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First Business Bank Reports Fourth Quarter 2023 Net Income of $9.6 Million

-- Robust deposit and loan growth and positive operating leverage support continued tangible book value expansion --

-- Private Wealth assets under management cross $3 billion milestone --

First Business Financial Services, Inc. (the “Company”, the “Bank”, or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income available to common shareholders of $9.6 million, or earnings per share of $1.15 on a diluted basis. This compares to net income available to common shareholders of $9.7 million, or $1.17 per share, in the third quarter of 2023 and $9.9 million, or $1.18 per share, in the fourth quarter of 2022.

“We had tremendous success attracting new client relationships in the fourth quarter, which again drove robust loan and deposit growth and resulted in record pre-tax, pre-provision income,” said Corey Chambas, Chief Executive Officer. “2023 marked the culmination of our five-year strategic plan in which First Business Bank committed to growing loans, deposits, and revenues at a 10% annual pace. We surpassed our own expectations by achieving a 17% increase in loans, a 29% increase in deposits, and a 13% increase in operating revenue. We outperformed our peers and delivered significant value to our shareholders by growing pre-tax, pre-provision adjusted earnings by 17% over 2022, while tangible book value per share rose 13%. Additionally, we grew Private Wealth assets under management and administration to record levels, exceeding $3 billion for the first time. Our team executed our plan with consistency and efficiency, producing outstanding results even as industry net interest margins narrowed and industry asset quality began to normalize away from the historically pristine levels seen in recent years.”

“We are pleased with our ability to manage net interest margin in the current interest rate environment,” Chambas added. “Much of our success stems from our relationship-based approach to deposit generation. This requires accepting incremental short-term costs due to marketplace pricing. The fourth quarter demonstrated the success of this long-held deposit-centric strategy, with deposit growth exceeding loan growth and new deposit account balances comprising nearly $70 million of the linked quarter increase.”

“Comprehensive planning has been underway for the past year to develop our strategies and establish our goals for the next five-year period,” Chambas continued. “It is expected this updated strategic plan will be rolled out company-wide in 2024. We expect our team to prioritize quality balance sheet and revenue growth while optimizing technology for the benefit of our clients and stakeholders, evolving with our industry in a manner that stays true to First Business Bank’s deep-rooted culture.”

Quarterly Highlights

  • Robust Deposit Growth. Total deposits grew $139.8 million, increasing 21.0% annualized from the third quarter and $628.6 million, or 29.0%, from the fourth quarter of 2022. In-market deposits grew to a record $2.339 billion, up $149.8 million, or 27.4% annualized, from the third quarter and $373.1 million, or 19.0%, from the fourth quarter of 2022. Successful execution of client deposit initiatives attracted new relationships, which drove in-market deposit growth. New relationships also contributed to increased gross Treasury Management service charges, which grew 16.8% to $1.5 million, compared to $1.3 million in the fourth quarter of 2022.
  • Strong Loan Growth. Loans increased $86.2 million, or 12.5% annualized, from the third quarter of 2023, and $407.2 million, or 16.7%, from the fourth quarter of 2022, reflecting ongoing expansion across the Company’s products and geographies in the fourth quarter.
  • Net Interest Income Expansion. Net interest income grew 3.3% from the linked quarter and 7.6% from the prior year quarter. The Company’s continued success in driving double-digit loan and deposit growth supported this expansion, offsetting the ongoing impact of industry-wide net interest margin compression. Net interest margin of 3.69% declined seven basis points from the linked quarter. Recent deposit client acquisition and retention at higher deposit rates drove the decline during the quarter.
  • Record Pre-Tax, Pre-Provision (“PTPP”) Income. PTPP income grew to $15.3 million, up 8.4% from the linked quarter and 17.8% from the prior year quarter. This performance reflects solid growth across the Company’s balance sheet and efficient execution of the Company’s revenue growth strategies. PTPP adjusted return on average assets measured 1.77%, compared to 1.72% and 1.81% for the linked and prior year quarters, respectively.
  • Tangible Book Value Growth. The Company’s strong earnings generation produced a 13.9% annualized increase in tangible book value per common share compared to the linked quarter and 12.9% 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)

 

December 31,

2023

 

September 30,

2023

 

December 31,

2022

 

December 31,

2023

 

December 31,

2022

Net interest income

 

$

29,540

 

 

$

28,596

 

 

$

27,452

 

 

$

112,588

 

 

$

98,422

 

Adjusted non-interest income (1)

 

 

7,094

 

 

 

8,430

 

 

 

6,164

 

 

 

31,353

 

 

 

28,619

 

Operating revenue (1)

 

 

36,634

 

 

 

37,026

 

 

 

33,616

 

 

 

143,941

 

 

 

127,041

 

Operating expense (1)

 

 

21,374

 

 

 

22,943

 

 

 

20,658

 

 

 

87,788

 

 

 

79,155

 

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

 

 

15,260

 

 

 

14,083

 

 

 

12,958

 

 

 

56,153

 

 

 

47,886

 

Less:

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

2,573

 

 

 

1,817

 

 

 

702

 

 

 

8,182

 

 

 

(3,868

)

Net loss on repossessed assets

 

 

4

 

 

 

4

 

 

 

22

 

 

 

12

 

 

 

49

 

Contribution to First Business Charitable Foundation

 

 

 

 

 

 

 

 

809

 

 

 

 

 

 

809

 

SBA recourse provision

 

 

210

 

 

 

242

 

 

 

(322

)

 

 

775

 

 

 

(188

)

Tax credit investment impairment recovery

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(351

)

Add:

 

 

 

 

 

 

 

 

 

 

Bank-owned life insurance claim

 

 

 

 

 

 

 

 

809

 

 

 

 

 

 

809

 

Net loss on sale of securities

 

 

 

 

 

 

 

 

 

 

 

(45

)

 

 

 

Income before income tax expense

 

 

12,473

 

 

 

12,020

 

 

 

12,556

 

 

 

47,139

 

 

 

52,244

 

Income tax expense

 

 

2,703

 

 

 

2,079

 

 

 

2,400

 

 

 

10,112

 

 

 

11,386

 

Net income

 

$

9,770

 

 

$

9,941

 

 

$

10,156

 

 

$

37,027

 

 

$

40,858

 

Preferred stock dividends

 

 

219

 

 

 

218

 

 

 

219

 

 

 

875

 

 

 

683

 

Net income available to common shareholders

 

$

9,551

 

 

$

9,723

 

 

$

9,937

 

 

$

36,152

 

 

$

40,175

 

Earnings per share, diluted

 

$

1.15

 

 

$

1.17

 

 

$

1.18

 

 

$

4.33

 

 

$

4.75

 

Book value per share

 

$

33.39

 

 

$

32.32

 

 

$

29.74

 

 

$

33.39

 

 

$

29.74

 

Tangible book value per share (1)

 

$

31.94

 

 

$

30.87

 

 

$

28.28

 

 

$

31.94

 

 

$

28.28

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (2)

 

 

3.69

%

 

 

3.76

%

 

 

4.15

%

 

 

3.78

%

 

 

3.82

%

Adjusted net interest margin (1)(2)

 

 

3.50

%

 

 

3.66

%

 

 

3.94

%

 

 

3.63

%

 

 

3.63

%

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

 

 

19.36

%

 

 

22.77

%

 

 

20.26

%

 

 

21.76

%

 

 

23.02

%

Efficiency ratio (1)

 

 

58.34

%

 

 

61.96

%

 

 

61.45

%

 

 

60.99

%

 

 

62.31

%

Return on average assets (2)

 

 

1.11

%

 

 

1.19

%

 

 

1.39

%

 

 

1.13

%

 

 

1.46

%

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

 

 

1.77

%

 

 

1.72

%

 

 

1.81

%

 

 

1.75

%

 

 

1.74

%

Return on average common equity (2)

 

 

13.99

%

 

 

14.62

%

 

 

16.26

%

 

 

13.79

%

 

 

16.79

%

 

 

 

 

 

 

 

 

 

 

 

Period-end loans and leases receivable

 

$

2,850,261

 

 

$

2,764,014

 

 

$

2,443,066

 

 

$

2,850,261

 

 

$

2,443,066

 

Average loans and leases receivable

 

$

2,810,793

 

 

$

2,711,851

 

 

$

2,384,091

 

 

$

2,647,851

 

 

$

2,304,990

 

Period-end in-market deposits

 

$

2,339,071

 

 

$

2,189,264

 

 

$

1,965,970

 

 

$

2,339,071

 

 

$

1,965,970

 

Average in-market deposits

 

$

2,247,639

 

 

$

2,105,716

 

 

$

1,950,625

 

 

$

2,098,153

 

 

$

1,928,815

 

Allowance for credit losses, including unfunded commitment reserves

 

$

32,997

 

 

$

31,036

 

 

$

24,230

 

 

$

32,997

 

 

$

24,230

 

Non-performing assets

 

$

20,844

 

 

$

17,689

 

 

$

3,754

 

 

$

20,844

 

 

$

3,754

 

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

 

 

1.16

%

 

 

1.12

%

 

 

0.99

%

 

 

1.16

%

 

 

0.99

%

Non-performing assets as a percent of total assets

 

 

0.59

%

 

 

0.52

%

 

 

0.13

%

 

 

0.59

%

 

 

0.13

%

(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.

Fourth Quarter 2023 Compared to Third Quarter 2023

Net interest income increased $944,000, or 3.3%, to $29.5 million.

  • The increase in net interest income was driven by an increase in 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 $98.9 million, or 14.6% annualized, to $2.811 billion. Fees in lieu of interest, which vary from quarter to quarter based on client-driven activity, totaled $1.1 million, compared to $582,000 in the prior quarter. Excluding fees in lieu of interest, net interest income increased $450,000, or 1.6%.
  • The yield on average interest-earning assets increased 14 basis points to 6.85% from 6.71%. Excluding fees in lieu of interest, the yield earned on average interest-earning assets increased 8 basis points to 6.71% from 6.63%. The daily average effective federal funds rate increased 7 basis points compared to the linked quarter, which equates to an average adjusted interest-earning asset beta of 118.5% for the three months ended December 31, 2023, compared to 104.8% in the linked quarter. The cumulative adjusted interest-earning asset beta since December 31, 2021 was 60.4%. 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 25 basis points to 3.99% from 3.74% due to heightened competition for deposits. Similarly, the rate paid for average total bank funding increased 20 basis points to 3.27% from 3.07%. Total bank funding is defined as total deposits plus Federal Home Loan Bank (“FHLB”) advances. The cumulative bank funding beta since December 31, 2021 was 56.0%.
  • Net interest margin was 3.69%, down 7 basis points compared to 3.76% in the linked quarter. Adjusted net interest margin1 was 3.50%, down 16 basis points compared to 3.66% in the linked quarter. The decrease in adjusted 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 interest earning assets.
  • Management believes net interest margin is nearing a floor, and based on current trends we believe our net interest margin should stabilize above our existing strategic plan goal of 3.50%.

The Bank reported a provision expense of $2.6 million, compared to $1.8 million in the third quarter of 2023. The fourth quarter provision expense included increases of $2.0 million in net specific reserves, $629,000 due to strong loan growth, and net charge-offs of $610,000. This expense was partially offset by a $432,000 reduction due to qualitative factor changes and a $260,000 reduction in general reserve due to an improved economic outlook in our model forecast compared to the prior period. Similar to the third quarter, the increase in specific reserves and charge-offs was primarily related to defaults by transportation and logistics borrowers in our Equipment Finance loan portfolio, which management believes is consistent with the cyclical nature of this industry, and to a lesser extent, the SBA portfolio. The Company expects continued stress within this group of borrowers in 2024.

Non-interest income decreased $1.3 million, or 15.8%, to $7.1 million.

  • Private Wealth and Company Retirement Plan (“Private Wealth”) fee income decreased $12,000, or 0.4% to $2.9 million. Private Wealth assets under management and administration measured $3.122 billion on December 31, 2023, up $206.9 million from the prior quarter. Fee income is based on overall asset levels and market value performance and is recognized on a one-month lag. The decrease in fourth quarter fees reflects weaker market performance in September and October, partially offset by improved performance in November.
  • Gains on sale of SBA loans decreased $567,000, or 66.6%, to $284,000 driven by the timing of loan sales. SBA gross loan production totaled $14.2 million for the first six months of 2023 and $26.6 million for the last six months of 2023.
  • Commercial loan swap fee income of $438,000 decreased by $554,000, or 55.8%. Swap fee income varies from period to period based on loan activity and the interest rate environment.
  • Other fee income decreased $299,000 to $1.7 million, compared to $2.0 million in the prior quarter. The decrease was primarily due to lower returns on the Company’s investments in mezzanine funds in the fourth quarter. Income from mezzanine funds was $860,000 in the fourth quarter, compared to $1.2 million in the linked quarter. Income from mezzanine funds varies from period to period based on changes in the realized and unrealized fair value of underlying investments. Frequency of the income recognized from mezzanine funds will occur quarterly, prospectively.

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.

Non-interest expense decreased $1.6 million, or 6.9%, to $21.6 million, while operating expense decreased $1.6 million, or 6.8%, to $21.4 million.

  • Compensation expense was $14.5 million, reflecting a decrease of $1.1 million, or 7.2%, from the linked quarter primarily due to a $563,000 decrease in the annual cash incentive bonus and profit sharing accruals, a $240,000 decrease in incentive compensation mainly due to timing of payouts on loan and deposit production, and a $101,000 decrease in Social Security expenses as employees met annual maximums in the prior quarter. Average full-time equivalents (“FTEs”) for the fourth quarter of 2023 were 343, down from 349 in the linked quarter. The Company’s compensation philosophy is to provide base salaries competitive with the market. Given the competitive job market and the critical importance to the Company of retaining employees, annual base salaries were increased an additional $1.5 million, or approximately 4.1%, in the aggregate for 2024. As of December 31, 2023, we had 15 open positions, 11 of which were filled in January 2024.
  • Professional fees were $1.3 million, decreasing $116,000, or 8.1%, from the linked quarter primarily due to a decrease in recruiting expenses.
  • FDIC insurance expense was $585,000, decreasing $95,000, or 14.0%, from the linked quarter primarily due to a decrease in the assessment rate.
  • Other non-interest expense decreased $231,000, or 14.6%, to $1.4 million from the linked quarter primarily due to a $570,000 decrease in liquidation expense related to an Asset-Based Lending (“ABL”) ABL loan relationship. In past loan resolutions, the Bank has been able to recover similar liquidation expenses. These decreases were partially offset by an increase in charitable contributions and travel expense.

Income tax expense increased $624,000, or 30.0%, to $2.7 million. The effective tax rate was 21.7% for the three months ended December 31, 2023, compared to 17.3% for the linked quarter. Management completed its analysis of the Wisconsin State Budget 2023, which included language that provides an exemption for state tax on certain loan income for loans to Wisconsin small businesses. Management estimates this law will eliminate the Bank’s Wisconsin state income tax in 2023 and the foreseeable future. This conclusion results in a 2023 benefit of $2.3 million more than offset by a one-time $2.8 million charge to state income tax expense to recognize a valuation allowance on deferred state income taxes. Based on expected earnings, reduction in state tax, and future tax credit investments, the Company expects to report an effective tax rate between 18% and 19% for 2024.

Total period-end loans and leases receivable increased $86.2 million, or 12.5% annualized, to $2.850 billion. Management expects loan growth to moderate to our long term target of 10% in future quarters. Management is evaluating loan sale and participation strategies as a means of adding to and further diversifying fee income while maintaining regulatory capital ratios at greater than well-capitalized levels. The average rate earned on average loans and leases receivable was 7.21%, up 15 basis points from 7.06% in the prior quarter. Additionally, $247.5 million of new and renewed loans were originated in the quarter at a weighted average yield of 7.86%.

  • Commercial Real Estate (“CRE”) loans increased by $64.5 million, or 15.8% annualized, to $1.700 billion. The increase was primarily due to an increase in non-owner occupied CRE and multi-family loans.
  • Commercial & Industrial (“C&I”) loans increased $22.1 million, or 8.0% annualized, to $1.106 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 $149.8 million, or 27.4% annualized, to $2.339 billion, compared to $2.189 billion. The average rate paid was 3.20%, up 23 basis points from 2.97% in the prior quarter.

  • The increase was due to growth in all major in-market deposit categories. During the quarter, non-maturity deposit balance increases were split between $68.3 million in growth from new accounts at a weighted average rate of 3.54% and $76.0 million in growth from existing accounts at a weighted average rate of 2.83%, compared to 2.72% in the linked quarter. Certificate of deposit runoff of $163.4 million at a weighted average rate of 4.22% was replaced by new and renewed certificates of deposit of $170.8 million at a weighted average rate of 4.69%.

Period-end wholesale funding, including FHLB advances, brokered deposits, and deposits gathered through internet deposit listing services, decreased $43.0 million, or 22.0% annualized, to $739.2 million.

  • Wholesale deposits decreased $10.0 million to $457.7 million, compared to $467.7 million, as in-market deposit growth exceeded earning asset growth . Consistent with the Bank’s long-held philosophy to manage interest rate risk, management will continue to utilize the most efficient and cost-effective source of wholesale funds to match-fund fixed-rate loans as necessary. The average rate paid on wholesale deposits decreased 8 basis points to 4.15% and the weighted average original maturity increased to 4.4 years from 4.0 years.
  • FHLB advances decreased $33.0 million to $281.5 million. The average rate paid on FHLB advances decreased 3 basis points to 2.45% and the weighted average original maturity was 5.2 years for both periods.

Non-performing assets increased $3.2 million to $20.8 million, or 0.59% of total assets, up from 0.52% in the prior quarter driven by Equipment Finance loans within the C&I portfolio. The increase in non-performing assets was primarily related to defaults by transportation and logistics borrowers in our Equipment Finance loan portfolio, which management believes is consistent with the cyclical nature of this industry. While we continue to expect full repayment of the one ABL loan that defaulted during the second quarter of 2023, the liquidation process has transitioned into Chapter 7 bankruptcy, likely delaying final resolution until the second half of 2024. Excluding the ABL loan, non-performing assets totaled $12.0 million, or 0.34% of total assets in the current quarter and $8.1 million, or 0.24% of total assets in the linked quarter.

The allowance for credit losses, including the unfunded credit commitments reserve, increased $2.0 million, or 6.3%, as increases in specific reserves and the general reserve from loan growth were partially offset by a decrease in the general reserve due a decrease in qualitative factors and an improved economic outlook in our model forecast. The allowance for credit losses, including unfunded credit commitment reserves, as a percent of total gross loans and leases was 1.16% compared to 1.12% in the prior quarter.

Fourth Quarter 2023 Compared to Fourth Quarter 2022

Net interest income increased $2.1 million, or 7.6%, to $29.5 million.

  • The increase in net interest income primarily reflects an increase in average gross loans and leases, partially offset by lower fees in lieu of interest and net interest margin compression. Fees in lieu of interest decreased from $1.3 million to $1.1 million. Excluding fees in lieu of interest, net interest income increased $2.3 million, or 8.9%.
  • The yield on average interest-earning assets measured 6.85% compared to 5.79%. Excluding fees in lieu of interest, the yield on average interest-earning assets measured 6.71%, compared to 5.59%. 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 168 basis points compared to the prior year quarter, which equates to an average adjusted interest-earning asset beta of 67.0% for the three months ended December 31, 2023, compared to the prior year period.
  • The rate paid for average interest-bearing in-market deposits increased 198 basis points to 3.99% from 2.01%. The rate paid for average total bank funding increased 159 basis points to 3.27% from 1.67%. The total bank funding beta was 94.6% for the three months ended December 31, 2023, compared to the prior year period.
  • Net interest margin decreased 46 basis points to 3.69% from 4.15%. Adjusted net interest margin decreased 44 basis points to 3.50% from 3.94%.

The Company reported a provision expense of $2.6 million, compared to $702,000 in the fourth quarter of 2022. The increase compared to the prior year quarter is mainly due to an increase in specific reserves related to the Equipment Finance lending portfolio.

Non-interest income of $7.1 million increased by $121,000, or 1.7%, from $7.0 million in the prior year period.

  • Private Wealth fee income increased $363,000, or 14.1%, to $2.9 million. Private Wealth assets under management and administration measured $3.122 billion at December 31, 2023, up $461.5 million, or 17.3%.
  • Commercial loan swap fee income of $438,000 decreased by $318,000, or 42.1%. Swap fee income varies from period to period based on loan activity and the interest rate environment.
  • Service charges on deposits increased $57,000, or 7.2%, to $848,000, driven by new in-market deposit relationships partially offset by an increase in the earnings credit rate commensurate with the rising rate environment.
  • Other fee income decreased $18,000, or 1.0%, to $1.7 million, primarily due to the recognition of a $809,000 bank-owned life insurance death benefit in the prior year quarter, partially offset by higher returns on the Company’s investments in mezzanine funds. Income from mezzanine funds was $860,000 in the fourth quarter, compared to $92,000 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 $421,000, or 2.0%, to $21.6 million. Operating expense increased $0.7 million, or 3.5%, to $21.4 million.

  • Compensation expense decreased $817,000, or 5.4%, to $14.5 million. The decrease in compensation expense was primarily due to a lower estimated annual incentive cash bonus program accrual partially offset by an increase in average FTEs and annual merit increases and promotions. Average FTEs increased 2% to 343 in the fourth quarter of 2023, compared to 336 in the fourth quarter of 2022, as a result of expanded hiring efforts that have successfully driven growth while maintaining positive operating leverage.
  • FDIC insurance increased $382,000, or 188.2%, to $585,000, primarily due to an increase in the assessment rate and the assessable base.
  • Computer software expense increased $228,000, or 20.9%, to $1.3 million, primarily due to continued investment in technology to support the Company’s growth initiatives.
  • Data processing expense increased $130,000, or 16.1%, to $936,000, primarily due to an increase in core processing costs commensurate with loan and deposit account growth, as well as various project implementations.
  • Professional fees expense increased $103,000, or 8.5%, to $1.3 million, primarily due to an increase in recruiting expense and a general increase in other professional consulting services for various projects.
  • Marketing expense increased $83,000, or 12.9%, to $724,000, primarily due to an increase in business development efforts and advertising projects commensurate with our expanded sales force.
  • Other expenses increased $429,000, or 46.5%, to $1.4 million, primarily due to increases in SBA recourse provision, travel expenses, swap credit valuation, and liquidation expenses. This was partially offset by a decrease in donations and contributions due to a non-recurring contribution to First Business Charitable Foundation totaling $809,000 in the prior year quarter.

Total period-end loans and leases receivable increased $407.2 million, or 16.7%, to $2.850 billion.

  • C&I loans increased $252.5 million, or 29.6%, to $1.106 billion, due to growth across all products and geographies.
  • CRE loans increased $157.9 million, or 10.2%, to $1.700 billion, primarily due to increases in non-owner occupied CRE and multi-family loans.

Total period-end in-market deposits grew $373.1 million, or 19.0%, to $2.339 billion, and the average rate paid increased 177 basis points to 3.20%. The increase in rate paid on in-market deposits was primarily due to a change in product mix.

Period-end wholesale funding increased $120.6 million to $739.2 million.

  • Wholesale deposits increased $255.5 million to $457.7 million, as the Bank utilized more wholesale deposits in lieu of FHLB advances to build excess liquidity and to match-fund fixed rate assets. The average rate paid on wholesale deposits increased 49 basis points to 4.15% and the weighted average effective maturity increased to 4.4 years from 2.1 years. Consistent with our balance sheet strategy to use the most efficient and cost-effective source of wholesale funding, the Company has entered into several derivative contracts hedging a portion of the wholesale deposits to reduce the fixed rate funding costs.
  • FHLB advances decreased $134.9 million to $281.5 million. The average rate paid on FHLB advances increased 24 basis points to 2.45% and the weighted average original maturity decreased to 5.2 years from 3.7 years.

Non-performing assets increased to $20.8 million, or 0.59% of total assets, compared to $3.8 million, or 0.13% of total assets, driven by the ABL, SBA, and Equipment Finance loan portfolios within the C&I portfolio. Excluding one ABL loan for which we expect full repayment, non-performing assets totaled $12.0 million, or 0.34% of total assets.

The allowance for credit losses, including unfunded commitment reserves, increased $8.8 million to $33.0 million, compared to $24.2 million due to an increase in specific reserves, loan growth, and a change in accounting standard. The allowance for credit losses as a percent of total gross loans and leases was 1.16%, compared to the allowance for loan losses of 0.99% 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 December 31, 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. At this time, the Company does not expect to renew the current plan or adopt a new plan upon its expiration due to strong 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 January 26, 2024.

About First Business Bank

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

This release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect First Business Bank’s current views with respect to future events and financial performance. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results, or other developments. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, uncertainties, and other factors that may cause actual results to differ materially from the views, beliefs, and projections expressed in such statements. Such statements are subject to risks and uncertainties, including among other things:

  • Adverse changes in the economy or business conditions, either nationally or in our markets including, without limitation, inflation, supply chain issues, 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 Company and the Bank to increased government regulation and supervision.
  • The proportion of the Company’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk.
  • The Company may be subject to increases in FDIC insurance assessments as a result of 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)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

139,510

 

 

$

132,915

 

 

$

112,809

 

 

$

185,973

 

 

$

102,682

 

Securities available-for-sale, at fair value

 

 

297,006

 

 

 

272,163

 

 

 

253,626

 

 

 

236,989

 

 

 

212,024

 

Securities held-to-maturity, at amortized cost

 

 

8,503

 

 

 

8,689

 

 

 

9,830

 

 

 

11,461

 

 

 

12,635

 

Loans held for sale

 

 

4,589

 

 

 

4,168

 

 

 

2,191

 

 

 

2,697

 

 

 

2,632

 

Loans and leases receivable

 

 

2,850,261

 

 

 

2,764,014

 

 

 

2,674,583

 

 

 

2,539,363

 

 

 

2,443,066

 

Allowance for credit losses

 

 

(31,275

)

 

 

(29,331

)

 

 

(28,115

)

 

 

(26,140

)

 

 

(24,230

)

Loans and leases receivable, net

 

 

2,818,986

 

 

 

2,734,683

 

 

 

2,646,468

 

 

 

2,513,223

 

 

 

2,418,836

 

Premises and equipment, net

 

 

6,190

 

 

 

6,157

 

 

 

5,094

 

 

 

4,933

 

 

 

4,340

 

Repossessed assets

 

 

247

 

 

 

61

 

 

 

65

 

 

 

89

 

 

 

95

 

Right-of-use assets

 

 

6,559

 

 

 

6,800

 

 

 

7,049

 

 

 

7,355

 

 

 

7,690

 

Bank-owned life insurance

 

 

55,536

 

 

 

55,123

 

 

 

54,747

 

 

 

54,383

 

 

 

54,018

 

Federal Home Loan Bank stock, at cost

 

 

12,042

 

 

 

13,528

 

 

 

14,482

 

 

 

13,088

 

 

 

17,812

 

Goodwill and other intangible assets

 

 

12,023

 

 

 

12,110

 

 

 

12,073

 

 

 

12,160

 

 

 

12,159

 

Derivatives

 

 

55,597

 

 

 

93,702

 

 

 

70,440

 

 

 

54,612

 

 

 

68,581

 

Accrued interest receivable and other assets

 

 

91,058

 

 

 

78,751

 

 

 

76,864

 

 

 

67,448

 

 

 

63,107

 

Total assets

 

$

3,507,846

 

 

$

3,418,850

 

 

$

3,265,738

 

 

$

3,164,411

 

 

$

2,976,611

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

In-market deposits

 

$

2,339,071

 

 

$

2,189,264

 

 

$

2,073,744

 

 

$

2,054,752

 

 

$

1,965,970

 

Wholesale deposits

 

 

457,708

 

 

 

467,743

 

 

 

455,108

 

 

 

422,088

 

 

 

202,236

 

Total deposits

 

 

2,796,779

 

 

 

2,657,007

 

 

 

2,528,852

 

 

 

2,476,840

 

 

 

2,168,206

 

Federal Home Loan Bank advances and other borrowings

 

 

330,916

 

 

 

363,891

 

 

 

370,113

 

 

 

341,859

 

 

 

456,808

 

Lease liabilities

 

 

8,954

 

 

 

9,236

 

 

 

9,499

 

 

 

9,822

 

 

 

10,175

 

Derivatives

 

 

51,949

 

 

 

78,696

 

 

 

61,147

 

 

 

49,012

 

 

 

61,419

 

Accrued interest payable and other liabilities

 

 

29,660

 

 

 

29,262

 

 

 

23,495

 

 

 

20,297

 

 

 

19,363

 

Total liabilities

 

 

3,218,258

 

 

 

3,138,092

 

 

 

2,993,106

 

 

 

2,897,830

 

 

 

2,715,971

 

Total stockholders’ equity

 

 

289,588

 

 

 

280,758

 

 

 

272,632

 

 

 

266,581

 

 

 

260,640

 

Total liabilities and stockholders’ equity

 

$

3,507,846

 

 

$

3,418,850

 

 

$

3,265,738

 

 

$

3,164,411

 

 

$

2,976,611

 

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)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

December 31,

2023

 

December 31,

2022

Total interest income

 

$

54,762

 

$

50,941

 

$

47,161

 

 

$

42,064

 

$

38,319

 

$

194,928

 

 

$

121,371

 

Total interest expense

 

 

25,222

 

 

22,345

 

 

19,414

 

 

 

15,359

 

 

10,867

 

 

82,340

 

 

 

22,949

 

Net interest income

 

 

29,540

 

 

28,596

 

 

27,747

 

 

 

26,705

 

 

27,452

 

 

112,588

 

 

 

98,422

 

Provision for credit losses

 

 

2,573

 

 

1,817

 

 

2,231

 

 

 

1,561

 

 

702

 

 

8,182

 

 

 

(3,868

)

Net interest income after provision for credit losses

 

 

26,967

 

 

26,779

 

 

25,516

 

 

 

25,144

 

 

26,750

 

 

104,406

 

 

 

102,290

 

Private wealth management service fees

 

 

2,933

 

 

2,945

 

 

2,893

 

 

 

2,654

 

 

2,570

 

 

11,425

 

 

 

10,881

 

Gain on sale of SBA loans

 

 

284

 

 

851

 

 

444

 

 

 

476

 

 

269

 

 

2,055

 

 

 

2,537

 

Service charges on deposits

 

 

848

 

 

835

 

 

766

 

 

 

682

 

 

791

 

 

3,131

 

 

 

3,849

 

Loan fees

 

 

869

 

 

786

 

 

905

 

 

 

803

 

 

847

 

 

3,363

 

 

 

3,010

 

Loss on sale of securities

 

 

 

 

 

 

(45

)

 

 

 

 

 

 

(45

)

 

 

 

Swap fees

 

 

438

 

 

992

 

 

977

 

 

 

557

 

 

756

 

 

2,964

 

 

 

1,793

 

Other non-interest income

 

 

1,722

 

 

2,021

 

 

1,434

 

 

 

3,238

 

 

1,740

 

 

8,415

 

 

 

7,358

 

Total non-interest income

 

 

7,094

 

 

8,430

 

 

7,374

 

 

 

8,410

 

 

6,973

 

 

31,308

 

 

 

29,428

 

Compensation

 

 

14,450

 

 

15,573

 

 

15,129

 

 

 

15,908

 

 

15,267

 

 

61,059

 

 

 

57,742

 

Occupancy

 

 

571

 

 

575

 

 

603

 

 

 

631

 

 

669

 

 

2,381

 

 

 

2,358

 

Professional fees

 

 

1,313

 

 

1,429

 

 

1,240

 

 

 

1,343

 

 

1,210

 

 

5,325

 

 

 

4,881

 

Data processing

 

 

936

 

 

953

 

 

1,061

 

 

 

875

 

 

806

 

 

3,826

 

 

 

3,197

 

Marketing

 

 

724

 

 

758

 

 

779

 

 

 

628

 

 

641

 

 

2,889

 

 

 

2,354

 

Equipment

 

 

340

 

 

349

 

 

355

 

 

 

295

 

 

359

 

 

1,340

 

 

 

1,091

 

Computer software

 

 

1,317

 

 

1,289

 

 

1,197

 

 

 

1,183

 

 

1,089

 

 

4,985

 

 

 

4,416

 

FDIC insurance

 

 

585

 

 

680

 

 

580

 

 

 

394

 

 

203

 

 

2,238

 

 

 

1,042

 

Other non-interest expense

 

 

1,352

 

 

1,583

 

 

1,087

 

 

 

510

 

 

923

 

 

4,532

 

 

 

2,393

 

Total non-interest expense

 

 

21,588

 

 

23,189

 

 

22,031

 

 

 

21,767

 

 

21,167

 

 

88,575

 

 

 

79,474

 

Income before income tax expense

 

 

12,473

 

 

12,020

 

 

10,859

 

 

 

11,787

 

 

12,556

 

 

47,139

 

 

 

52,244

 

Income tax expense

 

 

2,703

 

 

2,079

 

 

2,522

 

 

 

2,808

 

 

2,400

 

 

10,112

 

 

 

11,386

 

Net income

 

$

9,770

 

$

9,941

 

$

8,337

 

 

$

8,979

 

$

10,156

 

$

37,027

 

 

$

40,858

 

Preferred stock dividends

 

 

219

 

 

218

 

 

219

 

 

 

219

 

 

219

 

 

875

 

 

 

683

 

Net income available to common shareholders

 

$

9,551

 

$

9,723

 

$

8,118

 

 

$

8,760

 

$

9,937

 

$

36,152

 

 

$

40,175

 

Per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings

 

$

1.15

 

$

1.17

 

$

0.98

 

 

$

1.05

 

$

1.18

 

$

4.33

 

 

$

4.75

 

Diluted earnings

 

 

1.15

 

 

1.17

 

 

0.98

 

 

 

1.05

 

 

1.18

 

 

4.33

 

 

 

4.75

 

Dividends declared

 

 

0.2275

 

 

0.2275

 

 

0.2275

 

 

 

0.2275

 

 

0.1975

 

 

0.91

 

 

 

0.79

 

Book value

 

 

33.39

 

 

32.32

 

 

31.34

 

 

 

30.65

 

 

29.74

 

 

33.39

 

 

 

29.74

 

Tangible book value

 

 

31.94

 

 

30.87

 

 

29.89

 

 

 

29.19

 

 

28.28

 

 

31.94

 

 

 

28.28

 

Weighted-average common shares outstanding(1)

 

 

8,110,462

 

 

8,107,641

 

 

8,061,841

 

 

 

8,148,525

 

 

8,180,531

 

 

8,131,251

 

 

 

8,226,943

 

Weighted-average diluted common shares outstanding(1)

 

 

8,110,462

 

 

8,107,641

 

 

8,061,841

 

 

 

8,148,525

 

 

8,180,531

 

 

8,131,251

 

 

 

8,226,943

 

(1)

Excluding participating securities.

NET INTEREST INCOME ANALYSIS

(Unaudited)

 

For the Three Months Ended

(Dollars in thousands)

 

December 31, 2023

 

September 30, 2023

 

December 31, 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)

 

$

1,675,926

 

$

27,359

 

6.53

%

 

$

1,605,464

 

$

25,623

 

6.38

%

 

$

1,515,975

 

$

20,948

 

5.53

%

Commercial and industrial loans(1)

 

 

1,089,558

 

 

22,751

 

8.35

%

 

 

1,059,512

 

 

21,635

 

8.17

%

 

 

819,766

 

 

14,972

 

7.31

%

Consumer and other loans(1)

 

 

45,309

 

 

577

 

5.09

%

 

 

46,875

 

 

610

 

5.21

%

 

 

48,350

 

 

514

 

4.25

%

Total loans and leases receivable(1)

 

 

2,810,793

 

 

50,687

 

7.21

%

 

 

2,711,851

 

 

47,868

 

7.06

%

 

 

2,384,091

 

 

36,434

 

6.11

%

Mortgage-related securities(2)

 

 

221,708

 

 

2,061

 

3.72

%

 

 

204,291

 

 

1,681

 

3.29

%

 

 

164,120

 

 

1,008

 

2.46

%

Other investment securities(3)

 

 

67,444

 

 

541

 

3.21

%

 

 

67,546

 

 

517

 

3.06

%

 

 

49,850

 

 

261

 

2.09

%

FHLB stock

 

 

12,960

 

 

279

 

8.61

%

 

 

14,770

 

 

323

 

8.75

%

 

 

16,281

 

 

301

 

7.40

%

Short-term investments

 

 

86,580

 

 

1,193

 

5.51

%

 

 

40,318

 

 

552

 

5.48

%

 

 

34,807

 

 

315

 

3.62

%

Total interest-earning assets

 

 

3,199,485

 

 

54,761

 

6.85

%

 

 

3,038,776

 

 

50,941

 

6.71

%

 

 

2,649,149

 

 

38,319

 

5.79

%

Non-interest-earning assets

 

 

255,167

 

 

 

 

 

 

237,464

 

 

 

 

 

 

218,326

 

 

 

 

Total assets

 

$

3,454,652

 

 

 

 

 

$

3,276,240

 

 

 

 

 

$

2,867,475

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction accounts

 

$

785,480

 

 

7,657

 

3.90

%

 

$

731,529

 

 

6,774

 

3.70

%

 

$

492,586

 

 

2,360

 

1.92

%

Money market

 

 

734,903

 

 

7,145

 

3.89

%

 

 

657,183

 

 

5,871

 

3.57

%

 

 

748,502

 

 

3,784

 

2.02

%

Certificates of deposit

 

 

278,438

 

 

3,160

 

4.54

%

 

 

282,674

 

 

2,986

 

4.23

%

 

 

148,949

 

 

849

 

2.28

%

Wholesale deposits

 

 

450,880

 

 

4,682

 

4.15

%

 

 

410,494

 

 

4,172

 

4.07

%

 

 

128,908

 

 

1,180

 

3.66

%

Total interest-bearing deposits

 

 

2,249,701

 

 

22,644

 

4.03

%

 

 

2,081,880

 

 

19,803

 

3.80

%

 

 

1,518,945

 

 

8,173

 

2.15

%

FHLB advances

 

 

301,773

 

 

1,851

 

2.45

%

 

 

342,117

 

 

2,117

 

2.48

%

 

 

389,310

 

 

2,149

 

2.21

%

Other borrowings

 

 

49,394

 

 

727

 

5.89

%

 

 

34,745

 

 

425

 

4.89

%

 

 

41,143

 

 

545

 

5.30

%

Total interest-bearing liabilities

 

 

2,600,868

 

 

25,222

 

3.88

%

 

 

2,458,742

 

 

22,345

 

3.64

%

 

 

1,949,398

 

 

10,867

 

2.23

%

Non-interest-bearing demand deposit accounts

 

 

448,818

 

 

 

 

 

 

434,330

 

 

 

 

 

 

560,588

 

 

 

 

Other non-interest-bearing liabilities

 

 

119,833

 

 

 

 

 

 

105,079

 

 

 

 

 

 

100,998

 

 

 

 

Total liabilities

 

 

3,169,519

 

 

 

 

 

 

2,998,151

 

 

 

 

 

 

2,610,984

 

 

 

 

Stockholders’ equity

 

 

285,133

 

 

 

 

 

 

278,089

 

 

 

 

 

 

256,491

 

 

 

 

Total liabilities and stockholders’ equity

 

$

3,454,652

 

 

 

 

 

$

3,276,240

 

 

 

 

 

$

2,867,475

 

 

 

 

Net interest income

 

 

 

$

29,539

 

 

 

 

 

$

28,596

 

 

 

 

 

$

27,452

 

 

Interest rate spread

 

 

 

 

 

2.97

%

 

 

 

 

 

3.07

%

 

 

 

 

 

3.56

%

Net interest-earning assets

 

$

598,617

 

 

 

 

 

$

580,034

 

 

 

 

 

$

699,751

 

 

 

 

Net interest margin

 

 

 

 

 

3.69

%

 

 

 

 

 

3.76

%

 

 

 

 

 

4.15

%

(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 Year Ended

(Dollars in thousands)

 

December 31, 2023

 

December 31, 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)

 

$

1,586,967

 

$

98,370

 

6.20

%

 

$

1,484,239

 

$

66,917

 

4.51

%

Commercial and industrial loans(1)

 

 

1,013,866

 

 

81,963

 

8.08

%

 

 

771,056

 

 

46,575

 

6.04

%

Consumer and other loans(1)

 

 

47,018

 

 

2,316

 

4.93

%

 

 

49,695

 

 

1,876

 

3.78

%

Total loans and leases receivable(1)

 

 

2,647,851

 

 

182,649

 

6.90

%

 

 

2,304,990

 

 

115,368

 

5.01

%

Mortgage-related securities(2)

 

 

200,383

 

 

6,433

 

3.21

%

 

 

173,495

 

 

3,486

 

2.01

%

Other investment securities(3)

 

 

62,921

 

 

1,770

 

2.81

%

 

 

51,700

 

 

986

 

1.91

%

FHLB stock

 

 

15,162

 

 

1,231

 

8.12

%

 

 

16,462

 

 

989

 

6.01

%

Short-term investments

 

 

54,311

 

 

2,845

 

5.24

%

 

 

30,845

 

 

542

 

1.76

%

Total interest-earning assets

 

 

2,980,628

 

 

194,928

 

6.54

%

 

 

2,577,492

 

 

121,371

 

4.71

%

Non-interest-earning assets

 

 

231,521

 

 

 

 

 

 

175,424

 

 

 

 

Total assets

 

$

3,212,149

 

 

 

 

 

$

2,752,916

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Transaction accounts

 

$

689,500

 

 

23,727

 

3.44

%

 

$

503,668

 

 

3,963

 

0.79

%

Money market

 

 

681,336

 

 

22,129

 

3.25

%

 

 

761,469

 

 

6,241

 

0.82

%

Certificates of deposit

 

 

273,387

 

 

11,209

 

4.10

%

 

 

97,448

 

 

1,358

 

1.39

%

Wholesale deposits

 

 

346,285

 

 

14,353

 

4.14

%

 

 

48,825

 

 

1,616

 

3.31

%

Total interest-bearing deposits

 

 

1,990,508

 

 

71,418

 

3.59

%

 

 

1,411,410

 

 

13,178

 

0.93

%

FHLB advances

 

 

351,990

 

 

8,881

 

2.52

%

 

 

414,191

 

 

7,024

 

1.70

%

Other borrowings

 

 

38,891

 

 

2,041

 

5.25

%

 

 

43,818

 

 

2,243

 

5.12

%

Junior subordinated notes(5)

 

 

 

 

 

%

 

 

2,429

 

 

504

 

20.75

%

Total interest-bearing liabilities

 

 

2,381,389

 

 

82,340

 

3.46

%

 

 

1,871,848

 

 

22,949

 

1.23

%

Non-interest-bearing demand deposit accounts

 

 

453,930

 

 

 

 

 

 

566,230

 

 

 

 

Other non-interest-bearing liabilities

 

 

102,668

 

 

 

 

 

 

65,611

 

 

 

 

Total liabilities

 

 

2,937,987

 

 

 

 

 

 

2,503,689

 

 

 

 

Stockholders’ equity

 

 

274,162

 

 

 

 

 

 

249,227

 

 

 

 

Total liabilities and stockholders’ equity

 

$

3,212,149

 

 

 

 

 

$

2,752,916

 

 

 

 

Net interest income

 

 

 

$

112,588

 

 

 

 

 

$

98,422

 

 

Interest rate spread

 

 

 

 

 

3.08

%

 

 

 

 

 

3.48

%

Net interest-earning assets

 

$

599,239

 

 

 

 

 

$

705,644

 

 

 

 

Net interest margin

 

 

 

 

 

3.78

%

 

 

 

 

 

3.82

%

(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 year ended December 31, 2022, includes $236,000 in accelerated amortization of debt issuance costs.

ASSET AND LIABILITY BETA ANALYSIS

 

For the Three Months Ended

 

For the Year Ended

(Unaudited)

December

31, 2023

 

September

30, 2023

 

 

 

December

31, 2022

 

 

 

December

31, 2023

 

December

31, 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)

7.21

%

 

7.06

%

 

0.15

%

 

6.11

%

 

1.10

%

 

6.90

%

 

5.01

%

 

1.89

%

Total interest-earning assets(b)

6.85

%

 

6.71

%

 

0.14

%

 

5.79

%

 

1.06

%

 

6.54

%

 

4.71

%

 

1.83

%

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

7.06

%

 

6.97

%

 

0.09

%

 

5.89

%

 

1.17

%

 

6.78

%

 

4.78

%

 

2.00

%

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

6.71

%

 

6.63

%

 

0.08

%

 

5.59

%

 

1.12

%

 

6.43

%

 

4.50

%

 

1.93

%

Total in-market deposits(e)

3.20

%

 

2.97

%

 

0.23

%

 

1.43

%

 

1.77

%

 

2.72

%

 

0.60

%

 

2.12

%

Total bank funding(f)

3.27

%

 

3.07

%

 

0.20

%

 

1.67

%

 

1.60

%

 

2.87

%

 

0.84

%

 

2.03

%

Net interest margin(g)

3.69

%

 

3.76

%

 

(0.07

)%

 

4.15

%

 

(0.46

)%

 

3.78

%

 

3.82

%

 

(0.04

)%

Adjusted net interest margin(h)

3.50

%

 

3.66

%

 

(0.16

)%

 

3.94

%

 

(0.44

) %

 

3.63

%

 

3.63

%

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective fed funds rate (2)(i)

5.33

%

 

5.26

%

 

0.07

%

 

3.65

%

 

1.68

%

 

5.02

%

 

1.69

%

 

3.33

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beta Calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

65.5

%

 

 

 

 

 

56.76

%

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

 

 

 

 

 

 

 

 

63.1

%

 

 

 

 

 

54.98

%

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

 

 

 

 

 

 

 

 

69.6

%

 

 

 

 

 

60.06

%

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

 

 

 

 

 

 

 

 

67.0

%

 

 

 

 

 

57.87

%

Total in-market deposits(e/i)

 

 

 

 

 

 

 

 

105.4

%

 

 

 

 

 

63.66

%

Total bank funding(f)/(i)

 

 

 

 

 

 

 

 

94.6

%

 

 

 

 

 

60.96

%

Net interest margin(g/i)

 

 

 

 

 

 

 

 

(27.4

)%

 

 

 

 

 

(1.20

)%

Adjusted net interest margin(h/i)

 

 

 

 

 

 

 

 

(26.2

)%

 

 

 

 

 

%

(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 Year Ended

(Dollars in thousands)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

December 31,

2023

 

December 31,

2022

Change due to qualitative factor changes

 

$

(432

)

 

$

506

 

 

$

(50

)

 

$

9

 

 

$

85

 

 

$

33

 

 

$

(384

)

Change due to quantitative factor changes

 

 

(260

)

 

 

(1,372

)

 

 

(295

)

 

 

474

 

 

 

(930

)

 

 

(1,453

)

 

 

(2,012

)

Charge-offs

 

 

724

 

 

 

562

 

 

 

329

 

 

 

166

 

 

 

818

 

 

 

1,781

 

 

 

979

 

Recoveries

 

 

(114

)

 

 

(84

)

 

 

(245

)

 

 

(107

)

 

 

(203

)

 

 

(548

)

 

 

(4,741

)

Change in reserves on individually evaluated loans, net

 

 

2,008

 

 

 

1,265

 

 

 

1,093

 

 

 

(36

)

 

 

(50

)

 

 

4,330

 

 

 

146

 

Change due to loan growth, net

 

 

629

 

 

 

817

 

 

 

1,227

 

 

 

979

 

 

 

982

 

 

 

3,652

 

 

 

2,144

 

Change in unfunded commitment reserves

 

 

17

 

 

 

123

 

 

 

172

 

 

 

76

 

 

 

 

 

 

387

 

 

 

 

Total provision for credit losses

 

$

2,572

 

 

$

1,817

 

 

$

2,231

 

 

$

1,561

 

 

$

702

 

 

$

8,182

 

 

$

(3,868

)

PERFORMANCE RATIOS

 

 

For the Three Months Ended

 

For the Year Ended

(Unaudited)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

December 31,

2023

 

December 31,

2022

Return on average assets (annualized)

 

1.11

%

 

1.19

%

 

1.04

%

 

1.17

%

 

1.39

%

 

1.13

%

 

1.46

%

Return on average common equity (annualized)

 

13.99

%

 

14.62

%

 

12.58

%

 

13.96

%

 

16.26

%

 

13.79

%

 

16.79

%

Efficiency ratio

 

58.34

%

 

61.96

%

 

61.68

%

 

62.02

%

 

61.45

%

 

60.99

%

 

62.31

%

Interest rate spread

 

2.97

%

 

3.07

%

 

3.15

%

 

3.19

%

 

3.56

%

 

3.08

%

 

3.48

%

Net interest margin

 

3.69

%

 

3.76

%

 

3.81

%

 

3.86

%

 

4.15

%

 

3.78

%

 

3.82

%

Average interest-earning assets to average interest-bearing liabilities

 

123.02

%

 

123.59

%

 

124.82

%

 

130.09

%

 

135.90

%

 

125.16

%

 

137.70

%

ASSET QUALITY RATIOS

(Unaudited)

 

As of

(Dollars in thousands)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Non-accrual loans and leases

 

$

20,597

 

 

$

17,628

 

 

$

15,721

 

 

$

3,412

 

 

$

3,659

 

Repossessed assets

 

 

247

 

 

 

61

 

 

 

65

 

 

 

89

 

 

 

95

 

Total non-performing assets

 

$

20,844

 

 

$

17,689

 

 

$

15,786

 

 

$

3,501

 

 

$

3,754

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

0.72

%

 

 

0.64

%

 

 

0.59

%

 

 

0.13

%

 

 

0.15

%

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

 

 

0.73

%

 

 

0.64

%

 

 

0.59

%

 

 

0.14

%

 

 

0.15

%

Non-performing assets as a percent of total assets

 

 

0.59

%

 

 

0.52

%

 

 

0.48

%

 

 

0.11

%

 

 

0.13

%

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

 

 

1.16

%

 

 

1.12

%

 

 

1.11

%

 

 

1.08

%

 

 

0.99

%

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

 

 

160.21

%

 

 

176.06

%

 

 

188.90

%

 

 

807.44

%

 

 

662.20

%

NET CHARGE-OFFS (RECOVERIES)

(Unaudited)

 

For the Three Months Ended

 

For the Year Ended

(Dollars in thousands)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

December 31,

2023

 

December 31,

2022

Charge-offs

 

$

724

 

 

$

562

 

 

$

329

 

 

$

166

 

 

$

818

 

 

$

1,781

 

 

$

979

 

Recoveries

 

 

(114

)

 

 

(84

)

 

 

(245

)

 

 

(107

)

 

 

(203

)

 

 

(548

)

 

 

(4,741

)

Net charge-offs (recoveries)

 

$

610

 

 

$

478

 

 

$

84

 

 

$

59

 

 

$

615

 

 

$

1,233

 

 

$

(3,762

)

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

 

 

0.09

%

 

 

0.07

%

 

 

0.01

%

 

 

0.01

%

 

 

0.10

%

 

 

0.05

%

 

 

(0.16

)%

CAPITAL RATIOS

 

 

As of and for the Three Months Ended

(Unaudited)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Total capital to risk-weighted assets

 

11.19

%

 

11.20

%

 

10.70

%

 

11.04

%

 

11.26

%

Tier I capital to risk-weighted assets

 

8.74

%

 

8.74

%

 

8.70

%

 

9.01

%

 

9.20

%

Common equity tier I capital to risk-weighted assets

 

8.38

%

 

8.37

%

 

8.32

%

 

8.61

%

 

8.79

%

Tier I capital to adjusted assets

 

8.43

%

 

8.65

%

 

8.80

%

 

9.00

%

 

9.17

%

Tangible common equity to tangible assets

 

7.60

%

 

7.53

%

 

7.64

%

 

7.69

%

 

7.98

%

LOAN AND LEASE RECEIVABLE COMPOSITION

(Unaudited)

 

As of

(in thousands)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

Commercial real estate - owner occupied (1)

 

$

256,479

 

 

$

236,058

 

 

$

244,039

 

 

$

233,725

 

 

$

268,354

Commercial real estate - non-owner occupied (1)

 

 

773,494

 

 

 

753,517

 

 

 

715,309

 

 

 

675,087

 

 

 

687,091

Construction (1)

 

 

193,080

 

 

 

211,828

 

 

 

217,069

 

 

 

212,916

 

 

 

218,751

Multi-family (1)

 

 

450,529

 

 

 

409,714

 

 

 

392,297

 

 

 

384,043

 

 

 

350,026

1-4 family (1)

 

 

26,289

 

 

 

24,235

 

 

 

23,063

 

 

 

23,404

 

 

 

17,728

Total commercial real estate

 

 

1,699,871

 

 

 

1,635,352

 

 

 

1,591,777

 

 

 

1,529,175

 

 

 

1,541,950

Commercial and industrial (1)

 

 

1,105,835

 

 

 

1,083,698

 

 

 

1,036,921

 

 

 

963,328

 

 

 

853,327

Consumer and other (1)

 

 

44,312

 

 

 

44,808

 

 

 

45,743

 

 

 

46,773

 

 

 

47,938

Total gross loans and leases receivable

 

 

2,850,018

 

 

 

2,763,858

 

 

 

2,674,441

 

 

 

2,539,276

 

 

 

2,443,215

Less:

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

 

31,275

 

 

 

29,331

 

 

 

28,115

 

 

 

26,140

 

 

 

24,230

Deferred loan fees

 

 

(243

)

 

 

(156

)

 

 

(142

)

 

 

(87

)

 

 

149

Loans and leases receivable, net

 

$

2,818,986

 

 

$

2,734,683

 

 

$

2,646,468

 

 

$

2,513,223

 

 

$

2,418,836

(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)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Non-interest-bearing transaction accounts

 

$

445,376

 

 

$

430,011

 

 

$

419,294

 

 

$

471,904

 

 

$

537,107

 

Interest-bearing transaction accounts

 

 

895,319

 

 

 

779,789

 

 

 

719,198

 

 

 

612,500

 

 

 

576,601

 

Money market accounts

 

 

711,245

 

 

 

694,199

 

 

 

641,969

 

 

 

662,157

 

 

 

698,505

 

Certificates of deposit

 

 

287,131

 

 

 

285,265

 

 

 

293,283

 

 

 

308,191

 

 

 

153,757

 

Wholesale deposits

 

 

457,708

 

 

 

467,743

 

 

 

455,108

 

 

 

422,088

 

 

 

202,236

 

Total deposits

 

$

2,796,779

 

 

$

2,657,007

 

 

$

2,528,852

 

 

$

2,476,840

 

 

$

2,168,206

 

 

 

 

 

 

 

 

 

 

 

 

Uninsured deposits

 

$

994,687

 

 

$

916,083

 

 

$

867,397

 

 

$

974,242

 

 

$

967,465

 

Less: uninsured deposits collateralized by pledged assets

 

 

17,051

 

 

 

28,873

 

 

 

37,670

 

 

 

32,468

 

 

 

14,326

 

Total uninsured, net of collateralized deposits

 

 

977,636

 

 

 

887,210

 

 

 

829,727

 

 

 

941,774

 

 

 

953,139

 

% of total deposits

 

 

35.0

%

 

 

33.4

%

 

 

32.8

%

 

 

38.0

%

 

 

44.0

%

SOURCES OF LIQUIDITY

(Unaudited)

 

As of

(in thousands)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Short-term investments

 

$

107,162

 

$

109,612

 

$

80,510

 

$

159,859

 

$

76,871

Collateral value of unencumbered pledged loans

 

 

367,471

 

 

315,067

 

 

265,884

 

 

296,393

 

 

184,415

Market value of unencumbered securities

 

 

259,791

 

 

236,618

 

 

217,074

 

 

200,332

 

 

188,353

Readily available liquidity

 

 

734,424

 

 

661,297

 

 

563,468

 

 

656,584

 

 

449,639

 

 

 

 

 

 

 

 

 

 

 

Fed fund lines

 

 

45,000

 

 

45,000

 

 

45,000

 

 

45,000

 

 

45,000

Excess brokered CD capacity(1)

 

 

1,231,791

 

 

1,090,864

 

 

1,017,590

 

 

1,027,869

 

 

1,162,241

Total liquidity

 

$

2,011,215

 

$

1,797,161

 

$

1,626,058

 

$

1,729,453

 

$

1,656,880

Total uninsured, net of collateralized deposits

 

 

977,636

 

 

887,210

 

 

829,727

 

 

941,774

 

 

953,139

(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)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Trust assets under management

 

$

2,898,516

 

$

2,715,801

 

$

2,707,390

 

$

2,615,670

 

$

2,483,811

Trust assets under administration

 

 

223,013

 

 

198,864

 

 

199,729

 

 

188,458

 

 

176,225

Total trust assets

 

$

3,121,529

 

$

2,914,665

 

$

2,907,119

 

$

2,804,128

 

$

2,660,036

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)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Common stockholders’ equity

 

$

277,596

 

 

$

268,766

 

 

$

260,640

 

 

$

254,589

 

 

$

248,648

 

Less: Goodwill and other intangible assets

 

 

(12,023

)

 

 

(12,110

)

 

 

(12,073

)

 

 

(12,160

)

 

 

(12,159

)

Tangible common equity

 

$

265,573

 

 

$

256,656

 

 

$

248,567

 

 

$

242,429

 

 

$

236,489

 

Common shares outstanding

 

 

8,314,778

 

 

 

8,315,186

 

 

 

8,315,465

 

 

 

8,306,270

 

 

 

8,362,085

 

Book value per share

 

$

33.39

 

 

$

32.32

 

 

$

31.34

 

 

$

30.65

 

 

$

29.74

 

Tangible book value per share

 

 

31.94

 

 

 

30.87

 

 

 

29.89

 

 

 

29.19

 

 

 

28.28

 

TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS

“Tangible common equity to tangible assets” (“TCE”) is defined as the ratio of common stockholders’ equity reduced by intangible assets, if any, divided by total assets reduced by intangible assets, if any. Adjusted TCE ratio is defined as TCE adjusted for net fair value adjustments of financial assets and liabilities. For more information on fair value adjustments please refer to Note 19 - Fair Value Disclosures in the annual report on Form 10-K for the year ended December 31, 2023. The Company’s management believes that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. The information below reconciles tangible common equity and tangible assets to their most comparable GAAP measures.

(Unaudited)

 

As of

(Dollars in thousands)

 

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Common stockholders’ equity

 

$

277,596

 

 

$

268,766

 

 

$

260,640

 

 

$

254,589

 

 

$

248,648

 

Less: Goodwill and other intangible assets

 

 

(12,023

)

 

 

(12,110

)

 

 

(12,073

)

 

 

(12,160

)

 

 

(12,159

)

Tangible common equity (a)

 

$

265,573

 

 

$

256,656

 

 

$

248,567

 

 

$

242,429

 

 

$

236,489

 

Total assets

 

$

3,507,846

 

 

$

3,418,850

 

 

$

3,265,738

 

 

$

3,164,411

 

 

$

2,976,611

 

Less: Goodwill and other intangible assets

 

 

(12,023

)

 

 

(12,110

)

 

 

(12,073

)

 

 

(12,160

)

 

 

(12,159

)

Tangible assets (b)

 

$

3,495,823

 

 

$

3,406,740

 

 

$

3,253,665

 

 

$

3,152,251

 

 

$

2,964,452

 

Tangible common equity to tangible assets

 

 

7.60

%

 

 

7.53

%

 

 

7.64

%

 

 

7.69

%

 

 

7.98

%

 

 

 

 

 

 

 

 

 

 

 

Fair Value Adjustments:

 

 

 

 

 

 

 

 

 

 

Financial assets - MTM (c)

 

$

(29,136

)

 

$

(45,489

)

 

$

(43,403

)

 

$

(24,764

)

 

$

(24,302

)

Financial liabilities - MTM (d)

 

$

11,945

 

 

$

23,436

 

 

$

21,916

 

 

$

17,334

 

 

$

17,328

 

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

 

$

(13,581

)

 

$

(17,422

)

 

$

(16,975

)

 

$

(5,870

)

 

$

(5,509

)

 

 

 

 

 

 

 

 

 

 

 

Adjusted tangible equity f = (a-e)

 

$

251,992

 

 

$

239,234

 

 

$

231,592

 

 

$

236,559

 

 

$

230,980

 

Adjusted tangible assets g = (b-c)

 

$

3,466,687

 

 

$

3,361,251

 

 

$

3,210,262

 

 

$

3,127,487

 

 

$

2,940,150

 

Adjusted TCE ratio (f/g)

 

 

7.27

%

 

 

7.12

%

 

 

7.21

%

 

 

7.56

%

 

 

7.86

%

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 Year Ended

(Dollars in thousands)

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

December 31,

2023

 

December 31,

2022

Total non-interest expense

$

21,588

 

 

$

23,189

 

 

$

22,031

 

 

$

21,767

 

 

$

21,167

 

 

$

88,575

 

 

$

79,474

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss (gain) on repossessed assets

 

4

 

 

 

4

 

 

 

(2

)

 

 

6

 

 

 

22

 

 

 

12

 

 

 

49

 

SBA recourse provision (benefit)

 

210

 

 

 

242

 

 

 

341

 

 

 

(18

)

 

 

(322

)

 

 

775

 

 

 

(188

)

Contribution to First Business Charitable Foundation

 

 

 

 

 

 

 

 

 

 

 

 

 

809

 

 

 

 

 

 

809

 

Tax credit investment impairment recovery

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(351

)

Total operating expense (a)

$

21,374

 

 

$

22,943

 

 

$

21,692

 

 

$

21,779

 

 

$

20,658

 

 

$

87,788

 

 

$

79,155

 

Net interest income

$

29,540

 

 

$

28,596

 

 

$

27,747

 

 

$

26,705

 

 

$

27,452

 

 

$

112,588

 

 

$

98,422

 

Total non-interest income

 

7,094

 

 

 

8,430

 

 

 

7,374

 

 

 

8,410

 

 

 

6,973

 

 

 

31,308

 

 

 

29,428

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank-owned life insurance claim

 

 

 

 

 

 

 

 

 

 

 

 

 

809

 

 

 

 

 

 

809

 

Net loss on sale of securities

 

 

 

 

 

 

 

(45

)

 

 

 

 

 

 

 

 

(45

)

 

 

 

Adjusted non-interest income

 

7,094

 

 

 

8,430

 

 

 

7,419

 

 

 

8,410

 

 

 

6,164

 

 

 

31,353

 

 

 

28,619

 

Total operating revenue (b)

$

36,634

 

 

$

37,026

 

 

$

35,166

 

 

$

35,115

 

 

$

33,616

 

 

$

143,941

 

 

$

127,041

 

Efficiency ratio

 

58.34

%

 

 

61.96

%

 

 

61.68

%

 

 

62.02

%

 

 

61.45

%

 

 

60.99

%

 

 

62.31

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

15,260

 

 

$

14,083

 

 

$

13,474

 

 

$

13,336

 

 

$

12,958

 

 

$

56,153

 

 

$

47,886

 

Average total assets

$

3,454,652

 

 

$

3,276,240

 

 

$

3,127,234

 

 

$

2,984,600

 

 

$

2,867,475

 

 

$

3,212,149

 

 

$

2,752,916

 

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

 

1.77

%

 

 

1.72

%

 

 

1.72

%

 

 

1.79

%

 

 

1.81

%

 

 

1.75

%

 

 

1.74

%

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 Year Ended

(Dollars in thousands)

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

December 31,

2023

 

December 31,

2022

Interest income

$

54,762

 

 

$

50,941

 

 

$

47,161

 

 

$

42,064

 

 

$

38,319

 

 

$

194,928

 

 

$

121,371

 

Interest expense

 

25,222

 

 

 

22,345

 

 

 

19,414

 

 

 

15,359

 

 

 

10,867

 

 

 

82,340

 

 

 

22,949

 

Net interest income (a)

 

29,540

 

 

 

28,596

 

 

 

27,747

 

 

 

26,705

 

 

 

27,452

 

 

 

112,588

 

 

 

98,422

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees in lieu of interest

 

1,075

 

 

 

582

 

 

 

936

 

 

 

651

 

 

 

1,318

 

 

 

3,244

 

 

 

5,283

 

FRB interest income and FHLB dividend income

 

1,466

 

 

 

870

 

 

 

1,064

 

 

 

656

 

 

 

613

 

 

 

4,056

 

 

 

1,525

 

Adjusted net interest income (b)

$

26,999

 

 

$

27,144

 

 

$

25,747

 

 

$

25,398

 

 

$

25,521

 

 

$

105,288

 

 

$

91,614

 

Average interest-earning assets (c)

$

3,199,485

 

 

$

3,038,776

 

 

$

2,913,751

 

 

$

2,765,087

 

 

$

2,649,149

 

 

$

2,980,628

 

 

$

2,577,492

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Average FRB cash and FHLB stock

 

99,118

 

 

 

54,677

 

 

 

76,678

 

 

 

45,150

 

 

 

50,522

 

 

 

69,014

 

 

 

46,708

 

Average non-accrual loans and leases

 

18,602

 

 

 

15,775

 

 

 

3,781

 

 

 

3,536