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 $4.1
million, or $0.23 per share, for the three months ended September
30, 2022, a $1.4 million or 52.5% increase when compared to net
income attributable to the Company of $2.7 million, or $0.15 per
share, for the same period in 2021. For the nine months ended
September 30, 2022, the Company reported net income attributable to
the Company of $9.4 million, or $0.52 per share, a $3.5 million or
58.0% increase when compared to net income attributable to the
Company of $5.9 million, or $0.33 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. The
mergers remain subject to receipt of all required regulatory
approvals and fulfillment of other customary closing conditions.
OceanFirst continues to work towards regulatory approval for the
transaction. The one-year anniversary of the merger agreement is
November 4, 2022. After that date, either party may (but is not
obligated to) terminate the agreement without penalty.
As previously disclosed, on October 26, 2022,
the Company’s board of directors declared a cash dividend of $0.04
per share, which is payable on November 17, 2022, to holders of
record of its common stock as of the close of business on November
9, 2022.
The Company’s results of operations for the
three months ended September 30, 2022 were directly impacted by the
following:
Positive Impacts:
- An increase in
net interest income due primarily to a decrease in average
interest-bearing deposit balances and lower rates paid, a decrease
in average borrowings balances, an increase in average loan
balances, an increase in yields earned on average cash and cash
equivalents balances, and an increase in average investment
securities balances and yields earned, which were partially offset
by lower loan yields earned, and a decrease in average cash and
cash equivalents balances. Net interest income was negatively
impacted during the three months ended September 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); and
- Recording no
losses or operating expenses on other real estate owned during the
three months ended September 30, 2022.
Negative Impacts:
- Recording a
provision for credit losses as compared to a (reversal of) credit
losses for the same period of 2021 due primarily to organic loan
growth, which was partially offset by the current economic
environment and the milder impact of the COVID-19 pandemic compared
to September 30, 2021;
- Recording
losses on sales and calls of investment securities as compared to
gains for the same period of 2021;
- 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
- Merger related
expenses of $167 thousand were incurred during the three months
ended September 30, 2022 in connection with the Company’s pending
merger with OceanFirst.
The Company’s results of operations for the nine
months ended September 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 nine months
ended September 30, 2022 due to lower net loan fees earned related
to the forgiveness of loans originated and funded under the
PPP;
- 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 September 30, 2021; and
- Recording gains
on other real estate owned as compared to losses for the same
period of 2021.
Negative Impacts:
- Recording
losses on sales and calls of investment securities as compared to
gains for the same period of 2021;
- 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 $720 thousand were incurred during the nine months
ended September 30, 2022 in connection with the Company’s pending
merger with OceanFirst.
For the three months ended September 30, 2022,
the Company’s annualized return on average assets, annualized
return on average equity and efficiency ratio were 0.98%, 12.01%
and 64.00%, respectively, as compared to 0.66%, 7.79% and 73.81%,
respectively, for the same period in 2021.
For the nine months ended September 30, 2022,
the Company’s annualized return on average assets, annualized
return on average equity and efficiency ratio were 0.75%, 9.23% and
69.96%, respectively, as compared to 0.50%, 5.86% and 73.46%,
respectively, for the same period in 2021.
The increase in net income attributable to the
Company for the three months ended September 30, 2022, as compared
to the same period in 2021, was driven by an increase in net
interest income and lower other expenses, and was partially offset
by a higher provision for credit losses, a decrease in other income
and higher federal and state income taxes.
The increase in net income attributable to the
Company for the nine months ended September 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.
Lloyd B. Harrison, III, the Company’s Chief
Executive Officer, commented, “I am pleased with our operating
results for the first nine months of 2022 as loan growth came in
ahead of our internal targets. During the first nine months of
2022, the Company generated loan growth of 7.8% 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 and to improve our funding mix
and cost. As a result of these efforts, the Company generated
non-interest bearing demand deposit growth of 15.0% during the nine
months ended September 30, 2022, which now represent 39.0% of total
deposits at September 30, 2022 as compared to 34.2% of total
deposits at December 31, 2021. As of September 30, 2022, the
Company’s expansion into the Greater Washington market has added
$96.4 million in net loans and $109.6 million in total deposits,
including $83.9 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 nine
months ended September 30, 2022, our net interest margin improved
by 0.62% and 0.22%, respectively, when compared to the same periods
in 2021, and improved by 0.48% when compared to the second quarter
of 2022. Despite the impact of $720 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 nine months of 2022,
we are reporting improved earnings for the nine months ended
September 30, 2022, with net income attributable to the Company
increasing by 58.0% when compared to the same period of 2021.”
Harrison continued, “Throughout the balance 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.”
Interest Income and Expense – Three
Months Ended September 30, 2022 and 2021
Net interest income and net interest margin
Net interest income in the third quarter of 2022
increased by $3.0 million, or 25.0%, when compared to the third
quarter of 2021. The Company’s net interest margin (tax equivalent
basis) increased to 3.64%, representing an increase of 62 basis
points for the three months ended September 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
investment securities, higher yields earned on average interest
bearing deposits in other financial institutions and federal funds
sold, and lower average balances of and rates paid on
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, and lower average balances of
interest bearing deposits in other financial institutions and
federal funds sold. Total interest income increased by $2.4
million, or 16.9%, for the three months ended September 30, 2022,
while total interest expense decreased by $595 thousand, or 27.3%,
both as compared to the same period in 2021.
The most significant factors impacting net
interest income during the three month period ended September 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 previously low interest rate environment;
- Decrease in
average interest bearing deposits in other financial institutions
and federal funds sold, primarily due to loan growth outpacing
deposit growth and higher investment securities balances, and
higher yields on each due to higher interest rates over the
comparable periods;
- Decrease in
average interest-bearing deposit balances and lower rates paid,
primarily due to scheduled maturities of higher cost time deposits
that were not replaced, partially offset by organic deposit growth
in money market and savings accounts, and lower rates paid on
average interest bearing demand, money market and time deposits;
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.
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 $81.9
million, or 7.5%, and average yields earned decreased by 0.09% to
4.77% for the three months ended September 30, 2022, as compared to
the same period in 2021. The increase in average loan balances was
primarily due to organic loan growth, including growth in average
loan balances of approximately $53.3 million 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. 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 and
pay-offs of higher yielding fixed rate loans, which were partially
offset by repricing of variable rate loans and higher average
yields on new loan originations. Total average loans were 72.3% of
total average interest-earning assets for the three months ended
September 30, 2022, compared to 69.4% for the three months ended
September 30, 2021.
Investment securities
Average total investment securities balances
increased by $27.5 million, or 21.6%, and average yields earned
increased by 0.31% to 2.30% for the three months ended September
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
previously low interest rate environment. During the third 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 9.5% of total average interest-earning assets for
the three months ended September 30, 2022, compared to 8.1% for the
three months ended September 30, 2021.
Interest-bearing deposits
Average total interest-bearing deposit balances
decreased by $33.8 million, or 3.6%, and average rates paid
decreased by 0.23% to 0.47% for the three months ended September
30, 2022, as compared to the same period in 2021, primarily due to
scheduled maturities of higher cost time deposits that were not
replaced, partially offset by organic deposit growth in money
market and savings accounts, including average growth of
approximately $12.4 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 $697
thousand, or 1.4%, and average rates paid increased by 0.09% to
4.01% for the three months ended September 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. The increase in average rates paid was primarily due
to the decrease in the average balance of Federal Home Loan Bank
advances which was a lower cost interest-bearing liability.
Interest Income and Expense – Nine
Months Ended September 30, 2022 and 2021
Net interest income and net interest margin
Net interest income during the first nine months
of 2022 increased by $5.1 million, or 14.9%, when compared to the
first nine months of 2021. The Company’s net interest margin (tax
equivalent basis) increased to 3.27%, representing an increase of
22 basis points for the nine months ended September 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 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 $3.1 million, or 7.6%, for the nine
months ended September 30, 2022, while total interest expense
decreased by $2.0 million, or 28.6%, both as compared to the same
period in 2021.
The most significant factors impacting net
interest income during the nine months ended September 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 previously 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 $74.5
million, or 6.9%, and average yields earned decreased by 0.24% to
4.66% for the nine months ended September 30, 2022, as compared to
the same period in 2021. The increase in average loan balances was
primarily due to organic loan growth, including growth in average
loan balances of approximately $53.9 million 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. 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 and
pay-offs of higher yielding fixed rate loans, which were partially
offset by the repricing of variable rate loans and higher average
yields on new loan originations. Total average loans were 71.0% of
total average interest-earning assets for the nine months ended
September 30, 2022, compared to 70.8% for the nine months ended
September 30, 2021.
Investment securities
Average total investment securities balances
increased by $15.9 million, or 12.3%, and average yields earned
increased by 0.34% to 2.20% for the nine months ended September 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
previously low interest rate environment. During the first nine
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 8.9% of total average interest-earning assets for
the nine months ended September 30, 2022, compared to 8.5% for the
nine months ended September 30, 2021.
Interest-bearing deposits
Average total interest-bearing deposit balances
increased by $16.5 million, or 1.8%, and average rates paid
decreased by 0.28% to 0.50% for the nine months ended September 30,
2022, as compared to the same period in 2021, primarily due to
organic deposit growth, including average growth of approximately
$20.5 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 $12.6
million, or 20.4%, and average rates paid increased by 0.52% to
4.03% for the nine months ended September 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 (Reversal of) Credit
Losses
The provision for credit losses in the third
quarter of 2022 was $419 thousand, an increase of $449 thousand, or
1,496.7%, when compared to the (reversal of) credit losses of $30
thousand in the third quarter of 2021. The increase in the
provision for credit losses during the three months ended September
30, 2022, as compared to the same period of 2021, was primarily due
to organic loan growth, loans acquired in the Virginia Partners
acquisition that have converted from acquired to originated status
and higher net charge-offs, which were partially offset by 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.
The provision for credit losses during the first nine months of
2022 was $803 thousand, a decrease of $1.8 million, or 68.7%, when
compared to the provision for credit losses of $2.6 million during
the first nine months of 2021. The decrease in the provision for
credit losses during the nine months ended September 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 nine months ended September 30, 2022, as well as the allowance
for credit losses as of September 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 September 30, 2022,
the Company’s delinquencies and nonperforming assets had not been
materially impacted by the COVID-19 pandemic. In addition, as of
September 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 third quarter of 2022
decreased by $834 thousand, or 40.2%, when compared to the third
quarter of 2021. Key changes in the components of other income for
the three months ended September 30, 2022, as compared to the same
period in 2021, are as follows:
- Service charges
on deposit accounts increased by $30 thousand, or 13.3%, 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;
-
(Losses) gains on sales and calls of investment securities
increased by $8 thousand, or 310.1%, due primarily to Virginia
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 2021. In addition, during the third
quarter of 2021, Delmarva recorded gains of $3 thousand on sales or
calls of investment securities, as compared to recording no gains
on sales or calls of investment securities during the same period
of 2022;
-
Mortgage banking income decreased by $725 thousand, or 75.8%, 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; and
-
Other income decreased by $131 thousand, or 14.7%, 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 and
debit card income.
Other income for the nine months ended September
30, 2022 decreased by $2.6 million, or 39.1%, when compared to the
nine months ended September 30, 2021. Key changes in the components
of other income for the nine months ended September 30, 2022, as
compared to the same period in 2021, are as follows:
- Service charges
on deposit accounts increased by $151 thousand, or 26.3%, 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;
-
(Losses) gains on sales and calls of investment securities
decreased by $28 thousand, or 123.8%, due primarily to Virginia
Partners recording losses of $5 thousand on sales or calls of
investment securities during the first nine months of 2022, as
compared to recording gains of $19 thousand on sales or calls of
investment securities during the same period of 2021. In addition,
during the first nine months of 2021, Delmarva recorded gains of $3
thousand on sales or calls of investment securities, 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 $2.1 million, or 69.0%, 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 $563 thousand, or 19.6%, 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 and
debit card income, which were partially offset by Delmarva
recording higher earnings on bank owned life insurance policies due
to additional purchases made in 2021.
Other Expenses
Other expenses in the third quarter of 2022
decreased by $10 thousand, or 0.1%, when compared to the third
quarter of 2021. Key changes in the components of other expenses
for the three months ended September 30, 2022, as compared to the
same period in 2021, are as follows:
- Salaries and
employee benefits decreased by $149 thousand, or 2.6%, primarily
due to decreases related to staffing changes, a decrease in
commissions expense paid due to the decrease in mortgage banking
income from Virginia Partners’ majority owned subsidiary Johnson
Mortgage Company, LLC, and lower payroll taxes, which were
partially offset by merit increases and higher expenses related to
benefit costs and bonus accruals. In addition, salaries and
employee benefits increased due to Virginia Partners’ new key hires
and expansion into the Greater Washington market;
- Premises and
equipment increased by $98 thousand, or 7.5%, primarily due to an
increase related to Virginia Partners opening its new full-service
branch and commercial banking office in Reston, Virginia during the
third quarter of 2021, and higher expenses related to software
amortization and maintenance contracts, which were partially offset
by lower expenses related to building security and purchased
equipment and furniture, the cost of which did not qualify for
capitalization;
- Amortization of
core deposit intangible decreased by $20 thousand, or 13.4%,
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;
- Losses and
operating expenses on other real estate owned decreased by $35
thousand, or 100.0%, primarily due to valuation adjustments and
expenses being recorded on properties during the third quarter of
2021 as compared to no valuation adjustments or expenses being
recorded during the same period of 2022;
- Merger related
expenses increased from zero to $167 thousand, primarily due to
legal fees and other costs associated with the pending merger with
OceanFirst; and
- Other expenses
decreased by $72 thousand, or 2.4%, primarily due to lower expenses
related to legal, other professional fees, FDIC insurance
assessments, other losses, postage, printing and supplies, and
travel and entertainment, which were partially offset by higher
expenses related to loans, advertising, ATM, audit and accounting
fees, and sponsorships.
Other expenses for the nine months ended
September 30, 2022 increased by $365 thousand, or 1.2%, when
compared to the nine months ended September 30, 2021. Key changes
in the components of other expenses for the nine months ended
September 30, 2022, as compared to the same period in 2021, are as
follows:
- Salaries and
employee benefits decreased by $16 thousand, or 0.1%, primarily due
to decreases related to staffing changes and a decrease in
commissions expense paid due to the decrease in mortgage banking
income from Virginia Partners’ majority owned subsidiary Johnson
Mortgage Company, LLC, which were partially offset by merit
increases and higher expenses related to payroll taxes, benefit
costs, stock-based compensation expense and bonus accruals. In
addition, salaries and employee benefits increased due to 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;
- Premises and
equipment increased by $504 thousand, or 13.3%, 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, and higher expenses related to software
amortization and maintenance contracts, which were partially offset
by lower expenses related to building security and purchased
software, the cost of which did not qualify for
capitalization;
- Amortization of
core deposit intangible decreased by $60 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 $192
thousand, or 105.2%, primarily due to valuation adjustments being
recorded on properties during the first nine 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 $720 thousand, primarily due to
legal fees and other costs associated with the pending merger with
OceanFirst; and
- Other expenses
decreased by $591 thousand, or 6.5%, primarily due to lower
expenses related to legal, subscriptions and publications, 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, loans,
consulting, ATM, Virginia Partners state franchise tax, and
telephone and data circuits.
Federal and State Income
Taxes
Federal and state income taxes for the three
months ended September 30, 2022 increased by $453 thousand, or
53.9%, when compared to the three months ended September 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
September 30, 2022, the Company’s effective tax rate was
approximately 23.9% as compared to 23.8% for the same period in
2021.
Federal and state income taxes for the nine
months ended September 30, 2022 increased by $1.1 million, or
57.8%, when compared to the nine months ended September 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 nine months ended
September 30, 2022 and 2021, the Company’s effective tax rate was
approximately 23.7%, respectively.
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 nine months ended September 30, 2022 and
2021.
Balance Sheet
Changes in key balance sheet components as of
September 30, 2022 compared to December 31, 2021 were as
follows:
- Total assets as
of September 30, 2022 were $1.65 billion, an increase of $5.7
million, or 0.3%, 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 September
30, 2022 were $210.9 million, a decrease of $87.0 million, or
29.2%, from December 31, 2021. Key drivers of this change were an
increase in investment securities available for sale, at fair
value, and total loan growth outpacing total deposit growth;
- Federal funds
sold as of September 30, 2022 were $24.6 million, a decrease of
$3.5 million, or 12.4%, 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 September 30,
2022 were $131.5 million, an increase of $9.4 million, or 7.7%,
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 $1.8 million as of
September 30, 2022 were $1.20 billion, an increase of $86.8
million, or 7.8%, from December 31, 2021. The key driver of this
change was an increase in organic growth, including growth of
approximately $46.2 million in loans related to Virginia Partners’
recent expansion into the Greater Washington market, which was
partially offset by forgiveness payments received of approximately
$8.2 million under round two of the PPP. As of September 30, 2022,
there were no loans under round two of the PPP that were still
outstanding;
- Total deposits
as of September 30, 2022 were $1.46 billion, an increase of $13.1
million, or 0.9%, 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 September 30, 2022 were $48.8 million, a decrease
of $404 thousand, or 0.8%, 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 September 30, 2022 was $133.8 million, a
decrease of $7.6 million, or 5.4%, 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 nine months ended September 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
September 30, 2022 compared to September 30, 2021 were as
follows:
- Total assets as
of September 30, 2022 were $1.65 billion, an increase of $12.9
million, or 0.8%, from September 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 September
30, 2022 were $210.9 million, a decrease of $89.8 million, or
29.9%, from September 30, 2021. Key drivers of this change were
total loan growth outpacing total deposit growth and an increase in
investment securities available for sale, at fair value;
- Federal funds
sold as of September 30, 2022 were $24.6 million, a decrease of
$5.4 million, or 18.1%, from September 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 September 30,
2022 were $131.5 million, an increase of $15.9 million, or 13.8%,
from September 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 previously 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 $1.8 million as of
September 30, 2022 were $1.20 billion, an increase of $98.8
million, or 8.9%, from September 30, 2021. Key drivers of this
change were an increase in organic growth, including growth of
approximately $55.8 million in loans related to Virginia Partners’
recent expansion into the Greater Washington market, which was
partially offset by forgiveness payments received of approximately
$14.4 million under rounds one and two of the PPP. As of September
30, 2022, there were no loans under rounds one or two of the PPP
that were still outstanding;
- Total deposits
as of September 30, 2022 were $1.46 billion, an increase of $20.5
million, or 1.4%, from September 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 September 30, 2022 were $48.8 million, a decrease
of $442 thousand, or 0.9%, from September 30, 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 September 30, 2022 was $133.8 million, a
decrease of $5.8 million, or 4.1%, from September 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 October 1, 2021 through
September 30, 2022, the proceeds from stock option exercises, and
stock-based compensation expense related to restricted stock
awards.
As of September 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 nine months ended September 30, 2022 and
2021:
Net Charge-off Activity |
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
Dollars in Thousands |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
$ |
660 |
|
|
$ |
249 |
|
|
$ |
1,640 |
|
|
$ |
740 |
|
Net charge-offs/Average loans* |
|
|
0.22 |
% |
|
|
0.09 |
% |
|
|
0.19 |
% |
|
|
0.09 |
% |
* Annualized for the three and nine months ended September 30, 2022
and 2021, respectively. |
|
|
|
|
The following table depicts the level of the
allowance for credit losses as of September 30, 2022, December 31,
2021 and September 30, 2021:
Allowance for Credit Losses |
|
|
|
|
|
|
|
|
|
|
|
Dollars in Thousands |
|
September 30, 2022 |
|
December 31, 2021 |
|
September 30, 2021 |
|
|
|
|
|
|
|
Allowance for credit losses |
|
$ |
13,818 |
|
|
$ |
14,656 |
|
|
$ |
15,031 |
|
Allowance for credit losses/Period end loans |
|
|
1.15 |
% |
|
|
1.31 |
% |
|
|
1.36 |
% |
Allowance for credit losses/Period end loans (excluding PPP
loans) |
|
|
1.15 |
% |
|
|
1.32 |
% |
|
|
1.38 |
% |
Allowance for credit losses/Nonaccrual loans |
|
|
341.19 |
% |
|
|
163.55 |
% |
|
|
222.45 |
% |
Allowance for credit losses/Nonperforming loans |
|
|
319.49 |
% |
|
|
163.55 |
% |
|
|
222.45 |
% |
As of September 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 |
|
September 30, 2022 |
|
December 31, 2021 |
|
September 30, 2021 |
|
|
|
|
|
|
|
Unamortized discounts on acquired loans |
|
$ |
1,810 |
|
|
$ |
2,329 |
|
|
$ |
2,660 |
|
The following table depicts the level of
nonperforming assets as of September 30, 2022, December 31, 2021
and September 30, 2021:
Nonperforming Assets |
|
|
|
|
|
|
|
|
|
|
|
Dollars in Thousands |
|
September 30, 2022 |
|
December 31, 2021 |
|
September 30, 2021 |
|
|
|
|
|
|
|
Nonaccrual loans |
|
$ |
4,050 |
|
|
$ |
8,961 |
|
|
$ |
6,757 |
|
Loans past due 90 days and accruing interest |
|
$ |
275 |
|
|
$ |
- |
|
|
$ |
- |
|
Total nonperforming loans |
|
$ |
4,325 |
|
|
$ |
8,961 |
|
|
$ |
6,757 |
|
Other real estate owned, net |
|
$ |
- |
|
|
$ |
837 |
|
|
$ |
1,303 |
|
Total nonperforming assets |
|
$ |
4,325 |
|
|
$ |
9,798 |
|
|
$ |
8,060 |
|
Nonperforming assets/Total assets |
|
|
0.26 |
% |
|
|
0.60 |
% |
|
|
0.49 |
% |
Nonperforming assets/Total loans and other real estate owned,
net |
|
|
0.36 |
% |
|
|
0.88 |
% |
|
|
0.73 |
% |
COVID-19 Pandemic Update
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 September 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. During round
two of this program, on a consolidated basis, the Company directly
originated and funded over 430 loans totaling approximately $30.9
million, none of which were pledged as collateral to the Federal
Reserve Bank Discount Window under the PPP Liquidity Facility. As
of September 30, 2022, on a consolidated basis, the Company had no
loans outstanding under round two of this program.
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
September 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 September 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 September 30,
2022:
As of September 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) |
$ |
80,606 |
32 |
6.70% |
Amusement Services |
|
16,115 |
16 |
1.34% |
Restaurants |
|
66,855 |
65 |
5.55% |
Retail Commercial Real Estate |
|
33,052 |
40 |
2.75% |
Movie Theatres |
|
6,136 |
2 |
0.51% |
Aviation |
|
0 |
0 |
0.00% |
Charter Boats/Cruises |
|
1,702 |
3 |
0.14% |
Commuter Services |
|
44 |
4 |
0.00% |
Manufacturing/Distribution |
|
2,112 |
6 |
0.18% |
Totals |
$ |
206,622 |
168 |
17.16% |
* Excludes loans originated under the PPP of the Small Business
Administration. |
|
|
As of September 30, 2022, there were no loans
within these higher risk industries with respect to which the
Company has granted loan payment deferrals.
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 as 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 |
|
|
|
|
|
|
|
September 30, |
September 30, |
December 31, |
|
|
|
2022 |
|
|
2021 |
|
2021 |
|
(Unaudited) |
(Unaudited) |
* |
|
|
|
|
|
ASSETS |
|
|
|
Cash and due from banks |
$ |
12,783,517 |
|
$ |
16,175,876 |
$ |
12,886,968 |
Interest bearing deposits in other financial institutions |
|
210,934,967 |
|
|
300,769,632 |
|
297,901,913 |
Federal funds sold |
|
24,572,501 |
|
|
29,995,154 |
|
28,039,854 |
|
Cash and cash equivalents |
|
248,290,985 |
|
|
346,940,662 |
|
338,828,735 |
Investment securities available for sale, at fair value |
|
131,465,149 |
|
|
115,550,452 |
|
122,020,826 |
Loans held for sale |
|
201,245 |
|
|
5,803,392 |
|
4,064,312 |
Loans, less allowance for credit losses of $13,818,248 at September
30, 2022, |
|
|
|
$15,031,048 at September 30, 2021 and $14,655,654 at December 31,
2021 |
|
1,190,142,289 |
|
|
1,090,169,336 |
|
1,102,538,982 |
Accrued interest receivable |
|
4,034,632 |
|
|
4,407,957 |
|
4,313,207 |
Premises and equipment, less accumulated depreciation |
|
15,257,774 |
|
|
16,347,011 |
|
16,174,870 |
Restricted stock |
|
4,889,150 |
|
|
4,869,456 |
|
4,869,456 |
Operating lease right-of-use assets |
|
5,290,145 |
|
|
6,725,663 |
|
6,009,025 |
Finance lease right-of-use assets |
|
1,584,382 |
|
|
1,721,289 |
|
1,687,059 |
Other investments |
|
4,864,456 |
|
|
5,075,104 |
|
5,064,801 |
Bank owned life insurance |
|
18,592,308 |
|
|
18,140,898 |
|
18,254,339 |
Other real estate owned, net |
|
- |
|
|
1,303,325 |
|
837,000 |
Core deposit intangible, net |
|
1,665,517 |
|
|
2,205,431 |
|
2,060,463 |
Goodwill |
|
9,581,668 |
|
|
9,581,668 |
|
9,581,668 |
Other assets |
|
14,850,016 |
|
|
9,006,592 |
|
8,675,237 |
|
Total assets |
$ |
1,650,709,716 |
|
$ |
1,637,848,236 |
$ |
1,644,979,980 |
|
|
|
|
|
LIABILITIES |
|
|
|
Deposits: |
|
|
|
Non-interest bearing demand |
$ |
568,113,490 |
|
$ |
493,786,134 |
$ |
493,913,054 |
Interest bearing demand |
|
143,564,095 |
|
|
148,955,060 |
|
159,420,637 |
Savings and money market |
|
441,230,050 |
|
|
382,991,875 |
|
410,286,409 |
Time |
|
303,036,620 |
|
|
409,719,600 |
|
379,255,563 |
|
|
|
1,455,944,255 |
|
|
1,435,452,669 |
|
1,442,875,663 |
Accrued interest payable on deposits |
|
189,311 |
|
|
311,422 |
|
279,943 |
Long-term borrowings with the Federal Home Loan Bank |
|
25,819,286 |
|
|
26,477,857 |
|
26,313,214 |
Subordinated notes payable, net |
|
22,203,050 |
|
|
22,156,724 |
|
22,168,305 |
Other borrowings |
|
810,771 |
|
|
640,280 |
|
755,403 |
Operating lease liabilities |
|
5,687,948 |
|
|
7,052,986 |
|
6,372,332 |
Finance lease liabilities |
|
2,035,918 |
|
|
2,154,737 |
|
2,125,347 |
Other liabilities |
|
4,260,635 |
|
|
4,052,808 |
|
2,722,266 |
|
Total liabilities |
|
1,516,951,174 |
|
|
1,498,299,483 |
|
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 September 30, 2022, 17,788,472 as of September 30, 2021 and
17,941,604 as of December |
|
|
31, 2021, including 18,669 nonvested shares as of September 30,
2022, 58,824 nonvested shares |
|
|
as of September 30, 2021 and 28,000 nonvested shares as of December
31, 2021 |
|
179,430 |
|
|
177,266 |
|
179,136 |
Surplus |
|
88,575,750 |
|
|
87,058,140 |
|
88,389,831 |
Retained earnings |
|
59,355,817 |
|
|
50,288,700 |
|
51,304,840 |
Noncontrolling interest in consolidated subsidiaries |
|
727,299 |
|
|
1,121,482 |
|
1,179,042 |
Accumulated other comprehensive (loss) income, net of tax |
|
(15,079,754 |
) |
|
903,165 |
|
314,658 |
|
Total stockholders' equity |
|
133,758,542 |
|
|
139,548,753 |
|
141,367,507 |
|
Total liabilities and stockholders' equity |
$ |
1,650,709,716 |
|
$ |
1,637,848,236 |
$ |
1,644,979,980 |
|
|
|
|
|
* Derived from audited consolidated financial statements. |
|
|
|
The amounts presented in the Consolidated Balance Sheets as of
September 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 |
|
|
|
September 30, |
|
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
INTEREST INCOME ON: |
|
|
|
Loans, including fees |
$ |
14,118,979 |
|
$ |
13,380,511 |
|
|
Investment securities: |
|
|
|
|
Taxable |
|
606,695 |
|
|
309,776 |
|
|
|
Tax-exempt |
|
180,258 |
|
|
216,537 |
|
|
Federal funds sold |
|
352,763 |
|
|
24,895 |
|
|
Other interest income |
|
1,197,807 |
|
|
149,035 |
|
|
|
|
|
16,456,502 |
|
|
14,080,754 |
|
|
|
|
|
|
INTEREST EXPENSE ON: |
|
|
|
Deposits |
|
1,070,540 |
|
|
1,638,825 |
|
|
Borrowings |
|
511,096 |
|
|
537,894 |
|
|
|
|
|
1,581,636 |
|
|
2,176,719 |
|
|
|
|
|
|
NET INTEREST INCOME |
|
14,874,866 |
|
|
11,904,035 |
|
|
Provision for (reversal of) credit losses |
|
419,000 |
|
|
(30,000 |
) |
|
|
|
|
|
NET INTEREST INCOME AFTER PROVISION |
|
|
|
FOR (REVERSAL OF) CREDIT LOSSES |
|
14,455,866 |
|
|
11,934,035 |
|
|
|
|
|
|
OTHER INCOME: |
|
|
|
Service charges on deposit accounts |
|
254,646 |
|
|
224,670 |
|
|
(Losses) gains on sales and calls of investment securities |
|
(5,322 |
) |
|
2,533 |
|
|
Mortgage banking income |
|
231,373 |
|
|
956,809 |
|
|
Other income |
|
760,448 |
|
|
891,041 |
|
|
|
|
|
1,241,145 |
|
|
2,075,053 |
|
|
|
|
|
|
OTHER EXPENSES: |
|
|
|
Salaries and employee benefits |
|
5,687,787 |
|
|
5,837,203 |
|
|
Premises and equipment |
|
1,411,411 |
|
|
1,313,482 |
|
|
Amortization of core deposit intangible |
|
128,364 |
|
|
148,253 |
|
|
Losses and operating expenses on other real estate owned |
|
- |
|
|
34,794 |
|
|
Merger related expenses |
|
167,417 |
|
|
- |
|
|
Other expenses |
|
2,952,597 |
|
|
3,024,157 |
|
|
|
|
|
10,347,576 |
|
|
10,357,889 |
|
|
|
|
|
|
INCOME BEFORE TAXES ON INCOME |
|
5,349,435 |
|
|
3,651,199 |
|
|
|
|
|
|
Federal and state income taxes |
|
1,291,996 |
|
|
839,470 |
|
|
|
|
|
|
NET INCOME |
$ |
4,057,439 |
|
$ |
2,811,729 |
|
Net loss (income) attributable to noncontrolling
interest |
$ |
52,112 |
|
$ |
(116,907 |
) |
Net income attributable to Partners Bancorp |
$ |
4,109,551 |
|
$ |
2,694,822 |
|
|
|
|
|
|
Earnings per common share: |
|
|
|
Basic |
$ |
0.229 |
|
$ |
0.151 |
|
|
Diluted |
$ |
0.228 |
|
$ |
0.151 |
|
|
|
|
|
|
The amounts presented in these Consolidated Statements of Income
for the three months ended September 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) |
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
INTEREST INCOME ON: |
|
|
|
Loans, including fees |
$ |
40,222,265 |
|
$ |
39,616,973 |
|
|
Investment securities: |
|
|
|
|
Taxable |
|
1,518,898 |
|
|
757,478 |
|
|
|
Tax-exempt |
|
544,789 |
|
|
661,368 |
|
|
Federal funds sold |
|
433,085 |
|
|
44,300 |
|
|
Other interest income |
|
1,914,186 |
|
|
403,576 |
|
|
|
|
|
44,633,223 |
|
|
41,483,695 |
|
|
|
|
|
|
INTEREST EXPENSE ON: |
|
|
|
Deposits |
|
3,439,766 |
|
|
5,233,645 |
|
|
Borrowings |
|
1,524,214 |
|
|
1,723,087 |
|
|
|
|
|
4,963,980 |
|
|
6,956,732 |
|
|
|
|
|
|
NET INTEREST INCOME |
|
39,669,243 |
|
|
34,526,963 |
|
|
Provision for credit losses |
|
803,000 |
|
|
2,568,000 |
|
|
|
|
|
|
NET INTEREST INCOME AFTER PROVISION |
|
|
|
FOR CREDIT LOSSES |
|
38,866,243 |
|
|
31,958,963 |
|
|
|
|
|
|
OTHER INCOME: |
|
|
|
Service charges on deposit accounts |
|
726,664 |
|
|
575,366 |
|
|
(Losses) gains on sales and calls of investment securities |
|
(5,322 |
) |
|
22,326 |
|
|
Impairment (loss) on restricted stock |
|
(1,182 |
) |
|
- |
|
|
Mortgage banking income |
|
949,341 |
|
|
3,065,488 |
|
|
Gains on sales of other assets |
|
- |
|
|
1,405 |
|
|
Other income |
|
2,316,576 |
|
|
2,879,966 |
|
|
|
|
|
3,986,077 |
|
|
6,544,551 |
|
|
|
|
|
|
OTHER EXPENSES: |
|
|
|
Salaries and employee benefits |
|
16,767,374 |
|
|
16,782,969 |
|
|
Premises and equipment |
|
4,292,286 |
|
|
3,788,506 |
|
|
Amortization of core deposit intangible |
|
394,946 |
|
|
454,614 |
|
|
(Gains) losses and operating expenses on other real estate
owned |
|
(9,515 |
) |
|
182,963 |
|
|
Merger related expenses |
|
720,081 |
|
|
- |
|
|
Other expenses |
|
8,482,749 |
|
|
9,073,906 |
|
|
|
|
|
30,647,921 |
|
|
30,282,958 |
|
|
|
|
|
|
INCOME BEFORE TAXES ON INCOME |
|
12,204,399 |
|
|
8,220,556 |
|
|
|
|
|
|
Federal and state income taxes |
|
2,913,930 |
|
|
1,846,543 |
|
|
|
|
|
|
NET INCOME |
$ |
9,290,469 |
|
$ |
6,374,013 |
|
Net loss (income) attributable to noncontrolling
interest |
$ |
107,639 |
|
$ |
(426,297 |
) |
Net income attributable to Partners Bancorp |
$ |
9,398,108 |
|
$ |
5,947,716 |
|
|
|
|
|
|
Earnings per common share: |
|
|
|
Basic |
$ |
0.523 |
|
$ |
0.335 |
|
|
Diluted |
$ |
0.522 |
|
$ |
0.334 |
|
|
|
|
|
|
The amounts presented in these Consolidated Statements of Income
for the nine months ended September 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)
Storico
Da Ago 2024 a Set 2024
Grafico Azioni Partners Bancorp (NASDAQ:PTRS)
Storico
Da Set 2023 a Set 2024