Fayetteville-based White River Bancshares Co., the holding company for Signature Bank of Arkansas, reported Monday (April 19) net income rose 109.1% to $1.55 million, or $1.60 per diluted share, in the first quarter, from $742,000, or 77 cents per diluted share, in the same period in 2020. First-quarter earnings rose by 23% from $1.26 million, or $1.30 per diluted share, in the fourth quarter of 2020. Meanwhile, deposit balances were at record levels amid additional stimulus funding and Paycheck Protection Program (PPP) lending.
“We produced record results for the first quarter of 2021, with strong top and bottom-line revenue growth, double-digit loan and deposit growth and an improving net interest margin, compared to the first quarter a year ago,” said Gary Head, president and CEO. “Despite the ongoing challenges created by the COVID-19 pandemic and the related economic conditions, we made progress in several areas of the business, as we continued to support our customers, communities and employees. We are proud of our team and their accomplishments, as it is the investment in our people that drives our success.”
Scott Sandlin, chief strategy officer, said “deposit balances ended the quarter at record levels, with a second round of Paycheck Protection Program loans and two additional federal stimulus payments contributing to strong quarterly deposit growth. The investment we have made in our digital platform is helping us grow new client relationships and gather low-cost deposits. Additionally, we continue to lower the cost of deposits by bringing in more business and personal checking accounts and reducing our reliance on higher-cost CDs.”
Brant Ward, chief operating officer, said since the start of the pandemic the bank has been active with customers in the PPP loans offered through the Small Business Administration (SBA). The bank originated $20.7 million in PPP loans for 274 area businesses in the SBA’s first round of loans that ended on Aug. 8, 2020, Ward said. This round of PPP generated total PPP loan fees of about $680,000. As of March 31, SBA provided the bank with $7.8 million for 166 borrowers.
The additional COVID stimulus relief that was approved on Dec. 27, 2020, allowed for another round of PPP lending, Ward added. It offered new PPP loans for companies that did not receive PPP money in 2020 and additional funding for hard-hit businesses that already used their initial PPP money.
“We immediately began helping our customers with this second round of PPP lending during the first quarter of 2021, and at March 31, 2021, we had originated $7.7 million in new PPP loans during this second round of funding,” Ward said. “Approximately $402,000 of the income recognized during the first quarter of 2021 was related to origination fees from these second-round PPP loans. We will continue to help our customers until the program concludes at the end of May.”
Jeff Maland, chief risk officer, said the bank added programs to support customers experiencing financial hardship as a result of the pandemic. This included payment forbearance agreements with some customers for up to six months, he said.
“At the peak of our assistance, at June 30, 2020, we had deferred payment on 120 loans totaling $79.7 million,” Maland said. “As of March 31, 2021, only nine loans totaling $1.8 million were still in deferral. We are optimistic about the underlying quality of deferred loans, as most are longtime customer relationships who carry a strong guarantor support. Additionally, we feel the loan portfolio is well-positioned to handle any future economic impact from the pandemic, with less than 1% of the total portfolio in hotels, restaurants and energy loans as of the end of the first quarter.”
Following are some first-quarter highlights:
- Net interest margin improved to 3.82%, compared to 3.5% in the previous period and 3.64% in the same period in 2020.
- Net loans rose by 13.8% to $635 million as of March 31, from $558.2 million at the same time in 2020.
- Total deposits rose by 15.3% to $682.6 million as of March 31, from $592.1 million at the same time in 2020.
- Non-interest-bearing deposits rose by 58.3% to $189 million as of March 31, from $119.4 million at the same time in 2020.
- Nonperforming assets were almost nothing, or 0% of total assets, compared to nonperforming assets of $1.5 million, or 0.21% of total assets, at the same time in 2020.
- Book value per common share rose to $77.63 as of March 31, from $72.25 at the same time in 2020.
- Total risk-based capital ratio was 12.95%, and Tier 1 leverage ratio was 10.9% as of March 31.
First-quarter net interest income was $7 million, compared to $6 million in the same period in 2020. Total interest income was unchanged at $8.2 million, from the same period in 2020. Total interest expense declined by 41.4% to $1.3 million, from $2.2 million in the same period in 2020.
Non-interest income rose by 62.3% to $1.7 million in the first quarter of 2021, from $1.1 million in the same period in 2020. The company benefitted from higher wealth management fee income and higher secondary market fee income compared to the first quarter in 2020.
Non-interest expense increased to $6.6 million, from $5.4 million in the same period in 2020. Higher professional services related to a one-time expense as a result of a conversion fee for digital, core and EFT platforms contributed to the increase in the first quarter.
BALANCE SHEET REVIEW
Total assets rose by 13.3% to $806 million as of March 31, from $711.6 million at the same time in 2020. The assets increased 7.5% from $749.9 million as of Dec. 31. Cash and cash equivalents increased to $60.8 million as of March 31, from $53.3 million at the same time in 2020. Investment securities rose to $68.9 million, from $64.2 million.
Loans, net of allowance for loan losses, rose by 13.8% to $635 million as of March 31, from $558.2 million at the same time in 2020. The loans rose by 4.4% from $608.4 million at the end of the fourth quarter of 2020. As of March 31, the bank had on the books $11 million in PPP loans from round one and $7.7 million in PPP loans from round two.
Deposit balances remained at record levels, with the second round of PPP and two additional federal stimulus payments contributing to strong quarterly deposit growth, according to the bank. Total deposits rose by 8.7% from $627.8 million as of Dec. 31, 2020.
FHLB advances were $17 million as of March 31, from $19.9 million at the same time in 2020. Total stockholders’ equity rose by 7.3% to $75.2 million as of March 31, from $70.1 million at the same time in 2020 and rose by 1.4% when compared to $74.2 million as of Dec. 31.
The company reported no provision for loan losses in the first quarter because of “excellent credit quality and a strong allowance for loan losses.” This compared to a $458,000 provision for loan losses in the fourth quarter of 2020 and $677,000 in the first quarter of 2020. “Our credit quality remains exemplary, and we believe our current reserve level is adequate to cover potential loan losses,” Head said.
The company did not have any nonperforming loans as of March 31 or as of Dec. 31. This compared to $1.5 million in nonperforming loans as of March 31, 2020. Also, it did not have nonperforming assets as of March 31 or as of Dec. 31, compared with $1.5 million in nonperforming assets as of March 31, 2020.
The allowance for loan losses was $8.7 million, or 1.37% of total loans, as of March 31, when excluding the $18.7 million of PPP loans, which are 100% guaranteed by the SBA. This compared to $7.4 million, or 1.33% of total loans as of March 31, 2020. Net loan recoveries were $10,000 in the first quarter, compared to net charge-offs of $194,000 in the fourth quarter of 2020 and net loan recoveries of $15,000 in the first quarter of 2020.