Financial Highlights
Diluted EPS increased 29%
Net income up 30%
Top-line revenue increased 15%
$2.2 Billion in Wealth Assets
15% increase*
$1.6 Billion Total Assets
19% growth in total loans to $1.3 billion*
27% growth in total deposits to $1.4 billion*
Book value per share of $23.35 compared to $22.34 at 3/31/2023
Well-Capitalized
9.9% Tier 1 Capital Ratio**
9.4% Tier 1 Leverage Ratio**
10.9% Total Capital Ratio**
*Year-over-year 3.31.24 vs. 3.31.23
**YTD 3.31.24
For additional detail on our quarterly financial performance, read our latest Earnings Report.
Letter to Shareholders
Dear Oakworth Shareholders,
Oakworth is off to a strong start in the first quarter of 2024 (Q1). Our primary focus this year will be on realizing a return on our significant investments in 2023 and on a continued focus on our four categories of high performance: Culture, Safety & Soundness, Growth and Profitability.
Culture
A healthy culture leads to high levels of associate and client engagement. In turn, this engagement translates into an unmatched client experience for which we have become known. We measure associate satisfaction through an internal measure of associate engagement as well as our retention rate. We also objectively measure client satisfaction according to the Net Promoter Score (NPS©) measure that I have written about in this letter in the past. Both associate engagement and NPS© (i.e. client satisfaction) are world class!
Safety & Soundness
The banking industry has been rocked over the past five quarters with a rapidly rising rate environment. This rate environment has created concerns about capitalization, liquidity and potential future loan portfolio stress. We monitor all measures continually and are pleased to report that Oakworth is healthy on all fronts. Our Total Risk-Based Capital is 10.9%; Cash Liquidity is 8%; and our Texas Ratio (an overall measure of loan portfolio health {lower is better}) is 4%.
Growth
From a core growth perspective, we are very pleased with our 27% year-over-year deposit growth. Linked-quarter deposit levels were level, resulting from seasonally high deposits at year-end. We typically see a seasonal decline in January before beginning to build again through the quarter. For that reason, our slightly higher March 31 deposit balances represent stronger growth than is readily apparent. Loan growth was 19% year-over-year and 3% linked-quarter. The relatively slower growth is reflective of overall economic conditions and more intentional target market lending on our part. Wealth assets were $2.2 billion which is a healthy 15% increase over the prior year and 7% increase linked-quarter comprised of growth in core wealth assets as well as recovery of market values. Overall, pipeline values across deposits, loans and wealth assets are healthy heading into the 2nd Quarter.
Our Central Carolinas office is fully operational and ended Q1 with a strong $62 million in assets. The team, based in Charlotte, is a first class group of financial professionals who are out telling our story and delivering the Oakworth experience consistently.
Profitability
We reported net income of nearly $4 million in the first quarter of 2024, a 30% increase compared to first quarter 2023. There are three significant factors influencing our earnings in Q1 2024. Relatively slower loan growth in Q1 2024 vs. Q1 2023 resulted in lower provision for potential future loan losses. This had a positive impact to our Q1 Net Income. We also had the full impact to our expenses related to strategic investments, including our team in the Central Carolinas market. Finally, strong deposit growth coupled with an overall increase in the cost of funding has challenged margins. These three factors should begin to normalize throughout the balance of the year.
Our Board approved a share repurchase authorization in late March. Valuations for financial services firms overall have been depressed and Oakworth stock is not immune. Our board and management team believe that returning capital to shareholders in the form of a share repurchase at certain pricing levels is prudent. We will balance this form of shareholder value creation with our primary creator of shareholder value which is profitable growth.
In closing, we appreciate your investment in Oakworth. We hope you all plan to attend our annual shareholders meeting May 22 at 4:00 pm where we will recap 2023 and share our thoughts on the business moving forward. Please look for your proxy statement in the mail/email for specific instructions on how to access the meeting online via Zoom or in person. We would also appreciate your vote! Electronic voting can be done in as little as 60 seconds!
As always, thank you for your business and thank you for your support.
Sincerely,
Scott Reed
Chairman and CEO
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