
Enterprise Financial Reports First Quarter 2020 Results
First Quarter Results
- Net income of $12.9 million, $0.48 per diluted share, including the impact of provision for credit losses of $0.63 per share
- Net interest margin (tax equivalent) of 3.79%
- Return on average assets of 0.70%
- Loans increased $143.2 million, or 11% annualized
- Deposits increased $218.9 million, or 15% annualized
ST. LOUIS--(BUSINESS WIRE)-- Enterprise Financial Services Corp(Nasdaq: EFSC) (the “Company” or “EFSC”) reported net income of $12.9 million for the first quarter 2020, a decrease of $16.2 million compared to the linked fourth quarter (“linked quarter”) and a decrease of $3.3 million from the prior year quarter. Earnings per diluted share (“EPS”) was $0.48 for the first quarter 2020, compared to $1.09 and $0.67 for the linked and prior year quarters, respectively. Net income and EPS in the current quarter declined from the linked quarter and prior year quarter primarily due to an increase in provision for credit losses, described in more detail below. Merger-related expenses also impacted the results in the prior year quarter.
In the first quarter of 2020, the Company adopted the new accounting standard, commonly referred to as CECL, to estimate credit losses. Due to current economic conditions, the provision for credit losses was $22.3 million for the first quarter 2020, compared to $1.3 million for the linked quarter and $1.5 million for the first quarter 2019. CECL requires economic forecasts to be factored into determining estimated losses. As a result, CECL will typically require a higher level of provision at the start of an economic downturn.
Jim Lally, EFSC’s President and Chief Executive Officer, commented, “Currently, we are faced with unprecedented and rapidly evolving global challenges presented by the COVID-19 pandemic. Our sympathy goes out to everyone who has been impacted, and we are thankful for all the healthcare workers and other essential business employees who continue to keep us safe. The pandemic and resulting social distancing measures across the country have had a profound impact on how business has been conducted across all industries. Considering these challenges, it has been extremely encouraging to see how our associates have risen to the task of working remotely while continuing to serve our customers. We are actively working with our customers to provide support for all their financial needs. Our associates worked around the clock to put an operational framework in place for the rollout of the SBA’s Paycheck Protection Program. I am proud to say that we have processed over 1,500 applications and have received approval from the SBA to fund more than $680 million of loans to our customers, providing much needed relief to over 67,000 employees within our communities.”
Lally continued, “Despite the challenges of the COVID-19 pandemic and the substantial decrease in short-term interest rates, we had a strong first quarter. We had record operating revenue of $76.8 million, an expanded net interest margin and a stable efficiency ratio. While our provision for credit losses increased under CECL, we believe our asset quality is strong, and our loan portfolio continues to grow. Our focus on continuous improvement, which has been a cornerstone of our strategic plan, has served us well in this environment. We have taken proactive and disciplined steps to ensure the safety of our employees and customers as well as to manage our financial performance. We believe our liquidity, strong balance sheet and capital levels will aid us in navigating these uncertain times and position us to continue to serve our customers and communities.”
Highlights
The Company closed its acquisition of Trinity Capital Corporation (“Trinity”) on March 8, 2019. The results of operations of Trinity are included in our results from this date forward, which may affect certain comparisons to the first quarter of 2019.
- Earnings - Net income in the first quarter 2020 was $12.9 million and EPS was $0.48. Pre-tax pre-provision income1 (“PTPP”) of $38.1 million in the first quarter 2020, increased $0.4 million and $16.4 million from the linked-quarter and first quarter 2019, respectively.
- Net interest income and net interest margin - Net interest income of $63.4 million for the first quarter 2020, increased $1.8 million and $11.0 million, from the linked quarter and first quarter 2019. The net interest margin (“NIM”) was 3.79% for the first quarter 2020, compared to 3.68% and 3.87% for the linked quarter and first quarter 2019, respectively.
- Loans - Total loans grew $143.2 million, or 10.8% annualized, to $5.5 billion as of March 31, 2020. Year-over-year, loans grew $440.4 million, or 8.8%, from $5.0 billion as of March 31, 2019. Growth in the loan portfolio was broad-based across most lending categories.
- Deposits - Total deposits grew $218.9 million, or 15.3% annualized, to $6.0 billion as of March 31, 2020. Year-over-year, deposits grew $452.8 million, or 8.2%, from $5.5 billion as of March 31, 2019. Noninterest deposit accounts represented 22.6% of total deposits at March 31, 2020, and the loan to deposit ratio was 91.1%.
- Asset quality - The allowance for loan losses to total loans increased to 1.69% at March 31, 2020 from 0.81% and 0.86% at December 31, and March 31, 2019, respectively. The adoption of the CECL accounting standard on January 1, 2020 increased the allowance by $28.4 million and the allowance coverage ratio by 0.53% of total loans. The provision for credit losses on loans for the first quarter 2020 increased the allowance by $21.7 million.
- Capital - Total shareholders’ equity was $846.4 million and the tangible common equity to tangible assets ratio was 8.42% at March 31, 2020. Regulatory capital ratios remain “well-capitalized”, with a common equity tier 1 ratio of 9.58% and a total risk-based capital ratio of 12.85%.
In the first quarter 2020, the Company repurchased 456,251 shares at an average price of $33.64 prior to suspending its repurchase of shares through the share repurchase plan in March. There are 95,907 shares available for repurchase under the existing authorization.
The Company’s Board of Directors approved a quarterly dividend of $0.18 per common share, payable on June 30, 2020 to shareholders of record as of June 15, 2020.
- Liquidity - The Company maintains a high level of both on-balance-sheet and off-balance-sheet liquidity. At March 31, 2020, on-balance-sheet liquidity consisted of cash and unpledged investment securities of $1.1 billion. Off-balance-sheet liquidity totaled $1.8 billion through the Federal Home Loan Bank, Federal Reserve and correspondent bank lines. The Company also has an unused $25 million revolving line of credit and maintains a shelf registration allowing for the issuance of various forms of equity and debt securities.
1 PTPP is a non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables. |
Net Interest Income
Net interest income for the first quarter increased $1.8 million to $63.4 million from $61.6 million in the linked quarter, and increased $11.0 million from the prior year period. The increase from the linked quarter was primarily due to growth in the average loan portfolio while the increase from the prior year period was primarily due to the Trinity acquisition and organic growth. NIM, on a tax equivalent basis, was 3.79% for the first quarter, compared to 3.68% in the linked quarter, and 3.87% in the first quarter of 2019.
Core net interest income and core net interest margin noted in the table below exclude incremental accretion on non-core acquired loans.
| Quarter ended | |||||||||||||||||||
($ in thousands) | March 31,
|
| December 31,
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| September 30,
|
| June 30,
|
| March 31,
| |||||||||||
Net interest income | $ | 63,368 |
|
| $ | 61,613 |
|
| $ | 63,046 |
|
| $ | 61,715 |
|
| $ | 52,343 |
| |
Less: Incremental accretion income2 | 1,273 |
|
| 576 |
|
| 2,140 |
|
| 910 |
|
| 1,157 |
| ||||||
Core net interest income3 | $ | 62,095 |
|
| $ | 61,037 |
|
| $ | 60,906 |
|
| $ | 60,805 |
|
| $ | 51,186 |
| |
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|
|
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Net interest margin (tax equivalent) | 3.79 | % |
| 3.68 | % |
| 3.81 | % |
| 3.86 | % |
| 3.87 | % | ||||||
Core net interest margin3 (tax equivalent) | 3.71 |
|
| 3.64 |
|
| 3.69 |
|
| 3.80 |
|
| 3.79 |
|
2 Represents incremental accretion income on non-core acquired loans which were acquired from the FDIC and previously covered by shared-loss agreements. |
3 Core net interest income and core net interest margin are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables. |
Average Balance Sheets
The following table presents, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as, the corresponding interest rates earned and paid, all on a tax-equivalent basis.
| Quarter ended | ||||||||||||||||||||||||||||||||
| March 31, 2020 |
| December 31, 2019 |
| March 31, 2019 | ||||||||||||||||||||||||||||
($ in thousands) |
Average
|
|
Interest
|
|
Average
|
|
Average
|
|
Interest
|
|
Average
|
|
Average
|
|
Interest
|
|
Average
| ||||||||||||||||
Assets |
|
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Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Loans, excluding incremental accretion* | $ | 5,352,243 |
|
| $ | 66,017 |
|
| 4.96 | % |
| $ | 5,279,500 |
|
| $ | 67,085 |
|
| 5.04 | % |
| $ | 4,511,387 |
|
| $ | 59,973 |
|
| 5.39 | % | |
Debt and equity investments* | 1,346,968 |
|
| 9,708 |
|
| 2.90 |
|
| 1,322,017 |
|
| 9,699 |
|
| 2.92 |
|
| 896,936 |
|
| 6,292 |
|
| 2.84 |
| |||||||
Short-term investments | 92,248 |
|
| 300 |
|
| 1.31 |
|
| 102,989 |
|
| 406 |
|
| 1.56 |
|
| 102,166 |
|
| 447 |
|
| 1.77 |
| |||||||
Total earning assets | 6,791,459 |
|
| 76,025 |
|
| 4.50 |
|
| 6,704,506 |
|
| 77,190 |
|
| 4.57 |
|
| 5,510,489 |
|
| 66,712 |
|
| 4.91 |
| |||||||
|
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|
|
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Noninterest-earning assets | 572,146 |
|
|
|
|
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| 617,990 |
|
|
|
|
|
| 445,597 |
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| ||||||||||||||||
Total assets | $ | 7,363,605 |
|
|
|
|
|
| $ | 7,322,496 |
|
|
|
|
|
| $ | 5,956,086 |
|
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Liabilities and Shareholders’ Equity |
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Interest-bearing liabilities: |
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| ||||||||||||||||
Interest-bearing transaction accounts | $ | 1,375,154 |
|
| $ | 1,338 |
|
| 0.39 | % |
| $ | 1,325,363 |
|
| $ | 1,620 |
|
| 0.48 | % |
| $ | 1,077,289 |
|
| $ | 1,790 |
|
| 0.67 | % | |
Money market accounts | 1,811,090 |
|
| 4,740 |
|
| 1.05 |
|
| 1,693,357 |
|
| 5,797 |
|
| 1.36 |
|
| 1,521,878 |
|
| 6,515 |
|
| 1.74 |
| |||||||
Savings | 542,993 |
|
| 143 |
|
| 0.11 |
|
| 543,571 |
|
| 195 |
|
| 0.14 |
|
| 299,731 |
|
| 183 |
|
| 0.25 |
| |||||||
Certificates of deposit | 793,213 |
|
| 3,667 |
|
| 1.86 |
|
| 846,253 |
|
| 4,096 |
|
| 1.92 |
|
| 712,269 |
|
| 3,332 |
|
| 1.90 |
| |||||||
Total interest-bearing deposits | 4,522,450 |
|
| 9,888 |
|
| 0.88 |
|
| 4,408,544 |
|
| 11,708 |
|
| 1.05 |
|
| 3,611,167 |
|
| 11,820 |
|
| 1.33 |
| |||||||
Subordinated debentures | 141,295 |
|
| 1,919 |
|
| 5.46 |
|
| 141,217 |
|
| 1,945 |
|
| 5.46 |
|
| 124,154 |
|
| 1,648 |
|
| 5.38 |
| |||||||
FHLB advances | 220,453 |
|
| 895 |
|
| 1.63 |
|
| 291,057 |
|
| 1,371 |
|
| 1.87 |
|
| 215,420 |
|
| 1,398 |
|
| 2.63 |
| |||||||
Securities sold under agreements to repurchase | 201,887 |
|
| 343 |
|
| 0.68 |
|
| 170,481 |
|
| 308 |
|
| 0.72 |
|
| 187,297 |
|
| 274 |
|
| 0.59 |
| |||||||
Other borrowings | 34,270 |
|
| 275 |
|
| 3.23 |
|
| 36,220 |
|
| 293 |
|
| 3.21 |
|
| 14,900 |
|
| 134 |
|
| 3.65 |
| |||||||
Total interest-bearing liabilities | 5,120,355 |
|
| 13,320 |
|
| 1.05 |
|
| 5,047,519 |
|
| 15,625 |
|
| 1.23 |
|
| 4,152,938 |
|
| 15,274 |
|
| 1.49 |
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Noninterest-bearing liabilities: |
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Demand deposits | 1,315,267 |
|
|
|
|
|
| 1,347,748 |
|
|
|
|
|
| 1,088,323 |
|
|
|
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| |||||||||||||
Other liabilities | 62,948 |
|
|
|
|
|
| 67,555 |
|
|
|
|
|
| 52,371 |
|
|
|
|
| |||||||||||||
Total liabilities | 6,498,570 |
|
|
|
|
|
| 6,462,822 |
|
|
|
|
|
| 5,293,632 |
|
|
|
|
| |||||||||||||
Shareholders' equity | 865,035 |
|
|
|
|
|
| 859,674 |
|
|
|
|
|
| 662,454 |
|
|
|
|
| |||||||||||||
Total liabilities and shareholders' equity | $ | 7,363,605 |
|
|
|
|
|
| $ | 7,322,496 |
|
|
|
|
|
| $ | 5,956,086 |
|
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| ||||||||||
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Core net interest income3 |
|
| 62,705 |
|
|
|
|
|
| 61,565 |
|
|
|
|
|
| 51,438 |
|
|
| |||||||||||||
Core net interest margin3 |
|
|
|
| 3.71 | % |
|
|
|
|
| 3.64 | % |
|
|
|
|
| 3.79 | % | |||||||||||||
|
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Incremental accretion on non-core acquired loans |
|
| 1,273 |
|
|
|
|
|
| 576 |
|
|
|
|
|
| 1,157 |
|
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| |||||||||||||
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|
|
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Total net interest income |
|
| $ | 63,978 |
|
|
|
|
|
| $ | 62,141 |
|
|
|
|
|
| $ | 52,595 |
|
|
| ||||||||||
Net interest margin |
|
|
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| 3.79 | % |
|
|
|
|
| 3.68 | % |
|
|
|
|
| 3.87 | % | |||||||||||||
* Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $0.6 million for the three months ended March 31, 2020, $0.5 million for the three months ended December 31, 2019, and $0.3 million for the three months ended March 31, 2019. | |||||||||||||||||||||||||||||||||
3 Core net interest income and core net interest margin are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables. | |||||||||||||||||||||||||||||||||
NIM increased 11 basis points from the linked quarter to 3.79% during the current quarter primarily due to an 18 basis point decrease in the cost of funds partially offset by lower loan yields. Significant reductions in interest rates, including one-month LIBOR, continue to impact the Company’s variable-rate loans. The Company responded to interest rate trends by reducing the cost of certain managed money market and interest-bearing transaction accounts. This effort improved the cost of money market accounts by 31 basis points compared to the linked quarter. Additionally, the Company entered into interest rate swap transactions to hedge its exposure to variability on a portion of the Company’s floating-rate debt.
The Company manages its balance sheet to defend against pressures on core net interest margin, which could be negatively impacted by continued competition for deposits, current interest rate conditions, and downward movement in short-term rates.
Loans
The following table presents total loans for the most recent five quarters:
| Quarter ended | |||||||||||||||||||
($ in thousands) | March 31,
|
| December 31,
|
| September 30,
|
| June 30,
|
| March 31,
| |||||||||||
C&I - general | $ | 1,186,240 |
|
| $ | 1,186,667 |
|
| $ | 1,174,569 |
|
| $ | 1,103,908 |
|
| $ | 1,128,755 |
| |
CRE investor owned - general | 1,319,316 |
|
| 1,290,258 |
|
| 1,281,332 |
|
| 1,235,596 |
|
| 1,183,471 |
| ||||||
CRE owner occupied - general | 584,491 |
|
| 582,579 |
|
| 566,219 |
|
| 591,401 |
|
| 576,026 |
| ||||||
Enterprise value lendinga | 440,764 |
|
| 428,896 |
|
| 417,521 |
|
| 445,981 |
|
| 439,500 |
| ||||||
Life insurance premium financinga | 496,471 |
|
| 472,822 |
|
| 468,051 |
|
| 465,777 |
|
| 440,693 |
| ||||||
Residential real estate - general | 346,461 |
|
| 366,261 |
|
| 386,174 |
|
| 409,200 |
|
| 432,556 |
| ||||||
Construction and land development - general | 445,909 |
|
| 428,681 |
|
| 403,590 |
|
| 376,597 |
|
| 345,207 |
| ||||||
Tax creditsa | 354,046 |
|
| 294,210 |
|
| 265,626 |
|
| 268,405 |
|
| 235,454 |
| ||||||
Agriculture | 168,237 |
|
| 139,873 |
|
| 136,249 |
|
| 131,671 |
|
| 126,088 |
| ||||||
Consumer and other - general | 115,582 |
|
| 124,090 |
|
| 128,683 |
|
| 120,961 |
|
| 109,327 |
| ||||||
Total Loans | $ | 5,457,517 |
|
| $ | 5,314,337 |
|
| $ | 5,228,014 |
|
| $ | 5,149,497 |
|
| $ | 5,017,077 |
| |
|
|
|
|
|
|
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Total loan yield | 5.06 | % |
| 5.08 | % |
| 5.47 | % |
| 5.49 | % |
| 5.50 | % | ||||||
Total C&I loans to total loans | 45 | % |
| 44 | % |
| 44 | % |
| 44 | % |
| 44 | % | ||||||
Variable interest rate loans to total loans | 60 | % |
| 59 | % |
| 60 | % |
| 60 | % |
| 60 | % | ||||||
Certain prior period amounts have been reclassified among the categories to conform to the current period presentation | ||||||||||||||||||||
a Specialized categories may include a mix of C&I, CRE, Construction and land development, or Consumer and other loans. | ||||||||||||||||||||
Loans totaled $5.5 billion at March 31, 2020, increasing $143.2 million, or 10.8% annualized, compared to the linked quarter. Year-over-year, loans increased $440.4 million, or 8.8%.
In the first quarter 2020, the Company implemented several loan programs to assist its customers impacted by the COVID-19 pandemic. These programs include consumer and business deferral programs and expanded small business lines of credit. In April 2020, the Company began offering loans through the SBA’s Paycheck Protection Program that was part of the CARES Act passed by Congress.
Asset Quality
On January 1, 2020, the Company adopted the new accounting standard, commonly referred to as CECL, to estimate credit losses. Prior to the adoption of CECL, purchased credit impaired (PCI) loans were accounted for in performing pools of loans and were not individually identified as nonaccrual or classified. Under the CECL accounting model, the Company elected not to maintain PCI pools for certain loans which are now accounted for individually. Thus they are now included in nonperforming and classified loans. PCI loans are referred to as purchased credit deteriorated (PCD) under CECL.
The adoption of CECL impacted certain financial metrics as noted in the following table:
($ in thousands) |
Allowance for
|
|
Reserve for
|
|
Nonperforming
|
|
Classified
| |||||||||
Balance, 12/31/2019 | $ | 43,288 |
|
| $ | 430 |
|
| $ | 26,425 |
|
| $ | 85,897 |
| |
CECL adoption4 | 28,387 |
|
| 2,413 |
|
| 8,462 |
|
| 25,819 |
| |||||
PCD loans immediately charged-off5 | (1,680 | ) |
| — |
|
| (1,680 | ) |
| (1,680 | ) | |||||
Balance, 1/1/2020 | 69,995 |
|
| 2,843 |
|
| 33,207 |
|
| 110,036 |
| |||||
Provision for credit losses | 21,695 |
|
| 849 |
|
| — |
|
| — |
| |||||
Net recoveries | 497 |
|
| — |
|
| — |
|
| — |
| |||||
Net increase (decrease) | — |
|
| — |
|
| 3,997 |
|
| (5,282 | ) | |||||
Balance, 3/31/2020 | $ | 92,187 |
|
| $ | 3,692 |
|
| $ | 37,204 |
|
| $ | 104,754 |
| |
|
|
|
|
|
|
|
|
4 Loan balances at March 31, 2020 |
5 Under the Company’s credit policy, nonaccrual loans less than $100,000 are immediately charged-off. |
The following table presents the categories of nonperforming assets and related ratios for the most recent five quarters:
| Quarter ended | |||||||||||||||||||
($ in thousands) | March 31,
|
| December 31,
|
| September 30,
|
| June 30,
|
| March 31,
| |||||||||||
Nonperforming loans | $ | 37,204 |
|
| $ | 26,425 |
|
| $ | 15,569 |
|
| $ | 19,842 |
|
| $ | 9,607 |
| |
Other real estate | 5,072 |
|
| 6,344 |
|
| 8,498 |
|
| 10,531 |
|
| 6,804 |
| ||||||
Nonperforming assets | $ | 42,276 |
|
| $ | 32,769 |
|
| $ | 24,067 |
|
| $ | 30,373 |
|
| $ | 16,411 |
| |
|
|
|
|
|
|
|
|
|
| |||||||||||
Nonperforming loans to total loans | 0.68 | % |
| 0.50 | % |
| 0.30 | % |
| 0.39 | % |
| 0.19 | % | ||||||
Nonperforming assets to total assets | 0.56 |
|
| 0.45 |
|
| 0.33 |
|
| 0.42 |
|
| 0.24 |
| ||||||
Allowance for loan losses to total loans | 1.69 |
|
| 0.81 |
|
| 0.85 |
|
| 0.85 |
|
| 0.86 |
| ||||||
Net charge-offs | $ | 1,183 |
|
| $ | 2,544 |
|
| $ | 1,070 |
|
| $ | 970 |
|
| $ | 1,826 |
| |
Nonperforming loans increased $10.8 million to $37.2 million at March 31, 2020 from $26.4 million at December 31, 2019 primarily due to the adoption of CECL that added $6.8 million in PCD loans that were previously accounted for in an accruing pool of loans. In the first quarter 2020, the Company had net charge-offs of $1.2 million, primarily due to the administrative charge-off of nonaccrual loans less than $100,000 under the Company’s credit policy. Other real estate decreased during the first quarter 2020 due to write-downs of $0.8 million and sales of $0.5 million.
The Company recorded a provision for credit losses of $22.3 million for the first quarter 2020 compared to $1.3 million for the linked quarter and $1.5 million for the first quarter 2019, respectively. The increase in the provision for credit losses in the first quarter 2020 was primarily due to a change in economic forecasts, which worsened significantly in March due to the COVID-19 pandemic, the resulting slow-down of business activity and rise in unemployment. To the extent that the Company does not recognize charge-offs and economic forecasts improve in future periods, the Company could recognize a reversal of provision for credit losses. Conversely, if economic conditions and the Company’s forecast continue to worsen, the Company could recognize elevated levels of provision for credit losses.
Deposits
The following table presents deposits broken out by type for the most recent five quarters:
| Quarter ended | |||||||||||||||||||
($ in thousands) | March 31,
|
| December 31,
|
| September 30,
|
| June 30,
|
| March 31,
| |||||||||||
Noninterest-bearing accounts | $ | 1,354,571 |
|
| $ | 1,327,348 |
|
| $ | 1,295,450 |
|
| $ | 1,181,577 |
|
| $ | 1,186,508 |
| |
Interest-bearing transaction accounts | 1,389,603 |
|
| 1,367,444 |
|
| 1,307,855 |
|
| 1,392,586 |
|
| 1,389,826 |
| ||||||
Money market and savings accounts | 2,479,828 |
|
| 2,249,784 |
|
| 2,201,052 |
|
| 2,162,605 |
|
| 2,156,031 |
| ||||||
Brokered certificates of deposit | 170,667 |
|
| 215,758 |
|
| 209,754 |
|
| 213,138 |
|
| 180,788 |
| ||||||
Other certificates of deposit | 595,237 |
|
| 610,689 |
|
| 610,269 |
|
| 609,432 |
|
| 623,960 |
| ||||||
Total deposit portfolio | $ | 5,989,906 |
|
| $ | 5,771,023 |
|
| $ | 5,624,380 |
|
| $ | 5,559,338 |
|
| $ | 5,537,113 |
| |
|
|
|
|
|
|
|
|
|
| |||||||||||
Noninterest-bearing deposits to total deposits | 22.6 | % |
| 23.0 | % |
| 23.0 | % |
| 21.3 | % |
| 21.4 | % | ||||||
Total deposits at March 31, 2020 were $6.0 billion, an increase of $218.9 million from December 31, 2019, and an increase of $452.8 million from March 31, 2019.
Core deposits, defined as total deposits excluding certificates of deposits, were $5.2 billion at March 31, 2020, an increase of $279.4 million from the linked quarter. Noninterest-bearing deposits were $1.4 billion at March 31, 2020, an increase of $27.2 million compared to December 31, 2019, and an increase of $168.1 million compared to March 31, 2019. The total cost of deposits was 0.68% for the current quarter compared to 0.81% and 1.02% for the linked quarter and prior year quarter, respectively.
Noninterest Income
Total noninterest income for first quarter 2020 was $13.4 million, a decrease of $1.0 million from the linked quarter, and an increase of $4.2 million from the first quarter 2019. The decrease from the linked quarter is from lower tax credit income that typically peaks in the fourth quarter of the year. Income from the Company’s customer swap program continued to expand, totaling $1.1 million in the first quarter 2020, compared to $0.8 million in the linked quarter and $0.2 million in the first quarter 2019. The Company also recognized $0.7 million from a bank-owned life insurance claim in the first quarter 2020. The increase from the prior year quarter was driven by contributions from a full quarter of Trinity’s operations in 2020.
Noninterest Expenses
Noninterest expenses were $38.7 million for the first quarter 2020, compared to $38.4 million for the linked quarter, and $39.8 million for the first quarter 2019. The increase from the linked quarter is primarily due to merit increases and the reset of annual payroll tax limits, offset by a decrease in variable compensation. In the first quarter 2020, variable compensation accruals were decreased commensurate with the decrease in profitability. The decrease in noninterest expense from the first quarter 2019 was primarily due to a decline in merger-related expenses following the acquisition of Trinity, offset by a full quarter of Trinity’s operating expense in 2020.
The Company’s core efficiency ratio6 was 51.2% for the quarter ended March 31, 2020, compared to 50.7% for the linked quarter and 54.1% for the prior year period.