Continued solid loan and core deposit growth
supports ongoing tangible book value expansion
First Business Financial Services, Inc. (the “Company,” the
“Bank,” or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly
net income available to common shareholders of $8.6 million, or
earnings per share of $1.04 on a diluted basis. This compares to
net income available to common shareholders of $9.6 million, or
$1.15 per share, in the fourth quarter of 2023 and $8.8 million, or
$1.05 per share, in the first quarter of 2023.
“Solid first quarter performance is a testament to our team’s
consistent execution in a persistently challenging interest rate
environment,” said Corey Chambas, Chief Executive Officer. “Our
operating model produced 13% tangible book value growth this
quarter. We continued to deliver strong profitability and quality
growth through the addition and retention of valuable client
relationships — successes that are deeply rooted in our culture of
excellence and consistency. The cornerstone of our new five-year
plan is the confluence of the future of talent and technology.
Executing on this will drive continued double-digit growth in
loans, deposits, fee income, and top line revenue, which ultimately
delivers double-digit annual tangible book value growth for our
shareholders.”
“While deposit rates remain competitive, we continue to run a
match-funded balance sheet that we believe is effective in
delivering a stable net interest margin. With interest rates
outside of our control, we focus on executing our long-held
relationship-based approach to deposit generation, adding clients
and balances for the long term.” Chambas added, “In addition, we
continue to focus on growing our higher-yielding, niche commercial
and industrial loan portfolio, which we expect will support a
higher baseline net interest margin.”
Quarterly Highlights
- Solid Loan Growth. Loans increased $60.6 million, or
8.5% annualized, from the fourth quarter of 2023, and $371.5
million, or 14.6%, from the first quarter of 2023, reflecting
ongoing expansion across the Company’s products and
geographies.
- Core Deposit Growth Continues. Average core deposits
grew to a record $2.346 billion, up $98.8 million, or 17.6%
annualized, from the fourth quarter of 2023 and $345.9 million, or
17.3%, from the first quarter of 2023. The linked-quarter decline
in period-end balances reflects the timing of a significant deposit
inflow that typically recurs on at the end of the month but was
delayed until April 1. New relationships also contributed to
increased gross Treasury Management service charges, which grew
9.2% to $1.5 million, compared to $1.4 million in the first quarter
of 2023.
- Stable Net Interest Income. Net interest income remained
consistent with the linked quarter and grew 10.5% from the prior
year quarter. The Company’s continued success in driving loan and
deposit growth was partially offset by the ongoing impact of
industry-wide net interest margin compression.
- Tangible Book Value Growth. The Company’s strong
earnings generation and sound balance sheet management continued to
grow tangible book value per share growth, producing a 12.9%
annualized increase compared to the linked quarter and a 13.0%
increase compared to the prior year quarter.
Quarterly
Financial Results
(Unaudited)
As of and for the Three Months
Ended
(Dollars in thousands, except per share
amounts)
March 31,
2024
December 31,
2023
March 31,
2023
Net interest income
$
29,511
$
29,540
$
26,705
Adjusted non-interest income (1)
6,765
7,094
8,410
Operating revenue (1)
36,276
36,634
35,115
Operating expense (1)
23,130
21,374
21,779
Pre-tax, pre-provision adjusted earnings
(1)
13,146
15,260
13,336
Less:
Provision for credit losses
2,326
2,573
1,561
Net loss on repossessed assets
86
4
6
SBA recourse provision
126
210
(18
)
Add:
Net loss on sale of securities
(8
)
—
—
Income before income tax expense
10,600
12,473
11,787
Income tax expense
1,752
2,703
2,808
Net income
$
8,848
$
9,770
$
8,979
Preferred stock dividends
219
219
219
Net income available to common
shareholders
$
8,629
$
9,551
$
8,760
Earnings per share, diluted
$
1.04
$
1.15
$
1.05
Book value per share
$
34.41
$
33.39
$
30.65
Tangible book value per share (1)
$
32.97
$
31.94
$
29.19
Net interest margin (2)
3.58
%
3.69
%
3.86
%
Adjusted net interest margin (1)(2)
3.43
%
3.50
%
3.74
%
Fee income ratio (non-interest income /
total revenue)
18.63
%
19.36
%
23.95
%
Efficiency ratio (1)
63.76
%
58.34
%
62.02
%
Return on average assets (2)
0.98
%
1.11
%
1.17
%
Pre-tax, pre-provision adjusted return on
average assets (1)(2)
1.49
%
1.77
%
1.79
%
Return on average common equity (2)
12.24
%
13.99
%
13.96
%
Period-end loans and leases receivable
$
2,910,864
$
2,850,261
$
2,539,363
Average loans and leases receivable
$
2,887,454
$
2,810,793
$
2,481,200
Period-end core deposits
$
2,297,843
$
2,339,071
$
2,054,752
Average core deposits
$
2,346,453
$
2,247,639
$
2,000,602
Allowance for credit losses, including
unfunded commitment reserves
$
34,629
$
32,997
$
27,550
Non-performing assets
$
20,146
$
20,844
$
3,501
Allowance for credit losses as a percent
of total gross loans and leases
1.19
%
1.16
%
1.08
%
Non-performing assets as a percent of
total assets
0.57
%
0.59
%
0.11
%
(1)
This is a non-GAAP financial measure. Management believes these
measures are meaningful because they reflect adjustments commonly
made by management, investors, regulators, and analysts to evaluate
financial performance, provide greater understanding of ongoing
operations, and enhance comparability of results with prior
periods. See the section titled Non-GAAP Reconciliations at the end
of this release for a reconciliation of GAAP financial measures to
non-GAAP financial measures.
(2)
Calculation is annualized.
First Quarter 2024 Compared to Fourth
Quarter 2023
Net interest income decreased $29,000, or 0.1%, to $29.5
million.
- The decrease in net interest income was driven by a decrease in
net interest margin and fees in lieu of interest, partially offset
by an increase in average loans and leases receivable. Average
loans and leases receivable increased $76.7 million, or 10.9%
annualized, to $2.887 billion. Fees in lieu of interest, which vary
from quarter to quarter based on client-driven activity, totaled
$793,000, compared to $1.1 million in the prior quarter. Excluding
fees in lieu of interest, net interest income increased $254,000,
or 0.9%.
- The yield on average interest-earning assets decreased 8 basis
points to 6.77% from 6.85%. Excluding fees in lieu of interest, the
yield earned on average interest-earning assets decreased 3 basis
points to 6.68% from 6.71%. The cumulative adjusted
interest-earning asset beta2 since December 31, 2021 was
59.8%.
- The rate paid for average interest-bearing, core deposits
increased 5 basis points to 4.04% from 3.99% due to ongoing
competition for deposits. Conversely, the rate paid for average
wholesale deposits decreased 12 basis points to 4.03% from 4.15%.
The cumulative bank funding beta since December 31, 2021 was 56.8%.
Total bank funding is defined as total deposits plus Federal Home
Loan Bank (“FHLB”) advances.
- Net interest margin was 3.58%, down 11 basis points compared to
3.69% in the linked quarter. Adjusted net interest margin1 was
3.43%, down 7 basis points compared to 3.50% in the linked quarter.
The decrease in adjusted net interest margin was driven by an
increase in the rate paid on interest-bearing core deposits,
partially offset by a decrease in rate paid on wholesale
funding.
- Management believes net interest margin is nearing a floor. In
the current interest rate environment, we expect net interest
margin will approach our previous long-term target of 3.50%. Over
time, we expect our net interest margin to increase towards our new
long-term target range of 3.60% to 3.65%.
The Bank reported a provision expense of $2.3 million, compared
to $2.6 million in the fourth quarter of 2023. Provision expense
was lower due to an improved economic forecast and fewer new
specific reserves in the Equipment Finance loan portfolio. The $2.3
million expense consists of a general reserve increase of $740,000
due to qualitative factor changes, net charge-offs of $694,000,
$629,000 in additional specific reserves, and $354,000 due to loan
growth, partially offset by a $199,000 reduction in general
reserves due to an improved economic outlook in our model forecast
compared to the prior period. The increase in qualitative factors
was primarily driven by above target growth in several loan
portfolios. Similar to the second half of 2023, the additional
specific reserves and charge-offs were primarily related to
defaults by transportation and logistics borrowers in our Equipment
Finance loan portfolio, which management believes is consistent
with the cyclical nature of this industry. Given current conditions
in the industry, the Company expects continued stress within this
group of borrowers in 2024.
Non-interest income decreased $337,000, or 4.8%, to $6.8
million.
- Private Wealth and Company Retirement Plan (“Private Wealth”)
fee income increased $178,000, or 6.1% to $3.1 million. Private
Wealth assets under management and administration measured a record
$3.320 billion on March 31, 2024, up $198.7 million, or 25.5%
annualized from the prior quarter.
- Service charges on deposits increased $92,000, or 10.8%, to
$940,000, driven by new core deposit relationships.
- Gains on sale of SBA loans decreased $89,000, or 31.3%, to
$195,000. Management expects the SBA loan sales pipeline to build
throughout the year as production increases and previously closed
commitments fully fund and become eligible for sale.
- Commercial loan swap fee income of $198,000 decreased by
$240,000, or 54.8%. Swap fee income varies from period to period
based on loan activity and the interest rate environment.
- Other fee income decreased $248,000 to $1.5 million, compared
to $1.7 million in the prior quarter. The decrease was primarily
due to lower returns on the Company’s investments in mezzanine
funds in the first quarter. Income from mezzanine funds was
$653,000 in the first quarter, compared to $860,000 in the linked
quarter. Income from mezzanine funds varies from period to period
based on changes in the realized and unrealized fair value of
underlying investments.
_____________________________________
1
Adjusted net interest margin is a non-GAAP
measure representing net interest income excluding fees in lieu of
interest and other recurring, but volatile, components of net
interest margin divided by average interest-earning assets less
other recurring, but volatile, components of average
interest-earning assets.
2
The change in yield of the respective
interest-earning asset or the rate paid on interest-bearing
liability compared to the change in short-term market rates is
commonly referred to as a beta.
Non-interest expense increased $1.8 million, or 8.1%, to $23.3
million, while operating expense increased $1.8 million, or 8.2%,
to $23.1 million.
- Compensation expense was $16.2 million, reflecting an increase
of $1.7 million, or 11.8%, from the linked quarter primarily due to
higher seasonal payroll taxes, 401k match contributions paid in the
quarter on the annual cash bonus payout, annual merit increases
reflecting a competitive job market, and an expanded workforce.
These increases were partially offset by a decrease in incentive
compensation. Average full-time equivalents (“FTEs”) for the first
quarter of 2024 were 346, up from 343 in the linked quarter.
Management believes compensation expense will continue at this
level in 2024 as opportunistic investment in talent will offset the
reduction in payroll taxes throughout the year.
- Professional fees were $1.6 million, increasing $258,000, or
19.6%, from the linked quarter primarily due to an increase in
recruiting expenses and legal fees related to the sale of state tax
credits.
- Computer software expense increased $101,000, or 7.7%, from the
linked quarter primarily due to continued investment in technology
to support the Company’s growth initiatives.
- Marketing expense increased $94,000, or 13.0%, from the linked
quarter primarily due to an increase in business development
efforts and advertising projects commensurate with the Company’s
growth initiatives.
- Other non-interest expense decreased $554,000, or 41.0%, to
$798,000 from the linked quarter primarily due to decreases in
liquidation expense, loan-related expenses, donations, travel
expenses, and SBA recourse provision.
Income tax expense decreased $951,000, or 35.2%, to $1.8
million. The effective tax rate was 16.5% for the three months
ended March 31, 2024, compared to 21.7% for the linked quarter. The
decrease reflects the impact of lower state taxes due to
legislative change, recognition of a valuation allowance on state
deferred tax in the prior quarter, and new federal tax credit
projects. Based on expected earnings, reduction in state tax, and
future tax credit investments, the Company expects to report an
effective tax rate between 17% and 19% for 2024.
Total period-end loans and leases receivable increased $60.6
million, or 8.5% annualized, to $2.911 billion. Management expects
to manage loan growth towards our long-term target of 10%. The
average rate earned on average loans and leases receivable was
7.14%, down 7 basis points from 7.21% in the prior quarter.
Excluding fees in lieu of interest, the average rate earned on
average loans and leases receivable was 7.03%, down 3 basis points
from 7.06% in the prior quarter. Additionally, $197.2 million of
new and renewed loans were originated in the quarter at a weighted
average yield of 7.95%.
- Commercial Real Estate (“CRE”) loans increased by $39.9
million, or 9.4% annualized, to $1.740 billion. The increase was
primarily due to an increase in non-owner occupied CRE and
owner-occupied CRE, in the Wisconsin market.
- Commercial & Industrial (“C&I”) loans increased $14.9
million, or 5.6% annualized, to $1.121 billion. The increase was
due to growth across all categories.
Total period-end core deposits decreased $41.2 million to $2.298
billion, compared to $2.339 billion. The average rate paid was
3.28%, up 8 basis points from 3.20% in the prior quarter.
- The decline in period-end balances is due to the delayed
receipt of a significant core deposit which typically occurs near
the end of the month. Including this recurring deposit inflow
received by the Bank on April 1, period-end core deposits increased
$24.2 million, or 4.1% annualized. New non-maturity deposit
balances of $102.6 million were added at a weighted average rate of
4.31%. The increase in new accounts was partially offset by a $81.0
million reduction in existing accounts at a weighted average rate
of 2.99%, compared to 2.86% in the linked quarter. Certificate of
deposit maturities of $190.3 million at a weighted average rate of
4.38% were replaced by new and renewed certificates of deposit of
$170.2 million at a weighted average rate of 4.38%.
Period-end wholesale funding, including FHLB advances, brokered
deposits, and deposits gathered through internet deposit listing
services, increased $50.6 million, or 27.2% annualized, to $789.8
million. The increase reflects the temporary funding need due to
the delayed recurring core deposit inflow the Bank did not receive
until April 1. To cover this timing difference, the Bank utilized
short-term FHLB advances. Consistent with the Bank’s long-held
philosophy to manage interest rate risk, management will continue
to utilize the most efficient and cost-effective source of
wholesale funds to match-fund fixed-rate loans as necessary.
- Wholesale deposits decreased $145,000 to $457.6 million,
compared to $457.7 million. The average rate paid on wholesale
deposits decreased 12 basis points to 4.03% and the weighted
average original maturity was 4.4 years for both periods.
- FHLB advances increased $50.8 million to $332.3 million. The
average rate paid on FHLB advances decreased 6 basis points to
2.39% and the weighted average original maturity decreased to 4.5
years from 5.2 years.
Non-performing assets decreased $698,000 to $20.1 million, or
0.57% of total assets, down from 0.59% in the prior quarter. While
we continue to expect full repayment of the one asset-based lending
(ABL) loan that defaulted during the second quarter of 2023, the
liquidation process has transitioned into Chapter 7 bankruptcy,
likely delaying final resolution until late 2024 or potentially
2025. Excluding this ABL loan, non-performing assets totaled $12.7
million, or 0.36% of total assets in the current quarter and $12.0
million, or 0.34% of total assets in the linked quarter.
The allowance for credit losses, including the unfunded credit
commitments reserve, increased $1.6 million, or 4.9%, as increases
in specific reserves, the general reserve from loan growth, and
qualitative factors were partially offset by charge-offs and an
improved economic outlook in our model forecast. The allowance for
credit losses, including unfunded credit commitment reserves, as a
percent of total gross loans and leases was 1.19% compared to 1.16%
in the prior quarter.
First Quarter 2024 Compared to First
Quarter 2023
Net interest income increased $2.8 million, or 10.5%, to $29.5
million.
- The increase in net interest income primarily reflects an
increase in average gross loans and leases and an increase in fees
in lieu of interest, partially offset by net interest margin
compression. Fees in lieu of interest increased to $793,000 from
$651,000. Excluding fees in lieu of interest, net interest income
increased $2.7 million, or 10.2%.
- The yield on average interest-earning assets measured 6.77%
compared to 6.09%. Excluding fees in lieu of interest, the yield on
average interest-earning assets measured 6.68%, compared to 5.99%.
This increase in yield was primarily due to the increase in
short-term market rates and the reinvestment of cash flows from the
securities and fixed-rate loan portfolios in a rising rate
environment. The daily average effective federal funds rate
increased 82 basis points compared to the prior year quarter, which
equates to an average adjusted interest-earning asset beta of 83.6%
for the three months ended March 31, 2024, compared to the prior
year period.
- The rate paid for average interest-bearing core deposits
increased 126 basis points to 4.04% from 2.78%. The rate paid for
average total bank funding increased 101 basis points to 3.31% from
2.30%. The total bank funding beta was 122.0% for the three months
ended March 31, 2024, compared to the prior year period.
- Net interest margin decreased 28 basis points to 3.58% from
3.86%. Adjusted net interest margin decreased 31 basis points to
3.43% from 3.74%.
The Company reported a credit loss provision expense of $2.3
million, compared an expense of $1.6 million in the first quarter
of 2023. The increase compared to the prior year quarter is mainly
due to an increase in specific reserves related to the Equipment
Finance lending portfolio.
Non-interest income of $6.8 million decreased by $1.7 million,
or 19.7%, from $8.4 million in the prior year period.
- Private Wealth fee income increased $457,000, or 17.2%, to $3.1
million. Private Wealth assets under management and administration
measured $3.320 billion at March 31, 2024, up $516.1 million, or
18.4%.
- Commercial loan swap fee income decreased by $359,000, or
64.5%, to $198,000. Swap fee income varies from period to period
based on loan activity and the interest rate environment.
- Gain on sale of SBA loans decreased $281,000, or 59.0%, to
$195,000. Management expects the SBA loan sales pipeline to build
throughout the year as production increases and previously closed
commitments fully fund and become eligible for sale.
- Service charges on deposits increased $258,000, or 37.8%, to
$940,000, driven by new core deposit relationships.
- Other fee income decreased $1.8 million, or 54.5%, to $1.5
million. The decrease was primarily due to lower returns on the
Company’s investments in mezzanine funds in the first quarter.
Income from mezzanine funds was $653,000 in the first quarter,
compared to $2.4 million in the prior year quarter. Income from
mezzanine funds varies from period to period based on changes in
the realized and unrealized fair value of underlying
investments.
Non-interest expense increased $1.6 million, or 7.2%, to $23.3
million. Operating expense increased $1.4 million, or 6.2%, to
$23.1 million.
- Compensation expense increased $249,000, or 1.6%, to $16.2
million. The increase in compensation expense was primarily due to
an increase in average FTEs and annual merit increases and
promotions. These increases were partially offset by a decrease in
incentive compensation due to slower production and a decrease in
401k expense. Average FTEs increased 2% to 346 in the first quarter
of 2024, compared to 340 in the first quarter of 2023, as a result
of expanded hiring efforts that have successfully driven growth
while maintaining positive operating leverage on an annual
basis.
- Computer software expense increased $235,000, or 19.9%, to $1.4
million, primarily due to continued investment in technology to
support the Company’s growth initiatives.
- Professional fees expense increased $228,000, or 17.0%, to $1.6
million, primarily due to an increase in recruiting expense and a
general increase in other professional consulting services for
various projects.
- FDIC insurance increased $216,000, or 54.8%, to $610,000,
primarily due to an increase in the assessable base.
- Marketing expense increased $190,000, or 30.3%, to $818,000,
primarily due to an increase in business development efforts and
advertising projects commensurate with the Company’s growth
initiatives.
- Data processing expense increased $143,000, or 16.3%, to $1.0
million, primarily due to an increase in core processing costs
commensurate with loan and deposit account growth, as well as
various project implementations.
- Other expenses increased $288,000, or 56.5%, to $798,000,
primarily due to increases in SBA recourse provision, travel
expenses, and other loan-related costs, partially offset by a
decrease in liquidation expense.
Total period-end loans and leases receivable increased $371.5
million, or 14.6%, to $2.911 billion.
- CRE loans increased $210.6 million, or 13.8%, to $1.740
billion, primarily due to increases in non-owner occupied CRE and
owner occupied CRE loans in the Wisconsin market.
- C&I loans increased $157.5 million, or 16.3%, to $1.121
billion, due to growth across the majority of the Bank’s products
and geographies.
Total period-end core deposits grew $243.1 million, or 11.8%, to
$2.298 billion, and the average rate paid increased 119 basis
points to 3.28%. The increase in average rate paid on core deposits
was primarily due to a change in product mix. Total average core
deposits grew $345.9 million, or 17.3%, to $2.346 billion.
Period-end wholesale funding increased $60.2 million to $789.8
million.
- Wholesale deposits increased $35.5 million to $457.6 million,
as the Bank utilized more wholesale deposits in lieu of FHLB
advances to build excess liquidity and to match-fund fixed rate
assets. The average rate paid on wholesale deposits increased 18
basis points to 4.03% and the weighted average effective maturity
increased to 4.4 years from 1.8 years. Consistent with our balance
sheet strategy to use the most efficient and cost-effective source
of wholesale funding, the Company has entered into several
derivative contracts hedging a portion of the wholesale deposits to
reduce the fixed rate funding costs.
- FHLB advances increased $24.8 million to $332.3 million. The
average rate paid on FHLB advances increased 8 basis points to
2.39% and the weighted average original maturity decreased to 4.5
years from 4.7 years.
Non-performing assets increased to $20.1 million, or 0.57% of
total assets, compared to $3.5 million, or 0.11% of total assets,
driven by the ABL and Equipment Finance loan portfolios within the
C&I portfolio. Excluding one ABL loan for which we expect full
repayment, non-performing assets totaled $12.7 million, or 0.36% of
total assets.
The allowance for credit losses, including unfunded commitment
reserves, increased $7.1 million to $34.6 million, compared to
$26.1 million primarily due to an increase in specific reserves and
loan growth, partially offset by an improvement in economic
forecast. The allowance for credit losses as a percent of total
gross loans and leases was 1.19%, compared 1.08% in the prior
year.
Investor Presentation
The Company has prepared investor presentation materials that
management intends to use from time to time in discussions about
the Company’s operations and performance. The presentation will be
available for viewing in the Investor Relations section of the
Company’s website at firstbusiness.bank and will also be furnished
to the U.S. Securities and Exchange Commission on April 26,
2024.
About First Business Bank
First Business Bank® specializes in Business Banking, including
Commercial Banking and Specialty Finance, Private Wealth, and Bank
Consulting services, and through its refined focus delivers
unmatched expertise, accessibility, and responsiveness. Specialty
Finance solutions are delivered through First Business Bank’s
wholly owned subsidiary First Business Specialty Finance, LLC®.
First Business Bank is a wholly owned subsidiary of First Business
Financial Services, Inc®. (Nasdaq: FBIZ). For additional
information, visit firstbusiness.bank.
This release may include forward-looking statements as defined
in the Private Securities Litigation Reform Act of 1995, which
reflect First Business Bank’s current views with respect to future
events and financial performance. Forward-looking statements are
not based on historical information, but rather are related to
future operations, strategies, financial results, or other
developments. Forward-looking statements are based on management’s
expectations as well as certain assumptions and estimates made by,
and information available to, management at the time the statements
are made. Those statements are based on general assumptions and are
subject to various risks, uncertainties, and other factors that may
cause actual results to differ materially from the views, beliefs,
and projections expressed in such statements. Such statements are
subject to risks and uncertainties, including among other
things:
- Adverse changes in the economy or business conditions, either
nationally or in our markets including, without limitation,
inflation, supply chain issues, economic downturn, labor shortages,
wage pressures, and the adverse effects of public health events on
the global, national, and local economy.
- Competitive pressures among depository and other financial
institutions nationally and in the Company’s markets.
- Increases in defaults by borrowers and other
delinquencies.
- Management’s ability to manage growth effectively, including
the successful expansion of our client service, administrative
infrastructure, and internal management systems.
- Fluctuations in interest rates and market prices.
- Changes in legislative or regulatory requirements applicable to
the Company and its subsidiaries.
- Changes in tax requirements, including tax rate changes, new
tax laws, and revised tax law interpretations.
- Fraud, including client and system failure or breaches of our
network security, including the Company’s internet banking
activities.
- Failure to comply with the applicable SBA regulations in order
to maintain the eligibility of the guaranteed portion of SBA
loans.
- Ongoing volatility in the banking sector may result in new
legislation, regulations or policy changes that could subject the
Company and the Bank to increased government regulation and
supervision.
- The proportion of the Company’s deposit account balances that
exceed FDIC insurance limits may expose the Bank to enhanced
liquidity risk.
- The Company may be subject to increases in FDIC insurance
assessments as a result of bank failures that occurred in
2023.
For further information about the factors that could affect the
Company’s future results, please see the Company’s annual report on
Form 10-K for the year ended December 31, 2023 and other filings
with the Securities and Exchange Commission.
SELECTED FINANCIAL CONDITION
DATA
(Unaudited)
As of
(in thousands)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Assets
Cash and cash equivalents
$
72,040
$
139,510
$
132,915
$
112,809
$
185,973
Securities available-for-sale, at fair
value
314,114
297,006
272,163
253,626
236,989
Securities held-to-maturity, at amortized
cost
8,131
8,503
8,689
9,830
11,461
Loans held for sale
4,855
4,589
4,168
2,191
2,697
Loans and leases receivable
2,910,864
2,850,261
2,764,014
2,674,583
2,539,363
Allowance for credit losses
(32,799
)
(31,275
)
(29,331
)
(28,115
)
(26,140
)
Loans and leases receivable, net
2,878,065
2,818,986
2,734,683
2,646,468
2,513,223
Premises and equipment, net
6,268
6,190
6,157
5,094
4,933
Repossessed assets
317
247
61
65
89
Right-of-use assets
6,297
6,559
6,800
7,049
7,355
Bank-owned life insurance
55,948
55,536
55,123
54,747
54,383
Federal Home Loan Bank stock, at cost
13,326
12,042
13,528
14,482
13,088
Goodwill and other intangible assets
11,950
12,023
12,110
12,073
12,160
Derivatives
69,703
55,597
93,702
70,440
54,612
Accrued interest receivable and other
assets
90,344
91,058
78,751
76,864
67,448
Total assets
$
3,531,358
$
3,507,846
$
3,418,850
$
3,265,738
$
3,164,411
Liabilities and Stockholders’
Equity
Core deposits
$
2,297,843
$
2,339,071
$
2,189,264
$
2,073,744
$
2,054,752
Wholesale deposits
457,563
457,708
467,743
455,108
422,088
Total deposits
2,755,406
2,796,779
2,657,007
2,528,852
2,476,840
Federal Home Loan Bank advances and other
borrowings
381,718
330,916
363,891
370,113
341,859
Lease liabilities
8,664
8,954
9,236
9,499
9,822
Derivatives
61,133
51,949
78,696
61,147
49,012
Accrued interest payable and other
liabilities
26,649
29,660
29,262
23,495
20,297
Total liabilities
3,233,570
3,218,258
3,138,092
2,993,106
2,897,830
Total stockholders’ equity
297,788
289,588
280,758
272,632
266,581
Total liabilities and stockholders’
equity
$
3,531,358
$
3,507,846
$
3,418,850
$
3,265,738
$
3,164,411
STATEMENTS OF INCOME
(Unaudited)
As of and for the Three Months
Ended
(Dollars in thousands, except per share
amounts)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Total interest income
$
55,783
$
54,762
$
50,941
$
47,161
$
42,064
Total interest expense
26,272
25,222
22,345
19,414
15,359
Net interest income
29,511
29,540
28,596
27,747
26,705
Provision for credit losses
2,326
2,573
1,817
2,231
1,561
Net interest income after provision for
credit losses
27,185
26,967
26,779
25,516
25,144
Private wealth management service fees
3,111
2,933
2,945
2,893
2,654
Gain on sale of SBA loans
195
284
851
444
476
Service charges on deposits
940
848
835
766
682
Loan fees
847
869
786
905
803
Loss on sale of securities
(8
)
—
—
(45
)
—
Swap fees
198
438
992
977
557
Other non-interest income
1,474
1,722
2,021
1,434
3,238
Total non-interest income
6,757
7,094
8,430
7,374
8,410
Compensation
16,157
14,450
15,573
15,129
15,908
Occupancy
607
571
575
603
631
Professional fees
1,571
1,313
1,429
1,240
1,343
Data processing
1,018
936
953
1,061
875
Marketing
818
724
758
779
628
Equipment
345
340
349
355
295
Computer software
1,418
1,317
1,289
1,197
1,183
FDIC insurance
610
585
680
580
394
Other non-interest expense
798
1,352
1,583
1,087
510
Total non-interest expense
23,342
21,588
23,189
22,031
21,767
Income before income tax expense
10,600
12,473
12,020
10,859
11,787
Income tax expense
1,752
2,703
2,079
2,522
2,808
Net income
$
8,848
$
9,770
$
9,941
$
8,337
$
8,979
Preferred stock dividends
219
219
218
219
219
Net income available to common
shareholders
$
8,629
$
9,551
$
9,723
$
8,118
$
8,760
Per common share:
Basic earnings
$
1.04
$
1.15
$
1.17
$
0.98
$
1.05
Diluted earnings
1.04
1.15
1.17
0.98
1.05
Dividends declared
0.2500
0.2275
0.2275
0.2275
0.2275
Book value
34.41
33.39
32.32
31.34
30.65
Tangible book value
32.97
31.94
30.87
29.89
29.19
Weighted-average common shares
outstanding(1)
8,125,319
8,110,462
8,107,641
8,061,841
8,148,525
Weighted-average diluted common shares
outstanding(1)
8,125,319
8,110,462
8,107,641
8,061,841
8,148,525
(1)
Excluding participating securities.
NET INTEREST INCOME
ANALYSIS
(Unaudited)
For the Three Months
Ended
(Dollars in thousands)
March 31, 2024
December 31, 2023
March 31, 2023
Average
Balance
Interest
Average
Yield/Rate(4)
Average
Balance
Interest
Average
Yield/Rate(4)
Average
Balance
Interest
Average
Yield/Rate(4)
Interest-earning assets
Commercial real estate and other mortgage
loans(1)
$
1,721,186
$
28,120
6.54
%
$
1,675,926
$
27,359
6.53
%
$
1,518,053
$
21,717
5.72
%
Commercial and industrial loans(1)
1,115,724
22,724
8.15
%
1,089,558
22,751
8.35
%
916,457
17,557
7.66
%
Consumer and other loans(1)
50,544
705
5.58
%
45,309
577
5.09
%
46,690
540
4.63
%
Total loans and leases receivable(1)
2,887,454
51,549
7.14
%
2,810,793
50,687
7.21
%
2,481,200
39,814
6.42
%
Mortgage-related securities(2)
241,940
2,276
3.76
%
221,708
2,061
3.72
%
182,494
1,270
2.78
%
Other investment securities(3)
67,980
518
3.05
%
67,444
541
3.21
%
55,722
320
2.30
%
FHLB stock
12,271
282
9.19
%
12,960
279
8.61
%
17,125
327
7.64
%
Short-term investments
85,072
1,158
5.44
%
86,580
1,193
5.51
%
28,546
333
4.67
%
Total interest-earning assets
3,294,717
55,783
6.77
%
3,199,485
54,761
6.85
%
2,765,087
42,064
6.09
%
Non-interest-earning assets
233,224
255,167
219,513
Total assets
$
3,527,941
$
3,454,652
$
2,984,600
Interest-bearing liabilities
Transaction accounts
$
862,896
8,447
3.92
%
$
785,480
7,657
3.90
%
$
567,435
3,840
2.71
%
Money market
761,893
7,565
3.97
%
734,903
7,145
3.89
%
699,314
4,497
2.57
%
Certificates of deposit
278,248
3,210
4.61
%
278,438
3,160
4.54
%
236,083
2,117
3.59
%
Wholesale deposits
457,536
4,615
4.03
%
450,880
4,682
4.15
%
187,784
1,976
4.21
%
Total interest-bearing deposits
2,360,573
23,837
4.04
%
2,249,701
22,644
4.03
%
1,690,616
12,430
2.94
%
FHLB advances
287,307
1,717
2.39
%
301,773
1,851
2.45
%
398,109
2,461
2.47
%
Other borrowings
49,457
718
5.81
%
49,394
727
5.89
%
36,794
468
5.09
%
Total interest-bearing liabilities
2,697,337
26,272
3.90
%
2,600,868
25,222
3.88
%
2,125,519
15,359
2.89
%
Non-interest-bearing demand deposit
accounts
443,416
448,818
497,770
Other non-interest-bearing liabilities
93,307
119,833
98,347
Total liabilities
3,234,060
3,169,519
2,721,636
Stockholders’ equity
293,881
285,133
262,964
Total liabilities and stockholders’
equity
$
3,527,941
$
3,454,652
$
2,984,600
Net interest income
$
29,511
$
29,539
$
26,705
Interest rate spread
2.88
%
2.97
%
3.19
%
Net interest-earning assets
$
597,380
$
598,617
$
639,568
Net interest margin
3.58
%
3.69
%
3.86
%
(1)
The average balances of loans and leases
include non-accrual loans and leases and loans held for sale.
Interest income related to non-accrual loans and leases is
recognized when collected. Interest income includes net loan fees
collected in lieu of interest.
(2)
Includes amortized cost basis of assets
available for sale and held to maturity.
(3)
Yields on tax-exempt municipal obligations
are not presented on a tax-equivalent basis in this
table.
(4)
Represents annualized
yields/rates.
ASSET AND LIABILITY BETA
ANALYSIS
For the Three Months
Ended
(Unaudited)
March 31,
2024
December 31,
2023
March 31,
2023
December 31,
2021
Average
Yield/Rate (3)
Average
Yield/Rate (3)
Increase
(Decrease)
Average
Yield/Rate (3)
Increase
(Decrease)
Average
Yield/Rate (3)
Increase
(Decrease)
Total loans and leases receivable (a)
7.14
%
7.21
%
(0.07
)%
6.42
%
0.72
%
4.13
%
3.01
%
Total interest-earning assets(b)
6.77
%
6.85
%
(0.08
)%
6.09
%
0.68
%
3.81
%
2.96
%
Adjusted total loans and leases receivable
(1)(c)
7.03
%
7.06
%
(0.03
)%
6.31
%
0.72
%
3.82
%
3.21
%
Adjusted total interest-earning assets
(1)(d)
6.68
%
6.71
%
(0.03
)%
5.99
%
0.69
%
3.54
%
3.14
%
Total core deposits(e)
3.28
%
3.20
%
0.08
%
2.09
%
1.19
%
0.13
%
3.15
%
Total bank funding(f)
3.31
%
3.27
%
0.04
%
2.30
%
1.01
%
0.33
%
2.98
%
Net interest margin(g)
3.58
%
3.69
%
(0.11
)%
3.86
%
(0.28
)%
3.39
%
0.19
%
Adjusted net interest margin(h)
3.43
%
3.50
%
(0.07
)%
3.74
%
(0.31
)%
3.18
%
0.25
%
Effective fed funds rate (2)(i)
5.33
%
5.33
%
—
%
4.51
%
0.82
%
0.08
%
5.25
%
Beta
Calculations:
Total loans and leases
receivable(a)/(i)
88.1
%
57.3
%
Total interest-earning assets(b)/(i)
83.8
%
56.4
%
Adjusted total loans and leases receivable
(1)(c)/(i)
87.5
%
61.1
%
Adjusted total interest-earning assets
(1)(d)/(i)
83.6
%
59.8
%
Total core deposits(e/i)
145.1
%
60.0
%
Total bank funding(f)/(i)
122.0
%
56.8
%
Net interest margin(g/i)
(34.1
)%
3.6
%
Adjusted net interest margin(h/i)
(37.8
)%
4.8
%
(1)
Excluding fees in lieu of interest.
(2)
Board of Governors of the Federal Reserve
System (US), Effective Federal Funds Rate [DFF]. Retrieved from
FRED, Federal Reserve Bank of St. Louis. Represents average daily
rate.
(3)
Represents annualized yields/rates.
PROVISION FOR CREDIT LOSS
COMPOSITION
(Unaudited)
For the Three Months
Ended
(Dollars in thousands)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Change due to qualitative factor
changes
$
740
$
(432
)
$
506
$
(50
)
$
9
Change due to quantitative factor
changes
(199
)
(260
)
(1,372
)
(295
)
474
Charge-offs
921
724
562
329
166
Recoveries
(227
)
(114
)
(84
)
(245
)
(107
)
Change in reserves on individually
evaluated loans, net
629
2,008
1,265
1,093
(36
)
Change due to loan growth, net
354
629
817
1,227
979
Change in unfunded commitment reserves
108
17
123
172
76
Total provision for credit losses
$
2,326
$
2,572
$
1,817
$
2,231
$
1,561
PERFORMANCE RATIOS
For the Three Months
Ended
(Unaudited)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Return on average assets (annualized)
0.98
%
1.11
%
1.19
%
1.04
%
1.17
%
Return on average common equity
(annualized)
12.24
%
13.99
%
14.62
%
12.58
%
13.96
%
Efficiency ratio
63.76
%
58.34
%
61.96
%
61.68
%
62.02
%
Interest rate spread
2.88
%
2.97
%
3.07
%
3.15
%
3.19
%
Net interest margin
3.58
%
3.69
%
3.76
%
3.81
%
3.86
%
Average interest-earning assets to average
interest-bearing liabilities
122.15
%
123.02
%
123.59
%
124.82
%
130.09
%
ASSET QUALITY RATIOS
(Unaudited)
As of
(Dollars in thousands)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Non-accrual loans and leases
$
19,829
$
20,597
$
17,628
$
15,721
$
3,412
Repossessed assets
317
247
61
65
89
Total non-performing assets
$
20,146
$
20,844
$
17,689
$
15,786
$
3,501
Non-accrual loans and leases as a percent
of total gross loans and leases
0.68
%
0.72
%
0.64
%
0.59
%
0.13
%
Non-performing assets as a percent of
total gross loans and leases plus repossessed assets
0.69
%
0.73
%
0.64
%
0.59
%
0.14
%
Non-performing assets as a percent of
total assets
0.57
%
0.59
%
0.52
%
0.48
%
0.11
%
Allowance for credit losses as a percent
of total gross loans and leases
1.19
%
1.16
%
1.12
%
1.11
%
1.08
%
Allowance for credit losses as a percent
of non-accrual loans and leases
174.64
%
160.21
%
176.06
%
188.90
%
807.44
%
NET CHARGE-OFFS
(RECOVERIES)
(Unaudited)
For the Three Months
Ended
(Dollars in thousands)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Charge-offs
$
921
$
724
$
562
$
329
$
166
Recoveries
(227
)
(114
)
(84
)
(245
)
(107
)
Net charge-offs (recoveries)
$
694
$
610
$
478
$
84
$
59
Net charge-offs (recoveries) as a percent
of average gross loans and leases (annualized)
0.10
%
0.09
%
0.07
%
0.01
%
0.01
%
CAPITAL RATIOS
As of and for the Three Months
Ended
(Unaudited)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Total capital to risk-weighted assets
11.36
%
11.19
%
11.20
%
10.70
%
11.04
%
Tier I capital to risk-weighted assets
8.86
%
8.74
%
8.74
%
8.70
%
9.01
%
Common equity tier I capital to
risk-weighted assets
8.51
%
8.38
%
8.37
%
8.32
%
8.61
%
Tier I capital to adjusted assets
8.45
%
8.43
%
8.65
%
8.80
%
9.00
%
Tangible common equity to tangible
assets
7.78
%
7.60
%
7.53
%
7.64
%
7.69
%
LOAN AND LEASE RECEIVABLE
COMPOSITION
(Unaudited)
As of
(in thousands)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Commercial real estate:
Commercial real estate - owner
occupied
$
263,748
$
256,479
$
236,058
$
244,039
$
233,725
Commercial real estate - non-owner
occupied
792,858
773,494
753,517
715,309
675,087
Construction
202,382
193,080
211,828
217,069
212,916
Multi-family
453,321
450,529
409,714
392,297
384,043
1-4 family
27,482
26,289
24,235
23,063
23,404
Total commercial real estate
1,739,791
1,699,871
1,635,352
1,591,777
1,529,175
Commercial and industrial
1,120,779
1,105,835
1,083,698
1,036,921
963,328
Consumer and other
50,020
44,312
44,808
45,743
46,773
Total gross loans and leases
receivable
2,910,590
2,850,018
2,763,858
2,674,441
2,539,276
Less:
Allowance for credit losses
32,799
31,275
29,331
28,115
26,140
Deferred loan fees
(274
)
(243
)
(156
)
(142
)
(87
)
Loans and leases receivable, net
$
2,878,065
$
2,818,986
$
2,734,683
$
2,646,468
$
2,513,223
DEPOSIT COMPOSITION
(Unaudited)
As of
(in thousands)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Non-interest-bearing transaction
accounts
$
400,267
$
445,376
$
430,011
$
419,294
$
471,904
Interest-bearing transaction accounts
818,080
895,319
779,789
719,198
612,500
Money market accounts
813,467
711,245
694,199
641,969
662,157
Certificates of deposit
266,029
287,131
285,265
293,283
308,191
Wholesale deposits
457,563
457,708
467,743
455,108
422,088
Total deposits
$
2,755,406
$
2,796,779
$
2,657,007
$
2,528,852
$
2,476,840
Uninsured deposits
$
995,428
$
994,687
$
916,083
$
867,397
$
974,242
Less: uninsured deposits collateralized by
pledged assets
16,622
17,051
28,873
37,670
32,468
Total uninsured, net of collateralized
deposits
978,806
977,636
887,210
829,727
941,774
% of total deposits
35.5
%
35.0
%
33.4
%
32.8
%
38.0
%
SOURCES OF LIQUIDITY
(Unaudited)
As of
(in thousands)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Short-term investments
$
46,984
$
107,162
$
109,612
$
80,510
$
159,859
Collateral value of unencumbered pledged
loans
340,639
367,471
315,067
265,884
296,393
Market value of unencumbered
securities
288,965
259,791
236,618
217,074
200,332
Readily accessible liquidity
676,588
734,424
661,297
563,468
656,584
Fed fund lines
45,000
45,000
45,000
45,000
45,000
Excess brokered CD capacity(1)
1,166,661
1,231,791
1,090,864
1,017,590
1,027,869
Total liquidity
$
1,888,249
$
2,011,215
$
1,797,161
$
1,626,058
$
1,729,453
Total uninsured, net of collateralized
deposits
978,806
977,636
887,210
829,727
941,774
(1)
Bank internal policy limits brokered CDs
to 50% of total bank funding when combined with FHLB advances.
PRIVATE WEALTH OFF-BALANCE SHEET
COMPOSITION
(Unaudited)
As of
(in thousands)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Trust assets under management
$
3,080,951
$
2,898,516
$
2,715,801
$
2,707,390
$
2,615,670
Trust assets under administration
239,249
223,013
198,864
199,729
188,458
Total trust assets
$
3,320,200
$
3,121,529
$
2,914,665
$
2,907,119
$
2,804,128
NON-GAAP RECONCILIATIONS Certain financial information
provided in this release is determined by methods other than in
accordance with generally accepted accounting principles (United
States) (“GAAP”). Although the Company’s management believes that
these non-GAAP financial measures provide a greater understanding
of its business, these measures are not necessarily comparable to
similar measures that may be presented by other companies.
TANGIBLE BOOK VALUE “Tangible book value per share” is a
non-GAAP measure representing tangible common equity divided by
total common shares outstanding. “Tangible common equity” itself is
a non-GAAP measure representing common stockholders’ equity reduced
by intangible assets, if any. The Company’s management believes
that this measure is important to many investors in the marketplace
who are interested in period-to-period changes in book value per
common share exclusive of changes in intangible assets. The
information provided below reconciles tangible book value per share
and tangible common equity to their most comparable GAAP
measures.
(Unaudited)
As of
(Dollars in thousands, except per share
amounts)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Common stockholders’ equity
$
285,796
$
277,596
$
268,766
$
260,640
$
254,589
Less: Goodwill and other intangible
assets
(11,950
)
(12,023
)
(12,110
)
(12,073
)
(12,160
)
Tangible common equity
$
273,846
$
265,573
$
256,656
$
248,567
$
242,429
Common shares outstanding
8,306,573
8,314,778
8,315,186
8,315,465
8,306,270
Book value per share
$
34.41
$
33.39
$
32.32
$
31.34
$
30.65
Tangible book value per share
32.97
31.94
30.87
29.89
29.19
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS “Tangible
common equity to tangible assets” (“TCE”) is defined as the ratio
of common stockholders’ equity reduced by intangible assets, if
any, divided by total assets reduced by intangible assets, if any.
Adjusted TCE ratio is defined as TCE adjusted for net fair value
adjustments of financial assets and liabilities. For more
information on fair value adjustments please refer to Note 19 -
Fair Value Disclosures in the annual report on Form 10-K for the
year ended December 31, 2023. The Company’s management believes
that this measure is important to many investors in the marketplace
who are interested in the relative changes from period to period in
common equity and total assets, each exclusive of changes in
intangible assets. The information below reconciles tangible common
equity and tangible assets to their most comparable GAAP
measures.
(Unaudited)
As of
(Dollars in thousands)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Common stockholders’ equity
$
285,796
$
277,596
$
268,766
$
260,640
$
254,589
Less: Goodwill and other intangible
assets
(11,950
)
(12,023
)
(12,110
)
(12,073
)
(12,160
)
Tangible common equity (a)
$
273,846
$
265,573
$
256,656
$
248,567
$
242,429
Total assets
$
3,531,358
$
3,507,846
$
3,418,850
$
3,265,738
$
3,164,411
Less: Goodwill and other intangible
assets
(11,950
)
(12,023
)
(12,110
)
(12,073
)
(12,160
)
Tangible assets (b)
$
3,519,408
$
3,495,823
$
3,406,740
$
3,253,665
$
3,152,251
Tangible common equity to tangible
assets
7.78
%
7.60
%
7.53
%
7.64
%
7.69
%
Fair Value
Adjustments:
Financial assets - MTM (c)
$
(29,019
)
$
(29,136
)
$
(45,489
)
$
(43,403
)
$
(24,764
)
Financial liabilities - MTM (d)
$
12,560
$
11,945
$
23,436
$
21,916
$
17,334
Net MTM, after-tax e = (c-d)*(1-21%)
$
(13,003
)
$
(13,581
)
$
(17,422
)
$
(16,975
)
$
(5,870
)
Adjusted tangible equity f = (a-e)
$
260,843
$
251,992
$
239,234
$
231,592
$
236,559
Adjusted tangible assets g = (b-c)
$
3,490,389
$
3,466,687
$
3,361,251
$
3,210,262
$
3,127,487
Adjusted TCE ratio (f/g)
7.47
%
7.27
%
7.12
%
7.21
%
7.56
%
EFFICIENCY RATIO & PRE-TAX, PRE-PROVISION ADJUSTED
EARNINGS “Efficiency ratio” is a non-GAAP measure representing
non-interest expense excluding the effects of the SBA recourse
provision, impairment of tax credit investments, losses or gains on
repossessed assets, amortization of other intangible assets and
other discrete items, if any, divided by operating revenue, which
is equal to net interest income plus non-interest income less
realized gains or losses on securities, if any. “Pre-tax,
pre-provision adjusted earnings” is defined as operating revenue
less operating expense. In the judgment of the Company’s
management, the adjustments made to non-interest expense and
non-interest income allow investors and analysts to better assess
the Company’s operating expenses in relation to its core operating
revenue by removing the volatility that is associated with certain
one-time items and other discrete items. The information provided
below reconciles the efficiency ratio and pre-tax, pre-provision
adjusted earnings to its most comparable GAAP measure.
(Unaudited)
For the Three Months
Ended
(Dollars in thousands)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Total non-interest expense
$
23,342
$
21,588
$
23,189
$
22,031
$
21,767
Less:
Net loss (gain) on repossessed assets
86
4
4
(2
)
6
SBA recourse provision (benefit)
126
210
242
341
(18
)
Total operating expense (a)
$
23,130
$
21,374
$
22,943
$
21,692
$
21,779
Net interest income
$
29,511
$
29,540
$
28,596
$
27,747
$
26,705
Total non-interest income
6,757
7,094
8,430
7,374
8,410
Less:
Net loss on sale of securities
(8
)
—
—
(45
)
—
Adjusted non-interest income
6,765
7,094
8,430
7,419
8,410
Total operating revenue (b)
$
36,276
$
36,634
$
37,026
$
35,166
$
35,115
Efficiency ratio
63.76
%
58.34
%
61.96
%
61.68
%
62.02
%
Pre-tax, pre-provision adjusted earnings
(b - a)
$
13,146
$
15,260
$
14,083
$
13,474
$
13,336
Average total assets
$
3,527,941
$
3,454,652
$
3,276,240
$
3,127,234
$
2,984,600
Pre-tax, pre-provision adjusted return on
average assets
1.49
%
1.77
%
1.72
%
1.72
%
1.79
%
ADJUSTED NET INTEREST MARGIN “Adjusted Net Interest
Margin” is a non-GAAP measure representing net interest income
excluding the fees in lieu of interest and other recurring, but
volatile, components of net interest margin divided by average
interest-earning assets less other recurring, but volatile,
components of average interest-earning assets. Fees in lieu of
interest are defined as prepayment fees, asset-based loan fees,
non-accrual interest, and loan fee amortization. In the judgment of
the Company’s management, the adjustments made to net interest
income allow investors and analysts to better assess the Company’s
net interest income in relation to its core client-facing loan and
deposit rate changes by removing the volatility that is associated
with these recurring but volatile components. The information
provided below reconciles the net interest margin to its most
comparable GAAP measure.
(Unaudited)
For the Three Months
Ended
(Dollars in thousands)
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Interest income
$
55,783
$
54,762
$
50,941
$
47,161
$
42,064
Interest expense
26,272
25,222
22,345
19,414
15,359
Net interest income (a)
29,511
29,540
28,596
27,747
26,705
Less:
Fees in lieu of interest
793
1,075
582
936
651
FRB interest income and FHLB dividend
income
1,436
1,466
870
1,064
656
Adjusted net interest income (b)
$
27,282
$
26,999
$
27,144
$
25,747
$
25,398
Average interest-earning assets (c)
$
3,294,717
$
3,199,485
$
3,038,776
$
2,913,751
$
2,765,087
Less:
Average FRB cash and FHLB stock
97,036
99,118
54,677
76,678
45,150
Average non-accrual loans and leases
20,540
18,602
15,775
3,781
3,536
Adjusted average interest-earning assets
(d)
$
3,177,141
$
3,081,765
$
2,968,324
$
2,833,292
$
2,716,401
Net interest margin (a / c)
3.58
%
3.69
%
3.76
%
3.81
%
3.86
%
Adjusted net interest margin (b / d)
3.43
%
3.50
%
3.66
%
3.63
%
3.74
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240425679267/en/
First Business Financial Services, Inc. Brian D. Spielmann Chief
Financial Officer 608-232-5977 bspielmann@firstbusiness.bank
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