Ongoing success in the commercial loan market and strong investments continue to boost the bottom line for St. Joseph-based Edgewater Bancorp, Inc. -- holding company for Edgewater Bank.
Edgewater President & CEO Rick Dyer says year-to-date net income of $1,027, 708 through September 30, 2018 compares favorably to net income of $313,889 for the third quarter of 2017, resulting in earnings per share of $1.59 for the current period, compared to $0.50 per share in the same quarter a year ago. That's a substantive 227-percent increase in net income year-over-year.
Dyer says, “The organization’s financial results continue to exceed previous years’ results due to the growth in the balance sheet, especially the commercial loan portfolio and the investment portfolio.” Return on Average Equity (annualized) was 9.44-percent at September 30, 2018 compared to 3.52-percent for December 31, 2017 and Return on Average Assets (annualized) was .88-percent compared to .32-percent.
Total interest income for the first three quarters of 2018 increased $638,542, or 15.8-percent, to $4.7 million from $4.1 million during the first three quarters of 2017. Offsetting the increase in interest income is a $108,187, or 21.4-percent increase in interest expense, attributed to higher market-based deposit rates and an $8.2 million increase in total deposit balances and FHLB advances from December 31, 2017 to September 30, 2018.
Dyer says, “Competitive pressures and overall interest rate trends have pushed funding rates higher in the past several months however, the overall impact of volume and market interest rates on the organization’s net interest income is a $530,355, or 15.0-percent increase through the first nine months of 2018 versus the first nine months of 2017.”
The provision for loan losses of $80,000 at September 30, 2018 is twice the level it was for the same period in 2017. The increase is due to loan portfolio growth, not a deterioration of asset quality.
Non-interest income (primarily the gain on sale of residential mortgage loans) decreased $54,612 for the first nine months of 2018 compared to the first nine months of 2017. The drop is a result of the slower residential mortgage loan market.
Total non-interest expense increased 30.5-percent from $3.9 million at September 30, 2017 to $5.1 million at September 30, 2018, however $1.2 million, or almost the entire increase, is due to a one-time defined benefit plan contribution made during the second quarter of 2018. Without the one-time expense, total non-interest expense has been flat even with balance sheet growth.
Edgewater’s income tax benefit is the result of a $1.4 million reversal of the total $1.9 million deferred tax asset valuation reserve that was recognized during the second quarter of 2018. The reversal more than offsets the $1.2 million defined benefit plan expense.
The loan portfolio, investment portfolio, and deposit growth resulted in an increase in Edgewater’s balance sheet with consolidated total assets increasing from $156.4 million at December 31, 2017 to $168.9 million at September 30, 2018.
Total deposits grew from $137.6 million at December 31, 2017 to $142.8 million at September 30, 2018, or 3.8-percent, while Federal Home Loan Bank advances increased from $4.0 million to $7.0 million over the same time frame for loan funding, liquidity, and interest rate management purposes. The overall growth of the balance sheet was 8.0-percent from December 31, 2017 to September 30, 2018.
Total equity increased to $14.9 million as of September 30, 2018, with Edgewater’s Tier 1 capital ratio improving from 9.01-percent at December 31, 2017 to 9.64-percent at September 30, 2018.
Based in Saint Joseph, Edgewater Bancorp is the bank holding company for Edgewater Bank, which provides commercial, mortgage, and consumer loan and deposit banking services from 5 banking offices in St. Joseph, Bridgman, Buchanan, Coloma, and Royalton Township. Edgewater Bancorp’s common stock is listed under the symbol "EGDW."