8-K
FIRST BUSINESS FINANCIAL SERVICES, INC. (FBIZ)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 28, 2022
First Business Financial Services, Inc.
(Exact name of registrant as specified in its charter)
| Wisconsin | 1-34095 | 39-1576570 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission<br>File Number) | (I.R.S. Employer<br>Identification No.) |
401 Charmany Drive
Madison, Wisconsin 53719
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (608) 238-8008
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b- 2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value | FBIZ | The Nasdaq Stock Market LLC |
Item 2.02. Results of Operations and Financial Condition.
On July 28, 2022, First Business Financial Services, Inc. (the “Company”) announced its earnings for the quarter ended June 30, 2022. A copy of the Company’s press release containing this information is being “furnished” as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The information in Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 attached hereto is being “furnished” and will not, except to the extent required by applicable law or regulation, be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor will any of such information or exhibits be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibit is being “furnished” as part of this Current Report on Form 8-K:
| 99.1 | Press release of the registrant datedJuly28, 2022, containing financial information for its quarter endedJune30, 2022. |
|---|
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| July 28, 2022 | FIRST BUSINESS FINANCIAL SERVICES, INC. | |
|---|---|---|
| By: | /s/ Edward G. Sloane, Jr. | |
| Name: | Edward G. Sloane, Jr. | |
| Title: | Chief Financial Officer |
Document
Exhibit 99.1
[FOR IMMEDIATE RELEASE]
First Business Financial Services, Inc.
401 Charmany Drive
Madison, WI 53719
FIRST BUSINESS BANK REPORTS RECORD SECOND QUARTER 2022 NET INCOME OF $11.0 MILLION
-- Strong top line revenue and provision benefit drive tangible book value growth --
MADISON, Wis., July 28, 2022 (BUSINESS WIRE) -- First Business Financial Services, Inc. (the “Company”, the “Bank”, or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income available to common shareholders of $11.0 million, or $1.29 diluted earnings per share. This compares to net income of $8.7 million, or $1.02 per share, in the first quarter of 2022 and $8.2 million, or $0.95 per share, in the second quarter of 2021.
“Our record quarterly net income was driven by a notable increase in net interest income and exceptional commitment to asset quality resulting in a significant loan loss provision benefit,” President and Chief Executive Officer Corey Chambas said. “Despite above-average loan payoffs this year, we remain confident in our ability to produce 10% net loan growth. We believe this sustained loan growth and expanding net interest margin will continue to generate double-digit annual revenue growth.” Chambas added, “With an enhanced capital base, focus on diversified revenue streams, and relentless attention to credit quality, we believe we are well positioned to extend our track record of performance over the long term.”
Quarterly Highlights
•Robust Profitability Metrics. Pre-tax, pre-provision adjusted (“PTPP”) earnings, excluding Paycheck Protection Program (“PPP”) interest and fee income, increased $998,000, or 10.4%, from the linked quarter and $3.7 million, or 53.8%, from the prior year quarter. The improvement in profitability was driven by an increase in top line revenue, which rose $1.8 million, or 6.3%, from the linked quarter and $5.4 million, or 21.9%, from the prior year quarter. With revenue growth outpacing operating expense growth, the Company increased PTPP return on average assets to 1.57% in the second quarter of 2022, compared to 1.46% in linked quarter and 1.15% in the prior year quarter.
•Strong Asset Quality. The Bank continued its strong asset quality trend, highlighted by the team’s ability to proactively work through challenging loans to achieve positive outcomes for the Bank and its shareholders. Non-performing assets declined to $5.7 million, or 0.21% of total assets, improving from 0.40% of total assets on June 30, 2021. The Company recorded a provision benefit of $3.7 million, compared to a benefit of $855,000 in the first quarter of 2022 and $1.0 million in the second quarter of 2021. The provision benefit in the second quarter of 2022 was primarily due to a $4.1 million principal recovery on a legacy SBA relationship originated in May 2016 and fully charged-off in December 2020.
•Record Net Interest Income Reflecting Loan Growth and Net Interest Margin Expansion. Net interest income grew to a record $23.7 million, increasing $2.2 million, or 10.4%, from the linked quarter and $2.0 million, or 9.3%, from the prior year quarter. This increase was primarily due to a 32 and 22 basis point expansion in net interest margin compared to the linked and prior year quarters, respectively. This net interest expansion resulted from rising rates on variable-rate loans and low deposit betas on in-market deposits following the Federal Open Market Committee’s (“FOMC”) decision to raise the target Fed Funds rate 150 basis points during the first half of 2022.
•Increased Organic Loan Production. Loans, excluding net PPP loans, grew $48.9 million, or 8.8% annualized, from the first quarter of 2022 and $259.1 million, or 12.8%, from the second quarter of 2021, as the Company’s previous investments in both conventional and specialized lending continue to generate positive results.
•Compounding Tangible Book Value Growth. The Company’s demonstrated earnings power and diligent credit management more than offset the interest-rate-driven market value decline in the investment portfolio, providing a 9.4% annualized increase in tangible book value compared to the linked quarter and 9.7% compared to the prior year quarter.
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,<br>2022 | March 31,<br>2022 | June 30,<br>2021 | June 30,<br>2022 | June 30,<br>2021 | ||||||||||
| Net interest income | $ | 23,660 | $ | 21,426 | $ | 21,652 | $ | 45,087 | $ | 42,515 | |||||
| Adjusted non-interest income (1) | 6,872 | 7,386 | 6,292 | 14,258 | 13,487 | ||||||||||
| Operating revenue (1) | 30,532 | 28,812 | 27,944 | 59,345 | 56,002 | ||||||||||
| Operating expense (1) | 19,685 | 18,887 | 17,932 | 38,573 | 35,383 | ||||||||||
| Pre-tax, pre-provision adjusted earnings (1) | 10,847 | 9,925 | 10,012 | 20,772 | 20,619 | ||||||||||
| Less: | |||||||||||||||
| Provision for loan and lease losses | (3,727) | (855) | (958) | (4,582) | (3,026) | ||||||||||
| Net loss (gain) on foreclosed properties | 8 | 12 | (1) | 20 | 1 | ||||||||||
| Amortization of other intangible assets | — | — | 8 | — | 15 | ||||||||||
| SBA recourse provision (benefit) | 114 | (76) | 245 | 38 | 115 | ||||||||||
| Impairment (benefit) on tax credit investments | (351) | — | — | (351) | — | ||||||||||
| Add: | |||||||||||||||
| Net gain on sale of securities | — | — | 29 | — | 29 | ||||||||||
| Income before income tax expense | 14,803 | 10,844 | 10,747 | 25,647 | 23,543 | ||||||||||
| Income tax expense | 3,599 | 2,172 | 2,512 | 5,771 | 5,577 | ||||||||||
| Net income | $ | 11,204 | $ | 8,672 | $ | 8,235 | $ | 19,876 | $ | 17,966 | |||||
| Preferred stock dividends | 246 | — | — | 246 | — | ||||||||||
| Net income available to common shareholders | $ | 10,958 | $ | 8,672 | $ | 8,235 | $ | 19,630 | $ | 17,966 | |||||
| Earnings per share, diluted | $ | 1.29 | $ | 1.02 | $ | 0.95 | $ | 2.31 | $ | 2.08 | |||||
| Book value per share | $ | 28.08 | $ | 27.46 | $ | 25.70 | $ | 28.08 | $ | 25.70 | |||||
| Tangible book value per share (1) | $ | 26.63 | $ | 26.02 | $ | 24.28 | $ | 26.63 | $ | 24.28 | |||||
| Net interest margin (2) | 3.71 | % | 3.39 | % | 3.49 | % | 3.55 | % | 3.46 | % | |||||
| Adjusted net interest margin (1)(2) | 3.45 | % | 3.24 | % | 3.20 | % | 3.35 | % | 3.20 | % | |||||
| Fee income ratio (non-interest income / total revenue) | 22.51 | % | 25.64 | % | 22.60 | % | 24.03 | % | 24.12 | % | |||||
| Efficiency ratio (1) | 64.47 | % | 65.55 | % | 64.17 | % | 65.00 | % | 63.18 | % | |||||
| Return on average assets (2) | 1.61 | % | 1.30 | % | 1.26 | % | 1.46 | % | 1.38 | % | |||||
| Pre-tax, pre-provision adjusted return on average assets (1)(2) | 1.60 | % | 1.49 | % | 1.53 | % | 1.54 | % | 1.59 | % | |||||
| Return on average common equity (2) | 18.79 | % | 14.47 | % | 15.09 | % | 16.74 | % | 16.75 | % | |||||
| Period-end loans and leases receivable | $ | 2,290,100 | $ | 2,251,249 | $ | 2,143,561 | $ | 2,290,100 | $ | 2,143,561 | |||||
| Specialized lending as a percent of total loans and leases | 20.68 | % | 19.22 | % | 17.59 | % | 20.68 | % | 17.59 | % | |||||
| Average loans and leases receivable | $ | 2,272,946 | $ | 2,244,642 | $ | 2,223,353 | $ | 2,258,872 | $ | 2,203,267 | |||||
| Period-end in-market deposits | $ | 1,857,010 | $ | 2,011,373 | $ | 2,016,215 | $ | 1,857,010 | $ | 2,016,215 | |||||
| Average in-market deposits | $ | 1,900,842 | $ | 1,932,576 | $ | 1,735,393 | $ | 1,916,622 | $ | 1,728,787 | |||||
| Allowance for loan and lease losses | $ | 24,104 | $ | 23,669 | $ | 25,675 | $ | 24,104 | $ | 25,675 | |||||
| Non-performing assets | $ | 5,709 | $ | 5,734 | $ | 11,601 | $ | 5,709 | $ | 11,601 | |||||
| Allowance for loan and lease losses as a percent of total gross loans and leases | 1.05 | % | 1.05 | % | 1.20 | % | 1.05 | % | 1.20 | % | |||||
| Non-performing assets as a percent of total assets | 0.21 | % | 0.21 | % | 0.40 | % | 0.21 | % | 0.40 | % |
(1)This is a non-GAAP financial measure. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate financial performance, provide greater understanding of ongoing operations, and enhance comparability of results with prior periods. See the section titled Non-GAAP Reconciliations at the end of this release for a reconciliation of GAAP financial measures to non-GAAP financial measures.
(2)Calculation is annualized.
Quarterly Financial Results - Excluding PPP Loans, Interest Income, and Fees
| (Unaudited) | As of and for the Three Months Ended | As of and for the Six Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands, except per share amounts) | June 30,<br>2022 | March 31,<br>2022 | June 30,<br>2021 | June 30,<br>2022 | June 30,<br>2021 | ||||||||||
| Net interest income | $ | 23,435 | $ | 21,125 | $ | 18,545 | $ | 44,561 | $ | 36,592 | |||||
| Adjusted non-interest income (1) | 6,872 | 7,386 | 6,292 | 14,258 | 13,487 | ||||||||||
| Operating revenue (1) | 30,307 | 28,511 | 24,837 | 58,819 | 50,079 | ||||||||||
| Operating expense (1) | 19,685 | 18,887 | 17,932 | 38,573 | 35,383 | ||||||||||
| Pre-tax, pre-provision adjusted earnings (1) | $ | 10,622 | $ | 9,624 | $ | 6,905 | $ | 20,246 | $ | 14,696 | |||||
| Net interest margin (2) | 3.69 | % | 3.37 | % | 3.29 | % | 3.53 | % | 3.30 | % | |||||
| Fee income ratio (non-interest income / total revenue) | 22.67 | % | 25.91 | % | 25.42 | % | 24.24 | % | 26.97 | % | |||||
| Efficiency ratio (1) | 64.95 | % | 66.24 | % | 72.20 | % | 65.58 | % | 70.65 | % | |||||
| Pre-tax, pre-provision adjusted return on average assets (1)(2) | 1.57 | % | 1.46 | % | 1.15 | % | 1.51 | % | 1.24 | % | |||||
| Period-end loans and leases receivable | $ | 2,281,928 | $ | 2,233,043 | $ | 2,022,839 | $ | 2,281,928 | $ | 2,022,839 | |||||
| Specialized lending as a percent of total loans and leases | 20.76 | % | 19.38 | % | 18.67 | % | 20.76 | % | 18.67 | % | |||||
| Average loans and leases receivable | $ | 2,261,296 | $ | 2,223,707 | $ | 1,994,188 | $ | 2,242,606 | $ | 1,967,599 | |||||
| Allowance for loan and lease losses as a percent of total gross loans and leases | 1.06 | % | 1.06 | % | 1.27 | % | 1.06 | % | 1.27 | % | |||||
| Non-performing assets as a percent of total assets | 0.21 | % | 0.21 | % | 0.42 | % | 0.21 | % | 0.42 | % |
(1)This is a non-GAAP financial measure. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate financial performance, provide greater understanding of ongoing operations, and enhance comparability of results with prior periods. See the section titled Non-GAAP Reconciliations at the end of this release for a reconciliation of GAAP financial measures to non-GAAP financial measures.
(2)Calculation is annualized.
Second Quarter 2022 Compared to First Quarter 2022
Net interest income increased $2.2 million, or 10.4%, to $23.7 million.
•Net interest income growth was driven by an increase in average loans and leases, net interest margin expansion, and an increase in fees in lieu of interest, which included the recovery of $709,000 in interest from a previously charged-off legacy SBA loan relationship. Average loans and leases receivable increased $37.6 million, or 6.8% annualized, to $2.261 billion. Fees in lieu of interest, which can vary from quarter to quarter based on client-driven activity, totaled $1.9 million, compared to $1.3 million, and included $196,000 and $249,000 in PPP fees, respectively. Excluding fees in lieu of interest and interest income from PPP loans, net interest income increased $1.7 million, or 8.4%.
•Net interest margin was 3.71%, up 32 basis points compared to 3.39% in the linked quarter. Adjusted net interest margin was 3.45%, up 21 basis points compared to 3.24% in the linked quarter. The primary driver of improved net interest margin was a low deposit beta and higher earning asset yields in the current rising rate environment. The change in the 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. Management defines short-term market rates as the daily average effective federal funds rate for purposes of estimating interest-earning asset and interest-bearing liability betas. Adjusted net interest margin is a non-GAAP measure representing net interest income excluding fees in lieu of interest and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less average net PPP loans and other recurring, but volatile, components of average interest-earning assets.
•The yield on average interest-earning assets increased 40 basis points to 4.24% from 3.84%. Excluding average net PPP loans, PPP loan interest income, and fees in lieu of interest, the yield earned on average interest-earning assets increased 30 basis points to 3.96% from 3.66%.
•The rate paid for average interest-bearing, in-market deposits increased 10 basis points to 0.29% from 0.19%. The rate paid for average total bank funding increased 15 basis points to 0.46% from 0.31%. Total bank funding is defined as total deposits plus Federal Home Loan Bank (“FHLB”) advances. The daily average effective federal
funds rate increased 65 basis points compared to the linked quarter, which equates to an in-market, interest-bearing deposit beta of 15% for the three months ended June 30, 2022.
•The Bank continues to maintain an asset-sensitive balance sheet and ended the quarter appropriately positioned for net interest income to continue to benefit; however, the Bank anticipates deposit betas will rise at a greater rate with further increases in the federal funds rate during the second half of the year, slowing the pace of net interest margin expansion.
The Company reported a net benefit to provision for loan and lease losses of $3.7 million, compared to a $855,000 benefit in the first quarter of 2022.
•The provision benefit in the second quarter of 2022 was primarily due to net recoveries of $4.2 million, partially offset by a $527,000 increase in the general reserve due to loan growth.
Non-interest income decreased $514,000, or 7.0%, to $6.9 million.
•Other fee income decreased $1.2 million to $860,000, compared to $2.1 million in the first quarter. The decrease is primarily due to above-average returns on the Company’s investments in mezzanine funds in the first quarter, which returned to historical levels in the second quarter.
•Private Wealth management fee income increased $11,000, or 0.4% to $2.9 million, despite lower market values during the second quarter. Private Wealth and trust assets under management and administration measured $2.554 billion at June 30, 2022, down $280.3 million, primarily due to a decrease in market valuations, which was partially offset by new business development.
•Gains on sale of SBA loans increased $366,000 to $951,000.
•Commercial loan swap fee income increased $246,000 to $471,000. Swap fee income can vary from period to period based on loan activity and the interest rate environment.
Non-interest expense increased $633,000, or 3.4%, to $19.5 million, while operating expense increased $798,000, or 4.2%, to $19.7 million.
•Compensation expense was $14.0 million, reflecting an increase of $382,000, or 2.8%, from the linked quarter due to a $474,000 one-time increase to the annual cash incentive bonus program accrual, as well as expanded hiring to support the Bank’s growth plans. Management believes there will be upward pressure on compensation throughout the remainder of the year as the Bank continues to opportunistically invest in new talent and retain existing talent in the competitive market. Average FTEs for the second quarter of 2022 were 321, up eleven from 310 in the linked quarter as management continued to focus on talent acquisition to support the Bank’s growth initiatives.
•Marketing expense increased $170,000, or 34.0%, to $670,000 primarily due to the increase in client entertainment and sponsorships as business development activities continue to increase towards pre-pandemic levels.
•Professional fees increased $128,000, or 10.9%, to $1.3 million from the linked quarter primarily due to an increase in recruiting expense.
•Data processing expense increased $112,000, or 14.4%, to $892,000 primarily due to the recurring annual expense related to tax processing on behalf of the Bank’s Private Wealth clients.
Income tax expense increased $1.4 million, or 65.7%, to $3.6 million. The effective tax rate was 23.7% for the six months ended June 30, 2022, compared to 23.6% for the same period in 2021. For 2022, the Company expects to report an effective tax rate of approximately 23% as management intends to continue actively pursuing tax credit opportunities.
Total period-end loans and leases receivable increased $38.9 million, or 6.9% annualized, to $2.290 billion. Excluding net PPP loans, total period-end loans and leases receivable increased $48.9 million, or 8.8% annualized, to $2.282 billion.
•Commercial and industrial (“C&I”) loans increased $20.7 million, or 11.6% annualized, to $741.4 million, compared to $720.7 million. Excluding PPP loans, C&I loans increased $30.9 million, or 17.6% annualized, due to an increase in specialized lending.
•Commercial real estate (“CRE”) loans increased by $18.8 million, or 5.1% annualized, to $1.488 billion, compared to $1.470 billion. Increases in construction financing, owner-occupied CRE, multi-family, and land development were offset by a decrease in non-owner occupied CRE loans.
Total period-end in-market deposits decreased $154.4 million, or 30.7% annualized, to $1.857 billion, compared to $2.011 billion. The average rate paid was 0.20%, up seven basis points from 0.13% in the first quarter. The decline in balances was due to movement of client deposits to investment alternatives, seasonality within the Bank’s municipality clients, tax payments, and normal course of business for continuing client relationships.
”On the deposit front, the second quarter is typically seasonally weaker, due to tax payments and other business cycle reasons – just as the first quarter was seasonally strong,” said Corey Chambas. “What was unusual this quarter was several clients moved large amounts of deposits into investments and there were some large client distributions to investors, as well. Importantly, we have not lost any meaningful client relationships associated with these decreases in deposits. We believe a better measure of our deposit picture is that average deposits are up 10% from a year ago, and due to our Treasury Management sales success, service charge fee income is up 11% from a year ago.”
Period-end wholesale funding, including FHLB advances, brokered deposits, and deposits gathered through internet deposit listing services, increased $192.7 million to $566.4 million.
•Wholesale deposits were $12.3 million in both periods. The average rate paid on wholesale deposits increased seven basis points to 2.98% and the weighted average original maturity was 4.8 years.
•FHLB advances increased $192.7 million to $554.1 million. The average rate paid on FHLB advances increased 40 basis points to 1.48% and the weighted average original maturity decreased to 3.2 years from 6.0 years.
Non-performing assets were $5.7 million, or 0.21% of total assets, in both periods of comparison.
The allowance for loan and lease losses increased $435,000, or 1.8%, as an increase in the general reserve from loan growth was partially offset by a decrease in general reserve driven by a change in qualitative risk factors.
•The allowance for loan and lease losses as a percent of total gross loans and leases was 1.05% in both periods of comparison (1.06% excluding net PPP loans).
Second Quarter 2022 Compared to Second Quarter 2021
Net interest income increased $2.0 million, or 9.3%, to $23.7 million.
•The increase in net interest income primarily reflects an increase in average gross loans and leases, partially offset by lower fees in lieu of interest. Fees in lieu of interest decreased from $3.5 million to $1.9 million, primarily due to a $2.3 million reduction in PPP loan fee amortization. Excluding fees in lieu of interest and interest income from PPP loans, net interest income increased $4.2 million, or 24.0%. Excluding net PPP loans, average gross loans and leases increased $267.1 million, or 13.4%.
•Net interest margin increased 22 basis points to 3.71% from 3.49%. Adjusted net interest margin increased 25 basis points to 3.45% from 3.20%.
•The yield on average interest-earning assets measured 4.24% compared to 3.96%. Excluding fees in lieu of interest, PPP loan interest income, and net PPP loans, the yield on average interest-earning assets measured 3.96%, compared to 3.64%. This increase in yield was primarily due to the increase in short-term market rates and the reinvestment of cash flows from the securities and fixed rate loan portfolios in a rising rate environment.
•The rate paid for average interest-bearing in-market deposits increased eight basis points to 0.29% from 0.21%. The rate paid for average total bank funding increased seven basis points to 0.46% from 0.39%.
The Company reported a net benefit to provision for loan and lease losses of $3.7 million, compared to provision benefit of $958,000 in the second quarter of 2021. The reasons for the provision benefit are consistent with the explanations discussed above in the linked quarter comparison.
Non-interest income of $6.9 million increased by $551,000, or 8.7%, from $6.3 million in the prior year period.
•Private Wealth management fee income increased $108,000, or 3.9%, to $2.9 million, despite a decline in market values, due to the addition of new money from existing clients. Private Wealth and trust assets under management and administration measured $2.554 billion at June 30, 2022, down $10.6 million, or 0.4%.
•Gains on sale of SBA loans decreased $252,000 to $951,000.
•Loan fees of $697,000 increased by $128,000, or 22.5%, primarily due to an increase in conventional, SBA, and Floorplan Financing activity generating additional service fee income.
•Commercial loan swap fee income was $471,000. There was no swap fee activity in the prior year quarter. Swap fee income varies from period to period based on loan activity and the interest rate environment in any given quarter.
•Service charges on deposits increased $100,000, or 10.6%, to $1.0 million compared to $941,000, due to an increase in existing and new deposit client relationships.
Non-interest expense increased $1.3 million, or 7.0%, to $19.5 million. Operating expense increased $1.8 million, or 9.8%, to $19.7 million.
•Compensation expense increased $765,000, or 5.8%, to $14.0 million. Average FTEs were 321 in the second quarter of 2022, compared to 312 in the second quarter of 2021. The reasons for the increase in compensation expense are consistent with the explanations discussed above in the linked quarter analysis.
•Professional fees increased $385,000, or 42.2%, to $1.3 million, primarily due to an increase in recruiting expense, audit expenses, and a general increase in other professional consulting services for various projects.
•Marketing expense increased $159,000, or 31.1%, to $670,000 mainly due to an increase in business development activities as the Company continues to return to pre-pandemic spending levels.
Total period-end loans and leases receivable increased $146.5 million, or 6.8%, to $2.290 billion. Excluding net PPP loans, total period-end loans and leases receivable increased $259.1 million, or 12.8%, to $2.282 billion.
•C&I loans increased $45.9 million, or 6.6% to $741.4 million. Excluding PPP loans, C&I loans increased $161.5 million, or 28.2%, to $733.1 million due to an increase in conventional and specialized Commercial Lending. Management believes this growth rate will moderate to lower double-digits as the Company’s specialized lending products scale over time.
•CRE loans increased $96.5 million, or 6.9%, primarily due to an increase in non-owner-occupied real estate and construction financing.
Total period-end in-market deposits decreased $159.2 million, or 7.9%, to $1.857 billion and the average rate paid increased five basis points to 0.20%. This decrease in deposits was principally due to a $274.7 million decrease in transaction accounts, partially offset by a $68.9 million and $46.6 million increase in certificates of deposit and money market accounts, respectively. The reasons for the decrease in deposits are consistent with the explanations discussed above in the linked quarter comparison.
Period-end wholesale funding increased $34.1 million to $566.4 million.
•Wholesale deposits decreased $132.2 million to $12.3 million, compared to $144.5 million, as the existing portfolio runoff was replaced by FHLB advances. The average rate paid on brokered certificates of deposit increased 224 basis points to 2.98% and the weighted average original maturity increased to 4.8 years from 3.5 years.
•FHLB advances increased $166.3 million to $554.1 million. The average rate paid on FHLB advances increased 21 basis points to 1.48% and the weighted average original maturity decreased to 3.2 years from 6.1 years.
Non-performing assets decreased to $5.7 million, or 0.21% of total assets, compared to $11.6 million, or 0.40% of total assets. Excluding net PPP loans, non-performing assets decreased to 0.21% of total assets compared to 0.42%.
The allowance for loan and lease losses decreased $1.6 million to $24.1 million, compared to $25.7 million.
•The allowance for loan and lease losses as a percent of total gross loans and leases was 1.05% compared to 1.20%.
•Excluding net PPP loans, the allowance for loan and leases losses as a percent of total gross loans and leases was 1.06% compared to 1.27%.
Paycheck Protection Program
As of June 30, 2022, the Company had $8.3 million in gross PPP loans outstanding and deferred processing fees outstanding of $113,000. The processing fees are deferred and recognized over the contractual life of the loan, or accelerated at forgiveness, as an adjustment of yield using the interest method. During the three months ended June 30, 2022, the Company recognized $196,000 of PPP processing fees in interest income. The SBA provides a guaranty to the lender of 100% of principal and interest, unless the lender violated an obligation under the agreement.
Share Repurchase Program Update
As previously announced, effective March 4, 2022, the Company’s Board of Directors authorized the repurchase by the Company of shares of its common stock with a maximum aggregate purchase price of $5.0 million, effective March 4, 2022 through March 4, 2023. For the six months ended June 30, 2022, the Company repurchased a total of 30,600 shares for approximately $1.0 million at an average cost of $33.28 per share.
About First Business Financial Services, Inc.
First Business Financial Services, Inc., (Nasdaq: FBIZ) is the parent company of First Business Bank. First Business Bank specializes in Business Banking, including Commercial Banking and Specialized Lending, Private Wealth, and Bank Consulting services, and through its refined focus, delivers unmatched expertise, accessibility, and responsiveness. Specialized Lending solutions are delivered through First Business Bank’s wholly owned subsidiary First Business Specialty Finance, LLC. For additional information, visit 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:
•Adverse changes in the economy or business conditions, either nationally or in our markets including, without limitation, inflation, supply chain issues, labor shortages, and the adverse effects of the COVID-19 pandemic on the global, national, and local economy.
•Competitive pressures among depository and other financial institutions nationally and in the Company’s markets.
•Increases in defaults by borrowers and other delinquencies.
•Management’s ability to manage growth effectively, including the successful expansion of our client service, administrative infrastructure, and internal management systems.
•Fluctuations in interest rates and market prices.
•Changes in legislative or regulatory requirements applicable to the Company and its subsidiaries.
•Changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations.
•Fraud, including client and system failure or breaches of our network security, including the Company’s internet banking activities.
•Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portion of SBA loans.
For further information about the factors that could affect the Company’s future results, please see the Company’s annual report on Form 10-K for the year ended December 31, 2021 and other filings with the Securities and Exchange Commission.
| CONTACT: | First Business Financial Services, Inc. |
|---|---|
| Edward G. Sloane, Jr. | |
| Chief Financial Officer | |
| 608-232-5970 | |
| esloane@firstbusiness.bank |
SELECTED FINANCIAL CONDITION DATA
| (Unaudited) | As of | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | |||||
| Assets | ||||||||||
| Cash and cash equivalents | $ | 95,484 | $ | 95,603 | $ | 57,110 | $ | 110,624 | $ | 389,977 |
| Securities available-for-sale, at fair value | 208,643 | 223,631 | 205,702 | 194,056 | 171,219 | |||||
| Securities held-to-maturity, at amortized cost | 13,968 | 17,267 | 19,746 | 21,196 | 22,382 | |||||
| Loans held for sale | 2,256 | 2,418 | 3,570 | 5,603 | 6,059 | |||||
| Loans and leases receivable | 2,290,100 | 2,251,249 | 2,239,408 | 2,123,306 | 2,143,561 | |||||
| Allowance for loan and lease losses | (24,104) | (23,669) | (24,336) | (24,676) | (25,675) | |||||
| Loans and leases receivable, net | 2,265,996 | 2,227,580 | 2,215,072 | 2,098,630 | 2,117,886 | |||||
| Premises and equipment, net | 1,899 | 1,621 | 1,694 | 1,700 | 1,747 | |||||
| Foreclosed properties | 124 | 117 | 164 | 172 | 179 | |||||
| Right-of-use assets | 5,772 | 6,118 | 4,910 | 5,263 | 5,472 | |||||
| Bank-owned life insurance | 54,324 | 53,974 | 53,600 | 53,244 | 52,887 | |||||
| Federal Home Loan Bank stock, at cost | 22,959 | 12,863 | 13,336 | 12,351 | 13,451 | |||||
| Goodwill and other intangible assets | 12,262 | 12,184 | 12,268 | 12,229 | 12,178 | |||||
| Derivatives | 44,461 | 26,890 | 26,343 | 28,678 | 32,377 | |||||
| Accrued interest receivable and other assets | 48,868 | 43,816 | 39,390 | 40,664 | 39,855 | |||||
| Total assets | $ | 2,777,016 | $ | 2,724,082 | $ | 2,652,905 | $ | 2,584,410 | $ | 2,865,669 |
| Liabilities and Stockholders’ Equity | ||||||||||
| In-market deposits | $ | 1,857,010 | $ | 2,011,373 | $ | 1,928,285 | $ | 1,829,644 | $ | 2,016,215 |
| Wholesale deposits | 12,321 | 12,321 | 29,638 | 74,638 | 144,492 | |||||
| Total deposits | 1,869,331 | 2,023,694 | 1,957,923 | 1,904,282 | 2,160,707 | |||||
| Federal Home Loan Bank advances and other borrowings | 596,642 | 414,487 | 403,451 | 394,090 | 420,113 | |||||
| Junior subordinated notes | — | — | 10,076 | 10,072 | 10,069 | |||||
| Lease liabilities | 7,207 | 7,580 | 5,406 | 5,780 | 6,005 | |||||
| Derivatives | 40,357 | 24,961 | 28,283 | 31,890 | 36,109 | |||||
| Accrued interest payable and other liabilities | 13,556 | 8,309 | 15,344 | 13,016 | 11,214 | |||||
| Total liabilities | 2,527,093 | 2,479,031 | 2,420,483 | 2,359,130 | 2,644,217 | |||||
| Total stockholders’ equity | 249,923 | 245,051 | 232,422 | 225,280 | 221,452 | |||||
| Total liabilities and stockholders’ equity | $ | 2,777,016 | $ | 2,724,082 | $ | 2,652,905 | $ | 2,584,410 | $ | 2,865,669 |
STATEMENTS OF INCOME
| (Unaudited) | As of and for the Three Months Ended | As of and for the Year Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands, except per share amounts) | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | June 30,<br>2022 | June 30,<br>2021 | |||||||
| Total interest income | $ | 27,031 | $ | 24,235 | $ | 23,576 | $ | 24,014 | $ | 24,599 | $ | 51,266 | $ | 48,406 |
| Total interest expense | 3,371 | 2,809 | 2,652 | 2,791 | 2,947 | 6,179 | 5,891 | |||||||
| Net interest income | 23,660 | 21,426 | 20,924 | 21,223 | 21,652 | 45,087 | 42,515 | |||||||
| Provision for loan and lease losses | (3,727) | (855) | (508) | (2,269) | (958) | (4,582) | (3,026) | |||||||
| Net interest income after provision for loan and lease losses | 27,387 | 22,281 | 21,432 | 23,492 | 22,610 | 49,669 | 45,541 | |||||||
| Private wealth management service fees | 2,852 | 2,841 | 2,874 | 2,759 | 2,744 | 5,693 | 5,151 | |||||||
| Gain on sale of SBA loans | 951 | 585 | 1,042 | 721 | 1,203 | 1,537 | 2,281 | |||||||
| Service charges on deposits | 1,041 | 999 | 1,023 | 956 | 941 | 2,040 | 1,859 | |||||||
| Loan fees | 697 | 652 | 679 | 713 | 569 | 1,349 | 1,114 | |||||||
| Net gain on sale of securities | — | — | — | — | 29 | — | 29 | |||||||
| Swap fees | 471 | 225 | 684 | — | — | 697 | 684 | |||||||
| Other non-interest income | 860 | 2,084 | 1,267 | 1,866 | 835 | 2,942 | 2,398 | |||||||
| Total non-interest income | 6,872 | 7,386 | 7,569 | 7,015 | 6,321 | 14,258 | 13,516 | |||||||
| Compensation | 14,020 | 13,638 | 12,447 | 13,351 | 13,255 | 27,658 | 25,912 | |||||||
| Occupancy | 568 | 555 | 551 | 544 | 533 | 1,123 | 1,085 | |||||||
| Professional fees | 1,298 | 1,170 | 933 | 1,024 | 913 | 2,468 | 1,778 | |||||||
| Data processing | 892 | 780 | 773 | 746 | 798 | 1,673 | 1,569 | |||||||
| Marketing | 670 | 500 | 548 | 572 | 511 | 1,170 | 902 | |||||||
| Equipment | 235 | 244 | 223 | 260 | 261 | 479 | 506 | |||||||
| Computer software | 1,117 | 1,082 | 1,017 | 999 | 1,129 | 2,199 | 2,244 | |||||||
| FDIC insurance | 296 | 313 | 210 | 291 | 280 | 610 | 642 | |||||||
| Other non-interest expense | 360 | 541 | 829 | 703 | 504 | 900 | 876 | |||||||
| Total non-interest expense | 19,456 | 18,823 | 17,531 | 18,490 | 18,184 | 38,280 | 35,514 | |||||||
| Income before income tax expense | 14,803 | 10,844 | 11,470 | 12,017 | 10,747 | 25,647 | 23,543 | |||||||
| Income tax expense | 3,599 | 2,172 | 2,879 | 2,819 | 2,512 | 5,771 | 5,577 | |||||||
| Net income | $ | 11,204 | $ | 8,672 | $ | 8,591 | $ | 9,198 | $ | 8,235 | $ | 19,876 | $ | 17,966 |
| Preferred stock dividends | 246 | — | — | — | — | 246 | — | |||||||
| Net income available to common shareholders | $ | 10,958 | $ | 8,672 | $ | 8,591 | $ | 9,198 | $ | 8,235 | $ | 19,630 | $ | 17,966 |
| Per common share: | ||||||||||||||
| Basic earnings | $ | 1.29 | $ | 1.02 | $ | 1.01 | $ | 1.07 | $ | 0.95 | $ | 2.31 | $ | 2.08 |
| Diluted earnings | 1.29 | 1.02 | 1.01 | 1.07 | 0.95 | 2.31 | 2.08 | |||||||
| Dividends declared | 0.1975 | 0.1975 | 0.18 | 0.18 | 0.18 | 0.395 | 0.36 | |||||||
| Book value | 28.08 | 27.46 | 27.48 | 26.56 | 25.70 | 28.08 | 25.70 | |||||||
| Tangible book value | 26.63 | 26.02 | 26.03 | 25.11 | 24.28 | 26.63 | 24.28 | |||||||
| Weighted-average common shares outstanding(1) | 8,225,838 | 8,232,142 | 8,228,311 | 8,340,042 | 8,385,069 | 8,245,317 | 8,381,868 | |||||||
| Weighted-average diluted common shares outstanding(1) | 8,225,838 | 8,232,142 | 8,228,311 | 8,340,042 | 8,385,069 | 8,245,317 | 8,381,868 |
(1)Excluding participating securities.
NET INTEREST INCOME ANALYSIS
| (Unaudited) | For the Three Months Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | June 30, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||||
| Average<br>Balance | Interest | Average<br><br>Yield/Rate(4) | Average<br>Balance | Interest | Average<br><br>Yield/Rate(4) | Average<br>Balance | Interest | Average<br><br>Yield/Rate(4) | ||||||||||
| Interest-earning assets | ||||||||||||||||||
| Commercial real estate and other mortgage loans(1) | $ | 1,472,075 | $ | 15,343 | 4.17 | % | $ | 1,459,891 | $ | 13,346 | 3.66 | % | $ | 1,386,187 | $ | 13,087 | 3.78 | % |
| Commercial and industrial loans(1) | 734,299 | 9,710 | 5.29 | % | 718,364 | 9,101 | 5.07 | % | 772,257 | 9,875 | 5.11 | % | ||||||
| Direct financing leases(1) | 15,527 | 176 | 4.53 | % | 16,540 | 189 | 4.57 | % | 19,883 | 222 | 4.47 | % | ||||||
| Consumer and other loans(1) | 51,045 | 458 | 3.59 | % | 49,847 | 436 | 3.50 | % | 45,026 | 407 | 3.62 | % | ||||||
| Total loans and leases receivable(1) | 2,272,946 | 25,687 | 4.52 | % | 2,244,642 | 23,072 | 4.11 | % | 2,223,353 | 23,591 | 4.24 | % | ||||||
| Mortgage-related securities(2) | 176,747 | 804 | 1.82 | % | 184,962 | 760 | 1.64 | % | 149,253 | 631 | 1.69 | % | ||||||
| Other investment securities(3) | 54,591 | 260 | 1.91 | % | 50,555 | 215 | 1.70 | % | 41,569 | 185 | 1.78 | % | ||||||
| FHLB stock | 17,355 | 226 | 5.21 | % | 14,002 | 172 | 4.91 | % | 14,172 | 176 | 4.97 | % | ||||||
| Short-term investments | 29,541 | 54 | 0.73 | % | 31,111 | 16 | 0.21 | % | 55,100 | 16 | 0.12 | % | ||||||
| Total interest-earning assets | 2,551,180 | 27,031 | 4.24 | % | 2,525,272 | 24,235 | 3.84 | % | 2,483,447 | 24,599 | 3.96 | % | ||||||
| Non-interest-earning assets | 165,527 | 140,969 | 137,893 | |||||||||||||||
| Total assets | $ | 2,716,707 | $ | 2,666,241 | $ | 2,621,340 | ||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||
| Transaction accounts | $ | 502,763 | 343 | 0.27 | % | $ | 533,251 | 255 | 0.19 | % | $ | 499,040 | 248 | 0.20 | % | |||
| Money market | 767,433 | 509 | 0.27 | % | 784,276 | 338 | 0.17 | % | 662,919 | 282 | 0.17 | % | ||||||
| Certificates of deposit | 73,560 | 114 | 0.62 | % | 52,519 | 55 | 0.42 | % | 45,993 | 112 | 0.97 | % | ||||||
| Wholesale deposits | 12,350 | 92 | 2.98 | % | 16,236 | 118 | 2.91 | % | 162,580 | 301 | 0.74 | % | ||||||
| Total interest-bearing deposits | 1,356,106 | 1,058 | 0.31 | % | 1,386,282 | 766 | 0.22 | % | 1,370,532 | 943 | 0.28 | % | ||||||
| FHLB advances | 449,599 | 1,666 | 1.48 | % | 385,080 | 1,036 | 1.08 | % | 405,855 | 1,284 | 1.27 | % | ||||||
| Other borrowings | 51,018 | 647 | 5.07 | % | 40,311 | 503 | 4.99 | % | 32,447 | 443 | 5.46 | % | ||||||
| Junior subordinated notes(5) | — | — | — | % | 9,850 | 504 | 20.47 | % | 10,066 | 277 | 11.01 | % | ||||||
| Total interest-bearing liabilities | 1,856,723 | 3,371 | 0.73 | % | 1,821,523 | 2,809 | 0.62 | % | 1,818,900 | 2,947 | 0.65 | % | ||||||
| Non-interest-bearing demand deposit accounts | 557,086 | 562,530 | 527,441 | |||||||||||||||
| Other non-interest-bearing liabilities | 57,615 | 42,537 | 56,691 | |||||||||||||||
| Total liabilities | 2,471,424 | 2,426,590 | 2,403,032 | |||||||||||||||
| Stockholders’ equity | 245,283 | 239,651 | 218,308 | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,716,707 | $ | 2,666,241 | $ | 2,621,340 | ||||||||||||
| Net interest income | $ | 23,660 | $ | 21,426 | $ | 21,652 | ||||||||||||
| Interest rate spread | 3.51 | % | 3.22 | % | 3.31 | % | ||||||||||||
| Net interest-earning assets | $ | 694,457 | $ | 703,749 | $ | 664,547 | ||||||||||||
| Net interest margin | 3.71 | % | 3.39 | % | 3.49 | % |
(1)The average balances of loans and leases include non-accrual loans and leases and loans held for sale. Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees collected in lieu of interest.
(2)Includes amortized cost basis of assets available for sale and held to maturity.
(3)Yields on tax-exempt municipal obligations are not presented on a tax-equivalent basis in this table.
(4)Represents annualized yields/rates.
(5)The calculation for the three months ended June 30, 2022 and March 31, 2022 includes $12,000 and $236,000, respectively, in accelerated amortization of debt issuance costs.
NET INTEREST INCOME ANALYSIS
| (Unaudited) | For the Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | June 30, 2022 | June 30, 2021 | ||||||||||
| Average<br>Balance | Interest | Average<br><br>Yield/Rate(4) | Average<br>Balance | Interest | Average<br><br>Yield/Rate(4) | |||||||
| Interest-earning assets | ||||||||||||
| Commercial real estate and other mortgage loans(1) | $ | 1,466,017 | $ | 28,689 | 3.91 | % | $ | 1,371,744 | $ | 25,615 | 3.73 | % |
| Commercial and industrial loans(1) | 726,376 | 18,811 | 5.18 | % | 765,117 | 19,500 | 5.10 | % | ||||
| Direct financing leases(1) | 16,030 | 365 | 4.55 | % | 21,071 | 466 | 4.42 | % | ||||
| Consumer and other loans(1) | 50,449 | 894 | 3.54 | % | 45,335 | 805 | 3.55 | % | ||||
| Total loans and leases receivable(1) | 2,258,872 | 48,759 | 4.32 | % | 2,203,267 | 46,386 | 4.21 | % | ||||
| Mortgage-related securities(2) | 180,832 | 1,564 | 1.73 | % | 156,249 | 1,297 | 1.66 | % | ||||
| Other investment securities(3) | 52,584 | 475 | 1.81 | % | 41,871 | 372 | 1.78 | % | ||||
| FHLB stock | 15,688 | 398 | 5.07 | % | 13,323 | 329 | 4.94 | % | ||||
| Short-term investments | 30,321 | 70 | 0.46 | % | 39,922 | 22 | 0.11 | % | ||||
| Total interest-earning assets | 2,538,297 | 51,266 | 4.04 | % | 2,454,632 | 48,406 | 3.94 | % | ||||
| Non-interest-earning assets | 153,316 | 144,741 | ||||||||||
| Total assets | $ | 2,691,613 | $ | 2,599,373 | ||||||||
| Interest-bearing liabilities | ||||||||||||
| Transaction accounts | $ | 517,923 | 597 | 0.23 | % | $ | 510,024 | 498 | 0.20 | % | ||
| Money market | 775,808 | 848 | 0.22 | % | 660,319 | 557 | 0.17 | % | ||||
| Certificates of deposit | 63,098 | 169 | 0.54 | % | 51,677 | 288 | 1.11 | % | ||||
| Wholesale deposits | 14,282 | 210 | 2.94 | % | 164,654 | 619 | 0.75 | % | ||||
| Total interest-bearing deposits | 1,371,111 | 1,824 | 0.27 | % | 1,386,674 | 1,962 | 0.28 | % | ||||
| FHLB advances | 417,518 | 2,702 | 1.29 | % | 386,371 | 2,533 | 1.31 | % | ||||
| Other borrowings | 45,694 | 1,149 | 5.03 | % | 29,886 | 844 | 5.65 | % | ||||
| Junior subordinated notes(5) | 4,898 | 504 | 20.58 | % | 10,064 | 552 | 10.97 | % | ||||
| Total interest-bearing liabilities | 1,839,221 | 6,179 | 0.67 | % | 1,812,995 | 5,891 | 0.65 | % | ||||
| Non-interest-bearing demand deposit accounts | 559,793 | 506,767 | ||||||||||
| Other non-interest-bearing liabilities | 50,117 | 65,146 | ||||||||||
| Total liabilities | 2,449,131 | 2,384,908 | ||||||||||
| Stockholders’ equity | 242,482 | 214,465 | ||||||||||
| Total liabilities and stockholders’ equity | $ | 2,691,613 | $ | 2,599,373 | ||||||||
| Net interest income | $ | 45,087 | $ | 42,515 | ||||||||
| Interest rate spread | 3.37 | % | 3.29 | % | ||||||||
| Net interest-earning assets | $ | 699,076 | $ | 641,637 | ||||||||
| Net interest margin | 3.55 | % | 3.46 | % |
(1)The average balances of loans and leases include non-accrual loans and leases and loans held for sale. Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees collected in lieu of interest.
(2)Includes amortized cost basis of assets available for sale and held to maturity.
(3)Yields on tax-exempt municipal obligations are not presented on a tax-equivalent basis in this table.
(4)Represents annualized yields/rates.
(5)The calculation for the six months ended June 30, 2022, 2022 includes $248,000 in accelerated amortization of debt issuance costs.
PROVISION FOR LOAN AND LEASE LOSS COMPOSITION
| (Unaudited) | For the Three Months Ended | For the Six Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | June 30,<br>2022 | June 30,<br>2021 | |||||||
| Change in general reserve due to subjective factor changes | $ | (185) | $ | (416) | $ | (805) | $ | (51) | $ | (652) | $ | (601) | $ | 430 |
| Change in general reserve due to historical loss factor changes | 64 | (206) | (862) | (923) | (1,687) | (142) | (2,671) | |||||||
| Charge-offs | 85 | 22 | 106 | 364 | 2,894 | 107 | 3,038 | |||||||
| Recoveries | (4,247) | (210) | (274) | (1,634) | (545) | (4,457) | (3,218) | |||||||
| Change in specific reserves on impaired loans, net | 29 | (280) | (64) | (451) | (1,466) | (251) | (1,660) | |||||||
| Change due to loan growth, net | 527 | 235 | 1,391 | 426 | 498 | 762 | 1,055 | |||||||
| Total provision for loan and lease losses | $ | (3,727) | $ | (855) | $ | (508) | $ | (2,269) | $ | (958) | $ | (4,582) | $ | (3,026) |
PERFORMANCE RATIOS
| For the Three Months Ended | For the Six Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | June 30,<br>2022 | June 30,<br>2021 | |||||||
| Return on average assets (annualized) | 1.61 | % | 1.30 | % | 1.32 | % | 1.41 | % | 1.26 | % | 1.46 | % | 1.38 | % |
| Return on average common equity (annualized) | 18.79 | % | 14.47 | % | 15.04 | % | 16.39 | % | 15.09 | % | 16.74 | % | 16.75 | % |
| Efficiency ratio | 64.47 | % | 65.55 | % | 61.92 | % | 65.68 | % | 64.17 | % | 65.00 | % | 63.18 | % |
| Interest rate spread | 3.51 | % | 3.22 | % | 3.21 | % | 3.27 | % | 3.31 | % | 3.37 | % | 3.29 | % |
| Net interest margin | 3.71 | % | 3.39 | % | 3.39 | % | 3.45 | % | 3.49 | % | 3.55 | % | 3.46 | % |
| Average interest-earning assets to average interest-bearing liabilities | 137.40 | % | 138.64 | % | 141.19 | % | 139.19 | % | 136.54 | % | 138.01 | % | 135.39 | % |
ASSET QUALITY RATIOS
| (Unaudited) | As of | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | ||||||||||
| Non-accrual loans and leases | $ | 5,585 | $ | 5,617 | $ | 6,358 | $ | 7,433 | $ | 11,422 | |||||
| Foreclosed properties | 124 | 117 | 164 | 172 | 179 | ||||||||||
| Total non-performing assets | 5,709 | 5,734 | 6,522 | 7,605 | 11,601 | ||||||||||
| Performing troubled debt restructurings | 188 | 203 | 217 | 53 | 56 | ||||||||||
| Total impaired assets | $ | 5,897 | $ | 5,937 | $ | 6,739 | $ | 7,658 | $ | 11,657 | |||||
| Non-accrual loans and leases as a percent of total gross loans and leases | 0.24 | % | 0.25 | % | 0.28 | % | 0.35 | % | 0.53 | % | |||||
| Non-performing assets as a percent of total gross loans and leases plus foreclosed properties | 0.25 | % | 0.25 | % | 0.29 | % | 0.36 | % | 0.54 | % | |||||
| Non-performing assets as a percent of total assets | 0.21 | % | 0.21 | % | 0.25 | % | 0.29 | % | 0.40 | % | |||||
| Allowance for loan and lease losses as a percent of total gross loans and leases | 1.05 | % | 1.05 | % | 1.09 | % | 1.16 | % | 1.20 | % | |||||
| Allowance for loan and lease losses as a percent of non-accrual loans and leases | 431.58 | % | 421.38 | % | 382.76 | % | 331.98 | % | 224.79 | % |
ASSET QUALITY RATIOS - EXCLUDING NET PPP LOANS
| (Unaudited) | As of | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | ||||||||||
| Non-accrual loans and leases as a percent of total gross loans and leases | 0.24 | % | 0.25 | % | 0.29 | % | 0.36 | % | 0.56 | % | |||||
| Non-performing assets as a percent of total gross loans and leases plus foreclosed properties | 0.25 | % | 0.26 | % | 0.29 | % | 0.37 | % | 0.57 | % | |||||
| Non-performing assets as a percent of total assets | 0.21 | % | 0.21 | % | 0.25 | % | 0.30 | % | 0.42 | % | |||||
| Allowance for loan and lease losses as a percent of total gross loans and leases | 1.06 | % | 1.06 | % | 1.10 | % | 1.20 | % | 1.27 | % | |||||
| PPP loans outstanding, net | $ | 8,172 | $ | 18,206 | $ | 27,297 | $ | 64,454 | $ | 120,723 |
NET CHARGE-OFFS (RECOVERIES)
| (Unaudited) | For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | June 30,<br>2022 | June 30,<br>2021 | ||||||||||||||
| Charge-offs | $ | 85 | $ | 22 | $ | 106 | $ | 364 | $ | 2,894 | $ | 107 | $ | 3,038 | |||||||
| Recoveries | (4,247) | (210) | (274) | (1,634) | (545) | (4,457) | (3,218) | ||||||||||||||
| Net (recoveries) charge-offs | $ | (4,162) | $ | (188) | $ | (168) | $ | (1,270) | $ | 2,349 | $ | (4,350) | $ | (180) | |||||||
| Net (recoveries) charge-offs as a percent of average gross loans and leases (annualized) | (0.73) | % | (0.03) | % | (0.03) | % | (0.24) | % | 0.42 | % | (0.39) | % | (0.02) | % | |||||||
| Annualized (recoveries) charge-offs as a percent of average gross loans and leases, excluding average net PPP loans | (0.74) | % | (0.03) | % | (0.03) | % | (0.25) | % | 0.47 | % | (0.39) | % | (0.02) | % | |||||||
| Average PPP loans outstanding, net | $ | 11,650 | $ | 20,935 | $ | 52,923 | $ | 87,517 | $ | 229,165 | $ | 16,266 | $ | 235,668 |
CAPITAL RATIOS
| As of and for the Three Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | |||||
| Total capital to risk-weighted assets | 11.56 | % | 11.87 | % | 10.82 | % | 11.14 | % | 11.22 | % |
| Tier I capital to risk-weighted assets | 9.34 | % | 9.27 | % | 8.94 | % | 9.14 | % | 9.14 | % |
| Common equity tier I capital to risk-weighted assets | 8.90 | % | 8.81 | % | 8.55 | % | 8.73 | % | 8.72 | % |
| Tier I capital to adjusted assets | 9.19 | % | 9.09 | % | 8.94 | % | 8.69 | % | 8.48 | % |
| Tangible common equity to tangible assets | 8.16 | % | 8.14 | % | 8.34 | % | 8.28 | % | 7.33 | % |
| Tangible common equity to tangible assets, excluding net PPP loans | 8.19 | % | 8.20 | % | 8.42 | % | 8.50 | % | 7.66 | % |
LOAN AND LEASE RECEIVABLE COMPOSITION
| (Unaudited) | As of | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | |||||
| Commercial real estate: | ||||||||||
| Commercial real estate - owner occupied | $ | 258,375 | $ | 254,237 | $ | 235,589 | $ | 241,977 | $ | 253,600 |
| Commercial real estate - non-owner occupied | 651,920 | 656,185 | 661,423 | 639,423 | 614,289 | |||||
| Land development | 42,545 | 40,092 | 42,792 | 39,119 | 45,056 | |||||
| Construction | 203,913 | 200,472 | 179,841 | 139,933 | 139,943 | |||||
| Multi-family | 314,392 | 302,494 | 320,072 | 313,787 | 319,351 | |||||
| 1-4 family | 17,335 | 16,198 | 14,911 | 13,487 | 19,769 | |||||
| Total commercial real estate | 1,488,480 | 1,469,678 | 1,454,628 | 1,387,726 | 1,392,008 | |||||
| Commercial and industrial | 741,363 | 720,695 | 730,819 | 681,065 | 695,442 | |||||
| Direct financing leases, net | 13,718 | 14,551 | 15,743 | 16,810 | 18,142 | |||||
| Consumer and other: | ||||||||||
| Home equity and second mortgages | 5,132 | 4,523 | 4,223 | 4,576 | 5,740 | |||||
| Other | 42,387 | 43,066 | 35,518 | 35,645 | 36,567 | |||||
| Total consumer and other | 47,519 | 47,589 | 39,741 | 40,221 | 42,307 | |||||
| Total gross loans and leases receivable | 2,291,080 | 2,252,513 | 2,240,931 | 2,125,822 | 2,147,899 | |||||
| Less: | ||||||||||
| Allowance for loan and lease losses | 24,104 | 23,669 | 24,336 | 24,676 | 25,675 | |||||
| Deferred loan fees | 980 | 1,264 | 1,523 | 2,516 | 4,338 | |||||
| Loans and leases receivable, net | $ | 2,265,996 | $ | 2,227,580 | $ | 2,215,072 | $ | 2,098,630 | $ | 2,117,886 |
DEPOSIT COMPOSITION
| (Unaudited) | As of | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | |||||
| Non-interest-bearing transaction accounts | $ | 544,507 | $ | 600,987 | $ | 589,559 | $ | 526,047 | $ | 774,253 |
| Interest-bearing transaction accounts | 466,785 | 539,492 | 530,225 | 517,248 | 511,698 | |||||
| Money market accounts | 731,718 | 806,917 | 754,410 | 728,751 | 685,127 | |||||
| Certificates of deposit | 114,000 | 63,977 | 54,091 | 57,598 | 45,137 | |||||
| Wholesale deposits | 12,321 | 12,321 | 29,638 | 74,638 | 144,492 | |||||
| Total deposits | $ | 1,869,331 | $ | 2,023,694 | $ | 1,957,923 | $ | 1,904,282 | $ | 2,160,707 |
TRUST ASSETS COMPOSITION
| (Unaudited) | As of | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | |||||
| Trust assets under management | $ | 2,386,637 | $ | 2,636,896 | $ | 2,711,760 | $ | 2,545,089 | $ | 2,362,257 |
| Trust assets under administration | 167,095 | 197,160 | 208,954 | 202,657 | 202,116 | |||||
| Total trust assets | $ | 2,553,732 | $ | 2,834,056 | $ | 2,920,714 | $ | 2,747,746 | $ | 2,564,373 |
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,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | |||||
| Common stockholders’ equity | $ | 237,931 | $ | 233,059 | $ | 232,422 | $ | 225,280 | $ | 221,452 |
| Goodwill and other intangible assets | (12,262) | (12,184) | (12,268) | (12,229) | (12,178) | |||||
| Tangible common equity | $ | 225,669 | $ | 220,875 | $ | 220,154 | $ | 213,051 | $ | 209,274 |
| Common shares outstanding | 8,474,699 | 8,488,585 | 8,457,564 | 8,483,099 | 8,617,761 | |||||
| Book value per share | $ | 28.08 | $ | 27.46 | $ | 27.48 | $ | 26.56 | $ | 25.70 |
| Tangible book value per share | 26.63 | 26.02 | 26.03 | 25.11 | 24.28 |
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,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | ||||||||||
| Common stockholders’ equity | $ | 237,931 | $ | 233,052 | $ | 232,422 | $ | 225,280 | $ | 221,452 | |||||
| Goodwill and other intangible assets | (12,262) | (12,184) | (12,268) | (12,229) | (12,178) | ||||||||||
| Tangible common equity | $ | 225,669 | $ | 220,875 | $ | 220,154 | $ | 213,051 | $ | 209,274 | |||||
| Total assets | $ | 2,777,016 | $ | 2,724,082 | $ | 2,652,905 | $ | 2,584,410 | $ | 2,865,669 | |||||
| Goodwill and other intangible assets | (12,262) | (12,184) | (12,268) | (12,229) | (12,178) | ||||||||||
| Tangible assets | $ | 2,764,754 | $ | 2,711,898 | $ | 2,640,637 | $ | 2,572,181 | $ | 2,853,491 | |||||
| Tangible common equity to tangible assets | 8.16 | % | 8.14 | % | 8.34 | % | 8.28 | % | 7.33 | % | |||||
| Period-end net PPP loans | 8,172 | 18,206 | 27,297 | 64,454 | 120,722 | ||||||||||
| Tangible assets, excluding net PPP loans | $ | 2,756,582 | $ | 2,693,692 | $ | 2,613,340 | $ | 2,507,727 | $ | 2,732,769 | |||||
| Tangible common equity to tangible assets, excluding net PPP loans | 8.19 | % | 8.20 | % | 8.42 | % | 8.50 | % | 7.66 | % |
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,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | June 30,<br>2022 | June 30,<br>2021 | ||||||||||||||
| Total non-interest expense | $ | 19,456 | $ | 18,823 | $ | 17,531 | $ | 18,490 | $ | 18,184 | $ | 38,280 | $ | 35,514 | |||||||
| Less: | |||||||||||||||||||||
| Net loss (gain) on foreclosed properties | 8 | 12 | 7 | 6 | (1) | 20 | 1 | ||||||||||||||
| Amortization of other intangible assets | — | — | 2 | 7 | 8 | — | 15 | ||||||||||||||
| SBA recourse provision (benefit) | 114 | (76) | (122) | (69) | 245 | 38 | 115 | ||||||||||||||
| Tax credit investment impairment recovery | (351) | — | — | — | — | (351) | — | ||||||||||||||
| Total operating expense (a) | $ | 19,685 | $ | 18,887 | $ | 17,644 | $ | 18,546 | $ | 17,932 | $ | 38,573 | $ | 35,383 | |||||||
| Net interest income | $ | 23,660 | $ | 21,426 | $ | 20,924 | $ | 21,223 | $ | 21,652 | $ | 45,087 | $ | 42,515 | |||||||
| Total non-interest income | 6,872 | 7,386 | 7,569 | 7,015 | 6,321 | 14,258 | 13,516 | ||||||||||||||
| Less: | |||||||||||||||||||||
| Net gain on sale of securities | — | — | — | — | 29 | — | 29 | ||||||||||||||
| Adjusted non-interest income | 6,872 | 7,386 | 7,569 | 7,015 | 6,292 | 14,258 | 13,487 | ||||||||||||||
| Total operating revenue (b) | $ | 30,532 | $ | 28,812 | $ | 28,493 | $ | 28,238 | $ | 27,944 | $ | 59,345 | $ | 56,002 | |||||||
| Efficiency ratio | 64.47 | % | 65.55 | % | 61.92 | % | 65.68 | % | 64.17 | % | 65.00 | % | 63.18 | % | |||||||
| Pre-tax, pre-provision adjusted earnings (b - a) | $ | 10,847 | $ | 9,925 | $ | 10,849 | $ | 9,692 | $ | 10,012 | $ | 20,772 | $ | 20,619 | |||||||
| Less: | |||||||||||||||||||||
| PPP fee income | 196 | 249 | 892 | 1,666 | 2,541 | 445 | 4,754 | ||||||||||||||
| PPP loan interest income | 29 | 52 | 134 | 221 | 566 | 81 | 1,169 | ||||||||||||||
| Pre-tax, pre-provision adjusted earnings, excluding PPP | $ | 10,622 | $ | 9,624 | $ | 9,823 | $ | 7,805 | $ | 6,905 | $ | 20,246 | $ | 14,696 | |||||||
| Average total assets | $ | 2,716,707 | $ | 2,666,241 | $ | 2,612,905 | $ | 2,608,198 | $ | 2,621,340 | $ | 2,691,613 | $ | 2,599,373 | |||||||
| Less: | |||||||||||||||||||||
| Average net PPP loans | 11,650 | 20,935 | 52,923 | 87,517 | 229,165 | 16,266 | 235,668 | ||||||||||||||
| Adjusted average total assets | $ | 2,705,057 | $ | 2,645,306 | $ | 2,559,982 | $ | 2,520,681 | $ | 2,392,175 | $ | 2,675,347 | $ | 2,363,705 | |||||||
| Pre-tax, pre-provision adjusted return on average assets | 1.60 | % | 1.49 | % | 1.66 | % | 1.49 | % | 1.53 | % | 1.54 | % | 1.59 | % | |||||||
| Pre-tax, pre-provision adjusted return on average assets, excluding PPP | 1.57 | % | 1.46 | % | 1.53 | % | 1.24 | % | 1.15 | % | 1.51 | % | 1.24 | % |
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,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | June 30,<br>2022 | June 30,<br>2021 | ||||||||||||||
| Interest income | $ | 27,031 | $ | 24,235 | $ | 23,576 | $ | 24,014 | $ | 24,599 | $ | 51,266 | $ | 48,406 | |||||||
| Interest expense | 3,371 | 2,809 | 2,652 | 2,791 | 2,947 | 6,179 | 5,891 | ||||||||||||||
| Net interest income (a) | 23,660 | 21,426 | 20,924 | 21,223 | 21,652 | 45,087 | 42,515 | ||||||||||||||
| Less: | |||||||||||||||||||||
| Fees in lieu of interest | 1,865 | 1,293 | 1,700 | 2,839 | 3,536 | 3,158 | 6,621 | ||||||||||||||
| PPP loan interest income | 29 | 52 | 134 | 221 | 566 | 81 | 1,169 | ||||||||||||||
| FRB interest income and FHLB dividend income | 279 | 188 | 179 | 212 | 192 | 467 | 350 | ||||||||||||||
| Adjusted net interest income (b) | $ | 21,487 | $ | 19,893 | $ | 18,911 | $ | 17,951 | $ | 17,358 | $ | 41,381 | $ | 34,375 | |||||||
| Average interest-earning assets (c) | $ | 2,551,180 | $ | 2,525,272 | $ | 2,472,013 | $ | 2,460,567 | $ | 2,483,447 | $ | 2,538,297 | $ | 2,454,632 | |||||||
| Less: | |||||||||||||||||||||
| Average net PPP loans | 11,650 | 20,935 | 52,923 | 87,517 | 229,165 | 16,266 | 235,668 | ||||||||||||||
| Average FRB cash and FHLB stock | 46,334 | 44,577 | 71,939 | 129,469 | 68,503 | 45,461 | 52,661 | ||||||||||||||
| Average non-accrual loans and leases | 5,429 | 6,195 | 6,796 | 11,298 | 16,744 | 5,810 | 19,392 | ||||||||||||||
| Adjusted average interest-earning assets (d) | $ | 2,487,767 | $ | 2,453,565 | $ | 2,340,355 | $ | 2,232,283 | $ | 2,169,035 | $ | 2,470,760 | $ | 2,146,911 | |||||||
| Net interest margin (a / c) | 3.71 | % | 3.39 | % | 3.39 | % | 3.45 | % | 3.49 | % | 3.55 | % | 3.46 | % | |||||||
| Adjusted net interest margin (b / d) | 3.45 | % | 3.24 | % | 3.23 | % | 3.22 | % | 3.20 | % | 3.35 | % | 3.20 | % |
17