White River Bancshares posts 80% decline in first-quarter earnings

White River Bancshares Co., the holding company for Fayetteville-based Signature Bank of Arkansas, reported net income of $340,000, or 34 cents per diluted share, in the first quarter. That’s 80% lower than $1.07 million, or $1.08 per diluted share, in the same quarter a year ago.

Bank earnings were offset by higher expenses for new market expansion and compressed net interest rate margins.

“Of the $2.52 million adjustment, $962,000 related to funded loan balances and $1.58 million related to funding a reserve for unfunded commitments,” Jeff Maland, chief risk officer, noted in a Monday (April 17) news release.

The bank also said it recorded a credit loss provision of $150,000 during the first quarter, compared to a $350,000 loan loss provision during the fourth quarter of 2022.  Maland said the bank’s asset quality remains strong, and the loan portfolio continues to perform well. The bank’s capital ratios continue to exceed regularly ‘well capitalized” requirements as of March 31.

Chairman and CEO Gary Head said the bank continues to focus on the communities in which it operates and markets where its customers live and work.

“Our style of banking allows us to maintain close personal relationships with our customers,” Head said in the release. “We are a phone call away, night or day, and the past month has been a testament to this personalized approach to community banking. We have a diverse deposit and loan portfolio and have stayed clear of the issues affecting the banks that were closed by federal regulators in March.

“The bank expanded into Harrison, Jonesboro, and the addition of Banco Sí, our bilingual banking brand, have been strategic moves to continue diversifying the deposit and loan portfolios.

“These new markets have contributed to double-digit loan and deposit growth, year over year, which fueled our bottom line and strengthened our balance sheet. The near-term costs of entering these new markets, combined with the unprecedented rise in funding costs that the banking industry is managing, significantly impacted the bank’s net income results this quarter.”

Scott Sandlin, the company’s chief strategy officer, said the bank entered the new markets primarily to build out a deposit base to fund new loan activity.

“We continue to enhance our core funding mix and, as a result, total deposits increased 14.7% compared to a year ago, with demand and non-interest-bearing deposits representing 27.9% of total deposits and savings and interest-bearing transaction accounts representing 36.3% of total deposits at March 31, 2023,” he said.

Sandlin said the bank also remains focused on strengthening its loan-to-deposit ratio, which was 94% at March 31, 2023, compared to 102% three months earlier. New customer relationships are fueling deposit growth and the bank expects that to continue as it grows into the new market locations.

“Funding costs increased during the quarter due to the rapid rise in Fed rate increases, resulting in net interest margin contraction during the first quarter compared to the first quarter a year ago,” said Brant Ward, president. “We anticipate our net interest margin will stabilize as loan yields catch up to funding costs.”

The bank reported a 2.6% increase in net interest income totaling $7.5 million, compared to $7.3 million in the first quarter of 2022. Bank officials said largely due to the increase in deposit costs, the total interest expense also increased to $4.1 million in the first quarter, up from $896,000 a year ago.

White River Bancshares (OTC: WRIV) last traded at $66.25 per share, unchanged on Tuesday following the earnings release.

Other notable metrics in the quarter included:

• Total assets grew 20.5% to a record $1.08 billion
• Total deposits up 14.7% to $890.8 million, compared to $776.7 million a year ago.
• Declining net interest margin to 3.16%, down from 3.58% a year ago.
• Net loans rose 23.3% to $838.9 million as of March 31, 2023, compared to $680.3 million a year ago.
• Nonperforming assets were 0.01% of total assets versus 0.07% of total assets a year ago.