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First Savings Financial Group, Inc. Reports Financial Results For the Fiscal Year Ended September 30, 2020

First Savings Financial Group, Inc.
·24 min read

JEFFERSONVILLE, Ind., Oct. 30, 2020 (GLOBE NEWSWIRE) -- First Savings Financial Group, Inc. (NASDAQ: FSFG - news) (the "Company"), the holding company for First Savings Bank (the "Bank"), today reported net income of $33.4 million, or $14.04 per diluted share, for the year ended September 30, 2020 compared to net income of $16.2 million, or $6.82 per diluted share, for the year ended September 30, 2019, resulting in an increase of 106% on a per share basis.

Commenting on the Companys performance, Larry W. Myers, President and CEO stated: We are very pleased with another outstanding quarter and fiscal year, including record earnings and asset growth for the year, resiliency of asset quality during a challenging environment, stability of the net interest margin, significant increase in stockholders equity, and substantial increase in shareholder value. The core bank and ancillary business lines continue to perform exceptionally well and generate meaningful returns for our shareholders. I continue to have confidence that the Company is well-positioned to thrive during what is otherwise a very challenging banking environment and I continue to be very proud of our Company and staff.

COVID-19 Response

The COVID-19 pandemic has placed, and continues to place, significant health, economic and other major hardships throughout the communities we serve, the United States and the entire world. The Company has implemented a number of procedures in response to the pandemic to support the safety and well-being of our customers, employees, and communities:

  • Following the guidelines of the Center for Disease Control and local governments, we have updated our branch operating procedures. While our branches have remained open, the lobbies were temporarily closed and transactions were being conducted through drive-up windows or by appointment. Our branches have returned to pre-pandemic service levels, but have implemented safety precautions, including use of personal protective equipment (PPE) (where and when prudent), enhanced daily cleaning and instructions to maintain appropriate social distancing. We also actively encourage customers to utilize PPE and alternative banking channels, such as our online and mobile banking platforms. Our customer service and retail departments remain fully staffed and available to assist customers remotely.
     

  • Our corporate and operations offices have predominately returned to pre-pandemic schedules and processes, but we have enhanced daily cleaning and instructed employees to maintain appropriate social distancing. Our employees maintain the ability to work remotely, both safely and efficiently using technology, in the event that is required or necessary.
     

  • We continue to assist customers experiencing COVID-19 related hardships by approving payment extensions or loan forbearance agreements, and by waiving or refunding certain fees. During the initial onset of COVID-19, we proactively contacted all commercial borrowers and offered uniform payment extensions or loan forbearance agreements, while requests from consumer borrowers were reviewed and approved a on case-by-case basis. Beginning on March 18, 2020 and through October 23, 2020, we had approved 199 payment extensions or loan forbearance agreements on balances of approximately $86.2 million, of which $77.7 million related to commercial real estate loans, $7.0 million related to residential real estate and consumer loans, and $1.5 million related to Small Business Administration (SBA) lending relationships. These payment extensions or loan forbearance agreements were generally for periods of three months and included deferment of both principal and interest. As of October 23, 2020, we had 14 loans with payment extensions or loan forbearance agreements on balances of approximately $10.9 million that were still in effect and set to expire between November 25, 2020 and April 4, 2021. Included in those 14 agreements in effect as of October 23, 2020, 10 were for second deferral periods ranging from three to six months. Of the 10 agreements in the second deferral period, 6 were commercial business and commercial real estate loans, and 4 were residential mortgage loans. Following the expiration of the initial payment extensions or loan forbearance agreements, we will entertain requests for extended periods on a case-by-case basis, which will generally include deferment of only the principal portion of payments (but both principal and interest for hotel loans) for a period of up to three months.
     

  • As a result of the passage of the CARES Act, the SBA will make six months of principal and interest payments for loans of existing SBA clients that were in regular servicing status (not delinquent) at March 27, 2020 and for SBA loans of new clients originated between March 27, 2020 and September 27, 2020. The aforementioned $1.5 million of SBA lending relationships that were provided payment extensions or forbearance by the Company will also receive the six months of SBA-made payments once the extension or forbearance periods have expired. In addition, the majority of the Companys SBA clients applied for participation in the SBAs Paycheck Protection Program (PPP).
     

  • We are actively participating in the PPP and had $180.6 million of outstanding PPP loan balances as of September 30, 2020. At September 30, 2020, we had approximately $3.2 million of net deferred loan fees related to PPP loans that will be recognized over the life of the loans and as borrowers are granted forgiveness.
     

  • The leisure and hospitality industries carry a higher degree of credit risk due to the COVID-19 pandemic. Based on our evaluation of the allowance for loan losses at September 30, 2020, management believes sufficient reserves are in place to cover estimated losses at that date. However, as the pandemic continues, additional losses could be recognized.
     

  • The Company had outstanding loan balances to restaurants totaling $167.3 million as of September 30, 2020, of which $75.4 million is fully guaranteed by the SBA, including $74.5 million of PPP loans, and of which $82.5 million represents commercial real estate loans where the collateral property is leased to national-brand, investment-grade tenants.
     

  • The Company had outstanding loan balances to hotels totaling $17.4 million as of September 30, 2020, of which $3.7 million is fully guaranteed by the SBA, including $606,000 of PPP loans.

Management continues to closely monitor the pandemic and may take additional action to respond to the pandemics effects on the Companys business as the situation continues to evolve. We cannot determine or estimate the impact on our business at this time because the length and severity of the economic downturn is not yet known. We are confident that we are well-positioned to withstand any challenges that may be presented, and we are committed to continuing to serve our customers, employees and communities.

Results of Operations for the Fiscal Years Ended September 30, 2020 and 2019

Net interest income increased $9.3 million, or 23.2%, to $49.4 million for the year ended September 30, 2020 as compared to 2019. The increase in net interest income was due to an $8.9 million increase in interest income and a $368,000 decrease in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $290.4 million, from $1.06 billion for 2019 to $1.35 billion for 2020, partially offset by a decrease in the weighted-average tax-equivalent yield, from 4.91% for 2019 to 4.52% for 2020. The decrease in the weighted-average tax-equivalent yield was due primarily to declining market rates for loans and investment securities, which is typical during periods of declining U.S. treasury yields. Interest expense decreased due to a decrease in the average cost of interest-bearing liabilities, from 1.28% for 2019 to 0.96% for 2020, partially offset by an increase in the average balance of interest-bearing liabilities of $252.4 million, from $849.6 million for 2019 to $1.10 billion for 2020. The decrease in the average cost of interest-bearing liabilities for the year ended September 30, 2020 was due primarily to decreasing market interest rates on deposits and FHLB borrowings, as well as the Companys participation in the Federal Reserve Banks PPP Liquidity Facility (PPPLF), which began during the quarter ended June 30, 2020. Additional details are included in the Summarized Consolidated Average Balance Sheets table at the end of this release.

The Company recognized $8.0 million in provision for loan losses for the year ended September 30, 2020, compared to $1.5 million in provision for loan losses recognized in 2019. Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, increased $8.4 million, from $5.2 million at September 30, 2019 to $13.6 million at September 30, 2020, of which $3.7 million was guaranteed by the SBA. The Company recognized net charge-offs of $975,000 for the year ended September 30, 2020, of which $679,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $746,000 for the year ended September 30, 2019, of which $645,000 was related to unguaranteed portions of SBA loans. The increase in the provision for loan losses for 2020 was primarily due to increased nonperforming assets for the year, as well as changes to qualitative factors within the allowance for loan losses calculation related to economic uncertainties surrounding COVID-19.

Noninterest income increased $87.3 million for the year ended September 30, 2020 as compared to 2019. The increase was due primarily to an increase in mortgage banking income of $84.8 million. Additional details regarding the financial performance of the mortgage banking and SBA lending segments are included in the Segmented Income Statement Information table at the end of this release.

Noninterest expense increased $63.4 million for the year ended September 30, 2020 as compared to 2019. The increase was due primarily to increases in compensation and benefits, advertising expense and other operating expenses of $50.0 million, $4.6 million and $4.2 million, respectively. The increase in compensation and benefits expense is attributable to the addition of new employees primarily to support the growth of the Companys mortgage banking and SBA lending activities, routine salary and benefits adjustments, and increased incentive compensation as a result of the Companys performance. The increases in advertising expense and other operating expenses are primarily due to the mortgage banking segment.

The Company recognized income tax expense of $12.7 million for the year ended September 30, 2020, compared to $3.1 million for 2019. The effective tax rate increased from 15.4% for the year ended September 30, 2019 to 27.1% for 2020 primarily due to increases in pre-tax income and nondeductible executive compensation.

Comparison of Results of Operations for the Three Months Ended September 30, 2020 and 2019

The Company reported net income of $15.1 million, or $6.39 per diluted share, for the three months ended September 30, 2020 compared to net income of $5.3 million, or $2.24 per diluted share, for the three months ended September 30, 2019, resulting in an increase of 185% on a per share basis.

Net interest income increased $4.0 million, or 37.4%, to $14.8 million for the quarter ended September 30, 2020 as compared to the same quarter in 2019. The increase in net interest income was due to a $3.3 million increase in interest income and a $732,000 decrease in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $489.8 million, from $1.13 billion for 2019 to $1.62 billion for 2020, partially offset by a decrease in the weighted-average tax-equivalent yield, from 5.00% for 2019 to 4.32% for 2020. Interest expense decreased due to a decrease in the average cost of interest-bearing liabilities, from 1.35% for 2019 to 0.70% for 2020, partially offset by an increase in the average balance of interest-bearing liabilities of $421.2 million, from $908.7 million for 2019 to $1.33 billion for 2020. The decrease in the average cost of interest-bearing liabilities for 2020 was due primarily to decreasing market interest rates on deposits and Federal Home Loan Bank (FHLB) borrowings, as well as the Companys participation in the PPPLF previously discussed.

The Company recognized $2.8 million in provision for loan losses for the quarter ended September 30, 2020, compared to $471,000 for the comparable quarter in 2019. The Company recognized net charge-offs of $385,000 for the quarter ended September 30, 2020, of which $326,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $47,000 for the same quarter in 2019. The increase in the provision for loan losses for 2020 was primarily due to increased nonperforming assets as well as changes to qualitative factors within the allowance for loan losses calculation related to economic uncertainties surrounding COVID-19.

Noninterest income increased $37.3 million for the quarter ended September 30, 2020 as compared to the same quarter in 2019. The increase was due primarily to an increase in mortgage banking income of $35.6 million. The increase in mortgage banking income was due to production from the secondary-market residential mortgage lending segment that commenced operations in April 2018. Additional details regarding the financial performance of the mortgage banking and SBA lending segments are included in the Segmented Statements of Income Information table at the end of this release.

Noninterest expense increased $22.8 million for the quarter ended September 30, 2020 as compared to the same quarter in 2019. The increase was due primarily to an increase in compensation and benefits of $17.6 million. The increase in compensation and benefits expense is attributable to the addition of new employees primarily to support the growth of the Companys mortgage banking and SBA lending activities, routine salary and benefits adjustments, and increased incentive compensation as a result of the Companys performance.

The Company recognized income tax expense of $7.3 million for the quarter ended September 30, 2020, as compared to income tax expense of $1.4 million for 2019. The effective tax rate increased from 19.4% for the quarter ended September 20, 2019 to 31.2% for the quarter ended September 30, 2020 primarily due to increases in pre-tax income and nondeductible executive compensation.

Comparison of Financial Condition at September 30, 2020 and September 30, 2019

Total assets increased $542.0 million, from $1.22 billion at September 30, 2019 to $1.76 billion at September 30, 2020. Net loans increased $279.4 million during the year ended September 30, 2020, due primarily to continued growth in the commercial business, commercial real estate and SBA loan portfolios, as well as $180.6 million in PPP loans outstanding at September 30, 2020. Residential mortgage loans held for sale and SBA loans held for sale also increased by $182.9 million and $6.5 million, respectively, during the year ended September 30, 2020 due to increased production from the mortgage banking and SBA lending segments. Total liabilities increased $505.7 million primarily due to an increase of $213.7 million in total deposits, an increase of $174.8 million in Federal Reserve PPPLF advances and an increase of $88.3 million in FHLB borrowings.

Common stockholders equity increased $36.2 million, from $121.1 million at September 30, 2019 to $157.3 million at September 30, 2020, due primarily to increases in retained net income and net unrealized gains on available for sale securities included in accumulated other comprehensive income of $31.9 million and $3.9 million, respectively. At September 30, 2020 and September 30, 2019, the Bank was considered well-capitalized under applicable regulatory capital guidelines.

First Savings Bank has fifteen offices in the Indiana communities of Clarksville, Jeffersonville, Charlestown, Sellersburg, New Albany, Georgetown, Corydon, Lanesville, Elizabeth, English, Marengo, Salem, Odon and Montgomery. Access to First Savings Bank accounts, including online banking and electronic bill payments, is available anywhere with Internet access through the Bank's website at www.fsbbank.net .

This release may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts; rather, they are statements based on the Company's current expectations regarding its business strategies and their intended results and its future performance. Forward-looking statements are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions.

Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the Company's actual results, performance and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, changes in general economic conditions, including the duration, extent and severity of the COVID-19 pandemic, including its effect on our customers, service providers and on the economy and financial markets in general, changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; and other factors disclosed periodically in the Company's filings with the Securities and Exchange Commission.

Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this report or made elsewhere from time to time by the Company or on its behalf. Except as may be required by applicable law or regulation, the Company assumes no obligation to update any forward-looking statements.

Contact:
Tony A. Schoen, CPA
Chief Financial Officer
812-283-0724

FIRST SAVINGS FINANCIAL GROUP, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Years Ended

 

September 30,

 

September 30,

OPERATING DATA:

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

(In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total interest income

$

17,125

 

 

$

13,829

 

 

$

59,929

 

 

$

50,995

 

Total interest expense

 

2,337

 

 

 

3,069

 

 

 

10,538

 

 

 

10,906

 

 

 

 

 

 

 

 

 

Net interest income

 

14,788

 

 

 

10,760

 

 

 

49,391

 

 

 

40,089

 

Provision for loan losses

 

2,772

 

 

 

471

 

 

 

7,962

 

 

 

1,463

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

12,016

 

 

 

10,289

 

 

 

41,429

 

 

 

38,626

 

 

 

 

 

 

 

 

 

Total noninterest income

 

55,664

 

 

 

18,340

 

 

 

131,121

 

 

 

43,854

 

Total noninterest expense

 

44,452

 

 

 

21,606

 

 

 

125,808

 

 

 

62,390

 

 

 

 

 

 

 

 

 

Income before income taxes

 

23,228

 

 

 

7,023

 

 

 

46,742

 

 

 

20,090

 

Income tax expense

 

7,257

 

 

 

1,359

 

 

 

12,661

 

 

 

3,095

 

 

 

 

 

 

 

 

 

Net income

 

15,971

 

 

 

5,664

 

 

 

34,081

 

 

 

16,995

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

834

 

 

 

343

 

 

 

727

 

 

 

818

 

 

 

 

 

 

 

 

 

Net income attributable to the Company

$

15,137

 

 

$

5,321

 

 

$

33,354

 

 

$

16,177

 

 

 

 

 

 

 

 

 

Net income per share, basic

$

6.40

 

 

$

2.28

 

 

$

14.15

 

 

$

6.99

 

Weighted average shares outstanding, basic

 

2,365,217

 

 

 

2,337,472

 

 

 

2,356,680

 

 

 

2,315,697

 

 

 

 

 

 

 

 

 

Net income per share, diluted

$

6.39

 

 

$

2.24

 

 

$

14.04

 

 

$

6.82

 

Weighted average shares outstanding, diluted

 

2,370,694

 

 

 

2,378,221

 

 

 

2,375,954

 

 

 

2,372,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance ratios (annualized)

 

 

 

 

 

 

 

Return on average assets

 

3.44

%

 

 

1.75

%

 

 

2.27

%

 

 

1.42

%

Return on average common stockholders' equity

 

41.08

%

 

 

18.12

%

 

 

25.46

%

 

 

15.00

%

Interest rate spread (tax equivalent basis)

 

3.62

%

 

 

3.65

%

 

 

3.56

%

 

 

3.63

%

Net interest margin (tax equivalent basis)

 

3.74

%

 

 

3.92

%

 

 

3.75

%

 

 

3.88

%

Efficiency ratio

 

63.10

%

 

 

74.25

%

 

 

69.70

%

 

 

74.32

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

September 30,

 

September 30,

 

Increase

FINANCIAL CONDITION DATA:

 

2020

 

 

 

2019

 

 

(Decrease)

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

1,764,625

 

 

$

1,222,579

 

 

$

542,046

 

Cash and cash equivalents

 

33,726

 

 

 

41,432

 

 

 

(7,706

)

Investment securities

 

204,067

 

 

 

179,638

 

 

 

24,429

 

Loans held for sale

 

285,525

 

 

 

96,070

 

 

 

189,455

 

Gross loans (1)

 

1,107,089

 

 

 

820,698

 

 

 

286,391

 

Allowance for loan losses

 

17,026

 

 

 

10,040

 

 

 

6,986

 

Interest earning assets

 

1,620,831

 

 

 

1,130,095

 

 

 

490,736

 

Goodwill

 

9,848

 

 

 

9,848

 

 

 

-

 

Core deposit intangibles

 

1,202

 

 

 

1,416

 

 

 

(214

)

Mortgage servicing rights

 

21,703

 

 

 

934

 

 

 

20,769

 

Noninterest-bearing deposits

 

242,673

 

 

 

173,072

 

 

 

69,601

 

Interest-bearing deposits (2)

 

805,403

 

 

 

661,312

 

 

 

144,091

 

Federal Home Loan Bank borrowings

 

310,858

 

 

 

222,544

 

 

 

88,314

 

Federal Reserve PPPLF borrowings

 

174,834

 

 

 

-

 

 

 

174,834

 

Total liabilities

 

1,607,060

 

 

 

1,101,322

 

 

 

505,738

 

Stockholders' equity, net of noncontrolling interests

 

157,272

 

 

 

121,053

 

 

 

36,219

 

 

 

 

 

 

 

Book value per share

$

66.21

 

 

$

51.51

 

 

$

14.70

 

Tangible book value per share (3)

 

61.56

 

 

 

46.71

 

 

 

14.84

 

 

 

 

 

 

 

Non-performing assets:

 

 

 

 

 

Nonaccrual loans - SBA guaranteed

$

3,709

 

 

$

450

 

 

$

3,259

 

Nonaccrual loans - unguaranteed

 

9,906

 

 

 

4,718

 

 

 

5,188

 

Total nonaccrual loans

$

13,615

 

 

$

5,168

 

 

$

8,447

 

Accruing loans past due 90 days

 

-

 

 

 

12

 

 

 

(12

)

Total non-performing loans

 

13,615

 

 

 

5,180

 

 

 

8,435

 

Foreclosed real estate

 

-

 

 

 

55

 

 

 

(55

)

Troubled debt restructurings classified as performing loans

 

3,069

 

 

 

7,265

 

 

 

(4,196

)

Total non-performing assets

$

16,684

 

 

$

12,500

 

 

$

4,184

 

 

 

 

 

 

 

Asset quality ratios:

 

 

 

 

 

Allowance for loan losses as a percent of total gross loans

 

1.54

%

 

 

1.22

%

 

 

0.31

%

Allowance for loan losses as a percent of total gross loans, excluding PPP loans (4)

 

1.84

%

 

 

1.22

%

 

 

0.62

%

Allowance for loan losses as a percent of nonperforming loans

 

125.05

%

 

 

193.82

%

 

 

-68.77

%

Nonperforming loans as a percent of total gross loans

 

1.23

%

 

 

0.63

%

 

 

0.60

%

Nonperforming assets as a percent of total assets

 

0.95

%

 

 

1.02

%

 

 

(0.08

%)

 

 

 

 

 

 

 

 

 

 

 

 

_______________
(1) Includes $180.6 million of PPP loans at September 30, 2020. There were no such loans at September 30, 2019.

(2) Includes $132.1 million and $99.7 million of brokered certificates of deposit at September 30, 2020 and 2019, respectively.

(3) See reconciliation of GAAP and Non-GAAP financial measures for additional information relating to calculation of this item.

(4) Denominator excludes PPP loans, which are fully guaranteed by the SBA. This ratio is non-GAAP, but is believed by management to be meaningful because it provides a comparable ratio after eliminating PPP loans.

RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES (UNAUDITED):

The following non-GAAP financial measures used by the Company provide information useful to investors in understanding the Company's performance. The Company believes the financial measures presented below are important because of their widespread use by investors as a means to evaluate capital adequacy and earnings. The following table summarizes the non-GAAP financial measures derived from amounts reported in the Company's consolidated financial statements and reconciles those non-GAAP financial measures with the comparable GAAP financial measures.

 

September 30,

 

September 30,

 

Increase

Tangible Book Value Per Share

 

2020

 

 

 

2019

 

 

(Decrease)

(In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity, net of noncontrolling interests (GAAP)

$

157,272

 

 

$

121,053

 

 

$

36,219

Less: goodwill and core deposit intangibles

 

(11,050

)

 

 

(11,264

)

 

 

214

Tangible equity (non-GAAP)

$

146,222

 

 

$

109,789

 

 

$

36,433

 

 

 

 

 

 

Outstanding common shares

 

2,375,324

 

 

 

2,350,229

 

 

 

25,095

 

 

 

 

 

 

Tangible book value per share (non-GAAP)

$

61.56

 

 

$

46.71

 

 

$

14.84

 

 

 

 

 

 

Book value per share (GAAP)

$

66.21

 

 

$

51.51

 

 

$

14.70

 

 

 

 

 

 

 

 

 

 

 


SUMMARIZED FINANCIAL INFORMATION (UNAUDITED):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

Summarized Consolidated Balance Sheets

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

(In thousands, except per share data)

2020

 

 

2020

 

 

 

2020

 

 

2019

 

2019

Total cash and cash equivalents

$

33,726

 

$

27,544

 

 

$

22,603

 

 

$

41,327

 

$

41,432

Total investment securities

 

204,067

 

 

205,960

 

 

 

186,873

 

 

 

179,991

 

 

179,638

Total loans held for sale

 

285,525

 

 

210,077

 

 

 

163,927

 

 

 

110,523

 

 

96,070

Total loans, net of allowance for loan losses

 

1,090,063

 

 

1,081,381

 

 

 

877,276

 

 

 

851,700

 

 

810,658

PPP loans

 

180,561

 

 

180,536

 

 

 

-

 

 

 

-

 

 

-

Mortgage servicing rights

 

21,703

 

 

10,372

 

 

 

4,055

 

 

 

3,254

 

 

934

Total assets

 

1,764,625

 

 

1,661,281

 

 

 

1,368,252

 

 

 

1,292,573

 

 

1,222,579

 

 

 

 

 

 

 

 

 

 

Total deposits

$

1,048,076

 

$

982,870

 

 

$

937,306

 

 

$

885,598

 

$

834,384

Federal Home Loan Bank borrowings

 

310,858

 

 

298,622

 

 

 

270,000

 

 

 

239,566

 

 

222,544

Federal Reserve PPPLF borrowings

 

174,834

 

 

174,834

 

 

 

-

 

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders' equity, net of noncontrolling interests

$

157,272

 

$

142,362

 

 

$

116,659

 

 

$

123,810

 

$

121,053

Noncontrolling interests in subsidiary

 

293

 

 

(214

)

 

 

(414

)

 

 

368

 

 

204

Total equity

 

157,565

 

 

142,148

 

 

 

116,245

 

 

 

124,178

 

 

121,257

 

 

 

 

 

 

 

 

 

 

Outstanding common shares

 

2,375,324

 

 

2,375,324

 

 

 

2,375,324

 

 

 

2,357,369

 

 

2,350,229

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

Summarized Consolidated Statements of Income

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

(In thousands, except per share data)

2020

 

 

2020

 

 

 

2020

 

 

2019

 

2019

Total interest income

$

17,125

 

$

15,344

 

 

$

13,693

 

 

$

13,767

 

$

13,829

Total interest expense

 

2,337

 

 

2,543

 

 

 

2,783

 

 

 

2,875

 

 

3,069

Net interest income

 

14,788

 

 

12,801

 

 

 

10,910

 

 

 

10,892

 

 

10,760

Provision for loan losses

 

2,772

 

 

2,980

 

 

 

1,705

 

 

 

505

 

 

471

Net interest income after provision for loan losses

 

12,016

 

 

9,821

 

 

 

9,205

 

 

 

10,387

 

 

10,289

 

 

 

 

 

 

 

 

 

 

Total noninterest income

 

55,664

 

 

46,337

 

 

 

10,994

 

 

 

18,126

 

 

18,340

Total noninterest expense

 

44,452

 

 

35,009

 

 

 

22,075

 

 

 

24,272

 

 

21,606

Income (loss) before income taxes

 

23,228

 

 

21,149

 

 

 

(1,876

)

 

 

4,241

 

 

7,023

Income tax expense (benefit)

 

7,257

 

 

5,540

 

 

 

(774

)

 

 

638

 

 

1,359

Net income (loss)

 

15,971

 

 

15,609

 

 

 

(1,102

)

 

 

3,603

 

 

5,664

Less: net income (loss) attributable to noncontrolling interests

 

834

 

 

204

 

 

 

(475

)

 

 

164

 

 

343

Net income (loss) attributable to the Company

$

15,137

 

$

15,405

 

 

$

(627

)

 

$

3,439

 

$

5,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share, basic

$

6.40

 

$

6.51

 

 

$

(0.27

)

 

$

1.47

 

$

2.28

Weighted average shares outstanding, basic

 

2,365,217

 

 

2,365,217

 

 

 

2,355,750

 

 

 

2,340,619

 

 

2,337,472

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share, diluted

$

6.39

 

$

6.51

 

 

$

(0.26

)

 

$

1.44

 

$

2.24

Weighted average shares outstanding, diluted

 

2,370,694

 

 

2,366,787

 

 

 

2,379,901

 

 

 

2,382,754

 

 

2,378,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Three Months Ended

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

Consolidated Performance Ratios (Annualized)

 

2020

 

 

 

2020

 

 

 

2020

 

 

 

2019

 

 

 

2019

 

Return on average assets

 

3.44

%

 

 

4.02

%

 

 

(0.19

%)

 

 

1.09

%

 

 

1.75

%

Return on average equity

 

43.46

%

 

 

48.75

%

 

 

(3.51

%)

 

 

11.76

%

 

 

19.28

%

Return on average common stockholders' equity

 

41.08

%

 

 

47.91

%

 

 

(2.00

%)

 

 

11.24

%

 

 

18.12

%

Net interest margin (tax equivalent basis)

 

3.74

%

 

 

3.70

%

 

 

3.73

%

 

 

3.83

%

 

 

3.92

%

Efficiency ratio

 

63.10

%

 

 

59.20

%

 

 

100.78

%

 

 

83.64

%

 

 

74.25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of or for the Three Months Ended

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

Consolidated Asset Quality Ratios

 

2020

 

 

 

2020

 

 

 

2020

 

 

 

2019

 

 

 

2019

 

Nonperforming loans as a percentage of total loans

 

1.23

%

 

 

1.26

%

 

 

1.55

%

 

 

0.64

%

 

 

0.63

%

Nonperforming assets as a percentage of total assets

 

0.95

%

 

 

1.17

%

 

 

1.45

%

 

 

1.00

%

 

 

1.02

%

Allowance for loan losses as a percentage of total loans

 

1.54

%

 

 

1.34

%

 

 

1.32

%

 

 

1.22

%

 

 

1.22

%

Allowance for loan losses as a percentage of nonperforming loans

 

125.05

%

 

 

106.01

%

 

 

84.67

%

 

 

191.18

%

 

 

193.82

%

Net charge-offs (recoveries) to average outstanding loans

 

0.03

%

 

 

0.00

%

 

 

0.06

%

 

 

0.00

%

 

 

0.01

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

Segmented Statements of Income Information (5)

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

(In thousands, except per share data)

 

2020

 

 

 

2020

 

 

 

2020

 

 

 

2019

 

 

 

2019

 

Net interest income - Core Banking

$

10,512

 

 

$

9,645

 

 

$

9,035

 

 

$

9,012

 

 

$

8,924

 

Net interest income - SBA Lending (Q2)

 

1,959

 

 

 

1,584

 

 

 

1,151

 

 

 

1,217

 

 

 

1,237

 

Net interest income - Mortgage Banking (5)

 

2,317

 

 

 

1,572

 

 

 

724

 

 

 

663

 

 

 

599

 

Total net interest income

$

14,788

 

 

$

12,801

 

 

$

10,910

 

 

$

10,892

 

 

$

10,760

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses - Core Banking

$

2,232

 

 

$

1,668

 

 

$

216

 

 

$

520

 

 

$

104

 

Provision for loan losses - SBA Lending (Q2)

 

540

 

 

 

1,312

 

 

 

1,489

 

 

 

(15

)

 

 

367

 

Provision for loan losses - Mortgage Banking

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total provision for loan losses

$

2,772

 

 

$

2,980

 

 

$

1,705

 

 

$

505

 

 

$

471

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses - Core Banking

$

8,280

 

 

$

7,977

 

 

$

8,819

 

 

$

8,492

 

 

$

8,820

 

Net interest income (loss) after provision for loan losses - SBA Lending (Q2)

 

1,419

 

 

 

272

 

 

 

(338

)

 

 

1,232

 

 

 

870

 

Net interest income after provision for loan losses - Mortgage Banking

 

2,317

 

 

 

1,572

 

 

 

724

 

 

 

663

 

 

 

599

 

Total net interest income after provision for loan losses

$

12,016

 

 

$

9,821

 

 

$

9,205

 

 

$

10,387

 

 

$

10,289

 

 

 

 

 

 

 

 

 

 

 

Noninterest income - Core Banking

$

1,779

 

 

$

1,324

 

 

$

1,411

 

 

$

1,391

 

 

$

1,582

 

Noninterest income - SBA Lending (Q2)

 

2,828

 

 

 

1,785

 

 

 

1,209

 

 

 

929

 

 

 

1,715

 

Noninterest income - Mortgage Banking

 

51,057

 

 

 

43,228

 

 

 

8,374 15,806 15,043 Total noninterest income$55,664 $46,337 $10,994 $18,126 $18,340 Noninterest expense - Core Banking$7,920 $7,633 $6,720 $7,109 $6,866 Noninterest expense - SBA Lending (Q2) 2,545 1,642 1,841 1,825 1,883 Noninterest expense - Mortgage Banking 33,987 25,734 13,514 15,338 12,857 Total noninterest expense$44,452 $35,009 $22,075 $24,272 $21,606 Income (loss) before income taxes - Core Banking$2,139 $1,668 $3,510 $2,774 $3,536 Income (loss) before income taxes - SBA Lending (Q2) 1,702 415 (970) 336 702 Income (loss) before income taxes - Mortgage Banking 19,387 19,066 (4,416) 1,131 2,785 Total income (loss) before income taxes$23,228 $21,149 $(1,876) $4,241 $7,023 Income tax expense (benefit) - Core Banking$482 $276 $591 $330 $669 Income tax expense (benefit) - SBA Lending (Q2) 217 53 (124) 43 90 Income tax expense (benefit) - Mortgage Banking 6,558 5,211 (1,241) 265 600 Total income tax expense (benefit)$7,257 $5,540 $(774) $638 $1,359 Net income (loss) - Core Banking$1,657 $1,392 $2,919 $2,444 $2,867 Net income (loss) - SBA Lending (Q2) 1,485 362 (846) 293 612 Net income (loss) - Mortgage Banking 12,829 13,855 (3,175) 866 2,185 Total net income (loss)$15,971 $15,609 $(1,102) $3,603 $5,664 Net income (loss) attributable to the Company - Core Banking$1,657 $1,392 $2,919 $2,444 $2,867 Net income (loss) attributable to the Company - SBA Lending (Q2) 651 158 (371) 129 269 Net income (loss) attributable to the Company - Mortgage Banking 12,829 13,855 (3,175) 866 2,185 Total net income (loss) attributable to the Company$15,137 $15,405 $(627) $3,439 $5,321 Net income (loss) per share, basic - Core Banking$0.70 $0.59 $1.24 $1.04 $1.23 Net income (loss) per share, basic - SBA Lending (Q2) 0.28 0.07 (0.16) 0.06 0.12 Net income (loss) per share, basic - Mortgage Banking 5.42 5.85 (1.35) 0.37 0.93 Total net income (loss) per share, basic$6.40 $6.51 $(0.27) $1.47 $2.28 Net income (loss) per share, diluted - Core Banking$0.70 $0.59 $1.23 $1.03 $1.21 Net income (loss) per share, diluted - SBA Lending (Q2) 0.27 0.07 (0.16) 0.05 0.11 Net income (loss) per share, diluted - Mortgage Banking 5.42 5.85 (1.33) 0.36 0.92 Total net income (loss) per share, diluted$6.39 $6.51 $(0.26) $1.44 $2.24

_______________
(5) Adjustments were made to segment reporting for the Core Banking and Mortgage Banking segments in order to more accurately reflect the expenses borne by the Core Banking segment in support of the Mortgage Banking segment. The adjustments were made for each period presented in this earnings release.

Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

Noninterest Expense Detail by Segment (5)

(In thousands)

Compensation - Core Banking

$

4,250

$

4,219

$

3,535

$

4,015

$

3,771

Occupancy - Core Banking

1,512

1,239

1,133

1,200

1,140

Advertising - Core Banking

225

195

151

147

183

Other - Core Banking

1,933

1,980

1,901

1,747

1,772

Total Noninterest Expense - Core Banking

$

7,920

$

7,633

$

6,720

$

7,109

$

6,866

Compensation - SBA Lending (Q2)

$

1,939

$

1,314

$

1,569

$

1,469

$

1,403

Occupancy - SBA Lending (Q2)

116

118

99

89

88

Advertising - SBA Lending (Q2)

6

-

9

5

8

Other - SBA Lending (Q2)

484

210

164

262

384

Total Noninterest Expense - SBA Lending (Q2)

$

2,545

$

1,642

$

1,841

$

1,825

$

1,883

Compensation - Mortgage Banking

$

27,092

$

21,363

$

9,803

$

12,336

$

10,522

Occupancy - Mortgage Banking

1,207

855

757

633

549

Advertising - Mortgage Banking

2,011

1,666

1,617

1,314

871

Other - Mortgage Banking

3,677

1,850

1,337

1,055

915

Total Noninterest Expense - Mortgage Banking

$

33,987

$

25,734

$

13,514

$

15,338

$

12,857

Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

Mortgage Banking Noninterest Expense Fixed vs. Variable (5)

2020

2020

2020

2019

2019

(In thousands)

Noninterest Expense - Fixed Expenses

$

11,838

$

8,394

$

6,740

$

5,671

$

4,797

Noninterest Expense - Variable Expenses (6)

22,149

17,340

6,774

9,667

8,060

Total Noninterest Expense

$

33,987

$

25,734

$

13,514

$

15,338

$

12,857

Three Months Ended

SBA Lending (Q2) Data

September 30,

June 30,

March 31,

December 31,

September 30,

(In thousands, except percentage data)

2020

2020

2020

2019

2019

Final funded loans guaranteed portion sold, SBA

$

22,338

$

16,605

$

16,180

$

10,830

$

19,471

Gross gain on sales of loans, SBA

$

3,094

$

1,771

$

1,597

$

1,066

$

2,138

Weighted average gross gain on sales of loans, SBA

13.85

%

10.67

%

9.87

%

9.84

%

10.98

%

Net gain on sales of loans, SBA (7)

$

2,366

$

1,317

$

1,229

$

761

$

1,569

Weighted average net gain on sales of loans, SBA

10.59

%

7.93

%

7.60

%

7.03

%

8.06

%

Three Months Ended

Mortgage Banking Data

September 30,

June 30,

March 31,

December 31,

September 30,

(In thousands, except percentage data)

2020

2020

2020

2019

2019

Mortgage originations for sale in the secondary market

$

1,526,809

$

1,003,518

$

532,996

$

542,568

$

447,616

Mortgage sales

$

1,471,501

$

954,568

$

488,457

$

529,344

$

447,819

Gross gain on sales of loans, mortgage banking

$

53,633

$

31,067

$

14,912

$

13,411

$

14,244

Weighted average gross gain on sales of loans, mortgage banking

3.64

%

3.25

%

3.05

%

2.53

%

3.18

%

Mortgage banking income (8)

$

50,675

$

43,088

$

8,272

$

15,817

$

15,033

_______________
(5) Adjustments were made to segment reporting for the Core Banking and Mortgage Banking segments in order to more accurately reflect the expenses borne by the Core Banking segment in support of the Mortgage Banking segment. The adjustments were made for each period presented in this earnings release.

(6) Variable expenses include incentive compensation and advertising expenses.

(7) Net of commissions, referral fees, SBA repair fees and discounts on unguaranteed portions held-for-investment, and inclusive of gains on servicing assets.

(8) Net of lender credits and other investor expenses, and inclusive of loan fees, gains on mortgage servicing rights, fair value adjustments and gains (losses) on derivative instruments.

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED):

Three Months Ended

Summarized Consolidated Average Balance Sheets

September 30,

June 30,

March 31,

December 31,

September 30,

(In thousands)

2020

2020

2020

2019

2019

Interest-earning assets

Average balances:

Interest-bearing deposits with banks

$

58,775

$

25,985

$

48,306

$

46,296

$

52,736

Loans, excluding PPP

1,172,547

1,076,376

970,083

935,211

891,477

PPP loans

180,561

114,721

-

-

-

Investment securities

181,087

178,611

158,116

157,093

156,070

Agency mortgage-backed securities

7,981

8,660

10,870

13,057

15,178

FRB and FHLB stock

17,293

16,804

14,878

14,149

13,020

Total interest-earning assets

$

1,618,244

$

1,421,157

$

1,202,253

$

1,165,806

$

1,128,481

Interest income (tax equivalent basis):

Interest-bearing deposits with banks

$

22

$

37

$

153

$

205

$

277

Loans, excluding PPP

14,284

12,789

11,875

11,830

11,788

PPP loans

1,019

671

-

-

-

Investment securities

1,935

1,947

1,728

1,780

1,762

Agency mortgage-backed securities

55

69

76

83

105

FRB and FHLB stock

144

168

151

154

184

Total interest income (tax equivalent basis)

$

17,459

$

15,681

$

13,983

$

14,052

$

14,116

Weighted average yield (tax equivalent basis, annualized):

Interest-bearing deposits with banks

0.15

%

0.57

%

1.27

%

1.77

%

2.10

%

Loans, excluding PPP

4.87

%

4.75

%

4.90

%

5.06

%

5.29

%

PPP loans

2.26

%

2.34

%

0.00

%

0.00

%

0.00

%

Investment securities

4.27

%

4.36

%

4.37

%

4.53

%

4.52

%

Agency mortgage-backed securities

2.76

%

3.19

%

2.80

%

2.54

%

2.77

%

FRB and FHLB stock

3.33

%

4.00

%

4.06

%

4.35

%

5.65

%

Total interest-earning assets

4.32

%

4.41

%

4.65

%

4.82

%

5.00

%

Interest-bearing liabilities

Average balances:

Interest-bearing deposits

$

842,363

$

770,402

$

716,051

$

707,518

$

712,692

Repurchase agreements

-

-

-

-

250

Fed funds purchased

-

1,978

143

-

130

Federal Home Loan Bank borrowings

292,876

292,168

248,205

207,851

175,912

Federal Reserve PPPLF borrowings

174,835

74,218

-

-

-

Subordinated debt and other borrowings

19,786

19,769

19,752

19,735

19,718

Total interest-bearing liabilities

$

1,329,860

$

1,158,535

$

984,151

$

935,104

$

908,702

Interest expense:

Interest-bearing deposits

$

974

$

1,311

$

1,625

$

1,749

$

1,965

Repurchase agreements

-

-

-

-

-

Fed funds purchased

-

2

-

-

1

Federal Home Loan Bank borrowings

853

846

838

808

785

Federal Reserve PPPLF borrowings

154

66

-

-

-

Subordinated debt and other borrowings

356

318

320

318

318

Total interest expense

$

2,337

$

2,543

$

2,783

$

2,875

$

3,069

Weighted average cost (annualized):

Interest-bearing deposits

0.46

%

0.68

%

0.91

%

0.99

%

1.10

%

Repurchase agreements

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Fed funds purchased

0.00

%

0.40

%

0.00

%

0.00

%

3.08

%

Federal Home Loan Bank borrowings

1.16

%

1.16

%

1.35

%

1.55

%

1.78

%

Federal Reserve PPPLF borrowings

0.35

%

0.36

%

0.00

%

0.00

%

0.00

%

Subordinated debt and other borrowings

7.20

%

6.43

%

6.48

%

6.45

%

6.45

%

Total interest-bearing liabilities

0.70

%

0.88

%

1.13

%

1.23

%

1.35

%

Interest rate spread (tax equivalent basis, annualized)

3.62

%

3.53

%

3.52

%

3.59

%

3.65

%

Net interest margin (tax equivalent basis, annualized)

3.74

%

3.70

%

3.73

%

3.83

%

3.92

%