| Our PPP loans were originated with relatively large origination fees based on the SBA’s formula, which are recognized over the life of the loan. In fiscal 2021, we began receiving forgiveness payments on these loans, and accelerating the accretion of the income on related loans. Accelerated accretion increased interest income by $3.3 million in fiscal 2022, as compared to $3.4 million in fiscal 2021. This had the effect of increasing our net interest margin by 12 basis points in fiscal 2022, as compared to 14 basis points in fiscal 2021. Purchase accounting benefits realized on acquired loan and deposit portfolios were little changed. In total, these benefits increased net interest income (pre-tax) by $1.8 million in fiscal 2022, as compared to $1.9 million in fiscal 2021. These benefits contributed seven basis points to net interest margin in fiscal 2022, as compared to eight basis points in fiscal 2021. Noninterest income increased 5.8% in fiscal year 2022, as deposit service charges recovered from a lower fiscal 2021, other loan fees increased, and other income, including wealth management and insurance agency commissions, improved on an unusually large annuity sale in the December quarter, followed by the Fortune merger. Noninterest expense increased 17.3%, due to increased compensation expense, occupancy expenses, data processing expenses, and other expenses. Included in the increase was $1.4 million attributable to merger and acquisition activity. Compensation continues to be impacted by competition for team members, as well as by organizational growth. The Company’s efficiency ratio was modestly deteriorated from the prior fiscal year, as expenses grew more quickly than net interest income and noninterest income. 61.8% 61.6% 60.2% 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 Book value per common share as of June 30, 2022, was $34.91, an increase of 9.3% from June 30, 2021. Tangible book value per common share, a non-GAAP measure, improved by 5.1%, to $31.05, at June 30, 2022, as we recorded intangibles resulting from merger and acquisition activity. Our closing stock price at June 30, 2022, was $45.26, an increase of 0.7% from a year earlier, as banking industry stocks slumped. Over that same period, the S&P Broad Market Index (BMI) for US Banks reported a decrease of 19.8%, while the S&P 500 decreased 11.9%. Our total shareholder return over the five years ended June 30, 2022, assuming dividends had been reinvested, has been 52.6%. Over that same time period, the S&P BMI for US Banks has returned 19.7%, and the S&P 500 has returned 70.9%. Over the course of fiscal 2022, the Company’s assets grew faster than our capital, attributable to the swing to a loss from a gain on our available-for-sale (AFS) securities portfolio, as market interest rates increased significantly in the second half of the fiscal year. Accumulated other comprehensive income or loss (AOCI), which primarily represents the unrealized gain or loss on AFS securities, net of tax, moved from a $2.9 million gain to a $17.5 million loss. This affected our book value per share, as well as our ratio of tangible common equity to tangible assets (TCE/ EFFICIENCY COMPARES WELL TO PEERS The Company’s M&A activity contributed to modest deterioration, along with core compensation pressures. Efficiency Ratio 63.6% 64.3% 57.7% 55.9% 57.4% 48.0% 50.8% Dec.JuneDec.JuneDec.JuneDec.JuneDec.June SMBCpeer |
