Partners Bancorp (NASDAQ: PTRS) (the “Company”), the parent company
of The Bank of Delmarva (“Delmarva”), Seaford, Delaware, and
Virginia Partners Bank (“Virginia Partners”), Fredericksburg,
Virginia, reported net income attributable to the Company of $3.2
million, or $0.18 per share, for the three months ended June 30,
2022, a $1.0 million or 47.0% increase when compared to net income
attributable to the Company of $2.2 million, or $0.12 per share,
for the same period in 2021. For the six months ended June 30,
2022, the Company reported net income attributable to the Company
of $5.3 million, or $0.29 per share, a $2.0 million or 62.6%
increase when compared to net income attributable to the Company of
$3.3 million, or $0.18 per share, for the same period in
2021.
As previously disclosed, on November 4, 2021,
the Company and OceanFirst Financial Corp. (“OceanFirst”) announced
that they have entered into a definitive agreement and plan of
merger pursuant to which the Company will merge into OceanFirst,
with OceanFirst surviving, and following which Virginia Partners
and Delmarva will each successively merge with and into OceanFirst
Bank, N.A., with OceanFirst Bank surviving each bank merger. At
this time, OceanFirst has requested regulatory approvals; however,
OceanFirst has not received a timeline for when the review process
will be completed. The mergers remain subject to receipt of all
required regulatory approvals and fulfillment of other customary
closing conditions.
The Company’s results of operations for the
three and six months ended June 30, 2022 were directly impacted by
the following:
Positive Impacts:
- An increase in net interest income due primarily to lower rates
paid on average interest-bearing deposit balances, a decrease in
average borrowings balances, an increase in average loan balances,
an increase in average cash and cash equivalents balances and
yields earned, and an increase in average investment securities
balances and yields earned, which were partially offset by lower
loan yields earned, and an increase in average interest-bearing
deposit balances. Net interest income was negatively impacted
during the three and six months ended June 30, 2022 due to 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);
- A significantly lower provision for credit losses due to the
current economic environment and the milder impact of the COVID-19
pandemic compared to June 30, 2021; and
- Recording gains on other real estate owned as compared to
losses for the same periods of 2021.
Negative Impacts:
- Lower gains on sales and calls of investment securities;
- Reduced operating results from Virginia Partners’ majority
owned subsidiary Johnson Mortgage Company, LLC and lower mortgage
division fees at Delmarva;
- Expenses associated with Virginia Partners’ new key hires and
expansion into the Greater Washington market, including opening its
new full-service branch and commercial banking office in Reston,
Virginia during the third quarter of 2021, and Delmarva opening its
twelfth full-service branch at 26th Street in Ocean City, Maryland
during the second quarter of 2021; and
- Merger related expenses of $157 thousand and $553 thousand were
incurred during the three and six months ended June 30, 2022,
respectively, in connection with the Company’s pending merger with
OceanFirst.
As previously disclosed, on July 27, 2022, the
Company’s board of directors declared a cash dividend of $0.025 per
share, which is payable on August 19, 2022, to holders of record of
its common stock as of the close of business on August 10,
2022.
For the three months ended June 30, 2022, the
Company’s annualized return on average assets, annualized return on
average equity and efficiency ratio were 0.76%, 9.51% and 68.89%,
respectively, as compared to 0.55%, 6.44% and 72.30%, respectively,
for the same period in 2021.
For the six months ended June 30, 2022, the
Company’s annualized return on average assets, annualized return on
average equity and efficiency ratio were 0.64%, 7.82% and 73.45%,
respectively, as compared to 0.42%, 4.87% and 73.30%, respectively,
for the same period in 2021.
The increase in net income attributable to the
Company for the three months ended June 30, 2022, as compared to
the same period in 2021, was driven by an increase in net interest
income, a lower provision for credit losses and lower other
expenses, and was partially offset by a decrease in other income
and higher federal and state income taxes.
The increase in net income attributable to the
Company for the six months ended June 30, 2022, as compared to the
same period in 2021, was driven by an increase in net interest
income and a lower provision for credit losses, and was partially
offset by a decrease in other income, higher other expenses, and
higher federal and state income taxes.
Interest Income and Expense – Three
Months Ended June 30, 2022 and 2021
Net interest income and net interest margin
Net interest income in the second quarter of
2022 increased by $1.2 million, or 10.0%, when compared to the
second quarter of 2021. The Company’s net interest margin (tax
equivalent basis) increased to 3.16%, representing an increase of 8
basis points for the three months ended June 30, 2022 as compared
to the same period in 2021. The increase in the net interest margin
(tax equivalent basis) was primarily due to higher average balances
of loans, higher average balances of and yields earned on average
investment securities, higher average balances of and yields earned
on interest bearing deposits in other financial institutions,
higher yields earned on average federal funds sold, and lower rates
paid on average interest-bearing liabilities, which were partially
offset by a decrease in the yields earned on average loans, due
primarily to lower net loan fees earned related to the forgiveness
of loans originated and funded under the PPP, lower average
balances of federal funds sold, and higher average balances of
interest-bearing liabilities. Total interest income increased by
$519 thousand, or 3.7%, for the three months ended June 30, 2022,
while total interest expense decreased by $656 thousand, or 28.7%,
both as compared to the same period in 2021.
The most significant factors impacting net
interest income during the three month period ended June 30, 2022
were as follows:
Positive Impacts:
- Increases in average loan balances, primarily due to organic
loan growth, which was partially offset by the forgiveness of loans
originated and funded under the PPP;
- Increases 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, lower accelerated pre-payments on mortgage-backed investment
securities and higher interest rates over the comparable periods,
partially offset by calls on higher yielding investment securities
in the low interest rate environment;
- Increase in average interest bearing deposits in other
financial institutions, partially offset by a decrease in average
federal funds sold, primarily due to deposit growth outpacing loan
growth, and higher yields on each due to higher interest rates over
the comparable periods;
- Decrease in the rate paid on average interest-bearing deposit
balances, primarily due to lower rates paid on average interest
bearing demand, money market and time deposits, partially offset by
increases in average interest-bearing deposit balances, primarily
due to organic deposit growth; and
- Decrease in average borrowings balances, primarily due to a
decrease in the average balance of Federal Home Loan Bank advances
resulting from scheduled principal curtailments, and the early
redemption of $2.0 million in subordinated notes payable, net, in
early July 2021.
Negative Impacts:
- Lower loan
yields, primarily due to lower net loan fees earned related to the
forgiveness of loans originated and funded under the PPP.
Loans
Average loan balances increased by $69.0
million, or 6.3%, and average yields earned decreased by 0.33% to
4.59% for the three months ended June 30, 2022, as compared to the
same period in 2021. The increase in average loan balances was
primarily due to organic loan growth, including average growth of
approximately $56.9 million in loans related to Virginia Partners’
recent expansion into the Greater Washington market, which was
partially offset by the forgiveness of loans originated and funded
under the PPP. Organic loan growth continued to be negatively
impacted by higher pay-offs and tempered loan demand due to the
uncertainty surrounding the COVID-19 pandemic. The decrease in
average yields earned was primarily due to lower net loan fees
earned related to the forgiveness of loans originated and funded
under the PPP, pay-offs of higher yielding fixed rate loans,
repricing of variable rate loans, and lower average yields on new
loan originations. Total average loans were 70.3% of total average
interest-earning assets for the three months ended June 30, 2022,
compared to 70.9% for the three months ended June 30, 2021.
Investment securities
Average total investment securities balances
increased by $15.0 million, or 11.4%, and average yields earned
increased by 0.16% to 2.20% for the three months ended June 30,
2022, as compared to the same period in 2021. The increases in
average total investment securities balances and average yields
earned was primarily due to management of the investment securities
portfolio in light of the Company’s liquidity needs, lower
accelerated pre-payments on mortgage-backed investment securities
and higher interest rates over the comparable periods, partially
offset by calls on higher yielding investment securities in the low
interest rate environment. During the second quarter of 2021,
accelerated pre-payments on mortgage-backed investment securities
caused the premiums paid on these investment securities to be
amortized into expense on an accelerated basis thereby reducing
income and yield earned. Total average investment securities were
8.9% of total average interest-earning assets for the three months
ended June 30, 2022, compared to 8.6% for the three months ended
June 30, 2021.
Interest-bearing deposits
Average total interest-bearing deposit balances
increased by $19.8 million, or 2.2%, and average rates paid
decreased by 0.28% to 0.49% for the three months ended June 30,
2022, as compared to the same period in 2021, primarily due to
organic deposit growth, including average growth of approximately
$21.2 million in interest-bearing deposits related to Virginia
Partners’ recent expansion into the Greater Washington market, and
a decrease in the average rate paid on interest bearing demand,
money market and time deposits.
Borrowings
Average total borrowings decreased by $4.6
million, or 8.6%, and average rates paid were unchanged at 4.02%
for the three months ended June 30, 2022, as compared to the same
period in 2021. The decrease in average total borrowings balances
was primarily due to a decrease in the average balance of Federal
Home Loan Bank advances resulting from scheduled principal
curtailments, and the early redemption of $2.0 million in
subordinated notes payable, net, in early July 2021.
Interest Income and Expense – Six Months
Ended June 30, 2022 and 2021
Net interest income and net interest margin
Net interest income during the first six months
of 2022 increased by $2.1 million, or 9.5%, when compared to the
first six months of 2021. The Company’s net interest margin (tax
equivalent basis) increased to 3.08%, representing an increase of 2
basis points for the six months ended June 30, 2022 as compared to
the same period in 2021. The increase in the net interest margin
(tax equivalent basis) was primarily due to higher average balances
of loans, higher average balances of and yields earned on average
investment securities, higher average balances of and yields earned
on average interest bearing deposits in other financial
institutions, higher yields earned on average federal funds sold,
and lower rates paid on average interest-bearing liabilities, which
were partially offset by a decrease in the yields earned on average
loans, due primarily to lower net loan fees earned related to the
forgiveness of loans originated and funded under the PPP, lower
average balances of federal funds sold, and higher average balances
of interest-bearing liabilities. Total interest income increased by
$774 thousand, or 2.8%, for the six months ended June 30, 2022,
while total interest expense decreased by $1.4 million, or 28.9%,
both as compared to the same period in 2021.
The most significant factors impacting net
interest income during the six months ended June 30, 2022 were as
follows:
Positive Impacts:
- Increases in average loan balances, primarily due to organic
loan growth, which was partially offset by the forgiveness of loans
originated and funded under the PPP;
- Increases 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, lower accelerated pre-payments on mortgage-backed investment
securities and higher interest rates over the comparable periods,
partially offset by calls on higher yielding investment securities
in the low interest rate environment;
- Increase in average interest bearing deposits in other
financial institutions, partially offset by a decrease in average
federal funds sold, primarily due to deposit growth outpacing loan
growth, and higher yields on each due to higher interest rates over
the comparable periods;
- Decrease in the rate paid on average interest-bearing deposit
balances, primarily due to lower rates paid on average interest
bearing demand, money market and time deposits, partially offset by
increases in average interest-bearing deposit balances, primarily
due to organic deposit growth; and
- Decrease in average borrowings balances, primarily due to a
decrease in the average balance of Federal Home Loan Bank advances
resulting from maturities and payoffs of borrowings that were not
replaced and scheduled principal curtailments, a decrease in
average borrowings at the Federal Reserve Bank Discount Window
under the PPP Liquidity Facility in which the loans under the PPP
originated by the Company were previously pledged as collateral,
the early redemption of $2.0 million in subordinated notes payable,
net, in early July 2021, and offset by higher rates paid. The
increase in average rates paid was primarily due to the decreases
in the average balances of Federal Home Loan Bank advances and
borrowings at the Federal Reserve Bank Discount Window under the
PPP Liquidity Facility, both of which were lower cost
interest-bearing liabilities, partially offset by the early
redemption of subordinated notes payable, which was a higher cost
interest-bearing liability.
Negative Impacts:
- Lower loan
yields, primarily due to lower net loan fees earned related to the
forgiveness of loans originated and funded under the PPP.
Loans
Average loan balances increased by $70.8
million, or 6.6%, and average yields earned decreased by 0.33% to
4.60% for the six months ended June 30, 2022, as compared to the
same period in 2021. The increase in average loan balances was
primarily due to organic loan growth, including average growth of
approximately $54.2 million in loans related to Virginia Partners’
recent expansion into the Greater Washington market, which was
partially offset by the forgiveness of loans originated and funded
under the PPP. Organic loan growth continued to be negatively
impacted by higher pay-offs and tempered loan demand due to the
uncertainty surrounding the COVID-19 pandemic. The decrease in
average yields earned was primarily due to lower net loan fees
earned related to the forgiveness of loans originated and funded
under the PPP, pay-offs of higher yielding fixed rate loans,
repricing of variable rate loans, and lower average yields on new
loan originations. Total average loans were 70.3% of total average
interest-earning assets for the six months ended June 30, 2022,
compared to 71.5% for the six months ended June 30, 2021.
Investment securities
Average total investment securities balances
increased by $10.1 million, or 7.8%, and average yields earned
increased by 0.35% to 2.14% for the six months ended June 30, 2022,
as compared to the same period in 2021. The increases in average
total investment securities balances and average yields earned was
primarily due to management of the investment securities portfolio
in light of the Company’s liquidity needs, lower accelerated
pre-payments on mortgage-backed investment securities and higher
interest rates over the comparable periods, partially offset by
calls on higher yielding investment securities in the low interest
rate environment. During the first six months of 2021, accelerated
pre-payments on mortgage-backed investment securities caused the
premiums paid on these investment securities to be amortized into
expense on an accelerated basis thereby reducing income and yield
earned. Total average investment securities were 8.6% of total
average interest-earning assets for the six months ended June 30,
2022, compared to 8.7% for the six months ended June 30, 2021.
Interest-bearing deposits
Average total interest-bearing deposit balances
increased by $42.1 million, or 4.7%, and average rates paid
decreased by 0.31% to 0.51% for the six months ended June 30, 2022,
as compared to the same period in 2021, primarily due to organic
deposit growth, including average growth of approximately $24.6
million in interest-bearing deposits related to Virginia Partners’
recent expansion into the Greater Washington market, and a decrease
in the average rate paid on interest bearing demand, money market
and time deposits.
Borrowings
Average total borrowings decreased by $18.6
million, or 27.4%, and average rates paid increased by 0.67% to
4.03% for the six months ended June 30, 2022, as compared to the
same period in 2021. The decrease in average total borrowings
balances was primarily due to a decrease in the average balance of
Federal Home Loan Bank advances resulting from maturities and
payoffs of borrowings that were not replaced and scheduled
principal curtailments, a decrease in average borrowings at the
Federal Reserve Bank Discount Window under the PPP Liquidity
Facility in which the loans under the PPP originated by the Company
were previously pledged as collateral, and the early redemption of
$2.0 million in subordinated notes payable, net, in early July
2021. The increase in average rates paid was primarily due to the
decreases in the average balances of Federal Home Loan Bank
advances and borrowings at the Federal Reserve Bank Discount Window
under the PPP Liquidity Facility, which were lower cost
interest-bearing liabilities, partially offset by the early
redemption of subordinated notes payable, which was a higher cost
interest-bearing liability.
Provision for Credit Losses
The provision for credit losses in the second
quarter of 2022 was $319 thousand, a decrease of $539 thousand, or
62.8%, when compared to the provision for credit losses of $858
thousand in the second quarter of 2021. The decrease in the
provision for credit losses during the three months ended June 30,
2022, as compared to the same period of 2021, was primarily due to
a reduction of qualitative adjustment factors that had previously
been increased in the allowance for credit losses related to the
COVID-19 pandemic and the uncertainty in the economic environment,
which was partially offset by higher net charge-offs, loans
acquired in the Virginia Partners acquisition that have converted
from acquired to originated status, and organic loan
growth. The provision for credit losses during the
first six months of 2022 was $384 thousand, a decrease of $2.2
million, or 85.2%, when compared to the provision for credit losses
of $2.6 million during the first six months of 2021. The decrease
in the provision for credit losses during the six months ended June
30, 2022, as compared to the same period of 2021, was primarily due
to a reduction of qualitative adjustment factors that had
previously been increased in the allowance for credit losses
related to the COVID-19 pandemic and the uncertainty in the
economic environment, and the reversal of a specific reserve on one
loan relationship due to a large principal curtailment and improved
performance, which were partially offset by higher net charge-offs,
loans acquired in the Virginia Partners acquisition that have
converted from acquired to originated status, and organic loan
growth.
The provision for credit losses during the three
and six months ended June 30, 2022, as well as the allowance for
credit losses as of June 30, 2022, represents management’s best
estimate of the impact of the COVID-19 pandemic on the ability of
the Company’s borrowers to repay their loans. Management continues
to carefully assess the exposure of the Company’s loan portfolio to
COVID-19 pandemic related factors, economic trends and their
potential effect on asset quality. As of June 30, 2022, the
Company’s delinquencies and nonperforming assets had not been
materially impacted by the COVID-19 pandemic. In addition, as of
June 30, 2022, all of the loan balances that were approved by the
Company, on a consolidated basis, for loan payment deferrals or
payments of interest only have either resumed regular payments or
have been paid off.
Other Income
Other income in the second quarter of 2022
decreased by $763 thousand, or 34.4%, when compared to the second
quarter of 2021. Key changes in the components of other income for
the three months ended June 30, 2022, as compared to the same
period in 2021, are as follows:
- Service charges on deposit accounts increased by $67 thousand,
or 37.1%, due primarily to increases in overdraft fees as a result
of the easing of restrictions and the lifting of lockdowns in the
Company’s markets of operation and Virginia Partners no longer
automatically waiving overdraft fees which was previously done in
an effort to provide all necessary financial support and services
to its customers and communities, both as related to the ongoing
COVID-19 pandemic as compared to the same period of 2021;
- Gains on sales and calls of investment securities decreased by
$6 thousand, or 100.0%, due primarily to Virginia Partners
recording gains of $6 thousand on sales or calls of investment
securities during the second quarter of 2021, as compared to
recording no gains on sales or calls of investment securities
during the same period of 2022;
- Impairment (loss) on restricted stock increased from zero to $1
thousand, due primarily to Virginia Partners recording the final
write-down of its investment in Maryland Financial Bank, which had
been going through an orderly liquidation;
- Mortgage banking income decreased by $513 thousand, or 54.6%,
due primarily to Virginia Partners’ majority owned subsidiary
Johnson Mortgage Company, LLC having a lower volume of loan
closings as compared to the same period in 2021;
- Gains on sales of other assets decreased by less than $1
thousand, or 100.0%, as a result of Delmarva recording an
additional gain related to the sale of its VISA credit card
portfolio during the first quarter of 2021. There were no gains on
sales of other assets for the same period of 2022; and
- Other income decreased by $309 thousand, or 28.4%, due
primarily to lower mortgage division fees at Delmarva, Virginia
Partners recording lower fees from its participation in a loan
hedging program with a correspondent bank, and decreases in ATM
fees, which were partially offset by increases in debit card income
and Delmarva recording higher earnings on bank owned life insurance
policies due to additional purchases made in 2021.
Other income for the six months ended June 30,
2022 decreased by $1.7 million, or 38.6%, when compared to the six
months ended June 30, 2021. Key changes in the components of other
income for the six months ended June 30, 2022, as compared to the
same period in 2021, are as follows:
- Service charges on deposit accounts increased by $121 thousand,
or 34.6%, due primarily to increases in overdraft fees as a result
of the easing of restrictions and the lifting of lockdowns in the
Company’s markets of operation and Virginia Partners no longer
automatically waiving overdraft fees which was previously done in
an effort to provide all necessary financial support and services
to its customers and communities, both as related to the ongoing
COVID-19 pandemic as compared to the same period of 2021;
- Gains on sales and calls of investment securities decreased by
$20 thousand, or 100.0%, due primarily to Virginia Partners
recording gains of $20 thousand on sales or calls of investment
securities during the first six months of 2021, as compared to
recording no gains on sales or calls of investment securities
during the same period of 2022;
- Impairment (loss) on restricted stock increased from zero to $1
thousand, due primarily to Virginia Partners recording the final
write-down of its investment in Maryland Financial Bank, which had
been going through an orderly liquidation;
- Mortgage banking income decreased by $1.4 million, or 66.0%,
due primarily to Virginia Partners’ majority owned subsidiary
Johnson Mortgage Company, LLC having a lower volume of loan
closings as compared to the same period in 2021;
- Gains on sales of other assets decreased by $1 thousand, or
100.0%, as a result of Delmarva selling its VISA credit card
portfolio during the first quarter of 2021. There were no gains on
sales of other assets for the same period of 2022; and
- Other income decreased by $433 thousand, or 21.8%, due
primarily to lower mortgage division fees at Delmarva, Virginia
Partners recording lower fees from its participation in a loan
hedging program with a correspondent bank, and decreases in ATM
fees, which were partially offset by increases in debit card income
and Delmarva recording higher earnings on bank owned life insurance
policies due to additional purchases made in 2021.
Other Expenses
Other expenses in the second quarter of 2022
decreased by $196 thousand, or 1.9%, when compared to the second
quarter of 2021. Key changes in the components of other expenses
for the three months ended June 30, 2022, as compared to the same
period in 2021, are as follows:
- Salaries and employee benefits increased by $29 thousand, or
0.5%, primarily due to increases related to staffing changes,
including expenses associated with Virginia Partners’ new key hires
and expansion into the Greater Washington market and Delmarva
opening its new full-service branch at 26th Street in Ocean City,
Maryland, merit increases, payroll taxes and benefit costs, and
bonus accruals. In addition, due to the decrease in mortgage
banking income from Virginia Partners’ majority owned subsidiary
Johnson Mortgage Company, LLC, salaries and employee benefits
decreased due to a decrease in commissions expense paid;
- Premises and equipment increased by $182 thousand, or 15.0%,
primarily due to increases related to Delmarva opening its new
full-service branch at 26th Street in Ocean City, Maryland during
the second quarter of 2021 and Virginia Partners opening its new
full-service branch and commercial banking office in Reston,
Virginia during the third quarter of 2021;
- Amortization of core deposit intangible decreased by $20
thousand, or 13.1%, primarily due to lower amortization related to
the $2.7 million and $1.5 million, respectively, in core deposit
intangibles recognized in the Virginia Partners and Liberty Bell
Bank acquisitions;
- (Gains) losses and operating expenses on other real estate
owned increased by $154 thousand, or 101.4%, primarily due to
valuation adjustments being recorded on properties during the
second quarter of 2021 as compared to no valuation adjustments
being recorded during the same period of 2022, and lower expenses
related to other real estate owned;
- Merger related expenses increased from zero to $157 thousand,
primarily due to legal fees and other costs associated with the
pending merger with OceanFirst; and
- Other expenses decreased by $389 thousand, or 12.5%, primarily
due to lower expenses related to legal, subscriptions and
publications, insurance, data and item processing, loans,
debit/credit/merchant card transactions and other professional
fees, which were partially offset by higher expenses related to
advertising, printing and postage, FDIC insurance assessments, ATM,
telephone and data circuits, and travel and
entertainment.
Other expenses for the six months ended June 30,
2022 increased by $350 thousand, or 1.8%, when compared to the six
months ended June 30, 2021. Key changes in the components of other
expenses for the six months ended June 30, 2022, as compared to the
same period in 2021, are as follows:
- Salaries and employee benefits increased by $134 thousand, or
1.2%, primarily due to increases related to staffing changes,
including expenses associated with Virginia Partners’ new key hires
and expansion into the Greater Washington market and Delmarva
opening its new full-service branch at 26th Street in Ocean City,
Maryland, merit increases, payroll taxes and benefit costs,
stock-based compensation expense and bonus accruals. In addition,
due to the decrease in mortgage banking income from Virginia
Partners’ majority owned subsidiary Johnson Mortgage Company, LLC,
salaries and employee benefits decreased due to a decrease in
commissions expense paid;
- Premises and equipment increased by $406 thousand, or 16.4%,
primarily due to increases related to Delmarva opening its new
full-service branch at 26th Street in Ocean City, Maryland during
the second quarter of 2021 and Virginia Partners opening its new
full-service branch and commercial banking office in Reston,
Virginia during the third quarter of 2021;
- Amortization of core deposit intangible decreased by $40
thousand, or 13.0%, primarily due to lower amortization related to
the $2.7 million and $1.5 million, respectively, in core deposit
intangibles recognized in the Virginia Partners and Liberty Bell
Bank acquisitions;
- (Gains) losses and operating expenses on other real estate
owned increased by $158 thousand, or 106.4%, primarily due to
valuation adjustments being recorded on properties during the first
six months of 2021 as compared to no valuation adjustments being
recorded during the same period of 2022, and lower expenses related
to other real estate owned;
- Merger related expenses increased from zero to $553 thousand,
primarily due to legal fees and other costs associated with the
pending merger with OceanFirst; and
- Other expenses decreased by $545 thousand, or 9.0%, primarily
due to lower expenses related to legal, subscriptions and
publications, insurance, data and item processing, other losses,
and other professional fees, which were partially offset by higher
expenses related to advertising, printing and postage, FDIC
insurance assessments, consulting, ATM, Virginia Partners state
franchise tax, and travel and entertainment.
Federal and State Income
Taxes
Federal and state income taxes for the three
months ended June 30, 2022 increased by $252 thousand, or 37.4%,
when compared to the three months ended June 30, 2021. This
increase was due primarily to higher consolidated income before
taxes, higher merger related expenses, which are typically
non-deductible, and lower earnings on tax-exempt income, primarily
tax-exempt investment securities. For the three months ended June
30, 2022, the Company’s effective tax rate was approximately 22.5%
as compared to 23.8% for the same period in 2021.
Federal and state income taxes for the six
months ended June 30, 2022 increased by $615 thousand, or 61.1%,
when compared to the six months ended June 30, 2021. This increase
was due primarily to higher consolidated income before taxes,
higher merger related expenses, which are typically non-deductible,
and lower earnings on tax-exempt income, primarily tax-exempt
investment securities. For the six months ended June 30, 2022, the
Company’s effective tax rate was approximately 23.5% as compared to
23.6% for the same period in 2021.
Virginia Partners is not subject to Virginia
state income tax, but instead pays Virginia franchise tax. The
Virginia franchise tax paid by Virginia Partners is recorded in the
“Other expenses” line item on the Consolidated Statements of Income
for the three and six months ended June 30, 2022 and
2021.
Balance Sheet
Changes in key balance sheet components as of
June 30, 2022 compared to December 31, 2021 were as follows:
- Total assets as of June 30, 2022 were $1.69 billion, an
increase of $45.3 million, or 2.8%, from December 31, 2021. Key
drivers of this change were increases in investment securities
available for sale, at fair value, and total loans held for
investment, which were partially offset by decreases in cash and
cash equivalents;
- Interest bearing deposits in other financial institutions as of
June 30, 2022 were $275.6 million, a decrease of $22.4 million, or
7.5%, from December 31, 2021. Key drivers of this change were an
increase in investment securities available for sale, at fair
value, which was partially offset by total deposit growth outpacing
total loan growth and the Company repositioning its excess
liquidity in order to earn higher amounts of interest income;
- Federal funds sold as of June 30, 2022 were $24.7 million, a
decrease of $3.3 million, or 11.8%, from December 31, 2021. 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
June 30, 2022 were $135.4 million, an increase of $13.4 million, or
11.0%, from December 31, 2021. Key drivers of this change were
management of the investment securities portfolio in light of the
Company’s liquidity needs, which were partially offset by two
higher yielding investment securities being called, and an increase
in unrealized losses on the investment securities available for
sale portfolio;
- Loans, net of unamortized discounts on acquired loans of $1.9
million as of June 30, 2022 were $1.17 billion, an increase of
$52.3 million, or 4.7%, from December 31, 2021. The key driver of
this change was an increase in organic growth, including growth of
approximately $30.5 million in loans related to Virginia Partners’
recent expansion into the Greater Washington market, which was
partially offset by forgiveness payments received of approximately
$7.9 million under round two of the PPP. As of June 30, 2022,
approximately $247 thousand in loans under round two of the PPP
were still outstanding;
- Total deposits as of June 30, 2022 were $1.50 billion, an
increase of $52.5 million, or 3.6%, from December 31, 2021. Key
drivers of this change were organic growth as a result of our
continued focus on total relationship banking and Virginia
Partners’ recent expansion into the Greater Washington market, and
customers seeking the liquidity and safety of deposit accounts in
light of continuing economic uncertainty and volatility in stock
and other investment markets;
- Total borrowings as of June 30, 2022 were $49.2 million, a
decrease of $67 thousand, or 0.1%, from December 31, 2021. Key
drivers of this change was a decrease in long-term borrowings with
the Federal Home Loan Bank resulting from scheduled principal
curtailments, which was partially offset by an increase in Virginia
Partners’ majority owned subsidiary Johnson Mortgage Company, LLC’s
warehouse line of credit with another financial institution;
and
- Total stockholders’ equity as of June 30, 2022 was $134.8
million, a decrease of $6.6 million, or 4.7%, from December 31,
2021. Key drivers of this change were an increase in accumulated
other comprehensive (loss), net of tax, and cash dividends paid to
shareholders, which were partially offset by the net income
attributable to the Company for the six months ended June 30, 2022,
the proceeds from stock option exercises, and stock-based
compensation expense related to restricted stock awards.
Changes in key balance sheet components as of
June 30, 2022 compared to June 30, 2021 were as follows:
- Total assets as of June 30, 2022 were $1.69 billion, an
increase of $81.2 million, or 5.0%, from June 30, 2021. Key drivers
of this change were increases in investment securities available
for sale, at fair value, and total loans held for investment, which
were partially offset by decreases in cash and cash
equivalents;
- Interest bearing deposits in other financial institutions as of
June 30, 2022 were $275.6 million, an increase of $28.0 million, or
11.3%, from June 30, 2021. Key drivers of this change were total
deposit growth outpacing total loan growth and the Company
repositioning its excess liquidity in order to earn higher amounts
of interest income, which were partially offset by an increase in
investment securities available for sale, at fair value, and
decreases in long-term borrowings with the Federal Home Loan Bank
and subordinated notes payable, net;
- Federal funds sold as of June 30, 2022 were $24.7 million, a
decrease of $41.9 million, or 62.9%, from June 30, 2021. 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
June 30, 2022 were $135.4 million, an increase of $16.5 million, or
13.8%, from June 30, 2021. Key drivers of this change were
management of the investment securities portfolio in light of the
Company’s liquidity needs and lower accelerated prepayments on
mortgage-backed investment securities in the low interest rate
environment, which were partially offset by higher yielding
investment securities being called and an increase in unrealized
losses on the investment securities available for sale
portfolio;
- Loans, net of unamortized discounts on acquired loans of $1.9
million as of June 30, 2022 were $1.17 billion, an increase of
$77.7 million, or 7.1%, from June 30, 2021. Key drivers of this
change were an increase in organic growth, including growth of
approximately $63.5 million in loans related to Virginia Partners’
recent expansion into the Greater Washington market, which was
partially offset by forgiveness payments received of approximately
$25.9 million under rounds one and two of the PPP. As of June 30,
2022, approximately $247 thousand in loans under round two of the
PPP were still outstanding;
- Total deposits as of June 30, 2022 were $1.50 billion, an
increase of $87.6 million, or 6.2%, from June 30, 2021. Key drivers
of this change were organic growth as a result of our continued
focus on total relationship banking and Virginia Partners’ recent
expansion into the Greater Washington market, and customers seeking
the liquidity and safety of deposit accounts in light of continuing
economic uncertainty and volatility in stock and other investment
markets;
- Total borrowings as of June 30, 2022 were $49.2 million, a
decrease of $2.7 million, or 5.2%, from June 30, 2021. Key drivers
of this change were a decrease in long-term borrowings with the
Federal Home Loan Bank resulting from scheduled principal
curtailments, and the early redemption of $2.0 million in
subordinated notes payable, net, in early July 2021; and
- Total stockholders’ equity as of June 30, 2022 was $134.8
million, a decrease of $2.6 million, or 1.9%, from June 30, 2021.
Key drivers of this change were an increase in accumulated other
comprehensive (loss), net of tax, and cash dividends paid to
shareholders, which were partially offset by the net income
attributable to the Company for the period July 1, 2021 through
June 30, 2022, the proceeds from stock option exercises, and
stock-based compensation expense related to restricted stock
awards.
As of June 30, 2022, all of the capital ratios
of Delmarva and Virginia Partners continue to exceed regulatory
requirements, with total risk-based capital substantially above
well-capitalized regulatory requirements.
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 six months ended June 30, 2022 and
2021:
|
|
|
|
|
|
|
|
|
Net
Charge-off Activity |
|
Three Months
Ended |
|
Six Months
Ended |
|
|
June 30, |
|
June 30, |
Dollars in Thousands |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
$ |
826 |
|
|
$ |
300 |
|
|
$ |
981 |
|
|
$ |
491 |
|
Net
charge-offs/Average loans* |
|
|
0.29 |
% |
|
|
0.11 |
% |
|
|
0.17 |
% |
|
|
0.09 |
% |
* Annualized for the three and six months ended June 30, 2022 and
2021, respectively. |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table depicts the level of the
allowance for credit losses as of June 30, 2022, December 31, 2021
and June 30, 2021:
|
|
|
|
|
|
|
Allowance for Credit Losses |
|
|
|
|
|
|
|
|
|
|
|
Dollars in Thousands |
|
June 30, 2022 |
|
December 31, 2021 |
|
June 30, 2021 |
|
|
|
|
|
|
|
Allowance for credit losses |
|
$ |
14,059 |
|
|
$ |
14,656 |
|
|
$ |
15,310 |
|
Allowance for credit losses/Period end loans |
|
|
1.20 |
% |
|
|
1.31 |
% |
|
|
1.40 |
% |
Allowance
for credit losses/Period end loans (excluding PPP loans) |
|
|
1.20 |
% |
|
|
1.32 |
% |
|
|
1.44 |
% |
Allowance
for credit losses/Nonaccrual loans |
|
|
307.37 |
% |
|
|
163.55 |
% |
|
|
220.57 |
% |
Allowance
for credit losses/Nonperforming loans |
|
|
307.37 |
% |
|
|
163.55 |
% |
|
|
203.59 |
% |
|
|
|
|
|
|
|
As of June 30, 2022, the Company has not yet
adopted FASB ASU No. 2016-13, “Financial Instruments – Credit
Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments.” The adoption of this accounting standard will require
the Company to calculate its allowance for credit losses on the
basis of the current expected credit losses over the lifetime of
our loans, or the CECL model, which is expected to be applicable to
the Company beginning in 2023.
The following table depicts the unamortized
discounts on acquired loans related to the acquisitions of Liberty
Bell Bank and Virginia Partners:
|
|
|
|
|
|
|
Unamortized Discounts on Acquired Loans |
|
|
|
|
|
|
|
|
|
|
|
Dollars in Thousands |
|
June 30, 2022 |
|
December 31, 2021 |
|
June 30, 2021 |
|
|
|
|
|
|
|
Unamortized discounts on acquired loans |
|
$ |
1,909 |
|
|
$ |
2,329 |
|
|
$ |
3,223 |
|
|
|
|
|
|
|
|
The following table depicts the level of
nonperforming assets as of June 30, 2022, December 31, 2021 and
June 30, 2021:
|
|
|
|
|
|
|
Nonperforming Assets |
|
|
|
|
|
|
|
|
|
|
|
Dollars in Thousands |
|
June 30, 2022 |
|
December 31, 2021 |
|
June 30, 2021 |
|
|
|
|
|
|
|
Nonaccrual loans |
|
$ |
4,574 |
|
|
$ |
8,961 |
|
|
$ |
6,941 |
|
Loans past
due 90 days and accruing interest |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
579 |
|
Total
nonperforming loans |
|
$ |
4,574 |
|
|
$ |
8,961 |
|
|
$ |
7,520 |
|
Other real
estate owned, net |
|
$ |
- |
|
|
$ |
837 |
|
|
$ |
2,257 |
|
Total
nonperforming assets |
|
$ |
4,574 |
|
|
$ |
9,798 |
|
|
$ |
9,777 |
|
Nonperforming assets/Total assets |
|
|
0.27 |
% |
|
|
0.60 |
% |
|
|
0.61 |
% |
Nonperforming assets/Total loans and other real estate owned,
net |
|
|
0.39 |
% |
|
|
0.88 |
% |
|
|
0.89 |
% |
|
|
|
|
|
|
|
COVID-19 Pandemic Update
In connection with the ongoing COVID-19
pandemic, both Delmarva and Virginia Partners continue to follow
their pandemic response plans, which were enacted in February 2020.
To date, management believes that the plans have been implemented
successfully. As of June 30, 2022, both Delmarva and Virginia
Partners branch operations were operating under normal lobby and
drive-thru hours. In addition, the majority of Delmarva’s and
Virginia Partners’ employees, with a few exceptions, have shifted
from remote work to returning to the office on either a full-time
or hybrid basis. Delmarva and Virginia Partners continue to take
necessary precautions in order to protect their staffs, customers
and their families as well as their communities, and to limit the
ongoing impact of the COVID-19 pandemic.
The Company’s focus from the beginning has been
ensuring the health and safety of its employees and customers,
providing all necessary financial support and services to its
customers and communities, continuing to operate Delmarva and
Virginia Partners in a safe and sound manner, and protecting the
investment its shareholders have made in the Company. Beginning
late in the first quarter of 2020, both Delmarva and Virginia
Partners began assisting their customers in obtaining loans under
the PPP in order to further assist their communities. During round
one of this program, on a consolidated basis, the Company directly
originated and funded almost 700 loans totaling approximately $64.2
million, all of which were previously pledged as collateral to the
Federal Reserve Bank Discount Window under the PPP Liquidity
Facility. Beginning in the fourth quarter of 2020 and continuing
through the fourth quarter of 2021, the Company received
forgiveness payments from the Small Business Administration related
to all of these loans. As of June 30, 2022, on a consolidated
basis, the Company had no loans outstanding under round one of this
program.
Beginning early in the first quarter of 2021,
both Delmarva and Virginia Partners began assisting their customers
in obtaining loans under round two of this program. As of June 30,
2022, on a consolidated basis, the Company has directly originated
and funded over 430 loans totaling approximately $30.9 million,
none of which have been pledged as collateral to the Federal
Reserve Bank Discount Window under the PPP Liquidity Facility. As
of June 30, 2022, on a consolidated basis, the Company had
approximately $247 thousand in loans still outstanding under round
two of this program. Aggregate fees, net of costs to originate,
from the Small Business Administration of approximately $11
thousand will continue to be recognized in interest income over the
life of these loans. Upon forgiveness of these loans, the remaining
aggregate fees, net of costs to originate, will be recognized in
interest income on an accelerated basis.
In addition, in an effort to support the
Company’s borrowers in their times of need, the Company granted
loan payment deferrals to certain borrowers, who were current on
their payments prior to the COVID-19 pandemic, on a short-term
basis of three to six months. At the peak, which occurred during
the second quarter of 2020, the Company, on a consolidated basis,
had approved loan payment deferrals or payments of interest only
for 548 loans totaling $286.6 million, which represented
approximately 28.8% of total loan balances outstanding. As of June
30, 2022, all of the loan balances that were approved by the
Company, on a consolidated basis, for loan payment deferrals or
payments of interest only have either resumed regular payments or
have been paid off. As of June 30, 2022, on a consolidated basis,
there were no loans outstanding with respect to which the Company
has granted loan payment deferrals or payments of interest
only.
The Company continues to closely monitor credit
risk and its exposure to increased loan losses resulting from the
impact of the COVID-19 pandemic on its borrowers. The Company has
identified nine specific higher risk industries for credit exposure
monitoring during this crisis.
The table below identifies these higher risk
industries and the Company’s exposure to them as of June 30,
2022:
|
As of June 30, 2022 |
|
Higher Risk Industries |
Loan balances outstanding (dollars in thousands) |
Number of loans outstanding |
As a percentage of total loan balances outstanding (%)* |
|
Hospitality (Hotels) |
$83,303 |
34 |
7.12% |
|
Amusement
Services |
16,399 |
15 |
1.40% |
|
Restaurants |
61,347 |
71 |
5.25% |
|
Retail
Commercial Real Estate |
52,557 |
63 |
4.50% |
|
Movie
Theatres |
6,138 |
2 |
0.52% |
|
Aviation |
0 |
0 |
0.00% |
|
Charter
Boats/Cruises |
1,471 |
2 |
0.13% |
|
Commuter
Services |
39 |
3 |
0.00% |
|
Manufacturing/Distribution |
2,447 |
7 |
0.21% |
|
Totals |
$223,701 |
197 |
19.13% |
|
* Excludes loans originated under the PPP of the Small Business
Administration. |
|
|
|
|
|
|
|
As of June 30, 2022, there were no loans within
these higher risk industries with respect to which the Company has
granted loan payment deferrals.
Lloyd B. Harrison, III, the Company’s Chief
Executive Officer, commented, “I am pleased with our operating
results for the first six months of 2022 as both loan and deposit
growth came in ahead of our internal targets. During the first half
of 2022, the Company generated loan growth of 4.7% and finished the
period maintaining strong asset quality. As a company, we have
continued to focus on expanding and attracting new relationships in
our existing and expansion markets. As a result of these efforts,
the Company generated deposit growth of 3.6% during the six months
ended June 30, 2022, including growth in non-interest bearing
demand deposits of 13.7%, which now represent 37.5% of total
deposits at June 30, 2022 as compared to 34.2% of total deposits at
December 31, 2021. The Company’s expansion into the Greater
Washington market has continued to occur faster than originally
projected. As of June 30, 2022, that expansion has added $80.7
million in net loans and $88.0 million in total deposits, including
$60.6 million in non-interest bearing demand deposits. With our
asset sensitive balance sheet, combined with rising interest rates,
strong loan growth, the deployment of excess liquidity, and an
improved funding mix and cost, we are pleased to report an expanded
net interest margin. During the three and six months ended June 30,
2022, our net interest margin improved by 0.08% and 0.02%,
respectively, when compared to the same periods in 2021, and
improved by 0.15% when compared to the first quarter of 2022.
Despite the impact of $553 thousand in merger related expenses,
lower net loan fees earned related to PPP loan forgiveness, and
reduced operating results from Virginia Partners’ majority owned
subsidiary Johnson Mortgage Company, LLC due to a lower volume of
loan closings during the first half of 2022, we are reporting
improved earnings for the six months ended June 30, 2022, with net
income attributable to the Company increasing by 62.6% when
compared to the same period of 2021.”
Harrison continued, “As a Company, we continue
to be very excited about becoming part of OceanFirst and are
focused on the steps necessary to successfully complete the merger.
Throughout the second half of 2022, our focus will continue to be
finding ways to increase the efficiencies of our combined
organization, maintaining asset quality, prudently growing our loan
portfolio and deploying excess liquidity. While we expect that we
will continue to face economic and operational challenges related
to the ongoing COVID-19 pandemic, geopolitical disruption in
financial markets and economies, and inflationary pressures, we
believe we are poised to continue to benefit from the recent rise
in interest rates through an expanded net interest margin. Despite
these challenges, with our current levels of liquidity and capital,
combined with our emphasis on total relationship banking as well as
our current pipeline of opportunities, we believe we are well
positioned to deliver solid growth, increased profitability and
enhanced shareholder value.”
About Partners Bancorp
Partners Bancorp is the holding company for The
Bank of Delmarva and Virginia Partners Bank. The Bank of Delmarva
commenced operations in 1896. The Bank of Delmarva’s main office is
in Seaford, Delaware and it conducts full service commercial
banking through eleven branch locations in Maryland and Delaware,
and three branches, operating under the name Liberty Bell Bank, in
the South Jersey/Philadelphia metro market. The Bank of Delmarva
focuses on serving its local communities, knowing its customers and
providing superior customer service. Virginia Partners Bank,
headquartered in Fredericksburg, Virginia, was founded in 2008 and
has three branches in Fredericksburg, Virginia and operates a full
service branch and commercial banking office in Reston, Virginia.
In Maryland, Virginia Partners Bank trades under the name Maryland
Partners Bank (a division of Virginia Partners Bank), and operates
a full service branch and commercial banking office in La Plata,
Maryland and a Loan Production Office in Annapolis, Maryland.
Virginia Partners Bank also owns a controlling stake in Johnson
Mortgage Company, LLC, which is a residential mortgage company
headquartered in Newport News, Virginia, with branch offices in
Fredericksburg and Williamsburg, Virginia. For more information,
visit www.partnersbancorp.com, www.bankofdelmarvahb.com and
www.vapartnersbank.com.
For further information, please contact Lloyd B.
Harrison, III, Chief Executive Officer, at 540-899-2234, John W.
Breda, President and Chief Operating Officer, at 410-548-1100
x10233, J. Adam Sothen, Chief Financial Officer, at 540-322-5521,
or Betsy Eicher, Chief Accounting Officer, at 667-253-2904.
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 OceanFirst, Mr. Harrison’s quotes and statements regarding
expected future financial performance, potential effects of the
COVID-19 pandemic, strategic business initiatives including growth
in the Greater Washington market and the anticipated effects
thereof, margin expansion, technology initiatives, asset quality,
adequacy of allowances for credit losses and the level of future
charge-offs, capital levels, the effect of future market and
industry trends and the effects of future interest rate
fluctuations. Factors that could have a material adverse effect on
the operations and future prospects of the Company include, but are
not limited to: (1) the risk that the cost savings, any revenue
synergies and other anticipated benefits of the proposed merger
with OceanFirst may not be realized or may take longer than
anticipated to be realized, including as a result of the impact of,
or problems arising from, the integration of the two companies or
as a result of the condition of the economy and competitive factors
in areas where OceanFirst and the Company do business, (2) deposit
attrition, operating costs, customer losses and other disruptions
to the parties’ businesses as a result of the announcement and
pendency of the proposed merger, and diversion of management’s
attention from ongoing business operations and opportunities, (3)
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, (4) the risk that the integration
of OceanFirst and the Company’s operations will be materially
delayed or will be more costly or difficult than expected or that
OceanFirst and the Company are otherwise unable to successfully
integrate their businesses, (5) the outcome of any legal
proceedings instituted against OceanFirst and/or the Company, (6)
the failure to obtain governmental approvals required to complete
the merger (and the risk that such governmental approvals may
result in the imposition of conditions that could adversely affect
the combined company or the expected benefits of the proposed
transaction), (7) reputational risk and potential adverse reactions
of OceanFirst and/or the Company’s customers, suppliers, employees
or other business partners, including those resulting from the
announcement or completion of the proposed merger, (8) the failure
of any of the closing conditions in the merger agreement to be
satisfied on a timely basis or at all, (9) changes in interest
rates, such as volatility in yields on U.S. Treasury bonds and
increases or volatility in mortgage rates, (10) general business
conditions, as well as conditions within the financial markets,
including the impact thereon of geopolitical conflicts such as the
military conflict between Russian and Ukraine, (11) 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, including as a result
of the COVID-19 pandemic, (12) the effect of steps the Company
takes in response to the COVID-19 pandemic, the severity and
duration of the pandemic and the distribution and efficacy of
vaccines, the pace of recovery when the pandemic subsides and the
heightened impact it has on many of the risks described herein,
(13) legislative or regulatory changes and requirements, including
further legislative and regulatory changes related to the COVID-19
pandemic, (14) monetary and fiscal policies of the U.S. Government,
including policies of the U.S. Treasury and the Federal Reserve
Board, and the effect of these policies on interest rates and
business in our markets, (15) changes in the value of securities
held in the Company’s investment portfolios, (16) changes in the
quality or composition of the loan portfolios and the value of the
collateral securing those loans, (17) changes in the level of net
charge-offs on loans and the adequacy of our allowance for credit
losses, (18) demand for loan products, (19) deposit flows, (20) the
strength of the Company’s counterparties, (21) competition from
both banks and non-banks, (22) demand for financial services in the
Company’s market area, (23) reliance on third parties for key
services, (24) changes in the commercial and residential real
estate markets, (25) cyber threats, attacks or events, (26)
expansion of Delmarva’s and Virginia Partners’ product offerings,
(27) changes in accounting principles, policies and guidelines, and
elections by the Company thereunder, and (28) potential claims,
damages, and fines related to litigation or government actions,
including litigation or actions arising from the Company’s
participation in and administration of programs related to the
COVID-19 pandemic. 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 Securities and
Exchange Commission (“SEC”).
|
|
PARTNERS
BANCORP |
|
CONSOLIDATED
BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
June
30, |
June
30, |
December
31, |
|
|
|
2022 |
2021 |
2021 |
|
|
(Unaudited) |
(Unaudited) |
* |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
Cash and due from banks |
$ |
16,127,076 |
|
$ |
13,940,087 |
$ |
12,886,968 |
|
Interest bearing deposits in other financial institutions |
|
275,550,942 |
|
|
247,575,735 |
|
297,901,913 |
|
Federal funds sold |
|
24,738,347 |
|
|
66,595,917 |
|
28,039,854 |
|
Cash and cash equivalents |
|
316,416,365 |
|
|
328,111,739 |
|
338,828,735 |
|
Investment securities available for sale, at fair value |
|
135,420,461 |
|
|
118,954,612 |
|
122,020,826 |
|
Loans held for sale |
|
3,055,943 |
|
|
4,928,534 |
|
4,064,312 |
|
Loans, less allowance for credit losses of
$14,058,774 at June 30, 2022, $15,309,575 at June 30, 2021 and
$14,655,654 at December 31, 2021 |
|
1,155,407,145 |
|
|
1,076,492,395 |
|
1,102,538,982 |
|
Accrued interest receivable |
|
4,085,922 |
|
|
4,293,056 |
|
4,313,207 |
|
Premises and equipment, less accumulated depreciation |
|
15,647,167 |
|
|
16,483,496 |
|
16,174,870 |
|
Restricted stock |
|
4,932,200 |
|
|
4,869,456 |
|
4,869,456 |
|
Operating lease right-of-use assets |
|
5,530,706 |
|
|
6,131,248 |
|
6,009,025 |
|
Finance lease right-of-use assets |
|
1,618,607 |
|
|
1,755,514 |
|
1,687,059 |
|
Other investments |
|
4,929,294 |
|
|
5,076,407 |
|
5,064,801 |
|
Bank owned life insurance |
|
18,478,530 |
|
|
18,027,221 |
|
18,254,339 |
|
Other real estate owned, net |
|
- |
|
|
2,257,125 |
|
837,000 |
|
Core deposit intangible, net |
|
1,793,880 |
|
|
2,353,684 |
|
2,060,463 |
|
Goodwill |
|
9,581,668 |
|
|
9,581,668 |
|
9,581,668 |
|
Other assets |
|
13,332,170 |
|
|
9,667,290 |
|
8,675,237 |
|
Total assets |
$ |
1,690,230,058 |
|
$ |
1,608,983,445 |
$ |
1,644,979,980 |
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Deposits: |
|
|
|
|
Non-interest bearing demand |
$ |
561,428,067 |
|
$ |
477,252,559 |
$ |
493,913,054 |
|
Interest bearing demand |
|
153,086,286 |
|
|
145,109,355 |
|
159,420,637 |
|
Savings and money market |
|
453,915,954 |
|
|
363,667,932 |
|
410,286,409 |
|
Time |
|
326,917,618 |
|
|
421,739,165 |
|
379,255,563 |
|
|
|
|
1,495,347,925 |
|
|
1,407,769,011 |
|
1,442,875,663 |
|
Accrued interest payable on deposits |
|
217,363 |
|
|
327,453 |
|
279,943 |
|
Long-term borrowings with the Federal Home Loan Bank |
|
25,983,929 |
|
|
26,642,500 |
|
26,313,214 |
|
Subordinated notes payable, net |
|
22,191,469 |
|
|
24,126,051 |
|
22,168,305 |
|
Other borrowings |
|
994,613 |
|
|
1,078,182 |
|
755,403 |
|
Operating lease liabilities |
|
5,928,016 |
|
|
6,449,675 |
|
6,372,332 |
|
Finance lease liabilities |
|
2,065,938 |
|
|
2,183,921 |
|
2,125,347 |
|
Other liabilities |
|
2,713,150 |
|
|
3,061,692 |
|
2,722,266 |
|
Total liabilities |
|
1,555,442,403 |
|
|
1,471,638,485 |
|
1,503,612,473 |
|
|
|
|
|
|
|
COMMITMENTS & CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
|
|
Common stock, par value $.01, authorized 40,000,000 shares,
issued and outstanding 17,961,699 as of June 30, 2022, 17,785,472
as of June 30, 2021 and 17,941,604 as of December 31, 2021,
including 18,669 nonvested shares as of June 30, 2022, 58,824
nonvested shares as of June 30, 2021 and 28,000 nonvested shares as
of December 31, 2021, respectively |
|
|
179,430 |
|
|
177,266 |
|
179,136 |
|
Surplus |
|
88,552,151 |
|
|
87,020,640 |
|
88,389,831 |
|
Retained earnings |
|
55,695,309 |
|
|
48,038,517 |
|
51,304,840 |
|
Noncontrolling interest in consolidated subsidiaries |
|
1,122,411 |
|
|
1,004,575 |
|
1,179,042 |
|
Accumulated other comprehensive (loss) income, net of tax |
|
(10,761,646 |
) |
|
1,103,962 |
|
314,658 |
|
Total stockholders' equity |
|
134,787,655 |
|
|
137,344,960 |
|
141,367,507 |
|
Total liabilities and stockholders' equity |
$ |
1,690,230,058 |
|
$ |
1,608,983,445 |
$ |
1,644,979,980 |
|
|
|
|
|
|
|
* Derived from audited consolidated financial statements. |
|
|
|
|
The amounts
presented in the Consolidated Balance Sheets as of June 30, 2022
and 2021 are unaudited but include all adjustments |
|
which, in
management's opinion, are necessary for fair presentation. |
|
|
|
|
|
|
|
PARTNERS
BANCORP |
CONSOLIDATED
STATEMENTS OF INCOME |
(Unaudited) |
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
June 30, |
|
|
|
2022 |
2021 |
|
|
|
|
|
INTEREST INCOME ON: |
|
|
|
Loans, including fees |
$ |
13,208,816 |
|
$ |
13,330,400 |
|
|
Investment securities: |
|
|
|
|
Taxable |
|
516,065 |
|
|
326,739 |
|
|
|
Tax-exempt |
|
180,747 |
|
|
220,231 |
|
|
Federal funds sold |
|
63,248 |
|
|
9,299 |
|
|
Other interest income |
|
554,188 |
|
|
117,005 |
|
|
|
|
|
14,523,064 |
|
|
14,003,674 |
|
|
|
|
|
|
INTEREST EXPENSE ON: |
|
|
|
Deposits |
|
1,125,996 |
|
|
1,736,280 |
|
|
Borrowings |
|
507,565 |
|
|
553,655 |
|
|
|
|
|
1,633,561 |
|
|
2,289,935 |
|
|
|
|
|
|
NET INTEREST INCOME |
|
12,889,503 |
|
|
11,713,739 |
|
|
Provision for credit losses |
|
319,000 |
|
|
858,000 |
|
|
|
|
|
|
NET INTEREST INCOME AFTER PROVISION |
|
|
|
FOR CREDIT LOSSES |
|
12,570,503 |
|
|
10,855,739 |
|
|
|
|
|
|
OTHER INCOME: |
|
|
|
Service charges on deposit accounts |
|
248,927 |
|
|
181,585 |
|
|
Gains on sales and calls of investment securities |
|
- |
|
|
5,559 |
|
|
Impairment (loss) on restricted stock |
|
(1,182 |
) |
|
- |
|
|
Mortgage banking income |
|
426,711 |
|
|
940,198 |
|
|
Gains on sales of other assets |
|
- |
|
|
706 |
|
|
Other income |
|
778,213 |
|
|
1,087,341 |
|
|
|
|
|
1,452,669 |
|
|
2,215,389 |
|
|
|
|
|
|
OTHER EXPENSES: |
|
|
|
Salaries and employee benefits |
|
5,504,330 |
|
|
5,475,746 |
|
|
Premises and equipment |
|
1,400,337 |
|
|
1,218,101 |
|
|
Amortization of core deposit intangible |
|
131,649 |
|
|
151,538 |
|
|
(Gains) losses and operating expenses on other real estate
owned |
|
(2,190 |
) |
|
152,294 |
|
|
Merger related expenses |
|
156,769 |
|
|
- |
|
|
Other expenses |
|
2,722,927 |
|
|
3,111,945 |
|
|
|
|
|
9,913,822 |
|
|
10,109,624 |
|
|
|
|
|
|
INCOME BEFORE TAXES ON INCOME |
|
4,109,350 |
|
|
2,961,504 |
|
|
|
|
|
|
Federal and state income taxes |
|
925,600 |
|
|
673,879 |
|
|
|
|
|
|
NET INCOME |
$ |
3,183,750 |
|
$ |
2,287,625 |
|
Net (income) attributable to noncontrolling
interest |
$ |
(3,954 |
) |
$ |
(124,375 |
) |
Net income attributable to Partners Bancorp |
$ |
3,179,796 |
|
$ |
2,163,250 |
|
|
|
|
|
|
Earnings per common share: |
|
|
|
Basic |
$ |
0.177 |
|
$ |
0.122 |
|
|
Diluted |
$ |
0.177 |
|
$ |
0.122 |
|
|
|
|
|
|
The amounts
presented in these Consolidated Statements of Income for the three
months ended June 30, 2022 and 2021 are unaudited |
but include all
adjustments which, in management's opinion, are necessary for fair
presentation. |
|
|
|
|
|
PARTNERS
BANCORP |
CONSOLIDATED
STATEMENTS OF INCOME |
(Unaudited) |
|
|
|
|
|
|
|
|
Six Months
Ended |
|
|
|
June 30, |
|
|
|
2022 |
2021 |
|
|
|
|
|
INTEREST INCOME ON: |
|
|
|
Loans, including fees |
$ |
26,103,285 |
|
$ |
26,236,463 |
|
|
Investment securities: |
|
|
|
|
Taxable |
|
912,204 |
|
|
447,701 |
|
|
|
Tax-exempt |
|
364,531 |
|
|
444,831 |
|
|
Federal funds sold |
|
80,321 |
|
|
19,405 |
|
|
Other interest income |
|
716,380 |
|
|
254,541 |
|
|
|
|
|
28,176,721 |
|
|
27,402,941 |
|
|
|
|
|
|
INTEREST EXPENSE ON: |
|
|
|
Deposits |
|
2,369,225 |
|
|
3,594,820 |
|
|
Borrowings |
|
1,013,119 |
|
|
1,160,212 |
|
|
|
|
|
3,382,344 |
|
|
4,755,032 |
|
|
|
|
|
|
NET INTEREST INCOME |
|
24,794,377 |
|
|
22,647,909 |
|
|
Provision for credit losses |
|
384,000 |
|
|
2,598,000 |
|
|
|
|
|
|
NET INTEREST INCOME AFTER PROVISION |
|
|
|
FOR CREDIT LOSSES |
|
24,410,377 |
|
|
20,049,909 |
|
|
|
|
|
|
OTHER INCOME: |
|
|
|
Service charges on deposit accounts |
|
472,020 |
|
|
350,696 |
|
|
Gains on sales and calls of investment securities |
|
- |
|
|
19,793 |
|
|
Impairment (loss) on restricted stock |
|
(1,182 |
) |
|
- |
|
|
Mortgage banking income |
|
717,968 |
|
|
2,108,679 |
|
|
Gains on sales of other assets |
|
- |
|
|
1,405 |
|
|
Other income |
|
1,556,129 |
|
|
1,988,926 |
|
|
|
|
|
2,744,935 |
|
|
4,469,499 |
|
|
|
|
|
|
OTHER EXPENSES: |
|
|
|
Salaries and employee benefits |
|
11,079,587 |
|
|
10,945,766 |
|
|
Premises and equipment |
|
2,880,875 |
|
|
2,475,024 |
|
|
Amortization of core deposit intangible |
|
266,583 |
|
|
306,361 |
|
|
(Gains) losses and operating expenses on other real estate
owned |
|
(9,515 |
) |
|
148,169 |
|
|
Merger related expenses |
|
552,664 |
|
|
- |
|
|
Other expenses |
|
5,530,154 |
|
|
6,074,731 |
|
|
|
|
|
20,300,348 |
|
|
19,950,051 |
|
|
|
|
|
|
INCOME BEFORE TAXES ON INCOME |
|
6,854,964 |
|
|
4,569,357 |
|
|
|
|
|
|
Federal and state income taxes |
|
1,621,934 |
|
|
1,007,073 |
|
|
|
|
|
|
NET INCOME |
$ |
5,233,030 |
|
$ |
3,562,284 |
|
Net loss (income) attributable to noncontrolling
interest |
$ |
55,527 |
|
$ |
(309,390 |
) |
Net income attributable to Partners Bancorp |
$ |
5,288,557 |
|
$ |
3,252,894 |
|
|
|
|
|
|
Earnings per common share: |
|
|
|
Basic |
$ |
0.294 |
|
$ |
0.183 |
|
|
Diluted |
$ |
0.293 |
|
$ |
0.183 |
|
|
|
|
|
|
The amounts
presented in these Consolidated Statements of Income for the six
months ended June 30, 2022 and 2021 are unaudited |
but include all
adjustments which, in management's opinion, are necessary for fair
presentation. |
Grafico Azioni Partners Bancorp (NASDAQ:PTRS)
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Da Apr 2024 a Mag 2024
Grafico Azioni Partners Bancorp (NASDAQ:PTRS)
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Da Mag 2023 a Mag 2024