Integrated Financial Holdings, Inc. First Quarter 2021 Financial Results

Raleigh, North Carolina, UNITED STATES


RALEIGH, N.C., May 06, 2021 (GLOBE NEWSWIRE) -- Integrated Financial Holdings, Inc. (OTC PINK: IFHI) (the “Company” or “IFH”), the financial holding company for West Town Bank & Trust (“the Bank”), released its financial results for the three months ended March 31, 2021. Highlights include the following:

  • First quarter net income of $3.9 million or $1.76 per diluted share compared to 2020 first quarter net loss of $832,000 or ($0.37) per diluted share.  
  • Provision for loan losses of $622,000 for the first quarter of 2021 compared to $3.5 million for the same period in 2020.
  • Return on average assets of 3.99%, compared to (1.06%) for the first quarter of 2020.
  • Return on average common equity of 20.30%, compared to (4.88%) for the first quarter of 2020.
  • Return on average tangible common equity (a non-GAAP financial measure) of 27.28%, compared to (7.02%) for the first quarter of 2020.
  • Loan processing and servicing revenue of $8.8 million, compared to $1.7 million for the first quarter of 2020.
  • Mortgage origination and sales revenue of $1.7 million as compared to $1.4 million for the same period in 2020.
  • Other noninterest income of $2.2 million compared to $635,000 for the same period in 2020.

“The Company’s strong first quarter earnings to start the year can be attributed to Windsor’s recent PPP loan processing revenue and continued strong results from our Mortgage and Government Guaranteed Lending departments,” said Eric Bergevin, President & CEO. “In particular, we are very pleased with Windsor’s continued growth, having processed nearly $1 billion in PPP loans during the first quarter of 2021 alone, as well as growing it’s servicing portfolio as the result of increased government guaranteed lending activity from both new and existing financial institution clients. In addition, the Bank’s management team continues to perform exceptionally well in terms of addressing credit concerns related to the pandemic. Our strategy around proactive communication efforts with our existing business clients has led to improvements in asset quality across the board, including fewer charge-offs, positive trends in reserve allocations and a decrease in overall non-performing assets. With increased economic activity expected nationwide as we begin to see businesses reopen that have been significantly impacted by COVID-19, we feel confident that we will continue to experience positive trends in earnings, growth and asset quality going forward.”

BALANCE SHEET
At March 31, 2021, the Company’s total assets were $408.2 million, net loans held for investment were $272.6 million, loans held for sale were $17.7 million, total deposits were $311.7 million and total shareholders’ equity attributable to IFH was $80.7 million. Compared with December 31, 2020, total assets increased $19.0 million or 5%, net loans held for investment increased $19.7 million or 8%, loans held for sale decreased $8.6 million or 33%, total deposits increased $10.8 million or 4%, and total shareholders’ equity attributable to IFH increased $4.1 million or 5%. The increases in assets and loans reflect the Bank’s continued growth in its Government Guaranteed Loans (“GGL”) program as well as participation in the Paycheck Protection Program (“PPP”). The Bank funded $12.4 million of Round 2 PPP loans for its existing customers during 2021 with $7.3 million outstanding balances from 2020 Round 1 of PPP still on the balance sheet at quarter end. The Bank originated $56.3 million in Government Guaranteed Loans (“GGL”) during the first quarter. The Bank sold $12.6 million in GGL loans during the quarter ended March 31, 2021. The Bank has continued to see strong growth in deposits primarily as a result of corresponding growth in in GGL loans, many of which require customer deposits, as well as continued execution of a strategic advance into the hemp banking space (trademarked “Hemp Banks Here”). The increase in total shareholders’ equity was primarily a result of net income posted for the year.

During the first quarter of 2021, the Company issued 49,898 shares associated with various stock-based compensation programs and option exercises and repurchased 7,200 shares of its voting common stock.

CAPITAL LEVELS
At March 31, 2021, the regulatory capital ratios of West Town Bank & Trust exceeded the minimum thresholds established for well-capitalized banks under applicable banking regulations.


 "Well Capitalized"
Minimum
Basel III Fully
Phased-In
West Town
Bank & Trust
Tier 1 common equity ratio6.50%7.00%12.00%
Tier 1 risk-based capital ratio8.00%8.50%12.00%
Total risk-based capital ratio10.00%10.50%13.26%
Tier 1 leverage ratio5.00%4.00%9.72%
    

The Company’s book value per common share increased from $30.25 at March 30, 2020 to $36.08 at March 31, 2021. The Company’s tangible book value per common share (a non-GAAP financial measure) increased from $20.88 at March 31, 2020 to $27.16 at March 31, 2021, primarily as a result of the net income of the Company.

ASSET QUALITY
The Company’s nonperforming assets to total assets ratio decreased from 2.74% at December 31, 2020 to 2.14% at March 31, 2021, as management continued to address credit concerns surrounding the potential economic impact of COVID-19 and the widespread societal responses to the pandemic. Nonaccrual loans decreased $1.2 million or 14% as compared to December 31, 2020 while foreclosed assets decreased $995,000 or 42% during the same period. Patriarch, LLC, a subsidiary of the Company formed to expedite the liquidation and recovery of certain Bank assets, held $1.4 million in foreclosed assets while the Bank held no such assets. The Company regularly conducts impairment analyses on all nonperforming assets with updated appraisals to ensure the assets are carried at the lower of fair market value (less cost to sell) or book value.

The Company recorded a $622,000 provision for loan losses during the first quarter of 2021, as compared to a provision of $3.5 million in first quarter 2020, as the problem loan portfolio decreased for the period. The Company has granted 139 deferrals since June 30, 2020 totaling $71.1 million. However, as of March 31, 2021, there are only 27 loans in deferral status with net exposure of $18.9 million. Expected loss estimates consider the impacts of decreased economic activity and higher unemployment, partially offset by the mitigating benefits of government stimulus and industry-wide loan modification efforts. The Company recorded $156,000 net charge-offs during the first quarter of 2021.


  (Dollars in thousands)3/31/2112/31/209/30/206/30/203/31/20
Nonaccrual loans$7,341 $8,506 $8,790 $7,799 $7,732 
Foreclosed assets 1,377  2,372  3,522  4,464  5,243 
90 days past due and still accruing -  -  -  -  - 
Total nonperforming assets$8,718 $10,878 $12,312 $12,263 $12,975 
      
Net charge-offs$156 $96 $2 $667 $2,390 
Annualized net charge-offs to total average portfolio loans 0.24% 0.14% 0.00% 1.13% 4.39%
      
Ratio of total nonperforming assets to total assets 2.14% 2.74% 3.29% 3.45% 4.16%
Ratio of total nonperforming loans to total loans, net     
  of allowance 2.69% 3.26% 3.66% 3.33% 3.66%
Ratio of total allowance for loan losses to total loans 2.02% 1.94% 2.05% 2.05% 2.27%
      

NET INTEREST INCOME AND MARGIN
Net interest income for the three months ended March 31, 2021 increased $47,000 or 1% in comparison to the first quarter of 2020 as loan growth year over year offset the decrease in margin as a result of the low interest rate environment. The net interest margin was 4.40% for the first quarter of 2021 compared to 5.66% for the same period in 2020. Interest-earning asset yields decreased from 7.09% to 5.22% while interest-bearing liabilities cost decreased from 2.09% to 1.23% year-over-year between March 31, 2021 and 2020. The overall decrease in both yield on assets and rates on liabilities are reflective of the rate decreases by the Federal Open Market Committee (“FOMC”) in the first quarter of 2020 in response to the pandemic.  

 Three Months Ended 
  (Dollars in thousands)3/31/2112/31/209/30/206/30/203/31/20 
Average balances:      
Loans$288,700$285,969$270,897$250,125$226,683 
Available-for-sale securities 27,366 25,200 25,581 24,743 23,861 
Other interest-bearing balances 35,981 21,305 22,596 22,326 17,046 
Total interest-earning assets 352,047 332,474 319,074 297,194 267,590 
Total assets 399,774 382,574 371,395 353,179 313,476 
       
Noninterest-bearing deposits 80,626 81,552 77,857 64,617 56,329 
Interest-bearing liabilities:      
Interest-bearing deposits 228,726 212,636 204,204 185,507 166,567 
Borrowed funds 4,000 5,838 6,793 23,459 16,475 
Total interest-bearing liabilities 232,726 218,474 210,997 208,966 183,042 
Common shareholders' equity 78,639 75,774 73,970 71,035 68,445 
Tangible common equity (1) 58,505 55,454 53,463 50,343 47,570 
       
Interest income/expense:      
Loans$4,442$4,250$4,394$4,283$4,559 
Investment securities 50 52 64 72 95 
Interest-bearing balances and other 35 38 35 36 76 
Total interest income 4,527 4,340 4,493 4,391 4,730 
Deposits 704 759 855 835 845 
Borrowings - 2 1 70 109 
Total interest expense 704 761 856 905 954 
Net interest income$3,823$3,579$3,637$3,486$3,776 
       
  (1) See reconciliation of non-GAAP financial measures.    
       


 Three Months Ended 
 3/31/2112/31/209/30/206/30/203/31/20 
Average yields and costs:      
Loans6.24%5.90%6.44%6.87%8.07% 
Available-for-sale securities0.73%0.83%1.00%1.16%1.59% 
Interest-bearing balances and other0.39%0.71%0.61%0.65%1.79% 
Total interest-earning assets5.22%5.18%5.59%5.93%7.09% 
Interest-bearing deposits1.25%1.42%1.66%1.81%2.03% 
Borrowed funds0.00%0.14%0.06%1.20%2.65% 
Total interest-bearing liabilities1.23%1.38%1.61%1.74%2.09% 
Cost of funds0.91%1.01%1.18%1.33%1.60% 
Net interest margin4.40%4.27%4.52%4.70%5.66% 
       

NONINTEREST INCOME
Noninterest income for the three months ended March 31, 2021 was $14.6 million, an increase of $9.9 million or 214% as compared to the three months ended March 31, 2020. Specific items to note include:

  • Windsor, a subsidiary of the Company which offers an SBA and USDA loan servicing platform, had processing and servicing revenue totaling $8.8 million, an increase of $7.1 million or 415% as compared to the $1.7 million in income earned from the investment in Windsor during the same prior year period. The increase is directly attributable to PPP fee related income and increased volume of the servicing portfolio from new and existing clients.     
  • Mortgage revenue totaled $1.7 million, an increase of $288,000 or 20% as compared to the first quarter 2020. Mortgage loans originated to sell to the secondary market increased from $20.9 million in the first quarter 2020 to $39.4 million in the first quarter 2021. The increase in both the revenue and origination volume can be attributable to the decrease in market rates tied to the FOMC decision to decrease rates.
  • GGL revenue was $1.3 million in the first quarter of 2021, an increase of $570,000 or 75% in comparison to the same period in 2020. GGL volume was impacted by increased economic activity nationwide.
  • Other noninterest income totaled $2.2 million in the first quarter or 2021, an increase $1.6 million or 214% in comparison to the same period in 2020. The Company recognized a gain of $2.0 million in the share value in its investment in Dogwood State Bank after a successful capital raise by Dogwood Bank in the first quarter of 2021.

NONINTEREST EXPENSE
Noninterest expense for the first quarter of 2021 was $12.7 million, an increase of $6.6 million or 110%, from $6.0 million for the first quarter of 2020. The primary cause for the year-over-year increase was the cost of the software needed to process the PPP loans in the first quarter of 2021. Software costs at Windsor, the subsidiary that does the majority of the PPP loan processing, increased from $75,000 in the first quarter of 2020 to $3.1 million in the same period in 2021. However, the corresponding revenues of Windsor increased during that same period by $7.1 million. The increases in all noninterest expense categories, including compensation, occupancy, special assets, data processing, software, communications and other operating expenses are primarily related to the overall growth of the Company and its new business initiatives including the addition of West Town Payments in the third quarter of 2020 as well as a year-over-year increase in mortgage related compensation tied to the increase in revenues.

ABOUT INTEGRATED FINANCIAL HOLDINGS, INC.
Integrated Financial Holdings, Inc. is a financial holding company based in Raleigh, North Carolina. The Company changed its name from West Town Bancorp, Inc. in the third quarter of 2020. The Company is the holding company for West Town Bank & Trust, an Illinois state-chartered bank. West Town Bank & Trust provides banking services through its full-service office located in the greater Chicago area. The Company is also the parent company of: Windsor Advantage, LLC, a loan servicing company; West Town Insurance Agency, Inc., an insurance agency; Patriarch, LLC, a real estate management company; SBA Loan Documentation Services, LLC, a loan documentation origination company; and Glenwood Structured Finance, LLC, a loan broker and large loan syndication company. The Company is registered with and supervised by the Federal Reserve. West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC.

For more information, visit https://ifhinc.com/.

Important Note Regarding Forward-Looking Statements
This release contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of the Company and on the information available to management at the time this release was prepared. These statements can be identified by the use of words such as "expect," "anticipate," "estimate," "believe," variations of these words, and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand, and asset quality, including real estate and other collateral values; changes in Small Business Administration rules, regulations, or loan products, including the section 7(a) program; changes in other government guaranteed loan programs or our ability to participate in such programs; changes in tax law, including the impact of such changes on our tax assets and liabilities; future governmental shutdowns that may impact revenues associated with our lending and other operations that are dependent on government guaranteed loan programs; changes in banking regulations and accounting principles, policies, or guidelines; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with the Company’s acquisition and divesture activities; the failure of our strategic investments or acquisitions to perform as anticipated and the impact of any impairments to our intangible assets, such as goodwill; the impact of our strategic initiatives on our ability to retain key employees, and the impact of competition from traditional or new sources. These, and other factors that may emerge, could cause decisions and actual results to differ materially from current expectations. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.        

Consolidated Balance Sheets     
         
    Ending Balance
  (Dollars in thousands, unaudited)3/31/2112/31/209/30/206/30/203/31/20
Assets
     
Cash and due from banks$3,217 $4,268 $6,007 $6,183 $5,928 
Interest-bearing deposits 30,224  28,657  13,294  11,644  8,518 
 Total cash and cash equivalents 33,441  32,925  19,301  17,827  14,446 
Interest-bearing time deposits 2,746  2,746  2,746  2,746  2,746 
Available-for-sale securities 28,215  25,711  24,462  26,081  24,946 
Loans held for sale 17,735  26,308  35,743  23,072  11,839 
Loans held for investment 278,200  258,454  244,994  238,926  216,423 
 Allowance for loan and lease losses (5,609) (5,144) (5,029) (4,906) (4,907)
  Loans held for investment, net 272,591  253,310  239,965  234,020  211,516 
Premises and equipment, net 4,651  4,658  4,628  4,761  4,740 
Foreclosed assets 1,377  2,372  3,522  4,464  5,243 
Loan servicing assets 3,428  3,456  3,265  3,262  3,528 
Bank-owned life insurance 5,161  5,136  5,109  5,082  5,048 
Accrued interest receivable 1,656  1,556  1,705  1,422  1,067 
Goodwill 13,161  13,161  13,161  13,161  13,161 
Other intangible assets, net 6,851  7,037  7,224  7,409  7,596 
Other assets 17,176  10,833  13,186  12,349  6,370 
   Total assets$408,189 $389,209 $374,017 $355,656 $312,246 
         
Liabilities and Shareholders' Equity     
Liabilities     
Deposits:     
 Noninterest-bearing$77,167 $80,854 $78,849 $66,874 $59,360 
 Interest-bearing 234,523  220,036  206,913  198,108  162,059 
  Total deposits 311,690  300,890  285,762  264,982  221,419 
Borrowings 4,000  4,000  4,000  6,000  17,649 
Accrued interest payable 454  427  396  391  433 
Other liabilities 11,347  7,139  8,845  10,771  5,735 
 Total liabilities 327,491  312,456  299,003  282,144  245,236 
Shareholders' equity:     
Common stock, voting 2,223  2,181  2,181  2,193  2,193 
Common stock, non-voting 22  22  22  22  22 
Additional paid in capital 24,568  24,361  24,220  24,357  24,162 
Retained earnings 54,015  50,079  48,349  46,629  40,371 
Accumulated other comprehensive income 164  271  308  311  262 
 Total IFH, Inc. shareholders' equity 80,992  76,914  75,080  73,512  67,010 
Noncontrolling interest (294) (161) (66) -  - 
 Total shareholders' equity 80,698  76,753  75,014  73,512  67,010 
   Total liabilities and shareholders' equity$408,189 $389,209 $374,017 $355,656 $312,246 
         


Consolidated Statements of Income     
       
  Three Months Ended 
(Dollars in thousands except per share data; unaudited)3/31/2112/31/209/30/206/30/203/31/20 
Interest income      
Loans$4,442 $4,250 $4,394 $4,283 $4,559  
Available-for-sale securities and other 85  90  99  108  171  
Total interest income 4,527  4,340  4,493  4,391  4,730  
Interest expense      
Interest on deposits 704  759  855  835  845  
Interest on borrowings -  2  1  70  109  
Total interest expense 704  761  856  905  954  
Net interest income 3,823  3,579  3,637  3,486  3,776  
Provision for loan losses 622  210  125  665  3,460  
Noninterest income      
Loan processing and servicing      
revenue 8,838  2,291  2,579  14,186  1,713  
Mortgage 1,706  1,398  2,400  1,573  1,418  
Government guaranteed lending 1,325  1,815  571  37  755  
SBA documentation preparation fees 434  57  195  423  74  
Bank-owned life insurance 32  20  15  34  27  
Service charges on deposits 25  26  28  11  19  
Other noninterest income 2,196  491  771  (56) 635  
Total noninterest income 14,556  6,098  6,559  16,208  4,641  
Noninterest expense      
Compensation 6,016  5,250  4,422  5,682  3,753  
Occupancy and equipment 303  286  289  211  256  
Loan and special asset expenses 1,002  655  1,013  816  242  
Professional services 680  559  534  676  490  
Data processing 221  196  187  165  148  
Software 3,391  492  415  2,221  249  
Communications 107  94  83  82  89  
Advertising 109  128  109  215  55  
Amortization of intangibles 186  186  186  186  186  
Other operating expenses 644  792  545  593  562  
Total noninterest expense 12,659  8,638  7,783  10,847  6,030  
Income (loss) before income taxes 5,098  829  2,288  8,182  (1,073) 
Income tax expense (benefit) 1,296  (805) 634  1,924  (241) 
Net income (loss) 3,802  1,634  1,654  6,258  (832) 
Noncontrolling interest (134) (96) (66) -  -  
Net income (loss) attributable      
    to IFH, Inc.$ 3,936 $ 1,730 $ 1,720 $ 6,258 $ (832) 
       
Basic earnings (loss) per common share$1.80 $0.80 $0.79 $2.87 $(0.38) 
Diluted earnings (loss) per common share$1.76 $0.78 $0.78 $2.84 $(0.37) 
Weighted average common shares      
outstanding 2,185  2,169  2,176  2,177  2,193  
Diluted average common shares      
outstanding 2,240  2,212  2,206  2,204  2,232  
       


Performance Ratios      
        
  Three Months Ended 
  3/31/2112/31/209/30/206/30/203/31/20 
PER COMMON SHARE      
 Basic earnings (loss) per common share$1.80 $0.80 $0.79 $2.87 $(0.38) 
 Diluted earnings (loss) per common share 1.76  0.78  0.78  2.84  (0.37) 
 Book value per common share 36.08  34.91  34.08  33.19  30.25  
 Tangible book value per common share (2) 27.16  25.74  24.83  23.90  20.88  
        
FINANCIAL RATIOS (ANNUALIZED)      
 Return on average assets 3.99% 1.79% 1.84% 7.11% -1.06% 
 Return on average common shareholders'      
   equity 20.30% 9.06% 9.23% 35.34% -4.88% 
 Return on average tangible common      
   equity (2) 27.28% 12.38% 12.76% 49.86% -7.02% 
 Net interest margin 4.40% 4.27% 4.52% 4.70% 5.66% 
 Efficiency ratio (1) 68.9% 89.3% 76.3% 55.1% 71.6% 
        
   (1) Efficiency ratio is calculated by dividing noninterest expense less transaction-related costs by the sum of net interest income and noninterest income, less gains or losses on sale of securities.
        
   (2) See reconciliation of non-GAAP measures     
        

Loan Concentrations

The top ten commercial loan concentrations as of March 31, 2021 were as follows:

  % of
  Commercial
(in millions)AmountLoans
Solar electric power generation$56.628% 
Power and communication line and related structures construction 29.214% 
Lessors of nonresidential buildings (except miniwarehouses) 19.29% 
Hotels (except casino hotels) and motels 14.07% 
Lessors of other real estate property 11.05% 
Other activities related to real estate 8.54% 
Lessors of residential buildings and dwellings 7.84% 
General freight trucking, local 5.23% 
Golf courses and country clubs 4.12% 
Colleges, universities, and professional schools 3.52% 
 $159.178% 
   

Reconciliation of Non-GAAP Measures

  (In thousands except book value per share)3/31/2112/31/209/30/206/30/203/31/20 
Tangible book value per common share      
Total IFH, Inc. shareholders' equity$80,992 $76,914 $75,080 $73,512 $67,010  
Less: Goodwill 13,161  13,161  13,161  13,161  13,161  
Less Other intangible assets, net 6,851  7,037  7,224  7,409  7,596  
Total tangible common equity$60,980 $56,716 $54,695 $52,942 $46,253  
       
Ending common shares outstanding 2,245  2,203  2,203  2,215  2,215  
Tangible book value per common share$27.16 $25.74 $24.83 $23.90 $20.88  
       
 Three Months Ended 
  (Dollars in thousands)3/31/2112/31/209/30/206/30/203/31/20 
Return on average tangible common equity      
Average IFH, Inc. shareholders' equity$78,639 $76,723 $73,970 $71,035 $68,445  
Less: Average goodwill 13,161  13,161  13,161  13,161  13,157  
Less Average other intangible assets, net 6,973  7,037  7,346  7,531  7,718  
Average tangible common equity$58,505 $56,525 $53,463 $50,343 $47,570  
       
Net income attributable to IFH, Inc.$3,936 $1,730 $1,720 $6,258 $(832) 
Return on average tangible common equity 27.28% 12.14% 12.76% 49.86% -7.02% 
       



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