• West Bancorporation, Inc. Announces Third Quarter 2023 Financial Results and Declares Quarterly Dividend

    Source: Nasdaq GlobeNewswire / 26 Oct 2023 08:30:01   America/New_York

    WEST DES MOINES, Iowa, Oct. 26, 2023 (GLOBE NEWSWIRE) -- West Bancorporation, Inc. (Nasdaq: WTBA; the “Company”), parent company of West Bank, today reported third quarter 2023 net income of $5.9 million, or $0.35 per diluted common share, compared to second quarter 2023 net income of $5.9 million, or $0.35 per diluted common share, and third quarter 2022 net income of $11.6 million, or $0.69 per diluted common share. On October 25, 2023, the Company’s Board of Directors declared a regular quarterly dividend of $0.25 per common share. The dividend is payable on November 22, 2023, to stockholders of record on November 8, 2023.

    David Nelson, President and Chief Executive Officer of the Company, commented, “West Bank and the banking industry are healthy and strong. While West Bank’s earnings have been negatively impacted by the unprecedented size and pace of the Federal Reserve’s interest rate increases over the last 18 months, we remain committed to delivering high quality services and products, building strong relationships and delivering long-term shareholder value.”

    David Nelson added, “Our capital position is strong and our credit quality continues to be pristine. West Bank had no loans past due more than 30 days and only one nonaccrual loan at the end of the third quarter. Our credit risk management team remains focused on the economic uncertainties that are ahead and the volatile interest rate environment.”

    Third Quarter 2023 Financial Highlights
     
      Quarter Ended
    September 30, 2023    		 Nine Months Ended
    September 30, 2023
     Net income (in thousands)$5,906  $19,612 
     Return on average equity 10.89%  12.22%
     Return on average assets 0.64%  0.72%
     Efficiency ratio (a non-GAAP measure) 60.83%  59.52%
     Nonperforming assets to total assets 0.01%  0.01%
             

    Third Quarter 2023 Compared to Second Quarter 2023 Overview

    • Loans increased $42.7 million in the third quarter of 2023, or 6.1 percent annualized.
    • A provision for credit losses of $200 thousand was recorded in the third quarter of 2023, compared to no provision in the second quarter of 2023. The provision in the third quarter of 2023 was directly associated with loan growth.
    • The allowance for credit losses to total loans was 0.99 percent at September 30, 2023, compared to 1.00 percent at June 30, 2023. Nonaccrual loans at September 30, 2023 consisted of one loan with a balance of $303 thousand, in comparison to one loan with a balance of $309 thousand at June 30, 2023.
    • Loan swap fees of $431 thousand were recorded in the third quarter of 2023, compared to none in the second quarter of 2023.
    • Deposits decreased $80.8 million, or 2.8 percent, in the third quarter of 2023. Brokered deposits totaled $237.0 million at September 30, 2023, compared to $230.7 million at June 30, 2023, an increase of $6.3 million. Excluding brokered deposits, deposits decreased $87.1 million, or 3.3 percent, during the third quarter of 2023. The decline in deposits was primarily attributable to customers using their own liquidity to fund business transactions, instead of incurring debt, and customers seeking higher yielding investment options. As of September 30, 2023, estimated uninsured deposits, which excludes deposits in the IntraFi® reciprocal network, brokered deposits and public funds protected by state programs, were approximately 28.0 percent of total deposits.
    • Borrowed funds increased to $705.1 million at September 30, 2023, compared to $593.9 million at June 30, 2023. The increase included $77.4 million in federal funds purchased and other short-term borrowings and $35.0 million in Federal Home Loan Bank (FHLB) one-month rolling advances hedged with long-term interest rate swaps.
    • The efficiency ratio (a non-GAAP measure) was 60.83 percent for the third quarter of 2023, compared to 62.83 percent for the second quarter of 2023. The decrease in the efficiency ratio was primarily due to the increase in noninterest income and decrease in noninterest expense, partially offset by the decrease in net interest income.
    • Net interest margin, on a fully tax-equivalent basis (a non-GAAP measure), was 1.91 percent for the third quarter of 2023, compared to 2.02 percent for the second quarter of 2023. Net interest income for the third quarter of 2023 was $16.6 million, compared to $17.3 million for the second quarter of 2023. The rising cost of deposits and borrowed funds and the change in mix of funding has increased interest expense faster than the increase in interest income from loan repricing and loan originations.
    • The tangible common equity ratio was 5.51 percent at September 30, 2023, compared to 5.90 percent at June 30, 2023. The decline is attributable to the increase in accumulated other comprehensive loss, primarily driven by the negative effect that rising interest rates have had on the unrealized market value adjustment of our available for sale investment portfolio.

    Third Quarter 2023 Compared to Third Quarter 2022 Overview

    • Loans increased $235.6 million at September 30, 2023, or 9.0 percent, compared to September 30, 2022.
    • Deposits decreased $67.3 million at September 30, 2023, compared to September 30, 2022. Included in deposits were brokered deposits totaling $237.0 million at September 30, 2023, compared to $258.1 million at September 30, 2022. Excluding brokered deposits, deposits decreased $46.2 million, or 1.8 percent as of September 30, 2023 compared to September 30, 2022. The remaining decline in deposits was primarily attributable to customers using their own liquidity to fund business transactions, instead of incurring debt, and customers seeking higher yielding investment options.
    • Borrowed funds increased to $705.1 million at September 30, 2023, compared to $460.3 million at September 30, 2022. The increase included $190.0 million in FHLB one-month rolling advances hedged with long-term interest rate swaps and $57.0 million in federal funds purchased and other short-term borrowings.
    • The efficiency ratio (a non-GAAP measure) was 60.83 percent for the third quarter of 2023, compared to 43.16 percent for the third quarter of 2022. Tax-equivalent net interest income decreased in the third quarter of 2023 compared to the third quarter of 2022, primarily due to the increased cost of deposits and borrowed funds. Additionally, noninterest expense increased and noninterest income decreased.
    • Net interest margin, on a fully tax-equivalent basis (a non-GAAP measure), was 1.91 percent for the third quarter of 2023, compared to 2.78 percent for the third quarter of 2022. Net interest income for the third quarter of 2023 was $16.6 million, compared to $23.0 million for the third quarter of 2022. In 2022 and year-to-date in 2023, the rising cost of deposits and borrowed funds and the change in mix of funding increased interest expense faster than the increase in interest income from loan repricing and loan originations.

    The Company filed its report on Form 10-Q with the Securities and Exchange Commission today. Please refer to that document for a more in-depth discussion of the Company’s financial results. The Form 10-Q is available on the Investor Relations section of West Bank’s website at www.westbankstrong.com.

    The Company will discuss its results in a conference call scheduled for 2:00 p.m. Central Time on Thursday, October 26, 2023. The telephone number for the conference call is 888-300-4030. The access code for the conference call is 3218904. A recording of the call will be available until November 10, 2023, by dialing 800-770-2030.

    About West Bancorporation, Inc. (Nasdaq: WTBA)

    West Bancorporation, Inc. is headquartered in West Des Moines, Iowa. Serving customers since 1893, West Bank, a wholly-owned subsidiary of West Bancorporation, Inc., is a community bank that focuses on lending, deposit services, and trust services for small- to medium-sized businesses and consumers. West Bank has six offices in the Des Moines, Iowa metropolitan area, one office in Coralville, Iowa, and four offices in Minnesota in the cities of Rochester, Owatonna, Mankato and St. Cloud.

    Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to the Company’s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may appear throughout this report. These forward-looking statements are generally identified by the words “believes,” “expects,” “intends,” “anticipates,” “projects,” “future,” “confident,” “may,” “should,” “will,” “strategy,” “plan,” “opportunity,” “will be,” “will likely result,” “will continue” or similar references, or references to estimates, predictions or future events. Such forward-looking statements are based upon certain underlying assumptions, risks and uncertainties. Because of the possibility that the underlying assumptions are incorrect or do not materialize as expected in the future, actual results could differ materially from these forward-looking statements. Risks and uncertainties that may affect future results include: interest rate risk, including the effects of recent and potential additional rate increases by the Federal Reserve; fluctuations in the values of the securities held in our investment portfolio, including as a result of changes in interest rates; competitive pressures, including from non-bank competitors such as “fintech” companies and digital asset service providers; pricing pressures on loans and deposits; our ability to successfully manage liquidity risk; changes in credit and other risks posed by the Company’s loan portfolio, including declines in commercial or residential real estate values or changes in the allowance for credit losses dictated by new market conditions, accounting standards (including as a result of the implementation of the current expected credit loss (CECL) accounting standard) or regulatory requirements; the concentration of large deposits from certain clients who have balances above current FDIC insurance limits; changes in local, national and international economic conditions, including rising rates of inflation and possible recession; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank, Signature Bank and First Republic Bank that resulted in the failure of those institutions; changes in legal and regulatory requirements, limitations and costs including in response to the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank; changes in customers’ acceptance of the Company’s products and services; the occurrence of fraudulent activity, breaches or failures of our information security controls or cyber-security related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools; unexpected outcomes of existing or new litigation involving the Company; the monetary, trade and other regulatory policies of the U.S. government; acts of war or terrorism, including the Israeli-Palestinian conflict and the Russian invasion of Ukraine, widespread disease or pandemics, such as the COVID-19 pandemic, or other adverse external events; risks related to climate change and the negative impact it may have on our customers and their businesses; changes to U.S. tax laws, regulations and guidance; talent and labor shortages; the new 1 percent excise tax on stock buybacks by publicly traded companies; and any other risks described in the “Risk Factors” sections of reports filed by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to revise or update such forward-looking statements to reflect current or future events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

    WEST BANCORPORATION, INC. AND SUBSIDIARY      
    Financial Information (unaudited)          
    (in thousands)          
      As of
    CONDENSED BALANCE SHEETS September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
    Assets          
    Cash and due from banks $18,819  $29,776  $21,579  $24,896  $58,342 
    Interest-bearing deposits  1,802   1,968   901   1,643   1,049 
    Securities available for sale, at fair value  609,365   645,091   665,358   664,115   671,752 
    Federal Home Loan Bank stock, at cost  26,691   22,488   22,226   19,336   18,350 
    Loans  2,849,777   2,807,075   2,756,185   2,742,836   2,614,145 
    Allowance for credit losses  (28,147)  (27,938)  (27,941)  (25,473)  (25,418)
    Loans, net  2,821,630   2,779,137   2,728,244   2,717,363   2,588,727 
    Premises and equipment, net  75,675   66,683   59,565   53,124   44,592 
    Bank-owned life insurance  43,589   43,328   44,830   44,573   44,318 
    Other assets  104,329   90,084   82,240   88,168   90,387 
    Total assets $3,701,900  $3,678,555  $3,624,943  $3,613,218  $3,517,517 
               
    Liabilities and Stockholders’ Equity          
    Deposits $2,755,529  $2,836,325  $2,798,393  $2,880,408  $2,822,847 
    Federal funds purchased and other short-term borrowings  261,510   184,150   229,290   200,000   204,500 
    Other borrowings  443,552   409,736   350,921   285,855   255,789 
    Other liabilities  37,376   31,218   29,347   35,843   35,617 
    Stockholders’ equity  203,933   217,126   216,992   211,112   198,764 
    Total liabilities and stockholders’ equity $3,701,900  $3,678,555  $3,624,943  $3,613,218  $3,517,517 
               
      For the Quarter Ended
    AVERAGE BALANCES September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
    Assets $3,679,541  $3,645,651  $3,617,458  $3,511,717  $3,475,894 
    Loans  2,813,213   2,783,463   2,745,381   2,649,671   2,579,862 
    Deposits  2,764,184   2,854,945   2,846,926   2,901,928   2,864,648 
    Stockholders’ equity  215,230   213,177   215,391   199,947   219,065 


    WEST BANCORPORATION, INC. AND SUBSIDIARY      
    Financial Information (unaudited)          
    (in thousands)          
      As of
    LOANS September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
    Commercial $529,293  $535,085  $520,894  $519,196  $526,336 
    Real estate:          
    Construction, land and land development  399,253   351,461   336,739   363,014   341,549 
    1-4 family residential first mortgages  89,713   80,998   75,223   75,211   69,991 
    Home equity  12,429   12,625   9,726   10,322   10,271 
    Commercial  1,812,816   1,820,718   1,810,158   1,771,940   1,661,907 
    Consumer and other  10,123   10,289   7,381   7,292   7,884 
       2,853,627   2,811,176   2,760,121   2,746,975   2,617,938 
    Net unamortized fees and costs  (3,850)  (4,101)  (3,936)  (4,139)  (3,793)
    Total loans $2,849,777  $2,807,075  $2,756,185  $2,742,836  $2,614,145 
    Less allowance for credit losses  (28,147)  (27,938)  (27,941)  (25,473)  (25,418)
    Net loans $2,821,630  $2,779,137  $2,728,244  $2,717,363  $2,588,727 
               
    CREDIT QUALITY          
    Pass $2,853,100  $2,810,640  $2,706,951  $2,692,334  $2,559,722 
    Watch  184   187   52,766   54,231   57,789 
    Substandard  343   349   404   410   427 
    Doubtful  —   —   —   —   — 
    Total loans $2,853,627  $2,811,176  $2,760,121  $2,746,975  $2,617,938 
               
    DEPOSITS          
    Noninterest-bearing demand $551,688  $568,029  $605,666  $693,563  $712,722 
    Interest-bearing demand  417,802   459,030   486,656   536,226   469,257 
    Savings and money market - non-brokered  1,249,309   1,302,468   1,202,756   1,125,202   1,170,214 
    Money market - brokered  99,282   114,142   92,524   112,752   82,480 
    Total nonmaturity deposits  2,318,081   2,443,669   2,387,602   2,467,743   2,434,673 
    Time - non-brokered  299,683   276,097   269,102   252,725   212,574 
    Time - brokered  137,765   116,559   141,689   159,940   175,600 
    Total time deposits  437,448   392,656   410,791   412,665   388,174 
    Total deposits $2,755,529  $2,836,325  $2,798,393  $2,880,408  $2,822,847 
               
    BORROWINGS          
    Federal funds purchased and other short-term borrowings $261,510  $184,150  $229,290  $200,000  $204,500 
    Subordinated notes, net  79,566   79,500   79,435   79,369   79,303 
    Federal Home Loan Bank advances  315,000   280,000   220,000   155,000   125,000 
    Long-term debt  48,986   50,236   51,486   51,486   51,486 
    Total borrowings $705,062  $593,886  $580,211  $485,855  $460,289 
               
    STOCKHOLDERS’ EQUITY          
    Preferred stock $—  $—  $—  $—  $— 
    Common stock  3,000   3,000   3,000   3,000   3,000 
    Additional paid-in capital  33,487   32,642   31,797   32,021   31,152 
    Retained earnings  271,025   269,301   267,620   267,562   262,776 
    Accumulated other comprehensive loss  (103,579)  (87,817)  (85,425)  (91,471)  (98,164)
    Total Stockholders’ Equity $203,933  $217,126  $216,992  $211,112  $198,764 


    WEST BANCORPORATION, INC. AND SUBSIDIARY        
    Financial Information (unaudited)          
    (in thousands)          
      For the Quarter Ended
    CONSOLIDATED STATEMENTS OF INCOME September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
    Interest income:          
    Loans, including fees $36,756  $35,011  $32,948  $30,859  $28,102 
    Securities:          
    Taxable  3,427   3,432   3,316   3,398   3,147 
    Tax-exempt  880   883   885   887   890 
    Interest-bearing deposits  29   25   30   24   30 
    Total interest income  41,092   39,351   37,179   35,168   32,169 
    Interest expense:          
    Deposits  17,156   16,277   13,339   11,043   6,289 
    Federal funds purchased and other short-term borrowings  3,165   2,264   2,079   952   655 
    Subordinated notes  1,113   1,109   1,106   1,119   1,106 
    Federal Home Loan Bank advances  2,329   1,621   1,262   755   649 
    Long-term debt  695   739   698   630   466 
    Total interest expense  24,458   22,010   18,484   14,499   9,165 
    Net interest income  16,634   17,341   18,695   20,669   23,004 
    Credit loss expense (benefit)  200   —   —   —   — 
    Net interest income after credit loss expense (benefit)  16,434   17,341   18,695   20,669   23,004 
    Noninterest income:          
    Service charges on deposit accounts  463   458   462   476   553 
    Debit card usage fees  495   511   486   492   498 
    Trust services  831   749   706   678   780 
    Increase in cash value of bank-owned life insurance  262   250   257   255   246 
    Gain from bank-owned life insurance  —   —   691   —   — 
    Loan swap fees  431   —   —   —   835 
    Other income  340   421   355   364   364 
    Total noninterest income  2,822   2,389   2,957   2,265   3,276 
    Noninterest expense:          
    Salaries and employee benefits  6,696   7,029   6,867   6,552   6,578 
    Occupancy and equipment  1,359   1,322   1,327   1,270   1,315 
    Data processing  703   729   635   673   644 
    Technology and software  573   579   513   518   651 
    FDIC insurance  439   420   416   243   127 
    Professional fees  254   287   250   205   250 
    Director fees  196   251   205   215   209 
    Other expenses  1,685   1,857   1,858   1,989   1,684 
    Total noninterest expense  11,905   12,474   12,071   11,665   11,458 
    Income before income taxes  7,351   7,256   9,581   11,269   14,822 
    Income taxes  1,445   1,394   1,737   2,323   3,220 
    Net income $5,906  $5,862  $7,844  $8,946  $11,602 
               
    Basic earnings per common share $0.35  $0.35  $0.47  $0.54  $0.70 
    Diluted earnings per common share $0.35  $0.35  $0.47  $0.53  $0.69 


    WEST BANCORPORATION, INC. AND SUBSIDIARY  
    Financial Information (unaudited)    
    (in thousands)    
      For the Nine Months Ended
    CONSOLIDATED STATEMENTS OF INCOME September 30, 2023 September 30, 2022
    Interest income:    
    Loans, including fees $104,715  $76,236 
    Securities:    
    Taxable  10,175   9,126 
    Tax-exempt  2,648   2,640 
    Interest-bearing deposits  84   179 
    Total interest income  117,622   88,181 
    Interest expense:    
    Deposits  46,772   11,586 
    Federal funds purchased and other short-term borrowings  7,508   812 
    Subordinated notes  3,328   1,748 
    Federal Home Loan Bank advances  5,212   1,914 
    Long-term debt  2,132   1,050 
    Total interest expense  64,952   17,110 
    Net interest income  52,670   71,071 
    Credit loss expense (benefit)  200   (2,500)
    Net interest income after credit loss expense (benefit)  52,470   73,571 
    Noninterest income:    
    Service charges on deposit accounts  1,383   1,718 
    Debit card usage fees  1,492   1,477 
    Trust services  2,286   2,031 
    Increase in cash value of bank-owned life insurance  769   709 
    Loan swap fees  431   835 
    Gain from bank-owned life insurance  691   — 
    Other income  1,116   1,173 
    Total noninterest income  8,168   7,943 
    Noninterest expense:    
    Salaries and employee benefits  20,592   19,286 
    Occupancy and equipment  4,008   3,643 
    Data processing  2,067   1,924 
    Technology and software  1,665   1,619 
    FDIC insurance  1,275   753 
    Professional fees  791   669 
    Director fees  652   599 
    Other expenses  5,400   4,893 
    Total noninterest expense  36,450   33,386 
    Income before income taxes  24,188   48,128 
    Income taxes  4,576   10,675 
    Net income $19,612  $37,453 
         
    Basic earnings per common share $1.17  $2.25 
    Diluted earnings per common share $1.17  $2.23 


    WEST BANCORPORATION, INC. AND SUBSIDIARY      
    Financial Information (unaudited)              
                   
      As of and for the Quarter Ended For the Nine Months Ended
    COMMON SHARE DATA September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 September 30, 2023 September 30, 2022
    Earnings per common share (basic) $0.35  $0.35  $0.47  $0.54  $0.70  $1.17  $2.25 
    Earnings per common share (diluted)  0.35   0.35   0.47   0.53   0.69   1.17   2.23 
    Dividends per common share  0.25   0.25   0.25   0.25   0.25   0.75   0.75 
    Book value per common share(1)  12.19   12.98   12.98   12.69   11.94     
    Closing stock price  16.31   18.41   18.27   25.55   20.81     
    Market price/book value(2)  133.80%  141.83%  140.76%  201.34%  174.29%    
    Price earnings ratio(3)  11.75   13.11   9.56   11.93   7.49     
    Annualized dividend yield(4)  6.13%  5.43%  5.47%  3.91%  4.81%    
                   
    REGULATORY CAPITAL RATIOS              
    Consolidated:              
    Total risk-based capital ratio  11.96%  12.15%  12.17%  12.08%  12.34%    
    Tier 1 risk-based capital ratio  9.37   9.51   9.51   9.55   9.72     
    Tier 1 leverage capital ratio  8.58   8.60   8.60   8.81   8.85     
    Common equity tier 1 ratio  8.80   8.92   8.92   8.96   9.11     
    West Bank:              
    Total risk-based capital ratio  12.89%  13.13%  13.16%  13.08%  13.38%    
    Tier 1 risk-based capital ratio  12.01   12.24   12.26   12.33   12.60     
    Tier 1 leverage capital ratio  11.00   11.08   11.10   11.37   11.47     
    Common equity tier 1 ratio  12.01   12.24   12.26   12.33   12.60     
                   
    KEY PERFORMANCE RATIOS AND OTHER METRICS              
    Return on average assets(5)  0.64%  0.64%  0.88%  1.01%  1.32%  0.72%  1.43%
    Return on average equity(6)  10.89   11.03   14.77   17.75   21.01   12.22   21.57 
    Net interest margin(7)(13)  1.91   2.02   2.23   2.49   2.78   2.05   2.85 
    Yield on interest-earning assets(8)(13)  4.70   4.57   4.41   4.21   3.87   4.56   3.53 
    Cost of interest-bearing liabilities  3.38   3.10   2.76   2.24   1.45   3.09   0.90 
    Efficiency ratio(9)(13)  60.83   62.83   55.34   50.42   43.16   59.52   41.75 
    Nonperforming assets to total assets(10)  0.01   0.01   0.01   0.01   0.01     
    ACL ratio(11)  0.99   1.00   1.01   0.93   0.97     
    Loans/total assets  76.98   76.31   76.03   75.91   74.32     
    Loans/total deposits  103.42   98.97   98.49   95.22   92.61     
    Tangible common equity ratio(12)  5.51   5.90   5.99   5.84   5.65     

    (1) Includes accumulated other comprehensive income (loss).
    (2) Closing stock price divided by book value per common share.
    (3) Closing stock price divided by annualized earnings per common share (basic).
    (4) Annualized dividend divided by period end closing stock price.
    (5) Annualized net income divided by average assets.
    (6) Annualized net income divided by average stockholders’ equity.
    (7) Annualized tax-equivalent net interest income divided by average interest-earning assets.
    (8) Annualized tax-equivalent interest income on interest-earning assets divided by average interest-earning assets.
    (9) Noninterest expense (excluding other real estate owned expense and write-down of premises) divided by noninterest income (excluding net securities gains/losses and gains/losses on disposition of premises and equipment) plus tax-equivalent net interest income.
    (10) Total nonperforming assets divided by total assets.
    (11) Allowance for credit losses divided by total loans.
    (12) Common equity less intangible assets (none held) divided by tangible assets.
    (13) A non-GAAP measure.

    NON-GAAP FINANCIAL MEASURES

    This report contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include the Company’s presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis and the presentation of the efficiency ratio on an adjusted and FTE basis, excluding certain income and expenses. Management believes these non-GAAP financial measures provide useful information to both management and investors to analyze and evaluate the Company’s financial performance. These measures are considered standard measures of comparison within the banking industry. Additionally, management believes providing measures on a FTE basis enhances the comparability of income arising from taxable and nontaxable sources. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently. These non-GAAP disclosures should not be considered an alternative to the Company’s GAAP results. The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on a fully taxable equivalent basis and efficiency ratio on an adjusted and FTE basis.

    (in thousands) As of and for the Quarter Ended For the Nine Months Ended
      September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 September 30, 2023 September 30, 2022
    Reconciliation of net interest income and net interest margin on a FTE basis to GAAP:              
    Net interest income (GAAP) $16,634  $17,341  $18,695  $20,669  $23,004  $52,670  $71,071 
    Tax-equivalent adjustment (1)  113   122   161   197   270   396   925 
    Net interest income on a FTE basis (non-GAAP)  16,747   17,463   18,856   20,866   23,274   53,066   71,996 
    Average interest-earning assets  3,478,053   3,461,313   3,435,988   3,328,941   3,322,522   3,458,606   3,371,915 
    Net interest margin on a FTE basis (non-GAAP)  1.91%  2.02%  2.23%  2.49%  2.78%  2.05%  2.85%
                   
    Reconciliation of efficiency ratio on an adjusted and FTE basis to GAAP:              
    Net interest income on a FTE basis (non-GAAP) $16,747  $17,463  $18,856  $20,866  $23,274  $53,066  $71,996 
    Noninterest income  2,822   2,389   2,957   2,265   3,276   8,168   7,943 
    Adjustment for losses on disposal of premises and equipment, net  3   2   —   2   —   5   27 
    Adjusted income  19,572   19,854   21,813   23,133   26,550   61,239   79,966 
    Noninterest expense  11,905   12,474   12,071   11,665   11,458   36,450   33,386 
    Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)  60.83%  62.83%  55.34%  50.42%  43.16%  59.52%  41.75%

    (1) Computed on a tax-equivalent basis using a federal income tax rate of 21 percent, adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt securities and loans. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results, as it enhances the comparability of income arising from taxable and nontaxable sources.
    (2) The efficiency ratio expresses noninterest expense as a percent of fully taxable equivalent net interest income and noninterest income, excluding specific noninterest income and expenses. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the Company's financial performance. It is a standard measure of comparison within the banking industry. A lower ratio is more desirable.

    For more information contact:
    Jane Funk, Executive Vice President, Treasurer and Chief Financial Officer (515) 222-5766


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