WEST DES MOINES, Iowa, April 27, 2023 (GLOBE NEWSWIRE) -- West Bancorporation, Inc. (Nasdaq: WTBA; the “Company”), parent company of West Bank, today reported first quarter 2023 net income of $7.8 million, or $0.47 per diluted common share, compared to fourth quarter 2022 net income of $8.9 million, or $0.53 per diluted common share, and first quarter 2022 net income of $13.2 million, or $0.78 per diluted common share. On April 26, 2023, the Company’s Board of Directors declared a regular quarterly dividend of $0.25 per common share. The dividend is payable on May 24, 2023, to stockholders of record on May 10, 2023.
David Nelson, President and Chief Executive Officer of the Company, commented, “The unprecedented size and pace of the Federal Reserve short-term interest rate increases in 2022 and early 2023 and inverted yield curve have changed the dynamics of our commercial based customers’ deposit pricing. Our deposit and funding mix has changed as depositors react to significant short-term rate competition and utilize accumulated cash for business operations. The resulting increase in our cost of funds has outpaced the repricing benefits in loans and investments, leading to a decline in our net interest income and net interest margin.”
David Nelson added, “Our credit quality continues to be pristine and for the seventh consecutive quarter end, we had no loans greater than 30 days past due. We remain diligent in monitoring and managing our credit risk as we anticipate an economic downturn ahead along with an uncertain and volatile interest rate environment. Our capital position is strong and we remain focused on delivering high quality services and products through our successful relationship based business model.”
First Quarter 2023 Financial Highlights
| Quarter Ended March 31, 2023 | ||||
| Net Income (in thousands) | $ | 7,844 | ||
| Return on Average Equity | 14.77 | % | ||
| Return on Average Assets | 0.88 | % | ||
| Efficiency ratio (a non-GAAP measure) | 55.34 | % | ||
| Nonperforming assets to total assets | 0.01 | % | ||
First Quarter 2023 Compared to Fourth Quarter 2022 Overview
- Loans increased $13.3 million in the first quarter of 2023, or 2.0 percent annualized.
- No provision for credit losses was recorded in either the first quarter of 2023 or the fourth quarter of 2022.
- The allowance for credit losses to total loans was 1.01 percent at March 31, 2023, compared to 0.93 percent at December 31, 2022. The increase in the allowance ratio was due to the adoption of ASU 2016-13, which resulted in a $2.5 million increase to the allowance for credit losses. This adoption also resulted in establishing an allowance for unfunded commitments of $2.3 million which is included in other liabilities, a $3.6 million decrease to retained earnings and $1.2 million increase in deferred tax assets.
- There were no loans greater than 30 days past due at March 31, 2023, which was the seventh consecutive quarter in which no loans were greater than 30 days past due. Nonaccrual loans at March 31, 2023, consisted of one loan with a balance of $316 thousand.
- Deposits decreased $82.0 million in the first quarter of 2023. Included in this decrease was a decrease in brokered deposits of $38.5 million. Brokered deposits totaled $234.2 million at March 31, 2023, compared to $272.7 million at December 31, 2022.
- The efficiency ratio (a non-GAAP measure) was 55.34 percent for the first quarter of 2023, compared to 50.42 percent for the fourth quarter of 2022. The increase in the efficiency ratio is primarily the result of the decline in tax equivalent net interest income and an increase in compensation and employee benefits.
- Net interest margin, on a fully tax-equivalent basis (a non-GAAP measure), was 2.23 percent for the first quarter of 2023, compared to 2.49 percent for the fourth quarter of 2022. Net interest income for the first quarter of 2023 was $18.7 million, compared to $20.7 million for the fourth quarter of 2022. The rising cost of deposits and borrowed funds and the change in mix of liabilities has increased interest expense faster than the increase in interest income from loan repricing and loan originations.
- The tangible common equity ratio was 5.99 percent at March 31, 2023, an increase of 15 basis points compared to 5.84 percent at December 31, 2022, due to an increase in the market value of the securities portfolio, which decreased the accumulated other comprehensive loss.
First Quarter 2023 Compared to First Quarter 2022 Overview
- Loans increased $270.8 million at March 31, 2023, or 10.9 percent, compared to March 31, 2022.
- Deposits decreased $292.9 million at March 31, 2023, compared to March 31, 2022. Included in deposits were brokered deposits totaling $234.2 million at March 31, 2023, compared to $116.5 million at March 31, 2022. The decline in deposits was primarily attributable to customers using their own liquidity to fund business transactions, instead of incurring debt, and customers seeking higher yielding investment options for excess deposits accumulated over the past couple of years. During the second quarter of 2022, a large corporate customer completed a significant business transaction that was funded by the customer’s deposits held at West Bank, accounting for a significant portion of the decrease in deposits.
- Borrowed funds increased to $580.2 million at March 31, 2023, compared to $197.0 million at March 31, 2022. The increase included $58.9 million in subordinated notes that were issued in June 2022, $95.0 million in FHLB Advances associated with long-term interest rate swaps and $229.3 million in federal funds purchased and other short-term borrowings.
- The efficiency ratio (a non-GAAP measure) was 55.34 percent for the first quarter of 2023, compared to 40.14 percent for the first quarter of 2022. Tax-equivalent net interest income decreased in the first quarter of 2023 compared to the first quarter of 2022 due to the increased cost of deposits and borrowed funds. Additionally, salaries and employee benefits increased due to wage increases that have been higher than recent historical averages in response to market conditions and competition in retaining and recruiting talent and increases in full-time equivalent employees with growth in our commercial banking team and information technology department. Occupancy and equipment expense increased primarily due to the increase in depreciation expense related to the new building in St. Cloud, Minnesota which opened in March 2022 and scheduled increases in rent expense on existing leases.
- Net interest margin, on a fully tax-equivalent basis (a non-GAAP measure), was 2.23 percent for the first quarter of 2023, compared to 2.85 percent for the first quarter of 2022. Net interest income for the first quarter of 2023 was $18.7 million, compared to $23.8 million for the first quarter of 2022. In 2022 and 2023, the rising cost of deposits and borrowed funds and the change in mix of liabilities has increased interest expense faster than the increase in interest income from loan repricing and loan originations.
The Company filed its report on Form 10-Q with the Securities and Exchange Commission today. Please refer to that document for a more in-depth discussion of the Company’s financial results. The Form 10-Q is available on the Investor Relations section of West Bank’s website at www.westbankstrong.com.
The Company will discuss its results in a conference call scheduled for 2:00 p.m. Central Time on Thursday, April 27, 2023. The telephone number for the conference call is 844-200-6205. The access code for the conference call is 950386. A recording of the call will be available until May 11, 2023, by dialing 845-709-8569. The replay access code is 943070.
About West Bancorporation, Inc. (Nasdaq: WTBA)
West Bancorporation, Inc. is headquartered in West Des Moines, Iowa. Serving customers since 1893, West Bank, a wholly-owned subsidiary of West Bancorporation, Inc., is a community bank that focuses on lending, deposit services, and trust services for small- to medium-sized businesses and consumers. West Bank has six offices in the Des Moines, Iowa metropolitan area, one office in Coralville, Iowa, and four offices in Minnesota in the cities of Rochester, Owatonna, Mankato and St. Cloud.
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to the Company’s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may appear throughout this report. These forward-looking statements are generally identified by the words “believes,” “expects,” “intends,” “anticipates,” “projects,” “future,” “confident,” “may,” “should,” “will,” “strategy,” “plan,” “opportunity,” “will be,” “will likely result,” “will continue” or similar references, or references to estimates, predictions or future events. Such forward-looking statements are based upon certain underlying assumptions, risks and uncertainties. Because of the possibility that the underlying assumptions are incorrect or do not materialize as expected in the future, actual results could differ materially from these forward-looking statements. Risks and uncertainties that may affect future results include: interest rate risk, including the effects of recent rate increases by the Federal Reserve; fluctuations in the values of the securities held in our investment portfolio, including as a result of rising interest rates, which has resulted in unrealized losses in our portfolio; competitive pressures, including from non-bank competitors such as “fintech” companies and digital asset service providers; pricing pressures on loans and deposits; our ability to successfully manage liquidity risk; changes in credit and other risks posed by the Company’s loan portfolio, including declines in commercial or residential real estate values or changes in the allowance for loan losses dictated by new market conditions, accounting standards (including as a result of the implementation of the current expected credit loss (CECL) accounting standard) or regulatory requirements; the concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure; changes in local, national and international economic conditions, including rising rates of inflation; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank and Signature Bank that resulted in failure of those institutions; changes in legal and regulatory requirements, limitations and costs including in response to the recent failures of Silicon Valley Bank and Signature Bank; changes in customers’ acceptance of the Company’s products and services; cyber-attacks; unexpected outcomes of existing or new litigation involving the Company; the monetary, trade and other regulatory policies of the U.S. government; acts of war or terrorism, including the Russian invasion of Ukraine, widespread disease or pandemics, such as the COVID-19 pandemic, or other adverse external events; risks related to climate change and the negative impact it may have on our customers and their businesses; developments and uncertainty related to the future use and availability of some reference rates, such as the expected discontinuation of the London Interbank Offered Rate and the development of other alternative reference rates; changes to U.S. tax laws, regulations and guidance; talent and labor shortages; the new 1 percent excise tax on stock buybacks by publicly traded companies; and any other risks described in the “Risk Factors” sections of reports filed by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to revise or update such forward-looking statements to reflect current or future events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
| WEST BANCORPORATION, INC. AND SUBSIDIARY | ||||||||||||||||||||
| Financial Information (unaudited) | ||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| As of | ||||||||||||||||||||
| CONDENSED BALANCE SHEETS | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and due from banks | $ | 21,579 | $ | 24,896 | $ | 58,342 | $ | 26,174 | $ | 21,896 | ||||||||||
| Interest-bearing deposits | 901 | 1,643 | 1,049 | 766 | 122,359 | |||||||||||||||
| Securities available for sale, at fair value | 665,358 | 664,115 | 671,752 | 731,970 | 797,912 | |||||||||||||||
| Federal Home Loan Bank stock, at cost | 22,226 | 19,336 | 18,350 | 15,532 | 10,269 | |||||||||||||||
| Loans | 2,756,185 | 2,742,836 | 2,614,145 | 2,573,129 | 2,485,366 | |||||||||||||||
| Allowance for credit losses | (27,941 | ) | (25,473 | ) | (25,418 | ) | (25,434 | ) | (27,623 | ) | ||||||||||
| Loans, net | 2,728,244 | 2,717,363 | 2,588,727 | 2,547,695 | 2,457,743 | |||||||||||||||
| Premises and equipment, net | 59,565 | 53,124 | 44,592 | 41,807 | 40,898 | |||||||||||||||
| Bank-owned life insurance | 44,830 | 44,573 | 44,318 | 44,072 | 43,836 | |||||||||||||||
| Other assets | 82,240 | 88,168 | 90,387 | 66,775 | 52,156 | |||||||||||||||
| Total assets | $ | 3,624,943 | $ | 3,613,218 | $ | 3,517,517 | $ | 3,474,791 | $ | 3,547,069 | ||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||
| Deposits | $ | 2,798,393 | $ | 2,880,408 | $ | 2,822,847 | $ | 2,842,451 | $ | 3,091,252 | ||||||||||
| Federal funds purchased and other short-term borrowings | 229,290 | 200,000 | 204,500 | 133,000 | — | |||||||||||||||
| Other borrowings | 350,921 | 285,855 | 255,789 | 255,751 | 196,954 | |||||||||||||||
| Other liabilities | 29,347 | 35,843 | 35,617 | 27,400 | 22,383 | |||||||||||||||
| Stockholders’ equity | 216,992 | 211,112 | 198,764 | 216,189 | 236,480 | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 3,624,943 | $ | 3,613,218 | $ | 3,517,517 | $ | 3,474,791 | $ | 3,547,069 | ||||||||||
| For the Quarter Ended | ||||||||||||||||||||
| AVERAGE BALANCES | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||
| Assets | $ | 3,617,458 | $ | 3,511,717 | $ | 3,475,894 | $ | 3,503,686 | $ | 3,544,564 | ||||||||||
| Loans | 2,745,381 | 2,649,671 | 2,579,862 | 2,537,152 | 2,449,521 | |||||||||||||||
| Deposits | 2,846,926 | 2,901,928 | 2,864,648 | 3,002,535 | 3,067,019 | |||||||||||||||
| Stockholders’ equity | 215,391 | 199,947 | 219,065 | 222,731 | 255,130 | |||||||||||||||
| WEST BANCORPORATION, INC. AND SUBSIDIARY | ||||||||||||||||||||
| Financial Information (unaudited) | ||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| As of | ||||||||||||||||||||
| ANALYSIS OF LOAN PORTFOLIO | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||
| Loan mix: | ||||||||||||||||||||
| Commercial | $ | 520,894 | $ | 519,196 | $ | 526,336 | $ | 475,704 | $ | 466,874 | ||||||||||
| Real estate: | ||||||||||||||||||||
| Construction, land and land development | 336,739 | 363,015 | 341,549 | 390,137 | 388,424 | |||||||||||||||
| 1-4 family residential first mortgages | 75,223 | 75,211 | 69,991 | 69,829 | 65,978 | |||||||||||||||
| Home equity | 9,726 | 10,322 | 10,271 | 8,564 | 9,213 | |||||||||||||||
| Commercial | 1,810,158 | 1,771,940 | 1,661,907 | 1,627,150 | 1,555,001 | |||||||||||||||
| Consumer and other | 7,381 | 7,291 | 7,884 | 5,912 | 4,068 | |||||||||||||||
| 2,760,121 | 2,746,975 | 2,617,938 | 2,577,296 | 2,489,558 | ||||||||||||||||
| Net unamortized fees and costs | (3,936 | ) | (4,139 | ) | (3,793 | ) | (4,167 | ) | (4,192 | ) | ||||||||||
| Total loans | $ | 2,756,185 | $ | 2,742,836 | $ | 2,614,145 | $ | 2,573,129 | $ | 2,485,366 | ||||||||||
| Less allowance for credit losses | (27,941 | ) | (25,473 | ) | (25,418 | ) | (25,434 | ) | (27,623 | ) | ||||||||||
| Net loans | $ | 2,728,244 | $ | 2,717,363 | $ | 2,588,727 | $ | 2,547,695 | $ | 2,457,743 | ||||||||||
| ANALYSIS OF DEPOSITS | ||||||||||||||||||||
| Deposit mix: | ||||||||||||||||||||
| Noninterest-bearing demand | $ | 605,666 | $ | 693,563 | $ | 712,722 | $ | 690,335 | $ | 710,697 | ||||||||||
| Interest-bearing demand | 486,656 | 536,226 | 469,257 | 472,919 | 554,235 | |||||||||||||||
| Savings and money market | 1,295,280 | 1,237,954 | 1,252,694 | 1,360,020 | 1,632,690 | |||||||||||||||
| Time | 410,791 | 412,665 | 388,174 | 319,177 | 193,630 | |||||||||||||||
| Total deposits | $ | 2,798,393 | $ | 2,880,408 | $ | 2,822,847 | $ | 2,842,451 | $ | 3,091,252 | ||||||||||
| ANALYSIS OF BORROWINGS | ||||||||||||||||||||
| Borrowings mix: | ||||||||||||||||||||
| Federal funds purchased and other short-term borrowings | $ | 229,290 | $ | 200,000 | $ | 204,500 | $ | 133,000 | $ | — | ||||||||||
| Subordinated notes, net | 79,435 | 79,369 | 79,303 | 79,265 | 20,468 | |||||||||||||||
| Federal Home Loan Bank advances | 220,000 | 155,000 | 125,000 | 125,000 | 125,000 | |||||||||||||||
| Long-term debt | 51,486 | 51,486 | 51,486 | 51,486 | 51,486 | |||||||||||||||
| Total borrowings | $ | 580,211 | $ | 485,855 | $ | 460,289 | $ | 388,751 | $ | 196,954 | ||||||||||
| STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
| Preferred stock | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Common stock | 3,000 | 3,000 | 3,000 | 3,000 | 3,000 | |||||||||||||||
| Additional paid-in capital | 31,797 | 32,021 | 31,152 | 30,283 | 29,421 | |||||||||||||||
| Retained earnings | 267,620 | 267,562 | 262,776 | 255,334 | 246,827 | |||||||||||||||
| Accumulated other comprehensive loss | (85,425 | ) | (91,471 | ) | (98,164 | ) | (72,428 | ) | (42,768 | ) | ||||||||||
| Total Stockholders’ Equity | $ | 216,992 | $ | 211,112 | $ | 198,764 | $ | 216,189 | $ | 236,480 | ||||||||||
| WEST BANCORPORATION, INC. AND SUBSIDIARY | |||||||||||||||||
| Financial Information (unaudited) | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| For the Quarter Ended | |||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||
| Interest income: | |||||||||||||||||
| Loans, including fees | $ | 32,948 | $ | 30,859 | $ | 28,102 | $ | 24,848 | $ | 23,286 | |||||||
| Securities: | |||||||||||||||||
| Taxable | 3,316 | 3,398 | 3,147 | 3,090 | 2,889 | ||||||||||||
| Tax-exempt | 885 | 887 | 890 | 892 | 858 | ||||||||||||
| Interest-bearing deposits | 30 | 24 | 30 | 67 | 82 | ||||||||||||
| Total interest income | 37,179 | 35,168 | 32,169 | 28,897 | 27,115 | ||||||||||||
| Interest expense: | |||||||||||||||||
| Deposits | 13,339 | 11,043 | 6,289 | 3,146 | 2,151 | ||||||||||||
| Federal funds purchased and other short-term borrowings | 2,079 | 952 | 655 | 157 | — | ||||||||||||
| Subordinated notes | 1,106 | 1,119 | 1,106 | 394 | 248 | ||||||||||||
| Federal Home Loan Bank advances | 1,262 | 755 | 649 | 635 | 630 | ||||||||||||
| Long-term debt | 698 | 630 | 466 | 326 | 258 | ||||||||||||
| Total interest expense | 18,484 | 14,499 | 9,165 | 4,658 | 3,287 | ||||||||||||
| Net interest income | 18,695 | 20,669 | 23,004 | 24,239 | 23,828 | ||||||||||||
| Credit loss expense (benefit) | — | — | — | (1,750 | ) | (750 | ) | ||||||||||
| Net interest income after credit loss expense (benefit) | 18,695 | 20,669 | 23,004 | 25,989 | 24,578 | ||||||||||||
| Noninterest income: | |||||||||||||||||
| Service charges on deposit accounts | 462 | 476 | 553 | 585 | 580 | ||||||||||||
| Debit card usage fees | 486 | 492 | 498 | 507 | 472 | ||||||||||||
| Trust services | 706 | 678 | 780 | 622 | 629 | ||||||||||||
| Increase in cash value of bank-owned life insurance | 257 | 255 | 246 | 236 | 227 | ||||||||||||
| Gain from bank-owned life insurance | 691 | — | — | — | — | ||||||||||||
| Loan swap fees | — | — | 835 | — | — | ||||||||||||
| Other income | 355 | 364 | 364 | 328 | 481 | ||||||||||||
| Total noninterest income | 2,957 | 2,265 | 3,276 | 2,278 | 2,389 | ||||||||||||
| Noninterest expense: | |||||||||||||||||
| Salaries and employee benefits | 6,867 | 6,552 | 6,578 | 6,410 | 6,298 | ||||||||||||
| Occupancy and equipment | 1,327 | 1,270 | 1,315 | 1,242 | 1,086 | ||||||||||||
| Data processing | 635 | 673 | 644 | 656 | 624 | ||||||||||||
| Technology and software | 513 | 518 | 651 | 492 | 476 | ||||||||||||
| FDIC insurance | 416 | 243 | 127 | 289 | 337 | ||||||||||||
| Professional fees | 250 | 205 | 250 | 202 | 217 | ||||||||||||
| Director fees | 205 | 215 | 209 | 222 | 168 | ||||||||||||
| Other expenses | 1,858 | 1,989 | 1,684 | 1,753 | 1,456 | ||||||||||||
| Total noninterest expense | 12,071 | 11,665 | 11,458 | 11,266 | 10,662 | ||||||||||||
| Income before income taxes | 9,581 | 11,269 | 14,822 | 17,001 | 16,305 | ||||||||||||
| Income taxes | 1,737 | 2,323 | 3,220 | 4,334 | 3,121 | ||||||||||||
| Net income | $ | 7,844 | $ | 8,946 | $ | 11,602 | $ | 12,667 | $ | 13,184 | |||||||
| Basic earnings per common share | $ | 0.47 | $ | 0.54 | $ | 0.70 | $ | 0.76 | $ | 0.80 | |||||||
| Diluted earnings per common share | $ | 0.47 | $ | 0.53 | $ | 0.69 | $ | 0.75 | $ | 0.78 | |||||||
| WEST BANCORPORATION, INC. AND SUBSIDIARY | ||||||||||||||||||||
| Financial Information (unaudited) | ||||||||||||||||||||
| As of and for the Quarter Ended | ||||||||||||||||||||
| COMMON SHARE DATA | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||
| Earnings per common share (basic) | $ | 0.47 | $ | 0.54 | $ | 0.70 | $ | 0.76 | $ | 0.80 | ||||||||||
| Earnings per common share (diluted) | 0.47 | 0.53 | 0.69 | 0.75 | 0.78 | |||||||||||||||
| Dividends per common share | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | |||||||||||||||
| Book value per common share(1) | 12.98 | 12.69 | 11.94 | 12.99 | 14.22 | |||||||||||||||
| Closing stock price | 18.27 | 25.55 | 20.81 | 24.34 | 27.21 | |||||||||||||||
| Market price/book value(2) | 140.76 | % | 201.34 | % | 174.29 | % | 187.37 | % | 191.35 | % | ||||||||||
| Price earnings ratio(3) | 9.56 | 11.93 | 7.49 | 7.98 | 8.39 | |||||||||||||||
| Annualized dividend yield(4) | 5.47 | % | 3.91 | % | 4.81 | % | 4.11 | % | 3.68 | % | ||||||||||
| REGULATORY CAPITAL RATIOS | ||||||||||||||||||||
| Consolidated: | ||||||||||||||||||||
| Total risk-based capital ratio | 12.17 | % | 12.08 | % | 12.34 | % | 12.53 | % | 10.72 | % | ||||||||||
| Tier 1 risk-based capital ratio | 9.51 | 9.55 | 9.72 | 9.81 | 9.81 | |||||||||||||||
| Tier 1 leverage capital ratio | 8.60 | 8.81 | 8.85 | 8.59 | 8.39 | |||||||||||||||
| Common equity tier 1 ratio | 8.92 | 8.96 | 9.11 | 9.17 | 9.16 | |||||||||||||||
| West Bank: | ||||||||||||||||||||
| Total risk-based capital ratio | 13.16 | % | 13.08 | % | 13.38 | % | 13.62 | % | 11.88 | % | ||||||||||
| Tier 1 risk-based capital ratio | 12.26 | 12.33 | 12.60 | 12.81 | 10.98 | |||||||||||||||
| Tier 1 leverage capital ratio | 11.10 | 11.37 | 11.47 | 11.22 | 9.39 | |||||||||||||||
| Common equity tier 1 ratio | 12.26 | 12.33 | 12.60 | 12.81 | 10.98 | |||||||||||||||
| KEY PERFORMANCE RATIOS AND OTHER METRICS | ||||||||||||||||||||
| Return on average assets(5) | 0.88 | % | 1.01 | % | 1.32 | % | 1.45 | % | 1.51 | % | ||||||||||
| Return on average equity(6) | 14.77 | 17.75 | 21.01 | 22.81 | 20.96 | |||||||||||||||
| Net interest margin(7)(13) | 2.23 | 2.49 | 2.78 | 2.93 | 2.85 | |||||||||||||||
| Yield on interest-earning assets(8)(13) | 4.41 | 4.21 | 3.87 | 3.49 | 3.24 | |||||||||||||||
| Cost of interest-bearing liabilities | 2.76 | 2.24 | 1.45 | 0.73 | 0.52 | |||||||||||||||
| Efficiency ratio(9)(13) | 55.34 | 50.42 | 43.16 | 41.96 | 40.14 | |||||||||||||||
| Non-performing assets to total assets(10) | 0.01 | 0.01 | 0.01 | 0.01 | 0.25 | |||||||||||||||
| ACL ratio(11) | 1.01 | 0.93 | 0.97 | 0.99 | 1.11 | |||||||||||||||
| Loans/total assets | 76.03 | 75.91 | 74.32 | 74.05 | 70.07 | |||||||||||||||
| Loans/total deposits | 98.49 | 95.22 | 92.61 | 90.53 | 80.40 | |||||||||||||||
| Tangible common equity ratio(12) | 5.99 | 5.84 | 5.65 | 6.22 | 6.67 | |||||||||||||||
(1) Includes accumulated other comprehensive income (loss).
(2) Closing stock price divided by book value per common share.
(3) Closing stock price divided by annualized earnings per common share (basic).
(4) Annualized dividend divided by period end closing stock price.
(5) Annualized net income divided by average assets.
(6) Annualized net income divided by average stockholders’ equity.
(7) Annualized tax-equivalent net interest income divided by average interest-earning assets.
(8) Annualized tax-equivalent interest income on interest-earning assets divided by average interest-earning assets.
(9) Noninterest expense (excluding other real estate owned expense and write-down of premises) divided by noninterest income (excluding net securities gains/losses and gains/losses on disposition of premises and equipment) plus tax-equivalent net interest income.
(10) Total nonperforming assets divided by total assets.
(11) Allowance for credit losses divided by total loans.
(12) Common equity less intangible assets (none held) divided by tangible assets.
(13) A non-GAAP measure.
NON-GAAP FINANCIAL MEASURES
This report contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include the Company’s presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis and the presentation of the efficiency ratio on an adjusted and FTE basis, excluding certain income and expenses. Management believes these non-GAAP financial measures provide useful information to both management and investors to analyze and evaluate the Company’s financial performance. These measures are considered standard measures of comparison within the banking industry. Additionally, management believes providing measures on a FTE basis enhances the comparability of income arising from taxable and nontaxable sources. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently. These non-GAAP disclosures should not be considered an alternative to the Company’s GAAP results. The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on a fully taxable equivalent basis and efficiency ratio on an adjusted and FTE basis.
| (in thousands) | As of and for the Quarter Ended | |||||||||||||||||||
| March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||||||
| Reconciliation of net interest income and net interest margin on a FTE basis to GAAP: | ||||||||||||||||||||
| Net interest income (GAAP) | $ | 18,695 | $ | 20,669 | $ | 23,004 | $ | 24,239 | $ | 23,828 | ||||||||||
| Tax-equivalent adjustment (1) | 161 | 197 | 270 | 326 | 329 | |||||||||||||||
| Net interest income on a FTE basis (non-GAAP) | 18,856 | 20,866 | 23,274 | 24,565 | 24,157 | |||||||||||||||
| Average interest-earning assets | 3,435,988 | 3,328,941 | 3,322,522 | 3,362,313 | 3,432,114 | |||||||||||||||
| Net interest margin on a FTE basis (non-GAAP) | 2.23 | % | 2.49 | % | 2.78 | % | 2.93 | % | 2.85 | % | ||||||||||
| Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP: | ||||||||||||||||||||
| Net interest income on a FTE basis (non-GAAP) | $ | 18,856 | $ | 20,866 | $ | 23,274 | $ | 24,565 | $ | 24,157 | ||||||||||
| Noninterest income | 2,957 | 2,265 | 3,276 | 2,278 | 2,389 | |||||||||||||||
| Adjustment for losses on disposal of premises and equipment, net | — | 2 | — | 9 | 18 | |||||||||||||||
| Adjusted income | 21,813 | 23,133 | 26,550 | 26,852 | 26,564 | |||||||||||||||
| Noninterest expense | 12,071 | 11,665 | 11,458 | 11,266 | 10,662 | |||||||||||||||
| Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2) | 55.34 | % | 50.42 | % | 43.16 | % | 41.96 | % | 40.14 | % | ||||||||||
(1) Computed on a tax-equivalent basis using a federal income tax rate of 21 percent, adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt securities and loans. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results, as it enhances the comparability of income arising from taxable and nontaxable sources.
(2) The efficiency ratio expresses noninterest expense as a percent of fully taxable equivalent net interest income and noninterest income, excluding specific noninterest income and expenses. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the Company's financial performance. It is a standard measure of comparison within the banking industry. A lower ratio is more desirable.
For more information contact:
Jane Funk, Executive Vice President, Treasurer and Chief Financial Officer (515) 222-5766
