Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

First Business Bank Reports Strong Second Quarter 2021 Net Income of $8.2 Million


First Business Financial Services, Inc. (the "Company", the "Bank", or "First Business Bank") (Nasdaq:FBIZ) reported net income of $8.2 million, or $0.95 diluted earnings per share, in the second quarter 2021. This compares to record net income of $9.7 million or $1.12 in the first quarter of 2021, and $3.3 million or $0.38 in the second quarter of 2020.

"First Business Bank again delivered strong financial performance in the second quarter, highlighted by continued double-digit annualized loan growth, further improvement in asset quality metrics, and diversified fee income," President and Chief Executive Officer Corey Chambas said. "Our active management of asset quality led to another significant reduction in non-performing assets as well as a provision benefit that positively impacted the bottom-line. Our NPAs as a percentage of total assets are at the lowest level since 2006 and, based on what we are seeing today, we believe there will be additional reductions in NPAs and release of reserves in the second half of 2021. Therefore, at this time, we believe there will be no meaningful provision for the second half of 2021, even though we expect double-digit organic loan growth to continue."

Quarterly Highlights

Quarterly Financial Results

(Unaudited)

 

As of and for the Three Months Ended

 

As of and for the Six Months Ended

(Dollars in thousands, except per share amounts)

 

June 30,
2021

 

March 31,
2021

 

June 30,
2020

 

June 30,
2021

 

June 30,
2020

Net interest income

 

$

21,652

 

 

$

20,863

 

 

$

18,888

 

 

$

42,515

 

 

$

35,937

 

Adjusted non-interest income (1)

 

6,292

 

 

7,195

 

 

6,319

 

 

13,487

 

 

12,737

 

Operating revenue (1)

 

27,944

 

 

28,058

 

 

25,207

 

 

56,002

 

 

48,674

 

Operating expense (1)

 

17,932

 

 

17,449

 

 

15,431

 

 

35,383

 

 

31,327

 

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

 

10,012

 

 

10,609

 

 

9,776

 

 

20,619

 

 

17,347

 

Less:

 

 

 

 

 

 

 

 

 

 

Provision for loan and lease losses

 

(958)

 

 

(2,068)

 

 

5,469

 

 

(3,026)

 

 

8,651

 

Net (gain) loss on foreclosed properties

 

(1)

 

 

3

 

 

348

 

 

1

 

 

450

 

Amortization of other intangible assets

 

8

 

 

8

 

 

9

 

 

15

 

 

18

 

SBA recourse provision (benefit)

 

245

 

 

(130)

 

 

(30)

 

 

115

 

 

(5)

 

Impairment on tax credit investments

 

?

 

 

?

 

 

1,841

 

 

?

 

 

1,954

 

Loss on early extinguishment of debt

 

?

 

 

?

 

 

744

 

 

?

 

 

744

 

Add:

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on sale of securities

 

29

 

 

?

 

 

?

 

 

29

 

 

(4)

 

Income before income tax expense

 

10,747

 

 

12,796

 

 

1,395

 

 

23,543

 

 

5,531

 

Income tax expense (benefit)

 

2,512

 

 

3,065

 

 

(1,928)

 

 

5,577

 

 

(1,070)

 

Net income

 

$

8,235

 

 

$

9,731

 

 

$

3,323

 

 

$

17,966

 

 

$

6,601

 

Earnings per share, diluted

 

$

0.95

 

 

$

1.12

 

 

$

0.38

 

 

$

2.08

 

 

$

0.77

 

Book value per share

 

$

25.70

 

 

$

24.83

 

 

$

23.04

 

 

$

25.70

 

 

$

23.04

 

Tangible book value per share (1)

 

$

24.28

 

 

$

23.43

 

 

$

21.65

 

 

$

24.28

 

 

$

21.65

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

 

3.49

%

 

3.44

%

 

3.34

%

 

3.46

%

 

3.39

%

Adjusted net interest margin (1)

 

3.20

%

 

3.20

%

 

3.32

%

 

3.20

%

 

3.32

%

Efficiency ratio (1)

 

64.17

%

 

62.19

%

 

61.22

%

 

63.18

%

 

64.36

%

Return on average assets

 

1.26

%

 

1.51

%

 

0.55

%

 

1.38

%

 

0.58

%

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

 

1.53

%

 

1.65

%

 

1.61

%

 

1.59

%

 

1.53

%

Return on average equity

 

15.09

%

 

18.48

%

 

6.70

%

 

16.75

%

 

6.92

%

 

 

 

 

 

 

 

 

 

 

 

Period-end loans and leases receivable

 

$

2,143,561

 

 

$

2,235,112

 

 

$

2,056,863

 

 

$

2,143,561

 

 

$

2,056,863

 

Period-end loans and leases receivable, excluding net PPP loans

 

$

2,022,839

 

 

$

1,967,545

 

 

$

1,736,827

 

 

$

2,022,839

 

 

$

1,736,827

 

Average loans and leases receivable

 

$

2,223,353

 

 

$

2,182,958

 

 

$

1,983,121

 

 

$

2,203,267

 

 

$

1,858,432

 

Period-end in-market deposits

 

$

2,016,215

 

 

$

1,737,226

 

 

$

1,620,616

 

 

$

2,016,215

 

 

$

1,620,616

 

Average in-market deposits

 

$

1,735,393

 

 

$

1,722,107

 

 

$

1,570,552

 

 

$

1,728,787

 

 

$

1,468,348

 

Allowance for loan and lease losses

 

$

25,675

 

 

$

28,982

 

 

$

27,464

 

 

$

25,675

 

 

$

27,464

 

Non-performing assets

 

$

11,601

 

 

$

19,023

 

 

$

25,484

 

 

$

11,601

 

 

$

25,484

 

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

 

1.20

%

 

1.29

%

 

1.33

%

 

1.20

%

 

1.33

%

Allowance for loan and lease losses as a percent of total gross loans and leases, excluding net PPP loans

 

1.27

%

 

1.47

%

 

1.57

%

 

1.27

%

 

1.57

%

Non-performing assets as a percent of total assets

 

0.40

%

 

0.73

%

 

1.03

%

 

0.40

%

 

1.03

%

Non-performing assets as a percent of total assets, excluding net PPP loans

 

0.42

%

 

0.81

%

 

1.19

%

 

0.42

%

 

1.19

%

(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.

Second Quarter 2021 Compared to First Quarter 2021

Net interest income increased $789,000, or 3.8%, to $21.7 million.

The Company reported a net benefit to provision for loan and lease losses of $1.0 million, compared to a net benefit of $2.1 million in the first quarter.

Non-interest income decreased $874,000, or 12.1%, to $6.3 million.

Non-interest expense increased $854,000, or 4.9%, to $18.2 million. Operating expense increased $483,000, or 2.8%, to $17.9 million.

Total period-end loans and leases receivable, excluding net PPP loans in both periods of comparison, increased $55.3 million, or 11.2% annualized, to $2.023 billion.

Total period-end in-market deposits increased $279.0 million to $2.016 billion, or 64.2% annualized, and the average rate paid decreased one basis point to 0.15%.

Period-end wholesale funding, including FHLB advances, Federal Reserve Discount Window advances, brokered deposit, and deposits gathered through internet deposit listing services, decreased $49.0 million to $532.3 million.

Non-performing assets decreased $7.4 million, or 39.0%, to $11.6 million, or 0.40% of total assets, compared to $19.0 million, or 0.73% of total assets. The reduction in non-performing assets was principally due to loan payoffs and charge-offs. Excluding net PPP loans, non-performing assets were 0.42% of total assets as of June 30, 2021, compared to 0.81% as of March 31, 2021.

The allowance for loan and lease losses decreased $3.3 million, or 11.4%, as an increase in the general reserve from loan growth was more than offset by a decrease in the historical loss rate and reduction in specific reserves.

Second Quarter 2021 Compared to Second Quarter 2020

Net interest income increased $2.8 million, or 14.6%, to $21.7 million.

The Company reported a net benefit to provision for loan and lease losses of $1.0 million, compared to a $5.5 million expense in the second quarter of 2020.

Non-interest income was $6.3 million for both periods.

Non-interest expense decreased $159,000, or 0.9%, to $18.2 million. Operating expense increased $2.5 million, or 16.2%, to $17.9 million.

Total period-end loans and leases receivable, excluding net PPP loans in both periods of comparison, increased $286.0 million, or 16.5%, to $2.023 billion.

Total period-end in-market deposits increased $395.6 million, or 24.4%, to $2.016 billion and the average rate paid decreased 18 basis points to 0.15%.

Period-end wholesale funding increased $31.5 million to $532.3 million.

Non-performing assets decreased to $11.6 million, or 0.40% of total assets, compared to $25.5 million, or 1.03% of total assets. Excluding net PPP loans, non-performing assets were 0.42% of total assets as of June 30, 2021 compared to 1.19% one year prior.

The allowance for loan and lease losses decreased $1.8 million to $25.7 million compared to $27.5 million.

COVID-19 Update

On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic as a result of the global spread of the coronavirus illness. In response to the outbreak, federal and state authorities in the U.S. introduced various measures to try to limit or slow the spread of the virus, including travel restrictions, nonessential business closures, stay-at-home orders, and strict social distancing. The Company activated its Pandemic Preparedness Plan to protect the health of employees and clients, which included temporarily limiting lobby hours and transitioning the vast majority of the Company's workforce to remote work. The Company did not incur any significant disruptions to its business activities during this time of transition and extended remote work.

The second half of 2020 saw improvements in economic trends, but continued waves of new cases of COVID-19 created continued uncertainty in the economic environment. However, at the end of the fourth quarter of 2020 and into the first quarter of 2021, the rollout of new vaccines and the ratification of two additional stimulus laws resulted in lower infection rates and significant improvement in the outlook of the economy. In the second quarter of 2021, the Company communicated return to office plans to employees. Based on the national and local guidelines, the Company developed a phased-in approach for returning to the office. Under this phased-in approach, offices opened in early June 2021. The return to office included enhanced safety protocols and processes to provide the best working environment possible for employees.

Paycheck Protection Program

As of June 30, 2021, the Company had $123.8 million in gross PPP loans outstanding and deferred processing fees outstanding of $3.1 million. The processing fees are deferred and recognized over the contractual life of the loan, or accelerated at forgiveness, as an adjustment of yield using the interest method. During the three and six months ended June 30, 2021, the Company recognized $2.5 million and $4.8 million, respectively, of processing fees in loans and leases interest income in the unaudited Consolidated Statements of Income. The SBA provides a guaranty to the lender of 100% of principal and interest, unless the lender violated an obligation under the agreement. Since loan losses are expected to immaterial, if at all due to the government guarantee, management excluded the PPP loans from the allowance for loan and lease losses calculation. These short-term loans were funded primarily through a combination of excess cash held at the Federal Reserve and from an increase in in-market deposits.

Deferral Requests

The Company provided loan modifications deferring payments for certain borrowers impacted by COVID-19 who were current in their payments at the inception of the Company's loan modification program. Excluding gross PPP loans, as of June 30, 2021, the Company had five deferred loans outstanding of $20.5 million, or 1.0% of gross loans and leases, compared to $323.2 million, or 18.6% of gross loans and leases as of June 30, 2020. Of the $20.5 million of deferred loans outstanding, $19.8 million relates to two hospitality credits that went on deferral during the second quarter of 2021 and are both accruing and current on payments. Management believes there will be no losses associated with these two credits.

The following tables represent a breakdown of the deferred loan balances by industry segment and collateral type:

 

 

As of

 

 

June 30, 2021

 

 

 

 

Collateral Type

Industries Description

 

Balance

 

Real Estate

 

Non-Real Estate

 

 

(In thousands)

Accommodation and Food Services

 

$

19,811

 

 

$

19,811

 

 

$

?

 

Manufacturing

 

310

 

 

310

 

 

?

 

Agriculture, Forestry, Fishing, and Hunting

 

210

 

 

?

 

 

210

 

Educational Services

 

195

 

 

195

 

 

?

 

Total deferred loan balances

 

$

20,526

 

 

$

20,316

 

 

$

210

 

Exposure to Stressed Industries

Certain industries have been and are expected to be particularly impacted by social distancing, quarantines, and the economic impact of the COVID-19 pandemic, such as the following:

 

 

As of

 

 

June 30, 2021

 

December 31, 2020

Industries:

 

Balance

 

% Gross Loans
and Leases (1)

 

Balance

 

% Gross Loans
and Leases (1)

 

 

(Dollars in Thousands)

Retail (2) (3)

 

$

75,588

 

 

3.7

%

 

$

62,719

 

 

3.3

%

Hospitality

 

82,818

 

 

4.1

%

 

80,832

 

 

4.2

%

Entertainment

 

13,729

 

 

0.7

%

 

14,208

 

 

0.7

%

Restaurants & food service

 

23,340

 

 

1.2

%

 

24,854

 

 

1.3

%

Total outstanding exposure

 

$

195,475

 

 

9.6

%

 

$

182,613

 

 

9.5

%

(1)

Excluding net PPP loans.

(2)

Includes $38.6 million and $48.9 million in loans secured by commercial real estate as of June 30, 2021 and December 31, 2020, respectively.

(3)

Includes $24.1 million and $7.7 million in fully collateralized asset-based loans as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021, the Company had no meaningful direct exposure to the energy sector, airline industry or retail consumer, and does not participate in Shared National Credits.

Because of the uncertainties related to the ultimate duration of the COVID-19 pandemic and its effects on our clients and prospects, and on the national and local economies as a whole, there can be no assurances as to how the crisis may ultimately affect the Company's loan portfolio.

About First Business Financial Services, Inc.

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

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, 2020 and other filings with the Securities and Exchange Commission.

SELECTED FINANCIAL CONDITION DATA

(Unaudited)

 

As of

(in thousands)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

Assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

389,977

 

 

$

58,874

 

 

$

56,909

 

 

$

51,728

 

 

$

42,391

 

Securities available-for-sale, at fair value

 

171,219

 

 

173,261

 

 

183,925

 

 

179,274

 

 

171,680

 

Securities held-to-maturity, at amortized cost

 

22,382

 

 

24,783

 

 

26,374

 

 

28,897

 

 

29,826

 

Loans held for sale

 

6,059

 

 

6,576

 

 

8,695

 

 

15,049

 

 

13,672

 

Loans and leases receivable

 

2,143,561

 

 

2,235,112

 

 

2,145,970

 

 

2,170,299

 

 

2,056,863

 

Allowance for loan and lease losses

 

(25,675)

 

 

(28,982)

 

 

(28,521)

 

 

(30,817)

 

 

(27,464)

 

Loans and leases receivable, net

 

2,117,886

 

 

2,206,130

 

 

2,117,449

 

 

2,139,482

 

 

2,029,399

 

Premises and equipment, net

 

1,747

 

 

1,923

 

 

1,998

 

 

2,130

 

 

2,266

 

Foreclosed properties

 

179

 

 

31

 

 

34

 

 

613

 

 

1,389

 

Right-of-use assets

 

5,472

 

 

5,486

 

 

5,814

 

 

6,141

 

 

6,272

 

Bank-owned life insurance

 

52,887

 

 

52,537

 

 

52,188

 

 

51,798

 

 

51,433

 

Federal Home Loan Bank stock, at cost

 

13,451

 

 

14,941

 

 

13,578

 

 

15,153

 

 

13,470

 

Goodwill and other intangible assets

 

12,178

 

 

12,055

 

 

12,018

 

 

12,024

 

 

11,925

 

Derivatives

 

32,377

 

 

26,104

 

 

49,377

 

 

58,210

 

 

58,808

 

Accrued interest receivable and other assets

 

39,855

 

 

38,017

 

 

39,478

 

 

41,348

 

 

36,283

 

Total assets

 

$

2,865,669

 

 

$

2,620,718

 

 

$

2,567,837

 

 

$

2,601,847

 

 

$

2,468,814

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

In-market deposits

 

$

2,016,215

 

 

$

1,737,226

 

 

$

1,683,008

 

 

$

1,667,245

 

 

$

1,620,616

 

Wholesale deposits

 

144,492

 

 

165,492

 

 

172,508

 

 

154,130

 

 

89,759

 

Total deposits

 

2,160,707

 

 

1,902,718

 

 

1,855,516

 

 

1,821,375

 

 

1,710,375

 

Federal Home Loan Bank advances and other borrowings

 

420,113

 

 

448,417

 

 

419,167

 

 

483,517

 

 

465,007

 

Junior subordinated notes

 

10,069

 

 

10,065

 

 

10,062

 

 

10,058

 

 

10,054

 

Lease liabilities

 

6,005

 

 

6,040

 

 

6,386

 

 

6,728

 

 

6,877

 

Derivatives

 

36,109

 

 

29,565

 

 

54,927

 

 

64,403

 

 

65,390

 

Accrued interest payable and other liabilities

 

11,214

 

 

9,422

 

 

15,617

 

 

14,981

 

 

13,549

 

Total liabilities

 

2,644,217

 

 

2,406,227

 

 

2,361,675

 

 

2,401,062

 

 

2,271,252

 

Total stockholders' equity

 

221,452

 

 

214,491

 

 

206,162

 

 

200,785

 

 

197,562

 

Total liabilities and stockholders' equity

 

$

2,865,669

 

 

$

2,620,718

 

 

$

2,567,837

 

 

$

2,601,847

 

 

$

2,468,814

 

STATEMENTS OF INCOME

(Unaudited)

 

As of and for the Three Months Ended

 

As of and for the Six Months Ended

(Dollars in thousands, except per share amounts)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

 

June 30,
2021

 

June 30,
2020

Total interest income

 

$

24,599

 

 

$

23,806

 

 

$

25,770

 

 

$

22,276

 

 

$

22,761

 

 

$

48,406

 

 

$

46,132

 

Total interest expense

 

2,947

 

 

2,943

 

 

3,258

 

 

3,655

 

 

3,873

 

 

5,891

 

 

10,195

 

Net interest income

 

21,652

 

 

20,863

 

 

22,512

 

 

18,621

 

 

18,888

 

 

42,515

 

 

35,937

 

Provision for loan and lease losses

 

(958)

 

 

(2,068)

 

 

4,322

 

 

3,835

 

 

5,469

 

 

(3,026)

 

 

8,651

 

Net interest income after provision for loan and lease losses

 

22,610

 

 

22,931

 

 

18,190

 

 

14,786

 

 

13,419

 

 

45,541

 

 

27,286

 

Private wealth management service fees

 

2,744

 

 

2,407

 

 

2,208

 

 

2,167

 

 

2,124

 

 

5,151

 

 

4,235

 

Gain on sale of SBA loans

 

1,203

 

 

1,078

 

 

1,300

 

 

760

 

 

574

 

 

2,281

 

 

839

 

Service charges on deposits

 

941

 

 

917

 

 

887

 

 

881

 

 

829

 

 

1,859

 

 

1,647

 

Loan fees

 

569

 

 

545

 

 

412

 

 

478

 

 

451

 

 

1,114

 

 

936

 

Net gain on sale of securities

 

29

 

 

?

 

 

?

 

 

?

 

 

?

 

 

29

 

 

(4)

 

Swap fees

 

?

 

 

684

 

 

1,078

 

 

2,446

 

 

1,655

 

 

684

 

 

3,336

 

Other non-interest income

 

835

 

 

1,564

 

 

914

 

 

676

 

 

686

 

 

2,398

 

 

1,744

 

Total non-interest income

 

6,321

 

 

7,195

 

 

6,799

 

 

7,408

 

 

6,319

 

 

13,516

 

 

12,733

 

Compensation

 

13,255

 

 

12,657

 

 

12,145

 

 

11,857

 

 

10,796

 

 

25,912

 

 

21,848

 

Occupancy

 

533

 

 

552

 

 

556

 

 

570

 

 

554

 

 

1,085

 

 

1,126

 

Professional fees

 

913

 

 

866

 

 

909

 

 

943

 

 

859

 

 

1,778

 

 

1,678

 

Data processing

 

798

 

 

770

 

 

668

 

 

679

 

 

710

 

 

1,569

 

 

1,386

 

Marketing

 

511

 

 

391

 

 

411

 

 

356

 

 

352

 

 

902

 

 

813

 

Equipment

 

261

 

 

246

 

 

294

 

 

310

 

 

304

 

 

506

 

 

595

 

Computer software

 

1,129

 

 

1,115

 

 

1,028

 

 

1,017

 

 

966

 

 

2,244

 

 

1,856

 

FDIC insurance

 

280

 

 

362

 

 

479

 

 

312

 

 

239

 

 

642

 

 

448

 

Collateral liquidation cost

 

84

 

 

94

 

 

47

 

 

45

 

 

115

 

 

178

 

 

236

 

Net (gain) loss on foreclosed properties

 

(1)

 

 

3

 

 

54

 

 

(121)

 

 

348

 

 

1

 

 

450

 

Tax credit investment impairment

 

?

 

 

?

 

 

328

 

 

113

 

 

1,841

 

 

?

 

 

1,954

 

SBA recourse provision (benefit)

 

245

 

 

(130)

 

 

(330)

 

 

57

 

 

(30)

 

 

115

 

 

(5)

 

Loss on early extinguishment of debt

 

?

 

 

?

 

 

?

 

 

?

 

 

744

 

 

?

 

 

744

 

Other non-interest expense

 

176

 

 

404

 

 

1,062

 

 

620

 

 

545

 

 

582

 

 

1,359

 

Total non-interest expense

 

18,184

 

 

17,330

 

 

17,651

 

 

16,758

 

 

18,343

 

 

35,514

 

 

34,488

 

Income before income tax expense (benefit)

 

10,747

 

 

12,796

 

 

7,338

 

 

5,436

 

 

1,395

 

 

23,543

 

 

5,531

 

Income tax expense (benefit)

 

2,512

 

 

3,065

 

 

1,254

 

 

1,143

 

 

(1,928)

 

 

5,577

 

 

(1,070)

 

Net income

 

$

8,235

 

 

$

9,731

 

 

$

6,084

 

 

$

4,293

 

 

$

3,323

 

 

$

17,966

 

 

$

6,601

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings

 

$

0.95

 

 

$

1.12

 

 

$

0.71

 

 

$

0.50

 

 

$

0.38

 

 

$

2.08

 

 

$

0.77

 

Diluted earnings

 

0.95

 

 

1.12

 

 

0.71

 

 

0.50

 

 

0.38

 

 

2.08

 

 

0.77

 

Dividends declared

 

0.18

 

 

0.18

 

 

0.165

 

 

0.165

 

 

0.165

 

 

0.36

 

 

0.33

 

Book value

 

25.70

 

 

24.83

 

 

24.06

 

 

23.45

 

 

23.04

 

 

25.70

 

 

23.04

 

Tangible book value

 

24.28

 

 

23.43

 

 

22.66

 

 

22.05

 

 

21.65

 

 

24.28

 

 

21.65

 

Weighted-average common shares outstanding(1)

 

8,385,069

 

 

8,429,149

 

 

8,417,216

 

 

8,404,084

 

 

8,392,197

 

 

8,381,868

 

 

8,379,696

 

Weighted-average diluted common shares outstanding(1)

 

8,385,069

 

 

8,429,149

 

 

8,417,216

 

 

8,404,084

 

 

8,392,197

 

 

8,381,868

 

 

8,379,696

 

 

(1) Excluding participating securities.

NET INTEREST INCOME ANALYSIS

(Unaudited)

 

For the Three Months Ended

(Dollars in thousands)

 

June 30, 2021

 

March 31, 2021

 

June 30, 2020

 

 

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)

 

$

1,386,187

 

 

$

13,087

 

 

3.78

%

 

$

1,357,141

 

 

$

12,528

 

 

3.69

%

 

$

1,192,530

 

 

$

12,450

 

 

4.18

%

Commercial and industrial loans(1)

 

772,257

 

 

9,875

 

 

5.11

%

 

757,898

 

 

9,625

 

 

5.08

%

 

726,862

 

 

8,347

 

 

4.59

%

Direct financing leases(1)

 

19,883

 

 

222

 

 

4.47

%

 

22,271

 

 

244

 

 

4.38

%

 

27,115

 

 

395

 

 

5.83

%

Consumer and other loans(1)

 

45,026

 

 

407

 

 

3.62

%

 

45,648

 

 

398

 

 

3.49

%

 

36,614

 

 

356

 

 

3.89

%

Total loans and leases receivable(1)

 

2,223,353

 

 

23,591

 

 

4.24

%

 

2,182,958

 

 

22,795

 

 

4.18

%

 

1,983,121

 

 

21,548

 

 

4.35

%

Mortgage-related securities(2)

 

149,253

 

 

631

 

 

1.69

%

 

163,324

 

 

666

 

 

1.63

%

 

174,113

 

 

912

 

 

2.10

%

Other investment securities(3)

 

41,569

 

 

185

 

 

1.78

%

 

42,177

 

 

187

 

 

1.77

%

 

30,194

 

 

158

 

 

2.09

%

FHLB stock

 

14,172

 

 

176

 

 

4.97

%

 

12,465

 

 

152

 

 

4.88

%

 

10,301

 

 

127

 

 

4.93

%

Short-term investments

 

55,100

 

 

16

 

 

0.12

%

 

24,575

 

 

6

 

 

0.10

%

 

61,030

 

 

16

 

 

0.10

%

Total interest-earning assets

 

2,483,447

 

 

24,599

 

 

3.96

%

 

2,425,499

 

 

23,806

 

 

3.93

%

 

2,258,759

 

 

22,761

 

 

4.03

%

Non-interest-earning assets

 

137,893

 

 

 

 

 

 

151,665

 

 

 

 

 

 

167,008

 

 

 

 

 

Total assets

 

$

2,621,340

 

 

 

 

 

 

$

2,577,164

 

 

 

 

 

 

$

2,425,767

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction accounts

 

$

499,040

 

 

248

 

 

0.20

%

 

$

521,130

 

 

250

 

 

0.19

%

 

$

368,844

 

 

291

 

 

0.32

%

Money market

 

662,919

 

 

282

 

 

0.17

%

 

657,690

 

 

274

 

 

0.17

%

 

637,714

 

 

368

 

 

0.23

%

Certificates of deposit

 

45,993

 

 

112

 

 

0.97

%

 

57,424

 

 

177

 

 

1.23

%

 

123,581

 

 

627

 

 

2.03

%

Wholesale deposits

 

162,580

 

 

301

 

 

0.74

%

 

166,752

 

 

318

 

 

0.76

%

 

105,597

 

 

638

 

 

2.42

%

Total interest-bearing deposits

 

1,370,532

 

 

943

 

 

0.28

%

 

1,402,996

 

 

1,019

 

 

0.29

%

 

1,235,736

 

 

1,924

 

 

0.62

%

FHLB advances

 

405,855

 

 

1,284

 

 

1.27

%

 

366,670

 

 

1,249

 

 

1.36

%

 

409,281

 

 

1,283

 

 

1.25

%

Federal Reserve PPPLF

 

?

 

 

?

 

 

?

%

 

?

 

 

?

 

 

?

%

 

20,821

 

 

18

 

 

0.35

%

Other borrowings

 

32,447

 

 

443

 

 

5.46

%

 

27,296

 

 

401

 

 

5.88

%

 

24,681

 

 

371

 

 

6.01

%

Junior subordinated notes

 

10,066

 

 

277

 

 

11.01

%

 

10,063

 

 

274

 

 

10.89

%

 

10,052

 

 

277

 

 

11.02

%

Total interest-bearing liabilities

 

1,818,900

 

 

2,947

 

 

0.65

%

 

1,807,025

 

 

2,943

 

 

0.65

%

 

1,700,571

 

 

3,873

 

 

0.91

%

Non-interest-bearing demand deposit accounts

 

527,441

 

 

 

 

 

 

485,863

 

 

 

 

 

 

440,413

 

 

 

 

 

Other non-interest-bearing liabilities

 

56,691

 

 

 

 

 

 

73,695

 

 

 

 

 

 

86,504

 

 

 

 

 

Total liabilities

 

2,403,032

 

 

 

 

 

 

2,366,583

 

 

 

 

 

 

2,227,488

 

 

 

 

 

Stockholders' equity

 

218,308

 

 

 

 

 

 

210,581

 

 

 

 

 

 

198,279

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

2,621,340

 

 

 

 

 

 

$

2,577,164

 

 

 

 

 

 

$

2,425,767

 

 

 

 

 

Net interest income

 

 

 

$

21,652

 

 

 

 

 

 

$

20,863

 

 

 

 

 

 

$

18,888

 

 

 

Interest rate spread

 

 

 

 

 

3.31

%

 

 

 

 

 

3.27

%

 

 

 

 

 

3.12

%

Net interest-earning assets

 

$

664,547

 

 

 

 

 

 

$

618,474

 

 

 

 

 

 

$

558,188

 

 

 

 

 

Net interest margin

 

 

 

 

 

3.49

%

 

 

 

 

 

3.44

%

 

 

 

 

 

3.34

%

(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, 2021

 

June 30, 2020

 

 

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)

 

$

1,371,744

 

 

$

25,615

 

 

3.73

%

 

$

1,173,251

 

 

$

25,973

 

 

4.43

%

Commercial and industrial loans(1)

 

765,117

 

 

19,500

 

 

5.10

%

 

621,399

 

 

16,204

 

 

5.22

%

Direct financing leases(1)

 

21,071

 

 

466

 

 

4.42

%

 

27,538

 

 

503

 

 

3.65

%

Consumer and other loans(1)

 

45,335

 

 

805

 

 

3.55

%

 

36,244

 

 

717

 

 

3.96

%

Total loans and leases receivable(1)

 

2,203,267

 

 

46,386

 

 

4.21

%

 

1,858,432

 

 

43,397

 

 

4.67

%

Mortgage-related securities(2)

 

156,249

 

 

1,297

 

 

1.66

%

 

177,352

 

 

1,973

 

 

2.22

%

Other investment securities(3)

 

41,871

 

 

372

 

 

1.78

%

 

26,737

 

 

285

 

 

2.13

%

FHLB stock

 

13,323

 

 

329

 

 

4.94

%

 

9,407

 

 

331

 

 

7.04

%

Short-term investments

 

39,922

 

 

22

 

 

0.11

%

 

48,396

 

 

146

 

 

0.60

%

Total interest-earning assets

 

2,454,632

 

 

48,406

 

 

3.94

%

 

2,120,324

 

 

46,132

 

 

4.35

%

Non-interest-earning assets

 

144,741

 

 

 

 

 

 

144,991

 

 

 

 

 

Total assets

 

$

2,599,373

 

 

 

 

 

 

$

2,265,315

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Transaction accounts

 

$

510,024

 

 

498

 

 

0.20

%

 

$

320,188

 

 

938

 

 

0.59

%

Money market

 

660,319

 

 

557

 

 

0.17

%

 

653,598

 

 

2,237

 

 

0.68

%

Certificates of deposit

 

51,677

 

 

288

 

 

1.11

%

 

128,791

 

 

1,377

 

 

2.14

%

Wholesale deposits

 

164,654

 

 

619

 

 

0.75

%

 

119,032

 

 

1,488

 

 

2.50

%

Total interest-bearing deposits

 

1,386,674

 

 

1,962

 

 

0.28

%

 

1,221,609

 

 

6,040

 

 

0.99

%

FHLB advances

 

386,371

 

 

2,533

 

 

1.31

%

 

367,604

 

 

2,842

 

 

1.55

%

Federal Reserve PPPLF

 

?

 

 

?

 

 

?

%

 

10,410

 

 

18

 

 

0.35

%

Other borrowings

 

29,886

 

 

844

 

 

5.65

%

 

24,533

 

 

740

 

 

6.03

%

Junior subordinated notes

 

10,064

 

 

552

 

 

10.97

%

 

10,050

 

 

555

 

 

11.04

%

Total interest-bearing liabilities

 

1,812,995

 

 

5,891

 

 

0.65

%

 

1,634,206

 

 

10,195

 

 

1.25

%

Non-interest-bearing demand deposit accounts

 

506,767

 

 

 

 

 

 

365,771

 

 

 

 

 

Other non-interest-bearing liabilities

 

65,146

 

 

 

 

 

 

74,436

 

 

 

 

 

Total liabilities

 

2,384,908

 

 

 

 

 

 

2,074,413

 

 

 

 

 

Stockholders' equity

 

214,465

 

 

 

 

 

 

190,902

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

2,599,373

 

 

 

 

 

 

$

2,265,315

 

 

 

 

 

Net interest income

 

 

 

$

42,515

 

 

 

 

 

 

$

35,937

 

 

 

Interest rate spread

 

 

 

 

 

3.29

%

 

 

 

 

 

3.10

%

Net interest-earning assets

 

$

641,637

 

 

 

 

 

 

$

486,118

 

 

 

 

 

Net interest margin

 

 

 

 

 

3.46

%

 

 

 

 

 

3.39

%

(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.

PROVISION FOR LOAN AND LEASE LOSS COMPOSITION

(Unaudited)

 

For the Three Months Ended

 

For the Six Months Ended

(Dollars in thousands)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

 

June 30,
2021

 

June 30,
2020

Change in general reserve due to subjective factor changes

 

$

(652)

 

 

$

1,082

 

 

$

1,008

 

 

$

(766)

 

 

$

2,388

 

 

$

430

 

 

$

5,224

 

Change in general reserve due to historical loss factor changes

 

(1,687)

 

 

(984)

 

 

1,274

 

 

(16)

 

 

(54)

 

 

(2,671)

 

 

(334)

 

Charge-offs

 

2,894

 

 

144

 

 

6,685

 

 

505

 

 

817

 

 

3,038

 

 

948

 

Recoveries

 

(545)

 

 

(2,673)

 

 

(68)

 

 

(23)

 

 

(64)

 

 

(3,218)

 

 

(241)

 

Change in specific reserves on impaired loans, net

 

(1,466)

 

 

(194)

 

 

(5,216)

 

 

2,974

 

 

2,122

 

 

(1,660)

 

 

2,559

 

Change due to loan growth, net

 

498

 

 

557

 

 

639

 

 

1,161

 

 

260

 

 

1,055

 

 

495

 

Total provision for loan and lease losses

 

$

(958)

 

 

$

(2,068)

 

 

$

4,322

 

 

$

3,835

 

 

$

5,469

 

 

$

(3,026)

 

 

$

8,651

 

PERFORMANCE RATIOS

 

 

For the Three Months Ended

 

For the Six Months Ended

(Unaudited)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

 

June 30,
2021

 

June 30,
2020

Return on average assets (annualized)

 

1.26

%

 

1.51

%

 

0.93

%

 

0.68

%

 

0.55

%

 

1.38

%

 

0.58

%

Return on average equity (annualized)

 

15.09

%

 

18.48

%

 

11.92

%

 

8.58

%

 

6.70

%

 

16.75

%

 

6.92

%

Efficiency ratio

 

64.17

%

 

62.19

%

 

60.02

%

 

64.16

%

 

61.22

%

 

63.18

%

 

64.36

%

Interest rate spread

 

3.31

%

 

3.27

%

 

3.51

%

 

2.94

%

 

3.12

%

 

3.29

%

 

3.10

%

Net interest margin

 

3.49

%

 

3.44

%

 

3.69

%

 

3.14

%

 

3.34

%

 

3.46

%

 

3.39

%

Average interest-earning assets to average interest-bearing liabilities

 

136.54

%

 

134.23

%

 

132.88

%

 

131.68

%

 

132.82

%

 

135.39

%

 

129.75

%

ASSET QUALITY RATIOS

(Unaudited)

 

As of

(Dollars in thousands)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

Non-accrual loans and leases

 

$

11,422

 

 

$

18,992

 

 

$

26,617

 

 

$

36,050

 

 

$

24,095

 

Foreclosed properties

 

179

 

 

31

 

 

34

 

 

613

 

 

1,389

 

Total non-performing assets

 

11,601

 

 

19,023

 

 

26,651

 

 

36,663

 

 

25,484

 

Performing troubled debt restructurings

 

56

 

 

59

 

 

46

 

 

47

 

 

49

 

Total impaired assets

 

$

11,657

 

 

$

19,082

 

 

$

26,697

 

 

$

36,710

 

 

$

25,533

 

 

 

 

 

 

 

 

 

 

 

 

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

 

0.53

%

 

0.85

%

 

1.24

%

 

1.66

%

 

1.17

%

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

 

0.54

%

 

0.85

%

 

1.24

%

 

1.68

%

 

1.23

%

Non-performing assets as a percent of total assets

 

0.40

%

 

0.73

%

 

1.04

%

 

1.41

%

 

1.03

%

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

 

1.20

%

 

1.29

%

 

1.33

%

 

1.41

%

 

1.33

%

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

 

224.79

%

 

152.60

%

 

107.15

%

 

85.48

%

 

113.98

%

ASSET QUALITY RATIOS - EXCLUDING NET PPP LOANS

(Unaudited)

 

As of

(Dollars in thousands)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

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

 

0.56

%

 

0.96

%

 

1.38

%

 

1.95

%

 

1.38

%

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

 

0.57

%

 

0.96

%

 

1.38

%

 

1.98

%

 

1.46

%

Non-performing assets as a percent of total assets

 

0.42

%

 

0.81

%

 

1.14

%

 

1.61

%

 

1.19

%

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

 

1.27

%

 

1.47

%

 

1.48

%

 

1.67

%

 

1.57

%

PPP loans outstanding, net

 

$

120,723

 

 

$

267,567

 

 

$

225,323

 

 

$

325,481

 

 

$

320,036

 

 

NET CHARGE-OFFS (RECOVERIES)

(Unaudited)

 

For the Three Months Ended

 

For the Six Months Ended

(Dollars in thousands)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

 

June 30,
2021

 

June 30,
2020

Charge-offs

 

$

2,894

 

 

$

144

 

 

$

6,685

 

 

$

505

 

 

$

817

 

 

$

3,038

 

 

$

948

 

Recoveries

 

(545)

 

 

(2,673)

 

 

(68)

 

 

(23)

 

 

(64)

 

 

(3,218)

 

 

(241)

 

Net charge-offs (recoveries)

 

$

2,349

 

 

$

(2,529)

 

 

$

6,617

 

 

$

482

 

 

$

753

 

 

$

(180)

 

 

$

707

 

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

 

0.42

%

 

(0.46)

%

 

1.21

%

 

0.09

%

 

0.15

%

 

(0.02)

%

 

0.08

%

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

 

0.47

%

 

(0.52)

%

 

1.39

%

 

0.11

%

 

0.17

%

 

(0.02)

%

 

0.08

%

Average PPP loans outstanding, net

 

$

229,165

 

 

$

242,242

 

 

$

282,259

 

 

$

323,082

 

 

$

252,834

 

 

$

235,668

 

 

$

126,417

 

CAPITAL RATIOS

 

 

As of and for the Three Months Ended

(Unaudited)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

Total capital to risk-weighted assets

 

11.22

%

 

11.52

%

 

11.25

%

 

11.42

%

 

11.97

%

Tier I capital to risk-weighted assets

 

9.14

%

 

9.24

%

 

8.96

%

 

9.09

%

 

9.57

%

Common equity tier I capital to risk-weighted assets

 

8.72

%

 

8.81

%

 

8.53

%

 

8.64

%

 

9.08

%

Tier I capital to adjusted assets

 

8.48

%

 

8.37

%

 

7.99

%

 

8.04

%

 

8.29

%

Tangible common equity to tangible assets

 

7.33

%

 

7.76

%

 

7.60

%

 

7.29

%

 

7.56

%

Tangible common equity to tangible assets, excluding net PPP loans

 

7.66

%

 

8.65

%

 

8.33

%

 

8.34

%

 

8.69

%

LOAN AND LEASE RECEIVABLE COMPOSITION

(Unaudited)

 

As of

(in thousands)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

Commercial real estate - owner occupied

 

$

253,600

 

 

$

256,812

 

 

$

253,882

 

 

$

240,706

 

 

$

229,994

 

Commercial real estate - non-owner occupied

 

614,289

 

 

592,090

 

 

564,532

 

 

565,781

 

 

533,211

 

Land development

 

45,056

 

 

46,544

 

 

49,839

 

 

50,864

 

 

44,299

 

Construction

 

139,943

 

 

151,345

 

 

141,043

 

 

142,726

 

 

133,375

 

Multi-family

 

319,351

 

 

322,384

 

 

311,556

 

 

287,583

 

 

244,496

 

1-4 family

 

19,769

 

 

23,319

 

 

38,284

 

 

38,857

 

 

36,823

 

Total commercial real estate

 

1,392,008

 

 

1,392,494

 

 

1,359,136

 

 

1,326,517

 

 

1,222,198

 

Commercial and industrial

 

695,442

 

 

784,305

 

 

732,318

 

 

790,349

 

 

781,239

 

Direct financing leases, net

 

18,142

 

 

19,616

 

 

22,331

 

 

24,743

 

 

25,525

 

Consumer and other:

 

 

 

 

 

 

 

 

 

 

Home equity and second mortgages

 

5,740

 

 

6,719

 

 

7,833

 

 

7,106

 

 

6,706

 

Other

 

36,567

 

 

38,266

 

 

28,897

 

 

29,341

 

 

29,737

 

Total consumer and other

 

42,307

 

 

44,985

 

 

36,730

 

 

36,447

 

 

36,443

 

Total gross loans and leases receivable

 

2,147,899

 

 

2,241,400

 

 

2,150,515

 

 

2,178,056

 

 

2,065,405

 

Less:

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses

 

25,675

 

 

28,982

 

 

28,521

 

 

30,817

 

 

27,464

 

Deferred loan fees

 

4,338

 

 

6,288

 

 

4,545

 

 

7,757

 

 

8,542

 

Loans and leases receivable, net

 

$

2,117,886

 

 

$

2,206,130

 

 

$

2,117,449

 

 

$

2,139,482

 

 

$

2,029,399

 

LEGACY SBA 7(a) AND EXPRESS LOAN COMPOSITION (1)

(Unaudited)

 

As of

(in thousands)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

Performing loans:

 

 

 

 

 

 

 

 

 

 

Off-balance sheet loans

 

$

14,161

 

 

$

17,523

 

 

$

23,354

 

 

$

26,017

 

 

$

28,843

 

On-balance sheet loans

 

6,836

 

 

7,340

 

 

11,117

 

 

15,175

 

 

16,554

 

Gross loans

 

20,997

 

 

24,863

 

 

34,471

 

 

41,192

 

 

45,397

 

Non-performing loans:

 

 

 

 

 

 

 

 

 

 

Off-balance sheet loans

 

3,943

 

 

1,835

 

 

1,931

 

 

2,574

 

 

1,640

 

On-balance sheet loans

 

1,800

 

 

6,832

 

 

7,435

 

 

9,561

 

 

9,725

 

Gross loans

 

5,743

 

 

8,667

 

 

9,366

 

 

12,135

 

 

11,365

 

Total loans:

 

 

 

 

 

 

 

 

 

 

Off-balance sheet loans

 

18,104

 

 

19,358

 

 

25,285

 

 

28,591

 

 

30,483

 

On-balance sheet loans

 

8,636

 

 

14,172

 

 

18,552

 

 

24,736

 

 

26,279

 

Gross loans

 

$

26,740

 

 

$

33,530

 

 

$

43,837

 

 

$

53,327

 

 

$

56,762

 

 

(1) Defined as SBA 7(a) and Express loans originated in 2016 and prior.

DEPOSIT COMPOSITION

(Unaudited)

 

As of

(in thousands)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

Non-interest-bearing transaction accounts

 

$

774,253

 

 

$

496,877

 

 

$

472,818

 

 

$

452,268

 

 

$

433,760

 

Interest-bearing transaction accounts

 

511,698

 

 

561,466

 

 

503,992

 

 

484,761

 

 

413,214

 

Money market accounts

 

685,127

 

 

632,065

 

 

641,504

 

 

636,872

 

 

656,741

 

Certificates of deposit

 

45,137

 

 

46,818

 

 

64,694

 

 

93,344

 

 

116,901

 

Wholesale deposits

 

144,492

 

 

165,492

 

 

172,508

 

 

154,130

 

 

89,759

 

Total deposits

 

$

2,160,707

 

 

$

1,902,718

 

 

$

1,855,516

 

 

$

1,821,375

 

 

$

1,710,375

 

TRUST ASSETS COMPOSITION

(Unaudited)

 

As of

(in thousands)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

Trust assets under management

 

$

2,362,257

 

 

$

2,195,804

 

 

$

2,061,772

 

 

$

1,841,986

 

 

$

1,704,019

 

Trust assets under administration

 

202,116

 

 

190,721

 

 

187,228

 

 

175,521

 

 

169,388

 

Total trust assets

 

$

2,564,373

 

 

$

2,386,525

 

 

$

2,249,000

 

 

$

2,017,507

 

 

$

1,873,407

 

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,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

Common stockholders' equity

 

$

221,452

 

 

$

214,491

 

 

$

206,162

 

 

$

200,785

 

 

$

197,562

 

Goodwill and other intangible assets

 

(12,178)

 

 

(12,055)

 

 

(12,018)

 

 

(12,024)

 

 

(11,925)

 

Tangible common equity

 

$

209,274

 

 

$

202,436

 

 

$

194,144

 

 

$

188,761

 

 

$

185,637

 

Common shares outstanding

 

8,617,761

 

 

8,638,195

 

 

8,566,960

 

 

8,561,714

 

 

8,575,134

 

Book value per share

 

$

25.70

 

 

$

24.83

 

 

$

24.06

 

 

$

23.45

 

 

$

23.04

 

Tangible book value per share

 

24.28

 

 

23.43

 

 

22.66

 

 

22.05

 

 

21.65

 

TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS

"Tangible common equity to tangible assets" is defined as the ratio of common stockholders' equity reduced by intangible assets, if any, divided by total assets reduced by intangible assets, if any. The Company's management believes that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. The information below reconciles tangible common equity and tangible assets to their most comparable GAAP measures.

(Unaudited)

 

As of

(Dollars in thousands)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

Common stockholders' equity

 

$

221,452

 

 

$

214,491

 

 

$

206,162

 

 

$

200,785

 

 

$

197,562

 

Goodwill and other intangible assets

 

(12,178)

 

 

(12,055)

 

 

(12,018)

 

 

(12,024)

 

 

(11,925)

 

Tangible common equity

 

$

209,274

 

 

$

202,436

 

 

$

194,144

 

 

$

188,761

 

 

$

185,637

 

Total assets

 

$

2,865,669

 

 

$

2,620,718

 

 

$

2,567,837

 

 

$

2,601,847

 

 

$

2,468,814

 

Goodwill and other intangible assets

 

(12,178)

 

 

(12,055)

 

 

(12,018)

 

 

(12,024)

 

 

(11,925)

 

Tangible assets

 

$

2,853,491

 

 

$

2,608,663

 

 

$

2,555,819

 

 

$

2,589,823

 

 

$

2,456,889

 

Tangible common equity to tangible assets

 

7.33

%

 

7.76

%

 

7.60

%

 

7.29

%

 

7.56

%

Period-end net PPP loans

 

120,722

 

 

267,567

 

 

225,323

 

 

325,481

 

 

320,036

 

Tangible assets, excluding net PPP loans

 

$

2,732,769

 

 

$

2,341,096

 

 

$

2,330,496

 

 

$

2,264,342

 

 

$

2,136,853

 

Tangible common equity to tangible assets, excluding net PPP loans

 

7.66

%

 

8.65

%

 

8.33

%

 

8.34

%

 

8.69

%

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

"Efficiency ratio" is a non-GAAP measure representing non-interest expense excluding the effects of the SBA recourse provision, impairment of tax credit investments, losses or gains on foreclosed properties, amortization of other intangible assets and other discrete items, if any, divided by operating revenue, which is equal to net interest income plus non-interest income less realized gains or losses on securities, if any. "Pre-tax, pre-provision adjusted earnings" is defined as operating revenue less operating expense. In the judgment of the Company's management, the adjustments made to non-interest expense and non-interest income allow investors and analysts to better assess the Company's operating expenses in relation to its core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items. The information provided below reconciles the efficiency ratio and pre-tax, pre-provision adjusted earnings to its most comparable GAAP measure.

(Unaudited)

 

For the Three Months Ended

 

For the Six Months Ended

(Dollars in thousands)

 

June 30,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

 

June 30,
2021

 

June 30,
2020

Total non-interest expense

 

$

18,184

 

 

$

17,330

 

 

$

17,651

 

 

$

16,758

 

 

$

18,343

 

 

$

35,514

 

 

$

34,488

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (gain) loss on foreclosed properties

 

(1)

 

 

3

 

 

54

 

 

(121)

 

 

348

 

 

1

 

 

450

 

Amortization of other intangible assets

 

8

 

 

8

 

 

8

 

 

9

 

 

9

 

 

15

 

 

18

 

SBA recourse provision (benefit)

 

245

 

 

(130)

 

 

(330)

 

 

57

 

 

(30)

 

 

115

 

 

(5)

 

Tax credit investment impairment

 

?

 

 

?

 

 

328

 

 

113

 

 

1,841

 

 

?

 

 

1,954

 

Loss on early extinguishment of debt

 

?

 

 

?

 

 

?

 

 

?

 

 

744

 

 

?

 

 

744

 

Total operating expense (a)

 

$

17,932

 

 

$

17,449

 

 

$

17,591

 

 

$

16,700

 

 

$

15,431

 

 

$

35,383

 

 

$

31,327

 

Net interest income

 

$

21,652

 

 

$

20,863

 

 

$

22,512

 

 

$

18,621

 

 

$

18,888

 

 

$

42,515

 

 

$

35,937

 

Total non-interest income

 

6,321

 

 

7,195

 

 

6,799

 

 

7,408

 

 

6,319

 

 

13,516

 

 

12,733

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on sale of securities

 

29

 

 

?

 

 

?

 

 

?

 

 

?

 

 

29

 

 

(4)

 

Adjusted non-interest income

 

6,292

 

 

7,195

 

 

6,799

 

 

7,408

 

 

6,319

 

 

13,487

 

 

12,737

 

Total operating revenue (b)

 

$

27,944

 

 

$

28,058

 

 

$

29,311

 

 

$

26,029

 

 

$

25,207

 

 

$

56,002

 

 

$

48,674

 

Efficiency ratio

 

64.17

%

 

62.19

%

 

60.02

%

 

64.16

%

 

61.22

%

 

63.18

%

 

64.36

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

10,012

 

 

$

10,609

 

 

$

11,720

 

 

$

9,329

 

 

$

9,776

 

 

$

20,619

 

 

$

17,347

 

Average total assets

 

$

2,621,340

 

 

$

2,577,164

 

 

$

2,603,745

 

 

$

2,540,735

 

 

$

2,425,767

 

 

$

2,599,373

 

 

$

2,265,315

 

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

 

1.53

%

 

1.65

%

 

1.80

%

 

1.47

%

 

1.61

%

 

1.59

%

 

1.53

%

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 average net PPP loans, if any, and 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,
2021

 

March 31,
2021

 

December 31,
2020

 

September 30,
2020

 

June 30,
2020

 

June 30,
2021

 

June 30,
2020

Interest income

$

24,599

 

 

$

23,806

 

 

$

25,770

 

 

$

22,276

 

 

$

22,761

 

 

$

48,406

 

 

$

46,132

 

Interest expense

2,947

 

 

2,943

 

 

3,258

 

 

3,655

 

 

3,873

 

 

5,891

 

 

10,195

 

Net interest income (a)

21,652

 

 

20,863

 

 

22,512

 

 

18,621

 

 

18,888

 

 

42,515

 

 

35,937

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees in lieu of interest

3,536

 

 

3,085

 

 

4,749

 

 

1,511

 

 

2,257

 

 

6,621

 

 

3,055

 

PPP loan interest income

566

 

 

603

 

 

718

 

 

833

 

 

647

 

 

1,169

 

 

647

 

FRB interest income and FHLB dividend income

192

 

 

158

 

 

188

 

 

167

 

 

134

 

 

350

 

 

435

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

FRB PPPLF interest expense

?

 

 

?

 

 

9

 

 

26

 

 

18

 

 

?

 

 

18

 

Adjusted net interest income (b)

$

17,358

 

 

$

17,017

 

 

$

16,866

 

 

$

16,136

 

 

$

15,868

 

 

$

34,375

 

 

$

31,818

 

Average interest-earning assets (c)

$

2,483,447

 

 

$

2,425,499

 

 

$

2,441,735

 

 

$

2,374,891

 

 

$

2,258,759

 

 

$

2,454,632

 

 

$

2,120,324

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Average net PPP loans

229,165

 

 

242,242

 

 

282,259

 

 

323,082

 

 

252,834

 

 

235,668

 

 

126,417

 

Average FRB cash and FHLB stock

68,503

 

 

36,643

 

 

45,611

 

 

33,756

 

 

69,176

 

 

52,661

 

 

53,583

 

Average non-accrual loans and leases

16,744

 

 

22,069

 

 

36,013

 

 

26,931

 

 

25,386

 

 

19,392

 

 

23,797

 

Adjusted average interest-earning assets (d)

$

2,169,035

 

 

$

2,124,545

 

 

$

2,077,852

 

 

$

1,991,122

 

 

$

1,911,363

 

 

$

2,146,911

 

 

$

1,916,527

 

Net interest margin (a / c)

3.49

%

 

3.44

%

 

3.69

%

 

3.14

%

 

3.34

%

 

3.46

%

 

3.39

%

Adjusted net interest margin (b / d)

3.20

%

 

3.20

%

 

3.25

%

 

3.24

%

 

3.32

%

 

3.20

%

 

3.32

%

 


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