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Integrated Financial Holdings, Inc. Third Quarter 2020 Financial Results

West Town Bancorp
·24 min read

RALEIGH, N.C., Nov. 02, 2020 (GLOBE NEWSWIRE) -- Integrated Financial Holdings, Inc (formerly West Town Bancorp, 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 and nine months ended September 30, 2020. Highlights include the following:

  • Third quarter net income of $1.7 million or $0.78 per diluted share, compared to net income of $2.2 million or $0.91 per diluted share for the third quarter of 2019. Income for 2019 was positively impacted by a nonrecurring adjustment which decreased loan and legal related expenses pertaining to the guaranteed loan portfolio as the Company was able to recapture some of its previously expensed costs resulting in a negative expense for that prior year quarter.

  • Provision for loan losses of $125,000 for the third quarter of 2020 compared to $200,000 for the same period in 2019.

  • Return on average assets of 1.84%, compared to 2.85% for the third quarter of 2019.

  • Return on average common equity of 9.23%, compared to 12.49% for the third quarter of 2019.

  • Return on average tangible common equity (a non-GAAP financial measure) of 12.76%, compared to 17.94% for the third quarter of 2019.

  • Windsor processing and servicing revenue of $2.6 million, compared to $1.8 million for the same period in 2019.

  • Mortgage origination and sales revenue of $2.4 million as compared to $975,000 for the same period in 2019.

As previously announced, on May 6, 2019, Sound Bank (now known as Dogwood State Bank), formerly a wholly owned subsidiary of IFH, completed a recapitalization that resulted in a significant reduction in IFH’s ownership position in the Bank. Therefore, on a comparative basis, the Company’s year-to-date financial results for 2020 do not include any operating impact from Sound Bank, whereas the financial results for the same period in 2019 are impacted by the performance of Sound Bank.

Eric Bergevin, President & CEO, commented, “We are pleased with our third quarter financial results with improvements in asset quality, and we are very satisfied with the Company’s rebranding to IFH, aligning our identity and messaging with the strategic endeavors we embody. Our financial results are primarily due to several initiatives taken during the year. First, we continued to execute on our Originate-and-Hold strategy whereby we grew our GGL portfolio and held onto the guaranteed piece, thereby leveraging capital and increasing net interest income. Second, we began selling a small portion of 10-year government guaranteed loans before premium deterioration started to occur. Finally, mortgage volume has remained vibrant during the period and Windsor has had a record quarter for SBA 7(a) loan closings. As expected, our conservative approach as COVID-19 started shutting down the economy early this year has resulted in much lower provisions, charge-off’s and NPA’s in the third quarter and we expect this trend to continue into fourth quarter and 2021. Our corporate expansion and rebranding efforts have gained traction with the growth and maturation of our new subsidiaries, including SBA Loan Documentation Services, LLC, Glenwood Structured Finance, LLC and the current launch of West Town Payments, LLC, which is a direct acquirer for payment processing. Our new payments team is expected to augment the new and already robust deposit initiatives we kicked-off earlier this year as evidenced by our increased growth in non-interest bearing deposits accounts.”

BALANCE SHEET
At September 30, 2020, the Company’s total assets were $374.0 million, net loans held for investment were $240.0 million, loans held for sale were $35.7 million, total deposits were $285.8 million and total shareholders’ equity was $75.0 million. Compared with December 31, 2019, total assets increased $59.8 million or 19%, net loans held for investment increased $20.3 million or 9%, loans held for sale increased $23.2 million or 184%, total deposits increased $65.3 million or 30%, and total shareholders’ equity increased $7.4 million or 11%. The increases in assets and loans reflect the Bank’s participation in the PPP program, funding $22.8 million for its existing customers and originating $55.6 million in Government Guaranteed Loans (“GGL”), while selling only $18.6 million in GGL loans due to the “Originate-and-Hold” strategy which began in mid-first quarter of 2020. The Originate-and-Hold strategy indicates the Company holds the guaranteed portion of loans originated rather than selling them in the secondary market at a premium based on secondary market indicators. While this strategy has a short-term negative impact on profitability, the impact of leveraging the capital of the Company’s bank subsidiary, earning the additional spread income and ultimately taking the gains on premium should enhance overall long-term profitability. Executing a strategic advance into the hemp banking space (trademarked “Hemp Banks Here”) and added resources to Commercial Account Services (full-service treasury management solutions) to service this segment, along with the Bank’s GGL customers, has resulted in increased deposit levels. The increase in total shareholders’ equity was primarily a result of the income posted for the second quarter.

During the quarter, the Bank formed a new company, West Town Payments, LLC (“WTP”), and entered into an agreement whereby the Bank owns 48% of the common shares of the entity. WTP provides physical point-of-sale, online, contactless and mobile payment solutions to both targeted and generalist verticals and is well-equipped with the experience and compliance-driven framework to work directly with the Bank’s hemp-related customers. The financial position and results of the first three months of operation of WTP are included in the consolidated balances for IFH and the noncontrolling interest portion shown separately. Melissa Marsal, the Bank’s EVP/Chief Operating Officer, commented “Partnering with West Town Payments is a strategic alignment aimed to provide better, faster and more reliable service to our customers, starting with hemp businesses. Through combined expertise in commercial banking, on-boarding due diligence, compliance monitoring and payment processing, the Bank is poised to further increase deposits and provide an unmatched client experience in the hemp banking industry.”

CAPITAL LEVELS
At September 30, 2020, 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 ratio

6.50%

7.00%

13.88%

Tier 1 risk-based capital ratio

8.00%

8.50%

13.88%

Total risk-based capital ratio

10.00%

10.50%

15.14%

Tier 1 leverage ratio

5.00%

4.00%

10.26%

The Company’s book value per common share increased from $29.86 at September 30, 2019 to $34.08 at September 30, 2020. The Company’s tangible book value per common share (a non-GAAP financial measure) increased from $20.57 at September 30, 2019 to $24.83 at September 30, 2020, as a result of share repurchases over the period and the net income of the Company.

ASSET QUALITY
The Company’s nonperforming assets to total assets ratio decreased from 3.99% at December 31, 2019 to 3.29% at September 30, 2020, 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 $410,000 as of September 30, 2020 as compared to December 31,2019 while foreclosed assets increased $152,000 during the same period. Patriarch, LLC, a subsidiary of the holding company, formed to expedite the liquidation and recovery of certain Bank assets, held $3.3 million in foreclosed assets. The Company regularly conducts impairment analyses on all nonperforming assets with updated appraisals to ensure the assets are carried at the lower of net realizable value or book value, with any deficits charged off immediately versus carrying specific reserves.

The Company recorded a $125,000 provision for loan losses during the third quarter of 2020, as compared to a provision of $200,000 in third quarter 2019, as management continues to respond to concerns over deteriorating economic conditions driven by the ongoing COVID-19 pandemic. COVID-related deferrals under the CARES Act peaked at 115 loans as of June 30, 2020 with net exposure of $54.2 million. COVID-related deferrals have since decreased to 25 loans with net exposure of $16.8 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 minimal net charge-offs during the third quarter 2020.

(Dollars in thousands)

9/30/20

6/30/20

3/31/20

12/31/19

9/30/19

Nonaccrual loans

$

8,790

$

7,799

$

7,732

$

9,200

$

4,813

Foreclosed assets

3,522

4,464

5,243

3,370

2,028

90 days past due and still accruing

-

-

-

-

-

Total nonperforming assets

12,312

12,263

12,975

12,570

6,841

Net charge-offs

$

2

$

667

$

2,390

$

779

$

138

Annualized net charge-offs to total average portfolio loans

0.00

%

1.13

%

4.39

%

1.36

%

0.25

%

Ratio of total nonperforming assets to total assets

3.29

%

3.45

%

4.16

%

3.99

%

2.21

%

Ratio of total nonperforming loans to total loans, net of allowance

3.66

%

3.33

%

3.66

%

4.19

%

2.31

%

Ratio of total allowance for loan losses to total loans

2.05

%

2.05

%

2.27

%

1.72

%

1.64

%

NET INTEREST INCOME AND MARGIN
Net interest income for the three months ended September 30, 2020 increased $155,000 or 4% in comparison to the third quarter of 2019, as loan growth year over year offset the impact of net interest margin. The net interest margin was 4.52% for the third quarter of 2020 compared to 5.34% for the same period in 2019. Interest-earning asset yields decreased from 6.89% to 5.59% and interest-bearing liabilities cost decreased from 2.27% to 1.61% year-over-year between September 30, 2019 and September 30, 2020.

Net interest income for the nine months ended September 30, 2020 decreased $2.7 million or 20% in comparison to the same period in 2019, largely due to the deconsolidation of Sound Bank from the consolidated financial statements as of May 6, 2019.

Three Months Ended

Year-To-Date

(Dollars in thousands)

9/30/20

6/30/20

3/31/20

12/31/19

9/30/19

9/30/20

9/30/19

Average balances:

Loans

$

270,897

$

250,125

$

226,683

$

229,965

$

220,939

$

249,235

$

317,221

Investment securities

25,581

24,743

23,861

21,572

21,111

24,728

21,063

Interest-bearing balances and other

22,596

22,326

17,046

16,238

16,801

20,656

39,367

Total interest-earning assets

319,074

297,194

267,590

267,775

258,851

294,619

377,651

Noninterest-bearing deposits

77,857

64,617

56,329

52,464

47,199

66,268

78,319

Interest-bearing liabilities:

Interest-bearing deposits

204,204

185,507

166,567

179,162

170,390

185,426

247,275

Borrowed funds

6,793

23,459

16,475

6,167

6,452

15,576

20,387

Total interest-bearing liabilities

210,997

208,966

183,042

185,329

176,842

201,002

267,662

Total assets

371,395

353,179

313,476

311,293

300,011

346,016

430,151

Common shareholders' equity

73,970

71,035

68,445

67,078

68,448

71,296

76,375

Tangible common equity (1)

53,463

50,343

47,570

46,448

47,637

50,604

51,456

Interest income/expense:

Loans

$

4,394

$

4,283

$

4,559

$

4,139

$

4,315

$

13,236

$

16,655

Investment securities

64

72

95

82

76

231

343

Interest-bearing balances and other

35

36

76

83

105

147

702

Total interest income

4,493

4,391

4,730

4,304

4,496

13,614

17,700

Deposits

855

835

845

979

942

2,535

3,478

Borrowings

1

70

109

56

72

180

574

Total interest expense

856

905

954

1,035

1,014

2,715

4,052

Net interest income

$

3,637

$

3,486

$

3,776

$

3,269

$

3,482

$

10,899

$

13,648

(1) Non-GAAP financial measure. Tangible common equity is calculated by subtracting intangible assets from common shareholders' equity


Three Months Ended

Year-To-Date

9/30/20

6/30/20

3/31/20

12/31/19

9/30/19

9/30/20

9/30/19

Average yields and costs:

Loans

6.44

%

6.87

%

8.07

%

7.14

%

7.75

%

7.07

%

6.99

%

Investment securities

1.00

%

1.16

%

1.59

%

1.52

%

1.44

%

1.25

%

2.17

%

Interest-bearing balances and other

0.61

%

0.65

%

1.79

%

2.03

%

2.48

%

0.95

%

2.38

%

Total interest-earning assets

5.59

%

5.93

%

7.09

%

6.38

%

6.89

%

6.16

%

6.24

%

Interest-bearing deposits

1.66

%

1.81

%

2.03

%

2.17

%

2.19

%

1.82

%

1.87

%

Borrowed funds

0.06

%

1.20

%

2.65

%

3.60

%

4.43

%

1.54

%

3.75

%

Total interest-bearing liabilities

1.61

%

1.74

%

2.09

%

2.22

%

2.27

%

1.80

%

2.02

%

Cost of funds

1.18

%

1.33

%

1.60

%

1.73

%

1.80

%

1.35

%

1.56

%

Net interest margin

4.52

%

4.70

%

5.66

%

4.84

%

5.34

%

4.93

%

4.81

%

NONINTEREST INCOME
Noninterest income for the three months ended September 30, 2020 was $6.6 million, an increase of $2.6 million or 67% as compared to the three months ended September 30, 2019. 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 $2.6 million for the three months ended September 30, 2020, an increase of $805,000, or 45% as compared to the $1.8 million in income earned during the three months ended September 30, 2019. The increase is attributable to a record quarter in SBA 7(a) loan closings and continued growth in the servicing portfolio.

  • Mortgage revenue totaled $2.4 million, an increase of $1.4 million or 146% as compared to the third quarter 2019. Mortgage loans originated to sell to the secondary market increased from $26.4 million in the third quarter 2019 to $50.3 million in the third quarter 2020.

  • GGL revenue was $571,000 in the third quarter of 2020, a decrease of $412,000 or 42% in comparison to the same period in 2019. GGL volume was impacted by the Company’s “Originate-and-Hold” strategy as the Company moved to leverage its balance sheet for long-term profitability.

Noninterest income for the nine months ended September 30, 2020 was $27.4 million, an increase of $8.6 million or 45% as compared to the $18.9 million in the same prior year period. The most notable increase was due to Windsor revenues, which increased by $13.2 million period over period from $5.2 million in the nine months ended September 30, 2019 to $18.5 million for the nine months ended September 30, 2020. That growth was primarily driven by the Paycheck Protection Plan (“PPP”) as Windsor processed more than 16,000 loan applications totaling more than $2.3 billion for over 40 of its institutional lender clients during the second quarter.

NONINTEREST EXPENSE
Noninterest expense for the third quarter of 2020 was $7.8 million, an increase of $3.4 million or 78%, from $4.4 million for the third quarter of 2019. The primary cause for the change was a nonrecurring adjustment which decreased loan and legal related expenses in the third quarter of 2019 related to the guaranteed loan portfolio as the Bank was able to recapture some of its previously expensed costs which positively impacted that quarter. In addition, “one time” software expense and “one time” compensation expense increased $3.4 million from $3.2 million in the third quarter of 2019 to $6.6 million for the same period in 2020 as the Company processed more the large volume of PPP applications and continued to expand and grow its business lines including the addition of WTP in the current quarter. For the nine-month period ended September 30, 2020, noninterest expense increased from $19.0 million in the first nine months of 2019 to $24.7 million for the same period in 2020, primarily as a result of additional compensation due to the PPP program in the second quarter of 2020.

ABOUT INTEGRATED FINANCIAL HOLDINGS, INC.
Integrated Financial Holdings, Inc. is a financial holding company based in Raleigh, NC. The Company changed its name from West Town Bancorp, Inc. in the third quarter 2020 after a successful shareholder vote approving the action on July 23, 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 Sheet

Ending Balance

(Dollars in thousands, unaudited)

9/30/20

6/30/20

3/31/20

12/31/19

9/30/19

Assets

Cash and due from banks

$

6,007

$

6,183

$

5,928

$

5,021

$

4,085

Interest-bearing deposits

13,294

11,644

8,518

9,849

16,068

Total cash and cash equivalents

19,301

17,827

14,446

14,870

20,153

Interest-bearing time deposits

2,746

2,746

2,746

2,746

2,746

Securities, at fair value

24,462

26,081

24,946

21,087

21,804

Loans held for sale

35,743

23,072

11,839

12,568

13,965

Loans held for investment:

Originated loans

244,994

238,926

216,423

223,470

211,647

Allowance for loan and lease losses

(5,029

)

(4,906

)

(4,907

)

(3,837

)

(3,462

)

Loans held for investment, net

239,965

234,020

211,516

219,633

208,185

Premises and equipment, net

4,628

4,761

4,740

4,761

4,795

Foreclosed assets

3,522

4,464

5,243

3,370

2,028

Loan servicing assets

3,265

3,262

3,528

3,358

3,053

Bank owned life insurance

5,109

5,082

5,048

5,021

4,993

Accrued interest receivable

1,705

1,422

1,067

1,116

1,079

Goodwill

13,161

13,161

13,161

13,150

12,721

Other intangible assets, net

7,224

7,409

7,596

7,782

7,968

Other assets

13,186

12,349

6,370

4,729

5,779

Total assets

$

374,017

$

355,656

$

312,246

$

314,191

$

309,269

Liabilities and Shareholders' Equity

Liabilities

Deposits:

Noninterest-bearing

$

78,849

$

66,874

$

59,360

$

49,573

$

54,380

Interest-bearing

206,913

198,108

162,059

170,869

177,472

Total deposits

285,762

264,982

221,419

220,442

231,852

Borrowings

4,000

6,000

17,649

19,295

2,382

Accrued interest payable

396

391

433

429

424

Other liabilities

8,845

10,771

5,735

6,300

8,092

Total liabilities

299,003

282,144

245,236

246,466

242,750

Shareholders' equity:

Common stock, voting

2,181

2,193

2,193

2,166

2,206

Common stock, non-voting

22

22

22

22

22

Additional paid in capital

24,220

24,357

24,162

24,245

24,771

Retained earnings

48,349

46,629

40,371

41,203

39,446

Accumulated other comprehensive income

308

311

262

89

74

Total IFH, Inc. shareholders' equity

75,080

73,512

67,010

67,725

66,519

Noncontrolling interest

(66

)

-

-

-

-

Total shareholders' equity

75,014

73,512

67,010

67,725

66,519

Total liabilities and shareholders' equity

$

374,017

$

355,656

$

312,246

$

314,191

$

309,269


Financial Performance (Consolidated)

(Dollars in thousands except share

Three Months Ended

Year-To-Date

and per share data; unaudited)

9/30/20

6/30/20

3/31/20

12/31/19

9/30/19

9/30/20

9/30/19

Interest income

Loans

$

4,394

$

4,283

$

4,559

$

4,139

$

4,315

$

13,236

$

16,655

Investment securities and deposits

99

108

171

165

181

378

1,045

Total interest income

4,493

4,391

4,730

4,304

4,496

13,614

17,700

Interest expense

Interest on deposits

855

835

845

979

942

2,535

3,478

Interest on borrowed funds

1

70

109

56

72

180

574

Total interest expense

856

905

954

1,035

1,014

2,715

4,052

Net interest income

3,637

3,486

3,776

3,269

3,482

10,899

13,648

Provision for loan losses

125

665

3,460

1,155

200

4,250

850

Noninterest income

Windsor processing and servicing revenue

2,579

14,186

1,713

2,256

1,774

18,478

5,231

Mortgage

2,400

1,573

1,418

716

975

5,391

3,617

Government guaranteed lending

571

37

755

2,288

983

1,363

2,523

SBA documentation preparation fees

195

423

74

15

-

692

-

Bank-owned life insurance

15

34

27

28

29

45

129

Service charge

28

11

19

29

23

89

348

Gain on deconsolidation of Sound Bank

-

-

-

-

-

-

6,635

Other noninterest income

771

(56

)

635

83

153

1,350

367

Total noninterest income

6,559

16,208

4,641

5,415

3,937

27,408

18,850

Noninterest expense

Compensation

4,422

5,682

3,753

3,750

3,199

13,857

10,845

Occupancy and equipment

289

211

256

221

343

756

1,187

Loan and special asset expenses

1,013

816

242

318

(523

)

2,071

222

Professional services

534

676

490

359

432

1,700

1,583

Data processing

187

165

148

109

161

500

704

Software

415

2,221

249

172

160

2,885

673

Communications

83

82

89

80

33

254

369

Advertising

109

215

55

86

51

379

272

Transaction-related

-

4

17

16

1

21

960

Amortization of intangibles

186

186

186

186

186

558

744

Other operating expenses

545

589

545

464

335

1,679

1,483

Total noninterest expense

7,783

10,847

6,030

5,761

4,378

24,660

19,042

Income (loss) before income taxes

2,288

8,182

(1,073

)

1,768

2,841

9,397

12,606

Income tax expense (benefit)

634

1,924

(241

)

37

687

2,317

3,258

Net income (loss)

1,654

6,258

(832

)

1,731

2,154

7,080

9,348

Noncontrolling interest

(66

)

-

-

-

-

(66

)

-

Net income (loss) attributable

to IFH, Inc.

$

1,720

$

6,258

$

(832

)

$

1,731

$

2,154

$

7,146

$

9,348

Basic earnings (loss) per common share

$

0.79

$

2.87

$

(0.38

)

$

0.79

$

0.93

$

3.27

$

3.35

Diluted earnings (loss) per common share

$

0.78

$

2.84

$

(0.37

)

$

0.78

$

0.91

$

3.23

$

3.29

Weighted average common shares outstanding

2,176

2,177

2,193

2,196

2,328

2,182

2,790

Diluted average common shares outstanding

2,206

2,204

2,232

2,234

2,369

2,215

2,840


Performance Ratios

Three Months Ended

Year-To-Date

9/30/20

6/30/20

3/31/20

12/31/19

9/30/19

9/30/20

9/30/19

PER COMMON SHARE

Basic earnings (loss) per common share

$

0.79

$

2.87

$

(0.38

)

$

0.79

$

0.93

$

3.27

$

3.35

Diluted earnings (loss) per common share

0.78

2.84

(0.37

)

0.78

0.91

3.23

3.29

Book value per common share

34.08

33.19

30.25

30.78

29.86

34.08

29.86

Tangible book value per common share

24.83

23.90

20.88

21.27

20.57

24.83

20.57

FINANCIAL RATIOS (ANNUALIZED)

Return on average assets

1.84

%

7.11

%

-1.06

%

2.21

%

2.85

%

2.75

%

2.89

%

Return on average common shareholders' equity

9.23

%

35.34

%

-4.88

%

10.24

%

12.49

%

13.35

%

16.30

%

Return on average tangible common equity

12.76

%

49.86

%

-7.02

%

14.79

%

17.94

%

18.81

%

24.20

%

Net interest margin

4.52

%

4.70

%

5.66

%

4.84

%

5.34

%

4.93

%

4.17

%

Efficiency ratio (1)

76.3

%

55.1

%

71.4

%

66.2

%

59.0

%

64.3

%

69.9

%

(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 and consolidation and the fair value

adjustment on the equity investment in Sound Bank.

Loan Concentrations

The top ten commercial loan concentrations as of September 30, 2020 were as follows:

% of

Commercial

(in millions)

Amount

Loans

Solar Electric Power Generation

$

52.3

29%

Lessors of Nonresidential Buildings (except Miniwarehouses)

20.2

11%

Hotels (except Casino Hotels) and Motels

13.5

8%

Lessors of Residential Buildings and Dwellings

9.0

5%

Other Activities Related to Real Estate

7.4

4%

Lessors of Other Real Estate Property

6.4

4%

General Freight Trucking, Local

4.9

3%

Golf Courses and Country Clubs

3.8

2%

Child Day Care Services

3.7

2%

Colleges, Universities, and Professional Schools

3.5

2%

Contact: Eric Bergevin, 252-482-4400