As previously disclosed, on
Breda continued, “As previously disclosed, early in the fourth quarter of 2023 we announced the receipt of required regulatory approvals from the
Effective
The Company’s results for reporting periods beginning after
The Company’s results of operations for the three months ended
Positive Impacts:
- An increase in net interest income due primarily to an increase in average loan balances and higher yields earned, an increase in the yields earned on average cash and cash equivalents and investment securities balances, and a decrease in average interest-bearing deposit balances, which were partially offset by decreases in average cash and cash equivalents and investment securities balances, higher rates paid on average interest-bearing deposit balances, and an increase in average borrowings balances and higher rates paid;
- A higher net interest margin (tax equivalent basis);
- Recording a lower provision for credit losses due to changes in the assessment of economic factors, and for
September 30, 2023 , more favorable views on the downside risks to the economic forecast compared toJune 30, 2023 , and lower net charge-offs, which were partially offset by a higher required reserve on unfunded credit commitments and organic loan growth; - Recording no losses on sales and calls of investment securities during the three months ended
September 30, 2023 ; and - Recording gains on sales of other assets during the three months ended
September 30, 2023 .
Negative Impacts:
- Reduced operating results from Virginia Partners’ majority owned subsidiary
Johnson Mortgage Company, LLC and lower mortgage division fees at Delmarva; and - Incurring
$157 thousand in merger related expenses during the three months endedSeptember 30, 2023 in connection with the Company’s pending merger with LINK, as compared to$167 thousand during the same period of 2022 in connection with the Company’s terminated merger with OceanFirst Financial Corp. (“OceanFirst”).
The Company’s results of operations for the nine months ended
Positive Impacts:
- An increase in net interest income due primarily to increases in average loan and investment securities balances and higher yields earned on each, an increase in the yields earned on average cash and cash equivalents balances, and a decrease in average interest-bearing deposit balances, which were partially offset by a decrease in average cash and cash equivalents balances, higher rates paid on average interest-bearing deposit balances, an increase in average borrowings balances and higher rates paid, and lower net loan fees earned related to the forgiveness of loans originated and funded under the Paycheck Protection Program (“PPP”) of the
Small Business Administration ; - A higher net interest margin (tax equivalent basis);
- Recording a lower provision for credit losses due to changes in the assessment of economic factors, and for
September 30, 2023 , more favorable views on the downside risks to the economic forecast compared toJanuary 1, 2023 , lower net charge-offs, and a lower required reserve on unfunded credit commitments, which were partially offset by organic loan growth; - Recording no losses on sales and calls of investment securities during the nine months ended
September 30, 2023 ; - Recording no impairment loss on restricted stock during the nine months ended
September 30, 2023 ; and - Recording gains on sales of other assets during the nine months ended
September 30, 2023 .
Negative Impacts:
- Reduced operating results from Virginia Partners’ majority owned subsidiary
Johnson Mortgage Company, LLC and lower mortgage division fees at Delmarva; - Recording no gains or operating expenses on other real estate owned, net during the nine months ended
September 30, 2023 ; and - Incurring
$1.6 million in merger related expenses during the nine months endedSeptember 30, 2023 in connection with the Company’s pending merger with LINK, as compared to$720 thousand during the same period of 2022 in connection with the Company’s terminated merger with OceanFirst.
For the three months ended
For the nine months ended
The increase in net income attributable to the Company for the three and nine months ended
Interest Income and Expense – Three Months Ended
Net interest income and net interest margin
Net interest income in the third quarter of 2023 increased by
The most significant factors impacting net interest income during the three month period ended
Positive Impacts:
- Increase in average loan balances, primarily due to organic loan growth, and higher loan yields, primarily due to repricing of variable rate loans, higher average yields on new loan originations, and pay-offs of lower yielding fixed rate loans; and
- Higher yields earned on average interest-bearing deposits in other financial institutions, federal funds sold, and investment securities, primarily due to higher interest rates over the comparable periods.
Negative Impacts:
- Decrease in average interest-bearing deposits in other financial institutions and federal funds sold, primarily due to loan growth outpacing deposit growth, and deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, which were partially offset by lower investment securities balances;
- Decrease in average investment securities balances, primarily due to scheduled payments of principal, which was partially offset by management of the investment securities portfolio in light of the Company’s liquidity needs;
- Decrease in average interest-bearing deposit balances and higher rates paid, primarily due to deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, which were partially offset by organic deposit growth; and
- Increase in average borrowings balances and higher rates paid, primarily due to an increase in the average balance of short-term
Federal Home Loan Bank advances due to the aforementioned decrease in average interest-bearing deposit balances. The increase in the average balance of short-termFederal Home Loan Bank advances was partially offset by a decrease in the average balance of long-termFederal Home Loan Bank advances resulting from maturities and payoffs of borrowings that were not replaced and scheduled principal curtailments.
Loans
Average loan balances increased by
Investment securities
Average total investment securities balances decreased by
Interest-bearing deposits
Average total interest-bearing deposit balances decreased by
Borrowings
Average total borrowings increased by
Interest Income and Expense – Nine Months Ended
Net interest income and net interest margin
Net interest income during the first nine months of 2023 increased by
The most significant factors impacting net interest income during the nine months ended
Positive Impacts:
- Increase in average loan balances, primarily due to organic loan growth, and higher loan yields, primarily due to repricing of variable rate loans, higher average yields on new loan originations, and pay-offs of lower yielding fixed rate loans, which were partially offset by lower net loan fees earned related to the forgiveness of loans originated and funded under the PPP;
- Increase in average investment securities balances and higher investment securities yields, primarily due to management of the investment securities portfolio in light of the Company’s liquidity needs, which was partially offset by scheduled payments of principal, and higher interest rates over the comparable periods; and
- Higher yields earned on average interest-bearing deposits in other financial institutions and federal funds sold, primarily due to higher interest rates over the comparable periods.
Negative Impacts:
- Decrease in average interest-bearing deposits in other financial institutions and federal funds sold, primarily due to loan growth outpacing deposit growth, deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, and higher investment securities balances;
- Decrease in average interest-bearing deposit balances and higher rates paid, primarily due to scheduled maturities of time deposits that were not replaced and deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, which were partially offset by organic deposit growth; and
- Increase in average borrowings balances and higher rates paid, primarily due to an increase in the average balance of short-term
Federal Home Loan Bank advances due to the aforementioned decrease in average interest-bearing deposit balances. The increase in the average balance of short-termFederal Home Loan Bank advances was partially offset by a decrease in the average balance of long-termFederal Home Loan Bank advances resulting from maturities and payoffs of borrowings that were not replaced and scheduled principal curtailments.
Loans
Average loan balances increased by
Investment securities
Average total investment securities balances increased by
Interest-bearing deposits
Average total interest-bearing deposit balances decreased by
Borrowings
Average total borrowings increased by
Provision for Credit Losses
The provision for credit losses in the third quarter of 2023 was
The provision for credit losses during the three and nine months ended
Other Income
Other income in the third quarter of 2023 decreased by
- Service charges on deposit accounts increased by
$31 thousand , or 12.1%, due primarily to increases in overdraft fees and savings account service charges; - Losses on sales and calls of investment securities decreased by
$5 thousand , or 100.0%, due primarily toVirginia Partners recording losses of$5 thousand on sales or calls of investment securities during the third quarter of 2022, as compared to recording no losses on sales or calls of investment securities during the same period of 2023; - Mortgage banking income decreased by
$133 thousand , or 57.3%, due primarily to Virginia Partners’ majority owned subsidiaryJohnson Mortgage Company, LLC having a lower volume of loan closings as compared to the same period in 2022; - Gains on sales of other assets increased by
$3 thousand , or 100.0%, due primarily toVirginia Partners recording gains of$3 thousand on sales of other assets during the third quarter of 2023. There were no gains on sales of other assets for the same period of 2022; and - Other income decreased by
$40 thousand , or 5.3%, due primarily to a decrease in debit card income and lower mortgage division fees at Delmarva, which were partially offset by increases in bank owned life insurance, safe deposit box rentals, and other noninterest income.
Other income for the nine months ended
- Service charges on deposit accounts increased by
$68 thousand , or 9.4%, due primarily to increases in overdraft fees and savings account service charges; - Losses on sales and calls of investment securities decreased by
$5 thousand , or 100.0%, due primarily toVirginia Partners recording losses of$5 thousand on sales or calls of investment securities during the third quarter of 2022, as compared to recording no losses on sales or calls of investment securities during the same period of 2023; - Impairment loss on restricted stock decreased by
$1 thousand , or 100.0%, due primarily toVirginia Partners recording the final write-down of its investment inMaryland Financial Bank , which had been going through an orderly liquidation, during the second quarter of 2022. There was no impairment loss on restricted stock for the same period of 2023; - Mortgage banking income decreased by
$495 thousand , or 52.1%, due primarily to Virginia Partners’ majority owned subsidiaryJohnson Mortgage Company, LLC having a lower volume of loan closings as compared to the same period in 2022; - Gains on sales of other assets increased by
$3 thousand , or 100.0%, due primarily toVirginia Partners recording gains of$3 thousand on sales of other assets during the third quarter of 2023. There were no gains on sales of other assets for the same period of 2022; and - Other income decreased by
$160 thousand , or 6.9%, due primarily to decreases in safe deposit box rentals and debit card income, and lower mortgage division fees at Delmarva, which were partially offset by increases in bank owned life insurance and other noninterest income.
Other Expenses
Other expenses in the third quarter of 2023 increased by
- Salaries and employee benefits decreased by
$204 thousand , or 3.6%, primarily due to lower expenses related to bonus accruals, and a decrease in commissions expense paid due to the decrease in mortgage banking income from Virginia Partners’ majority owned subsidiaryJohnson Mortgage Company, LLC and lower mortgage division fees at Delmarva, which were partially offset by increases related to staffing changes and merit increases, higher expenses related to benefit costs and payroll taxes, and a lower impact from deferred loan origination costs; - Premises and equipment increased by
$6 thousand , or 0.5%, primarily due to higher expenses related to software amortization and maintenance contracts, which were partially offset by lower expenses related to depreciation and real estate taxes; - Amortization of core deposit intangible decreased by
$13 thousand , or 10.2%, primarily due to lower amortization related to the$2.7 million and$1.5 million , respectively, in core deposit intangibles recognized in theVirginia Partners andLiberty Bell Bank acquisitions; - Merger related expenses decreased by
$10 thousand , or 6.2%, primarily due to lower legal fees and other costs associated with the pending merger with LINK during the third quarter of 2023, as compared to the legal fees and other costs in the third quarter of 2022 associated with the merger with OceanFirst, that was subsequently terminated in the fourth quarter of 2022; and - Other expenses increased by
$290 thousand , or 9.8%, primarily due to higher expenses related to professional services, ATMs, audit and related professional fees, insurance and other, which were partially offset by lower expenses related toFDIC insurance assessments, directors fees, marketing and legal fees.
Other expenses for the nine months ended
- Salaries and employee benefits increased by
$570 thousand , or 3.4%, primarily due to increases related to staffing changes and merit increases, higher expenses related to benefit costs and payroll taxes, and a lower impact from deferred loan origination costs, which were partially offset by lower expenses related to bonus accruals, and a decrease in commissions expense paid due to the decrease in mortgage banking income from Virginia Partners’ majority owned subsidiaryJohnson Mortgage Company, LLC and lower mortgage division fees at Delmarva; - Premises and equipment decreased by
$98 thousand , or 2.3%, primarily due to lower expenses related to depreciation, leases, repairs and maintenance and purchased equipment and furniture, the cost of which did not qualify for capitalization, which were partially offset by higher expenses related to software amortization, real estate taxes, maintenance contracts and utilities; - Amortization of core deposit intangible decreased by
$39 thousand , or 10.0%, primarily due to lower amortization related to the$2.7 million and$1.5 million , respectively, in core deposit intangibles recognized in theVirginia Partners andLiberty Bell Bank acquisitions; - (Gains) and operating expenses on other real estate owned, net decreased by
$10 thousand , or 100.0%, primarily due to no gains on sales or expenses being recorded during the first nine months of 2023, as compared to gains on sales and expenses being recorded during the first nine months of 2022; - Merger related expenses increased by
$897 thousand , or 124.6%, primarily due to higher legal fees and other costs associated with the pending merger with LINK during the first nine months of 2023, as compared to the legal fees and other costs in the first nine months of 2022 associated with the merger with OceanFirst, that was subsequently terminated in the fourth quarter of 2022; and - Other expenses increased by
$930 thousand , or 11.0%, primarily due to higher expenses related to professional services, ATMs, legal fees, audit and related professional fees, insurance, and other, which were partially offset by lower expenses related toFDIC insurance assessments.
Federal and State Income Taxes
Federal and state income taxes for the three months ended
Federal and state income taxes for the nine months ended
Balance Sheet
Changes in key balance sheet components as of
- Total assets as of
September 30, 2023 were$1.53 billion , a decrease of$41.6 million , or 2.6%, fromDecember 31, 2022 . Key drivers of this change were decreases in cash and cash equivalents and investment securities available for sale, at fair value, which were partially offset by an increase in total loans held for investment; - Interest-bearing deposits in other financial institutions as of
September 30, 2023 were$23.1 million , a decrease of$80.8 million , or 77.7%, fromDecember 31, 2022 . Key drivers of this change were loan growth outpacing deposit growth, deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, and a decrease in short-term borrowings with theFederal Home Loan Bank ; - Federal funds sold as of
September 30, 2023 were$9.8 million , a decrease of$13.2 million , or 57.3%, fromDecember 31, 2022 . Key drivers of this change were the aforementioned items noted in the analysis of interest-bearing deposits in other financial institutions; - Investment securities available for sale, at fair value as of
September 30, 2023 were$121.9 million , a decrease of$11.7 million , or 8.8%, fromDecember 31, 2022 . Key drivers of this change were scheduled payments of principal and an increase in unrealized losses on the investment securities available for sale portfolio as a result of increases in market interest rates; - Loans, net of unamortized discounts on acquired loans of
$1.3 million as ofSeptember 30, 2023 were$1.30 billion , an increase of$64.6 million , or 5.2%, fromDecember 31, 2022 . The key driver of this change was an increase in organic growth, including growth of approximately$4.0 million in loans related to Virginia Partners’ expansion into theGreater Washington market; - Total deposits as of
September 30, 2023 were$1.32 billion , a decrease of$16.6 million , or 1.2%, fromDecember 31, 2022 . Key drivers of this change were deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, partially offset by organic growth in time deposits; - Total borrowings as of
September 30, 2023 were$52.6 million , a decrease of$32.0 million , or 37.8%, fromDecember 31, 2022 . The key driver of this change was a decrease in short-term borrowings with theFederal Home Loan Bank ; and - Total stockholders’ equity as of
September 30, 2023 was$143.7 million , an increase of$4.3 million , or 3.1%, fromDecember 31, 2022 . Key drivers of this change were the net income attributable to the Company for the nine months endedSeptember 30, 2023 , the proceeds from stock option exercises, and stock-based compensation expense related to restricted stock awards, which were partially offset by a decrease to retained earnings, net of tax, related to the adoption of the CECL Standard, an increase in accumulated other comprehensive (loss), net of tax, and cash dividends paid to shareholders.
Changes in key balance sheet components as of
- Total assets as of
September 30, 2023 were$1.53 billion , a decrease of$117.7 million , or 7.1%, fromSeptember 30, 2022 . Key drivers of this change were decreases in cash and cash equivalents and investment securities available for sale, at fair value, which were partially offset by an increase in total loans held for investment; - Interest-bearing deposits in other financial institutions as of
September 30, 2023 were$23.1 million , a decrease of$187.8 million , or 89.0%, fromSeptember 30, 2022 . Key drivers of this change were loan growth outpacing deposit growth, deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, and a decrease in long-term borrowings with theFederal Home Loan Bank , which were partially offset by a decrease in investment securities available for sale, at fair value, and an increase in short-term borrowings with theFederal Home Loan Bank ; - Federal funds sold as of
September 30, 2023 were$9.8 million , a decrease of$14.8 million , or 60.1%, fromSeptember 30, 2022 . Key drivers of this change were the aforementioned items noted in the analysis of interest-bearing deposits in other financial institutions; - Investment securities available for sale, at fair value as of
September 30, 2023 were$121.9 million , a decrease of$9.5 million , or 7.3%, fromSeptember 30, 2022 . Key drivers of this change were scheduled payments of principal and an increase in unrealized losses on the investment securities available for sale portfolio as a result of increases in market interest rates; - Loans, net of unamortized discounts on acquired loans of
$1.3 million as ofSeptember 30, 2023 were$1.30 billion , an increase of$93.5 million , or 7.8%, fromSeptember 30, 2022 . The key driver of this change was an increase in organic growth, including growth of approximately$26.7 million in loans related to Virginia Partners’ expansion into theGreater Washington market; - Total deposits as of
September 30, 2023 were$1.32 billion , a decrease of$132.9 million , or 9.1%, fromSeptember 30, 2022 . Key drivers of this change were deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, partially offset by organic growth in time deposits; - Total borrowings as of
September 30, 2023 were$52.6 million , an increase of$3.8 million , or 7.8%, fromSeptember 30, 2022 . The key driver of this change was an increase in short-term borrowings with theFederal Home Loan Bank due to the aforementioned items noted in the analysis of total deposits, which was partially offset by a decrease in long-term borrowings with theFederal Home Loan Bank resulting from maturities and payoffs of borrowings that were not replaced and scheduled principal curtailments, and a decrease in Virginia Partners’ majority owned subsidiaryJohnson Mortgage Company , LLC’s warehouse line of credit with another financial institution; and - Total stockholders’ equity as of
September 30, 2023 was$143.7 million , an increase of$9.9 million , or 7.4%, fromSeptember 30, 2022 . Key drivers of this change were the net income attributable to the Company for the periodOctober 1, 2022 throughSeptember 30, 2023 , the proceeds from stock option exercises, and stock-based compensation expense related to restricted stock awards, which were partially offset by an increase in accumulated other comprehensive (loss), net of tax, a decrease to retained earnings, net of tax, related to the adoption of the CECL Standard, and cash dividends paid to shareholders.
As of
Asset Quality
The asset quality measures depicted below continue to reflect the Company’s efforts to prudently charge-off loans as losses are identified and maintain an appropriate allowance for credit losses.
The following table depicts the net charge-off activity for the three and nine months ended
Net Charge-off Activity | Three Months Ended | Nine Months Ended | ||||||||||
Dollars in Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||
Net charge-offs | $ | 99 | $ | 660 | $ | 37 | $ | 1,640 | ||||
Net charge-offs /Average loans* | 0.03% | 0.22% | 0.00% | 0.19% | ||||||||
* Annualized for the three and nine months ended | ||||||||||||
The following table depicts the level of the allowance for credit losses on loans as of
Allowance for Credit Losses on Loans | |||||||||
Dollars in Thousands | |||||||||
Allowance for credit losses on loans | $ | 16,075 | $ | 14,315 | $ | 13,818 | |||
Allowance for credit losses on loans/Period end loans | 1.24% | 1.16% | 1.15% | ||||||
Allowance for credit losses on loans/Nonaccrual loans | 842.51% | 664.58% | 341.19% | ||||||
Allowance for credit losses on loans/Nonperforming loans | 842.51% | 650.98% | 319.49% | ||||||
The following table depicts the unamortized discounts on acquired loans related to the acquisitions of
Unamortized Discounts on Acquired Loans | |||||||||
Dollars in Thousands | |||||||||
Unamortized discounts on acquired loans | $ | 1,323 | $ | 1,728 | $ | 1,810 | |||
The following table depicts the level of nonperforming assets as of
Nonperforming Assets | |||||||||
Dollars in Thousands | |||||||||
Nonaccrual loans | $ | 1,908 | $ | 2,154 | $ | 4,050 | |||
Loans past due 90 days and accruing interest | $ | - | $ | 45 | $ | 275 | |||
Total nonperforming loans | $ | 1,908 | $ | 2,199 | $ | 4,325 | |||
Other real estate owned, net | $ | - | $ | - | $ | - | |||
Total nonperforming assets | $ | 1,908 | $ | 2,199 | $ | 4,325 | |||
Nonperforming assets/Total assets | 0.12% | 0.14% | 0.26% | ||||||
Nonperforming assets/Total loans and other real estate owned, net | 0.15% | 0.18% | 0.34% | ||||||
About
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Forward-Looking Statements
Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include, without limitation, projections, predictions, expectations, or beliefs about future events or results that are not statements of historical fact. Statements in this press release which express “belief,” “intention,” “expectation,” “potential” and similar expressions, or which use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “may,” “will,” “intend,” “should,” “could,” or similar expressions, identify forward-looking statements. These forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by, and information currently available to, the Company’s management. These statements are inherently uncertain, and there can be no assurance that the underlying assumptions will prove to be accurate. Actual results could differ materially from those anticipated or implied by such statements. Forward-looking statements in this release may include, without limitation, statements related to the completion and benefits of the merger with LINK, statements in Mr. Breda’s quote regarding, among other items, expected future financial performance, strategic business initiatives including growth in the
- the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement between the Company and LINK;
- the outcome of any legal proceedings that may be instituted against the Company or LINK;
- the possibility that the proposed transaction will not close when expected or at all because any remaining required regulatory or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated (and the risk that the remaining required regulatory approval may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction);
- the ability of the Company and LINK to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction;
- the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the common stock of either or both parties to the proposed transaction;
- the possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where the Company and LINK do business;
- certain restrictions during the pendency of the proposed transaction that may impact the parties’ ability to pursue certain business opportunities or strategic transactions;
- the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events;
- diversion of management’s attention from ongoing business operations and opportunities;
- the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the merger within the expected timeframes or at all and to successfully integrate the Company’s operations and those of LINK, which may be more difficult, time-consuming or costly than expected;
- revenues following the proposed transaction may be lower than expected;
- the Company’s and LINK’s success in executing their respective business plans and strategies and managing the risks involved in the foregoing;
- the dilution caused by LINK’s issuance of additional shares of its capital stock in connection with the proposed transaction;
- effects of the announcement, pendency or completion of the proposed transaction on the ability of the Company and LINK to retain customers and retain and hire key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally;
- changes in interest rates, such as volatility in yields on
U.S. Treasury bonds and increases or volatility in mortgage rates, and the impacts on macroeconomic conditions, customer and client spending and saving behaviors, the Company’s funding costs and the Company’s loan and investment securities portfolios; - monetary and fiscal policies of the
U.S. Government , including policies of theU.S. Treasury and theFederal Reserve , and the effect of these policies on interest rates and business in our markets; - general business conditions, as well as conditions within the financial markets, including the impact thereon of unusual and infrequently occurring events, such as the recent bank closures and related negative impact on the banking industry, weather-related disasters, terrorist acts, geopolitical conflicts (such as the wars in
Ukraine and theMiddle East ) or public health events (such as the COVID-19 pandemic), and of governmental and societal responses thereto; - general economic conditions, in
the United States generally and particularly in the markets in which the Company operates and which its loans are concentrated, including the effects of declines in real estate values, increases in unemployment levels and inflation, recession and slowdowns in economic growth; - changes in the value of securities held in the Company’s investment portfolios;
- changes in the quality or composition of the loan portfolios and the value of the collateral securing those loans;
- changes in the level of net charge-offs on loans and the adequacy of our allowance for credit losses;
- demand for loan products;
- deposit flows;
- the strength of the Company’s counterparties;
- competition from both banks and non-banks;
- demand for financial services in the Company’s market areas;
- reliance on third parties for key services;
- changes in the commercial and residential real estate markets;
- cyber threats, attacks or events;
- expansion of Delmarva’s and Virginia Partners’ product offerings;
- changes in accounting principles, standards, rules and interpretations, and elections by the Company thereunder, and the related impact on the Company’s financial statements;
- potential claims, damages, and fines related to litigation or government actions;
- legislative or regulatory changes and requirements;
- the discontinuation of London Interbank Offered Rate (“LIBOR”) and its impact on the financial markets, and the Company’s ability to manage operational, legal and compliance risks related to the discontinuation of LIBOR and implementation of one or more alternative reference rates; and
- other factors, many of which are beyond the control of the Company.
These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein, and readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this release. For additional information on risk factors that could affect the forward-looking statements contained herein, see the Company’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other reports filed with the
CONSOLIDATED BALANCE SHEETS | ||||||
2023 | 2022 | 2022 | ||||
(Unaudited) | (Unaudited) | * | ||||
ASSETS | ||||||
Cash and due from banks | $ | 15,673,670 | $ | 12,783,517 | $ | 14,677,774 |
Interest bearing deposits in other financial institutions | 23,141,446 | 210,934,967 | 103,921,732 | |||
Federal funds sold | 9,816,042 | 24,572,501 | 22,989,879 | |||
Cash and cash equivalents | 48,631,158 | 248,290,985 | 141,589,385 | |||
Investment securities available for sale, at fair value | 121,920,137 | 131,465,149 | 133,656,642 | |||
Loans held for sale | 354,219 | 201,245 | 1,314,125 | |||
Loans, less allowance for credit losses of | 1,281,428,912 | 1,190,142,289 | 1,218,551,209 | |||
Accrued interest receivable | 4,729,204 | 4,034,632 | 4,566,487 | |||
Premises and equipment, less accumulated depreciation | 14,115,786 | 15,257,774 | 14,857,298 | |||
Restricted stock | 5,640,300 | 4,889,150 | 6,512,350 | |||
Operating lease right-of-use assets | 4,631,333 | 5,290,145 | 5,064,866 | |||
Finance lease right-of-use assets | 1,447,479 | 1,584,382 | 1,550,156 | |||
Other investments | 5,362,709 | 4,864,456 | 4,888,118 | |||
Bank owned life insurance | 19,064,145 | 18,592,308 | 18,706,260 | |||
Core deposit intangible, net | 1,184,913 | 1,665,517 | 1,540,438 | |||
9,581,668 | 9,581,668 | 9,581,668 | ||||
Other assets | 14,941,562 | 14,850,016 | 12,233,494 | |||
Total assets | $ | 1,533,033,525 | $ | 1,650,709,716 | $ | 1,574,612,496 |
LIABILITIES | ||||||
Deposits: | ||||||
Non-interest bearing demand | $ | 508,793,017 | $ | 568,113,490 | $ | 528,769,800 |
Interest bearing demand | 111,936,047 | 143,564,095 | 121,786,774 | |||
Savings and money market | 374,210,060 | 441,230,050 | 431,538,080 | |||
Time | 328,090,302 | 303,036,620 | 257,510,218 | |||
1,323,029,426 | 1,455,944,255 | 1,339,604,872 | ||||
Accrued interest payable on deposits | 1,071,210 | 189,311 | 267,205 | |||
Short-term borrowings with the | 10,000,000 | - | 42,000,000 | |||
Long-term borrowings with the | 19,800,000 | 25,819,286 | 19,800,000 | |||
Subordinated notes payable, net | 22,249,377 | 22,203,050 | 22,214,632 | |||
Other borrowings | 596,103 | 810,771 | 613,423 | |||
Operating lease liabilities | 5,036,820 | 5,687,948 | 5,464,727 | |||
Finance lease liabilities | 1,907,394 | 2,035,918 | 2,005,685 | |||
Other liabilities | 5,684,101 | 4,260,635 | 3,312,977 | |||
Total liabilities | 1,389,374,431 | 1,516,951,174 | 1,435,283,521 | |||
COMMITMENTS & CONTINGENCIES | ||||||
STOCKHOLDERS' EQUITY | ||||||
Common stock, par value | 179,762 | 179,430 | 179,551 | |||
Surplus | 88,809,022 | 88,575,750 | 88,669,334 | |||
Retained earnings | 70,915,709 | 59,355,817 | 62,854,235 | |||
Noncontrolling interest in consolidated subsidiaries | 515,459 | 727,299 | 707,138 | |||
Accumulated other comprehensive (loss), net of tax | (16,760,858) | (15,079,754) | (13,081,283) | |||
Total stockholders' equity | 143,659,094 | 133,758,542 | 139,328,975 | |||
Total liabilities and stockholders' equity | $ | 1,533,033,525 | $ | 1,650,709,716 | $ | 1,574,612,496 |
* Derived from audited consolidated financial statements. | ||||||
The amounts presented in the Consolidated Balance Sheets as of which, in management's opinion, are necessary for fair presentation. |
CONSOLIDATED STATEMENTS OF INCOME | ||||
(Unaudited) | ||||
Three Months Ended | ||||
2023 | 2022 | |||
INTEREST INCOME ON: | ||||
Loans, including fees | $ | 18,224,412 | $ | 14,118,979 |
Investment securities: | ||||
Taxable | 690,370 | 606,695 | ||
Tax-exempt | 187,574 | 180,258 | ||
Federal funds sold | 252,779 | 352,763 | ||
Other interest income | 423,281 | 1,197,807 | ||
19,778,416 | 16,456,502 | |||
INTEREST EXPENSE ON: | ||||
Deposits | 3,778,036 | 1,070,540 | ||
Borrowings | 721,425 | 511,096 | ||
4,499,461 | 1,581,636 | |||
NET INTEREST INCOME | 15,278,955 | 14,874,866 | ||
Provision for credit losses | 2,200 | 419,000 | ||
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 15,276,755 | 14,455,866 | ||
OTHER INCOME: | ||||
Service charges on deposit accounts | 285,363 | 254,646 | ||
Losses on sales and calls of investment securities | - | (5,322) | ||
Mortgage banking income | 98,796 | 231,373 | ||
Gains on sales of other assets | 2,500 | - | ||
Other income | 720,334 | 760,448 | ||
1,106,993 | 1,241,145 | |||
OTHER EXPENSES: | ||||
Salaries and employee benefits | 5,483,484 | 5,687,787 | ||
Premises and equipment | 1,417,751 | 1,411,411 | ||
Amortization of core deposit intangible | 115,223 | 128,364 | ||
Merger related expenses | 157,017 | 167,417 | ||
Other expenses | 3,242,154 | 2,952,597 | ||
10,415,629 | 10,347,576 | |||
INCOME BEFORE TAXES ON INCOME | 5,968,119 | 5,349,435 | ||
Federal and state income taxes | 1,506,191 | 1,291,996 | ||
NET INCOME | $ | 4,461,928 | $ | 4,057,439 |
Net loss attributable to noncontrolling interest | $ | 76,431 | $ | 52,112 |
Net income attributable to | $ | 4,538,359 | $ | 4,109,551 |
Earnings per common share: | ||||
Basic | $ | 0.252 | $ | 0.229 |
Diluted | $ | 0.252 | $ | 0.228 |
The amounts presented in these Consolidated Statements of Income for the three months ended but include all adjustments which, in management's opinion, are necessary for fair presentation. |
CONSOLIDATED STATEMENTS OF INCOME | ||||
(Unaudited) | ||||
Nine Months Ended | ||||
2023 | 2022 | |||
INTEREST INCOME ON: | ||||
Loans, including fees | $ | 51,493,246 | $ | 40,222,265 |
Investment securities: | ||||
Taxable | 2,054,048 | 1,518,898 | ||
Tax-exempt | 560,068 | 544,789 | ||
Federal funds sold | 823,249 | 433,085 | ||
Other interest income | 1,663,693 | 1,914,186 | ||
56,594,304 | 44,633,223 | |||
INTEREST EXPENSE ON: | ||||
Deposits | 8,906,033 | 3,439,766 | ||
Borrowings | 2,400,643 | 1,524,214 | ||
11,306,676 | 4,963,980 | |||
NET INTEREST INCOME | 45,287,628 | 39,669,243 | ||
Provision for credit losses | 395,700 | 803,000 | ||
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 44,891,928 | 38,866,243 | ||
OTHER INCOME: | ||||
Service charges on deposit accounts | 794,794 | 726,664 | ||
Losses on sales and calls of investment securities | - | (5,322) | ||
Impairment loss on restricted stock | - | (1,182) | ||
Mortgage banking income | 454,581 | 949,341 | ||
Gains on sales of other assets | 2,500 | - | ||
Other income | 2,156,138 | 2,316,576 | ||
3,408,013 | 3,986,077 | |||
OTHER EXPENSES: | ||||
Salaries and employee benefits | 17,337,018 | 16,767,374 | ||
Premises and equipment | 4,194,146 | 4,292,286 | ||
Amortization of core deposit intangible | 355,525 | 394,946 | ||
(Gains) and operating expenses on other real estate owned, net | - | (9,515) | ||
Merger related expenses | 1,617,106 | 720,081 | ||
Other expenses | 9,413,039 | 8,482,749 | ||
32,916,834 | 30,647,921 | |||
INCOME BEFORE TAXES ON INCOME | 15,383,107 | 12,204,399 | ||
Federal and state income taxes | 3,942,982 | 2,913,930 | ||
NET INCOME | $ | 11,440,125 | $ | 9,290,469 |
Net loss attributable to noncontrolling interest | $ | 192,281 | $ | 107,639 |
Net income attributable to | $ | 11,632,406 | $ | 9,398,108 |
Earnings per common share: | ||||
Basic | $ | 0.647 | $ | 0.523 |
Diluted | $ | 0.646 | $ | 0.522 |
The amounts presented in these Consolidated Statements of Income for the nine months ended but include all adjustments which, in management's opinion, are necessary for fair presentation. |
Source:
2023 GlobeNewswire, Inc., source