-- Significant loan recovery and strong top line revenue drive record
quarterly net income --
MADISON, Wis.--(BUSINESS WIRE)--
First Business Financial Services, Inc. (the “Company” or “First
Business”) (NASDAQ:FBIZ) reported third quarter 2018 net income of $5.3
million highlighted by record net interest income, solid fee income, and
a net provision benefit from a significant loan recovery which more than
offset credit costs related to the legacy Small Business Administration
(“SBA”) portfolio.
Summary results for the quarter ended September 30, 2018 include:
-
Net income totaled $5.3 million, compared to $3.3 million in the
linked quarter and $2.6 million in the third quarter of 2017.
-
Diluted earnings per common share measured $0.60, compared to $0.38
and $0.30 for the linked and prior year quarters, respectively.
-
Annualized return on average assets and annualized return on average
equity measured 1.11% and 12.06%, respectively, compared to 0.70% and
7.59% for the linked quarter and 0.58% and 6.22% for the third quarter
of 2017.
-
Net interest margin was 3.75%, compared to 3.77% in the linked quarter
and 3.52% for the third quarter of 2017.
-
Net interest income was $17.1 million, compared to $16.9 million in
the linked quarter and $14.9 million for the third quarter of 2017.
-
Trust and investment services fee income totaled $1.9 million, down
2.3% compared to the linked quarter and up 17.4% from the third
quarter of 2017.
-
Top line revenue, the sum of net interest income and non-interest
income, increased 5.0% to $22.0 million from the linked quarter and
14.3% from the third quarter of 2017.
-
Provision for loan and lease losses was a net benefit of $546,000,
compared to provision expense of $2.6 million for the linked quarter
and $1.5 million for the third quarter of 2017. The decrease in
provision was primarily due to liquidating collateral associated with
the Wisconsin-based commercial and industrial loan previously
disclosed as impaired during the first quarter of 2017.
-
SBA recourse provision was $314,000, compared to $99,000 in the linked
quarter and $1.3 million for the third quarter of 2017.
-
The Company’s efficiency ratio measured 69.55%, compared to 67.07% for
the linked quarter and 66.56% for the third quarter of 2017.
-
Record period-end gross loans and leases receivable of $1.599 billion
grew 0.9% annualized during the third quarter and 9.0% from September
30, 2017.
-
Non-performing assets were $32.1 million at September 30, 2018,
compared to $32.6 million and $35.8 million at June 30, 2018 and
September 30, 2017, respectively.
“Third quarter 2018 results demonstrated our team’s commitment to asset
quality resolution and improvement,” said Corey Chambas, President and
Chief Executive Officer. “Through a tremendous amount of effort over the
past 18 months, we were able to collect all contractual principal
related to the Wisconsin-based C&I loan previously disclosed as impaired
during the first quarter of 2017. This has been a long and arduous
process, which resulted in a recovery of the $4.1 million in credit
losses recorded in 2017 related to this loan.” Chambas added, “Aside
from the significant loan recovery, the fundamentals of the Company
continue to drive solid operating results, contributing to record top
line revenue in the third quarter of 2018. While loan growth moderated
in the quarter due to above average payoffs, the outlook for the rest of
the year remains strong.”
Results of Operations
Net interest income was $17.1 million in the third quarter of 2018,
compared to $16.9 million in the linked quarter and $14.9 million in the
third quarter of 2017. The increase compared to the linked and prior
year quarters was principally due to an increase in both average loans
and leases outstanding and average loan and lease yields. Average gross
loans and leases of $1.602 billion increased by $32.4 million, or 8.3%
annualized, compared to the linked quarter and by $130.7 million, or
8.9%, compared to the third quarter of 2017. Both periods of comparison
benefited from increases to short-term market rates, which management
defines as the daily average effective federal funds rate for purposes
of estimating interest-earning asset and interest-bearing liability
betas. The change in the yield of the respective interest-earning asset
or the rate paid on interest-bearing liability compared to the change in
short-term market rates is commonly referred to as a beta. The daily
average effective federal funds rate increased 19 basis points and 78
basis points for the third quarter of 2018 compared to the linked and
prior year quarter, respectively.
The yield on average loans and leases improved to 5.56%, up from 5.42%
and 4.81% in the linked and prior year quarters, respectively. The
average loans and leases beta was 74% from the linked quarter and 96%
from the prior year quarter. The increase in yield from the linked
quarter was primarily due to the increase in short-term market rates.
Fees collected in lieu of interest were $1.4 million in both the second
and third quarters of 2018, compared to $375,000 in the third quarter of
2017. Excluding fees collected in lieu of interest, the average loans
and leases beta was 80% from the linked quarter and 64% from the prior
year quarter. Similarly, the yield on average interest-earning assets
improved to 5.17%, up from 5.01% and 4.41% in the linked and prior year
quarter, respectively. The average interest-earning assets beta was 84%
from the linked quarter and 97% from the prior year quarter. Also,
excluding fees collected in lieu of interest, the average
interest-earning assets beta was 86% from the linked quarter and 69%
from the prior year quarter.
The Company’s cost of total average interest-bearing liabilities
increased to 1.75% for the third quarter of 2018 from 1.52% and 1.09% in
the linked and prior year quarters, respectively. The average
interest-bearing liabilities beta was 121% from the linked quarter and
85% from the prior year quarter. Average interest-bearing deposit costs
for the third quarter of 2018 increased to 1.47%, up from 1.17% and
0.88% in the linked and prior year quarter, respectively. The average
interest-bearing deposit beta was 158% from the linked quarter and 76%
from the prior year quarter. Management believes an increase in funding
costs may compress net interest margin as the Company looks to grow
in-market deposits amid both intense competition and the continued
expectation of rising short-term market rates.
“The third quarter 2018 increase in funding costs reflects the
competitive nature of attracting and retaining deposits in a rising rate
environment, a trend we expect to continue in coming quarters,” said
Chambas. “While our quarterly deposit betas may fluctuate and place
downward pressure on our net interest margin, we are confident our
relationship-based approach to banking and wholesale funding strategy
should allow us to maintain a net interest margin at or above our
long-term goal of 3.50%, as we have done historically.”
Net interest margin measured 3.75% for the third quarter of 2018,
compared to 3.77% in the linked quarter and 3.52% in the third quarter
of 2017. The decrease compared to the linked quarter was principally due
to the rate paid on average interest-bearing liabilities increasing at a
slightly greater rate than the yield on average interest-earning assets.
When comparing the third quarter of 2018 to the same period in 2017, the
increase in the yield on average earning assets outpaced the
corresponding increase in the rate paid on interest-bearing liabilities.
Pricing discipline amid a rising rate environment and an increase in
fees collected in lieu of interest have contributed to the increased net
interest margin compared to the prior year quarter.
The Company recorded a provision for loan and lease losses benefit of
$546,000 in the third quarter of 2018, compared to expenses of $2.6
million in the linked quarter and $1.5 million in the third quarter of
2017. Provision for the third quarter of 2018 benefited from
successfully liquidating collateral associated with the previously
disclosed Wisconsin-based commercial and industrial loan, which
decreased the provision by approximately $4.1 million. This decrease was
partially offset by losses from the deterioration of collateral
associated with certain existing impaired legacy SBA loan relationships,
combined with establishing specific reserves related to legacy SBA loan
relationships that migrated to impaired status during the current
quarter. The legacy on-balance sheet portfolio, defined as SBA loans
originated prior to 2017, continues to decline. As of September 30,
2018, performing on-balance sheet legacy loans were $26.1 million, down
from $29.9 million and $49.1 million at June 30, 2018 and September 30,
2017, respectively.
Non-interest income totaled $4.9 million, or 22.2% of total revenue, in
the third quarter of 2018, compared to $4.0 million, or 19.0% of total
revenue, in the linked quarter and $4.3 million, or 22.6% of total
revenue, in the prior year quarter. Non-interest income increased
compared to the linked quarter primarily due to our strongest quarter in
SBA gains since the second quarter of 2016 and fee income related to the
Company’s commercial loan swap transactions. Non-interest income
increased compared to the prior year quarter principally due to trust
and investment services fee income growth.
Trust and investment services fee income, which remained the Company’s
largest source of non-interest income, totaled $1.9 million in the third
quarter of 2018, down slightly compared to the linked quarter and up
$288,000, or 17.4%, compared to the prior year quarter. Existing client
relationships and business development efforts contributed to trust
assets under management and administration growing to a record $1.721
billion at September 30, 2018, up $75.5 million, or 18.4% annualized,
from the linked quarter and $304.4 million, or 21.5%, from September 30,
2017.
Gains on sale of SBA loans totaled $641,000 in the third quarter of
2018, compared to $274,000 in the linked quarter and $606,000 in the
third quarter of 2017.
“Our SBA pipeline of approved loans continues to grow and, as expected,
SBA gains in the third quarter of 2018 were our strongest in over two
years,” Chambas commented. “While we continue to expect some variability
around SBA gains during the platform’s early stages of growth, we
believe this rebuilt SBA lending platform will generate additional fee
income in the quarters ahead.”
Swap fee income totaled $306,000 in the third quarter of 2018, compared
to $70,000 in the linked quarter and $418,000 in the third quarter of
2017. Management believes additional demand for these types of
opportunities will continue in 2018 due to the market’s assumptions of a
rising interest rate environment, and swap fee income may be a source of
non-interest income volatility.
Non-interest expense was $15.7 million for the third quarter of 2018,
compared to $14.5 million for the linked quarter and $14.2 million in
the third quarter of 2017. Operating expense, as defined in the
Efficiency Ratio table included in the Non-GAAP Reconciliations at the
end of this release, totaled $15.3 million in the third quarter of 2018,
$14.0 million in the linked quarter and $12.8 million in the third
quarter of 2017.
Third quarter 2018 compensation expense was $9.8 million, up $703,000
compared to the linked quarter and $2.2 million compared to the prior
year quarter. Growth in compensation expense reflects a $486,000
increase in the Company’s performance-based incentive compensation
accrual based on management’s updated estimates of full year 2018
results. No adjustment to the performance-based incentive compensation
accrual was made in the linked quarter and a $560,000 decrease to the
accrual was recorded in the prior year quarter. The addition of several
new producers across multiple business lines, including commercial
lending, SBA lending, wealth management and equipment finance also
contributed to the increase in compensation expense from both the linked
and prior year quarter. Full-time equivalent employees were 275 at
September 30, 2018, compared to 265 at June 30, 2018 and 251 at
September 30, 2017. Six full-time equivalent employees were added during
the current quarter to establish our new vendor equipment finance
program. Management expects to continue strategically investing in
talent to drive long-term organic revenue growth.
“Consistent with our innovative and entrepreneurial approach to meeting
the financial needs of our niche client base, we are excited to have
recently launched a vendor equipment finance program,” Chambas
commented. “While in its early stages, we expect production to gradually
increase from this proprietary program that leverages technology and
industry expertise to serve the unmet needs of a new client base.”
In the third quarter of 2018, the Company recorded a $314,000 SBA
recourse provision for estimated losses in the outstanding guaranteed
portion of SBA loans sold, compared to $99,000 in the linked quarter and
$1.3 million in the prior year quarter. The total recourse reserve
balance was $2.7 million, or 3.0% of total sold SBA loans outstanding at
September 30, 2018. The balance of sold legacy SBA loans, which is
defined as SBA loans sold prior to 2017, continues to decline. As of
September 30, 2018, the total outstanding balance of performing sold
legacy SBA loans was $46.8 million, down from $57.6 million and $80.3
million at June 30, 2018 and September 30, 2017, respectively. Changes
to SBA recourse reserves may be a source of non-interest expense
volatility in future quarters, though the magnitude of this volatility
should diminish over time.
“We continue to see our legacy SBA portfolio decrease at a greater pace
than originally expected,” Chambas commented. “While we experienced
losses in the third quarter, the portfolio continues to decline
meaningfully through amortization, paydowns, refinance opportunities,
and charge-offs.”
The Company’s third quarter 2018 efficiency ratio was 69.55%, compared
to 67.07% for the linked quarter and 66.56% for the third quarter of
2017. Over time, the Company intends to achieve its target efficiency
ratio range of 58-62% through proactive expense management and revenue
growth efforts. These include the completed charter consolidation and
core conversion, as well as efforts to increase SBA lending production
and to increase commercial banking market share, particularly in our
less mature markets, by continuing to prudently invest in production
talent.
The effective tax rate for the third quarter of 2018 was 21.6%, compared
to 14.9% in the linked quarter and 26.6% for the third quarter of 2017.
The higher effective tax rate compared to the linked quarter is
commensurate with higher taxable income and the recognition of a state
historic tax credit during the second quarter of 2018, which reduced
income tax expense by $245,000.
Balance Sheet
Period-end gross loans and leases receivable totaled a record $1.599
billion at September 30, 2018, increasing $3.7 million, or 0.9%
annualized, from June 30, 2018 and increasing $131.9 million, or 9.0%,
from September 30, 2017.
“Above average loan payoffs of nearly $50 million muted an otherwise
solid quarter of new loan production,” said Chambas. “We continue to see
strong pipelines and also expect unfunded construction loans booked in
the first half of the year to further contribute to loan growth
throughout the fourth quarter of 2018 and into 2019.”
Period-end in-market deposits, which consist of all transaction
accounts, money market accounts and non-wholesale deposits, increased to
$1.077 billion, or 64.6% of total bank funding at September 30, 2018,
compared to $1.056 billion, or 62.9%, at June 30, 2018 and $1.091
billion, or 69.6%, at September 30, 2017. Period-end wholesale bank
funds were $589.1 million at September 30, 2018, including FHLB advances
of $257.0 million, brokered certificates of deposit of $329.5 million
and deposits gathered through internet deposit listing services of $2.6
million. Consistent with the Company’s longstanding funding strategy to
manage risk and use the most efficient and cost effective source of
wholesale funds, 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 assets were $32.1 million at September 30, 2018,
decreasing by $508,000, or 1.6%, from $32.6 million at June 30, 2018 and
by $3.8 million, or 10.5%, from $35.8 million at September 30, 2017. The
decrease from the linked quarter primarily reflects liquidation of the
collateral associated with the aforementioned partially charged off
Wisconsin-based loan, which decreased non-performing assets by $4.7
million. Non-performing assets also decreased due to $1.9 million of
current quarter charge-offs, the majority of which related to one legacy
SBA relationship previously classified as impaired. These decreases were
partially offset by the migration of legacy SBA loan relationships to
impaired status during the third quarter, which increased non-performing
assets by approximately $6.2 million. As a percent of total assets,
non-performing assets measured 1.69% at September 30, 2018, compared to
1.71% and 2.01% at the end of the linked quarter and third quarter of
2017, respectively.
Capital Strength
The Company’s capital ratios continued to exceed the highest required
regulatory benchmark levels. As of September 30, 2018, total capital to
risk-weighted assets was 12.05%, tier 1 capital to risk-weighted assets
was 9.54%, tier 1 leverage capital to adjusted average assets was 9.34%
and common equity tier 1 capital to risk-weighted assets was 9.00%. In
addition, as of September 30, 2018, tangible common equity to tangible
assets was 8.79%.
Quarterly Dividend
As previously announced, during the third quarter of 2018, the Company’s
Board of Directors declared a regular quarterly dividend of $0.14 per
share. The dividend was paid on August 16, 2018 to stockholders of
record at the close of business on August 6, 2018. Measured against
third quarter 2018 diluted earnings per share of $0.60, the dividend
represents a 23.3% 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 service, 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, 2017 and other filings with the
Securities and Exchange Commission.
SELECTED FINANCIAL CONDITION DATA
(Unaudited)
|
|
As of
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
(in thousands)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
40,293
|
|
|
$
|
45,803
|
|
|
$
|
61,322
|
|
|
$
|
52,539
|
|
|
$
|
73,196
|
|
Securities available-for-sale, at fair value
|
|
134,995
|
|
|
135,470
|
|
|
127,961
|
|
|
126,005
|
|
|
131,130
|
|
Securities held-to-maturity, at amortized cost
|
|
39,950
|
|
|
40,946
|
|
|
41,885
|
|
|
37,778
|
|
|
38,873
|
|
Loans held for sale
|
|
4,712
|
|
|
4,976
|
|
|
3,429
|
|
|
2,194
|
|
|
—
|
|
Loans and leases receivable
|
|
1,598,607
|
|
|
1,594,953
|
|
|
1,563,490
|
|
|
1,501,595
|
|
|
1,466,713
|
|
Allowance for loan and lease losses
|
|
(20,455
|
)
|
|
(20,932
|
)
|
|
(18,638
|
)
|
|
(18,763
|
)
|
|
(19,923
|
)
|
Loans and leases receivable, net
|
|
1,578,152
|
|
|
1,574,021
|
|
|
1,544,852
|
|
|
1,482,832
|
|
|
1,446,790
|
|
Premises and equipment, net
|
|
3,247
|
|
|
3,358
|
|
|
3,247
|
|
|
3,156
|
|
|
3,048
|
|
Foreclosed properties
|
|
1,454
|
|
|
1,484
|
|
|
1,484
|
|
|
1,069
|
|
|
2,585
|
|
Bank-owned life insurance
|
|
41,212
|
|
|
40,912
|
|
|
40,614
|
|
|
40,323
|
|
|
39,988
|
|
Federal Home Loan Bank stock, at cost
|
|
6,890
|
|
|
9,295
|
|
|
8,650
|
|
|
5,670
|
|
|
5,083
|
|
Goodwill and other intangible assets
|
|
12,132
|
|
|
12,380
|
|
|
12,579
|
|
|
12,652
|
|
|
12,735
|
|
Accrued interest receivable and other assets
|
|
31,293
|
|
|
31,142
|
|
|
32,194
|
|
|
29,848
|
|
|
32,228
|
|
Total assets
|
|
$
|
1,894,330
|
|
|
$
|
1,899,787
|
|
|
$
|
1,878,217
|
|
|
$
|
1,794,066
|
|
|
$
|
1,785,656
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
In-market deposits
|
|
$
|
1,076,851
|
|
|
$
|
1,056,294
|
|
|
$
|
1,078,605
|
|
|
$
|
1,086,346
|
|
|
$
|
1,090,524
|
|
Wholesale deposits
|
|
332,052
|
|
|
281,431
|
|
|
292,553
|
|
|
307,985
|
|
|
333,200
|
|
Total deposits
|
|
1,408,903
|
|
|
1,337,725
|
|
|
1,371,158
|
|
|
1,394,331
|
|
|
1,423,724
|
|
Federal Home Loan Bank advances and other borrowings
|
|
281,430
|
|
|
365,416
|
|
|
308,912
|
|
|
207,898
|
|
|
167,884
|
|
Junior subordinated notes
|
|
10,029
|
|
|
10,026
|
|
|
10,022
|
|
|
10,019
|
|
|
10,015
|
|
Accrued interest payable and other liabilities
|
|
16,426
|
|
|
12,948
|
|
|
16,645
|
|
|
12,540
|
|
|
17,252
|
|
Total liabilities
|
|
1,716,788
|
|
|
1,726,115
|
|
|
1,706,737
|
|
|
1,624,788
|
|
|
1,618,875
|
|
Total stockholders’ equity
|
|
177,542
|
|
|
173,672
|
|
|
171,480
|
|
|
169,278
|
|
|
166,781
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,894,330
|
|
|
$
|
1,899,787
|
|
|
$
|
1,878,217
|
|
|
$
|
1,794,066
|
|
|
$
|
1,785,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATEMENTS OF INCOME
|
|
|
|
As of and for the Nine
|
(Unaudited)
|
|
As of and for the Three Months Ended
|
|
Months Ended
|
(Dollars in thousands, except
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
per share amounts)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
|
2018
|
|
2017
|
Total interest income
|
|
$
|
23,563
|
|
|
$
|
22,468
|
|
|
$
|
20,722
|
|
|
$
|
19,504
|
|
|
$
|
18,634
|
|
|
$
|
66,754
|
|
|
$
|
56,306
|
Total interest expense
|
|
6,469
|
|
|
5,537
|
|
|
4,520
|
|
|
4,146
|
|
|
3,751
|
|
|
16,527
|
|
|
11,056
|
Net interest income
|
|
17,094
|
|
|
16,931
|
|
|
16,202
|
|
|
15,358
|
|
|
14,883
|
|
|
50,227
|
|
|
45,250
|
Provision for loan and lease losses
|
|
(546
|
)
|
|
2,579
|
|
|
2,476
|
|
|
473
|
|
|
1,471
|
|
|
4,508
|
|
|
5,699
|
Net interest income after provision for loan and lease losses
|
|
17,640
|
|
|
14,352
|
|
|
13,726
|
|
|
14,885
|
|
|
13,412
|
|
|
45,719
|
|
|
39,551
|
Trust and investment service fees
|
|
1,941
|
|
|
1,987
|
|
|
1,898
|
|
|
1,739
|
|
|
1,653
|
|
|
5,826
|
|
|
4,930
|
Gain on sale of SBA loans
|
|
641
|
|
|
274
|
|
|
269
|
|
|
90
|
|
|
606
|
|
|
1,184
|
|
|
1,501
|
Service charges on deposits
|
|
788
|
|
|
720
|
|
|
784
|
|
|
727
|
|
|
756
|
|
|
2,292
|
|
|
2,287
|
Loan fees
|
|
459
|
|
|
389
|
|
|
527
|
|
|
463
|
|
|
391
|
|
|
1,375
|
|
|
1,525
|
Net (loss) gain on sale of securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(409
|
)
|
|
5
|
|
|
—
|
|
|
—
|
Swap fees
|
|
306
|
|
|
70
|
|
|
633
|
|
|
42
|
|
|
418
|
|
|
1,009
|
|
|
866
|
Other non-interest income
|
|
736
|
|
|
542
|
|
|
556
|
|
|
873
|
|
|
510
|
|
|
1,833
|
|
|
2,031
|
Total non-interest income
|
|
4,871
|
|
|
3,982
|
|
|
4,667
|
|
|
3,525
|
|
|
4,339
|
|
|
13,519
|
|
|
13,140
|
Compensation
|
|
9,819
|
|
|
9,116
|
|
|
9,071
|
|
|
6,953
|
|
|
7,645
|
|
|
28,006
|
|
|
24,710
|
Occupancy
|
|
560
|
|
|
544
|
|
|
529
|
|
|
567
|
|
|
527
|
|
|
1,632
|
|
|
1,521
|
Professional fees
|
|
1,027
|
|
|
928
|
|
|
1,035
|
|
|
1,017
|
|
|
995
|
|
|
2,990
|
|
|
3,046
|
Data processing
|
|
512
|
|
|
626
|
|
|
611
|
|
|
891
|
|
|
592
|
|
|
1,748
|
|
|
1,810
|
Marketing
|
|
593
|
|
|
591
|
|
|
333
|
|
|
563
|
|
|
594
|
|
|
1,518
|
|
|
1,546
|
Equipment
|
|
403
|
|
|
343
|
|
|
343
|
|
|
342
|
|
|
285
|
|
|
1,089
|
|
|
868
|
Computer software
|
|
814
|
|
|
679
|
|
|
742
|
|
|
686
|
|
|
715
|
|
|
2,235
|
|
|
2,037
|
FDIC insurance
|
|
457
|
|
|
369
|
|
|
299
|
|
|
307
|
|
|
320
|
|
|
1,125
|
|
|
1,081
|
Collateral liquidation costs
|
|
230
|
|
|
222
|
|
|
1
|
|
|
273
|
|
|
371
|
|
|
454
|
|
|
556
|
Net loss (gain) on foreclosed properties
|
|
30
|
|
|
—
|
|
|
—
|
|
|
(143
|
)
|
|
—
|
|
|
30
|
|
|
—
|
Impairment of tax credit investments
|
|
113
|
|
|
329
|
|
|
113
|
|
|
2,447
|
|
|
112
|
|
|
554
|
|
|
338
|
SBA recourse provision (benefit)
|
|
314
|
|
|
99
|
|
|
(295
|
)
|
|
145
|
|
|
1,315
|
|
|
118
|
|
|
2,095
|
Other non-interest expense
|
|
874
|
|
|
621
|
|
|
1,125
|
|
|
811
|
|
|
760
|
|
|
2,621
|
|
|
2,404
|
Total non-interest expense
|
|
15,746
|
|
|
14,467
|
|
|
13,907
|
|
|
14,859
|
|
|
14,231
|
|
|
44,120
|
|
|
42,012
|
Income before income tax expense (benefit)
|
|
6,765
|
|
|
3,867
|
|
|
4,486
|
|
|
3,551
|
|
|
3,520
|
|
|
15,118
|
|
|
10,679
|
Income tax expense (benefit)
|
|
1,464
|
|
|
578
|
|
|
837
|
|
|
(486
|
)
|
|
936
|
|
|
2,879
|
|
|
2,812
|
Net income
|
|
$
|
5,301
|
|
|
$
|
3,289
|
|
|
$
|
3,649
|
|
|
$
|
4,037
|
|
|
$
|
2,584
|
|
|
$
|
12,239
|
|
|
$
|
7,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
|
|
$
|
0.60
|
|
|
$
|
0.38
|
|
|
$
|
0.42
|
|
|
$
|
0.46
|
|
|
$
|
0.30
|
|
|
$
|
1.40
|
|
|
$
|
0.90
|
Diluted earnings
|
|
0.60
|
|
|
0.38
|
|
|
0.42
|
|
|
0.46
|
|
|
0.30
|
|
|
1.40
|
|
|
0.90
|
Dividends declared
|
|
0.14
|
|
|
0.14
|
|
|
0.14
|
|
|
0.13
|
|
|
0.13
|
|
|
0.42
|
|
|
0.39
|
Book value
|
|
20.19
|
|
|
19.83
|
|
|
19.57
|
|
|
19.32
|
|
|
19.04
|
|
|
20.19
|
|
|
19.04
|
Tangible book value
|
|
18.81
|
|
|
18.41
|
|
|
18.13
|
|
|
17.87
|
|
|
17.59
|
|
|
18.81
|
|
|
17.59
|
Weighted-average common shares outstanding(1)
|
|
8,650,057
|
|
|
8,631,189
|
|
|
8,633,278
|
|
|
8,631,554
|
|
|
8,621,311
|
|
|
8,634,890
|
|
|
8,606,080
|
Weighted-average diluted common shares outstanding(1)
|
|
8,650,057
|
|
|
8,631,189
|
|
|
8,633,278
|
|
|
8,631,554
|
|
|
8,621,311
|
|
|
8,634,890
|
|
|
8,606,080
|
(1)
|
|
Excluding participating securities.
|
|
|
|
NET INTEREST INCOME ANALYSIS
(Unaudited)
|
|
For the Three Months Ended
|
(Dollars in thousands)
|
|
September 30, 2018
|
|
June 30, 2018
|
|
September 30, 2017
|
|
|
Average
|
|
|
|
Average
|
|
Average
|
|
|
|
Average
|
|
Average
|
|
|
|
Average
|
|
|
Balance
|
|
Interest
|
|
Yield/Rate((4))
|
|
Balance
|
|
Interest
|
|
Yield/Rate((4))
|
|
Balance
|
|
Interest
|
|
Yield/Rate((4))
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate and other mortgage loans(1)
|
|
$
|
1,085,315
|
|
|
$
|
13,755
|
|
|
5.07
|
%
|
|
$
|
1,073,326
|
|
|
$
|
13,264
|
|
|
4.94
|
%
|
|
$
|
966,711
|
|
|
$
|
10,922
|
|
|
4.52
|
%
|
Commercial and industrial loans(1)
|
|
455,242
|
|
|
7,865
|
|
|
6.91
|
%
|
|
434,657
|
|
|
7,347
|
|
|
6.76
|
%
|
|
448,955
|
|
|
6,187
|
|
|
5.51
|
%
|
Direct financing leases(1)
|
|
31,197
|
|
|
313
|
|
|
4.01
|
%
|
|
31,284
|
|
|
313
|
|
|
4.00
|
%
|
|
28,648
|
|
|
303
|
|
|
4.23
|
%
|
Consumer and other loans(1)
|
|
29,798
|
|
|
333
|
|
|
4.47
|
%
|
|
29,914
|
|
|
319
|
|
|
4.27
|
%
|
|
26,577
|
|
|
274
|
|
|
4.12
|
%
|
Total loans and leases receivable(1)
|
|
1,601,552
|
|
|
22,266
|
|
|
5.56
|
%
|
|
1,569,181
|
|
|
21,243
|
|
|
5.42
|
%
|
|
1,470,891
|
|
|
17,686
|
|
|
4.81
|
%
|
Mortgage-related securities(2)
|
|
140,227
|
|
|
833
|
|
|
2.38
|
%
|
|
136,982
|
|
|
775
|
|
|
2.26
|
%
|
|
136,330
|
|
|
613
|
|
|
1.80
|
%
|
Other investment securities(3)
|
|
34,140
|
|
|
169
|
|
|
1.98
|
%
|
|
34,391
|
|
|
163
|
|
|
1.90
|
%
|
|
36,106
|
|
|
158
|
|
|
1.75
|
%
|
FHLB and FRB stock
|
|
7,722
|
|
|
89
|
|
|
4.61
|
%
|
|
8,392
|
|
|
66
|
|
|
3.15
|
%
|
|
3,949
|
|
|
25
|
|
|
2.53
|
%
|
Short-term investments
|
|
40,201
|
|
|
206
|
|
|
2.05
|
%
|
|
45,473
|
|
|
221
|
|
|
1.94
|
%
|
|
44,478
|
|
|
152
|
|
|
1.37
|
%
|
Total interest-earning assets
|
|
1,823,842
|
|
|
23,563
|
|
|
5.17
|
%
|
|
1,794,419
|
|
|
22,468
|
|
|
5.01
|
%
|
|
1,691,754
|
|
|
18,634
|
|
|
4.41
|
%
|
Non-interest-earning assets
|
|
91,359
|
|
|
|
|
|
|
94,923
|
|
|
|
|
|
|
85,768
|
|
|
|
|
|
Total assets
|
|
$
|
1,915,201
|
|
|
|
|
|
|
$
|
1,889,342
|
|
|
|
|
|
|
$
|
1,777,522
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction accounts
|
|
$
|
263,928
|
|
|
785
|
|
|
1.19
|
%
|
|
$
|
272,840
|
|
|
628
|
|
|
0.92
|
%
|
|
$
|
240,035
|
|
|
364
|
|
|
0.61
|
%
|
Money market
|
|
472,866
|
|
|
1,413
|
|
|
1.20
|
%
|
|
474,943
|
|
|
1,067
|
|
|
0.90
|
%
|
|
588,811
|
|
|
700
|
|
|
0.48
|
%
|
Certificates of deposit
|
|
88,903
|
|
|
384
|
|
|
1.73
|
%
|
|
71,994
|
|
|
239
|
|
|
1.33
|
%
|
|
57,716
|
|
|
150
|
|
|
1.04
|
%
|
Wholesale deposits
|
|
327,146
|
|
|
1,650
|
|
|
2.02
|
%
|
|
278,496
|
|
|
1,275
|
|
|
1.83
|
%
|
|
346,641
|
|
|
1,494
|
|
|
1.72
|
%
|
Total interest-bearing deposits
|
|
1,152,843
|
|
|
4,232
|
|
|
1.47
|
%
|
|
1,098,273
|
|
|
3,209
|
|
|
1.17
|
%
|
|
1,233,203
|
|
|
2,708
|
|
|
0.88
|
%
|
FHLB advances
|
|
292,465
|
|
|
1,546
|
|
|
2.11
|
%
|
|
322,791
|
|
|
1,637
|
|
|
2.03
|
%
|
|
103,401
|
|
|
351
|
|
|
1.36
|
%
|
Other borrowings
|
|
24,420
|
|
|
411
|
|
|
6.73
|
%
|
|
24,889
|
|
|
414
|
|
|
6.65
|
%
|
|
24,400
|
|
|
411
|
|
|
6.74
|
%
|
Junior subordinated notes
|
|
10,027
|
|
|
280
|
|
|
11.17
|
%
|
|
10,023
|
|
|
277
|
|
|
11.05
|
%
|
|
10,013
|
|
|
281
|
|
|
11.23
|
%
|
Total interest-bearing liabilities
|
|
1,479,755
|
|
|
6,469
|
|
|
1.75
|
%
|
|
1,455,976
|
|
|
5,537
|
|
|
1.52
|
%
|
|
1,371,017
|
|
|
3,751
|
|
|
1.09
|
%
|
Non-interest-bearing demand deposit accounts
|
|
239,594
|
|
|
|
|
|
|
240,352
|
|
|
|
|
|
|
224,961
|
|
|
|
|
|
Other non-interest-bearing liabilities
|
|
19,989
|
|
|
|
|
|
|
19,752
|
|
|
|
|
|
|
15,376
|
|
|
|
|
|
Total liabilities
|
|
1,739,338
|
|
|
|
|
|
|
1,716,080
|
|
|
|
|
|
|
1,611,354
|
|
|
|
|
|
Stockholders’ equity
|
|
175,863
|
|
|
|
|
|
|
173,262
|
|
|
|
|
|
|
166,168
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,915,201
|
|
|
|
|
|
|
$
|
1,889,342
|
|
|
|
|
|
|
$
|
1,777,522
|
|
|
|
|
|
Net interest income
|
|
|
|
$
|
17,094
|
|
|
|
|
|
|
$
|
16,931
|
|
|
|
|
|
|
$
|
14,883
|
|
|
|
Interest rate spread
|
|
|
|
|
|
3.42
|
%
|
|
|
|
|
|
3.49
|
%
|
|
|
|
|
|
3.32
|
%
|
Net interest-earning assets
|
|
$
|
344,087
|
|
|
|
|
|
|
$
|
338,443
|
|
|
|
|
|
|
$
|
320,737
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
3.75
|
%
|
|
|
|
|
|
3.77
|
%
|
|
|
|
|
|
3.52
|
%
|
(1)
|
|
The average balances of loans and leases include non-accrual loans
and leases and loans held for sale. Interest income related to
non-accrual loans and leases is recognized when collected. Interest
income includes net loan fees collected in lieu of interest.
|
(2)
|
|
Includes amortized cost basis of assets available for sale and held
to maturity.
|
(3)
|
|
Yields on tax-exempt municipal obligations are not presented on a
tax-equivalent basis in this table.
|
(4)
|
|
Represents annualized yields/rates.
|
|
|
|
NET INTEREST INCOME ANALYSIS
(Unaudited)
|
|
For the Nine Months Ended
|
(Dollars in thousands)
|
|
September 30, 2018
|
|
September 30, 2017
|
|
|
Average
|
|
|
|
Average
|
|
Average
|
|
|
|
Average
|
|
|
Balance
|
|
Interest
|
|
Yield/Rate((4))
|
|
Balance
|
|
Interest
|
|
Yield/Rate((4))
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate and other mortgage loans(1)
|
|
$
|
1,068,605
|
|
|
$
|
39,360
|
|
|
4.91
|
%
|
|
$
|
957,408
|
|
|
$
|
31,861
|
|
|
4.44
|
%
|
Commercial and industrial loans(1)
|
|
443,188
|
|
|
21,915
|
|
|
6.59
|
%
|
|
451,352
|
|
|
19,863
|
|
|
5.87
|
%
|
Direct financing leases(1)
|
|
30,789
|
|
|
929
|
|
|
4.02
|
%
|
|
29,161
|
|
|
932
|
|
|
4.26
|
%
|
Consumer and other loans(1)
|
|
29,693
|
|
|
967
|
|
|
4.34
|
%
|
|
27,780
|
|
|
837
|
|
|
4.02
|
%
|
Total loans and leases receivable(1)
|
|
1,572,275
|
|
|
63,171
|
|
|
5.36
|
%
|
|
1,465,701
|
|
|
53,493
|
|
|
4.87
|
%
|
Mortgage-related securities(2)
|
|
135,135
|
|
|
2,295
|
|
|
2.26
|
%
|
|
140,705
|
|
|
1,845
|
|
|
1.75
|
%
|
Other investment securities(3)
|
|
34,966
|
|
|
501
|
|
|
1.91
|
%
|
|
37,466
|
|
|
480
|
|
|
1.71
|
%
|
FHLB and FRB stock
|
|
7,614
|
|
|
203
|
|
|
3.55
|
%
|
|
3,779
|
|
|
73
|
|
|
2.58
|
%
|
Short-term investments
|
|
47,592
|
|
|
584
|
|
|
1.64
|
%
|
|
48,375
|
|
|
415
|
|
|
1.14
|
%
|
Total interest-earning assets
|
|
1,797,582
|
|
|
66,754
|
|
|
4.95
|
%
|
|
1,696,026
|
|
|
56,306
|
|
|
4.43
|
%
|
Non-interest-earning assets
|
|
91,657
|
|
|
|
|
|
|
82,628
|
|
|
|
|
|
Total assets
|
|
$
|
1,889,239
|
|
|
|
|
|
|
$
|
1,778,654
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction accounts
|
|
$
|
278,042
|
|
|
1,821
|
|
|
0.87
|
%
|
|
$
|
221,526
|
|
|
885
|
|
|
0.53
|
%
|
Money market
|
|
487,395
|
|
|
3,331
|
|
|
0.91
|
%
|
|
601,455
|
|
|
2,019
|
|
|
0.45
|
%
|
Certificates of deposit
|
|
80,630
|
|
|
862
|
|
|
1.43
|
%
|
|
55,888
|
|
|
415
|
|
|
0.99
|
%
|
Wholesale deposits
|
|
302,262
|
|
|
4,257
|
|
|
1.88
|
%
|
|
374,083
|
|
|
4,720
|
|
|
1.68
|
%
|
Total interest-bearing deposits
|
|
1,148,329
|
|
|
10,271
|
|
|
1.19
|
%
|
|
1,252,952
|
|
|
8,039
|
|
|
0.86
|
%
|
FHLB advances
|
|
277,866
|
|
|
4,186
|
|
|
2.01
|
%
|
|
83,987
|
|
|
784
|
|
|
1.24
|
%
|
Other borrowings
|
|
24,571
|
|
|
1,238
|
|
|
6.72
|
%
|
|
24,933
|
|
|
1,401
|
|
|
7.49
|
%
|
Junior subordinated notes
|
|
10,023
|
|
|
832
|
|
|
11.07
|
%
|
|
10,009
|
|
|
832
|
|
|
11.08
|
%
|
Total interest-bearing liabilities
|
|
1,460,789
|
|
|
16,527
|
|
|
1.51
|
%
|
|
1,371,881
|
|
|
11,056
|
|
|
1.07
|
%
|
Non-interest-bearing demand deposit accounts
|
|
236,208
|
|
|
|
|
|
|
228,231
|
|
|
|
|
|
Other non-interest-bearing liabilities
|
|
21,055
|
|
|
|
|
|
|
13,726
|
|
|
|
|
|
Total liabilities
|
|
1,718,052
|
|
|
|
|
|
|
1,613,838
|
|
|
|
|
|
Stockholders’ equity
|
|
171,187
|
|
|
|
|
|
|
164,816
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,889,239
|
|
|
|
|
|
|
$
|
1,778,654
|
|
|
|
|
|
Net interest income
|
|
|
|
$
|
50,227
|
|
|
|
|
|
|
$
|
45,250
|
|
|
|
Interest rate spread
|
|
|
|
|
|
3.44
|
%
|
|
|
|
|
|
3.36
|
%
|
Net interest-earning assets
|
|
$
|
336,793
|
|
|
|
|
|
|
$
|
324,145
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
3.73
|
%
|
|
|
|
|
|
3.56
|
%
|
(1)
|
|
The average balances of loans and leases include non-accrual loans
and leases and loans held for sale. Interest income related to
non-accrual loans and leases is recognized when collected. Interest
income includes net loan fees collected in lieu of interest.
|
(2)
|
|
Includes amortized cost basis of assets available for sale and held
to maturity.
|
(3)
|
|
Yields on tax-exempt municipal obligations are not presented on a
tax-equivalent basis in this table.
|
(4)
|
|
Represents annualized yields/rates.
|
|
|
|
PERFORMANCE RATIOS
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
(Unaudited)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
|
2018
|
|
2017
|
Return on average assets (annualized)
|
|
1.11
|
%
|
|
0.70
|
%
|
|
0.78
|
%
|
|
0.91
|
%
|
|
0.58
|
%
|
|
0.86
|
%
|
|
0.59
|
%
|
Return on average equity (annualized)
|
|
12.06
|
%
|
|
7.59
|
%
|
|
8.88
|
%
|
|
9.57
|
%
|
|
6.22
|
%
|
|
9.53
|
%
|
|
6.36
|
%
|
Efficiency ratio
|
|
69.55
|
%
|
|
67.07
|
%
|
|
67.45
|
%
|
|
63.23
|
%
|
|
66.56
|
%
|
|
68.05
|
%
|
|
67.55
|
%
|
Interest rate spread
|
|
3.42
|
%
|
|
3.49
|
%
|
|
3.42
|
%
|
|
3.39
|
%
|
|
3.32
|
%
|
|
3.44
|
%
|
|
3.36
|
%
|
Net interest margin
|
|
3.75
|
%
|
|
3.77
|
%
|
|
3.65
|
%
|
|
3.63
|
%
|
|
3.52
|
%
|
|
3.73
|
%
|
|
3.56
|
%
|
Average interest-earning
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assets to average interest-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
bearing liabilities
|
|
123.25
|
%
|
|
123.25
|
%
|
|
122.66
|
%
|
|
124.66
|
%
|
|
123.39
|
%
|
|
123.06
|
%
|
|
123.63
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET QUALITY RATIOS
(Unaudited)
|
|
As of
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
(Dollars in thousands)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Non-accrual loans and leases
|
|
$
|
30,613
|
|
|
$
|
31,091
|
|
|
$
|
20,030
|
|
|
$
|
26,389
|
|
|
$
|
33,232
|
|
Foreclosed properties
|
|
1,454
|
|
|
1,484
|
|
|
1,484
|
|
|
1,069
|
|
|
2,585
|
|
Total non-performing assets
|
|
32,067
|
|
|
32,575
|
|
|
21,514
|
|
|
27,458
|
|
|
35,817
|
|
Performing troubled debt restructurings
|
|
187
|
|
|
249
|
|
|
261
|
|
|
332
|
|
|
275
|
|
Total impaired assets
|
|
$
|
32,254
|
|
|
$
|
32,824
|
|
|
$
|
21,775
|
|
|
$
|
27,790
|
|
|
$
|
36,092
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accrual loans and leases as a percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of total gross loans and leases
|
|
1.91
|
%
|
|
1.95
|
%
|
|
1.28
|
%
|
|
1.76
|
%
|
|
2.26
|
%
|
Non-performing assets as a percent of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
total gross loans and leases plus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
foreclosed properties
|
|
2.00
|
%
|
|
2.04
|
%
|
|
1.37
|
%
|
|
1.83
|
%
|
|
2.44
|
%
|
Non-performing assets as a percent of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
total assets
|
|
1.69
|
%
|
|
1.71
|
%
|
|
1.15
|
%
|
|
1.53
|
%
|
|
2.01
|
%
|
Allowance for loan and lease losses as a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
percent of total gross loans and leases
|
|
1.28
|
%
|
|
1.31
|
%
|
|
1.19
|
%
|
|
1.25
|
%
|
|
1.36
|
%
|
Allowance for loan and lease losses as a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
percent of non-accrual loans and leases
|
|
66.82
|
%
|
|
67.32
|
%
|
|
93.05
|
%
|
|
71.10
|
%
|
|
59.95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Criticized assets:
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
$
|
38,752
|
|
|
$
|
42,477
|
|
|
$
|
30,622
|
|
|
$
|
32,687
|
|
|
$
|
36,747
|
|
Doubtful
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,692
|
|
|
5,055
|
|
Foreclosed properties
|
|
1,454
|
|
|
1,484
|
|
|
1,484
|
|
|
1,069
|
|
|
2,585
|
|
Total criticized assets
|
|
$
|
40,206
|
|
|
$
|
43,961
|
|
|
$
|
32,106
|
|
|
$
|
38,448
|
|
|
$
|
44,387
|
|
Criticized assets to total assets
|
|
2.12
|
%
|
|
2.31
|
%
|
|
1.71
|
%
|
|
2.14
|
%
|
|
2.49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHARGE-OFFS (RECOVERIES)
(Unaudited)
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
(Dollars in thousands)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
|
2018
|
|
2017
|
Charge-offs
|
|
$
|
1,914
|
|
|
$
|
306
|
|
|
$
|
2,685
|
|
|
$
|
1,643
|
|
|
$
|
3,230
|
|
|
$
|
4,904
|
|
|
$
|
7,196
|
|
Recoveries
|
|
(1,983
|
)
|
|
(21
|
)
|
|
(84
|
)
|
|
(11
|
)
|
|
(5
|
)
|
|
(2,088
|
)
|
|
(508
|
)
|
Net (recoveries) charge-offs
|
|
$
|
(69
|
)
|
|
$
|
285
|
|
|
$
|
2,601
|
|
|
$
|
1,632
|
|
|
$
|
3,225
|
|
|
$
|
2,816
|
|
|
$
|
6,688
|
|
Net (recoveries)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
charge-offs as a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
percent of average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
gross loans and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
leases (annualized)
|
|
(0.02
|
)%
|
|
0.07
|
%
|
|
0.67
|
%
|
|
0.44
|
%
|
|
0.88
|
%
|
|
0.24
|
%
|
|
0.61
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL RATIOS
|
|
As of and for the Three Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
(Unaudited)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Total capital to risk-weighted assets
|
|
12.05
|
%
|
|
11.87
|
%
|
|
11.78
|
%
|
|
11.98
|
%
|
|
11.91
|
%
|
Tier I capital to risk-weighted assets
|
|
9.54
|
%
|
|
9.34
|
%
|
|
9.33
|
%
|
|
9.45
|
%
|
|
9.43
|
%
|
Common equity tier I capital to risk-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
weighted assets
|
|
9.00
|
%
|
|
8.80
|
%
|
|
8.79
|
%
|
|
8.89
|
%
|
|
8.86
|
%
|
Tier I capital to adjusted assets
|
|
9.34
|
%
|
|
9.25
|
%
|
|
9.26
|
%
|
|
9.54
|
%
|
|
9.39
|
%
|
Tangible common equity to tangible assets
|
|
8.79
|
%
|
|
8.55
|
%
|
|
8.52
|
%
|
|
8.79
|
%
|
|
8.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOAN AND LEASE RECEIVABLE COMPOSITION
(Unaudited)
|
|
As of
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
(in thousands)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate - owner occupied
|
|
$
|
203,733
|
|
|
$
|
196,032
|
|
|
$
|
197,268
|
|
|
$
|
200,387
|
|
|
$
|
182,755
|
Commercial real estate - non-owner occupied
|
|
487,842
|
|
|
485,962
|
|
|
484,151
|
|
|
470,236
|
|
|
461,586
|
Land development
|
|
45,009
|
|
|
45,033
|
|
|
46,379
|
|
|
40,154
|
|
|
41,499
|
Construction
|
|
132,271
|
|
|
188,036
|
|
|
156,020
|
|
|
125,157
|
|
|
115,660
|
Multi-family
|
|
174,664
|
|
|
137,388
|
|
|
136,098
|
|
|
136,978
|
|
|
125,080
|
1-4 family
|
|
35,729
|
|
|
35,569
|
|
|
41,866
|
|
|
44,976
|
|
|
40,173
|
Total commercial real estate
|
|
1,079,248
|
|
|
1,088,020
|
|
|
1,061,782
|
|
|
1,017,888
|
|
|
966,753
|
Commercial and industrial
|
|
457,932
|
|
|
447,540
|
|
|
443,005
|
|
|
429,002
|
|
|
447,223
|
Direct financing leases, net
|
|
31,090
|
|
|
32,001
|
|
|
31,387
|
|
|
30,787
|
|
|
28,868
|
Consumer and other:
|
|
|
|
|
|
|
|
|
|
|
Home equity and second mortgages
|
|
8,388
|
|
|
7,962
|
|
|
8,270
|
|
|
7,262
|
|
|
7,776
|
Other
|
|
23,451
|
|
|
21,075
|
|
|
20,717
|
|
|
18,099
|
|
|
17,447
|
Total consumer and other
|
|
31,839
|
|
|
29,037
|
|
|
28,987
|
|
|
25,361
|
|
|
25,223
|
Total gross loans and leases receivable
|
|
1,600,109
|
|
|
1,596,598
|
|
|
1,565,161
|
|
|
1,503,038
|
|
|
1,468,067
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses
|
|
20,455
|
|
|
20,932
|
|
|
18,638
|
|
|
18,763
|
|
|
19,923
|
Deferred loan fees
|
|
1,502
|
|
|
1,645
|
|
|
1,671
|
|
|
1,443
|
|
|
1,354
|
Loans and leases receivable, net
|
|
$
|
1,578,152
|
|
|
$
|
1,574,021
|
|
|
$
|
1,544,852
|
|
|
$
|
1,482,832
|
|
|
$
|
1,446,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEPOSIT COMPOSITION
(Unaudited)
|
|
As of
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
(in thousands)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Non-interest-bearing transaction accounts
|
|
$
|
233,915
|
|
|
$
|
255,521
|
|
|
$
|
240,422
|
|
|
$
|
277,445
|
|
|
$
|
253,320
|
Interest-bearing transaction accounts
|
|
256,303
|
|
|
272,057
|
|
|
262,766
|
|
|
217,625
|
|
|
251,355
|
Money market accounts
|
|
475,322
|
|
|
450,654
|
|
|
498,310
|
|
|
515,077
|
|
|
527,705
|
Certificates of deposit
|
|
111,311
|
|
|
78,062
|
|
|
77,107
|
|
|
76,199
|
|
|
58,144
|
Wholesale deposits
|
|
332,052
|
|
|
281,431
|
|
|
292,553
|
|
|
307,985
|
|
|
333,200
|
Total deposits
|
|
$
|
1,408,903
|
|
|
$
|
1,337,725
|
|
|
$
|
1,371,158
|
|
|
$
|
1,394,331
|
|
|
$
|
1,423,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRUST ASSETS COMPOSITION
(Unaudited)
|
|
As of
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
(in thousands)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Trust assets under management
|
|
$
|
1,534,395
|
|
|
$
|
1,465,101
|
|
|
$
|
1,393,654
|
|
|
$
|
1,350,025
|
|
|
$
|
1,240,014
|
Trust assets under administration
|
|
186,530
|
|
|
180,320
|
|
|
185,463
|
|
|
186,383
|
|
|
176,472
|
Total trust assets
|
|
$
|
1,720,925
|
|
|
$
|
1,645,421
|
|
|
$
|
1,579,117
|
|
|
$
|
1,536,408
|
|
|
$
|
1,416,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-GAAP RECONCILIATIONS
Certain financial information provided in this release is determined by
methods other than in accordance with generally accepted accounting
principles (United States) (“GAAP”). Although the Company’s management
believes that these non-GAAP financial measures provide a greater
understanding of its business, these measures are not necessarily
comparable to similar measures that may be presented by other companies.
TANGIBLE BOOK VALUE
“Tangible book value per share” is a non-GAAP measure representing
tangible common equity divided by total common shares outstanding.
“Tangible common equity” itself is a non-GAAP measure representing
common stockholders’ equity reduced by intangible assets, if any. The
Company’s management believes that this measure is important to many
investors in the marketplace who are interested in period-to-period
changes in book value per common share exclusive of changes in
intangible assets. The information provided below reconciles tangible
book value per share and tangible common equity to their most comparable
GAAP measures.
(Unaudited)
|
|
As of
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
(Dollars in thousands, except per share amounts)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Common stockholders’ equity
|
|
$
|
177,542
|
|
|
$
|
173,672
|
|
|
$
|
171,480
|
|
|
$
|
169,278
|
|
|
$
|
166,781
|
|
Goodwill and other intangible assets
|
|
(12,132
|
)
|
|
(12,380
|
)
|
|
(12,579
|
)
|
|
(12,652
|
)
|
|
(12,735
|
)
|
Tangible common equity
|
|
$
|
165,410
|
|
|
$
|
161,292
|
|
|
$
|
158,901
|
|
|
$
|
156,626
|
|
|
$
|
154,046
|
|
Common shares outstanding
|
|
8,793,941
|
|
|
8,760,103
|
|
|
8,764,420
|
|
|
8,763,539
|
|
|
8,758,923
|
|
Book value per share
|
|
$
|
20.19
|
|
|
$
|
19.83
|
|
|
$
|
19.57
|
|
|
$
|
19.32
|
|
|
$
|
19.04
|
|
Tangible book value per share
|
|
18.81
|
|
|
18.41
|
|
|
18.13
|
|
|
17.87
|
|
|
17.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
(Dollars in thousands)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Common stockholders’ equity
|
|
$
|
177,542
|
|
|
$
|
173,672
|
|
|
$
|
171,480
|
|
|
$
|
169,278
|
|
|
$
|
166,781
|
|
Goodwill and other intangible assets
|
|
(12,132
|
)
|
|
(12,380
|
)
|
|
(12,579
|
)
|
|
(12,652
|
)
|
|
(12,735
|
)
|
Tangible common equity
|
|
$
|
165,410
|
|
|
$
|
161,292
|
|
|
$
|
158,901
|
|
|
$
|
156,626
|
|
|
$
|
154,046
|
|
Total assets
|
|
$
|
1,894,330
|
|
|
$
|
1,899,787
|
|
|
$
|
1,878,217
|
|
|
$
|
1,794,066
|
|
|
$
|
1,785,656
|
|
Goodwill and other intangible assets
|
|
(12,132
|
)
|
|
(12,380
|
)
|
|
(12,579
|
)
|
|
(12,652
|
)
|
|
(12,735
|
)
|
Tangible assets
|
|
$
|
1,882,198
|
|
|
$
|
1,887,407
|
|
|
$
|
1,865,638
|
|
|
$
|
1,781,414
|
|
|
$
|
1,772,921
|
|
Tangible common equity to tangible assets
|
|
8.79
|
%
|
|
8.55
|
%
|
|
8.52
|
%
|
|
8.79
|
%
|
|
8.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Nine Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
(Dollars in thousands)
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
|
2018
|
|
2017
|
Total non-interest expense
|
|
$
|
15,746
|
|
|
$
|
14,467
|
|
|
$
|
13,907
|
|
|
$
|
14,859
|
|
|
$
|
14,231
|
|
|
$
|
44,120
|
|
|
$
|
42,012
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (gain) on foreclosed properties
|
|
30
|
|
|
—
|
|
|
—
|
|
|
(143
|
)
|
|
—
|
|
|
30
|
|
|
—
|
|
Amortization of other intangible assets
|
|
12
|
|
|
12
|
|
|
12
|
|
|
13
|
|
|
14
|
|
|
36
|
|
|
41
|
|
SBA recourse provision (benefit)
|
|
314
|
|
|
99
|
|
|
(295
|
)
|
|
145
|
|
|
1,315
|
|
|
118
|
|
|
2,095
|
|
Impairment of tax credit investments
|
|
113
|
|
|
329
|
|
|
113
|
|
|
2,447
|
|
|
112
|
|
|
554
|
|
|
338
|
|
Deconversion fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
199
|
|
|
—
|
|
|
—
|
|
|
101
|
|
Total operating expense
|
|
$
|
15,277
|
|
|
$
|
14,027
|
|
|
$
|
14,077
|
|
|
$
|
12,198
|
|
|
$
|
12,790
|
|
|
$
|
43,382
|
|
|
$
|
39,437
|
|
Net interest income
|
|
$
|
17,094
|
|
|
$
|
16,931
|
|
|
$
|
16,202
|
|
|
$
|
15,358
|
|
|
$
|
14,883
|
|
|
$
|
50,227
|
|
|
$
|
45,250
|
|
Total non-interest income
|
|
4,871
|
|
|
3,982
|
|
|
4,667
|
|
|
3,525
|
|
|
4,339
|
|
|
13,519
|
|
|
13,140
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) gain on sale of securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(409
|
)
|
|
5
|
|
|
—
|
|
|
6
|
|
Total operating revenue
|
|
$
|
21,965
|
|
|
$
|
20,913
|
|
|
$
|
20,869
|
|
|
$
|
19,292
|
|
|
$
|
19,217
|
|
|
$
|
63,746
|
|
|
$
|
58,384
|
|
Efficiency ratio
|
|
69.55
|
%
|
|
67.07
|
%
|
|
67.45
|
%
|
|
63.23
|
%
|
|
66.56
|
%
|
|
68.05
|
%
|
|
67.55
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|

View source version on businesswire.com: https://www.businesswire.com/news/home/20181025005969/en/
First Business Financial Services, Inc.
Edward G. Sloane, Jr.
Chief
Financial Officer
608-232-5970
esloane@firstbusiness.com
Source: First Business Financial Services, Inc.