- Net income of
$8.5 million and diluted earnings per share of$0.81 for the three months endedMarch 31, 2024 compared to net income of$7.6 million and diluted earnings per share of$0.73 for the three months endedDecember 31, 2023 ; - Excluding the impact of
$0.7 million in expenses related to the pending merger of equals transaction with Codorus Valley Bancorp, Inc., net income and diluted earnings per share, respectively, were$9.2 million (1) and$0.88 (1) for the first quarter of 2024 compared to net income and diluted earnings per share of$8.6 million (1) and$0.83 (1), respectively, excluding the impact of$1.1 million in merger-related expenses recorded for the fourth quarter of 2023; - As a result of the payoff of a commercial real estate loan which totaled
$13.4 million atDecember 31, 2023 , nonaccrual loans decreased to$12.9 million atMarch 31, 2024 from$25.5 million atDecember 31, 2023 ; nonaccrual loans to total loans declined to 0.56% atMarch 31, 2024 from 1.11% atDecember 31, 2023 ; - Net interest margin, on a tax equivalent basis, was 3.77% in the first quarter of 2024 compared to 3.71% in the fourth quarter of 2023; during the three months ended
March 31, 2024 , the Bank recognized interest income previously applied to principal of$1.6 million from the loan payoff noted above; - Return on average equity for the three months ended
March 31, 2024 was 12.79% compared to 12.21% for the three months endedDecember 31, 2023 ; excluding the aforementioned merger-related expenses in both periods, return on average equity was 13.79%(1) for the three months endedMarch 31, 2024 compared to 13.77%(1) for the three months endedDecember 31, 2023 ; - Deposit growth was
$137.1 million during the first quarter of 2024 compared to$12.4 million during the fourth quarter of 2023; - Total risk-based capital was 13.4% at
March 31, 2024 compared to 13.0% atDecember 31, 2023 ; - Tangible book value per common share(1) improved to
$23.47 per share atMarch 31, 2024 compared to$23.03 per share atDecember 31, 2023 ; - The Board of Directors declared a cash dividend of
$0.20 per common share, payableMay 14, 2024 , to shareholders of record as ofMay 7, 2024 .
(1) Non-GAAP measure. See Appendix A for additional information.
"We began this year with another solid quarter, highlighted by strong earnings. The successful workout of a large commercial real estate loan that entered non-accrual status at the end of 2022 aided our first quarter performance. Our team remains conscious of the current credit environment as we seek to limit risk while still taking steps to grow prudently. Excluding loan payoff activity that we initiated, we experienced modest loan growth and expect that to continue throughout the year. Orrstown's Wealth Management team is leading the way in generating strong fee income. As in prior years, expenses were higher in the first quarter and, excluding merger-related costs, are expected to normalize in the second quarter. Our liquidity position was bolstered by strong deposit growth, which included successful CD and money market production, as well as seasonal and short-term balances from which we expect some runoff,” commented
DISCUSSION OF RESULTS
Balance Sheet
Loans
Loans held for investment increased by
Loans held-for-sale decreased by
Investment securities, all of which are classified as available-for-sale, increased by
Deposits
During the first quarter of 2024, deposits increased by
Borrowings
The Bank actively manages its liquidity position through its various sources of funding to meet the needs of its clients. FHLB advances and other borrowings decreased by
Income Statement
Net Interest Income and Margin
Net interest income was
Interest income on loans, on a tax equivalent basis, increased by
Interest income on investment securities, on a tax equivalent basis, was
Interest expense, on a tax equivalent basis, increased by
Provision for Credit Losses
The Company recorded a provision for credit losses of
Special mention loans decreased by
Management regularly analyzes the commercial real estate portfolio, which includes the review of occupancy, cash flows, expenses and expiring leases, as well as the location of the real estate. At
Noninterest Income
Noninterest income increased by
For the three months ended
Wealth management income increased by
During the first quarter of 2024, the Company recorded swap fee income of
Noninterest Expenses
Noninterest expenses increased by
Salaries and benefits expense increased by
Other operating expenses decreased by
For the three months ended
Taxes other than income increased by
Income Taxes
The Company's effective tax rate for the first quarter of 2024 was 20.6% compared to 21.2% for the fourth quarter of 2023. The Company's effective tax rate for the three months ended
Capital
Shareholders’ equity totaled
Tangible book value per share(1) increased to
The Company's tangible common equity ratio decreased to 7.9% at
(1) Non-GAAP measure. See Appendix A for additional information.
Investor Relations Contact: |
Executive Vice President, Chief Financial Officer |
Phone (717) 510-7097 |
FINANCIAL HIGHLIGHTS (Unaudited) | ||||||||
Three Months Ended | ||||||||
(Dollars in thousands) | 2024 | 2023 | ||||||
Profitability for the period: | ||||||||
Net interest income | $ | 26,881 | $ | 26,294 | ||||
Provision for credit losses | 298 | 729 | ||||||
Noninterest income | 6,630 | 6,078 | ||||||
Noninterest expenses | 22,469 | 20,255 | ||||||
Income before income tax expense | 10,744 | 11,388 | ||||||
Income tax expense | 2,213 | 2,232 | ||||||
Net income available to common shareholders | $ | 8,531 | $ | 9,156 | ||||
Financial ratios: | ||||||||
Return on average assets (1) | 1.11 | % | 1.27 | % | ||||
Return on average assets, adjusted (1) (2) (3) | 1.19 | % | 1.27 | % | ||||
Return on average equity (1) | 12.79 | % | 15.88 | % | ||||
Return on average equity, adjusted (1) (2) (3) | 13.79 | % | 15.88 | % | ||||
Net interest margin (1) | 3.77 | % | 3.94 | % | ||||
Efficiency ratio | 67.0 | % | 62.6 | % | ||||
Efficiency ratio, adjusted (2) (3) | 65.0 | % | 62.6 | % | ||||
Income per common share: | ||||||||
Basic | $ | 0.82 | $ | 0.88 | ||||
Basic, adjusted (2) (3) | $ | 0.89 | $ | 0.88 | ||||
Diluted | $ | 0.81 | $ | 0.87 | ||||
Diluted, adjusted (2) (3) | $ | 0.88 | $ | 0.87 | ||||
Average equity to average assets | 8.66 | % | 7.97 | % | ||||
(1) Annualized for the three months ended | ||||||||
(2) Ratio for the three months ended | ||||||||
(3) Non-GAAP based financial measure. Please refer to Appendix A - Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations for a discussion of our use of non-GAAP based financial measures, including tables reconciling GAAP and non-GAAP financial measures appearing herein. | ||||||||
FINANCIAL HIGHLIGHTS (Unaudited) | |||||||
(continued) | |||||||
(Dollars in thousands, except per share amounts) | 2024 | 2023 | |||||
At period-end: | |||||||
Total assets | $ | 3,183,331 | $ | 3,064,240 | |||
Total deposits | 2,695,951 | 2,558,814 | |||||
Loans, net of allowance for credit losses | 2,273,908 | 2,269,611 | |||||
Loans held-for-sale, at fair value | 535 | 5,816 | |||||
Securities available for sale, at fair value | 514,909 | 513,519 | |||||
Borrowings | 127,099 | 147,285 | |||||
Subordinated notes | 32,111 | 32,093 | |||||
Shareholders' equity | 271,682 | 265,056 | |||||
Credit quality and capital ratios(1): | |||||||
Allowance for credit losses to total loans | 1.27 | % | 1.25 | % | |||
Total nonaccrual loans to total loans | 0.56 | % | 1.11 | % | |||
Nonperforming assets to total assets | 0.40 | % | 0.83 | % | |||
Allowance for credit losses to nonaccrual loans | 226 | % | 112 | % | |||
Total risk-based capital: | |||||||
13.4 | % | 13.0 | % | ||||
13.1 | % | 12.8 | % | ||||
Tier 1 risk-based capital: | |||||||
11.2 | % | 10.8 | % | ||||
11.9 | % | 11.6 | % | ||||
Tier 1 common equity risk-based capital: | |||||||
11.2 | % | 10.8 | % | ||||
11.9 | % | 11.6 | % | ||||
Tier 1 leverage capital: | |||||||
9.0 | % | 8.9 | % | ||||
9.6 | % | 9.5 | % | ||||
Book value per common share | $ | 25.38 | $ | 24.98 | |||
(1) Capital ratios are estimated, subject to regulatory filings. The Company elected the three-year phase in option for the day-one impact of ASU 2016-13 for current expected credit losses ("CECL") to regulatory capital. Beginning in 2023, the Company adjusted retained earnings, allowance for credit losses includable in tier 2 capital and the deferred tax assets from temporary differences in risk weighted assets by the permitted percentage of the day-one impact from adopting the CECL standard. | |||||||
CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||||
(Dollars in thousands, except per share amounts) | |||||||
Assets | |||||||
Cash and due from banks | $ | 23,552 | $ | 32,586 | |||
Interest-bearing deposits with banks | 159,170 | 32,575 | |||||
Cash and cash equivalents | 182,722 | 65,161 | |||||
Restricted investments in bank stocks | 11,453 | 11,992 | |||||
Securities available for sale (amortized cost of | 514,909 | 513,519 | |||||
Loans held for sale, at fair value | 535 | 5,816 | |||||
Loans | 2,303,073 | 2,298,313 | |||||
Less: Allowance for credit losses | (29,165 | ) | (28,702 | ) | |||
Net loans | 2,273,908 | 2,269,611 | |||||
Premises and equipment, net | 28,952 | 29,393 | |||||
Cash surrender value of life insurance | 73,656 | 73,204 | |||||
18,724 | 18,724 | ||||||
Other intangible assets, net | 2,189 | 2,414 | |||||
Accrued interest receivable | 13,496 | 13,630 | |||||
Deferred tax assets, net | 21,181 | 22,017 | |||||
Other assets | 41,606 | 38,759 | |||||
Total assets | $ | 3,183,331 | $ | 3,064,240 | |||
Liabilities | |||||||
Deposits: | |||||||
Noninterest-bearing | $ | 418,512 | $ | 430,959 | |||
Interest-bearing | 2,277,439 | 2,127,855 | |||||
Total deposits | 2,695,951 | 2,558,814 | |||||
Securities sold under agreements to repurchase and federal funds purchased | 12,099 | 9,785 | |||||
FHLB advances and other borrowings | 115,000 | 137,500 | |||||
Subordinated notes | 32,111 | 32,093 | |||||
Accrued interest and other liabilities | 56,488 | 60,992 | |||||
Total liabilities | 2,911,649 | 2,799,184 | |||||
Shareholders’ Equity | |||||||
Preferred stock, | — | — | |||||
Common stock, no par value—$0.05205 stated value per share; 50,000,000 shares authorized; 11,203,221 shares issued and 10,705,077 outstanding at | 583 | 583 | |||||
Additional paid—in capital | 187,267 | 189,027 | |||||
Retained earnings | 124,075 | 117,667 | |||||
Accumulated other comprehensive losses | (28,668 | ) | (28,476 | ) | |||
(11,575 | ) | (13,745 | ) | ||||
Total shareholders’ equity | 271,682 | 265,056 | |||||
Total liabilities and shareholders’ equity | $ | 3,183,331 | $ | 3,064,240 | |||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | |||||||||
Three Months Ended | |||||||||
(In thousands) | 2024 | 2023 | |||||||
Interest income | |||||||||
Loans | $ | 36,233 | $ | 28,744 | |||||
Investment securities - taxable | 4,584 | 4,370 | |||||||
Investment securities - tax-exempt | 877 | 865 | |||||||
Short-term investments | 956 | 298 | |||||||
Total interest income | 42,650 | 34,277 | |||||||
Interest expense | |||||||||
Deposits | 13,516 | 6,202 | |||||||
Securities sold under agreements to repurchase and federal funds purchased | 25 | 25 | |||||||
FHLB advances and other borrowings | 1,474 | 1,252 | |||||||
Subordinated notes | 754 | 504 | |||||||
Total interest expense | 15,769 | 7,983 | |||||||
Net interest income | 26,881 | 26,294 | |||||||
Provision for credit losses | 298 | 729 | |||||||
Net interest income after provision for credit losses | 26,583 | 25,565 | |||||||
Noninterest income | |||||||||
Service charges | 1,200 | 1,157 | |||||||
Interchange income | 911 | 965 | |||||||
Swap fee income | 199 | — | |||||||
Wealth management income | 3,102 | 2,747 | |||||||
Mortgage banking activities | 458 | 478 | |||||||
Investment securities losses | (5 | ) | (8 | ) | |||||
Other income | 765 | 739 | |||||||
Total noninterest income | 6,630 | 6,078 | |||||||
Noninterest expenses | |||||||||
Salaries and employee benefits | 13,752 | 12,196 | |||||||
Occupancy, furniture and equipment | 2,639 | 2,333 | |||||||
Data processing | 1,265 | 1,217 | |||||||
Advertising and bank promotions | 398 | 405 | |||||||
441 | 504 | ||||||||
Professional services | 631 | 734 | |||||||
Taxes other than income | 494 | 457 | |||||||
Intangible asset amortization | 225 | 250 | |||||||
Merger-related expenses | 672 | — | |||||||
Other operating expenses | 1,952 | 2,159 | |||||||
Total noninterest expenses | 22,469 | 20,255 | |||||||
Income before income tax expense | 10,744 | 11,388 | |||||||
Income tax expense | 2,213 | 2,232 | |||||||
Net income | $ | 8,531 | $ | 9,156 | |||||
Share information: | |||||||||
Basic earnings per share | $ | 0.82 | $ | 0.88 | |||||
Diluted earnings per share | $ | 0.81 | $ | 0.87 | |||||
Dividends paid per share | $ | 0.20 | $ | 0.20 | |||||
Weighted average shares - basic | 10,349 | 10,385 | |||||||
Weighted average shares - diluted | 10,482 | 10,496 | |||||||
ANALYSIS OF NET INTEREST INCOME | |||||||||||||||||||||||||||||||||||||||||||||||||
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Taxable- | Taxable- | Taxable- | Taxable- | Taxable- | Taxable- | Taxable- | Taxable- | Taxable- | Taxable- | ||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Average | Equivalent | Equivalent | Average | Equivalent | Equivalent | Average | Equivalent | Equivalent | Average | Equivalent | Equivalent | Average | Equivalent | Equivalent | ||||||||||||||||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||||||||||||||
Federal funds sold & interest-bearing bank balances | $ | 74,523 | $ | 956 | 5.16 | % | $ | 37,873 | $ | 460 | 4.82 | % | $ | 57,778 | $ | 633 | 4.35 | % | $ | 37,895 | $ | 418 | 4.42 | % | $ | 29,599 | $ | 298 | 4.07 | % | |||||||||||||||||||
Investment securities (1)(2) | 519,851 | 5,694 | 4.39 | 508,891 | 5,890 | 4.63 | 521,234 | 5,548 | 4.26 | 526,225 | 5,510 | 4.19 | 525,685 | 5,465 | 4.18 | ||||||||||||||||||||||||||||||||||
Loans (1)(3)(4)(5) | 2,308,103 | 36,382 | 6.34 | 2,286,678 | 34,055 | 5.91 | 2,256,727 | 32,878 | 5.78 | 2,233,312 | 31,329 | 5.63 | 2,180,224 | 28,844 | 5.36 | ||||||||||||||||||||||||||||||||||
Total interest-earning assets | 2,902,477 | 43,032 | 5.96 | 2,833,442 | 40,405 | 5.67 | 2,835,739 | 39,059 | 5.47 | 2,797,432 | 37,257 | 5.34 | 2,735,508 | 34,607 | 5.12 | ||||||||||||||||||||||||||||||||||
Other assets | 196,295 | 204,382 | 200,447 | 191,983 | 197,620 | ||||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 3,098,772 | $ | 3,037,824 | $ | 3,036,186 | $ | 2,989,415 | $ | 2,933,128 | |||||||||||||||||||||||||||||||||||||||
Liabilities and Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing demand deposits | $ | 1,570,622 | 9,192 | 2.35 | $ | 1,543,575 | 8,333 | 2.14 | $ | 1,541,728 | 7,476 | 1.92 | $ | 1,511,468 | 6,273 | 1.66 | $ | 1,503,421 | 4,862 | 1.31 | |||||||||||||||||||||||||||||
Savings deposits | 170,005 | 144 | 0.34 | 178,351 | 153 | 0.34 | 190,817 | 164 | 0.34 | 204,584 | 135 | 0.26 | 219,408 | 133 | 0.25 | ||||||||||||||||||||||||||||||||||
Time deposits | 428,443 | 4,180 | 3.92 | 392,085 | 3,632 | 3.67 | 357,194 | 2,942 | 3.27 | 326,034 | 2,200 | 2.71 | 275,880 | 1,207 | 1.78 | ||||||||||||||||||||||||||||||||||
Total interest-bearing deposits | 2,169,070 | 13,516 | 2.51 | 2,114,011 | 12,118 | 2.27 | 2,089,739 | 10,582 | 2.01 | 2,042,086 | 8,608 | 1.69 | 1,998,709 | 6,202 | 1.26 | ||||||||||||||||||||||||||||||||||
Securities sold under agreements to repurchase and federal funds purchased | 12,010 | 25 | 0.85 | 13,874 | 30 | 0.85 | 15,006 | 31 | 0.83 | 13,685 | 28 | 0.82 | 13,868 | 25 | 0.72 | ||||||||||||||||||||||||||||||||||
FHLB advances and other borrowings | 137,505 | 1,474 | 4.31 | 127,843 | 1,358 | 4.21 | 128,131 | 1,354 | 4.19 | 132,094 | 1,386 | 4.21 | 106,434 | 1,252 | 4.77 | ||||||||||||||||||||||||||||||||||
Subordinated notes | 32,100 | 754 | 9.45 | 32,083 | 504 | 6.29 | 32,066 | 505 | 6.29 | 32,049 | 504 | 6.29 | 32,033 | 504 | 6.29 | ||||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 2,350,685 | 15,769 | 2.70 | 2,287,811 | 14,010 | 2.43 | 2,264,942 | 12,472 | 2.19 | 2,219,914 | 10,526 | 1.90 | 2,151,044 | 7,983 | 1.50 | ||||||||||||||||||||||||||||||||||
Noninterest-bearing demand deposits | 417,469 | 441,695 | 468,628 | 476,123 | 495,562 | ||||||||||||||||||||||||||||||||||||||||||||
Other liabilities | 62,329 | 59,876 | 54,353 | 50,851 | 52,630 | ||||||||||||||||||||||||||||||||||||||||||||
Total liabilities | 2,830,483 | 2,789,382 | 2,787,923 | 2,746,888 | 2,699,236 | ||||||||||||||||||||||||||||||||||||||||||||
Shareholders' equity | 268,289 | 248,442 | 248,263 | 242,527 | 233,892 | ||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 3,098,772 | $ | 3,037,824 | $ | 3,036,186 | $ | 2,989,415 | $ | 2,933,128 | |||||||||||||||||||||||||||||||||||||||
Taxable-equivalent net interest income / net interest spread | 27,263 | 3.26 | % | 26,395 | 3.24 | % | 26,587 | 3.29 | % | 26,731 | 3.44 | % | 26,624 | 3.62 | % | ||||||||||||||||||||||||||||||||||
Taxable-equivalent net interest margin | 3.77 | % | 3.71 | % | 3.73 | % | 3.83 | % | 3.94 | % | |||||||||||||||||||||||||||||||||||||||
Taxable-equivalent adjustment | (382 | ) | (377 | ) | (368 | ) | (356 | ) | (330 | ) | |||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 26,881 | $ | 26,018 | $ | 26,219 | $ | 26,375 | $ | 26,294 | |||||||||||||||||||||||||||||||||||||||
Ratio of average interest-earning assets to average interest-bearing liabilities | 123 | % | 124 | % | 125 | % | 126 | % | 127 | % | |||||||||||||||||||||||||||||||||||||||
NOTES: | |||||||||||||||||||||||||||||||||||||||||||||||||
(1) Yields and interest income on tax-exempt assets have been computed on a taxable-equivalent basis assuming a 21% tax rate. | |||||||||||||||||||||||||||||||||||||||||||||||||
(2) Average balance of investment securities is computed at fair value. | |||||||||||||||||||||||||||||||||||||||||||||||||
(3) Average balances include nonaccrual loans. | |||||||||||||||||||||||||||||||||||||||||||||||||
(4) Interest income on loans includes prepayment and late fees, where applicable. | |||||||||||||||||||||||||||||||||||||||||||||||||
(5) Interest income on loans includes interest recovered of | |||||||||||||||||||||||||||||||||||||||||||||||||
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited) | |||||||||||||||||||
(In thousands) | 2024 | 2023 | 2023 | 2023 | 2023 | ||||||||||||||
Profitability for the quarter: | |||||||||||||||||||
Net interest income | $ | 26,881 | $ | 26,018 | $ | 26,219 | $ | 26,375 | $ | 26,294 | |||||||||
Provision for credit losses | 298 | 418 | 136 | 399 | 729 | ||||||||||||||
Noninterest income | 6,630 | 6,491 | 5,925 | 7,158 | 6,078 | ||||||||||||||
Noninterest expenses | 22,469 | 22,392 | 20,447 | 20,749 | 20,255 | ||||||||||||||
Income before income taxes | 10,744 | 9,699 | 11,561 | 12,385 | 11,388 | ||||||||||||||
Income tax expense | 2,213 | 2,056 | 2,535 | 2,547 | 2,232 | ||||||||||||||
Net income | $ | 8,531 | $ | 7,643 | $ | 9,026 | $ | 9,838 | $ | 9,156 | |||||||||
Financial ratios: | |||||||||||||||||||
Return on average assets(1) | 1.11 | % | 1.00 | % | 1.18 | % | 1.32 | % | 1.27 | % | |||||||||
Return on average assets, adjusted(1)(2)(3) | 1.19 | % | 1.13 | % | 1.18 | % | 1.32 | % | 1.27 | % | |||||||||
Return on average equity(1) | 12.79 | % | 12.21 | % | 14.42 | % | 16.27 | % | 15.88 | % | |||||||||
Return on average equity, adjusted(1)(2)(3) | 13.79 | % | 13.77 | % | 14.42 | % | 16.27 | % | 15.88 | % | |||||||||
Net interest margin(1) | 3.77 | % | 3.71 | % | 3.73 | % | 3.83 | % | 3.94 | % | |||||||||
Efficiency ratio | 67.0 | % | 68.9 | % | 63.6 | % | 61.9 | % | 62.6 | % | |||||||||
Efficiency ratio, adjusted(2)(3) | 65.0 | % | 65.6 | % | 63.6 | % | 61.9 | % | 62.6 | % | |||||||||
Per share information: | |||||||||||||||||||
Income per common share: | |||||||||||||||||||
Basic | $ | 0.82 | $ | 0.74 | $ | 0.87 | $ | 0.95 | $ | 0.88 | |||||||||
Basic, adjusted(2)(3) | 0.89 | 0.84 | 0.87 | 0.95 | 0.88 | ||||||||||||||
Diluted | 0.81 | 0.73 | 0.87 | 0.94 | 0.87 | ||||||||||||||
Diluted, adjusted(2)(3) | 0.88 | 0.83 | 0.87 | 0.94 | 0.87 | ||||||||||||||
Book value | 25.38 | 24.98 | 22.90 | 23.15 | 22.46 | ||||||||||||||
Tangible book value | 23.47 | 23.03 | 20.94 | 21.19 | 20.50 | ||||||||||||||
Cash dividends paid | 0.20 | 0.20 | 0.20 | 0.20 | 0.20 | ||||||||||||||
Average basic shares | 10,349 | 10,321 | 10,319 | 10,336 | 10,385 | ||||||||||||||
Average diluted shares | 10,482 | 10,419 | 10,405 | 10,421 | 10,496 | ||||||||||||||
(1) Annualized. | |||||||||||||||||||
(2) Ratio has been adjusted for the merger-related costs for the three months ended | |||||||||||||||||||
(3) Non-GAAP based financial measure. Please refer to Appendix A - Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations for a discussion of our use of non-GAAP based financial measures, including tables reconciling GAAP and non-GAAP financial measures appearing herein. | |||||||||||||||||||
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited) | |||||||||||||||||||
(continued) | |||||||||||||||||||
(In thousands) | 2024 | 2023 | 2023 | 2023 | 2023 | ||||||||||||||
Noninterest income: | |||||||||||||||||||
Service charges | $ | 1,200 | $ | 1,198 | $ | 1,260 | $ | 1,251 | $ | 1,157 | |||||||||
Interchange income | 911 | 952 | 963 | 993 | 965 | ||||||||||||||
Swap fee income | 199 | 588 | 255 | 196 | — | ||||||||||||||
Wealth management income | 3,102 | 2,945 | 2,826 | 2,822 | 2,747 | ||||||||||||||
Mortgage banking activities | 458 | 143 | (142 | ) | 112 | 478 | |||||||||||||
Other income | 765 | 704 | 761 | 1,786 | 739 | ||||||||||||||
Investment securities (losses) gains | (5 | ) | (39 | ) | 2 | (2 | ) | (8 | ) | ||||||||||
Total noninterest income | $ | 6,630 | $ | 6,491 | $ | 5,925 | $ | 7,158 | $ | 6,078 | |||||||||
Noninterest expenses: | |||||||||||||||||||
Salaries and employee benefits | $ | 13,752 | $ | 12,848 | $ | 12,885 | $ | 13,054 | $ | 12,196 | |||||||||
Occupancy, furniture and equipment | 2,639 | 2,534 | 2,460 | 2,266 | 2,333 | ||||||||||||||
Data processing | 1,265 | 1,247 | 1,248 | 1,201 | 1,217 | ||||||||||||||
Advertising and bank promotions | 398 | 501 | 332 | 919 | 405 | ||||||||||||||
441 | 460 | 477 | 519 | 504 | |||||||||||||||
Professional services | 631 | 702 | 965 | 504 | 734 | ||||||||||||||
Taxes other than income | 494 | 203 | 387 | 3 | 457 | ||||||||||||||
Intangible asset amortization | 225 | 236 | 228 | 239 | 250 | ||||||||||||||
Merger-related expenses | 672 | 1,059 | — | — | — | ||||||||||||||
Other operating expenses | 1,952 | 2,602 | 1,465 | 2,044 | 2,159 | ||||||||||||||
Total noninterest expenses | $ | 22,469 | $ | 22,392 | $ | 20,447 | $ | 20,749 | $ | 20,255 | |||||||||
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited) | |||||||||||||||||||
(continued) | |||||||||||||||||||
(In thousands) | 2024 | 2023 | 2023 | 2023 | 2023 | ||||||||||||||
Balance Sheet at quarter end: | |||||||||||||||||||
Cash and cash equivalents | $ | 182,722 | $ | 65,161 | $ | 94,939 | $ | 76,318 | $ | 98,323 | |||||||||
Restricted investments in bank stocks | 11,453 | 11,992 | 12,987 | 12,602 | 12,869 | ||||||||||||||
Securities available for sale | 514,909 | 513,519 | 495,162 | 508,612 | 520,232 | ||||||||||||||
Loans held for sale, at fair value | 535 | 5,816 | 6,448 | 6,450 | 7,341 | ||||||||||||||
Loans: | |||||||||||||||||||
Commercial real estate: | |||||||||||||||||||
Owner occupied | 364,280 | 373,757 | 376,350 | 366,439 | 339,371 | ||||||||||||||
Non-owner occupied | 707,871 | 694,638 | 630,514 | 626,140 | 603,396 | ||||||||||||||
Multi-family | 147,773 | 150,675 | 143,437 | 145,257 | 144,053 | ||||||||||||||
Non-owner occupied residential | 91,858 | 95,040 | 100,391 | 105,504 | 106,390 | ||||||||||||||
Commercial and industrial | 365,524 | 367,085 | 374,190 | 379,905 | 380,683 | ||||||||||||||
Acquisition and development: | |||||||||||||||||||
1-4 family residential construction | 22,277 | 24,516 | 25,642 | 20,461 | 20,941 | ||||||||||||||
Commercial and land development | 118,010 | 115,249 | 153,279 | 143,177 | 174,556 | ||||||||||||||
Municipal | 10,925 | 9,812 | 10,334 | 10,638 | 11,329 | ||||||||||||||
Total commercial loans | 1,828,518 | 1,830,772 | 1,814,137 | 1,797,521 | 1,780,719 | ||||||||||||||
Residential mortgage: | |||||||||||||||||||
First lien | 270,748 | 266,239 | 248,335 | 235,813 | 227,031 | ||||||||||||||
Home equity – term | 4,966 | 5,078 | 5,223 | 5,228 | 5,371 | ||||||||||||||
Home equity – lines of credit | 189,966 | 186,450 | 188,736 | 185,099 | 183,340 | ||||||||||||||
Installment and other loans | 8,875 | 9,774 | 10,405 | 10,756 | 11,040 | ||||||||||||||
Total loans | 2,303,073 | 2,298,313 | 2,266,836 | 2,234,417 | 2,207,501 | ||||||||||||||
Allowance for credit losses | (29,165 | ) | (28,702 | ) | (28,278 | ) | (28,383 | ) | (28,364 | ) | |||||||||
Net loans held-for-investment | 2,273,908 | 2,269,611 | 2,238,558 | 2,206,034 | 2,179,137 | ||||||||||||||
18,724 | 18,724 | 18,724 | 18,724 | 18,724 | |||||||||||||||
Other intangible assets, net | 2,189 | 2,414 | 2,650 | 2,589 | 2,828 | ||||||||||||||
Total assets | 3,183,331 | 3,064,240 | 3,054,435 | 3,008,197 | 3,011,548 | ||||||||||||||
Total deposits | 2,695,951 | 2,558,814 | 2,546,435 | 2,522,861 | 2,515,626 | ||||||||||||||
Borrowings | 127,099 | 147,285 | 175,241 | 152,229 | 176,315 | ||||||||||||||
Subordinated notes | 32,111 | 32,093 | 32,076 | 32,059 | 32,042 | ||||||||||||||
Total shareholders' equity | 271,682 | 265,056 | 243,080 | 245,641 | 240,161 | ||||||||||||||
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited) | |||||||||||||||||||
(continued) | |||||||||||||||||||
2024 | 2023 | 2023 | 2023 | 2023 | |||||||||||||||
Capital and credit quality measures(1): | |||||||||||||||||||
Total risk-based capital: | |||||||||||||||||||
13.4 | % | 13.0 | % | 13.0 | % | 13.0 | % | 12.8 | % | ||||||||||
13.1 | % | 12.8 | % | 12.5 | % | 12.5 | % | 12.4 | % | ||||||||||
Tier 1 risk-based capital: | |||||||||||||||||||
11.2 | % | 10.8 | % | 10.6 | % | 10.5 | % | 10.4 | % | ||||||||||
11.9 | % | 11.6 | % | 11.4 | % | 11.4 | % | 11.2 | % | ||||||||||
Tier 1 common equity risk-based capital: | |||||||||||||||||||
11.2 | % | 10.8 | % | 10.6 | % | 10.5 | % | 10.4 | % | ||||||||||
11.9 | % | 11.6 | % | 11.4 | % | 11.4 | % | 11.2 | % | ||||||||||
Tier 1 leverage capital: | |||||||||||||||||||
9.0 | % | 8.9 | % | 8.7 | % | 8.6 | % | 8.5 | % | ||||||||||
9.6 | % | 9.5 | % | 9.3 | % | 9.3 | % | 9.2 | % | ||||||||||
Average equity to average assets | 8.66 | % | 8.18 | % | 8.18 | % | 8.11 | % | 7.97 | % | |||||||||
Allowance for credit losses to total loans | 1.27 | % | 1.25 | % | 1.25 | % | 1.27 | % | 1.28 | % | |||||||||
Total nonaccrual loans to total loans | 0.56 | % | 1.11 | % | 0.98 | % | 0.94 | % | 0.96 | % | |||||||||
Nonperforming assets to total assets | 0.40 | % | 0.83 | % | 0.73 | % | 0.70 | % | 0.71 | % | |||||||||
Allowance for credit losses to nonaccrual loans | 226 | % | 112 | % | 127 | % | 135 | % | 134 | % | |||||||||
Other information: | |||||||||||||||||||
Net (recoveries) charge-offs | $ | (42 | ) | $ | (6 | ) | $ | 241 | $ | 380 | $ | (34 | ) | ||||||
Classified loans | 48,997 | 55,030 | 33,593 | 26,347 | 34,024 | ||||||||||||||
Nonperforming and other risk assets: | |||||||||||||||||||
Nonaccrual loans | 12,886 | 25,527 | 22,324 | 21,062 | 21,246 | ||||||||||||||
Other real estate owned | — | — | — | — | 85 | ||||||||||||||
Total nonperforming assets | 12,886 | 25,527 | 22,324 | 21,062 | 21,331 | ||||||||||||||
Financial difficulty modifications still accruing | — | 9 | — | — | — | ||||||||||||||
Loans past due 90 days or more and still accruing | 99 | 66 | 277 | 539 | 28 | ||||||||||||||
Total nonperforming and other risk assets | $ | 12,985 | $ | 25,602 | $ | 22,601 | $ | 21,601 | $ | 21,359 | |||||||||
(1) Capital ratios are estimated, subject to regulatory filings. The Company elected the three-year phase in option for the day-one impact of ASU 2016-13 for current expected credit losses ("CECL") to regulatory capital. Beginning in 2023, the Company adjusted retained earnings, allowance for credit losses includable in tier 2 capital and the deferred tax assets from temporary differences in risk weighted assets by the permitted percentage of the day-one impact from adopting the new CECL standard. | |||||||||||||||||||
Appendix A- Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations
Management believes providing certain other “non-GAAP” financial information will assist investors in their understanding of the effect on recent financial results from non-recurring charges.
As a result of acquisitions, the Company has intangible assets consisting of goodwill, core deposit and other intangible assets, which totaled
Tangible book value per common share and the impact of the merger-related expenses on net income and associated ratios, as used by the Company in this earnings release, are determined by methods other than in accordance with
The following tables present the computation of each non-GAAP based measure:
(dollars and shares in thousands)
Tangible Book Value per Common Share | 2024 | 2023 | 2023 | 2023 | 2023 | |||||||||||||||
Shareholders' equity (most directly comparable GAAP-based measure) | $ | 271,682 | $ | 265,056 | $ | 243,080 | $ | 245,641 | $ | 240,161 | ||||||||||
Less: | 18,724 | 18,724 | 18,724 | 18,724 | 18,724 | |||||||||||||||
Other intangible assets | 2,189 | 2,414 | 2,650 | 2,589 | 2,828 | |||||||||||||||
Related tax effect | (460 | ) | (507 | ) | (557 | ) | (544 | ) | (594 | ) | ||||||||||
Tangible common equity (non-GAAP) | $ | 251,229 | $ | 244,425 | $ | 222,263 | $ | 224,872 | $ | 219,203 | ||||||||||
Common shares outstanding | 10,705 | 10,612 | 10,613 | 10,611 | 10,692 | |||||||||||||||
Book value per share (most directly comparable GAAP-based measure) | $ | 25.38 | $ | 24.98 | $ | 22.90 | $ | 23.15 | $ | 22.46 | ||||||||||
Intangible assets per share | 1.91 | 1.95 | 1.96 | 1.96 | 1.96 | |||||||||||||||
Tangible book value per share (non-GAAP) | $ | 23.47 | $ | 23.03 | $ | 20.94 | $ | 21.19 | $ | 20.50 | ||||||||||
(dollars and shares in thousands) | Three Months Ended | ||||||||||
Adjusted Ratios for Merger-Related Expenses | 2024 | 2023 | 2023 | ||||||||
Net income (A) - most directly comparable GAAP-based measure | $ | 8,531 | $ | 7,643 | $ | 9,156 | |||||
Plus: Merger-related expenses (B) | 672 | 1,059 | — | ||||||||
Less: Related tax effect (C) | (1 | ) | (79 | ) | — | ||||||
Adjusted net income (D=A+B-C) - Non-GAAP | $ | 9,202 | $ | 8,623 | $ | 9,156 | |||||
Average assets (E) | $ | 3,098,772 | $ | 3,037,824 | $ | 2,933,128 | |||||
Return on average assets (= A / E) - most directly comparable GAAP-based measure(1) | 1.11 | % | 1.00 | % | 1.27 | % | |||||
Return on average assets, adjusted (= D / E) - Non-GAAP(1) | 1.19 | % | 1.13 | % | 1.27 | % | |||||
Average equity (F) | $ | 268,289 | $ | 248,442 | $ | 233,892 | |||||
Return on average equity (= A / F) - most directly comparable GAAP-based measure(1) | 12.79 | % | 12.21 | % | 15.88 | % | |||||
Return on average equity, adjusted (= D / F) - Non-GAAP(1) | 13.79 | % | 13.77 | % | 15.88 | % | |||||
Weighted average shares - basic (G) - most directly comparable GAAP-based measure | 10,349 | 10,321 | 10,385 | ||||||||
Basic earnings per share (= | $ | 0.82 | $ | 0.74 | $ | 0.88 | |||||
Basic earnings per share, adjusted (= D / G) - Non-GAAP | $ | 0.89 | $ | 0.84 | $ | 0.88 | |||||
Weighted average shares - diluted (H) - most directly comparable GAAP-based measure | 10,482 | 10,419 | 10,496 | ||||||||
Diluted earnings per share (= A / H) - most directly comparable GAAP-based measure | $ | 0.81 | $ | 0.73 | $ | 0.87 | |||||
Diluted earnings per share, adjusted (= D / H) - Non-GAAP | $ | 0.88 | $ | 0.83 | $ | 0.87 | |||||
Noninterest expense (I) - most directly comparable GAAP-based measure | $ | 22,469 | $ | 22,392 | $ | 20,255 | |||||
Less: Merger-related expenses (B) | (672 | ) | (1,059 | ) | — | ||||||
Adjusted noninterest expense (J = I - B) - Non-GAAP | $ | 21,797 | $ | 21,333 | $ | 20,255 | |||||
Net interest income (K) | $ | 26,881 | $ | 26,018 | $ | 26,294 | |||||
Noninterest income (L) | 6,630 | 6,491 | 6,078 | ||||||||
Total operating income (M = K + L) | $ | 33,511 | $ | 32,509 | $ | 32,372 | |||||
Efficiency ratio (= I / M) - most directly comparable GAAP-based measure | 67.0 | % | 68.9 | % | 62.6 | % | |||||
Efficiency ratio, adjusted (= J / M) - Non-GAAP | 65.0 | % | 65.6 | % | 62.6 | % | |||||
(1) Annualized | |||||||||||
Appendix B- Investment Portfolio Concentrations
The following table summarizes the credit ratings and collateral associated with the Company's investment security portfolio, excluding equity securities, at
(dollars in thousands)
Sector | Portfolio Mix | Amortized Book | Fair Value | Credit Enhancement | AA | A | BBB | NR | Collateral / Guarantee Type | |||||||||||||||||||
Unsecured ABS | 1 | % | $ | 3,512 | $ | 3,200 | 27 | % | — | % | — | % | — | % | — | % | 100 | % | Unsecured Consumer Debt | |||||||||
Student Loan ABS | 1 | 5,043 | 4,939 | 27 | — | — | — | — | 100 | Seasoned Student Loans | ||||||||||||||||||
Federal Family Education Loan ABS | 17 | 94,553 | 93,677 | 9 | 7 | 80 | — | 13 | — | Federal Family Education Loan (1) | ||||||||||||||||||
PACE Loan ABS | — | 2,277 | 1,973 | 6 | 100 | — | — | — | — | PACE Loans (2) | ||||||||||||||||||
Non-Agency CMBS | 3 | 17,208 | 17,247 | 29 | — | — | — | — | 100 | |||||||||||||||||||
Non-Agency RMBS | 3 | 17,539 | 14,314 | 20 | 100 | — | — | — | — | Reverse Mortgages (3) | ||||||||||||||||||
Municipal - General Obligation | 18 | 102,033 | 93,384 | 10 | 83 | 7 | — | — | ||||||||||||||||||||
Municipal - Revenue | 22 | 119,088 | 107,483 | — | 82 | 12 | — | 6 | ||||||||||||||||||||
SBA ReRemic (5) | 1 | 3,293 | 3,260 | — | 100 | — | — | — | SBA Guarantee (4) | |||||||||||||||||||
1 | 7,786 | 8,243 | — | 100 | — | — | — | SBA Guarantee (4) | ||||||||||||||||||||
Agency MBS | 29 | 159,649 | 149,400 | — | 100 | — | — | — | Residential Mortgages (4) | |||||||||||||||||||
4 | 20,054 | 17,669 | — | 100 | — | — | — | |||||||||||||||||||||
100 | % | $ | 552,035 | $ | 514,789 | 7 | % | 81 | % | 4 | % | 2 | % | 6 | % | |||||||||||||
(1) 97% guaranteed by | ||||||||||||||||||||||||||||
(2) PACE acronym represents Property Assessed Clean Energy loans | ||||||||||||||||||||||||||||
(3) Non-agency reverse mortgages with current structural credit enhancements | ||||||||||||||||||||||||||||
(4) Guaranteed by | ||||||||||||||||||||||||||||
(5) SBA ReRemic acronym represents Re-Securitization of Real Estate Mortgage Investment Conduits | ||||||||||||||||||||||||||||
Note: Ratings in table are the lowest of the six rating agencies ( | ||||||||||||||||||||||||||||
About the Company
With
Cautionary Note Regarding Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements reflect the current views of the Company's management with respect to, among other things, future events and the Company's financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates, predictions or projections about events or the Company's industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company's control. Accordingly, the Company cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements and there can be no assurances that the Company will achieve the desired level of new business development and new loans, growth in the balance sheet and fee-based revenue lines of business, successful merger and acquisition activity and cost savings initiatives and continued reductions in risk assets or mitigation of losses in the future. Factors which could cause the actual results of the Company's operations to differ materially from expectations include, but are not limited to: general economic conditions (including inflation and concerns about liquidity) on a national basis or in the local markets in which the Company operates; ineffectiveness of the Company's strategic growth plan due to changes in current or future market conditions; changes in interest rates; failure to complete the merger with Codorus Valley Bancorp, Inc. or unexpected delays related to the merger or either party's inability to satisfy closing conditions required to complete the merger; certain restrictions during the pendency of the proposed transactions with Codorus Valley Bancorp, Inc. that may impact the parties' abilities to pursue certain business opportunities or strategic transactions; the diversion of management's attention from ongoing business operations and opportunities; the effects of competition and how it may impact our community banking model, including industry consolidation and development of competing financial products and services; changes in consumer behavior due to changing political, business and economic conditions, or legislative or regulatory initiatives; changes in laws and regulations; changes in credit quality; inability to raise capital, if necessary, under favorable conditions; volatility in the securities markets; the demand for our products and services; deteriorating economic conditions; geopolitical tensions; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; expenses associated with litigation and legal proceedings; and other risks and uncertainties, including those detailed in our Annual Report on Form 10-K for the year ended
The foregoing list of factors is not exhaustive. If one or more events related to these or other risks or uncertainties materializes, or if the Company's underlying assumptions prove to be incorrect, actual results may differ materially from what the Company anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company disclaims any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for the Company to predict those events or how they may affect it. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Company or persons acting on the Company's behalf may issue.
The review period for subsequent events extends up to and includes the filing date of a public company’s financial statements, when filed with the
Source:
2024 GlobeNewswire, Inc., source