White River Bancshares Company (OTCQX: WRIV), (the “Company”) the holding company for Signature Bank of Arkansas (the “Bank”), reported net income of $1.79 million, or $1.79 per dilute share, in the second quarter of 2022, compared to $2.08 million, or $2.14 per diluted share, in the second quarter of 2021. In the immediate prior quarter, the Company earned $1.07 million, or $1.08 per diluted share. In the first six months of 2022, net income was $2.9 million, or $2.88 per diluted share, compared to $3.6 million, or $3.75 per diluted share, in the first six months of 2021. All financial results are unaudited.

“Our results for the second quarter of 2022 were highlighted by an increase in net interest income generation and net interest margin expansion,” said Gary Head, President and Chief Executive Officer. “We generated double digit year-over-year growth in both loans and core deposits, in part due to new customer relationships from our existing market locations and new markets in Harrison and Jonesboro that opened earlier this year. As expected, net income for the second quarter was impacted by the reduction in PPP income when compared to the year ago quarter, as we continue to wind down from the unprecedented events of the pandemic. Results were also impacted by the investments we have made in employee retention and in our new market locations. However, we are very encouraged with the progress these new locations are making, as both are exceeding our expectations for growth, and already contributing to operating revenue. We are also making advancements with our plans to enter a new market later this year with the recently formed division of Signature Bank of Arkansas, Banco Sí! This new division will employ bilingual staff as we increase our efforts to better serve Arkansas area Latinos.”

“We continue to strengthen our core funding mix with non-interest bearing deposits increasing 25.0% compared to a year ago, and representing 33.9% of total deposits at quarter end,” said Scott Sandlin, Chief Strategy Officer. “By building out our core deposit base, we are able to fund new loan activity with core deposits and reduce our reliance on borrowed funds, contributing to the net interest margin expanding 26 basis points compared to the second quarter a year ago.”

Second Quarter 2022 Financial Highlights:

• Second quarter net income was $1.79 million, or $1.79 per diluted share, compared to $2.08 million, or $2.14 per diluted share, in the second quarter of 2021.
• Annualized return on average assets was 0.81%, compared to 1.04% in the second quarter a year ago.
• Annualized return on average equity was 9.28%, from 10.95% in the second quarter a year ago.
• Second quarter net interest margin (“NIM”) expanded 31 basis points to 3.87%, compared to 3.56% in the second quarter a year ago.
• There was no provision for loan losses in the second quarter of 2022, or the second quarter of 2021.
• Net loans increased 10.2% to $709.3 million at June 30, 2022, compared to $643.6 million at June 30, 2021.
• Total deposits increased 13.4% to $778.1 million at June 30, 2022, compared to $685.9 million a year ago.
• Noninterest bearing deposits increased 25.0% to $264.1 million at June 30, 2022, compared to $211.3 million a year ago.
• Nonperforming assets totaled $185,000, or 0.02% of total assets at June 30, 2022, compared to almost nil, or 0.00% of total assets, at June 30, 2021.
• Book value per common share was $76.61 at June 30, 2022, from $79.91 a year ago.
• Total risk-based capital ratio was 12.59% and the Tier 1 leverage ratio was 10.22% for the Bank at June 30, 2022.

Income Statement

The Company’s NIM expanded 31 basis points to 3.87% in the second quarter of 2022, compared to 3.56% in the second quarter of 2021. In the first six months of 2022, the NIM was 3.72%, compared to 3.69% in the first six months of 2021.

“The changes we made in our investments and funding mix over the last several quarters continue to reduce our dependency on brokered CDs, internet CDs and Federal Home Loan Bank (“FHLB”) advances, and resulted in significant net interest margin expansion during the second quarter. Our balance sheet remains well positioned to continue to benefit from any additional Fed rate increases,” said Brant Ward, Chief Operating Officer.

Net interest income increased 20.0% to $8.2 million, compared to $6.9 million in the second quarter of 2021. Total interest income increased 13.4% to $9.1 million in the second quarter of 2022, compared to $8.0 million in the second quarter of 2021. Total interest expense decreased by 25.5% to $869,000 in the second quarter of 2022, from $1.2 million during the second quarter of 2021.   In the first six months of 2022, net interest income increased 12.4% to $15.5 million, compared to $13.8 million in the first six months of 2021.

Noninterest income was $1.6 million in the second quarter of 2022, which was unchanged compared to the second quarter a year ago. Higher wealth management fee income was offset by lower secondary market fee income during the second quarter of 2022.   In the first six months of the year, noninterest income decreased 13.4% to $2.9 million, compared to $3.4 million in the first six months of 2021.

Noninterest expense increased to $7.4 million in the second quarter of 2022, compared to $5.7 million in the second quarter of 2021. Higher commissions due to increased revenues in business lines, residual costs related to the core conversion and costs associated with the two new markets contributed to the increase during the second quarter of 2022, compared to the second quarter a year ago.   In the first six months of the year, noninterest expense increased to $14.6 million, compared to $12.3 million in the first six months of 2021.

Balance Sheet

Total assets increased 10.5% to $896.1 million at June 30, 2022, from $810.7 million at June 30, 2021, and increased modestly compared to $895.6 million at March 31, 2022. Cash and cash equivalents increased to $50.6 million at June 30, 2022 from $40.9 million a year ago and decreased when compared to $90.3 million at March 31, 2022. Investment securities increased to $95.8 million at June 30, 2022, from $87.7 million a year ago, as the Company continued to move cash balances into better yielding investment securities during the quarter.

Loans, net of allowance for loan losses, increased 10.2% to $709.3 million at June 30, 2022, compared to $643.6 million a year ago, and increased 4.2% compared to $680.4 million three months earlier.

“Loan growth was robust during the quarter, increasing 4.2% over the three-month period, or 16.8% annualized. Our team has done an excellent job with new loan originations, and we anticipate this trend to continue with strong demand for 1-4 family loans,” said Jeff Maland, Chief Risk Officer.

Total deposits increased 13.4% to $778.1 million at June 30, 2022, compared to $685.9 million a year ago and increased modestly compared to $776.7 million at March 31, 2022. Noninterest bearing deposits increased 25.0% to $264.1 million at June 30, 2022, compared to $211.3 million a year ago. New customer relationships, primarily with low-cost checking accounts, continue to account for a majority of the deposit growth year-over-year.

FHLB advances continue to decline, totaling $10.9 million at June 30, 2022, from $16.8 million at June 30, 2021. Total stockholders’ equity was $76.2 million at June 30, 2022, compared to $77.4 million at June 30, 2021, and $78.0 million at March 31, 2022. Tangible book value per common share was $76.61 at June 30, 2022, from $79.91 at June 30, 2021, and $78.61 at March 31, 2022. The decrease in total stockholders’ equity and tangible book value per share during the current quarter was primarily due to a $6.3 million decrease in accumulated other comprehensive income (“AOCI”) related primarily to an increase in the unrealized loss on available for sale securities reflecting the increase in interest rates during the current quarter. Excluding AOCI, tangible book value per share was $82.91 at June 30, 2022.

Credit Quality

“Asset quality remains strong, and we continue to focus on maintaining a moderate risk profile,” said Maland. Due to sound credit quality and a strong allowance for loan losses, the Company reported no provision for loan losses in the second quarter of 2022, the first quarter of 2022, or the second quarter of 2021.

Nonperforming loans totaled $185,000 at June 30, 2022. This compared to $114,000 in nonperforming loans at March 31, 2022, and no nonperforming loans at June 30, 2021. Nonperforming assets were $185,000 at June 30, 2022, compared to $664,000 at March 31, 2022, and no nonperforming assets at June 30, 2021. Total nonperforming assets were 0.02% of total assets at June 30, 2022, 0.07% at March 31, 2022, and 0.00% at June 30, 2021.

The allowance for loan losses was $8.3 million, or 1.15% of total loans, at June 30, 2022, compared to $8.7 million, or 1.35% of total loans, at June 30, 2021. Net loan recoveries were $50,000 in the second quarter of 2022, compared to net loan recoveries of $11,000 in the first quarter of 2022, and net loan recoveries of $3,000 in the second quarter of 2021.

Capital

The Bank’s capital ratios continued to exceed regulatory “well-capitalized” requirements, with a Tier 1 leverage ratio estimate of 10.22%, Common equity Tier 1 capital ratio of 11.54%, Tier 1 risk-based capital ratio of 11.54% and Total capital ratio of 12.59%, at June 30, 2022.

Recent Developments

Earlier this year, the Company announced plans to launch a new market employing bilingual staff as it increases its efforts to better serve Arkansas area Latinos. Banco Sí!, a recently formed division of Signature Bank of Arkansas, will focus on a growing segment of the population who feels underserved by traditional banks. The name Banco Sí! (meaning “Yes Bank” in Spanish) was chosen to send a positive message to the Latino community, who has historically been told ‘no’ where finances are concerned. The initial market location is planned for downtown Rogers in a historic building at 114 S. First St.

“The Latino community has grown to become the largest minority community in the region and the United States, and we believe it is underserved,” said Ward. “Our mission is to create economic growth and access to banking services, capital, and funds for small and midsize businesses that traditionally have not had access in the past.”

During the first quarter of 2022, the Company opened its seventh market, located at 111 East Jackson Avenue in Jonesboro. This facility will serve as a temporary location for the market and marks the Company’s entry into Craighead County. According to the 2020 Census, Jonesboro had a population of 78,576 and is the fifth-largest city in Arkansas.

During the fourth quarter of 2021, the Company opened its sixth market, located in Harrison in the Durand Center at 303 N. Main Street, Suite 100. Harrison, located in the heart of the Ozark Mountains, is nationally recognized as one of the “Best Small Towns in America” and was previously featured in Where to Retire Magazine as one of the best retirement towns in the United States. https://www.cityofharrison.com/