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01/10 16:06
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates strong financial performance with a 16% revenue growth, a stable net interest margin, and reduced nonperforming assets. The Q&A section reveals positive borrower sentiment and growth opportunities, especially in asset-based lending. While there are some concerns, like the litigation issue and rising deposit costs, overall guidance remains optimistic with plans for shareholder returns and strategic acquisitions. The positive aspects outweigh the negatives, suggesting a positive stock price movement in the near term.
Year-to-date Return on Assets (ROA) Grew 15 basis points to 1.23% compared to the same period of 2024. This improvement reflects robust profitability metrics.
Year-to-date Return on Average Tangible Common Equity Increased to over 15%, up from just under 14% in 2024. This growth highlights strong shareholder returns.
Tangible Book Value Per Share Grew 16% from a year ago, showcasing strong financial performance and shareholder value.
Pretax Pre-Provision Earnings Increased 18% from the second quarter and 20% compared to the first 9 months of 2024. This reflects consistent growth and profitability.
Earnings Per Share (EPS) Grew 26% from the second quarter and 25% year-to-date, driven by record levels of noninterest income and lower-than-expected credit costs.
Swap Income Grew nearly 6x from the linked quarter, driven by elevated swap fees.
Income from SBIC Funds Grew over 4x from the linked quarter, contributing to record noninterest income.
Loan Balances Grew about $85 million or 10% annualized during the quarter and $286 million or 9% over the same period last year. Growth was driven by strong demand for conventional and niche C&I products.
Core Deposits Increased 9% from both the linked and prior year quarters, supported by new relationships and strong deposit growth in South Central Wisconsin.
Service Charges on Deposits Grew 25% from last year's third quarter, indicating strong new relationship deposit growth.
Net Charge-Offs Totaled $1.3 million, primarily from previously reserved equipment finance loans. Nonperforming assets decreased by $5.2 million to 0.58% of total assets compared to 0.72% last quarter.
Net Interest Margin (NIM) Grew 1 basis point to 3.68% in Q3 and increased to 3.68% year-to-date from 3.62% for the same period of 2024. This reflects strong balance sheet management and risk-mitigating strategies.
Nonrecurring Fee Income Totaled $770,000, including a $537,000 fee from an accounts receivable finance credit exit and $234,000 in BOLI insurance proceeds.
Compensation Expense Grew about $900,000 due to an annual cash bonus accrual update tied to strong total bank performance. Excluding this, compensation expense declined by about $183,000.
Revenue Growth Increased 16% in Q3, driven by record fee income and strong operating leverage.
Private Wealth assets: Private Wealth assets continue to expand, delivering significant annuity-like fee income and operating revenue reached record levels.
SBIC funds and swap income: Swap income grew nearly 6x from the linked quarter and income from SBIC funds grew over 4x from the linked quarter, contributing to record noninterest income.
Loan and deposit growth: Loan balances grew about $85 million or 10% annualized during the quarter and $286 million or 9% over the same period last year. Deposit growth was up 9% from both the linked and prior year quarters.
Geographic market performance: Kansas City and Northeast Wisconsin markets led loan growth, while South Central Wisconsin market led deposit growth.
Net interest margin: Net interest margin grew 1 basis point to 3.68%, reflecting strong balance sheet management.
Fee income: Fee income comprised 19% of operating revenue year-to-date, compared to about 15% for peers, showcasing successful revenue diversification.
Asset quality: Nonperforming assets decreased by $5.2 million to 0.58% of total assets compared to 0.72% last quarter.
Revenue diversification: Investments in niche C&I products, asset-based lending, and accounts receivable financing have driven revenue diversification and positioned the company for growth.
Talent and technology investments: Continued investment in high-quality talent and technology to support growth and efficiency.
Federal Government Shutdown Impact: The company depends on federal government processing to complete SBA loan closings. A government shutdown may affect the timing of SBA loan sale premiums, introducing variability and potential delays.
Competitive Pricing in SBA Loans: Pricing in the SBA loan market remains extremely competitive, which could impact the company's ability to win deals or maintain margins.
Nonrecurring Fee Income: The record fee income in Q3 included nonrecurring items, such as a large accounts receivable finance credit fee and BOLI insurance proceeds. These are not expected to recur, potentially leading to lower fee income in future quarters.
Compensation Expense Growth: Compensation expenses are expected to grow more than the 7% year-to-date growth in 2025 due to higher benefit costs and filling open positions, which could pressure operating leverage.
SBA Loan Backlog: A potential backlog at the SBA due to the government shutdown could delay SBA gains, impacting short-term revenue.
Annual Fee Income Growth: Looking ahead, the company expects annual fee income growth to approximate 10%. However, Q4 operating fee income is expected to align more closely with the recent 4-quarter average.
Loan Growth: Loan balances grew about $85 million or 10% annualized during the quarter and $286 million or 9% over the same period last year. The company anticipates strong demand for conventional and niche C&I products, with robust pipelines for the fourth quarter.
Asset-Based Lending and Accounts Receivable Financing: Activity levels in the asset-based lending group are exceeding the past two years, and the company is positioned to capture growth opportunities in this space. Accounts receivable financing is also poised for growth, supported by investments in business development, technology, and process improvements.
Net Interest Margin: The company targets a range of 3.60% to 3.65% for net interest margin, reflecting its interest rate neutral balance sheet strategy.
SBA Loan Pipeline: The SBA loan pipeline remains strong, though the timing of SBA loan sale premiums may be affected by the federal government shutdown. Pricing remains competitive, but the company continues to win deals.
Compensation Expense Growth: Compensation levels are expected to grow slightly more than the 7% year-to-date growth in 2025, driven by filling open positions and increased benefit costs.
Revenue Growth and Operating Leverage: The company targets 10% annual revenue growth and aims to achieve annual positive operating leverage, with expense growth modestly below revenue growth.
Tax Rate: The effective tax rate is expected to remain within the 16% to 18% range.
Capital Management: Strong earnings are expected to generate sufficient capital to support organic growth, with reinvestment in the company prioritized for shareholder returns.
Tangible Book Value Growth: Year-to-date return on average tangible common equity grew to over 15%, up from just under 14% in 2024. Tangible book value per share grew an impressive 16% from a year ago.
Capital Management: Strong earnings are generating more than enough capital to facilitate expected organic growth. Reinvestment in the growth of the company typically provides the best return for shareholders. Regular evaluation of all capital management tools to maximize shareholder returns.
The earnings call indicates strong financial performance with a 16% revenue growth, a stable net interest margin, and reduced nonperforming assets. The Q&A section reveals positive borrower sentiment and growth opportunities, especially in asset-based lending. While there are some concerns, like the litigation issue and rising deposit costs, overall guidance remains optimistic with plans for shareholder returns and strategic acquisitions. The positive aspects outweigh the negatives, suggesting a positive stock price movement in the near term.
The earnings call summary shows strong financial performance, with EPS and tangible book value increases, stable net interest margins, and strong deposit growth. The Q&A section indicates confidence in achieving growth targets and managing competitive pressures. Despite an increase in NPAs, management reassures collateral coverage. Overall, the company demonstrates resilience and growth potential, warranting a positive sentiment.
The earnings call indicates strong financial performance with a 27% increase in EPS, significant revenue and deposit growth, and well-managed expenses. Despite some concerns about loan portfolio risks and economic conditions, management's responses suggest stability, with no major impact from tariffs or macro volatility. The company also maintained its effective tax rate and expects consistent loan fee income. These factors, along with positive Q&A insights, support a positive sentiment, predicting a stock price increase of 2% to 8% over the next two weeks.
The earnings call presents a mixed outlook. Strong financial metrics like a 27% EPS increase and 13% revenue growth are positive, but concerns over credit quality risks, competitive pressures, and economic conditions temper enthusiasm. The Q&A reveals management's avoidance of specific details, adding uncertainty. No significant new partnerships or guidance changes were noted, and while shareholder returns are a focus, no specific plans were announced. The stock is likely to remain stable, resulting in a neutral sentiment.
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