Residential real estate loans were 20.1% of total loans at March 31, 2023 and 20.4% at December 31, 2022, representing a decrease of $626,000, less than 1% since December 31, 2022. At March 31, 2023, the Company did not hold any loans for sale.
The Company adopted ASU No. 2016-13 effective January 1, 2023. The impact of the adoption was and $2.4 million in the allowance for loan losses. The allowance for loan losses totaled $4.5 million at March 31, 2023, which represented 0.96% of total loans. The allowance for loan losses prior to adopting ASU 2016-13 December 31, 2021, or was $2.1 million or 0.45% of total loans. The allowance represents the amount which management and the Board of Directors estimates is adequate to provide for probable losses inherent in the loan portfolio. The allowance balance and the provision charged to expense are reviewed by management and the Board of Directors monthly using a risk evaluation model that considers borrowers’ past due experience, economic conditions and various other circumstances that are subject to change over time. Management believes the current balance of the allowance for loan losses is adequate to absorb probable incurred credit losses associated with the loan portfolio. Net loan (recoveries) charge-offs (exclusive of overdrafts net charge-offs of $19,000) for the three months ended March 31, 2023 were approximately ($4,000) . Net loans charged off (exclusive of overdrafts net charge-offs $31,000) was $29,000 for the three months ended March 31, 2022.
Earning Assets – Securities
The securities portfolio is comprised of U.S. Government agency-backed securities, tax-exempt obligations of state and political subdivisions and certain other investments. Securities available for sale at March 31, 2023 increased approximately $16.4 million from December 31, 2022 totals.
Sources of Funds – Deposits
The Company’s primary source of funds is core deposits from retail and business customers. These core deposits include all categories of interest-bearing and noninterest-bearing deposits, excluding certificates of deposit greater than $250,000. For the period ended March 31, 2023, total core deposits (interest and non interest bearing accounts and savings) decreased approximately $3.8 million, or 0.6% from December 31, 2022 totals. The Company’s savings accounts decreased $2.3 million or 1.6% from December 31, 2022 totals. The Company’s interest-bearing and non-interest bearing demand deposits decreased $16.6 million while certificates of deposit under $250,000 increased by $15.1 million.
The Company has a strong deposit base from public agencies, including local school districts, city and township municipalities, public works facilities and others that may tend to be more seasonal in nature resulting from the receipt and disbursement of state and federal grants. These entities have maintained fairly static balances with the Company due to various funding and disbursement timeframes.
Certificates of deposit greater than $250,000 are not considered part of core deposits, and as such, are used to balance rate sensitivity as a tool of funds management. At March 31, 2023, certificates of deposit greater than $250,000 decreased $7.3 million or 64.0%, from December 31, 2022 totals.
Sources of Funds – Securities Sold under Agreements to Repurchase and Other Borrowings
Other interest-bearing liabilities include securities sold under agreements to repurchase and Federal Home Loan Bank (“FHLB”) advances. The majority of the Company’s repurchase agreements are with local school districts and city and county governments. The Company’s repurchase agreements increased approximately $12.4 million from December 31, 2022 totals. At March 31, 2023, the Company has $75 million of fixed rate advances that mature over the next 3 to 5 years. Refer to footnote 10 for further information.
Results of Operations for the Three Months Ended March 31, 2023 and 2022
Net Income
The reported diluted earnings per share was $0.33 for the quarter ended March 31, 2023 compared to $0.30 for the quarter ended March 31, 2022, an increase of 10%.
Net Interest Income
Net interest income increased $913,000 or 16.6% for the three months ended March 31, 2023 compared to the same period in 2022.