Integrated Financial Holdings, Inc. Third Quarter 2022

RALEIGH, N.C., Oct. 28, 2022 (GLOBE NEWSWIRE) — Integrated Financial Holdings, Inc. (OTCQX: IFHI) (the “Company” or “IFHI”), the financial holding company for West Town Bank & Trust (the “Bank”), released its financial results for the three months and nine months ended September 30, 2022. Highlights from the 2022 third quarter and year-to-date results include the following:

  • Third quarter net loss of $7.5 million or $3.31 per diluted share, compared to third quarter 2021 net income of $2.9 million or $1.32 per diluted share. The 2022 third quarter was materially impacted by a $10.0 million litigation expense, as previously disclosed in the Company’s second quarter earnings release. Year-to-date net loss was $2.6 million or ($1.14) per diluted share compared to $11.4 million in net income or $5.15 per diluted share in the prior year.
  • Net interest income of $5.7 million for the third quarter of 2022, compared to $4.3 million for the same period in 2021. For the year, net interest income was $16.0 million compared to $12.2 million for the same nine-month period in 2021.
  • Return on average assets of (6.97)% and (0.79)% for the three and nine-month periods ending September 30, 2022 compared to 2.61% and 3.63%, respectively for the same periods in 2021.
  • Return on average tangible common equity (a non-GAAP financial measure) of (43.36)% and (4.86)% for the three and nine-month periods ending September 30, 2022 compared to 17.70% and 24.71%, respectively for the same periods in 2021.

Eric Bergevin, President and CEO of the Company said, “The settlement expense associated with our decision to resolve the RESPA Litigation obviously impacted our 2022 third quarter and year-to-date results. However, putting aside this extraordinary expense item, we saw a lot of positive momentum in our core government-guaranteed lending business segment.  We saw all-time highs for government-guaranteed loan closings, exceeding $100 million for the quarter and seeing the pipeline bump over $500 million, mostly focused on renewable energy projects.  Renewable energy projects have been, and we expect will continue to be, a focus of ours going forward.  In that regard, we are excited about some of the opportunities we anticipate from our pending merger with MVB Financial Corp. that was announced during the third quarter.  Due to the size of some of these renewable energy projects, we expect that the larger balance sheet offered by our proposed strategic partnership with MVB would allow us to retain a larger portion of the economic benefits from these projects, rather than participating out portions of the loans.  As we look ahead to year-end, we are focused on strategic initiatives that we expect will bring renewed focus on our core strength of government-guaranteed lending, enhancing our pipeline and being accretive to long-term earnings.  We have already begun, and will continue to take prudent cost-savings measures, as we respond to reduced activity in our historical mortgage operations in light of the interest-rate environment and look to maximize shareholder value with respect to some of our non-core business lines.”

BALANCE SHEET
On September 30, 2022, the Company’s total assets were $437.4 million, net loans held for investment were $288.7 million, loans held for sale (“HFS”) were $28.4 million, total deposits were $325.1 million and total shareholders’ equity attributable to IFHI was $84.3 million. Compared with December 31, 2021, total assets decreased $15.5 million or 3%, net loans held for investment increased $34.6 million or 14%, HFS loans increased $519,000 or 2%, total deposits decreased $23.0 million or 7%, and total shareholders’ equity attributable to IFHI decreased $4.3 million or 5%. Cash and cash equivalents increased slightly from the prior quarter but have decreased since year end as the Company has redeployed cash into higher yielding loans. The Bank has continued to see strong growth in loans held for investment primarily as a result of the retained portion of the loan pipeline for the Government Guaranteed Lending (“GGL”) type loans. At $28.4 million in volume, HFS loans at September 30, 2022 represents significant potential future GGL revenues as those loans are sold in the market and the associated premiums are recognized. Noninterest bearing deposits increased $22.7 million from the prior quarter but are down $8.0 million since the prior year-end, in part, as a result of some ongoing merger and acquisition activity in one of the targeted industries that the Company banks.   The decrease in total shareholders’ equity since year-end 2021 was primarily a result of the net loss posted for the nine-month period ended September 30, 2022.

CAPITAL LEVELS
At September 30, 2022, the regulatory capital ratios of West Town Bank & Trust exceeded the minimum thresholds established for well-capitalized banks under applicable banking regulations.

  “Well Capitalized”
Minimum
Basel III Fully
Phased-In
West Town
Bank & Trust
Tier 1 common equity ratio 6.50 % 7.00 % 12.12 %
Tier 1 risk-based capital ratio 8.00 % 8.50 % 12.12 %
Total risk-based capital ratio 10.00 % 10.50 % 13.38 %
Tier 1 leverage ratio 5.00 % 4.00 % 10.91 %
       

As a result of the loss driven by the litigation settlement, the Company’s book value per common share decreased from $39.74 as of September 30, 2021, to $37.29 at September 30, 2022. The Company’s tangible book value per common share (a non-GAAP financial measure) also decreased from $30.76 as of September 30, 2021, to $28.88 at September 30, 2022, primarily as a result of the net loss of the Company.

ASSET QUALITY
The Company’s nonperforming assets to total assets ratio decreased from 1.65% at December 31, 2021, to 1.05% at September 30, 2022, as management continued to aggressively work to reduce its special assets portfolio. Nonaccrual loans at September 30, 2022 decreased $2.2 million or 33% as compared to December 31, 2021. The Bank held no foreclosed assets as of September 30, 2022.

The Company recorded $320,000 and $960,000 in provision for loan losses during the three and nine-months periods ending September 30, 2022, respectively, as compared to provisions of $500,000 and $1,172,000 for the same periods in 2021 as the size of the loan portfolio increased for those periods. The Company recorded $29,000 in net recoveries during the third quarter of 2022 compared to $325,000 in net charge-offs for the same period in 2021. Management continues to believe it is making progress in improving overall asset quality. Set forth in the table below is certain asset quality information as of the dates indicated:

  (Dollars in thousands) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21
Nonaccrual loans $ 4,612   $ 4,656   $ 6,558   $ 6,848   $ 7,575  
Foreclosed assets               618     618  
90 days past due and still accruing                    
Total nonperforming assets $ 4,612   $ 4,656   $ 6,558   $ 7,466   $ 8,193  
           
Net charge-offs $ (29 ) $ (279 ) $ 105   $ 1,038   $ 325  
Annualized net charge-offs (rececoveries) to total          
average portfolio loans   -0.04 %   -0.43 %   0.16 %   1.65 %   0.50 %
           
Ratio of total nonperforming assets to total assets   1.05 %   1.07 %   1.52 %   1.65 %   1.84 %
Ratio of total nonperforming loans to total loans, net          
of allowance   1.60 %   1.79 %   2.56 %   2.70 %   2.99 %
Ratio of total allowance for loan losses to total loans   2.27 %   2.39 %   2.14 %   2.14 %   2.24 %
                               

NET INTEREST INCOME AND MARGIN
Net interest income for the three months ended September 30, 2022, increased $1.4 million or 33% in comparison to the third quarter of 2021 as loan yields increased year over year from 6.92% to 7.55%. The increase in yield from the prior year resulted from a change in loan mix while also reflecting the impact of 300 basis points of rate increases by the Federal Open Market Committee (“FOMC”) since the beginning of 2022 in response to current economic conditions. Overall cost of funds decreased from 0.73% in the third quarter of 2021 to 0.66% for the same period in 2022; however the Company expects to see an upward trend in its costs of funds as average retail certificate of deposit (“CD”) rates trend up and new CDs are originated at a higher market rate. Net interest margin increased from 4.37% during the three months ended September 30, 2021, to 6.22% for the same period in 2022. The increase in margin was also driven by the increase in loan yield resulting from the FOMC actions.

Net interest income for the nine months ended September 30, 2022, increased $3.8 million or 31% in comparison to the same period of 2021 as loan yields increased year over year from 6.52% to 7.39% primarily as a result of the FOMC rate increases during the period.

  Three Months Ended       Year-To-Date
(Dollars in thousands) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21   9/30/22 9/30/21
Average balances:            
Loans $ 312,475   $ 319,115   $ 294,502   $ 277,510   $ 272,994     $ 308,697   $ 284,620  
Available-for-sale securities   19,096     21,879     21,088     20,367     19,393       20,688     29,576  
Other interest-bearing balances   30,378     33,328     56,359     86,261     93,682       40,022     58,736  
Total interest-earning assets   361,949     374,322     371,949     384,138     386,069       369,407     372,932  
Total assets   428,983     438,732     437,402     442,139     446,822       435,039     421,779  
                 
Noninterest-bearing deposits   94,013     85,042     98,546     104,472     103,708       92,534     90,084  
Interest-bearing liabilities:            
Interest-bearing deposits   233,464     244,363     235,092     237,847     240,957       237,640     234,899  
Borrowings   2,174     8,626     6,306     5,272     5,196       5,702     4,794  
Total interest-bearing liabilities   235,638     252,989     241,398     243,119     246,153       243,342     239,693  
Common shareholders’ equity   88,043     90,721     90,441     86,549     85,683       89,735     81,969  
Tangible common equity (1)   68,924     71,437     70,939     66,877     65,843       70,433     61,979  
                 
Interest income/expense:            
Loans $ 5,943   $ 5,491   $ 5,623   $ 4,571   $ 4,759     $ 17,057   $ 13,887  
Available-for-sale securities   105     104     89     77     75       298     191  
Interest-bearing balances and other   169     89     42     53     67       300     135  
Total interest income   6,217     5,684     5,754     4,701     4,901       17,655     14,213  
Deposits   532     523     522     566     645       1,577     2,014  
Borrowings   13     15     9     1           37      
Total interest expense   545     538     531     567     645       1,614     2,014  
Net interest income $ 5,672   $ 5,146   $ 5,223   $ 4,134   $ 4,256     $ 16,041   $ 12,199  
                 
(1) See reconciliation of non-GAAP financial measures.
  Three Months Ended   Year-To-Date
  9/30/22 6/30/22 3/31/22 12/31/21 9/30/21   9/30/22 9/30/21
Average yields and costs:                
Loans 7.55 % 6.90 % 7.74 % 6.53 % 6.92 %   7.39 % 6.52 %
Available-for-sale securities 2.20 % 1.90 % 1.69 % 1.51 % 1.55 %   1.92 % 0.86 %
Interest-bearing balances and other 2.21 % 1.07 % 0.30 % 0.24 % 0.28 %   1.00 % 0.31 %
Total interest-earning assets 6.81 % 6.09 % 6.27 % 4.86 % 5.04 %   6.39 % 5.10 %
Interest-bearing deposits 0.90 % 0.86 % 0.90 % 0.94 % 1.06 %   0.89 % 1.15 %
Borrowings 2.37 % 0.70 % 0.58 % 0.08 % 0.00 %   0.87 % 0.00 %
Total interest-bearing liabilities 0.92 % 0.85 % 0.89 % 0.93 % 1.04 %   0.89 % 1.12 %
Cost of funds 0.66 % 0.64 % 0.63 % 0.65 % 0.73 %   0.64 % 0.82 %
Net interest margin 6.22 % 5.51 % 5.69 % 4.27 % 4.37 %   5.81 % 4.37 %
                               

NONINTEREST INCOME
Noninterest income for the three months ended September 30, 2022, was $5.4 million, a decrease of $3.7 million or 41% as compared to the three months ended September 30, 2021. Specific items to note include:

  • Windsor Advantage, LLC (“Windsor”), a subsidiary of the Company which offers an SBA and USDA loan servicing platform, had processing and servicing revenue totaling $2.2 million, a decrease of $3.8 million or 64% as compared to the $6.0 million in income earned during the same prior-year period. The decrease is almost entirely attributable to $3.7 million in PPP fee related income realized in the third quarter of 2021 compared to no such income in the same period in 2022.
  • Mortgage revenue totaled $477,000, a decrease of $1.1 million or 69% as compared to the third quarter of 2021. Mortgage originations have continued to decline due to rising interest rates. To that effect, mortgage loans originated to sell to the secondary market decreased from $33.2 million in the third quarter 2021 to $20.3 million in the third quarter 2022.   The decrease in both the core mortgage revenue and origination volume can be attributable to the nationwide slowdown in refinancing volume with housing supplies continuing to be an issue along with the impact of a doubling of long-term mortgage rates year-over-year.  
  • Government Guaranteed Lending revenue was $2.2 million in the third quarter of 2022, an increase of $1.6 million or 279% in comparison to the $584,000 of revenues for the same period in 2021.
  • Other noninterest income was $222,000 in the third quarter of 2022 compared to income of $694,000 in the same period in 2021.

Noninterest income for the nine months ended September 30, 2022, was $22.4 million compared to $36.2 million for the same period in 2021, a decrease of $13.7 million or 38%. The decrease is primarily due to a decrease of $13.8 million in loan processing and servicing revenue driven by the decrease in PPP-related revenue during the period. Mortgage revenues during the period decreased $3.3 million due to a general slowdown in the refinancing market but was offset by an increase in other noninterest income of $3.2 million primarily associated with a gain in the market value of marketable equity securities.

NONINTEREST EXPENSE
Noninterest expense for the third quarter of 2022 was $20.9 million, an increase of $12.0 million or 134%, from $8.9 million for the third quarter of 2021.   This change was primarily due to the recognition of a $10.0 million expense during the 2022 third quarter associated with a litigation reserve for a class action lawsuit against the Bank (the “RESPA Litigation”), as previously detailed in the Company’s second quarter earnings release. On August 10, 2022, the Bank agreed to settle the RESPA Litigation for an aggregate sum of $10.0 million, subject to execution of a definitive settlement agreement and court approval. The plaintiffs, plaintiffs’ counsel, and the Bank subsequently executed a definitive settlement agreement dated as of September 7, 2022, for the aggregate sum of $10.0 million. On October 12, 2022, the court issued an order granting preliminary approval of the class action settlement, as reflected in the settlement agreement, and scheduled the final fairness hearing on the settlement for January 18, 2023.

Also contributing to the year-over-year increase in noninterest expense was an increase in compensation expense, which increased from $5.5 million in the third quarter of 2021 to $6.9 million during the same period in 2022. This $1.4 million increase was due to the additional cost of new hires and overall increases in payroll for existing employees. Additionally, the Company incurred $561,000 of merger-related expenses associated with the Company’s proposed merger with MVB Financial Corp. Finally, loan and special asset expenses, which change significantly period over period, increased $836,000 between the third quarter of 2022 and the same period in 2021.   These increases were partially offset by decreases to several expense categories. Software expenses were $460,000, a decrease of $382,000 or 45% in the third quarter of 2022 compared to the same period in 2021. The expense in 2021 included additional costs related to the processing of PPP loans during the period. The decreases in the other noninterest expense categories, including professional services and advertising are primarily related to management’s overall effort to grow profitability.

Noninterest expense for the nine months ended September 30, 2022, was $40.9 million compared to $32.2 million for the same period in 2021, an increase of $8.7 million or 27%.   The primary difference period over period was the $10.0 million litigation expense discussed above.   

ENTRY INTO MERGER AGREEMENT WITH MVB FINANCIAL CORP.  
On August 12, 2022, it was publicly announced that the Company had entered into a definitive merger agreement with MVB Financial Corp. (“MVB”), the holding company for MVB Bank, Inc., a West Virginia state-chartered bank. Under the terms of the merger agreement, which is an all-stock transaction, the Company would be merged with and into MVB, with MVB as the surviving corporation in the proposed merger. The proposed merger is subject to required shareholder and regulatory approvals and the satisfaction of various closing conditions. Readers are also directed to the end of this press release and the section entitled “Additional Information on the Merger and Where to Find it.”

ABOUT INTEGRATED FINANCIAL HOLDINGS, INC.
Integrated Financial Holdings, Inc. is a financial holding company based in Raleigh, North Carolina. The Company is the holding company for West Town Bank & Trust, an Illinois state-chartered bank. West Town Bank & Trust provides banking services through its full-service office located in the greater Chicago area. The Company is also the parent company of Windsor Advantage, LLC, a loan service provider that offers community banks and credit unions with a comprehensive outsourced U.S. Small Business Association (“SBA”) 7(a) and U.S. Department of Agriculture (“USDA”) lending platform. The Company is registered with and supervised by the Federal Reserve. West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC.

For more information, visit https://ifhinc.com/.

Important Note Regarding Forward-Looking Statements
This release contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company, as well as regarding the announced merger with MVB. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of the Company and on the information available to management at the time this release was prepared. These statements can be identified by the use of words such as “expect,” “anticipate,” “estimate,” “believe,” variations of these words, and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand, and asset quality, including real estate and other collateral values; changes in Small Business Administration rules, regulations, or loan products, including the section 7(a) program; changes in other government guaranteed loan programs or our ability to participate in such programs; changes in tax law, including the impact of such changes on our tax assets and liabilities; future governmental shutdowns that may impact revenues associated with our lending and other operations that are dependent on government guaranteed loan programs; changes in banking regulations and accounting principles, policies, or guidelines; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with the Company’s acquisition and divesture activities or the Company’s planned merger with MVB; the failure of our strategic investments or acquisitions to perform as anticipated and the impact of any impairments to our intangible assets, such as goodwill; the impact of our strategic initiatives, including our planned merger with MVB, on our ability to retain key employees; the possibility that the proposed merger with MVB will not close when expected or at all because required regulatory, shareholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all; the possibility that the anticipated benefits of the proposed merger with MVB will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where the Company and MVB do business; adverse results (including judgments, costs, fines, reputational harm, financial settlements and/or other negative effects) from current or future litigation, regulatory proceedings, investigations, or similar matters, or developments related thereto; that costs or estimated liabilities and expenses associated with the RESPA Litigation may be greater than currently estimated, whether due to the court not finally approving the settlement agreement or otherwise; and the impact of competition from traditional or new sources, including non-bank financial service providers, such as Fintechs. These, and other factors that may emerge, could cause decisions and actual results to differ materially from current expectations. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.        

Additional Information on the Merger and Where to Find It

In connection with the proposed merger, MVB will file a registration statement on Form S-4 with the U.S. Securities and Exchange Commission (“SEC”). The registration statement will include a joint proxy statement of MVB and IFHI, which also constitutes a prospectus of MVB, that will be sent to IFHI’s and MVB’s shareholders seeking certain approvals related to the proposed transaction.  

The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. INVESTORS AND SECURITY HOLDERS OF IFHI AND MVB AND THEIR RESPECTIVE AFFILIATES ARE URGED TO READ, WHEN AVAILABLE, THE REGISTRATION STATEMENT ON FORM S-4, THE JOINT PROXY STATEMENT/PROSPECTUS TO BE INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT IFHI, MVB AND THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain a free copy of the registration statement, including the joint proxy statement/prospectus, as well as other relevant documents filed by MVB with the SEC containing information about IFHI and MVB, without charge, at the SEC’s website (http://www.sec.gov). In addition, copies of documents filed with the SEC by MVB will be made available free of charge in the “Investor Relations” section of MVB’s website, https://www.mvbbanking.com, under the heading “SEC Filings;” and investors may obtain free copies of the joint proxy statement/prospectus (when available) by contacting Integrated Financial Holdings, Inc., Attn: Eric J. Bergevin, 8450 Falls of Neuse Road, Suite 202, Raleigh, NC 27615, telephone: (252) 482-4400.

Participants in Solicitation

IFHI, MVB, and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction under the rules of the SEC. Information regarding MVB’s directors and executive officers is available in its definitive proxy statement, which was filed with the SEC on April 7, 2022, and certain other documents filed by MVB with the SEC. Other information regarding the participants in the solicitation of proxies in respect of the proposed transaction and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC. Free copies of these documents, when available, may be obtained as described in the preceding paragraph.

Consolidated Balance Sheets          
                 
        Ending Balance
(In thousands, unaudited) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21
Assets          
Cash and due from banks $ 6,272   $ 4,700   $ 3,900   $ 3,803   $ 4,452  
Interest-bearing deposits   25,011     21,981     28,876     79,910     83,327  
  Total cash and cash equivalents   31,283     26,681     32,776     83,713     87,779  
Interest-bearing time deposits   1,249     1,499     1,746     1,746     1,996  
Available-for-sale securities   17,460     19,038     20,386     20,659     19,341  
Marketable equity securities   17,982     17,982     18,000     12,000     12,000  
Loans held for sale   28,399     59,592     51,095     27,880     20,610  
Loans held for investment   295,416     266,259     262,281     259,625     259,206  
  Allowance for loan and lease losses   (6,710 )   (6,361 )   (5,622 )   (5,547 )   (5,810 )
    Loans held for investment, net   288,706     259,898     256,659     254,078     253,396  
Premises and equipment, net   4,264     4,238     4,235     4,106     4,127  
Foreclosed assets               618     618  
Loan servicing assets   3,979     4,178     4,014     3,993     3,830  
Bank-owned life insurance   5,330     5,304     5,271     5,246     5,220  
Accrued interest receivable   2,485     2,139     1,886     1,373     1,508  
Goodwill   13,161     13,161     13,161     13,161     13,161  
Other intangible assets, net   5,848     6,014     6,180     6,400     6,569  
Other assets   17,293     15,764     15,218     18,001     13,954  
      Total assets $ 437,439   $ 435,488   $ 430,627   $ 452,974   $ 444,109  
                 
Liabilities and Shareholders’ Equity          
Liabilities          
Deposits:          
  Noninterest-bearing $ 106,272   $ 83,544   $ 92,499   $ 114,313   $ 98,940  
  Interest-bearing   218,835     250,026     233,953     233,842     241,959  
    Total deposits   325,107     333,570     326,452     348,155     340,899  
Borrowings   5,000         5,000     7,500     5,000  
Accrued interest payable   370     308     325     326     372  
Other liabilities   23,557     9,939     8,320     9,212     11,130  
  Total liabilities   354,034     343,817     340,097     365,193     357,401  
Shareholders’ equity:          
Common stock, voting   2,239     2,227     2,213     2,176     2,176  
Common stock, non-voting   22     22     22     22     22  
Additional paid in capital   24,674     24,498     24,013     23,664     23,515  
Retained earnings   60,248     67,781     66,372     62,810     61,534  
Accumulated other comprehensive income (loss)   (2,866 )   (1,985 )   (1,296 )   (99 )   65  
  Total IFH, Inc. shareholders’ equity   84,317     92,543     91,324     88,573     87,312  
Noncontrolling interest   (912 )   (872 )   (794 )   (792 )   (604 )
  Total shareholders’ equity   83,405     91,671     90,530     87,781     86,708  
      Total liabilities and shareholders’ equity $ 437,439   $ 435,488   $ 430,627   $ 452,974   $ 444,109  
                 
Consolidated Statements of Income
                 
(In thousands except per Three Months Ended   Year-To-Date
 share data; unaudited) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21   9/30/22 9/30/21
Interest income                
Loans $ 5,943   $ 5,491   $ 5,623   $ 4,571   $ 4,759     $ 17,057   $ 13,887  
Available-for-sale securities and other   274     193     131     130     142       598     326  
Total interest income   6,217     5,684     5,754     4,701     4,901       17,655     14,213  
Interest expense                
Interest on deposits   532     523     522     566     645       1,577     2,014  
Interest on borrowings   13     15     9     1           37      
Total interest expense   545     538     531     567     645       1,614     2,014  
Net interest income   5,672     5,146     5,223     4,134     4,256       16,041     12,199  
Provision for loan losses   320     460     180     775     500       960     1,172  
Noninterest income                
Loan processing and servicing revenue   2,163     2,373     2,207     2,863     5,951       6,743     20,554  
Mortgage   477     1,066     173     1,090     1,537       1,716     5,016  
Government guaranteed lending   2,213     2,767     1,124     2,216     584       6,104     5,721  
SBA documentation preparation fees   78     128     144     167     149       350     824  
Service charges on deposits   182     118     104     85     77       404     158  
Bank-owned life insurance   27     33     25     25     27       85     84  
Other noninterest income (loss)   222     290     6,509     (1,473 )   694       7,021     3,798  
Total noninterest income   5,362     6,775     10,286     4,973     9,019       22,423     36,155  
Noninterest expense                
Compensation   6,880     6,271     7,061     6,178     5,462       20,212     17,474  
Occupancy and equipment   402     254     344     254     324       1,000     927  
Loan and special asset expenses   969     491     638     483     133       2,098     1,769  
Professional services   207     491     551     845     732       1,249     1,972  
Data processing   263     271     249     267     196       783     632  
Software   460     426     425     830     842       1,311     5,757  
Communications   86     97     83     99     100       266     297  
Advertising   252     321     214     453     474       787     976  
Amortization of intangibles   170     170     170     170     170       510     528  
Merger related expenses   561                       561      
Other operating expenses   10,683     846     631     754     505       12,160     1,882  
Total noninterest expense   20,933     9,638     10,366     10,333     8,938       40,937     32,214  
Income (loss) before income taxes   (10,219 )   1,823     4,963     (2,001 )   3,837       (3,433 )   14,968  
Income tax expense (benefit)   (2,646 )   492     1,403     (3,090 )   1,055       (751 )   3,957  
Net income (loss)   (7,573 )   1,331     3,560     1,089     2,782       (2,682 )   11,011  
Noncontrolling interest   (40 )   (78 )   (2 )   (187 )   (155 )     (120 )   (444 )
Net income (loss) attributable to IFH, Inc. $ (7,533 ) $ 1,409   $ 3,562   $ 1,276   $ 2,937     $ (2,562 ) $ 11,455  
                 
Basic earnings (loss) per common share $ (3.45 ) $ 0.65   $ 1.65   $ 0.60   $ 1.37     $ (1.18 ) $ 5.31  
Diluted earnings (loss) per common share $ (3.31 ) $ 0.63   $ 1.59   $ 0.57   $ 1.32     $ (1.14 ) $ 5.15  
Weighted average common shares outstanding   2,185     2,175     2,159     2,140     2,144       2,273     2,158  
Diluted average common shares outstanding   2,173     2,244     2,242     2,234     2,219       2,254     2,226  
                 
Performance Ratios
                   
    Three Months Ended   Year-To-Date
    9/30/22 6/30/22 3/31/22 12/31/21 9/30/21   9/30/22 9/30/21
PER COMMON SHARE                
  Basic earnings (loss) per common share $ (3.45 ) $ 0.65   $ 1.65   $ 0.60   $ 1.37     $ (1.18 ) $ 5.31  
  Diluted earnings (loss) per common share   (3.31 )   0.63     1.59     0.57     1.32       (1.14 )   5.15  
  Book value per common share   37.29     41.15     40.86     40.35     39.74       37.29     39.74  
  Tangible book value per common share (2)   28.88     32.62     32.21     31.44     30.76       28.88     30.76  
                   
FINANCIAL RATIOS (ANNUALIZED)                
  Return on average assets   -6.97 %   1.29 %   3.30 %   1.14 %   2.61 %     -0.79 %   3.63 %
  Return on average common shareholders’ equity   -33.95 %   6.23 %   15.97 %   5.85 %   13.60 %     -3.82 %   18.68 %
  Return on average tangible common equity (2)   -43.36 %   7.91 %   20.36 %   7.57 %   17.70 %     -4.86 %   24.71 %
  Net interest margin   6.22 %   5.51 %   5.69 %   4.27 %   4.37 %     5.81 %   4.37 %
  Efficiency ratio (1)   189.7 %   80.8 %   66.8 %   113.5 %   67.3 %     106.4 %   66.6 %
                   
  (1) Efficiency ratio is calculated by dividing noninterest expense less transaction-related costs by the sum of net interest income and noninterest income, less gains or losses on sale of securities.
                   
  (2) See reconciliation of non-GAAP measures
   

Loan Concentrations

The top ten commercial loan concentrations as of September 30, 2022, were as follows:

    % of
    Commercial
(Dollars in millions) Amount Loans
Solar electric power generation $ 69.9   32 %
Power and communication line and related structures construction   47.5   22 %
Lessors of nonresidential buildings (except miniwarehouses)   16.7   8 %
Other activities related to real estate   9.8   4 %
Hotels (except casino hotels) and motels   8.5   4 %
Commercial and Industrial Machinery and Equipment   8.1   4 %
Lessors of residential buildings and dwellings   5.5   3 %
Lessors of other real estate property   5.1   2 %
Other heavy and civil engineering construction   4.3   2 %
All other amusement and recreation industries   3.0   1 %
  $ 178.4   82 %
     

Reconciliation of Non-GAAP Measures

  9/30/22 6/30/22 3/31/22 12/31/21 9/30/21      
    (Dolars in thousands except book value per share)      
Tangible book value per common share                
Total IFH, Inc. shareholders’ equity $ 84,317   $ 92,543   $ 91,324   $ 88,573   $ 87,312        
Less: Goodwill   13,161     13,161     13,161     13,161     13,161        
Less Other intangible assets, net   5,848     6,014     6,180     6,400     6,569        
Total tangible common equity $ 65,308   $ 73,368   $ 71,983   $ 69,012   $ 67,582        
                 
Ending common shares outstanding   2,261     2,249     2,235     2,198     2,204        
Tangible book value per common share $ 28.88   $ 32.62   $ 32.21   $ 31.44   $ 30.76        
                 
  Three Months Ended   Year-To-Date
(Dollars in thousands) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21   9/30/22 9/30/21
Return on average tangible common equity                
Average IFH, Inc. shareholders’ equity $ 88,043   $ 90,721   $ 90,441   $ 86,549   $ 85,683     $ 89,735   $ 81,969  
Less: Average goodwill   13,161     13,161     13,161     13,161     13,161       13,161     13,161  
Less Average other intangible assets, net   5,958     6,123     6,341     6,511     6,679       6,141     6,829  
Average tangible common equity $ 68,924   $ 71,437   $ 70,939   $ 66,877   $ 65,843     $ 70,433   $ 61,979  
                 
Net income (loss) attributable to IFH, Inc. $ (7,533 ) $ 1,409   $ 3,562   $ 1,276   $ 2,937     $ (2,562 ) $ 11,455  
Return on average tangible common equity   -43.36 %   7.91 %   20.36 %   7.57 %   17.70 %     -4.86 %   24.71 %

Source