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| 8-K - FORM 8-K - FIRST BUSINESS FINANCIAL SERVICES, INC. | fbiz20170930earningsreleas.htm |
Exhibit 99.1
[FOR IMMEDIATE RELEASE]
First Business Financial Services, Inc.
401 Charmany Drive
Madison, WI 53719
FIRST BUSINESS REPORTS THIRD QUARTER 2017 FINANCIAL RESULTS
MADISON, Wis., October 26, 2017 (GLOBE NEWSWIRE) -- First Business Financial Services, Inc. (the “Company” or “First Business”) (NASDAQ:FBIZ) reported third quarter 2017 results including sequential earnings growth driven by record trust and investment performance, prudent operating expense management and solid net interest margin; partially offset by elevated recourse provision expense and net charge-offs related to two previously disclosed impaired loans.
Summary results for the quarter ended September 30, 2017 include:
• | Net income totaled $2.6 million, compared to $1.9 million in the linked quarter and $2.7 million in the third quarter of 2016. |
• | Diluted earnings per common share measured $0.30, compared to $0.22 and $0.31 for the linked and prior year quarters, respectively. |
• | Annualized return on average assets and annualized return on average equity measured 0.58% and 6.22%, respectively, for the third quarter of 2017, compared to 0.42% and 4.50% for the linked quarter and 0.59% and 6.69% for the third quarter of 2016. |
• | Net interest margin measured 3.52%, compared to 3.64% in the linked quarter and 3.50% for the third quarter of 2016. Prepayment fees within our conventional portfolio contributed less than one basis point to the third quarter 2017 net interest margin, compared to 16 basis points and four basis points in the linked quarter and prior year quarter, respectively. |
• | Trust and investment services fee income totaled a record $1.7 million, compared to $1.6 million in the linked quarter and $1.4 million for the third quarter of 2016. |
• | Trust assets under management and administration reached a record $1.416 billion, compared to $1.338 billion at June 30, 2017 and $1.167 billion at September 30, 2016. |
• | The Company’s efficiency ratio measured 66.56%, compared to 65.39% for the linked quarter and 63.63% for the third quarter of 2016. |
• | Provision for loan and lease losses was $1.5 million, compared to $3.7 million for the linked quarter and $3.5 million for the third quarter of 2016. |
• | SBA recourse provision was $1.3 million, compared to $774,000 for the linked quarter and $375,000 for the third quarter of 2016. |
• | Net charge-offs measured an annualized 0.88% of average loans and leases, compared to 0.99% in the linked quarter and 0.44% for the third quarter of 2016. |
• | Period-end gross loans and leases receivable measured $1.467 billion at September 30, 2017, compared to $1.458 billion at both June 30, 2017 and September 30, 2016. |
• | Non-performing loans as a percent of total gross loans and leases receivable measured 2.26% at period end, compared to 2.55% and 1.76% at the end of the linked and prior year quarters, respectively. |
“During the third quarter of 2017 we made progress in resolving certain impaired credits that have impacted our bottom line through both provision and recourse reserve expenses,” said Corey Chambas, President and Chief Executive Officer. “At the same time, we have stabilized loan balances and increased profitability from the prior quarter as we continue to build our client-facing teams in Kansas City and our specialty finance business lines, positioning our balance sheet for expected loan growth throughout our markets.”
Chambas added, “The ability to maintain net interest margin above our established 3.50% target reflects the continued success of our funding model and relationship approach to business banking. Likewise, we are very pleased to report solid conventional net loan growth in our established Wisconsin markets of approximately $80 million, compared to the third quarter of 2016. We believe this demonstrates the ability of our teams to execute growth objectives when appropriately staffed.”
Results of Operations
Net interest income was $14.9 million in the third quarter of 2017, compared to $15.5 million in the linked quarter and $15.3 million in the third quarter of 2016. Elevated second quarter 2017 fees collected in lieu of interest from loan payoffs
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(“prepayment fees”) was the primary driver of higher net interest income in the linked quarter. Compared to the prior year period, net interest income in the third quarter of 2017 reflected a shift in the mix of loan originations toward lower-yielding conventional commercial loans, offset by runoff in the Company’s specialty lending portfolios. This was partially offset by successful efforts to manage deposit rates and increased rates on certain variable-rate loans following the Federal Open Market Committee’s decision to raise the targeted federal funds rate in December 2016, March 2017 and June 2017.
Net interest margin measured 3.52% for the third quarter of 2017, compared to 3.64% in the second quarter of 2017 and 3.50% in the third quarter of 2016. Despite unusually low loan prepayment fees, management is pleased to have maintained net interest margin above our stated goal of 3.50%. The collection of prepayment fees is, and will continue to be, an expected source of volatility to quarterly net interest income and net interest margin. Prepayment fees within our conventional portfolio totaling $7,000 were immaterial to net interest margin during the third quarter of 2017, while prepayment fees totaling $658,000 contributed 16 basis points to net interest margin in the second quarter of 2017 and prepayment fees totaling $189,000 contributed four basis points in the third quarter of 2016.
The rising rate environment resulted in modest increases in deposit pricing as necessary to serve the Company’s client relationships. As such, the average total deposit costs for the third quarter of 2017 increased to 0.74%, compared to 0.72% in the linked quarter and 0.71% in the prior year quarter. Similarly, the Company’s cost of total interest-bearing liabilities remained steady at 1.09% for the third quarter of 2017, flat compared to the linked quarter and up nominally from 1.04% in the prior year quarter. Management believes a modest increase in average total deposit costs may continue as the Company looks to effectively manage deposit relationships amid intense competition and continued expectation of a rising rate environment.
Non-interest income totaled $4.3 million, or 22.6% of total revenue, for the third quarter of 2017, compared to $4.7 million, or 23.4%, for the second quarter of 2017 and $3.6 million, or 19.2%, for the third quarter of 2016. The linked quarter comparison primarily reflected lower loan fees, partially offset by an increase in swap fees and moderately higher gains on the sale of SBA loans. The increase in non-interest income from the prior year primarily reflected an increase in trust and investment services fee income, strong swap income and higher gains from SBA loan sales.
Trust and investment services fee income totaled $1.7 million in the third quarter of 2017, increasing $5,000, or 0.3%, and $289,000, or 21.2%, compared to the linked and prior year quarters, respectively. Existing client relationships and business development efforts remained strong as trust assets under management and administration reached a record $1.416 billion at September 30, 2017, up $78.1 million, or 23.3% annualized, from the prior quarter and $249.1 million, or 21.3%, from September 30, 2016.
“Our trust and investment services business has been a stellar contributor for the Company for several years now,” Chambas commented. “What originally started as a retirement plan platform to meet the employee-benefit needs of our commercial clients has transitioned into a very successful wealth management business that we believe is scalable beyond our established Madison, Wisconsin market. Over the past 18 months we have added two experienced private wealth management producers in our Wisconsin markets; one in our Milwaukee market and one in our Northeast Wisconsin market. We are also excited to announce the September 2017 addition of an experienced private wealth management producer in Kansas City as we begin to build out our wealth management presence in our newest market.”
Non-interest expense was $14.2 million in both the third quarter of 2017 and the linked second quarter, and $15.8 million in the third quarter of 2016. The prior year period included $3.2 million in nonrecurring expense due to impairment of a historic tax credit investment, which corresponded with $3.6 million in tax credits recognized during the quarter, providing a net benefit to after-tax earnings of $430,000. Excluding this tax credit-related expense impact, third quarter 2016 non-interest expense totaled $12.6 million.
For the third quarter of 2017 the Company recognized a $1.3 million SBA recourse provision for estimated losses in the outstanding guaranteed portion of SBA loans sold. The provision reflected refinements to the recourse reserve estimate due to the migration of certain credits with potential guaranty eligibility issues during the third quarter. SBA recourse provisions of $774,000 and $375,000 were recognized in the second quarter of 2017 and third quarter of 2016, respectively. The total recourse reserve balance was $2.7 million at September 30, 2017. Changes to SBA recourse reserves may be a source of non-interest expense volatility in future quarters.
Third quarter 2017 compensation expense decreased by $737,000 compared to the linked quarter, primarily due to incentive compensation adjustments made to more closely align these expenses to the Company’s full year 2017 performance expectations. Compensation expenses were essentially flat compared to the third quarter of 2016.
Collateral liquidation costs increased to $371,000 for the third quarter of 2017, compared to $77,000 and $89,000 in the linked and prior year quarters, respectively. The increase primarily reflected the Company’s workout process related to two non-performing loans.
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The Company’s third quarter 2017 efficiency ratio was 66.56%, compared to 65.39% for the linked quarter and 63.63% for the third quarter of 2016. Lower prepayment fees and loan fees, and an increase in collateral liquidation costs drove the modest decrease in operating efficiency compared to both the linked quarter and prior year quarter. Over time the Company intends to achieve its target efficiency ratio range of 58-62% through proactive expense management efforts, including through its recently completed charter consolidation and planned December 2017 core conversion, as well as long-term revenue initiatives, such as efforts to increase sustainable and high-quality SBA lending production.
The Company recorded provision for loan and lease losses totaling $1.5 million in the third quarter of 2017, compared to $3.7 million in the linked quarter and $3.5 million in the third quarter of 2016. Provision for the third quarter of 2017 reflected a $1.6 million charge-off related to a previously disclosed energy sector loan in connection with liquidating the underlying collateral during the quarter. The provision also included the partial charge-off of the previously disclosed $6.7 million Wisconsin-based commercial and industrial impaired loan due to further degradation of repayment sources during the quarter. Management continues to pursue all potential repayment sources related to this credit. These increases were partially offset by the reversal of a $1.8 million specific reserve based on the full repayment of a previously disclosed impaired construction loan originated in our Kansas City market. The payoff proceeds were received in October 2017, which will reduce non-performing loans by $2.5 million in the fourth quarter of 2017.
As of September 30, 2017, our direct exposure to the energy sector consisted of $669,000 in performing loans and leases receivable, or 0.05% of total gross loans and leases receivable, with no remaining unfunded commitments. Management believes the portfolio is adequately collateralized as of the end of the reporting period.
The effective tax rate was 26.6% in the third quarter of 2017, compared to 19.4% in the linked quarter. The third quarter 2016 effective tax rate was impacted by the recognition of the previously noted $3.6 million historic tax credit.
Balance Sheet
Period-end gross loans and leases receivable totaled $1.467 billion at September 30, 2017, increasing $8.5 million, or 0.6%, from June 30, 2017 and increasing $8.4 million, or 0.6%, from September 30, 2016. On an average basis, gross loans and leases of $1.471 billion increased by $829,000, or 0.1%, and $10.0 million, or 0.7%, compared to the second quarter of 2017 and third quarter of 2016, respectively.
“We continue to see solid pipelines in our Wisconsin markets and are committed to replicating this activity in our Kansas City market and nationwide SBA platform through continued opportunistic hiring of experienced lenders,” Chambas said. As of September 30, 2017, net conventional loan balances for the Company’s established Wisconsin markets increased $18.3 million compared to the linked quarter and $83.4 million compared to the prior year quarter, reflecting solid execution of the Company’s niche business banking model. The Company expects recent and ongoing investments in its Kansas City market and SBA platform to deliver similar growth outcomes over time, outpacing acquired portfolio runoff. “Moving forward, we anticipate high-quality loan growth will continue at a moderate pace as recently hired talent and anticipated hires gain momentum,” Chambas added.
Period-end in-market deposits - consisting of all transaction accounts, money market accounts and non-wholesale deposits - totaled $1.091 billion, or 69.6% of total bank funding at September 30, 2017, compared to $1.120 billion, or 72.0% at June 30, 2017 and $1.117 billion, or 71.0% at September 30, 2016. The decrease in in-market deposits compared to the linked quarter was primarily due to lower money market account balances, reflecting First Business Bank’s pricing discipline. Period-end wholesale bank funds were $476.7 million at September 30, 2017, including brokered certificates of deposit of $306.4 million, deposits gathered through internet deposit listing services of $26.8 million and Federal Home Loan Bank (“FHLB”) advances of $143.5 million. Consistent with the Company’s longstanding funding strategy to use the most efficient and cost effective source of wholesale funds, management continues to replace maturing wholesale deposits with fixed rate FHLB advances at various terms to meet its balance sheet management needs. Over time, management intends to maintain a ratio of in-market deposits to total bank funding sources in line with the Company's historical range of 60%-70%.
Asset Quality
Total non-performing loans were $33.2 million at September 30, 2017, decreasing by $3.9 million, or 10.6%, compared to $37.2 million at June 30, 2017 and increasing by $7.5 million, or 29.2%, compared to $25.7 million at September 30, 2016. The decrease to the linked quarter primarily reflected the aforementioned charge–offs related to an energy sector loan and the Wisconsin–based commercial and industrial impaired loan. As a percent of total gross loans and leases receivable, non-performing loans measured 2.26% at September 30, 2017, compared to 2.55% and 1.76% at the end of the linked quarter and third quarter of 2016, respectively. Included in these totals are non-performing loans originated in our Kansas City office, which totaled $21.1 million at September 30, 2017, compared to $20.9 million at June 30, 2017 and $12.8 million at September 30, 2016.
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“We believe we have made progress in further resolving certain problem credits and implementing our Company’s credit policies and procedures across all of our markets,” Chambas said. “The significant steps we’ve taken over the past 18 months position us well to begin delivering improved asset quality and financial performance metrics.”
Capital Strength
The Company's capital ratios continued to exceed the highest required regulatory benchmark levels. As of September 30, 2017, total capital to risk-weighted assets was 11.91%, tier 1 capital to risk-weighted assets was 9.43%, tier 1 leverage capital to adjusted average assets was 9.39% and common equity tier 1 capital to risk-weighted assets was 8.86%. In addition, as of September 30, 2017, tangible common equity to tangible assets was 8.69%.
Quarterly Dividend
As previously announced, during the third quarter of 2017, the Company's Board of Directors declared a regular quarterly dividend of $0.13 per share. The dividend was paid on August 17, 2017 to shareholders of record at the close of business on August 7, 2017. Measured against third quarter 2017 diluted earnings per share of $0.30, the dividend represents a 43.3% payout ratio. The Board of Directors routinely considers dividend declarations as part of its normal course of business.
About First Business Financial Services, Inc.
First Business Financial Services, Inc. (NASDAQ:FBIZ) is a Wisconsin-based bank holding company focused on the unique needs of businesses, business executives and high net worth individuals. First Business offers commercial banking, specialty finance and private wealth management solutions, and because of its niche focus, is able to provide its clients with unmatched expertise, accessibility and responsiveness. For additional information, visit www.firstbusiness.com or call 608-238-8008.
This release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect First Business’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:
• | Competitive pressures among depository and other financial institutions nationally and in our markets. |
• | Adverse changes in the economy or business conditions, either nationally or in our markets. |
• | Increases in defaults by borrowers and other delinquencies. |
• | Our ability to manage growth effectively, including the successful expansion of our client support, administrative infrastructure and internal management systems. |
• | Fluctuations in interest rates and market prices. |
• | The consequences of continued bank acquisitions and mergers in our markets, resulting in fewer but much larger and financially stronger competitors. |
• | Changes in legislative or regulatory requirements applicable to us and our 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 our 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, 2016 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.com | ||
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SELECTED FINANCIAL CONDITION DATA
(Unaudited) | As of | |||||||||||||||||||
(in thousands) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and cash equivalents | $ | 73,196 | $ | 63,745 | $ | 60,899 | $ | 77,517 | $ | 68,764 | ||||||||||
Securities available-for-sale, at fair value | 131,130 | 136,834 | 147,058 | 145,893 | 154,480 | |||||||||||||||
Securities held-to-maturity, at amortized cost | 38,873 | 37,806 | 38,485 | 38,612 | 35,109 | |||||||||||||||
Loans held for sale | — | 3,491 | 3,924 | 1,111 | 2,627 | |||||||||||||||
Loans and leases receivable | 1,466,713 | 1,458,175 | 1,480,971 | 1,450,675 | 1,458,297 | |||||||||||||||
Allowance for loan and lease losses | (19,923 | ) | (21,677 | ) | (21,666 | ) | (20,912 | ) | (20,067 | ) | ||||||||||
Loans and leases, net | 1,446,790 | 1,436,498 | 1,459,305 | 1,429,763 | 1,438,230 | |||||||||||||||
Premises and equipment, net | 3,048 | 2,930 | 3,955 | 3,772 | 3,898 | |||||||||||||||
Foreclosed properties | 2,585 | 2,585 | 1,472 | 1,472 | 1,527 | |||||||||||||||
Bank-owned life insurance | 39,988 | 39,674 | 39,358 | 39,048 | 29,028 | |||||||||||||||
Federal Home Loan Bank and Federal Reserve Bank stock, at cost | 5,083 | 2,815 | 4,782 | 2,131 | 2,165 | |||||||||||||||
Goodwill and other intangible assets | 12,735 | 12,760 | 12,774 | 12,773 | 12,762 | |||||||||||||||
Accrued interest receivable and other assets | 32,228 | 29,790 | 28,578 | 28,607 | 23,848 | |||||||||||||||
Total assets | $ | 1,785,656 | $ | 1,768,928 | $ | 1,800,590 | $ | 1,780,699 | $ | 1,772,438 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
In-market deposits | $ | 1,090,524 | $ | 1,120,205 | $ | 1,104,281 | $ | 1,122,174 | $ | 1,116,974 | ||||||||||
Wholesale deposits | 333,200 | 354,393 | 388,433 | 416,681 | 449,225 | |||||||||||||||
Total deposits | 1,423,724 | 1,474,598 | 1,492,714 | 1,538,855 | 1,566,199 | |||||||||||||||
Federal Home Loan Bank advances and other borrowings | 167,884 | 106,395 | 121,841 | 59,676 | 29,946 | |||||||||||||||
Junior subordinated notes | 10,015 | 10,012 | 10,008 | 10,004 | 10,001 | |||||||||||||||
Accrued interest payable and other liabilities | 17,252 | 12,689 | 11,893 | 10,514 | 6,361 | |||||||||||||||
Total liabilities | 1,618,875 | 1,603,694 | 1,636,456 | 1,619,049 | 1,612,507 | |||||||||||||||
Total stockholders’ equity | 166,781 | 165,234 | 164,134 | 161,650 | 159,931 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,785,656 | $ | 1,768,928 | $ | 1,800,590 | $ | 1,780,699 | $ | 1,772,438 | ||||||||||
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STATEMENTS OF INCOME
(Unaudited) | As of and for the Three Months Ended | As of and for the Nine Months Ended | ||||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||||||||||
Total interest income | $ | 18,634 | $ | 19,225 | $ | 18,447 | $ | 20,321 | $ | 18,898 | $ | 56,306 | $ | 57,796 | ||||||||||||||
Total interest expense | 3,751 | 3,746 | 3,559 | 3,568 | 3,603 | 11,056 | 11,221 | |||||||||||||||||||||
Net interest income | 14,883 | 15,479 | 14,888 | 16,753 | 15,295 | 45,250 | 46,575 | |||||||||||||||||||||
Provision for loan and lease losses | 1,471 | 3,656 | 572 | 994 | 3,537 | 5,699 | 6,824 | |||||||||||||||||||||
Net interest income after provision for loan and lease losses | 13,412 | 11,823 | 14,316 | 15,759 | 11,758 | 39,551 | 39,751 | |||||||||||||||||||||
Trust and investment services fee income | 1,653 | 1,648 | 1,629 | 1,375 | 1,364 | 4,930 | 3,981 | |||||||||||||||||||||
Gain on sale of SBA loans | 606 | 535 | 360 | 546 | 347 | 1,501 | 3,854 | |||||||||||||||||||||
Service charges on deposits | 756 | 766 | 765 | 743 | 772 | 2,287 | 2,247 | |||||||||||||||||||||
Loan fees | 391 | 675 | 458 | 639 | 506 | 1,525 | 1,791 | |||||||||||||||||||||
Other non-interest income | 933 | 1,114 | 851 | 628 | 651 | 2,897 | 2,184 | |||||||||||||||||||||
Total non-interest income | 4,339 | 4,738 | 4,063 | 3,931 | 3,640 | 13,140 | 14,057 | |||||||||||||||||||||
Compensation | 7,645 | 8,382 | 8,683 | 7,091 | 7,637 | 24,710 | 24,454 | |||||||||||||||||||||
Occupancy | 527 | 519 | 475 | 481 | 530 | 1,521 | 1,538 | |||||||||||||||||||||
Professional fees | 995 | 1,041 | 1,010 | 1,144 | 1,065 | 3,046 | 2,888 | |||||||||||||||||||||
Data processing | 592 | 635 | 584 | 1,327 | 623 | 1,810 | 1,971 | |||||||||||||||||||||
Marketing | 594 | 582 | 370 | 628 | 528 | 1,546 | 1,710 | |||||||||||||||||||||
Equipment | 285 | 300 | 283 | 276 | 292 | 868 | 913 | |||||||||||||||||||||
Computer software | 715 | 639 | 683 | 553 | 539 | 2,037 | 1,607 | |||||||||||||||||||||
FDIC insurance | 320 | 381 | 380 | 483 | 444 | 1,081 | 989 | |||||||||||||||||||||
Collateral liquidation costs | 371 | 77 | 92 | 58 | 89 | 556 | 204 | |||||||||||||||||||||
Net loss on foreclosed properties | — | — | — | 29 | — | — | 93 | |||||||||||||||||||||
Impairment of tax credit investments | 112 | 112 | 113 | 171 | 3,314 | 338 | 3,520 | |||||||||||||||||||||
SBA recourse provision | 1,315 | 774 | 6 | 1,619 | 375 | 2,095 | 449 | |||||||||||||||||||||
Other non-interest expense | 760 | 779 | 881 | 663 | 317 | 2,404 | 1,574 | |||||||||||||||||||||
Total non-interest expense | 14,231 | 14,221 | 13,560 | 14,523 | 15,753 | 42,012 | 41,910 | |||||||||||||||||||||
Income (loss) before income tax expense | 3,520 | 2,340 | 4,819 | 5,167 | (355 | ) | 10,679 | 11,898 | ||||||||||||||||||||
Income tax expense (benefit)(1) | 936 | 454 | 1,422 | 1,199 | (3,020 | ) | 2,812 | 957 | ||||||||||||||||||||
Net income(1) | $ | 2,584 | $ | 1,886 | $ | 3,397 | $ | 3,968 | $ | 2,665 | $ | 7,867 | $ | 10,941 | ||||||||||||||
Per common share: | ||||||||||||||||||||||||||||
Basic earnings(1) | $ | 0.30 | $ | 0.22 | $ | 0.39 | $ | 0.46 | $ | 0.31 | $ | 0.90 | $ | 1.26 | ||||||||||||||
Diluted earnings(1) | 0.30 | 0.22 | 0.39 | 0.46 | 0.31 | 0.90 | 1.26 | |||||||||||||||||||||
Dividends declared | 0.13 | 0.13 | 0.13 | 0.12 | 0.12 | 0.39 | 0.36 | |||||||||||||||||||||
Book value | 19.04 | 18.96 | 18.83 | 18.55 | 18.35 | 19.04 | 18.35 | |||||||||||||||||||||
Tangible book value | 17.59 | 17.50 | 17.36 | 17.08 | 16.88 | 17.59 | 16.88 | |||||||||||||||||||||
Weighted-average common shares outstanding(2) | 8,621,311 | 8,601,379 | 8,600,620 | 8,587,814 | 8,582,836 | 8,606,080 | 8,569,613 | |||||||||||||||||||||
Weighted-average diluted common shares outstanding(2) | 8,621,311 | 8,601,379 | 8,600,620 | 8,587,814 | 8,582,836 | 8,606,080 | 8,569,613 | |||||||||||||||||||||
(1) | Results as of and for the three and nine months ended September 30, 2016 have been adjusted to reflect early adoption of ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” |
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(2) | Excluding participating securities. |
NET INTEREST INCOME ANALYSIS
(Unaudited) | For the Three Months Ended | ||||||||||||||||||||||||||||||||
(Dollars in thousands) | September 30, 2017 | June 30, 2017 | September 30, 2016 | ||||||||||||||||||||||||||||||
Average Balance | Interest | Average Yield/Rate(5) | Average Balance | Interest | Average Yield/Rate(5) | Average Balance | Interest | Average Yield/Rate(5) | |||||||||||||||||||||||||
Interest-earning assets | |||||||||||||||||||||||||||||||||
Commercial real estate and other mortgage loans(1) | $ | 966,711 | $ | 10,922 | 4.52 | % | $ | 959,176 | $ | 10,620 | 4.43 | % | $ | 947,167 | $ | 10,656 | 4.50 | % | |||||||||||||||
Commercial and industrial loans(1) | 448,955 | 6,187 | 5.51 | % | 453,578 | 7,081 | 6.24 | % | 459,871 | 6,651 | 5.79 | % | |||||||||||||||||||||
Direct financing leases(1) | 28,648 | 303 | 4.23 | % | 28,728 | 306 | 4.26 | % | 30,231 | 341 | 4.51 | % | |||||||||||||||||||||
Consumer and other loans(1) | 26,577 | 274 | 4.12 | % | 28,580 | 277 | 3.88 | % | 23,662 | 368 | 6.22 | % | |||||||||||||||||||||
Total loans and leases receivable(1) | 1,470,891 | 17,686 | 4.81 | % | 1,470,062 | 18,284 | 4.98 | % | 1,460,931 | 18,016 | 4.93 | % | |||||||||||||||||||||
Mortgage-related securities(2) | 136,330 | 613 | 1.80 | % | 140,086 | 615 | 1.76 | % | 149,414 | 567 | 1.52 | % | |||||||||||||||||||||
Other investment securities(3) | 36,106 | 158 | 1.75 | % | 37,765 | 161 | 1.70 | % | 34,042 | 131 | 1.54 | % | |||||||||||||||||||||
FHLB and FRB stock | 3,949 | 25 | 2.53 | % | 4,229 | 24 | 2.26 | % | 2,163 | 21 | 3.88 | % | |||||||||||||||||||||
Short-term investments | 44,478 | 152 | 1.37 | % | 49,584 | 141 | 1.14 | % | 103,549 | 163 | 0.63 | % | |||||||||||||||||||||
Total interest-earning assets | 1,691,754 | 18,634 | 4.41 | % | 1,701,726 | 19,225 | 4.52 | % | 1,750,099 | 18,898 | 4.32 | % | |||||||||||||||||||||
Non-interest-earning assets | 85,768 | 81,798 | 67,884 | ||||||||||||||||||||||||||||||
Total assets | $ | 1,777,522 | $ | 1,783,524 | $ | 1,817,983 | |||||||||||||||||||||||||||
Interest-bearing liabilities | |||||||||||||||||||||||||||||||||
Transaction accounts | $ | 240,035 | 364 | 0.61 | % | $ | 231,720 | 288 | 0.50 | % | $ | 182,743 | 113 | 0.25 | % | ||||||||||||||||||
Money market | 588,811 | 700 | 0.48 | % | 588,787 | 659 | 0.45 | % | 632,415 | 758 | 0.48 | % | |||||||||||||||||||||
Certificates of deposit | 57,716 | 150 | 1.04 | % | 54,530 | 133 | 0.98 | % | 63,581 | 152 | 0.96 | % | |||||||||||||||||||||
Wholesale deposits | 346,641 | 1,494 | 1.72 | % | 375,530 | 1,578 | 1.68 | % | 465,273 | 1,847 | 1.59 | % | |||||||||||||||||||||
Total interest-bearing deposits | 1,233,203 | 2,708 | 0.88 | % | 1,250,567 | 2,658 | 0.85 | % | 1,344,012 | 2,870 | 0.85 | % | |||||||||||||||||||||
FHLB advances | 103,401 | 351 | 1.36 | % | 87,386 | 279 | 1.28 | % | 4,991 | 18 | 1.44 | % | |||||||||||||||||||||
Other borrowings(4) | 24,400 | 411 | 6.74 | % | 24,494 | 532 | 8.69 | % | 24,976 | 435 | 6.97 | % | |||||||||||||||||||||
Junior subordinated notes | 10,013 | 281 | 11.23 | % | 10,009 | 277 | 11.08 | % | 9,998 | 280 | 11.20 | % | |||||||||||||||||||||
Total interest-bearing liabilities | 1,371,017 | 3,751 | 1.09 | % | 1,372,456 | 3,746 | 1.09 | % | 1,383,977 | 3,603 | 1.04 | % | |||||||||||||||||||||
Non-interest-bearing demand deposit accounts | 224,961 | 229,051 | 263,627 | ||||||||||||||||||||||||||||||
Other non-interest-bearing liabilities | 15,376 | 14,531 | 11,098 | ||||||||||||||||||||||||||||||
Total liabilities | 1,611,354 | 1,616,038 | 1,658,702 | ||||||||||||||||||||||||||||||
Stockholders’ equity | 166,168 | 167,486 | 159,281 | ||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,777,522 | $ | 1,783,524 | $ | 1,817,983 | |||||||||||||||||||||||||||
Net interest income | $ | 14,883 | $ | 15,479 | $ | 15,295 | |||||||||||||||||||||||||||
Interest rate spread | 3.32 | % | 3.43 | % | 3.28 | % | |||||||||||||||||||||||||||
Net interest-earning assets | $ | 320,737 | $ | 329,270 | $ | 366,122 | |||||||||||||||||||||||||||
Net interest margin | 3.52 | % | 3.64 | % | 3.50 | % | |||||||||||||||||||||||||||
(1) | The average balances of loans and leases include non-performing loans and leases and loans held for sale. Interest income related to non-performing 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) | Average rate of other borrowings reflects the cost of prepaying a secured borrowing during the second quarter of 2017. |
(5) | Represents annualized yields/rates. |
7
NET INTEREST INCOME ANALYSIS (CONTINUED)
(Unaudited) | For the Nine Months Ended | |||||||||||||||||||||
(Dollars in thousands) | September 30, 2017 | September 30, 2016 | ||||||||||||||||||||
Average Balance | Interest | Average Yield/Rate(5) | Average Balance | Interest | Average Yield/Rate(5) | |||||||||||||||||
Interest-earning assets | ||||||||||||||||||||||
Commercial real estate and other mortgage loans(1) | $ | 957,408 | $ | 31,861 | 4.44 | % | $ | 934,615 | $ | 32,366 | 4.62 | % | ||||||||||
Commercial and industrial loans(1) | 451,352 | 19,863 | 5.87 | % | 466,729 | 20,833 | 5.95 | % | ||||||||||||||
Direct financing leases(1) | 29,161 | 932 | 4.26 | % | 30,683 | 1,039 | 4.51 | % | ||||||||||||||
Consumer and other loans(1) | 27,780 | 837 | 4.02 | % | 25,581 | 923 | 4.81 | % | ||||||||||||||
Total loans and leases receivable(1) | 1,465,701 | 53,493 | 4.87 | % | 1,457,608 | 55,161 | 5.04 | % | ||||||||||||||
Mortgage-related securities(2) | 140,705 | 1,845 | 1.75 | % | 145,599 | 1,721 | 1.58 | % | ||||||||||||||
Other investment securities(3) | 37,466 | 480 | 1.71 | % | 32,518 | 381 | 1.56 | % | ||||||||||||||
FHLB and FRB stock | 3,779 | 73 | 2.58 | % | 2,482 | 61 | 3.28 | % | ||||||||||||||
Short-term investments | 48,375 | 415 | 1.14 | % | 107,369 | 472 | 0.59 | % | ||||||||||||||
Total interest-earning assets | 1,696,026 | 56,306 | 4.43 | % | 1,745,576 | 57,796 | 4.41 | % | ||||||||||||||
Non-interest-earning assets | 82,628 | 75,969 | ||||||||||||||||||||
Total assets | $ | 1,778,654 | $ | 1,821,545 | ||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||
Transaction accounts | $ | 221,526 | 885 | 0.53 | % | $ | 164,278 | 273 | 0.22 | % | ||||||||||||
Money market | 601,455 | 2,019 | 0.45 | % | 650,864 | 2,453 | 0.50 | % | ||||||||||||||
Certificates of deposit | 55,888 | 415 | 0.99 | % | 67,440 | 446 | 0.88 | % | ||||||||||||||
Wholesale deposits | 374,083 | 4,720 | 1.68 | % | 478,038 | 5,789 | 1.61 | % | ||||||||||||||
Total interest-bearing deposits | 1,252,952 | 8,039 | 0.86 | % | 1,360,620 | 8,961 | 0.88 | % | ||||||||||||||
FHLB advances | 83,987 | 784 | 1.24 | % | 8,941 | 68 | 1.01 | % | ||||||||||||||
Other borrowings(4) | 24,933 | 1,401 | 7.49 | % | 26,982 | 1,357 | 6.71 | % | ||||||||||||||
Junior subordinated notes | 10,009 | 832 | 11.08 | % | 10,101 | 835 | 11.02 | % | ||||||||||||||
Total interest-bearing liabilities | 1,371,881 | 11,056 | 1.07 | % | 1,406,644 | 11,221 | 1.06 | % | ||||||||||||||
Non-interest-bearing demand deposit accounts | 228,231 | 246,238 | ||||||||||||||||||||
Other non-interest-bearing liabilities | 13,726 | 11,126 | ||||||||||||||||||||
Total liabilities | 1,613,838 | 1,664,008 | ||||||||||||||||||||
Stockholders’ equity | 164,816 | 157,537 | ||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,778,654 | $ | 1,821,545 | ||||||||||||||||||
Net interest income | $ | 45,250 | $ | 46,575 | ||||||||||||||||||
Interest rate spread | 3.36 | % | 3.35 | % | ||||||||||||||||||
Net interest-earning assets | $ | 324,145 | $ | 338,932 | ||||||||||||||||||
Net interest margin | 3.56 | % | 3.56 | % | ||||||||||||||||||
(1) | The average balances of loans and leases include non-performing loans and leases and loans held for sale. Interest income related to non-performing 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) | Average rate of other borrowings reflects the cost of prepaying a secured borrowing during the second quarter of 2017. |
(5) | Represents annualized yields/rates. |
8
SELECTED FINANCIAL TRENDS
PERFORMANCE RATIOS
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||
(Unaudited) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||||
Return on average assets (annualized)(1) | 0.58 | % | 0.42 | % | 0.77 | % | 0.89 | % | 0.59 | % | 0.59 | % | 0.80 | % | |||||||
Return on average equity (annualized)(1) | 6.22 | % | 4.50 | % | 8.31 | % | 9.82 | % | 6.69 | % | 6.36 | % | 9.26 | % | |||||||
Efficiency ratio | 66.56 | % | 65.39 | % | 70.85 | % | 57.52 | % | 63.63 | % | 67.55 | % | 62.35 | % | |||||||
Interest rate spread | 3.32 | % | 3.43 | % | 3.31 | % | 3.70 | % | 3.28 | % | 3.36 | % | 3.35 | % | |||||||
Net interest margin | 3.52 | % | 3.64 | % | 3.51 | % | 3.91 | % | 3.50 | % | 3.56 | % | 3.56 | % | |||||||
Average interest-earning assets to average interest-bearing liabilities | 123.39 | % | 123.99 | % | 123.50 | % | 125.33 | % | 126.45 | % | 123.63 | % | 124.10 | % | |||||||
(1) | Results for the three and nine months ended September 30, 2016 have been adjusted to reflect early adoption of ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” |
ASSET QUALITY RATIOS
(Unaudited) | As of | |||||||||||||||||||
(Dollars in thousands) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Non-performing loans and leases | $ | 33,232 | $ | 37,162 | $ | 37,519 | $ | 25,194 | $ | 25,712 | ||||||||||
Foreclosed properties | 2,585 | 2,585 | 1,472 | 1,472 | 1,527 | |||||||||||||||
Total non-performing assets | 35,817 | 39,747 | 38,991 | 26,666 | 27,239 | |||||||||||||||
Performing troubled debt restructurings | 275 | 702 | 702 | 717 | 732 | |||||||||||||||
Total impaired assets | $ | 36,092 | $ | 40,449 | $ | 39,693 | $ | 27,383 | $ | 27,971 | ||||||||||
Non-performing loans and leases as a percent of total gross loans and leases | 2.26 | % | 2.55 | % | 2.53 | % | 1.74 | % | 1.76 | % | ||||||||||
Non-performing assets as a percent of total gross loans and leases plus foreclosed properties | 2.44 | % | 2.72 | % | 2.63 | % | 1.83 | % | 1.86 | % | ||||||||||
Non-performing assets as a percent of total assets | 2.01 | % | 2.25 | % | 2.17 | % | 1.50 | % | 1.54 | % | ||||||||||
Allowance for loan and lease losses as a percent of total gross loans and leases | 1.36 | % | 1.49 | % | 1.46 | % | 1.44 | % | 1.37 | % | ||||||||||
Allowance for loan and lease losses as a percent of non-performing loans and leases | 59.95 | % | 58.33 | % | 57.75 | % | 83.00 | % | 78.05 | % | ||||||||||
Criticized assets: | ||||||||||||||||||||
Substandard | $ | 36,747 | $ | 39,011 | $ | 46,299 | $ | 34,299 | $ | 32,135 | ||||||||||
Doubtful | 5,055 | 6,658 | — | — | — | |||||||||||||||
Foreclosed properties | 2,585 | 2,585 | 1,472 | 1,472 | 1,527 | |||||||||||||||
Total criticized assets | $ | 44,387 | $ | 48,254 | $ | 47,771 | $ | 35,771 | $ | 33,662 | ||||||||||
Criticized assets to total assets | 2.49 | % | 2.73 | % | 2.65 | % | 2.01 | % | 1.90 | % | ||||||||||
9
NET CHARGE-OFFS (RECOVERIES)
(Unaudited) | For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||
(Dollars in thousands) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||||||||||
Charge-offs | $ | 3,230 | $ | 3,757 | $ | 209 | $ | 344 | $ | 1,656 | $ | 7,196 | $ | 3,250 | ||||||||||||||
Recoveries | (5 | ) | (112 | ) | (391 | ) | (194 | ) | (32 | ) | (508 | ) | (177 | ) | ||||||||||||||
Net charge-offs (recoveries) | $ | 3,225 | $ | 3,645 | $ | (182 | ) | $ | 150 | $ | 1,624 | $ | 6,688 | $ | 3,073 | |||||||||||||
Net charge-offs (recoveries) as a percent of average gross loans and leases (annualized) | 0.88 | % | 0.99 | % | (0.05 | )% | 0.04 | % | 0.44 | % | 0.61 | % | 0.28 | % | ||||||||||||||
CAPITAL RATIOS
As of and for the Three Months Ended | |||||||||||||||
(Unaudited) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||
Total capital to risk-weighted assets | 11.91 | % | 11.91 | % | 11.55 | % | 11.74 | % | 11.44 | % | |||||
Tier I capital to risk-weighted assets | 9.43 | % | 9.33 | % | 9.16 | % | 9.26 | % | 9.02 | % | |||||
Common equity tier I capital to risk-weighted assets | 8.86 | % | 8.77 | % | 8.60 | % | 8.68 | % | 8.45 | % | |||||
Tier I capital to adjusted assets | 9.39 | % | 9.28 | % | 9.26 | % | 9.07 | % | 8.75 | % | |||||
Tangible common equity to tangible assets | 8.69 | % | 8.68 | % | 8.47 | % | 8.42 | % | 8.36 | % | |||||
SELECTED OTHER INFORMATION
Loan and Lease Receivable Composition
(Unaudited) | As of | |||||||||||||||||||
(in thousands) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Commercial real estate: | ||||||||||||||||||||
Commercial real estate - owner occupied | $ | 182,755 | $ | 183,161 | $ | 183,016 | $ | 176,459 | $ | 169,170 | ||||||||||
Commercial real estate - non-owner occupied | 461,586 | 468,778 | 492,366 | 473,158 | 483,540 | |||||||||||||||
Land development | 41,499 | 46,500 | 52,663 | 56,638 | 60,348 | |||||||||||||||
Construction | 115,660 | 104,515 | 91,343 | 101,206 | 110,426 | |||||||||||||||
Multi-family | 125,080 | 124,488 | 107,669 | 92,762 | 73,081 | |||||||||||||||
1-4 family | 40,173 | 38,922 | 40,036 | 45,651 | 46,341 | |||||||||||||||
Total commercial real estate | 966,753 | 966,364 | 967,093 | 945,874 | 942,906 | |||||||||||||||
Commercial and industrial | 447,223 | 437,955 | 458,778 | 450,298 | 464,920 | |||||||||||||||
Direct financing leases, net | 28,868 | 29,216 | 29,330 | 30,951 | 29,638 | |||||||||||||||
Consumer and other: | ||||||||||||||||||||
Home equity and second mortgages | 7,776 | 7,973 | 8,237 | 8,412 | 5,390 | |||||||||||||||
Other | 17,447 | 17,976 | 18,859 | 16,329 | 16,610 | |||||||||||||||
Total consumer and other | 25,223 | 25,949 | 27,096 | 24,741 | 22,000 | |||||||||||||||
Total gross loans and leases receivable | 1,468,067 | 1,459,484 | 1,482,297 | 1,451,864 | 1,459,464 | |||||||||||||||
Less: | ||||||||||||||||||||
Allowance for loan and lease losses | 19,923 | 21,677 | 21,666 | 20,912 | 20,067 | |||||||||||||||
Deferred loan fees | 1,354 | 1,309 | 1,326 | 1,189 | 1,167 | |||||||||||||||
Loans and leases receivable, net | $ | 1,446,790 | $ | 1,436,498 | $ | 1,459,305 | $ | 1,429,763 | $ | 1,438,230 | ||||||||||
10
SELECTED OTHER INFORMATION (CONTINUED)
Deposit Composition
(Unaudited) | As of | |||||||||||||||||||
(in thousands) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Non-interest-bearing transaction accounts | $ | 253,320 | $ | 241,577 | $ | 227,947 | $ | 252,638 | $ | 258,423 | ||||||||||
Interest-bearing transaction accounts | 251,355 | 231,074 | 205,912 | 183,992 | 192,482 | |||||||||||||||
Money market accounts | 527,705 | 593,487 | 616,557 | 627,090 | 603,872 | |||||||||||||||
Certificates of deposit | 58,144 | 54,067 | 53,865 | 58,454 | 62,197 | |||||||||||||||
Wholesale deposits | 333,200 | 354,393 | 388,433 | 416,681 | 449,225 | |||||||||||||||
Total deposits | $ | 1,423,724 | $ | 1,474,598 | $ | 1,492,714 | $ | 1,538,855 | $ | 1,566,199 | ||||||||||
Trust Assets
(Unaudited) | As of | |||||||||||||||||||
(in thousands) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Trust assets under management | $ | 1,240,014 | $ | 1,164,433 | $ | 1,126,835 | $ | 977,015 | $ | 935,584 | ||||||||||
Trust assets under administration | 176,472 | 173,931 | 176,976 | 227,360 | 231,825 | |||||||||||||||
Total trust assets | $ | 1,416,486 | $ | 1,338,364 | $ | 1,303,811 | $ | 1,204,375 | $ | 1,167,409 | ||||||||||
11
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 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) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Common stockholders’ equity | $ | 166,781 | $ | 165,234 | $ | 164,134 | $ | 161,650 | $ | 159,931 | ||||||||||
Goodwill and other intangible assets | (12,735 | ) | (12,760 | ) | (12,774 | ) | (12,773 | ) | (12,762 | ) | ||||||||||
Tangible common equity | $ | 154,046 | $ | 152,474 | $ | 151,360 | $ | 148,877 | $ | 147,169 | ||||||||||
Common shares outstanding | 8,758,923 | 8,716,018 | 8,718,307 | 8,715,856 | 8,717,299 | |||||||||||||||
Book value per share | $ | 19.04 | $ | 18.96 | $ | 18.83 | $ | 18.55 | $ | 18.35 | ||||||||||
Tangible book value per share | 17.59 | 17.49 | 17.36 | 17.08 | 16.88 | |||||||||||||||
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) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Common stockholders’ equity | $ | 166,781 | $ | 165,234 | $ | 164,134 | $ | 161,650 | $ | 159,931 | ||||||||||
Goodwill and other intangible assets | (12,735 | ) | (12,760 | ) | (12,774 | ) | (12,773 | ) | (12,762 | ) | ||||||||||
Tangible common equity | $ | 154,046 | $ | 152,474 | $ | 151,360 | $ | 148,877 | $ | 147,169 | ||||||||||
Total assets | $ | 1,785,656 | $ | 1,768,928 | $ | 1,800,590 | $ | 1,780,699 | $ | 1,772,438 | ||||||||||
Goodwill and other intangible assets | (12,735 | ) | (12,760 | ) | (12,774 | ) | (12,773 | ) | (12,762 | ) | ||||||||||
Tangible assets | $ | 1,772,921 | $ | 1,756,168 | $ | 1,787,816 | $ | 1,767,926 | $ | 1,759,676 | ||||||||||
Tangible common equity to tangible assets | 8.69 | % | 8.68 | % | 8.47 | % | 8.42 | % | 8.36 | % | ||||||||||
12
EFFICIENCY RATIO
“Efficiency ratio” is a non-GAAP measure representing non-interest expense excluding the effects of losses or gains on foreclosed properties, other discrete items that are unrelated to the Company’s primary business activities and amortization of other intangible assets, 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. In the judgment of the Company’s management, the adjustments made to non-interest expense and operating revenue 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 to its most comparable GAAP measure.
(Unaudited) | For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||
(Dollars in thousands) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||||||||||
Total non-interest expense | $ | 14,231 | $ | 14,221 | $ | 13,560 | $ | 14,523 | $ | 15,753 | $ | 42,012 | $ | 41,910 | ||||||||||||||
Less: | ||||||||||||||||||||||||||||
Net loss on foreclosed properties | — | — | — | 29 | — | — | 93 | |||||||||||||||||||||
Amortization of other intangible assets | 14 | 14 | 14 | 14 | 16 | 41 | 48 | |||||||||||||||||||||
SBA recourse provision | 1,315 | 774 | 6 | 1,619 | 375 | 2,095 | 449 | |||||||||||||||||||||
Impairment of tax credit investments | 112 | 112 | 113 | 171 | 3,314 | 338 | 3,520 | |||||||||||||||||||||
Deconversion fees | — | 101 | — | 794 | — | 101 | — | |||||||||||||||||||||
Total operating expense | $ | 12,790 | $ | 13,220 | $ | 13,427 | $ | 11,896 | $ | 12,048 | $ | 39,437 | $ | 37,800 | ||||||||||||||
Net interest income | $ | 14,883 | $ | 15,479 | $ | 14,888 | $ | 16,753 | $ | 15,295 | $ | 45,250 | $ | 46,575 | ||||||||||||||
Total non-interest income | 4,339 | 4,738 | 4,063 | 3,931 | 3,640 | 13,140 | 14,057 | |||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||
Gain on sale of securities | 5 | 1 | — | 3 | — | 6 | 7 | |||||||||||||||||||||
Total operating revenue | $ | 19,217 | $ | 20,216 | $ | 18,951 | $ | 20,681 | $ | 18,935 | $ | 58,384 | $ | 60,625 | ||||||||||||||
Efficiency ratio | 66.56 | % | 65.39 | % | 70.85 | % | 57.52 | % | 63.63 | % | 67.55 | % | 62.35 | % | ||||||||||||||
13