Most U.S. community banks reported stronger earnings in the first quarter on both year-over-year and quarter-over-quarter comparisons.
During the first two weeks of earnings, 28 out of 30 banks between $5 billion and $10 billion in total assets posted higher EPS year over year. Lower credit costs, which enabled significant reserve releases, boosted net income for many banks.
Newark, Ohio-based Park National Corp. reported first-quarter EPS of $2.61, up from $1.36 for the same period in 2020. The bank's bottom line benefitted from a negative provision for loan losses of $4.9 million, compared to a positive provision of $5.2 million. However, the bank still built reserves on a linked-quarter basis due to adopting the current expected credit loss standard on Jan. 1, 2021.
San Jose, Calif.-based Heritage Commerce Corp's total assets increased 23% from a year ago and surpassed $5 billion at quarter-end despite the economic turmoil caused by the coronavirus. The bank, whose EPS increased to 19 cents from 3 cents for the year-ago period, said first-quarter results also benefitted from a negative provision, to the tune of $1.5 million, compared to a positive provision of $13.3 million in the first quarter of 2020.
Heritage Commerce President and CEO Walter Kaczmarek said the bank's positive credit trends continued in the first quarter with nonperforming assets falling to $5.6 million at March 31, down from $12.1 million a year earlier.
The only bank that logged lower EPS both sequentially and year over year was Charleston, W.Va.-based City Holding Co. Its EPS was $1.25, down from $1.40 in the linked quarter and $1.78 in the year-ago period.
City Holding President and CEO Charles Hageboeck said that while it is encouraging to see economic activity returning to more "normal" conditions, the bank's financial performance during the first quarter continued to be impacted by the pandemic.
"Loan growth has been a particular challenge with interest rates at historic lows," Hageboeck said in the bank's earnings release. "Although our residential mortgage origination levels hit record highs in 2020, balances have decreased as some mortgages were refinanced into fixed rate loans not predominately offered by City."
Louisville, Ky.-based Republic Bancorp Inc. was the other bank that reported a year-over-year EPS decline: to 98 cents from $1.28. Its EPS was unchanged on a quarter-over-quarter basis.
Republic Bancorp Chair and CEO Steve Trager said the year-over-year drop was driven by the bank's tax refund solutions segment, which contributed an $11.6 million negative swing in net income due to a "highly unusual and delayed tax season." Trager said the segment traditionally provides a first-quarter lift to net income with its seasonal tax business.
"Initial applications for our TRS products were impacted, as the season began approximately two weeks later than its normal start date," Trager said. "Furthermore, as consumers received the benefits from two new rounds of U.S. Treasury economic stimulus payments during the quarter, demand for our early season tax products have, so far, moderated from the previous year."