Company Overview

Headquartered in Birmingham, Alabama, Oakworth Capital Inc., via its wholly-owned subsidiary Oakworth Capital Bank (“Oakworth”), provides commercial banking, wealth management, and private banking services to clients across the United States. Oakworth’s goal is to “bring the bank to you” with a unique combination of personalized service from their professional associates and the support of innovative technology. Oakworth was named the “Best Bank to Work For” in 2018 and 2019 by American Banker.

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Loans increased15to $558 millioncompared to $487 million one year ago
Wealth assets$1.173billion*as of March 31, 2020
Book value per share of$18.35*as of March 31, 2020

1st Quarter 2020

Dear Shareholders:

This year has begun in an unprecedented way. It’s difficult to review the first quarter of 2020 without focusing on the introduction of COVID-19 into our vocabularies and lives. In mid-January, our Board of Directors approved the final budget. At that time, there was a low probability of a change in the Federal Reserve overnight target lending rate through the first quarter of the year. Further, there was debate about whether that target rate would increase or decrease in the latter part of the year. The economy was strong by all measures and the equity market indices were setting records. By March 3, the Federal Reserve had cut that target 50 basis points “off cycle” and, in an unprecedented Sunday surprise, on March 15, the Federal Reserve cut the overnight lending target another 100 basis points to a range of 0-0.25%. (For a full review of the volatility that ensued in all aspects of the financial markets in the quarter, our wealth group’s Quarterly Outlook & Overview provides a comprehensive summary.) This sudden drop in rates has challenged the entire banking industry with compressed net interest margins.


The economic uncertainty brought on by the COVID-19 pandemic has challenged our industry. Let me assure you that Oakworth is positioned very well to weather this storm. Our regulatory capital levels are well in excess of “well-capitalized” standards, our loan loss reserve is strong at 1.3% of loans and we carried no non-performing assets on our books at March 31. From a
wealth management perspective, our investment committee acted early to raise a significant amount of cash by strategically realizing gains in client portfolios and are positioned to re-enter the market as volatility begins to subside. We have communicated early and often with our clients, providing assurance in the face of unprecedented market movements. We look forward to being in a position to support our clients by lending and providing a safe haven for their liquidity through this economic downturn and helping them grow their businesses and assets as the economy emerges.


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Balance Sheet Growth

As optimistic as we are, we are not naïve. Our net interest margin (and,
therefore, net interest income) has been negatively impacted by the flat
yield curve that we are currently experiencing. The net interest margin has
contracted by approximately 40 basis points year-over-year resulting in a
slight decline in net interest income in spite of strong balance sheet growth.
We expect this to continue into the first part of the second quarter. As
higher cost deposits (namely certificates of deposit) mature and reprice to
market levels, this will help our margins settle to a more normal level.

in millions

Wealth Management & Trust

The second largest part of our revenue stream is wealth fees which are
directly related to the value of the underlying assets. That value contracted
9% in the past year even though we have had strong growth in underlying
wealth assets (i.e., acquisition of new clients and wealth assets). Finally,
while our credit statistics are pristine today, we know we are not immune
to the stresses that exist in the economy. As a result, we built our loan loss
reserve by approximately $1 million in the quarter. We will monitor our
credit portfolio and continue to make adjustments to the loan loss reserve
should it be necessary.