White River Bancshares Co. Earns $1.33 Million, or $1.34 Per Diluted Share, in Third Quarter 2022; Highlighted By Strong Quarterly Loan Growth and Net Interest Margin Expansion

White River Bancshares Company (OTCQX: WRIV), (the “Company”) the holding company for Signature Bank of Arkansas (the “Bank”), reported net income of $1.33 million, or $1.34 per dilute share, in the third quarter of 2022, compared to $1.93 million, or $1.99 per diluted share, in the third quarter of 2021. In the immediate prior quarter, the Company earned $1.79 million, or $1.79 per diluted share. In the first nine months of 2022, net income was $4.19 million, or $4.22 per diluted share, compared to $5.56 million, or $5.73 per diluted share, in the first nine months of 2021. All financial results are unaudited.

“We’re very pleased with the progress we have made in the third quarter,” said Gary Head, President and Chief Executive Officer. “Our new markets in Harrison and Jonesboro are thriving, bringing the Signature level of service to parts of our state who have been searching for a more personalized approach to their community banking needs. The biggest news of the quarter, of course, was the grand opening of Banco Sí! in downtown Rogers. This new division of our organization is dedicated to serving the needs of our growing Hispanic and Latino population with a fully bilingual staff. As you might expect, our investments in these market expansions have impacted net income for the quarter, but they’re growing and thriving, making excellent progress.”

“Our shareholders will be pleased by the Board’s decision to double the annual cash dividend to $1.00 per share,” Head continued. “The continued success from our core markets and activities allows us to return some of our success to the shareholders who have believed in us since the beginning.”

“We continue to strengthen our core funding mix and as a results total deposits increased 7.0% compared to a year ago, with demand and non-interest bearing deposits representing 32.5% of total deposits and savings and interest bearing transaction accounts representing 44.7% 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 non-interest bearing and low-cost deposits and reduce our reliance on borrowed funds, contributing to the net interest margin expanding 23 basis points compared to the third quarter a year ago.”

Third Quarter 2022 Financial Highlights:

• Third quarter net income was $1.33 million, or $1.34 per diluted share, compared to $1.93 million, or $1.99 per diluted share, in the third quarter of 2021.
• Third quarter net interest margin (“NIM”) expanded 23 basis points to 3.88%, compared to 3.65% in the third quarter a year ago.
• Annualized return on average assets was 0.58%, compared to 0.95% in the third quarter a year ago.
• Annualized return on average equity was 6.87%, from 9.80% in the third quarter a year ago.
• The Company recorded a $410,000 provision for loan losses in the third quarter of 2022, compared to no provision for loan losses in the third quarter of 2021.
• Net loans increased 17.9% to $780.5 million at September 30, 2022, compared to $661.7 million at September 30, 2021.
• Total deposits increased 7.0% to $791.5 million at September 30, 2022, compared to $739.7 million a year ago.
• Nonperforming assets totaled $153,000, or 0.02% of total assets at September 30, 2022, compared to $149,000, or 0.02% of total assets, at September 30, 2021.
• Book value per common share was $75.73 at September 30, 2022, from $81.47 a year ago.
• Total risk-based capital ratio was 13.57% and the Tier 1 leverage ratio was 11.53% for the Bank at September 30,  2022.
• The Company paid a $1.00 per share annual cash dividend on August 31, 2022 to shareholders of record at the close of business on July 20, 2022.

Income Statement

The Company’s NIM expanded 23 basis points to 3.88% in the third quarter of 2022, compared to 3.65% in the third quarter of 2021. In the first nine months of 2022, the NIM was 3.79%, compared to 3.68% in the first nine months of 2021.

“The changes we made in our investments and funding mix over the last several quarters, augmented by the recent Fed rate increases, resulted in net interest margin expansion during the third quarter. Our balance sheet remains well positioned to continue to benefit from additional Fed rate increases,” said Brant Ward, Chief Operating Officer.

Net interest income increased 21.1% to $8.6 million, compared to $7.1 million in the third quarter of 2021. Total interest income increased 20.2% to $9.8 million in the third quarter of 2022, compared to $8.1 million in the third quarter of 2021. Total interest expense increased by 14.2% to $1.2 million in the third quarter of 2022, from $1.1 million during the third quarter of 2021. In the first nine months of 2022, net interest income increased 15.3% to $24.1 million, compared to $20.9 million in the first nine months of 2021.

Noninterest income decreased 19.1% to $1.4 million in the third quarter of 2022, compared to $1.7 million in the third quarter a year ago. Lower wealth management fee income due to the volatility in the stock market, as well lower secondary market fee income contributed to the decline during the third quarter of 2022. In the first nine months of the year, noninterest income decreased 15.3% to $4.3 million, compared to $5.1 million in the first nine months of 2021.

Noninterest expense increased to $7.7 million in the third quarter of 2022, compared to $6.2 million in the third 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 third quarter of 2022, compared to the third quarter a year ago. In the first nine months of the year, noninterest expense increased to $22.3 million, compared to $18.5 million in the first nine months of 2021.

Balance Sheet

Total assets increased 8.0% to $935.0 million at September 30, 2022, from $866.1 million at September 30, 2021, and increased 4.3% compared to $896.1 million at June 30, 2022. Cash and cash equivalents decreased to $16.5 million at September 30, 2022 from $77.5 million a year ago and decreased when compared to $50.6 million at June 30, 2022. Investment securities increased 12.3% to $95.2 million at September 30, 2022, from $84.7 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 17.9% to $780.5 million at September 30, 2022, compared to $661.7 million a year ago, and increased 10.0% compared to $709.3 million three months earlier.

“Loan growth was solid during the quarter, increasing 10.0% over the three-month period. Our team has done an excellent job with new loan originations, and the loan pipeline remains strong,” said Jeff Maland, Chief Risk Officer.

Total deposits increased 7.0% to $791.5 million at September 30, 2022, compared to $739.7 million a year ago and increased 1.7% compared to $778.1 million at June 30, 2022. New customer relationships continue to account for a majority of the deposit growth year-over-year.

FHLB advances increased during the quarter to $22.8 million at September 30, 2022, from $16.1 million at September 30, 2021. Total stockholders’ equity was $75.4 million at September 30, 2022, compared to $78.9 million at September 30, 2021, and $76.2 million at June 30, 2022. Tangible book value per common share was $75.73 at September 30, 2022, from $81.47 at September 30, 2021, and $76.61 at June 30, 2022. The decrease in total stockholders’ equity and tangible book value per share during the current quarter was primarily due to a $8.8 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 $84.58 at September 30, 2022.

Credit Quality

“While asset quality remains exemplary, we recorded a $410,000 provision for loan losses due to the extraordinary levels of loan growth during the third quarter,” said Maland. “We continue to focus on maintaining a moderate risk profile, throughout all credit cycles.” This compared to no provision for loan losses in the second quarter of 2022, or the third quarter of 2021.

Nonperforming loans totaled $153,000 at September 30, 2022. This compared to $185,000 in nonperforming loans at June 30,  2022, and $149,000 in nonperforming loans at September 30, 2021. Nonperforming assets were $153,000 at September 30, 2022, compared to $185,000 at June 30, 2022, and $149,000 assets at September 30, 2021. Total nonperforming assets were 0.02% of total assets at September 30, 2022, June 30, 2022, and September 30, 2021.

The allowance for loan losses was $8.7 million, or 1.10% of total loans, at September 30, 2022, compared to $8.6 million, or 1.28% of total loans, at September 30, 2021. Net loan recoveries were $43,000 in the third quarter of 2022, compared to net loan recoveries of $50,000 in the second quarter of 2022, and net loan charge-offs of $81,000 in the third quarter of 2021.

Capital

The Bank’s capital ratios continued to exceed regulatory “well-capitalized” requirements, with a Tier 1 leverage ratio estimate of 11.53%, Common equity Tier 1 capital ratio of 12.54%, Tier 1 risk-based capital ratio of 12.54% and Total capital ratio of 13.57%, at September 30, 2022.

On July 13, 2022, the Company issued $15 million in subordinated notes to certain qualified institutional accredited investors through a private placement offering. The Company intends to use the net proceeds from the offering for general corporate purposes.

Recent Developments

Earlier this year, the Company launched a new market employing bilingual staff as it increased 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. The name Banco Sí! (meaning “Yes Bank” in Spanish) was chosen to send a positive message to the Latino community, which has historically been told ‘no’ where finances are concerned. During the third quarter of 2022, the initial market location opened in 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.”

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/