088

 

 

 

17,812

 

 

 

15,701

 

 

 

22,959

 

Goodwill and other intangible assets

 

 

12,073

 

 

 

12,160

 

 

 

12,159

 

 

 

12,218

 

 

 

12,262

 

Derivatives

 

 

70,440

 

 

 

54,612

 

 

 

68,581

 

 

 

73,718

 

 

 

44,461

 

Accrued interest receivable and other assets

 

 

76,864

 

 

 

67,448

 

 

 

63,107

 

 

 

57,372

 

 

 

48,868

 

Total assets

 

$

3,265,738

 

 

$

3,164,411

 

 

$

2,976,611

 

 

$

2,850,802

 

 

$

2,777,016

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

In-market deposits

 

$

2,073,744

 

 

$

2,054,752

 

 

$

1,965,970

 

 

$

1,929,224

 

 

$

1,857,010

 

Wholesale deposits

 

 

455,108

 

 

 

422,088

 

 

 

202,236

 

 

 

158,321

 

 

 

12,321

 

Total deposits

 

 

2,528,852

 

 

 

2,476,840

 

 

 

2,168,206

 

 

 

2,087,545

 

 

 

1,869,331

 

Federal Home Loan Bank advances and other borrowings

 

 

370,113

 

 

 

341,859

 

 

 

456,808

 

 

 

420,297

 

 

 

596,642

 

Lease liabilities

 

 

9,499

 

 

 

9,822

 

 

 

10,175

 

 

 

6,827

 

 

 

7,207

 

Derivatives

 

 

61,147

 

 

 

49,012

 

 

 

61,419

 

 

 

66,162

 

 

 

40,357

 

Accrued interest payable and other liabilities

 

 

23,495

 

 

 

20,297

 

 

 

19,363

 

 

 

16,967

 

 

 

13,556

 

Total liabilities

 

 

2,993,106

 

 

 

2,897,830

 

 

 

2,715,971

 

 

 

2,597,798

 

 

 

2,527,093

 

Total stockholders’ equity

 

 

272,632

 

 

 

266,581

 

 

 

260,640

 

 

 

253,004

 

 

 

249,923

 

Total liabilities and stockholders’ equity

 

$

3,265,738

 

 

$

3,164,411

 

 

$

2,976,611

 

 

$

2,850,802

 

 

$

2,777,016

 

STATEMENTS OF INCOME

(Unaudited)

 

As of and for the Three Months Ended

 

As of and for the Year Ended

(Dollars in thousands, except per share amounts)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

Total interest income

 

$

47,161

 

 

$

42,064

 

$

38,319

 

$

31,786

 

$

27,031

 

 

$

89,226

 

 

$

51,266

 

Total interest expense

 

 

19,414

 

 

 

15,359

 

 

 

10,867

 

 

 

5,902

 

 

 

3,371

 

 

 

34,773

 

 

 

6,179

 

Net interest income

 

 

27,747

 

 

 

26,705

 

 

 

27,452

 

 

 

25,884

 

 

 

23,660

 

 

 

54,453

 

 

 

45,087

 

Provision for credit losses

 

 

2,231

 

 

 

1,561

 

 

 

702

 

 

 

12

 

 

 

(3,727

)

 

 

3,793

 

 

 

(4,582

)

Net interest income after provision for credit losses

 

 

25,516

 

 

 

25,144

 

 

 

26,750

 

 

 

25,872

 

 

 

27,387

 

 

 

50,660

 

 

 

49,669

 

Private wealth management service fees

 

 

2,893

 

 

 

2,654

 

 

 

2,570

 

 

 

2,618

 

 

 

2,852

 

 

 

5,547

 

 

 

5,693

 

Gain on sale of SBA loans

 

 

444

 

 

 

476

 

 

 

269

 

 

 

732

 

 

 

951

 

 

 

920

 

 

 

1,537

 

Service charges on deposits

 

 

766

 

 

 

682

 

 

 

791

 

 

 

1,018

 

 

 

1,041

 

 

 

1,448

 

 

 

2,040

 

Loan fees

 

 

905

 

 

 

803

 

 

 

847

 

 

 

814

 

 

 

697

 

 

 

1,708

 

 

 

1,349

 

Loss on sale of securities

 

 

(45

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45

)

 

 

 

Swap fees

 

 

977

 

 

 

557

 

 

 

756

 

 

 

341

 

 

 

471

 

 

 

1,534

 

 

 

697

 

Other non-interest income

 

 

1,434

 

 

 

3,238

 

 

 

1,740

 

 

 

2,674

 

 

 

860

 

 

 

4,672

 

 

 

2,942

 

Total non-interest income

 

 

7,374

 

 

 

8,410

 

 

 

6,973

 

 

 

8,197

 

 

 

6,872

 

 

 

15,784

 

 

 

14,258

 

Compensation

 

 

15,129

 

 

 

15,908

 

 

 

15,267

 

 

 

14,817

 

 

 

14,020

 

 

 

31,037

 

 

 

27,658

 

Occupancy

 

 

603

 

 

 

631

 

 

 

669

 

 

 

566

 

 

 

568

 

 

 

1,234

 

 

 

1,123

 

Professional fees

 

 

1,240

 

 

 

1,343

 

 

 

1,210

 

 

 

1,203

 

 

 

1,298

 

 

 

2,583

 

 

 

2,468

 

Data processing

 

 

1,061

 

 

 

875

 

 

 

806

 

 

 

719

 

 

 

892

 

 

 

1,936

 

 

 

1,673

 

Marketing

 

 

779

 

 

 

628

 

 

 

641

 

 

 

543

 

 

 

670

 

 

 

1,407

 

 

 

1,170

 

Equipment

 

 

355

 

 

 

295

 

 

 

359

 

 

 

253

 

 

 

235

 

 

 

650

 

 

 

479

 

Computer software

 

 

1,197

 

 

 

1,183

 

 

 

1,089

 

 

 

1,128

 

 

 

1,117

 

 

 

2,379

 

 

 

2,199

 

FDIC insurance

 

 

580

 

 

 

394

 

 

 

203

 

 

 

230

 

 

 

296

 

 

 

974

 

 

 

610

 

Other non-interest expense

 

 

1,087

 

 

 

510

 

 

 

923

 

 

 

569

 

 

 

360

 

 

 

1,598

 

 

 

900

 

Total non-interest expense

 

 

22,031

 

 

 

21,767

 

 

 

21,167

 

 

 

20,028

 

 

 

19,456

 

 

 

43,798

 

 

 

38,280

 

Income before income tax expense

 

 

10,859

 

 

 

11,787

 

 

 

12,556

 

 

 

14,041

 

 

 

14,803

 

 

 

22,646

 

 

 

25,647

 

Income tax expense

 

 

2,522

 

 

 

2,808

 

 

 

2,400

 

 

 

3,215

 

 

 

3,599

 

 

 

5,330

 

 

 

5,771

 

Net income

 

$

8,337

 

 

$

8,979

 

 

$

10,156

 

 

$

10,826

 

 

$

11,204

 

 

$

17,316

 

 

$

19,876

 

Preferred stock dividends

 

 

219

 

 

 

219

 

 

 

219

 

 

 

218

 

 

 

246

 

 

 

438

 

 

 

246

 

Net income available to common shareholders

 

$

8,118

 

 

$

8,760

 

 

$

9,937

 

 

$

10,608

 

 

$

10,958

 

 

$

16,878

 

 

$

19,630

 

Per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings

 

$

0.98

 

 

$

1.05

 

 

$

1.18

 

 

$

1.25

 

 

$

1.29

 

 

$

2.02

 

 

$

2.31

 

Diluted earnings

 

 

0.98

 

 

 

1.05

 

 

 

1.18

 

 

 

1.25

 

 

 

1.29

 

 

 

2.02

 

 

 

2.31

 

Dividends declared

 

 

0.2275

 

 

 

0.2275

 

 

 

0.1975

 

 

 

0.1975

 

 

 

0.1975

 

 

 

0.4550

 

 

 

0.395

 

Book value

 

 

31.34

 

 

 

30.65

 

 

 

29.74

 

 

 

28.58

 

 

 

28.08

 

 

 

31.34

 

 

 

28.08

 

Tangible book value

 

 

29.89

 

 

 

29.19

 

 

 

28.28

 

 

 

27.13

 

 

 

26.63

 

 

 

29.89

 

 

 

26.63

 

Weighted-average common shares outstanding(1)

 

 

8,061,841

 

 

 

8,148,525

 

 

 

8,180,531

 

 

 

8,230,902

 

 

 

8,225,838

 

 

 

8,140,831

 

 

 

8,245,317

 

Weighted-average diluted common shares outstanding(1)

 

 

8,061,841

 

 

 

8,148,525

 

 

 

8,180,531

 

 

 

8,230,902

 

 

 

8,225,838

 

 

 

8,140,831

 

 

 

8,245,317

 

 

(1) Excluding participating securities.

NET INTEREST INCOME ANALYSIS

(Unaudited)

 

For the Three Months Ended

(Dollars in thousands)

 

June 30, 2023

 

March 31, 2023

 

June 30, 2022

 

 

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)

 

$

1,546,487

)

 

$

23,671

)

 

6.12

%

 

$

1,518,053

)

 

$

21,717

)

 

5.72

%

 

$

1,472,075

)

 

$

15,343

)

 

4.17

%

Commercial and industrial loans(1)

 

 

987,534

 

 

 

20,020

 

 

8.11

%

 

 

916,457

 

 

 

17,557

 

 

7.66

%

 

 

749,826

 

 

 

9,886

 

 

5.27

%

Consumer and other loans(1)

 

 

49,216

 

 

 

588

 

 

4.78

%

 

 

46,690

 

 

 

540

 

 

4.63

%

 

 

51,045

 

 

 

458

 

 

3.59

%

Total loans and leases receivable(1)

 

 

2,583,237

 

 

 

44,279

 

 

6.86

%

 

 

2,481,200

 

 

 

39,814

 

 

6.42

%

 

 

2,272,946

 

 

 

25,687

 

 

4.52

%

Mortgage-related securities(2)

 

 

192,564

 

 

 

1,421

 

 

2.95

%

 

 

182,494

 

 

 

1,270

 

 

2.78

%

 

 

176,747

 

 

 

804

 

 

1.82

%

Other investment securities(3)

 

 

60,790

 

 

 

392

 

 

2.58

%

 

 

55,722

 

 

 

320

 

 

2.30

%

 

 

54,591

 

 

 

260

 

 

1.91

%

FHLB stock

 

 

15,844

 

 

 

302

 

 

7.62

%

 

 

17,125

 

 

 

327

 

 

7.64

%

 

 

17,355

 

 

 

226

 

 

5.21

%

Short-term investments

 

 

61,316

 

 

 

767

 

 

5.00

%

 

 

28,546

 

 

 

333

 

 

4.67

%

 

 

29,541

 

 

 

54

 

 

0.73

%

Total interest-earning assets

 

 

2,913,751

 

 

 

47,161

 

 

6.47

%

 

 

2,765,087

 

 

 

42,064

 

 

6.09

%

 

 

2,551,180

 

 

 

27,031

 

 

4.24

%

Non-interest-earning assets

 

 

213,483

 

 

 

 

 

 

 

219,513

 

 

 

 

 

 

 

165,527

 

 

 

 

 

Total assets

 

$

3,127,234

 

 

 

 

 

 

$

2,984,600

 

 

 

 

 

 

$

2,716,707

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction accounts

 

$

670,698

 

 

 

5,455

 

 

3.25

%

 

$

567,435

 

 

 

3,840

 

 

2.71

%

 

$

502,763

 

 

 

343

 

 

0.27

%

Money market

 

 

633,817

 

 

 

4,617

 

 

2.91

%

 

 

699,314

 

 

 

4,497

 

 

2.57

%

 

 

767,433

 

 

 

509

 

 

0.27

%

Certificates of deposit

 

 

295,785

 

 

 

2,946

 

 

3.98

%

 

 

236,083

 

 

 

2,117

 

 

3.59

%

 

 

73,560

 

 

 

114

 

 

0.62

%

Wholesale deposits

 

 

332,387

 

 

 

3,523

 

 

4.24

%

 

 

187,784

 

 

 

1,976

 

 

4.21

%

 

 

12,350

 

 

 

92

 

 

2.98

%

Total interest-bearing deposits

 

 

1,932,687

 

 

 

16,541

 

 

3.42

%

 

 

1,690,616

 

 

 

12,430

 

 

2.94

%

 

 

1,356,106

 

 

 

1,058

 

 

0.31

%

FHLB advances

 

 

367,129

 

 

 

2,452

 

 

2.67

%

 

 

398,109

 

 

 

2,461

 

 

2.47

%

 

 

449,599

 

 

 

1,666

 

 

1.48

%

Other borrowings

 

 

34,538

 

 

 

421

 

 

4.88

%

 

 

36,794

 

 

 

468

 

 

5.09

%

 

 

51,018

 

 

 

647

 

 

5.07

%

Total interest-bearing liabilities

 

 

2,334,354

 

 

 

19,414

 

 

3.33

%

 

 

2,125,519

 

 

 

15,359

 

 

2.89

%

 

 

1,856,723

 

 

 

3,371

 

 

0.73

%

Non-interest-bearing demand deposit accounts

 

 

435,556

 

 

 

 

 

 

 

497,770

 

 

 

 

 

 

 

557,086

 

 

 

 

 

Other non-interest-bearing liabilities

 

 

87,148

 

 

 

 

 

 

 

98,347

 

 

 

 

 

 

 

57,615

 

 

 

 

 

Total liabilities

 

 

2,857,058

 

 

 

 

 

 

 

2,721,636

 

 

 

 

 

 

 

2,471,424

 

 

 

 

 

Stockholders’ equity

 

 

270,176

 

 

 

 

 

 

 

262,964

 

 

 

 

 

 

 

245,283

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

3,127,234

 

 

 

 

 

 

$

2,984,600

 

 

 

 

 

 

$

2,716,707

 

 

 

 

 

Net interest income

 

 

 

$

27,747

 

 

 

 

 

 

$

26,705

 

 

 

 

 

 

$

23,660

 

 

 

Interest rate spread

 

 

 

 

 

3.15

%

 

 

 

 

 

3.19

%

 

 

 

 

 

3.51

%

Net interest-earning assets

 

$

579,397

 

 

 

 

 

 

$

639,568

 

 

 

 

 

 

$

694,457

 

 

 

 

 

Net interest margin

 

 

 

 

 

3.81

%

 

 

 

 

 

3.86

%

 

 

 

 

 

3.71

%

(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 Six Months Ended

(Dollars in thousands)

 

June 30, 2023

 

June 30, 2022

 

 

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)

 

$

1,532,348

 

$

45,389

 

5.92

%

 

$

1,466,017

 

$

28,689

 

3.91

%

Commercial and industrial loans(1)

 

 

952,192

 

 

 

37,577

 

 

7.89

%

 

 

742,406

 

 

 

19,176

 

 

5.17

%

Consumer and other loans(1)

 

 

47,960

 

 

 

1,128

 

 

4.70

%

 

 

50,449

 

 

 

894

 

 

3.54

%

Total loans and leases receivable(1)

 

 

2,532,500

 

 

 

84,094

 

 

6.64

%

 

 

2,258,872

 

 

 

48,759

 

 

4.32

%

Mortgage-related securities(2)

 

 

187,556

 

 

 

2,691

 

 

2.87

%

 

 

180,832

 

 

 

1,564

 

 

1.73

%

Other investment securities(3)

 

 

58,270

 

 

 

712

 

 

2.44

%

 

 

52,584

 

 

 

475

 

 

1.81

%

FHLB stock

 

 

16,481

 

 

 

629

 

 

7.63

%

 

 

15,688

 

 

 

398

 

 

5.07

%

Short-term investments

 

 

45,022

 

 

 

1,100

 

 

4.89

%

 

 

30,321

 

 

 

70

 

 

0.46

%

Total interest-earning assets

 

 

2,839,829

 

 

 

89,226

 

 

6.28

%

 

 

2,538,297

 

 

 

51,266

 

 

4.04

%

Non-interest-earning assets

 

 

216,482

 

 

 

 

 

 

 

153,316

 

 

 

 

 

Total assets

 

$

3,056,311

 

 

 

 

 

 

$

2,691,613

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Transaction accounts

 

$

619,352

 

 

 

9,295

 

 

3.00

%

 

$

517,923

 

 

 

597

 

 

0.23

%

Money market

 

 

666,385

 

 

 

9,114

 

 

2.74

%

 

 

775,808

 

 

 

848

 

 

0.22

%

Certificates of deposit

 

 

266,099

 

 

 

5,064

 

 

3.81

%

 

 

63,098

 

 

 

169

 

 

0.54

%

Wholesale deposits

 

 

260,485

 

 

 

5,498

 

 

4.22

%

 

 

14,282

 

 

 

210

 

 

2.94

%

Total interest-bearing deposits

 

 

1,812,321

 

 

 

28,971

 

 

3.20

%

 

 

1,371,111

 

 

 

1,824

 

 

0.27

%

FHLB advances

 

 

382,533

 

 

 

4,913

 

 

2.57

%

 

 

417,518

 

 

 

2,702

 

 

1.29

%

Other borrowings

 

 

35,660

 

 

 

889

 

 

4.99

%

 

 

45,694

 

 

 

1,149

 

 

5.03

%

Junior subordinated notes(5)

 

 

 

 

 

 

 

%

 

 

4,898

 

 

 

504

 

 

20.58

%

Total interest-bearing liabilities

 

 

2,230,514

 

 

 

34,773

 

 

3.12

%

 

 

1,839,221

 

 

 

6,179

 

 

0.67

%

Non-interest-bearing demand deposit accounts

 

 

466,491

 

 

 

 

 

 

 

559,793

 

 

 

 

 

Other non-interest-bearing liabilities

 

 

92,716

 

 

 

 

 

 

 

50,117

 

 

 

 

 

Total liabilities

 

 

2,789,721

 

 

 

 

 

 

 

2,449,131

 

 

 

 

 

Stockholders’ equity

 

 

266,590

 

 

 

 

 

 

 

242,482

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

3,056,311

 

 

 

 

 

 

$

2,691,613

 

 

 

 

 

Net interest income

 

 

 

$

54,453

 

 

 

 

 

 

$

45,087

 

 

 

Interest rate spread

 

 

 

 

 

3.17

%

 

 

 

 

 

3.37

%

Net interest-earning assets

 

$

609,315

 

 

 

 

 

 

$

699,076

 

 

 

 

 

Net interest margin

 

 

 

 

 

3.83

%

 

 

 

 

 

3.55

%

(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 six months ended June 30, 2022, includes $248,000 in accelerated amortization of debt issuance costs.

ASSET AND LIABILITY BETA ANALYSIS

 

For the Three Months Ended

 

For the Six Months Ended

(Unaudited)

June 30,

2023

 

March 31,

2023

 

 

 

June 30,

2022

 

 

 

June 30,

2023

 

June 30,

2022

 

 

 

Average

Yield/Rate (3)

 

Average

Yield/Rate (3)

 

Increase

(Decrease)

 

Average

Yield/Rate (3)

 

Increase

(Decrease)

 

Average

Yield/Rate

 

Average

Yield/Rate

 

Increase

(Decrease)

Total loans and leases receivable (a)

6.86

%

 

6.42

%

 

0.44

%

 

4.52

%

 

2.34

%

 

6.64

%

 

4.32

%

 

2.32

%

Total interest-earning assets(b)

6.47

%

 

6.09

%

 

0.38

%

 

4.24

%

 

2.23

%

 

6.28

%

 

4.04

%

 

2.24

%

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

6.71

%

 

6.31

%

 

0.40

%

 

4.19

%

 

2.52

%

 

6.52

%

 

4.04

%

 

2.48

%

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

6.35

%

 

5.99

%

 

0.36

%

 

3.95

%

 

2.40

%

 

6.17

%

 

3.79

%

 

2.38

%

Total in-market deposits(e)

2.56

%

 

2.09

%

 

0.47

%

 

0.20

%

 

2.36

%

 

2.33

%

 

0.17

%

 

2.16

%

Total bank funding(f)

2.78

%

 

2.30

%

 

0.48

%

 

0.46

%

 

2.32

%

 

2.55

%

 

0.39

%

 

2.16

%

Net interest margin(g)

3.81

%

 

3.86

%

 

(0.05

)%

 

3.71

%

 

0.10

%

 

3.83

%

 

3.55

%

 

0.28

%

Adjusted net interest margin(h)

3.63

%

 

3.74

%

 

(0.11

)%

 

3.44

%

 

0.19

%

 

3.69

%

 

3.33

%

 

0.36

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective fed funds rate (2)(i)

4.99

%

 

4.51

%

 

0.48

%

 

0.77

%

 

4.22

%

 

4.75

%

 

0.45

%

 

4.30

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beta Calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

91.2

%

 

 

 

55.4

%

 

 

 

 

 

53.95

%

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

 

 

 

 

81.1

%

 

 

 

53.0

%

 

 

 

 

 

52.20

%

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

 

 

 

 

82.9

%

 

 

 

59.7

%

 

 

 

 

 

57.67

%

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

 

 

 

 

73.9

%

 

 

 

56.9

%

 

 

 

 

 

55.39

%

Total in-market deposits(e/i)

 

 

 

 

97.9

%

 

 

 

55.9

%

 

 

 

 

 

50.23

%

Total bank funding(f)/(i)

 

 

 

 

98.9

%

 

 

 

55.0

%

 

 

 

 

 

50.23

%

Net interest margin(g/i)

 

 

 

 

(10.4

)%

 

 

 

2.4

%

 

 

 

 

 

6.51

%

Adjusted net interest margin(h/i)

 

 

 

 

(22.9

)%

 

 

 

4.5

%

 

 

 

 

 

8.37

%

(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

 

For the Six Months Ended

(Dollars in thousands)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

Change due to qualitative factor changes

 

$

(50

)

 

$

9

 

 

$

85

 

 

$

132

 

 

$

(185

)

 

$

(41

)

 

$

(601

)

Change due to quantitative factor changes

 

 

(295

)

 

 

474

 

 

 

(930

)

 

 

(940

)

 

 

64

 

 

 

179

 

 

 

(142

)

Charge-offs

 

 

329

 

 

 

166

 

 

 

818

 

 

 

54

 

 

 

85

 

 

 

495

 

 

 

107

 

Recoveries

 

 

(245

)

 

 

(107

)

 

 

(203

)

 

 

(81

)

 

 

(4,247

)

 

 

(351

)

 

 

(4,457

)

Change in reserves on individually evaluated loans, net

 

 

1,093

 

 

 

(36

)

 

 

(50

)

 

 

447

 

 

 

29

 

 

 

1,057

 

 

 

(251

)

Change due to loan growth, net

 

 

1,227

 

 

 

979

 

 

 

982

 

 

 

400

 

 

 

527

 

 

 

2,206

 

 

 

762

 

Change in unfunded commitment reserves

 

 

172

 

 

 

76

 

 

 

 

 

 

 

 

 

 

 

 

248

 

 

 

 

Total provision for credit losses

 

$

2,231

 

 

$

1,561

 

 

$

702

 

 

$

12

 

 

$

(3,727

)

 

$

3,793

 

 

$

(4,582

)

PERFORMANCE RATIOS

 

 

For the Three Months Ended

 

For the Six Months Ended

(Unaudited)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

Return on average assets (annualized)

 

1.04

%

 

1.17

%

 

1.39

%

 

1.54

%

 

1.61

%

 

1.10

%

 

1.46

%

Return on average common equity (annualized)

 

12.58

%

 

13.96

%

 

16.26

%

 

17.44

%

 

18.79

%

 

13.26

%

 

16.74

%

Efficiency ratio

 

61.68

%

 

62.02

%

 

61.45

%

 

58.46

%

 

64.47

%

 

61.85

%

 

65.00

%

Interest rate spread

 

3.15

%

 

3.19

%

 

3.56

%

 

3.65

%

 

3.51

%

 

3.17

%

 

3.37

%

Net interest margin

 

3.81

%

 

3.86

%

 

4.15

%

 

4.01

%

 

3.71

%

 

3.83

%

 

3.55

%

Average interest-earning assets to average interest-bearing liabilities

 

124.82

%

 

130.09

%

 

135.90

%

 

138.98

%

 

137.40

%

 

127.32

%

 

138.01

%

ASSET QUALITY RATIOS

(Unaudited)

 

As of

(Dollars in thousands)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

Non-accrual loans and leases

 

$

15,721

 

 

$

3,412

 

 

$

3,659

 

 

$

3,645

 

 

$

5,585

 

Repossessed assets

 

 

65

 

 

 

89

 

 

 

95

 

 

 

151

 

 

 

124

 

Total non-performing assets

 

 

15,786

 

 

 

3,501

 

 

 

3,754

 

 

 

3,796

 

 

 

5,709

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

0.59

%

 

 

0.13

%

 

 

0.15

%

 

 

0.16

%

 

 

0.24

%

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

 

 

0.59

%

 

 

0.14

%

 

 

0.15

%

 

 

0.16

%

 

 

0.25

%

Non-performing assets as a percent of total assets

 

 

0.48

%

 

 

0.11

%

 

 

0.13

%

 

 

0.13

%

 

 

0.21

%

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

 

 

1.11

%

 

 

1.08

%

 

 

0.99

%

 

 

1.04

%

 

 

1.05

%

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

 

 

188.90

%

 

 

807.44

%

 

 

662.20

%

 

 

662.36

%

 

 

431.58

%

NET CHARGE-OFFS (RECOVERIES)

(Unaudited)

 

For the Three Months Ended

 

For the Six Months Ended

(Dollars in thousands)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

Charge-offs

 

$

329

 

 

$

166

 

 

$

818

 

 

$

54

 

 

$

85

 

 

$

495

 

 

$

107

 

Recoveries

 

 

(245

)

 

 

(107

)

 

 

(203

)

 

 

(81

)

 

 

(4,247

)

 

 

(351

)

 

 

(4,457

)

Net charge-offs (recoveries)

 

$

84

 

 

$

59

 

 

$

615

 

 

$

(27

)

 

$

(4,162

)

 

$

144

 

 

$

(4,350

)

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

 

 

0.01

%

 

 

0.01

%

 

 

0.10

%

 

 

%

 

 

(0.73

)%

 

 

0.01

%

 

 

(0.39

)%

CAPITAL RATIOS

 

 

As of and for the Three Months Ended

(Unaudited)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

Total capital to risk-weighted assets

 

10.70

%

 

11.04

%

 

11.26

%

 

11.66

%

 

11.56

%

Tier I capital to risk-weighted assets

 

8.70

%

 

9.01

%

 

9.20

%

 

9.48

%

 

9.34

%

Common equity tier I capital to risk-weighted assets

 

8.32

%

 

8.61

%

 

8.79

%

 

9.04

%

 

8.90

%

Tier I capital to adjusted assets

 

8.80

%

 

9.00

%

 

9.17

%

 

9.34

%

 

9.19

%

Tangible common equity to tangible assets

 

7.64

%

 

7.69

%

 

7.98

%

 

8.06

%

 

8.16

%

LOAN AND LEASE RECEIVABLE COMPOSITION

(Unaudited)

 

As of

(in thousands)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

Commercial real estate - owner occupied (1)

 

$

244,039

 

 

$

233,725

 

 

$

268,354

 

$

265,989

 

$

258,375

Commercial real estate - non-owner occupied (1)

 

 

715,309

 

 

 

675,087

 

 

 

687,091

 

 

 

657,975

 

 

 

651,920

 

Construction (1)

 

 

217,069

 

 

 

212,916

 

 

 

218,751

 

 

 

211,509

 

 

 

246,458

 

Multi-family (1)

 

 

392,297

 

 

 

384,043

 

 

 

350,026

 

 

 

332,782

 

 

 

314,392

 

1-4 family (1)

 

 

23,063

 

 

 

23,404

 

 

 

17,728

 

 

 

16,678

 

 

 

17,335

 

Total commercial real estate

 

 

1,591,777

 

 

 

1,529,175

 

 

 

1,541,950

 

 

 

1,484,933

 

 

 

1,488,480

 

Commercial and industrial (1)

 

 

1,036,921

 

 

 

963,328

 

 

 

853,327

 

 

 

800,092

 

 

 

755,081

 

Consumer and other (1)

 

 

45,743

 

 

 

46,773

 

 

 

47,938

 

 

 

46,123

 

 

 

47,519

 

Total gross loans and leases receivable

 

 

2,674,441

 

 

 

2,539,276

 

 

 

2,443,215

 

 

 

2,331,148

 

 

 

2,291,080

 

Less:

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

 

28,115

 

 

 

26,140

 

 

 

24,230

 

 

 

24,143

 

 

 

24,104

 

Deferred loan fees

 

 

(142

)

 

 

(87

)

 

 

149

 

 

 

448

 

 

 

980

 

Loans and leases receivable, net

 

$

2,646,468

 

 

$

2,513,223

 

 

$

2,418,836

 

 

$

2,306,557

 

 

$

2,265,996

 

(1)

On January 1, 2023, the Bank adopted ASU 2016-03 Financial Instruments - Credit losses (“ASC 326”). The Bank adopted ASC 326 using the modified retrospective method which does not require restatement of prior periods. The balances as of March 31, 2023 reflect a reclassification of $43 million to commercial and industrial from commercial real estate, and $7 million from consumer and other to commercial real estate.

DEPOSIT COMPOSITION

(Unaudited)

 

As of

(in thousands)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

Non-interest-bearing transaction accounts

 

$

419,294

 

 

$

471,904

 

 

$

537,107

 

 

$

564,141

 

 

$

544,507

 

Interest-bearing transaction accounts

 

 

719,198

 

 

 

612,500

 

 

 

576,601

 

 

 

461,883

 

 

 

466,785

 

Money market accounts

 

 

641,969

 

 

 

662,157

 

 

 

698,505

 

 

 

742,545

 

 

 

731,718

 

Certificates of deposit

 

 

293,283

 

 

 

308,191

 

 

 

153,757

 

 

 

160,655

 

 

 

114,000

 

Wholesale deposits

 

 

455,108

 

 

 

422,088

 

 

 

202,236

 

 

 

158,321

 

 

 

12,321

 

Total deposits

 

$

2,528,852

 

 

$

2,476,840

 

 

$

2,168,206

 

 

$

2,087,545

 

 

$

1,869,331

 

 

 

 

 

 

 

 

 

 

 

 

Uninsured deposits

 

 

867,397

 

 

 

974,242

 

 

 

967,465

 

 

 

1,007,935

 

 

 

935,101

 

Less: uninsured deposits collateralized by pledged assets

 

 

37,670

 

 

 

32,468

 

 

 

14,326

 

 

 

34,264

 

 

 

34,199

 

Total uninsured, net of collateralized deposits

 

 

829,727

 

 

 

941,774

 

 

 

953,139

 

 

 

973,671

 

 

 

900,902

 

% of total deposits

 

 

32.8

%

 

 

38.0

%

 

 

44.0

%

 

 

46.6

%

 

 

48.2

%

SOURCES OF LIQUIDITY

(Unaudited)

 

As of

(in thousands)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

Short-term investments

 

$

80,510

 

$

159,859

 

$

76,871

 

$

86,707

 

$

56,233

Collateral value of unencumbered pledged loans

 

 

265,884

 

 

 

296,393

 

 

 

184,415

 

 

 

289,513

 

 

 

174,315

 

Market value of unencumbered securities

 

 

217,074

 

 

 

200,332

 

 

 

188,353

 

 

 

173,013

 

 

 

182,429

 

Readily available liquidity

 

 

563,468

 

 

 

656,584

 

 

 

449,639

 

 

 

549,233

 

 

 

412,977

 

 

 

 

 

 

 

 

 

 

 

 

Fed fund lines

 

 

45,000

 

 

 

45,000

 

 

 

45,000

 

 

 

45,000

 

 

 

45,000

 

Excess brokered CD capacity(1)

 

 

1,017,590

 

 

 

1,027,869

 

 

 

1,162,241

 

 

 

1,100,369

 

 

 

1,112,386

 

Total liquidity

 

$

1,626,058

 

 

$

1,729,453

 

 

$

1,656,880

 

 

$

1,694,602

 

 

$

1,570,363

 

Total uninsured, net of collateralized deposits

 

 

829,727

 

 

 

941,774

 

 

 

953,139

 

 

 

973,671

 

 

 

900,902

 

 

(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)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

Trust assets under management

 

$

2,707,390

 

$

2,615,670

 

$

2,483,811

 

$

2,332,448

 

$

2,386,637

Trust assets under administration

 

 

199,729

 

 

 

188,458

 

 

 

176,225

 

 

 

160,171

 

 

 

167,095

 

Total trust assets

 

$

2,907,119

 

 

$

2,804,128

 

 

$

2,660,036

 

 

$

2,492,619

 

 

$

2,553,732

 

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)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

Common stockholders’ equity

 

$

260,640

 

 

$

254,589

 

 

$

248,648

 

 

$

241,012

 

 

$

237,931

 

Less: Goodwill and other intangible assets

 

 

(12,073

)

 

 

(12,160

)

 

 

(12,159

)

 

 

(12,218

)

 

 

(12,262

)

Tangible common equity

 

$

248,567

 

 

$

242,429

 

 

$

236,489

 

 

$

228,794

 

 

$

225,669

 

Common shares outstanding

 

 

8,315,465

 

 

 

8,306,270

 

 

 

8,362,085

 

 

 

8,432,048

 

 

 

8,474,699

 

Book value per share

 

$

31.34

 

 

$

30.65

 

 

$

29.74

 

 

$

28.58

 

 

$

28.08

 

Tangible book value per share

 

 

29.89

 

 

 

29.19

 

 

 

28.28

 

 

 

27.13

 

 

 

26.63

 

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, 2022. 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)

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

Common stockholders’ equity

 

$

260,640

 

 

$

254,589

 

 

$

248,648

 

 

$

241,012

 

 

$

237,931

 

Less: Goodwill and other intangible assets

 

 

(12,073

)

 

 

(12,160

)

 

 

(12,159

)

 

 

(12,218

)

 

 

(12,262

)

Tangible common equity (a)

 

$

248,567

 

 

$

242,429

 

 

$

236,489

 

 

$

228,794

 

 

$

225,669

 

Total assets

 

$

3,265,738

 

 

$

3,164,411

 

 

$

2,976,611

 

 

$

2,850,802

 

 

$

2,777,016

 

Less: Goodwill and other intangible assets

 

 

(12,073

)

 

 

(12,160

)

 

 

(12,159

)

 

 

(12,218

)

 

 

(12,262

)

Tangible assets (b)

 

$

3,253,665

 

 

$

3,152,251

 

 

$

2,964,452

 

 

$

2,838,584

 

 

$

2,764,754

 

Tangible common equity to tangible assets

 

 

7.64

%

 

 

7.69

%

 

 

7.98

%

 

 

8.06

%

 

 

8.16

%

 

 

 

 

 

 

 

 

 

 

 

Fair Value Adjustments:

 

 

 

 

 

 

 

 

 

 

Financial assets - MTM (c)

 

$

(43,403

)

 

$

(24,764

)

 

$

(24,302

)

 

$

(7,650

)

 

$

(7,206

)

Financial liabilities - MTM (d)

 

$

21,916

 

 

$

17,334

 

 

$

17,328

 

 

$

11,230

 

 

$

9,474

 

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

 

$

(16,975

)

 

$

(5,870

)

 

$

(5,509

)

 

$

2,828

 

 

$

1,792

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted tangible equity f = (a-e)

 

$

231,592

 

 

$

236,559

 

 

$

230,980

 

 

$

231,622

 

 

$

227,461

 

Adjusted tangible assets g = (b-c)

 

$

3,210,262

 

 

$

3,127,487

 

 

$

2,940,150

 

 

$

2,830,934

 

 

$

2,757,548

 

Adjusted TCE ratio (f/g)

 

 

7.21

%

 

 

7.56

%

 

 

7.86

%

 

 

8.18

%

 

 

8.25

%

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

 

For the Six Months Ended

(Dollars in thousands)

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

Total non-interest expense

$

22,031

 

 

$

21,767

 

 

$

21,167

 

 

$

20,028

 

 

$

19,456

 

 

$

43,798

 

 

$

38,280

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss on repossessed assets

 

(2

)

 

 

6

 

 

 

22

 

 

 

7

 

 

 

8

 

 

 

4

 

 

 

20

 

SBA recourse provision (benefit)

 

341

 

 

 

(18

)

 

 

(322

)

 

 

96

 

 

 

114

 

 

 

323

 

 

 

38

 

Contribution to First Business Charitable Foundation

 

 

 

 

 

 

 

809

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax credit investment impairment recovery

 

 

 

 

 

 

 

 

 

 

 

 

 

(351

)

 

 

 

 

 

(351

)

Total operating expense (a)

$

21,692

 

 

$

21,779

 

 

$

20,658

 

 

$

19,925

 

 

$

19,685

 

 

$

43,471

 

 

$

38,573

 

Net interest income

$

27,747

 

 

$

26,705

 

 

$

27,452

 

 

$

25,884

 

 

$

23,660

 

 

$

54,453

 

 

$

45,087

 

Total non-interest income

 

7,374

 

 

 

8,410

 

 

 

6,973

 

 

 

8,197

 

 

 

6,872

 

 

 

15,784

 

 

 

14,258

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank-owned life insurance claim

 

 

 

 

 

 

 

809

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss on sale of securities

 

(45

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45

)

 

 

 

Adjusted non-interest income

 

7,419

 

 

 

8,410

 

 

 

6,164

 

 

 

8,197

 

 

 

6,872

 

 

 

15,829

 

 

 

14,258

 

Total operating revenue (b)

$

35,166

 

 

$

35,115

 

 

$

33,616

 

 

$

34,081

 

 

$

30,532

 

 

$

70,282

 

 

$

59,345

 

Efficiency ratio

 

61.68

%

 

 

62.02

%

 

 

61.45

%

 

 

58.46

%

 

 

64.47

%

 

 

61.85

%

 

 

65.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

13,474

 

 

$

13,336

 

 

$

12,958

 

 

$

14,156

 

 

$

10,847

 

 

$

26,811

 

 

$

20,772

 

Average total assets

$

3,127,234

 

 

$

2,984,600

 

 

$

2,867,475

 

 

$

2,758,961

 

 

$

2,716,707

 

 

$

3,056,311

 

 

$

2,691,613

 

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

 

1.72

%

 

 

1.79

%

 

 

1.81

%

 

 

2.05

%

 

 

1.60

%

 

 

1.75

%

 

 

1.54

%

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

 

For the Six Months Ended

(Dollars in thousands)

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

Interest income

$

47,161

 

 

$

42,064

 

 

$

38,319

 

 

$

31,786

 

 

$

27,031

 

 

$

89,226

 

 

$

51,266

 

Interest expense

 

19,414

 

 

 

15,359

 

 

 

10,867

 

 

 

5,902

 

 

 

3,371

 

 

 

34,773

 

 

 

6,179

 

Net interest income (a)

 

27,747

 

 

 

26,705

 

 

 

27,452

 

 

 

25,884

 

 

 

23,660

 

 

 

54,453

 

 

 

45,087

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees in lieu of interest

 

936

 

 

 

651

 

 

 

1,318

 

 

 

807

 

 

 

1,865

 

 

 

1,587

 

 

 

3,158

 

FRB interest income and FHLB dividend income

 

1,064

 

 

 

656

 

 

 

613

 

 

 

445

 

 

 

279

 

 

 

1,720

 

 

 

467

 

Adjusted net interest income (b)

$

25,747

 

 

$

25,398

 

 

$

25,521

 

 

$

24,632

 

 

$

21,516

 

 

$

51,146

 

 

$

41,462

 

Average interest-earning assets (c)

$

2,913,751

 

 

$

2,765,087

 

 

$

2,649,149

 

 

$

2,582,945

 

 

$

2,551,180

 

 

$

2,839,829

 

 

$

2,538,297

 

Less: