Slide 1: Financial Results Second Quarter 2022
Financial Results Second Quarter 2022
Slide 2: Forward-Looking Statements & Non-GAAP Financial Measures
Forward-Looking Statements & Non-GAAP Financial Measures This presentation contains forward-looking statements, including statements with respect to the financial condition, results of operations, trends in lending policies and loan programs, plans and prospective business partnerships, objectives,
Slide 3: Second Quarter 2022 Highlights
Second Quarter 2022 Highlights Diluted EPS of $0.99; adjusted diluted EPS of $1.061 Earnings Net income of $9.5 million; adjusted net income of $10.3 million1 Total revenue of $30.0 million NIM of 2.60% and FTE NIM of 2.74%, increases of 4 bps & 5 bps, respectively, from 1Q221 Key Operating
Slide 4: Loan Portfolio Overview
Loan Portfolio Overview Total loan portfolio balances increased 7.0% from 1Q22 and 4.2% from 2Q21 Commercial loan balances increased $97.7 million, or 4.2%, compared to 1Q22 – Solid growth in franchise finance, public finance, investor commercial real estate, single tenant lease financing and co
Slide 5: Deposit Composition
Deposit Composition Total deposits decreased $65.9 million, or 2.0%, compared to 1Q22, and declined 1.7% from 2Q21 Deposits include $194.1 million of BaaS deposits, increasing $144.1 million during 2Q22 CD and brokered deposit balances decreased $119.4 million, or 10.2%, compared to 1Q22 Cos
Slide 6: Net Interest Income and Net Interest Margin
Net Interest Income and Net Interest Margin Net interest income on both a GAAP and FTE basis Net Interest Income – GAAP and FTE1 were stable with 1Q22 results Dollars in millions $27.1 $27.1 2 $24.9 $23.0 $23.1 Deployment of cash into loan growth combined with higher yields on securities and cas
Slide 7: Net Interest Margin Drivers
Net Interest Margin Drivers Linked-quarter FTE NIM increased 5 bps, driven by higher commercial loan and securities yields, partially offset by lower income from tax refund advance loans and higher deposit costs – Yield on loans, excluding tax refund advance loans, increased 7 bps from 1Q22 to 4.2
Slide 8: Noninterest Income
Noninterest Income Noninterest income of $4.3 million, compared to $6.8 million in 1Q22 and $9.0 million in 2Q21 Gain on sale of loans of $2.0 million, compared to $3.8 million in 1Q22 and $3.0 million in 2Q21 – SBA gain on sale impacted by timing of loan sales and decline in gain on sale premiu
Slide 9: Noninterest Expense
Noninterest Expense Noninterest expense of $18.0 million, compared to $18.8 million in 1Q22 – Higher salaries and employee benefits driven by $0.8 million of nonrecurring items – Professional fees lower due to nonrecurring consulting fees of $0.9 million incurred in 1Q22 – Professional fees also i
Slide 10: Asset Quality
Asset Quality Allowance for loan losses to total loans of 0.95% in 2Q22, both including and excluding PPP loans1 Quarterly provision for loan losses was $1.2 million, compared to $0.8 million in 1Q22 and $21,000 in 2Q21 Net charge-offs to average loans of 0.04%, compared to 0.05% in 1Q22 – 2Q2
Slide 11: Capital
Capital Tangible common equity to tangible assets increased 4 bps to 8.81%1 from 1Q22 Tangible book value per share of $38.35, up 0.4% from 1Q221 and 6.8% from 2Q211 Repurchased 294,464 shares at an average price per share of $37.77 during 2Q22 Since 4Q21, 498,167 shares have been purchased
Slide 12: Positioned for an Increasing Interest Rate Cycle
Positioned for an Increasing Interest Rate Cycle Improved deposit composition Deposit Composition – Larger percentage of non-maturity deposits compared to the beginning of the last rate tightening cycle 8% 15% – Cycle-to-date betas on non-maturity products have been much lower than previous cycles
Slide 13: Small Business Lending
Small Business Lending $102.7 million in balances as of June 30, 2022 Current outstanding balance of $0.2 million under the Paycheck Protection Program – $0.8 million of PPP loans forgiven during 2Q22 SBA sales, credit and operations teams in place to support expanded loan production Managed S
Slide 14: Franchise Finance
Franchise Finance $168.9 million in balances as of June 30, 2022 Loan portfolio consists of primarily indoor recreation, beauty salons, full and limited service restaurants, and fitness and recreation sports centers Origination volumes expected to be $250 million in 2022 Average loan size of
Slide 15: Construction and Investor Commercial Real Estate
Construction and Investor Commercial Real Estate $196.1 million in combined balances as of June 30, 2022 Unfunded commitments as of June 30, 2022 Average current loan balance of $2.4 million for investor CRE – Commercial construction/development: $139.9 million – Residential construction/devel
Slide 16: Single Tenant Lease Financing
Single Tenant Lease Financing $867.2 million in balances as of June 30, 2022 Strong historical credit performance Long-term financing of single tenant properties occupied No delinquencies in this portfolio by historically strong national and regional tenants Weighted-average portfolio LTV
Slide 17: Public Finance
Public Finance $613.8 million in balances as of June 30, 2022 No delinquencies or losses since inception Provides a range of credit solutions for government and not-for-profit entities Borrowers’ needs include short-term financing, debt refinancing, infrastructure improvements, economic deve
Slide 18: Healthcare Finance
Healthcare Finance $317.2 million in balances as of June 30, 2022 Loan portfolio focused primarily on dental practices with some exposure to veterinary practices and other specialties Borrowers’ needs include practice finance or acquisition, acquiring or refinancing owner-occupied CRE, equipme
Slide 19: C&I and Owner-Occupied Commercial Real Estate
C&I and Owner-Occupied Commercial Real Estate $171.8 million in combined balances as of June 30, 2022 Current C&I LOC utilization of 39.3% Average loan sizes C&I: $692,000 Owner-occupied CRE: $789,000 Portfolio by Loan Type Portfolio Mix by State Portfolio Mix by Major Industry Services 1%
Slide 20: Residential Mortgage
Residential Mortgage $301.1 million in balances as of June 30, 2022 (includes home equity balances) Direct-to-consumer originations centrally located at corporate headquarters Focused on high quality borrowers – Average loan size of $180,000 – Average credit score at origination of 750 – Avera
Slide 21: Specialty Consumer
Specialty Consumer $293.0 million in balances as of June 30, 2022 Direct-to-consumer and nationwide dealer network originations Focused on high quality borrowers – Average credit score at origination of 778 – Average loan size of $23,000 Strong historical credit performance Concentration by
Slide 22: Appendix
Appendix 22
Slide 23: Loan Portfolio Composition
Loan Portfolio Composition Dollars in thousands 2019 2020 2021 1Q22 2Q22 Commercial loans Commercial and industrial $ 96,420 $ 75,387 $ 96,008 $ 99,808 $ 110,540 Owner-occupied commercial real estate 86,726 89,785 66,732 56,752 61,277 Investor commercial real estate 12,567 13,902 28,019 34,627 52,64
Slide 24: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 2015 2016 2017 2018 2019 2020 2021 2Q22 Total equity - GAAP $104,330 $153,942 $224,127 $288,735 $304,913 $330,944 $380,338 $365,332 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) Tangible common
Slide 25: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 2Q21 3Q21 4Q21 1Q22 2Q22 Total equity - GAAP $358,641 $370,442 $380,338 $374,655 $365,332 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687) Tangible common equity $353,954 $365,755 $375,651 $369,968 $360,645 Total assets
Slide 26: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 2Q21 3Q21 4Q21 1Q22 2Q22 Total interest income $33,377 $33,034 $34,192 $36,034 $36,106 Adjustments: Fully-taxable equivalent adjustments 1 1,394 1,356 1,348 1,314 1,377 Total interest income - FTE $34,771 $34,390 $35,540 $37,348 $37,
Slide 27: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 2Q21 3Q21 4Q21 1Q22 2Q22 Net interest margin 2.11% 2.00% 2.30% 2.56% 2.60% Adjustments: Effect of subordinated debt redemption cost 0.00% 0.08% 0.00% 0.00% 0.00% Effect of income from tax refund advance loans 0.00% 0.00% 0.00% (0.28%
Slide 28: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 2Q21 3Q21 4Q21 1Q22 2Q22 Noninterest income $8,962 $7,813 $7,694 $6,820 $4,314 Adjustments: Gain on sale of premises and equipment (2,523) - - - - Adjusted noninterest income $6,439 $7,813 $7,694 $6,820 $4,314 Noninterest expense $15
Slide 29: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 2Q21 3Q21 4Q21 1Q22 2Q22 Income tax provision - GAAP $ 2,377 $ 2,220 $ 2,004 $ 1,790 $ 1,279 Adjustments:1 Gain on sale of premises and equipment (530) - - - - Subordinated debt redemption cost - 170 - - - Acquisition-related expense
Slide 30: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 2Q21 3Q21 4Q21 1Q22 2Q22 Return on average assets 1.25% 1.12% 1.19% 1.08% 0.93% Effect of gain on sale of premises and equipment (0.19%) 0.00% 0.00% 0.00% 0.00% Effect of subordinated debt redemption cost 0.00% 0.06% 0.00% 0.00% 0.00
Slide 31: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 2Q21 3Q21 4Q21 1Q22 2Q22 Income before income taxes - GAAP $ 15,473 $ 14,310 $ 14,482 $ 12,999 $ 10,824 Adjustments: Income from tax refund advance loans - - - (2,864) (149) Provision for tax refund advance loans losses - - - 1,842 1