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| 8-K - FORM 8-K - FIRST BUSINESS FINANCIAL SERVICES, INC. | fbiz20171231earningsreleas.htm |
Exhibit 99.1
[FOR IMMEDIATE RELEASE]
First Business Financial Services, Inc.
401 Charmany Drive
Madison, WI 53719
FIRST BUSINESS REPORTS FOURTH QUARTER 2017 FINANCIAL RESULTS
-- Improved asset quality, strong margin, and loan growth support solid performance --
MADISON, Wis., Jan. 25, 2018 (GLOBE NEWSWIRE) -- First Business Financial Services, Inc. (the “Company” or “First Business”) (NASDAQ:FBIZ) reported fourth quarter 2017 results highlighted by markedly improved credit metrics, stable net interest margin and solid loan growth. Loan loss provision declined by $1.0 million, or 67.8%, from the linked quarter, marking the lowest level of provision in nine quarters.
Summary results for the quarter ended December 31, 2017 include:
• | Net income totaled $4.0 million, compared to $2.6 million in the linked quarter and $4.0 million in the fourth quarter of 2016. Net income reflected $629,000 in a one-time tax expense related to the enactment of the Tax Cuts and Jobs Act (the “Act”) during the fourth quarter of 2017. |
• | During the fourth quarter of 2017, the Company recognized a $3.0 million federal historic tax credit that resulted in a net benefit totaling $674,000, or $0.08 per share, after consideration of the $2.3 million impairment of the underlying tax credit investment. |
• | Diluted earnings per common share measured $0.46, compared to $0.30 and $0.46 for the linked and prior year quarters, respectively. |
• | Annualized return on average assets and annualized return on average equity measured 0.91% and 9.57%, respectively, for the fourth quarter of 2017, compared to 0.58% and 6.22% for the linked quarter and 0.89% and 9.82% for the fourth quarter of 2016. |
• | Net interest margin was 3.63%, compared to 3.52% in the linked quarter and 3.91% for the fourth quarter of 2016. |
• | Trust and investment services fee income totaled a record $1.7 million, growing 5.2% from the linked quarter and 26.5% from the fourth quarter of 2016. |
• | Provision for loan and lease losses decreased to $473,000, compared to $1.5 million for the linked quarter and $1.0 million for the fourth quarter of 2016. |
• | SBA recourse provision decreased to $145,000, compared to $1.3 million for the linked quarter and $1.6 million for the fourth quarter of 2016. |
• | The Company’s efficiency ratio measured 63.23%, compared to 66.56% for the linked quarter and 57.52% for the fourth quarter of 2016. |
• | Record period-end gross loans and leases receivable of $1.502 billion grew 9.5% annualized during the fourth quarter and up 3.5% from December 31, 2016. |
• | Non-performing loans and leases as a percent of total gross loans and leases receivable measured 1.76% at December 31, 2017, compared to 2.26% and 1.74% at the end of the linked and prior year quarters, respectively. |
“Fourth quarter results reflect a positive trajectory for First Business,” said Corey Chambas, President and Chief Executive Officer. “Non-performing loans declined for the third consecutive quarter, total loans grew meaningfully, and core net interest margin remained above our 3.50% target, aided by well-managed funding amid a rising rate and highly competitive environment. In addition, our trust business again posted record levels of assets and revenue, and we continued to exercise discipline in our operating expenses.”
Chambas added, “While a lack of SBA loan sales muted fourth quarter revenue, we believe our strengthening pipeline positions us well for 2018. We rebuilt our SBA production staff during the second half of 2017 and expect to add additional producers in 2018. We begin the new year encouraged by the outcomes of significant work on our SBA platform, which positions us for growth as we move through 2018.”
Results of Operations
Net interest income was $15.4 million in the fourth quarter of 2017, compared to $14.9 million in the linked quarter and $16.8 million in the fourth quarter of 2016. Non-accrual interest received upon full repayment of $4.3 million of impaired loans outstanding from four borrowers boosted net interest income by $440,000 during the quarter. Elevated fourth quarter 2016 fees collected in lieu of interest from loan payoffs (“prepayment fees”) of $2.0 million significantly increased net interest income in the prior year quarter. Additionally, net interest income in the fourth quarter of 2017 continued to reflect a
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shift in the mix of loan originations toward lower-yielding conventional commercial loans. This was partially offset by successful efforts to manage deposit rates and utilize an efficient mix of wholesale funding sources, as well as the increase in rates on certain variable-rate loans following the Federal Open Market Committee’s increases in the targeted federal funds rate since December 2016.
Average total deposit costs for the fourth quarter of 2017 increased to 0.79%, compared to 0.74% in the linked quarter and 0.71% in the prior year quarter. Similarly, the Company’s cost of total bank funding increased to 0.88% for the fourth quarter of 2017, compared to 0.78% in the linked quarter and 0.72% in the prior year quarter. Total bank funding is defined as total deposits plus FHLB advances. Management believes a modest increase in average total deposit costs will continue as the Company looks to effectively manage deposit relationships amid intense competition and continued expectation of a rising rate environment.
Net interest margin measured 3.63% for the fourth quarter of 2017, compared to 3.52% in the linked quarter and 3.91% in the fourth quarter of 2016. The full repayment of the aforementioned non-performing credits contributed 10 basis points to net interest margin during the fourth quarter of 2017. Third quarter of 2017 was not materially affected by volatile sources of net interest income. Elevated prepayment fees drove the net interest margin increase in the fourth quarter of 2016. The collection of interest on loans previously in non-accrual status, prepayment fees, and the accumulation of significant short-term deposit inflows are, and will continue to be, expected sources of volatility to quarterly net interest income and net interest margin. Management expects the successful continuation of its strategies will allow the Company to maintain a net interest margin within its target of 3.50% or better.
The Company recorded provision for loan and lease losses totaling $473,000 in the fourth quarter of 2017, compared to $1.5 million in the linked quarter and $1.0 million in the fourth quarter of 2016. Provision for the fourth quarter of 2017 primarily reflects an increase to the general reserve commensurate with loan growth during the quarter.
Non-interest income totaled $3.5 million, or 18.7% of total revenue, for the fourth quarter of 2017, compared to $4.3 million, or 22.6%, for the linked quarter and $3.9 million, or 19.0%, for the fourth quarter of 2016. Non-interest income was reduced by the sale of certain securities at a net loss of $409,000 late in December 2017, ahead of the 2018 reduction in corporate tax rates. The Company reinvested the cash into securities within the portfolio’s existing risk profile while adding approximately 130 basis points in yield. Additionally, fourth quarter of 2017 non-interest income decreased as gains on the sale of SBA loans decreased to $90,000 for the fourth quarter of 2017, compared to $606,000 and $546,000 in the linked and year ago quarters, respectively.
“The SBA loans originated through our revamped nationwide SBA platform continue to meet our quality, compliance and profitability expectations,” Chambas commented. “While we anticipate some volatility in our SBA business line, we are pleased with our recent hires of production staff and low level of fourth quarter recourse reserve expense. Moving forward, we anticipate high quality growth will continue at a moderate pace as recently hired talent and anticipated hires gain momentum.”
The linked quarter comparison additionally reflected lower swap fees resulting from transactions in which the Company offers the client a floating rate loan and interest rate swap and then offsets the interest rate risk through an interest rate swap with a counter-party dealer. Although we believe additional demand for these types of opportunities will continue in 2018 due to the market’s assumptions of a rising interest rate environment, swap fee income may be a source of non-interest income volatility based on the needs of our clients.
Record trust and investment services fee income continued to boost revenues and remained the Company’s largest source of non-interest income. Trust and investment services fee income totaled $1.7 million in the fourth quarter of 2017, increasing $86,000, or 5.2%, and $364,000, or 26.5%, 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 $1.536 billion at December 31, 2017, up $119.9 million, or 33.9% annualized, from the prior quarter and $332.0 million, or 27.6%, from December 31, 2016.
Non-interest expense was $14.9 million for the fourth quarter of 2017, compared to $14.2 million for the linked quarter and $14.5 million in the fourth quarter of 2016. Significant non-operating, one-time items impacted expenses across these periods. During the fourth quarter of 2017, the Company recognized $2.3 million in nonrecurring expense due to impairment of a federal historic tax credit investment, which corresponded with the recognition of $3.0 million in tax credits during the quarter. Additionally, during the fourth quarter of 2017 the Company recognized $199,000 in final deconversion costs related to Alterra Bank’s core banking system, following $794,000 in one-time fees recognized in the fourth quarter of 2016 to terminate its core banking system vendor agreement. The Company also recorded $145,000 in SBA recourse provision for estimated losses in the outstanding guaranteed portion of SBA loans sold, down from $1.3 million and $1.6 million recorded in the linked and prior year quarters, respectively. The total recourse reserve balance was $2.8 million, or 2.8% of total sold
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SBA loans outstanding at December 31, 2017. Changes to SBA recourse reserves may be a source of non-interest expense volatility in future quarters.
Operating expense totaled $12.2 million in the fourth quarter of 2017, $12.8 million in the linked quarter and $11.9 million in the fourth quarter of 2016. Operating expenses for the periods of comparison are defined in the Efficiency Ratio table included in the Non-GAAP Reconciliations at the end of this release.
Lower full year 2017 incentive compensation, which is tied to the Company’s overall performance, is reflected in total compensation expense for the fourth quarter. Consequently, total compensation expense decreased by $692,000 and $138,000 compared to the linked and prior year quarters, respectively.
The Company’s fourth quarter 2017 efficiency ratio was 63.23%, compared to 66.56% for the linked quarter and 57.52% for the fourth quarter of 2016. 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 core conversion, as well as long-term revenue initiatives, such as efforts to increase sustainable and high-quality SBA lending production.
Income Tax Expense
Effective January 1, 2018, the Act reduced the corporate federal income tax rate to 21% from 35%, which required the Company to revalue deferred taxes as of December 31, 2017. The revaluation resulted in an additional $629,000 income tax expense during the fourth quarter of 2017. The Company also recognized a federal historic tax credit during the quarter, which reduced income tax expense by $3.0 million.
The full year 2017 effective tax rate, excluding these fourth quarter discrete items, was 28.4%. For 2018, the Company expects to report an effective tax rate of 20%-22%, excluding discrete items.
Balance Sheet
Period-end gross loans and leases receivable totaled $1.502 billion at December 31, 2017, increasing $34.9 million, or 2.4%, from September 30, 2017 and increasing $50.9 million, or 3.5%, from December 31, 2016. On an average basis, reflecting particularly strong production late in the fourth quarter, gross loans and leases of $1.467 billion decreased by $3.6 million, or 0.2%, compared to the linked quarter and decreased by $817,000, or 0.1%, compared to the fourth quarter of 2016.
As of December 31, 2017, net conventional loan balances for the Company’s established Wisconsin markets increased $22.5 million compared to the linked quarter and $91.7 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.
Period-end in-market deposits - consisting of all transaction accounts, money market accounts and non-wholesale deposits - totaled $1.086 billion, or 68.9% of total bank funding at December 31, 2017, compared to $1.091 billion, or 69.6%, at September 30, 2017 and $1.122 billion, or 71.4%, at December 31, 2016. Period-end wholesale bank funds were $491.5 million at December 31, 2017, including brokered certificates of deposit of $287.6 million, deposits gathered through internet deposit listing services of $20.4 million and Federal Home Loan Bank (“FHLB”) advances of $183.5 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 target range of 60%-70%.
Asset Quality
Total non-performing loans were $26.4 million at December 31, 2017, decreasing by $6.8 million, or 20.6%, compared to $33.2 million at September 30, 2017 and increasing by $1.2 million, or 4.7%, compared to $25.2 million at December 31, 2016. The decrease from the linked quarter primarily reflected the aforementioned full repayment of $4.3 million of impaired loans associated with four borrowers. Net charge-offs of $1.6 million during the fourth quarter of 2017, of which the significant majority were previously individually reserved for, also contributed to the non-performing loans decrease. No significant credits migrated to non-accrual status during the quarter. As a percent of total gross loans and leases receivable, non-performing loans measured 1.76% at December 31, 2017, compared to 2.26% and 1.74% at the end of the linked quarter and fourth quarter of 2016, respectively.
“The significant steps we have taken to improve asset quality are producing the intended outcomes,” Chambas said. “The fourth quarter decline in non-performing loans marks the third consecutive quarterly improvement, and we are pleased with our success in securing repayment for previously impaired credits. We remain focused on restoring our historically strong asset quality and are confident in our team’s ability to execute over the long term.”
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Capital Strength
The Company's capital ratios continued to exceed the highest required regulatory benchmark levels. As of December 31, 2017, total capital to risk-weighted assets was 11.98%, tier 1 capital to risk-weighted assets was 9.45%, tier 1 leverage capital to adjusted average assets was 9.54% and common equity tier 1 capital to risk-weighted assets was 8.89%. In addition, as of December 31, 2017, tangible common equity to tangible assets was 8.79%.
Quarterly Dividend
As previously announced, during the fourth quarter of 2017, the Company's Board of Directors declared a regular quarterly dividend of $0.13 per share. The dividend was paid on November 16, 2017 to shareholders of record at the close of business on November 6, 2017. Measured against fourth quarter 2017 diluted earnings per share of $0.46, the dividend represents a 28.3% 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) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and cash equivalents | $ | 52,539 | $ | 73,196 | $ | 63,745 | $ | 60,899 | $ | 77,517 | ||||||||||
Securities available-for-sale, at fair value | 126,005 | 131,130 | 136,834 | 147,058 | 145,893 | |||||||||||||||
Securities held-to-maturity, at amortized cost | 37,778 | 38,873 | 37,806 | 38,485 | 38,612 | |||||||||||||||
Loans held for sale | 2,194 | — | 3,491 | 3,924 | 1,111 | |||||||||||||||
Loans and leases receivable | 1,501,595 | 1,466,713 | 1,458,175 | 1,480,971 | 1,450,675 | |||||||||||||||
Allowance for loan and lease losses | (18,763 | ) | (19,923 | ) | (21,677 | ) | (21,666 | ) | (20,912 | ) | ||||||||||
Loans and leases, net | 1,482,832 | 1,446,790 | 1,436,498 | 1,459,305 | 1,429,763 | |||||||||||||||
Premises and equipment, net | 3,156 | 3,048 | 2,930 | 3,955 | 3,772 | |||||||||||||||
Foreclosed properties | 1,069 | 2,585 | 2,585 | 1,472 | 1,472 | |||||||||||||||
Bank-owned life insurance | 40,323 | 39,988 | 39,674 | 39,358 | 39,048 | |||||||||||||||
Federal Home Loan Bank and Federal Reserve Bank stock, at cost | 5,670 | 5,083 | 2,815 | 4,782 | 2,131 | |||||||||||||||
Goodwill and other intangible assets | 12,652 | 12,735 | 12,760 | 12,774 | 12,773 | |||||||||||||||
Accrued interest receivable and other assets | 29,848 | 32,228 | 29,790 | 28,578 | 28,607 | |||||||||||||||
Total assets | $ | 1,794,066 | $ | 1,785,656 | $ | 1,768,928 | $ | 1,800,590 | $ | 1,780,699 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
In-market deposits | $ | 1,086,346 | $ | 1,090,524 | $ | 1,120,205 | $ | 1,104,281 | $ | 1,122,174 | ||||||||||
Wholesale deposits | 307,985 | 333,200 | 354,393 | 388,433 | 416,681 | |||||||||||||||
Total deposits | 1,394,331 | 1,423,724 | 1,474,598 | 1,492,714 | 1,538,855 | |||||||||||||||
Federal Home Loan Bank advances and other borrowings | 207,898 | 167,884 | 106,395 | 121,841 | 59,676 | |||||||||||||||
Junior subordinated notes | 10,019 | 10,015 | 10,012 | 10,008 | 10,004 | |||||||||||||||
Accrued interest payable and other liabilities | 12,540 | 17,252 | 12,689 | 11,893 | 10,514 | |||||||||||||||
Total liabilities | 1,624,788 | 1,618,875 | 1,603,694 | 1,636,456 | 1,619,049 | |||||||||||||||
Total stockholders’ equity | 169,278 | 166,781 | 165,234 | 164,134 | 161,650 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,794,066 | $ | 1,785,656 | $ | 1,768,928 | $ | 1,800,590 | $ | 1,780,699 | ||||||||||
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STATEMENTS OF INCOME
(Unaudited) | As of and for the Three Months Ended | As of and for the Year Ended | ||||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||
Total interest income | $ | 19,504 | $ | 18,634 | $ | 19,225 | $ | 18,447 | $ | 20,321 | $ | 75,811 | $ | 78,117 | ||||||||||||||
Total interest expense | 4,146 | 3,751 | 3,746 | 3,559 | 3,568 | 15,202 | 14,789 | |||||||||||||||||||||
Net interest income | 15,358 | 14,883 | 15,479 | 14,888 | 16,753 | 60,609 | 63,328 | |||||||||||||||||||||
Provision for loan and lease losses | 473 | 1,471 | 3,656 | 572 | 994 | 6,172 | 7,818 | |||||||||||||||||||||
Net interest income after provision for loan and lease losses | 14,885 | 13,412 | 11,823 | 14,316 | 15,759 | 54,437 | 55,510 | |||||||||||||||||||||
Trust and investment service fees | 1,739 | 1,653 | 1,648 | 1,629 | 1,375 | 6,670 | 5,356 | |||||||||||||||||||||
Gain on sale of SBA loans | 90 | 606 | 535 | 360 | 546 | 1,591 | 4,400 | |||||||||||||||||||||
Service charges on deposits | 727 | 756 | 766 | 765 | 743 | 3,013 | 2,990 | |||||||||||||||||||||
Loan fees | 463 | 391 | 675 | 458 | 639 | 1,988 | 2,430 | |||||||||||||||||||||
Net (loss) gain on sale of securities | (409 | ) | 5 | 1 | — | 3 | (403 | ) | 10 | |||||||||||||||||||
Other non-interest income | 915 | 928 | 1,113 | 851 | 625 | 3,806 | 2,802 | |||||||||||||||||||||
Total non-interest income | 3,525 | 4,339 | 4,738 | 4,063 | 3,931 | 16,665 | 17,988 | |||||||||||||||||||||
Compensation | 6,953 | 7,645 | 8,382 | 8,683 | 7,091 | 31,663 | 31,545 | |||||||||||||||||||||
Occupancy | 567 | 527 | 519 | 475 | 481 | 2,088 | 2,019 | |||||||||||||||||||||
Professional fees | 1,017 | 995 | 1,041 | 1,010 | 1,144 | 4,063 | 4,031 | |||||||||||||||||||||
Data processing | 891 | 592 | 635 | 584 | 1,327 | 2,701 | 3,298 | |||||||||||||||||||||
Marketing | 563 | 594 | 582 | 370 | 628 | 2,109 | 2,338 | |||||||||||||||||||||
Equipment | 342 | 285 | 300 | 283 | 276 | 1,211 | 1,189 | |||||||||||||||||||||
Computer software | 686 | 715 | 639 | 683 | 553 | 2,723 | 2,160 | |||||||||||||||||||||
FDIC insurance | 307 | 320 | 381 | 380 | 483 | 1,388 | 1,472 | |||||||||||||||||||||
Collateral liquidation costs | 273 | 371 | 77 | 92 | 58 | 829 | 262 | |||||||||||||||||||||
Net (gain) loss on foreclosed properties | (143 | ) | — | — | — | 29 | (143 | ) | 122 | |||||||||||||||||||
Impairment of tax credit investments | 2,447 | 112 | 112 | 113 | 171 | 2,784 | 3,691 | |||||||||||||||||||||
SBA recourse provision | 145 | 1,315 | 774 | 6 | 1,619 | 2,240 | 2,068 | |||||||||||||||||||||
Other non-interest expense | 811 | 760 | 779 | 881 | 663 | 3,215 | 2,238 | |||||||||||||||||||||
Total non-interest expense | 14,859 | 14,231 | 14,221 | 13,560 | 14,523 | 56,871 | 56,433 | |||||||||||||||||||||
Income before income tax (benefit) expense | 3,551 | 3,520 | 2,340 | 4,819 | 5,167 | 14,231 | 17,065 | |||||||||||||||||||||
Income tax (benefit) expense(1) | (486 | ) | 936 | 454 | 1,422 | 1,199 | 2,326 | 2,156 | ||||||||||||||||||||
Net income(1) | $ | 4,037 | $ | 2,584 | $ | 1,886 | $ | 3,397 | $ | 3,968 | $ | 11,905 | $ | 14,909 | ||||||||||||||
Per common share: | ||||||||||||||||||||||||||||
Basic earnings(1) | $ | 0.46 | $ | 0.30 | $ | 0.22 | $ | 0.39 | $ | 0.46 | $ | 1.36 | $ | 1.71 | ||||||||||||||
Diluted earnings(1) | 0.46 | 0.30 | 0.22 | 0.39 | 0.46 | 1.36 | 1.71 | |||||||||||||||||||||
Dividends declared | 0.13 | 0.13 | 0.13 | 0.13 | 0.12 | 0.52 | 0.48 | |||||||||||||||||||||
Book value | 19.32 | 19.04 | 18.96 | 18.83 | 18.55 | 19.32 | 18.55 | |||||||||||||||||||||
Tangible book value | 17.87 | 17.59 | 17.49 | 17.36 | 17.08 | 17.87 | 17.08 | |||||||||||||||||||||
Weighted-average common shares outstanding(2) | 8,631,554 | 8,621,311 | 8,601,379 | 8,600,620 | 8,587,814 | 8,612,770 | 8,573,722 | |||||||||||||||||||||
Weighted-average diluted common shares outstanding(2) | 8,631,554 | 8,621,311 | 8,601,379 | 8,600,620 | 8,587,814 | 8,612,770 | 8,573,722 | |||||||||||||||||||||
(1) | Results as of and for the three months and year ended December 31, 2016 have been adjusted to reflect early adoption of ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” |
(2) | Excluding participating securities. |
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NET INTEREST INCOME ANALYSIS
(Unaudited) | For the Three Months Ended | ||||||||||||||||||||||||||||||||
(Dollars in thousands) | December 31, 2017 | September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||||||||
Average Balance | Interest | Average Yield/Rate(4) | Average Balance | Interest | Average Yield/Rate(4) | Average Balance | Interest | Average Yield/Rate(4) | |||||||||||||||||||||||||
Interest-earning assets | |||||||||||||||||||||||||||||||||
Commercial real estate and other mortgage loans(1) | $ | 973,929 | $ | 11,591 | 4.76 | % | $ | 966,711 | $ | 10,922 | 4.52 | % | $ | 950,168 | $ | 11,561 | 4.87 | % | |||||||||||||||
Commercial and industrial loans(1) | 437,804 | 6,303 | 5.76 | % | 448,955 | 6,187 | 5.51 | % | 462,778 | 7,309 | 6.32 | % | |||||||||||||||||||||
Direct financing leases(1) | 28,476 | 299 | 4.20 | % | 28,648 | 303 | 4.23 | % | 29,476 | 325 | 4.41 | % | |||||||||||||||||||||
Consumer and other loans(1) | 27,110 | 274 | 4.04 | % | 26,577 | 274 | 4.12 | % | 25,714 | 271 | 4.22 | % | |||||||||||||||||||||
Total loans and leases receivable(1) | 1,467,319 | 18,467 | 5.03 | % | 1,470,891 | 17,686 | 4.81 | % | 1,468,136 | 19,466 | 5.30 | % | |||||||||||||||||||||
Mortgage-related securities(2) | 132,067 | 621 | 1.88 | % | 136,330 | 613 | 1.80 | % | 152,894 | 607 | 1.59 | % | |||||||||||||||||||||
Other investment securities(3) | 35,956 | 202 | 2.25 | % | 36,106 | 158 | 1.75 | % | 34,414 | 136 | 1.58 | % | |||||||||||||||||||||
FHLB and FRB stock | 5,572 | 30 | 2.15 | % | 3,949 | 25 | 2.53 | % | 2,702 | 18 | 2.66 | % | |||||||||||||||||||||
Short-term investments | 51,303 | 184 | 1.43 | % | 44,478 | 152 | 1.37 | % | 56,364 | 94 | 0.67 | % | |||||||||||||||||||||
Total interest-earning assets | 1,692,217 | 19,504 | 4.61 | % | 1,691,754 | 18,634 | 4.41 | % | 1,714,510 | 20,321 | 4.74 | % | |||||||||||||||||||||
Non-interest-earning assets | 91,361 | 85,768 | 67,719 | ||||||||||||||||||||||||||||||
Total assets | $ | 1,783,578 | $ | 1,777,522 | $ | 1,782,229 | |||||||||||||||||||||||||||
Interest-bearing liabilities | |||||||||||||||||||||||||||||||||
Transaction accounts | $ | 241,421 | 450 | 0.75 | % | $ | 240,035 | 364 | 0.61 | % | $ | 185,336 | 184 | 0.40 | % | ||||||||||||||||||
Money market | 529,195 | 727 | 0.55 | % | 588,811 | 700 | 0.48 | % | 618,723 | 659 | 0.43 | % | |||||||||||||||||||||
Certificates of deposit | 58,977 | 154 | 1.04 | % | 57,716 | 150 | 1.04 | % | 60,149 | 145 | 0.96 | % | |||||||||||||||||||||
Wholesale deposits | 325,000 | 1,435 | 1.77 | % | 346,641 | 1,494 | 1.72 | % | 437,412 | 1,767 | 1.62 | % | |||||||||||||||||||||
Total interest-bearing deposits | 1,154,593 | 2,766 | 0.96 | % | 1,233,203 | 2,708 | 0.88 | % | 1,301,620 | 2,755 | 0.85 | % | |||||||||||||||||||||
FHLB advances | 168,451 | 689 | 1.64 | % | 103,401 | 351 | 1.36 | % | 30,995 | 72 | 0.93 | % | |||||||||||||||||||||
Other borrowings | 24,389 | 411 | 6.74 | % | 24,400 | 411 | 6.74 | % | 25,387 | 461 | 7.26 | % | |||||||||||||||||||||
Junior subordinated notes | 10,016 | 280 | 11.18 | % | 10,013 | 281 | 11.23 | % | 10,002 | 280 | 11.20 | % | |||||||||||||||||||||
Total interest-bearing liabilities | 1,357,449 | 4,146 | 1.22 | % | 1,371,017 | 3,751 | 1.09 | % | 1,368,004 | 3,568 | 1.04 | % | |||||||||||||||||||||
Non-interest-bearing demand deposit accounts | 238,846 | 224,961 | 246,016 | ||||||||||||||||||||||||||||||
Other non-interest-bearing liabilities | 18,632 | 15,376 | 6,655 | ||||||||||||||||||||||||||||||
Total liabilities | 1,614,927 | 1,611,354 | 1,620,675 | ||||||||||||||||||||||||||||||
Stockholders’ equity | 168,651 | 166,168 | 161,554 | ||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,783,578 | $ | 1,777,522 | $ | 1,782,229 | |||||||||||||||||||||||||||
Net interest income | $ | 15,358 | $ | 14,883 | $ | 16,753 | |||||||||||||||||||||||||||
Interest rate spread | 3.39 | % | 3.32 | % | 3.70 | % | |||||||||||||||||||||||||||
Net interest-earning assets | $ | 334,768 | $ | 320,737 | $ | 346,506 | |||||||||||||||||||||||||||
Net interest margin | 3.63 | % | 3.52 | % | 3.91 | % | |||||||||||||||||||||||||||
(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) | Represents annualized yields/rates. |
7
NET INTEREST INCOME ANALYSIS (CONTINUED)
(Unaudited) | For the Year Ended | |||||||||||||||||||||
(Dollars in thousands) | December 31, 2017 | December 31, 2016 | ||||||||||||||||||||
Average Balance | Interest | Average Yield/Rate | Average Balance | Interest | Average Yield/Rate | |||||||||||||||||
Interest-earning assets | ||||||||||||||||||||||
Commercial real estate and other mortgage loans(1) | $ | 961,572 | $ | 43,452 | 4.52 | % | $ | 938,524 | $ | 43,927 | 4.68 | % | ||||||||||
Commercial and industrial loans(1) | 447,937 | 26,165 | 5.84 | % | 465,736 | 28,143 | 6.04 | % | ||||||||||||||
Direct financing leases(1) | 28,988 | 1,231 | 4.25 | % | 30,379 | 1,364 | 4.49 | % | ||||||||||||||
Consumer and other loans(1) | 27,612 | 1,112 | 4.03 | % | 25,615 | 1,193 | 4.66 | % | ||||||||||||||
Total loans and leases receivable(1) | 1,466,109 | 71,960 | 4.91 | % | 1,460,254 | 74,627 | 5.11 | % | ||||||||||||||
Mortgage-related securities(2) | 138,528 | 2,466 | 1.78 | % | 147,433 | 2,328 | 1.58 | % | ||||||||||||||
Other investment securities(3) | 37,085 | 682 | 1.84 | % | 32,995 | 517 | 1.57 | % | ||||||||||||||
FHLB and FRB stock | 4,231 | 103 | 2.43 | % | 2,537 | 79 | 3.11 | % | ||||||||||||||
Short-term investments | 49,113 | 600 | 1.22 | % | 94,548 | 566 | 0.60 | % | ||||||||||||||
Total interest-earning assets | 1,695,066 | 75,811 | 4.47 | % | 1,737,767 | 78,117 | 4.50 | % | ||||||||||||||
Non-interest-earning assets | 84,829 | 73,905 | ||||||||||||||||||||
Total assets | $ | 1,779,895 | $ | 1,811,672 | ||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||
Transaction accounts | $ | 226,540 | 1,335 | 0.59 | % | $ | 169,571 | 456 | 0.27 | % | ||||||||||||
Money market | 583,241 | 2,746 | 0.47 | % | 642,784 | 3,112 | 0.48 | % | ||||||||||||||
Certificates of deposit | 56,667 | 569 | 1.00 | % | 65,608 | 592 | 0.90 | % | ||||||||||||||
Wholesale deposits | 361,712 | 6,155 | 1.70 | % | 467,826 | 7,556 | 1.62 | % | ||||||||||||||
Total interest-bearing deposits | 1,228,160 | 10,805 | 0.88 | % | 1,345,789 | 11,716 | 0.87 | % | ||||||||||||||
FHLB advances | 105,276 | 1,472 | 1.40 | % | 14,485 | 140 | 0.97 | % | ||||||||||||||
Other borrowings(4) | 24,796 | 1,813 | 7.31 | % | 26,581 | 1,818 | 6.84 | % | ||||||||||||||
Junior subordinated notes | 10,011 | 1,112 | 11.11 | % | 10,076 | 1,115 | 11.07 | % | ||||||||||||||
Total interest-bearing liabilities | 1,368,243 | 15,202 | 1.11 | % | 1,396,931 | 14,789 | 1.06 | % | ||||||||||||||
Non-interest-bearing demand deposit accounts | 230,907 | 246,182 | ||||||||||||||||||||
Other non-interest-bearing liabilities | 14,375 | 10,013 | ||||||||||||||||||||
Total liabilities | 1,613,525 | 1,653,126 | ||||||||||||||||||||
Stockholders’ equity | 166,370 | 158,546 | ||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,779,895 | $ | 1,811,672 | ||||||||||||||||||
Net interest income | $ | 60,609 | $ | 63,328 | ||||||||||||||||||
Interest rate spread | 3.36 | % | 3.44 | % | ||||||||||||||||||
Net interest-earning assets | $ | 326,823 | $ | 340,836 | ||||||||||||||||||
Net interest margin | 3.58 | % | 3.64 | % | ||||||||||||||||||
(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. |
8
SELECTED FINANCIAL TRENDS
PERFORMANCE RATIOS
For the Three Months Ended | For the Year Ended | ||||||||||||||||||||
(Unaudited) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | ||||||||||||||
Return on average assets (annualized)(1) | 0.91 | % | 0.58 | % | 0.42 | % | 0.77 | % | 0.89 | % | 0.67 | % | 0.82 | % | |||||||
Return on average equity (annualized)(1) | 9.57 | % | 6.22 | % | 4.50 | % | 8.31 | % | 9.82 | % | 7.16 | % | 9.40 | % | |||||||
Efficiency ratio | 63.23 | % | 66.56 | % | 65.39 | % | 70.85 | % | 57.52 | % | 66.48 | % | 61.12 | % | |||||||
Interest rate spread | 3.39 | % | 3.32 | % | 3.43 | % | 3.31 | % | 3.70 | % | 3.36 | % | 3.44 | % | |||||||
Net interest margin | 3.63 | % | 3.52 | % | 3.64 | % | 3.51 | % | 3.91 | % | 3.58 | % | 3.64 | % | |||||||
Average interest-earning assets to average interest-bearing liabilities | 124.66 | % | 123.39 | % | 123.99 | % | 123.50 | % | 125.33 | % | 123.89 | % | 124.40 | % | |||||||
(1) | Results for the three months and year ended December 31, 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) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||||||||
Non-performing loans and leases | $ | 26,389 | $ | 33,232 | $ | 37,162 | $ | 37,519 | $ | 25,194 | ||||||||||
Foreclosed properties | 1,069 | 2,585 | 2,585 | 1,472 | 1,472 | |||||||||||||||
Total non-performing assets | 27,458 | 35,817 | 39,747 | 38,991 | 26,666 | |||||||||||||||
Performing troubled debt restructurings | 332 | 275 | 702 | 702 | 717 | |||||||||||||||
Total impaired assets | $ | 27,790 | $ | 36,092 | $ | 40,449 | $ | 39,693 | $ | 27,383 | ||||||||||
Non-performing loans and leases as a percent of total gross loans and leases | 1.76 | % | 2.26 | % | 2.55 | % | 2.53 | % | 1.74 | % | ||||||||||
Non-performing assets as a percent of total gross loans and leases plus foreclosed properties | 1.83 | % | 2.44 | % | 2.72 | % | 2.63 | % | 1.83 | % | ||||||||||
Non-performing assets as a percent of total assets | 1.53 | % | 2.01 | % | 2.25 | % | 2.17 | % | 1.50 | % | ||||||||||
Allowance for loan and lease losses as a percent of total gross loans and leases | 1.25 | % | 1.36 | % | 1.49 | % | 1.46 | % | 1.44 | % | ||||||||||
Allowance for loan and lease losses as a percent of non-performing loans and leases | 71.10 | % | 59.95 | % | 58.33 | % | 57.75 | % | 83.00 | % | ||||||||||
Criticized assets: | ||||||||||||||||||||
Substandard | $ | 32,687 | $ | 36,747 | $ | 39,011 | $ | 46,299 | $ | 34,299 | ||||||||||
Doubtful | 4,692 | 5,055 | 6,658 | — | — | |||||||||||||||
Foreclosed properties | 1,069 | 2,585 | 2,585 | 1,472 | 1,472 | |||||||||||||||
Total criticized assets | $ | 38,448 | $ | 44,387 | $ | 48,254 | $ | 47,771 | $ | 35,771 | ||||||||||
Criticized assets to total assets | 2.14 | % | 2.49 | % | 2.73 | % | 2.65 | % | 2.01 | % | ||||||||||
9
NET CHARGE-OFFS (RECOVERIES)
(Unaudited) | For the Three Months Ended | For the Year Ended | ||||||||||||||||||||||||||
(Dollars in thousands) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||
Charge-offs | $ | 1,643 | $ | 3,230 | $ | 3,757 | $ | 209 | $ | 344 | $ | 8,840 | $ | 3,594 | ||||||||||||||
Recoveries | (11 | ) | (5 | ) | (112 | ) | (391 | ) | (194 | ) | (519 | ) | (372 | ) | ||||||||||||||
Net charge-offs (recoveries) | $ | 1,632 | $ | 3,225 | $ | 3,645 | $ | (182 | ) | $ | 150 | $ | 8,321 | $ | 3,222 | |||||||||||||
Net charge-offs (recoveries) as a percent of average gross loans and leases (annualized) | 0.44 | % | 0.88 | % | 0.99 | % | (0.05 | )% | 0.04 | % | 0.57 | % | 0.22 | % | ||||||||||||||
CAPITAL RATIOS
As of and for the Three Months Ended | |||||||||||||||
(Unaudited) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | ||||||||||
Total capital to risk-weighted assets | 11.98 | % | 11.91 | % | 11.91 | % | 11.55 | % | 11.74 | % | |||||
Tier I capital to risk-weighted assets | 9.45 | % | 9.43 | % | 9.33 | % | 9.16 | % | 9.26 | % | |||||
Common equity tier I capital to risk-weighted assets | 8.89 | % | 8.86 | % | 8.77 | % | 8.60 | % | 8.68 | % | |||||
Tier I capital to adjusted assets | 9.54 | % | 9.39 | % | 9.28 | % | 9.26 | % | 9.07 | % | |||||
Tangible common equity to tangible assets | 8.79 | % | 8.69 | % | 8.68 | % | 8.47 | % | 8.42 | % | |||||
SELECTED OTHER INFORMATION
Loan and Lease Receivable Composition
(Unaudited) | As of | |||||||||||||||||||
(in thousands) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||||||||
Commercial real estate: | ||||||||||||||||||||
Commercial real estate - owner occupied | $ | 200,387 | $ | 182,755 | $ | 183,161 | $ | 183,016 | $ | 176,459 | ||||||||||
Commercial real estate - non-owner occupied | 470,236 | 461,586 | 468,778 | 492,366 | 473,158 | |||||||||||||||
Land development | 40,154 | 41,499 | 46,500 | 52,663 | 56,638 | |||||||||||||||
Construction | 125,157 | 115,660 | 104,515 | 91,343 | 101,206 | |||||||||||||||
Multi-family | 136,978 | 125,080 | 124,488 | 107,669 | 92,762 | |||||||||||||||
1-4 family | 44,976 | 40,173 | 38,922 | 40,036 | 45,651 | |||||||||||||||
Total commercial real estate | 1,017,888 | 966,753 | 966,364 | 967,093 | 945,874 | |||||||||||||||
Commercial and industrial | 429,002 | 447,223 | 437,955 | 458,778 | 450,298 | |||||||||||||||
Direct financing leases, net | 30,787 | 28,868 | 29,216 | 29,330 | 30,951 | |||||||||||||||
Consumer and other: | ||||||||||||||||||||
Home equity and second mortgages | 7,262 | 7,776 | 7,973 | 8,237 | 8,412 | |||||||||||||||
Other | 18,099 | 17,447 | 17,976 | 18,859 | 16,329 | |||||||||||||||
Total consumer and other | 25,361 | 25,223 | 25,949 | 27,096 | 24,741 | |||||||||||||||
Total gross loans and leases receivable | 1,503,038 | 1,468,067 | 1,459,484 | 1,482,297 | 1,451,864 | |||||||||||||||
Less: | ||||||||||||||||||||
Allowance for loan and lease losses | 18,763 | 19,923 | 21,677 | 21,666 | 20,912 | |||||||||||||||
Deferred loan fees | 1,443 | 1,354 | 1,309 | 1,326 | 1,189 | |||||||||||||||
Loans and leases receivable, net | $ | 1,482,832 | $ | 1,446,790 | $ | 1,436,498 | $ | 1,459,305 | $ | 1,429,763 | ||||||||||
10
SELECTED OTHER INFORMATION (CONTINUED)
Deposit Composition
(Unaudited) | As of | |||||||||||||||||||
(in thousands) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||||||||
Non-interest-bearing transaction accounts | $ | 277,445 | $ | 253,320 | $ | 241,577 | $ | 227,947 | $ | 252,638 | ||||||||||
Interest-bearing transaction accounts | 217,625 | 251,355 | 231,074 | 205,912 | 183,992 | |||||||||||||||
Money market accounts | 515,077 | 527,705 | 593,487 | 616,557 | 627,090 | |||||||||||||||
Certificates of deposit | 76,199 | 58,144 | 54,067 | 53,865 | 58,454 | |||||||||||||||
Wholesale deposits | 307,985 | 333,200 | 354,393 | 388,433 | 416,681 | |||||||||||||||
Total deposits | $ | 1,394,331 | $ | 1,423,724 | $ | 1,474,598 | $ | 1,492,714 | $ | 1,538,855 | ||||||||||
Trust Assets
(Unaudited) | As of | |||||||||||||||||||
(in thousands) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||||||||
Trust assets under management | $ | 1,350,025 | $ | 1,240,014 | $ | 1,164,433 | $ | 1,126,835 | $ | 977,015 | ||||||||||
Trust assets under administration | 186,383 | 176,472 | 173,931 | 176,976 | 227,360 | |||||||||||||||
Total trust assets | $ | 1,536,408 | $ | 1,416,486 | $ | 1,338,364 | $ | 1,303,811 | $ | 1,204,375 | ||||||||||
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) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||||||||
Common stockholders’ equity | $ | 169,278 | $ | 166,781 | $ | 165,234 | $ | 164,134 | $ | 161,650 | ||||||||||
Goodwill and other intangible assets | (12,652 | ) | (12,735 | ) | (12,760 | ) | (12,774 | ) | (12,773 | ) | ||||||||||
Tangible common equity | $ | 156,626 | $ | 154,046 | $ | 152,474 | $ | 151,360 | $ | 148,877 | ||||||||||
Common shares outstanding | 8,763,539 | 8,758,923 | 8,716,018 | 8,718,307 | 8,715,856 | |||||||||||||||
Book value per share | $ | 19.32 | $ | 19.04 | $ | 18.96 | $ | 18.83 | $ | 18.55 | ||||||||||
Tangible book value per share | 17.87 | 17.59 | 17.49 | 17.36 | 17.08 | |||||||||||||||
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) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||||||||
Common stockholders’ equity | $ | 169,278 | $ | 166,781 | $ | 165,234 | $ | 164,134 | $ | 161,650 | ||||||||||
Goodwill and other intangible assets | (12,652 | ) | (12,735 | ) | (12,760 | ) | (12,774 | ) | (12,773 | ) | ||||||||||
Tangible common equity | $ | 156,626 | $ | 154,046 | $ | 152,474 | $ | 151,360 | $ | 148,877 | ||||||||||
Total assets | $ | 1,794,066 | $ | 1,785,656 | $ | 1,768,928 | $ | 1,800,590 | $ | 1,780,699 | ||||||||||
Goodwill and other intangible assets | (12,652 | ) | (12,735 | ) | (12,760 | ) | (12,774 | ) | (12,773 | ) | ||||||||||
Tangible assets | $ | 1,781,414 | $ | 1,772,921 | $ | 1,756,168 | $ | 1,787,816 | $ | 1,767,926 | ||||||||||
Tangible common equity to tangible assets | 8.79 | % | 8.69 | % | 8.68 | % | 8.47 | % | 8.42 | % | ||||||||||
12
EFFICIENCY RATIO
“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. 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 Year Ended | ||||||||||||||||||||||||||
(Dollars in thousands) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||
Total non-interest expense | $ | 14,859 | $ | 14,231 | $ | 14,221 | $ | 13,560 | $ | 14,523 | $ | 56,871 | $ | 56,433 | ||||||||||||||
Less: | ||||||||||||||||||||||||||||
Net (gain) loss on foreclosed properties | (143 | ) | — | — | — | 29 | (143 | ) | 122 | |||||||||||||||||||
Amortization of other intangible assets | 13 | 14 | 14 | 14 | 14 | 54 | 62 | |||||||||||||||||||||
SBA recourse provision | 145 | 1,315 | 774 | 6 | 1,619 | 2,240 | 2,068 | |||||||||||||||||||||
Impairment of tax credit investments | 2,447 | 112 | 112 | 113 | 171 | 2,784 | 3,691 | |||||||||||||||||||||
Deconversion fees | 199 | — | 101 | — | 794 | 300 | 794 | |||||||||||||||||||||
Total operating expense | $ | 12,198 | $ | 12,790 | $ | 13,220 | $ | 13,427 | $ | 11,896 | $ | 51,636 | $ | 49,696 | ||||||||||||||
Net interest income | $ | 15,358 | $ | 14,883 | $ | 15,479 | $ | 14,888 | $ | 16,753 | $ | 60,609 | $ | 63,328 | ||||||||||||||
Total non-interest income | 3,525 | 4,339 | 4,738 | 4,063 | 3,931 | 16,665 | 17,988 | |||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||
Net (loss) gain on sale of securities | (409 | ) | 5 | 1 | — | 3 | (403 | ) | 10 | |||||||||||||||||||
Total operating revenue | $ | 19,292 | $ | 19,217 | $ | 20,216 | $ | 18,951 | $ | 20,681 | $ | 77,677 | $ | 81,306 | ||||||||||||||
Efficiency ratio | 63.23 | % | 66.56 | % | 65.39 | % | 70.85 | % | 57.52 | % | 66.48 | % | 61.12 | % | ||||||||||||||
13