Fentura Financial, Inc. Announces Fourth Quarter 2022 Earnings (unaudited)
Fentura Financial (OTCQX: FETM) reported strong financial results for 2022, with a net income of $14.9 million and a 19.6% increase in total assets, reaching $1.69 billion. Net interest income surged 18.7% to a record $52.5 million, supported by a 30.5% growth in gross loans. The company maintained a solid asset quality, with nonperforming loans at 0.16% of gross loans. Despite challenges such as increased loan loss provisions and decreased noninterest income due to a drop in mortgage sales, the CEO expressed confidence in sustaining profitability and asset quality in 2023.
- Net interest income increased 18.7% to $52.5 million.
- Gross loans rose 30.5%, supporting overall asset growth.
- Total assets grew 19.6% year-over-year, reaching $1.69 billion.
- Nonperforming loans remained low at 0.16% of gross loans.
- Net income decreased by 9.93% from the previous year.
- Higher provision for loan losses associated with loan growth.
- Noninterest income declined significantly due to reduced residential mortgage sales.
Dollars in thousands except per share amounts. Certain items in the prior period financial statements have been reclassified to conform with the December 31, 2022 presentation.
FENTON, Mich., Jan. 31, 2023 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX: FETM) announces quarterly and year to date results of net income of
Ronald L. Justice, President and CEO, stated, "Our 2022 performance reflects another year of strong profitability, record loan growth, and robust asset quality. Net interest income increased
Mr. Justice continued, “As we look to 2023, we plan to focus on expanding net interest income by capitalizing on the growth we have produced over the past several years. In fact, since 2018, we have nearly doubled our loan portfolio, while we have preserved asset quality and maintained a stable net interest margin. Additionally, we believe we are well positioned to navigate a more uncertain economic period as we focus on sustaining excellent asset quality, controlling operating expenses, and providing superior financial services to our customers and communities. As a result, we believe 2023 will be another good year for Fentura Financial."
Following is a discussion of our financial performance as of, and for the year ended December 31, 2022. At the end of this document is a list of abbreviations and acronyms.
Results of Operations (unaudited)
The following table outlines our QTD results of operations and provides certain performance measures as of, and for the three months ended:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||||||||||||
| INCOME STATEMENT DATA | ||||||||||||||||||||
| Interest income | $ | 17,782 | $ | 15,726 | $ | 13,411 | $ | 12,301 | $ | 11,749 | ||||||||||
| Interest expense | 3,645 | 1,738 | 785 | 599 | 645 | |||||||||||||||
| Net interest income | 14,137 | 13,988 | 12,626 | 11,702 | 11,104 | |||||||||||||||
| Provision for loan losses | 847 | 1,231 | 525 | 502 | 38 | |||||||||||||||
| Noninterest income | 1,933 | 2,377 | 2,778 | 2,792 | 3,097 | |||||||||||||||
| Noninterest expenses | 9,765 | 10,125 | 10,544 | 10,151 | 9,957 | |||||||||||||||
| Federal income tax expense | 1,094 | 1,000 | 859 | 757 | 864 | |||||||||||||||
| Net income | $ | 4,364 | $ | 4,009 | $ | 3,476 | $ | 3,084 | $ | 3,342 | ||||||||||
| PER SHARE | ||||||||||||||||||||
| Earnings | $ | 0.99 | $ | 0.91 | $ | 0.79 | $ | 0.69 | $ | 0.74 | ||||||||||
| Dividends | $ | 0.09 | $ | 0.09 | $ | 0.09 | $ | 0.09 | $ | 0.08 | ||||||||||
| Tangible book value(1) | $ | 26.22 | $ | 25.22 | $ | 24.53 | $ | 24.97 | $ | 25.43 | ||||||||||
| Quoted market value | ||||||||||||||||||||
| High | $ | 23.40 | $ | 25.20 | $ | 27.85 | $ | 29.25 | $ | 28.28 | ||||||||||
| Low | $ | 21.60 | $ | 23.00 | $ | 24.40 | $ | 27.10 | $ | 25.75 | ||||||||||
| Close(1) | $ | 22.20 | $ | 23.00 | $ | 25.00 | $ | 27.90 | $ | 28.28 | ||||||||||
| PERFORMANCE RATIOS | ||||||||||||||||||||
| Return on average assets | 1.06 | % | 1.02 | % | 0.96 | % | 0.86 | % | 0.98 | % | ||||||||||
| Return on average shareholders' equity | 14.01 | % | 12.96 | % | 11.55 | % | 10.53 | % | 10.56 | % | ||||||||||
| Return on average tangible shareholders' equity | 15.21 | % | 14.10 | % | 12.60 | % | 11.49 | % | 10.87 | % | ||||||||||
| Efficiency ratio | 60.77 | % | 61.87 | % | 68.45 | % | 70.04 | % | 70.11 | % | ||||||||||
| Yield on earning assets (FTE) | 4.57 | % | 4.27 | % | 3.96 | % | 3.70 | % | 3.67 | % | ||||||||||
| Rate on interest bearing liabilities | 1.42 | % | 0.75 | % | 0.38 | % | 0.29 | % | 0.33 | % | ||||||||||
| Net interest margin to earning assets (FTE) | 3.63 | % | 3.79 | % | 3.73 | % | 3.52 | % | 3.47 | % | ||||||||||
| BALANCE SHEET DATA(1) | ||||||||||||||||||||
| Total investment securities | $ | 125,049 | $ | 129,886 | $ | 136,725 | $ | 151,579 | $ | 164,942 | ||||||||||
| Gross loans | $ | 1,436,166 | $ | 1,350,851 | $ | 1,232,892 | $ | 1,139,351 | $ | 1,100,092 | ||||||||||
| Allowance for loan losses | $ | 13,000 | $ | 12,200 | $ | 11,000 | $ | 11,000 | $ | 10,500 | ||||||||||
| Total assets | $ | 1,694,999 | $ | 1,595,126 | $ | 1,474,307 | $ | 1,435,501 | $ | 1,417,801 | ||||||||||
| Total deposits | $ | 1,332,883 | $ | 1,345,209 | $ | 1,231,543 | $ | 1,252,892 | $ | 1,228,298 | ||||||||||
| Borrowed funds | $ | 222,350 | $ | 116,600 | $ | 111,000 | $ | 52,000 | $ | 50,000 | ||||||||||
| Total shareholders' equity | $ | 126,087 | $ | 121,630 | $ | 118,566 | $ | 121,346 | $ | 124,455 | ||||||||||
| Net loans to total deposits | 106.77 | % | 99.51 | % | 99.22 | % | 90.06 | % | 88.71 | % | ||||||||||
| Common shares outstanding | 4,439,725 | 4,434,937 | 4,429,357 | 4,459,544 | 4,496,701 | |||||||||||||||
| QTD BALANCE SHEET AVERAGES | ||||||||||||||||||||
| Total assets | $ | 1,637,191 | $ | 1,558,040 | $ | 1,449,874 | $ | 1,448,545 | $ | 1,353,694 | ||||||||||
| Earning assets | $ | 1,544,880 | $ | 1,464,233 | $ | 1,360,658 | $ | 1,348,647 | $ | 1,273,650 | ||||||||||
| Interest bearing liabilities | $ | 1,016,876 | $ | 917,888 | $ | 826,708 | $ | 831,200 | $ | 773,082 | ||||||||||
| Total shareholders' equity | $ | 123,567 | $ | 122,695 | $ | 120,659 | $ | 118,759 | $ | 125,500 | ||||||||||
| Total tangible shareholders' equity | $ | 113,810 | $ | 112,829 | $ | 110,686 | $ | 108,862 | $ | 121,933 | ||||||||||
| Earned common shares outstanding | 4,413,710 | 4,408,399 | 4,417,447 | 4,451,607 | 4,520,962 | |||||||||||||||
| Unvested stock grants | 24,460 | 24,460 | 24,460 | 27,466 | 20,671 | |||||||||||||||
| Total common shares outstanding | 4,438,170 | 4,432,859 | 4,441,907 | 4,479,073 | 4,541,633 | |||||||||||||||
| ASSET QUALITY | ||||||||||||||||||||
| Nonperforming loans to gross loans (1) | 0.16 | % | 0.12 | % | 0.16 | % | 0.20 | % | 0.18 | % | ||||||||||
| Nonperforming assets to total assets (1) | 0.15 | % | 0.12 | % | 0.16 | % | 0.19 | % | 0.17 | % | ||||||||||
| Allowance for loan losses to gross loans (1) | 0.91 | % | 0.90 | % | 0.89 | % | 0.97 | % | 0.95 | % | ||||||||||
| Allowance for loan losses to gross loans, net of PPP loans (1) | 0.91 | % | 0.90 | % | 0.89 | % | 0.97 | % | 0.96 | % | ||||||||||
| Net charge-offs (recoveries) to QTD average gross loans | — | % | — | % | 0.04 | % | — | % | — | % | ||||||||||
| Provision for loan losses to QTD average gross loans | 0.06 | % | 0.10 | % | 0.04 | % | 0.05 | % | — | % | ||||||||||
| CAPITAL RATIOS(1) | ||||||||||||||||||||
| Total capital to risk weighted assets | 10.84 | % | 10.96 | % | 11.36 | % | 12.07 | % | 12.22 | % | ||||||||||
| Tier 1 capital to risk weighted assets | 9.93 | % | 10.07 | % | 10.50 | % | 11.13 | % | 11.30 | % | ||||||||||
| CET1 capital to risk weighted assets | 8.94 | % | 9.04 | % | 9.39 | % | 9.94 | % | 10.07 | % | ||||||||||
| Tier 1 leverage ratio | 8.75 | % | 8.91 | % | 9.30 | % | 9.07 | % | 9.13 | % | ||||||||||
| (1)At end of period | ||||||||||||||||||||
The following table outlines our YTD results of operations and provides certain performance measures as of, and for the twelve months ended:
| (unaudited) | ||||||||||||||||||||
| 12/31/2022 | 12/31/2021 | 12/31/2020 | 12/31/2019 | 12/31/2018 | ||||||||||||||||
| INCOME STATEMENT DATA | ||||||||||||||||||||
| Interest income | $ | 59,220 | $ | 46,910 | $ | 45,979 | $ | 43,541 | $ | 36,350 | ||||||||||
| Interest expense | 6,767 | 2,736 | 5,924 | 8,627 | 5,827 | |||||||||||||||
| Net interest income | 52,453 | 44,174 | 40,055 | 34,914 | 30,523 | |||||||||||||||
| Provision for loan losses | 3,105 | (180 | ) | 5,634 | 1,335 | 1,057 | ||||||||||||||
| Noninterest income | 9,880 | 14,080 | 19,640 | 8,163 | 8,277 | |||||||||||||||
| Noninterest expenses | 40,585 | 37,663 | 34,684 | 27,223 | 25,310 | |||||||||||||||
| Federal income tax expense | 3,710 | 4,192 | 3,913 | 2,941 | 2,319 | |||||||||||||||
| Net income | $ | 14,933 | $ | 16,579 | $ | 15,464 | $ | 11,578 | $ | 10,114 | ||||||||||
| PER SHARE | ||||||||||||||||||||
| Earnings | $ | 3.38 | $ | 3.60 | $ | 3.31 | $ | 2.49 | $ | 2.65 | ||||||||||
| Dividends | $ | 0.36 | $ | 0.32 | $ | 0.30 | $ | 0.28 | $ | 0.24 | ||||||||||
| Tangible book value(1) | $ | 26.22 | $ | 25.43 | $ | 23.88 | $ | 20.87 | $ | 18.32 | ||||||||||
| Quoted market value | ||||||||||||||||||||
| High | $ | 29.25 | $ | 28.28 | $ | 26.00 | $ | 25.50 | $ | 23.00 | ||||||||||
| Low | $ | 21.60 | $ | 21.90 | $ | 12.55 | $ | 20.05 | $ | 18.88 | ||||||||||
| Close(1) | $ | 22.20 | $ | 28.28 | $ | 22.00 | $ | 25.23 | $ | 21.00 | ||||||||||
| PERFORMANCE RATIOS | ||||||||||||||||||||
| Return on average assets | 0.98 | % | 1.26 | % | 1.29 | % | 1.20 | % | 1.20 | % | ||||||||||
| Return on average shareholders' equity | 12.30 | % | 13.52 | % | 14.05 | % | 12.02 | % | 15.05 | % | ||||||||||
| Return on average tangible shareholders' equity | 13.39 | % | 13.93 | % | 14.57 | % | 12.59 | % | 16.23 | % | ||||||||||
| Efficiency ratio | 65.11 | % | 64.65 | % | 58.10 | % | 63.20 | % | 65.23 | % | ||||||||||
| Yield on earning assets (FTE) | 4.15 | % | 3.80 | % | 4.01 | % | 4.77 | % | 4.57 | % | ||||||||||
| Rate on interest bearing liabilities | 0.75 | % | 0.36 | % | 0.82 | % | 1.41 | % | 1.07 | % | ||||||||||
| Net interest margin to earning assets (FTE) | 3.67 | % | 3.58 | % | 3.50 | % | 3.83 | % | 3.84 | % | ||||||||||
| BALANCE SHEET DATA(1) | ||||||||||||||||||||
| Total investment securities | $ | 125,049 | $ | 164,942 | $ | 76,111 | $ | 61,621 | $ | 94,721 | ||||||||||
| Gross loans | $ | 1,436,166 | $ | 1,100,092 | $ | 1,066,562 | $ | 870,555 | $ | 772,227 | ||||||||||
| Allowance for loan losses | $ | 13,000 | $ | 10,500 | $ | 10,900 | $ | 5,813 | $ | 4,488 | ||||||||||
| Total assets | $ | 1,694,999 | $ | 1,417,801 | $ | 1,251,446 | $ | 1,034,759 | $ | 926,450 | ||||||||||
| Total deposits | $ | 1,332,883 | $ | 1,228,298 | $ | 1,071,976 | $ | 863,102 | $ | 763,124 | ||||||||||
| Borrowed funds | $ | 222,350 | $ | 50,000 | $ | 49,000 | $ | 61,500 | $ | 69,000 | ||||||||||
| Total shareholders' equity | $ | 126,087 | $ | 124,455 | $ | 115,868 | $ | 101,444 | $ | 89,516 | ||||||||||
| Net loans to total deposits | 106.77 | % | 88.71 | % | 98.48 | % | 100.19 | % | 100.60 | % | ||||||||||
| Common shares outstanding | 4,439,725 | 4,496,701 | 4,694,275 | 4,664,369 | 4,636,455 | |||||||||||||||
| YTD BALANCE SHEET AVERAGES | ||||||||||||||||||||
| Total assets | $ | 1,523,419 | $ | 1,311,673 | $ | 1,200,605 | $ | 961,586 | $ | 844,673 | ||||||||||
| Earning assets | $ | 1,429,605 | $ | 1,237,755 | $ | 1,147,570 | $ | 913,574 | $ | 796,283 | ||||||||||
| Interest bearing liabilities | $ | 898,170 | $ | 754,622 | $ | 726,869 | $ | 612,549 | $ | 544,344 | ||||||||||
| Total shareholders' equity | $ | 121,422 | $ | 122,629 | $ | 110,094 | $ | 96,358 | $ | 67,192 | ||||||||||
| Total tangible shareholders' equity | $ | 111,548 | $ | 118,986 | $ | 106,140 | $ | 91,994 | $ | 62,329 | ||||||||||
| Earned common shares outstanding | 4,422,791 | 4,603,259 | 4,669,979 | 4,643,955 | 3,811,677 | |||||||||||||||
| Unvested stock grants | 25,212 | 20,984 | 14,027 | 9,917 | 756 | |||||||||||||||
| Total common shares outstanding | 4,448,003 | 4,624,243 | 4,684,006 | 4,653,872 | 3,812,433 | |||||||||||||||
| ASSET QUALITY | ||||||||||||||||||||
| Nonperforming loans to gross loans (1) | 0.16 | % | 0.18 | % | 0.75 | % | 0.17 | % | 0.14 | % | ||||||||||
| Nonperforming assets to total assets (1) | 0.15 | % | 0.17 | % | 0.64 | % | 0.14 | % | 0.12 | % | ||||||||||
| Allowance for loan losses to gross loans (1) | 0.91 | % | 0.95 | % | 1.02 | % | 0.67 | % | 0.58 | % | ||||||||||
| Allowance for loan losses to gross loans, net of PPP loans (1) | 0.91 | % | 0.96 | % | 1.23 | % | 0.67 | % | 0.58 | % | ||||||||||
| Net charge-offs (recoveries) to YTD average gross loans | 0.05 | % | 0.02 | % | 0.05 | % | — | % | 0.02 | % | ||||||||||
| Provision for loan losses to YTD average gross loans | 0.25 | % | (0.02) % | 0.56 | % | 0.16 | % | 0.15 | % | |||||||||||
| CAPITAL RATIOS(1) | ||||||||||||||||||||
| Total capital to risk weighted assets | 10.84 | % | 12.22 | % | 15.14 | % | 14.03 | % | 14.00 | % | ||||||||||
| Tier 1 capital to risk weighted assets | 9.93 | % | 11.30 | % | 13.93 | % | 13.33 | % | 13.40 | % | ||||||||||
| CET1 capital to risk weighted assets | 8.94 | % | 10.07 | % | 12.38 | % | 11.64 | % | 11.52 | % | ||||||||||
| Tier 1 leverage ratio | 8.75 | % | 9.13 | % | 9.80 | % | 11.20 | % | 10.92 | % | ||||||||||
| (1)At end of period | ||||||||||||||||||||
Income Statement Breakdown and Analysis
| Quarter to Date | ||||||||||||||||||||
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||||||||||||
| Net income | $ | 4,364 | $ | 4,009 | $ | 3,476 | $ | 3,084 | $ | 3,342 | ||||||||||
| Acquisition related items (net of tax) | ||||||||||||||||||||
| Accretion on purchased loans | (20 | ) | (20 | ) | (20 | ) | (20 | ) | (154 | ) | ||||||||||
| Amortization of core deposit intangibles | 85 | 85 | 85 | 85 | 54 | |||||||||||||||
| Amortization on acquired time deposits | (21 | ) | (21 | ) | (21 | ) | (21 | ) | 2 | |||||||||||
| Other acquisition related expenses | — | — | 11 | 202 | 178 | |||||||||||||||
| Total acquisition related items (net of tax) | 44 | 44 | 55 | 246 | 80 | |||||||||||||||
| Other nonrecurring items (net of tax) | ||||||||||||||||||||
| Prepayment penalties collected | (61 | ) | (119 | ) | (48 | ) | (162 | ) | (91 | ) | ||||||||||
| Total other nonrecurring items (net of tax) | (61 | ) | (119 | ) | (48 | ) | (162 | ) | (91 | ) | ||||||||||
| Adjusted net income from operations | $ | 4,347 | $ | 3,934 | $ | 3,483 | $ | 3,168 | $ | 3,331 | ||||||||||
| Net interest income | $ | 14,137 | $ | 13,988 | $ | 12,626 | $ | 11,702 | $ | 11,104 | ||||||||||
| Accretion on purchased loans | (25 | ) | (25 | ) | (26 | ) | (25 | ) | (195 | ) | ||||||||||
| Prepayment penalties collected | (77 | ) | (150 | ) | (61 | ) | (205 | ) | (115 | ) | ||||||||||
| Amortization on acquired time deposits | (27 | ) | (27 | ) | (26 | ) | (27 | ) | 3 | |||||||||||
| Adjusted net interest income | $ | 14,008 | $ | 13,786 | $ | 12,513 | $ | 11,445 | $ | 10,797 | ||||||||||
| PERFORMANCE RATIOS | ||||||||||||||||||||
| Based on adjusted net income from operations | ||||||||||||||||||||
| Earnings per share | $ | 0.98 | $ | 0.89 | $ | 0.79 | $ | 0.71 | $ | 0.74 | ||||||||||
| Return on average assets | 1.05 | % | 1.00 | % | 0.96 | % | 0.89 | % | 0.98 | % | ||||||||||
| Return on average shareholders' equity | 13.96 | % | 12.72 | % | 11.58 | % | 10.82 | % | 10.53 | % | ||||||||||
| Return on average tangible shareholders' equity | 15.15 | % | 13.83 | % | 12.62 | % | 11.80 | % | 10.84 | % | ||||||||||
| Efficiency ratio | 60.58 | % | 61.98 | % | 68.16 | % | 68.75 | % | 69.55 | % | ||||||||||
| Based on adjusted net interest income | ||||||||||||||||||||
| Yield on earning assets (FTE) | 4.54 | % | 4.22 | % | 3.93 | % | 3.63 | % | 3.57 | % | ||||||||||
| Rate on interest bearing liabilities | 1.41 | % | 0.74 | % | 0.37 | % | 0.28 | % | 0.33 | % | ||||||||||
| Net interest margin to earning assets (FTE) | 3.60 | % | 3.74 | % | 3.70 | % | 3.44 | % | 3.37 | % | ||||||||||
| Year to Date December 31 | Variance | ||||||||||||||
| 2022 | 2021 | Amount | % | ||||||||||||
| Net income | $ | 14,933 | $ | 16,579 | $ | (1,646 | ) | (9.93)% | |||||||
| Acquisition related items (net of tax) | |||||||||||||||
| Accretion on purchased loans | (80 | ) | (609 | ) | 529 | (86.86)% | |||||||||
| Amortization of core deposit intangibles | 340 | 215 | 125 | 58.14 | % | ||||||||||
| Amortization on acquired time deposits | (84 | ) | 8 | (92 | ) | (1,150.00)% | |||||||||
| Other acquisition related expenses | 213 | 229 | (16 | ) | (6.99)% | ||||||||||
| Total acquisition related items (net of tax) | 389 | (157 | ) | 546 | (347.77)% | ||||||||||
| Other nonrecurring items (net of tax) | |||||||||||||||
| Prepayment penalties collected | (390 | ) | (205 | ) | (185 | ) | 90.24 | % | |||||||
| Total other nonrecurring items (net of tax) | (390 | ) | (205 | ) | (185 | ) | 90.24 | % | |||||||
| Adjusted net income from operations | $ | 14,932 | $ | 16,217 | $ | (1,285 | ) | (7.92)% | |||||||
| Net interest income | $ | 52,453 | $ | 44,174 | $ | 8,279 | 18.74 | % | |||||||
| Accretion on purchased loans | (101 | ) | (770 | ) | 669 | (86.88)% | |||||||||
| Prepayment penalties collected | (493 | ) | (260 | ) | (233 | ) | 89.62 | % | |||||||
| Amortization on acquired time deposits | (107 | ) | 12 | (119 | ) | (991.67)% | |||||||||
| Adjusted net interest income | $ | 51,752 | $ | 43,156 | $ | 8,596 | 19.92 | % | |||||||
| PERFORMANCE RATIOS | |||||||||||||||
| Based on adjusted net income from operations | |||||||||||||||
| Earnings per share | $ | 3.38 | $ | 3.52 | $ | (0.14 | ) | (3.98)% | |||||||
| Return on average assets | 0.98 | % | 1.24 | % | (0.26)% | ||||||||||
| Return on average shareholders' equity | 12.30 | % | 13.22 | % | (0.92)% | ||||||||||
| Return on average tangible shareholders' equity | 13.39 | % | 13.63 | % | (0.24)% | ||||||||||
| Efficiency ratio | 64.72 | % | 64.82 | % | (0.10)% | ||||||||||
| Based on adjusted net interest income | |||||||||||||||
| Yield on earning assets (FTE) | 4.11 | % | 3.72 | % | 0.39 | % | |||||||||
| Rate on interest bearing liabilities | 0.74 | % | 0.36 | % | 0.38 | % | |||||||||
| Net interest margin to earning assets (FTE) | 3.62 | % | 3.50 | % | 0.12 | % | |||||||||
Average Balances, Interest Rate, and Net Interest Income
The following tables present the daily average amount outstanding for each major category of interest earning assets, nonearning assets, interest bearing liabilities, and noninterest bearing liabilities. These tables also present an analysis of interest income and interest expense for the periods indicated. All interest income is reported on a FTE basis using a federal income tax rate of
Net interest income is the amount by which interest income on earning assets exceeds the interest expenses on interest bearing liabilities. Net interest income, which includes loan fees, is influenced by changes in the balance and mix of assets and liabilities and market interest rates. We exert some control over these factors; however, FRB monetary policy and competition have a significant impact. For analytical purposes, net interest income is adjusted to a FTE basis by adding the income tax savings from interest on tax exempt loans, and nontaxable investment securities, thus making period-to-period comparisons more meaningful.
| Three Months Ended | ||||||||||||||||||||||||||||||
| December 31, 2022 | September 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||
| Average Balance | Tax Equivalent Interest | Average Yield / Rate | Average Balance | Tax Equivalent Interest | Average Yield / Rate | Average Balance | Tax Equivalent Interest | Average Yield / Rate | ||||||||||||||||||||||
| Interest earning assets | ||||||||||||||||||||||||||||||
| Total loans | $ | 1,397,113 | $ | 17,024 | 4.83 | % | $ | 1,294,302 | $ | 15,004 | 4.60 | % | $ | 1,050,383 | $ | 11,235 | 4.24 | % | ||||||||||||
| Taxable investment securities | 112,321 | 443 | 1.56 | % | 121,704 | 443 | 1.44 | % | 129,817 | 389 | 1.19 | % | ||||||||||||||||||
| Nontaxable investment securities | 14,326 | 81 | 2.24 | % | 14,517 | 83 | 2.27 | % | 16,876 | 94 | 2.21 | % | ||||||||||||||||||
| Interest earning cash and cash equivalents | 12,261 | 116 | 3.75 | % | 28,384 | 160 | 2.24 | % | 73,022 | 33 | 0.18 | % | ||||||||||||||||||
| Federal Home Loan Bank stock | 8,859 | 135 | 6.05 | % | 5,326 | 54 | 4.02 | % | 3,552 | 18 | 2.01 | % | ||||||||||||||||||
| Total earning assets | 1,544,880 | 17,799 | 4.57 | % | 1,464,233 | 15,744 | 4.27 | % | 1,273,650 | 11,769 | 3.67 | % | ||||||||||||||||||
| Nonearning assets | ||||||||||||||||||||||||||||||
| Allowance for loan losses | (12,538 | ) | (11,478 | ) | (10,773 | ) | ||||||||||||||||||||||||
| Premises and equipment, net | 15,866 | 16,315 | 16,568 | |||||||||||||||||||||||||||
| Accrued income and other assets | 88,983 | 88,970 | 74,249 | |||||||||||||||||||||||||||
| Total assets | $ | 1,637,191 | $ | 1,558,040 | $ | 1,353,694 | ||||||||||||||||||||||||
| Interest bearing liabilities | ||||||||||||||||||||||||||||||
| Interest bearing demand deposits | $ | 320,672 | $ | 1,383 | 1.71 | % | $ | 318,771 | $ | 818 | 1.02 | % | $ | 250,327 | $ | 132 | 0.21 | % | ||||||||||||
| Savings deposits | 362,250 | 170 | 0.19 | % | 371,020 | 126 | 0.13 | % | 344,180 | 113 | 0.13 | % | ||||||||||||||||||
| Time deposits | 133,166 | 523 | 1.56 | % | 102,472 | 121 | 0.47 | % | 128,574 | 224 | 0.69 | % | ||||||||||||||||||
| Borrowed funds | 200,788 | 1,569 | 3.10 | % | 125,625 | 673 | 2.13 | % | 50,001 | 176 | 1.40 | % | ||||||||||||||||||
| Total interest bearing liabilities | 1,016,876 | 3,645 | 1.42 | % | 917,888 | 1,738 | 0.75 | % | 773,082 | 645 | 0.33 | % | ||||||||||||||||||
| Noninterest bearing liabilities | ||||||||||||||||||||||||||||||
| Noninterest bearing deposits | 484,586 | 505,435 | 444,929 | |||||||||||||||||||||||||||
| Accrued interest and other liabilities | 12,162 | 12,022 | 10,183 | |||||||||||||||||||||||||||
| Shareholders' equity | 123,567 | 122,695 | 125,500 | |||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,637,191 | $ | 1,558,040 | $ | 1,353,694 | ||||||||||||||||||||||||
| Net interest income (FTE) | $ | 14,154 | $ | 14,006 | $ | 11,124 | ||||||||||||||||||||||||
| Net interest margin to earning assets (FTE) | 3.63 | % | 3.79 | % | 3.47 | % | ||||||||||||||||||||||||
| Twelve Months Ended | ||||||||||||||||||||
| December 31, 2022 | December 31, 2021 | |||||||||||||||||||
| Average Balance | Tax Equivalent Interest | Average Yield / Rate | Average Balance | Tax Equivalent Interest | Average Yield / Rate | |||||||||||||||
| Interest earning assets | ||||||||||||||||||||
| Total loans | $ | 1,247,996 | $ | 56,610 | 4.54 | % | $ | 1,037,189 | $ | 45,129 | 4.35 | % | ||||||||
| Taxable investment securities | 126,925 | 1,767 | 1.39 | % | 98,002 | 1,285 | 1.31 | % | ||||||||||||
| Nontaxable investment securities | 15,215 | 342 | 2.25 | % | 17,090 | 394 | 2.31 | % | ||||||||||||
| Interest earning cash and cash equivalents | 34,145 | 345 | 1.01 | % | 81,970 | 112 | 0.14 | % | ||||||||||||
| Federal Home Loan Bank stock | 5,324 | 228 | 4.28 | % | 3,504 | 73 | 2.08 | % | ||||||||||||
| Total earning assets | 1,429,605 | 59,292 | 4.15 | % | 1,237,755 | 46,993 | 3.80 | % | ||||||||||||
| Nonearning assets | ||||||||||||||||||||
| Allowance for loan losses | (11,436 | ) | (11,000 | ) | ||||||||||||||||
| Premises and equipment, net | 16,455 | 16,224 | ||||||||||||||||||
| Accrued income and other assets | 88,795 | 68,694 | ||||||||||||||||||
| Total assets | $ | 1,523,419 | $ | 1,311,673 | ||||||||||||||||
| Interest bearing liabilities | ||||||||||||||||||||
| Interest bearing demand deposits | $ | 293,039 | $ | 2,523 | 0.86 | % | $ | 227,114 | $ | 496 | 0.22 | % | ||||||||
| Savings deposits | 366,503 | 529 | 0.14 | % | 325,043 | 438 | 0.13 | % | ||||||||||||
| Time deposits | 122,032 | 971 | 0.80 | % | 153,057 | 1,156 | 0.76 | % | ||||||||||||
| Borrowed funds | 116,596 | 2,744 | 2.35 | % | 49,408 | 646 | 1.31 | % | ||||||||||||
| Total interest bearing liabilities | 898,170 | 6,767 | 0.75 | % | 754,622 | 2,736 | 0.36 | % | ||||||||||||
| Noninterest bearing liabilities | ||||||||||||||||||||
| Noninterest bearing deposits | 488,370 | 424,273 | ||||||||||||||||||
| Accrued interest and other liabilities | 15,457 | 10,149 | ||||||||||||||||||
| Shareholders' equity | 121,422 | 122,629 | ||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,523,419 | $ | 1,311,673 | ||||||||||||||||
| Net interest income (FTE) | $ | 52,525 | $ | 44,257 | ||||||||||||||||
| Net interest margin to earning assets (FTE) | 3.67 | % | 3.58 | % | ||||||||||||||||
Volume and Rate Variance Analysis
The following table sets forth the effect of volume and rate changes on interest income and expense for the periods indicated. For the purpose of this table, changes in interest due to volume and rate were determined as follows:
Volume - change in volume multiplied by the previous period's rate.
Rate - change in the FTE rate multiplied by the previous period's volume.
The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.
| Three Months Ended | Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||||
| December 31, 2022 | December 31, 2022 | December 31, 2022 | |||||||||||||||||||||||||||||||||
| Compared To | Compared To | Compared To | |||||||||||||||||||||||||||||||||
| September 30, 2022 | December 31, 2021 | December 31, 2021 | |||||||||||||||||||||||||||||||||
| Increase (Decrease) Due to | Increase (Decrease) Due to | Increase (Decrease) Due to | |||||||||||||||||||||||||||||||||
| Volume | Rate | Net | Volume | Rate | Net | Volume | Rate | Net | |||||||||||||||||||||||||||
| Changes in interest income | |||||||||||||||||||||||||||||||||||
| Total loans | $ | 1,240 | $ | 780 | $ | 2,020 | $ | 4,072 | $ | 1,717 | $ | 5,789 | $ | 9,450 | $ | 2,031 | $ | 11,481 | |||||||||||||||||
| Taxable investment securities | (140 | ) | 140 | — | (274 | ) | 328 | 54 | 400 | 82 | 482 | ||||||||||||||||||||||||
| Nontaxable investment securities | (1 | ) | (1 | ) | (2 | ) | (21 | ) | 8 | (13 | ) | (42 | ) | (10 | ) | (52 | ) | ||||||||||||||||||
| Interest earning cash and cash equivalents | (412 | ) | 368 | (44 | ) | (206 | ) | 289 | 83 | (102 | ) | 335 | 233 | ||||||||||||||||||||||
| Federal Home Loan Bank stock | 46 | 35 | 81 | 50 | 67 | 117 | 51 | 104 | 155 | ||||||||||||||||||||||||||
| Total changes in interest income | 733 | 1,322 | 2,055 | 3,621 | 2,409 | 6,030 | 9,757 | 2,542 | 12,299 | ||||||||||||||||||||||||||
| Changes in interest expense | |||||||||||||||||||||||||||||||||||
| Interest bearing demand deposits | 5 | 560 | 565 | 47 | 1,204 | 1,251 | 184 | 1,843 | 2,027 | ||||||||||||||||||||||||||
| Savings deposits | (19 | ) | 63 | 44 | 6 | 51 | 57 | 56 | 35 | 91 | |||||||||||||||||||||||||
| Time deposits | 46 | 356 | 402 | 8 | 291 | 299 | (244 | ) | 59 | (185 | ) | ||||||||||||||||||||||||
| Borrowed funds | 509 | 387 | 896 | 993 | 400 | 1,393 | 1,324 | 774 | 2,098 | ||||||||||||||||||||||||||
| Total changes in interest expense | 541 | 1,366 | 1,907 | 1,054 | 1,946 | 3,000 | 1,320 | 2,711 | 4,031 | ||||||||||||||||||||||||||
| Net change in net interest income (FTE) | $ | 192 | $ | (44 | ) | $ | 148 | $ | 2,567 | $ | 463 | $ | 3,030 | $ | 8,437 | $ | (169 | ) | $ | 8,268 | |||||||||||||||
| Average Yield/Rate for the Three Months Ended | |||||||||||||||
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Total earning assets | 4.57 | % | 4.27 | % | 3.96 | % | 3.70 | % | 3.67 | % | |||||
| Total interest bearing liabilities | 1.42 | % | 0.75 | % | 0.38 | % | 0.29 | % | 0.33 | % | |||||
| Net interest margin to earning assets (FTE) | 3.63 | % | 3.79 | % | 3.73 | % | 3.52 | % | 3.47 | % | |||||
| Quarter to Date Net Interest Income (FTE) | |||||||||||||||
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Interest income | $ | 17,782 | $ | 15,726 | $ | 13,411 | $ | 12,301 | $ | 11,749 | |||||
| FTE adjustment | 17 | 18 | 18 | 19 | 20 | ||||||||||
| Total interest income (FTE) | 17,799 | 15,744 | 13,429 | 12,320 | 11,769 | ||||||||||
| Total interest expense | 3,645 | 1,738 | 785 | 599 | 645 | ||||||||||
| Net interest income (FTE) | $ | 14,154 | $ | 14,006 | $ | 12,644 | $ | 11,721 | $ | 11,124 | |||||
Noninterest Income
| Three Months Ended | ||||||||||||||||||||
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||||||||||||
| Net gain on sales of loans | $ | 24 | $ | 36 | $ | 182 | $ | 483 | $ | 838 | ||||||||||
| Service charges and fees | ||||||||||||||||||||
| ATM and debit card income | 559 | 553 | 577 | 485 | 496 | |||||||||||||||
| Trust and investment services | 505 | 546 | 458 | 598 | 399 | |||||||||||||||
| Service charges on deposit accounts | 245 | 270 | 246 | 241 | 218 | |||||||||||||||
| Total | 1,309 | 1,369 | 1,281 | 1,324 | 1,113 | |||||||||||||||
| Changes in the fair value of MSR | (129 | ) | 207 | 433 | 319 | 407 | ||||||||||||||
| Net gain (loss) on sale of AFS securities | — | — | — | — | (1 | ) | ||||||||||||||
| Change in fair value of equity investments | 2 | (39 | ) | (31 | ) | (48 | ) | (9 | ) | |||||||||||
| Other | ||||||||||||||||||||
| Mortgage servicing fees | 415 | 427 | 435 | 444 | 394 | |||||||||||||||
| Change in cash surrender value of corporate owned life insurance | 175 | 172 | 168 | 166 | 168 | |||||||||||||||
| PPP referral fees | — | — | — | — | — | |||||||||||||||
| Other | 137 | 205 | 310 | 104 | 187 | |||||||||||||||
| Total | 727 | 804 | 913 | 714 | 749 | |||||||||||||||
| Total noninterest income | $ | 1,933 | $ | 2,377 | $ | 2,778 | $ | 2,792 | $ | 3,097 | ||||||||||
| Memo items: | ||||||||||||||||||||
| Residential mortgage operations | $ | 310 | $ | 670 | $ | 1,050 | $ | 1,246 | $ | 1,639 | ||||||||||
| Twelve Months Ended December 31 | Variance | ||||||||||||||
| 2022 | 2021 | Amount | % | ||||||||||||
| Net gain on sales of loans | $ | 725 | $ | 5,032 | $ | (4,307 | ) | (85.59)% | |||||||
| Service charges and fees | |||||||||||||||
| ATM and debit card income | 2,174 | 1,950 | 224 | 11.49 | % | ||||||||||
| Trust and investment services | 2,107 | 1,832 | 275 | 15.01 | % | ||||||||||
| Service charges on deposit accounts | 1,002 | 751 | 251 | 33.42 | % | ||||||||||
| Total | $ | 5,283 | $ | 4,533 | 750 | 16.55 | % | ||||||||
| Changes in the fair value of MSR | 830 | 1,595 | (765 | ) | (47.96)% | ||||||||||
| Net gain (loss) on sale of AFS securities | — | (1 | ) | 1 | (100.00)% | ||||||||||
| Change in fair value of equity investments | (116 | ) | (30 | ) | (86 | ) | 286.67 | % | |||||||
| Other | |||||||||||||||
| Mortgage servicing fees | 1,721 | 1,460 | 261 | 17.88 | % | ||||||||||
| Change in cash surrender value of corporate owned life insurance | 681 | 634 | 47 | 7.41 | % | ||||||||||
| PPP referral fees | — | 431 | (431 | ) | (100.00)% | ||||||||||
| Other | 756 | 426 | 330 | 77.46 | % | ||||||||||
| Total | 3,158 | 2,951 | 207 | 7.01 | % | ||||||||||
| Total noninterest income | $ | 9,880 | $ | 14,080 | $ | (4,200 | ) | (29.83)% | |||||||
| Memo items: | |||||||||||||||
| Residential mortgage operations | $ | 3,276 | $ | 8,087 | (4,811 | ) | (59.49)% | ||||||||
Residential Mortgage Operations
Residential mortgage operations includes net gains on sales of loans, net mortgage servicing rights income, and mortgage servicing fees.
Net gain on sales of loans represents the income earned on the sale of residential mortgage loans into the secondary market. Increases in interest rates and limited inventories have significantly driven down the volume of new originations and refinancing activity, which in turn has reduced gains throughout 2022. Additionally, the majority of residential mortgage loans originated during 2022 have been portfolio loans (adjustable rate mortgages, construction loans, etc.) as rates offered for those products are typically more attractive as interest rates increase.
Changes in the fair value of MSR are highly correlated to changes in interest rates. Although a significant portion of the serviced loan portfolio were originated at historically low interest rates, changes in the fair value MSR have trended downward due to a reduction in the size of our servicing portfolio due to reduced levels of secondary market originations. During the fourth quarter, the serviced loan portfolio declined by
Mortgage servicing fees includes the fees earned for servicing loans that have been sold into the secondary market. The annual increase in mortgage servicing fees is directly related to the size of the serviced portfolio. We expect mortgage servicing fees to trend modestly downward in 2023 due to decreased secondary market originations.
All Other Noninterest Income
ATM and debit card income represents fees earned on ATM and debit card transactions. We expect these fees to increase slightly in 2023.
Trust and investment services includes income earned from contracts with customers to manage assets for investment and/or to transact on their accounts through the wealth management and trust department. The annual increase in income is a direct result of higher customer demand for annuity products. Trust services and wealth management fees are subject to market fluctuations and interest rate changes. We expect these fees to continue to increase in 2023.
Service charges on deposit accounts includes fees earned from deposit customers for transaction-based charges, account maintenance and overdraft services. Revenue from service charges increased throughout 2022 as a result of increased transaction volume as well as more customers utilizing overdraft services. Service charges on deposit accounts are expected to approximate current levels in 2023.
Change in cash surrender value of corporate owned life insurance is expected to modestly increase in 2023.
PPP referral fees earned in 2021 represent fees earned earned from the second round of the PPP loan program through the SBA. As the PPP loan program has ended, we do not anticipate to record any future revenues from PPP.
Other includes miscellaneous other income items, none of which are individually significant.
Noninterest Expenses
| Three Months Ended | |||||||||||||||
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Compensation and benefits | $ | 5,329 | $ | 5,320 | $ | 5,453 | $ | 5,347 | $ | 5,054 | |||||
| Furniture and equipment | 772 | 822 | 805 | 818 | 794 | ||||||||||
| Professional services | 594 | 763 | 777 | 812 | 948 | ||||||||||
| Occupancy | 566 | 578 | 579 | 604 | 491 | ||||||||||
| Loan and collection | 262 | 417 | 584 | 311 | 286 | ||||||||||
| Data processing | 111 | 363 | 665 | 412 | 622 | ||||||||||
| Advertising and promotional | 580 | 405 | 326 | 278 | 356 | ||||||||||
| Other | |||||||||||||||
| ATM and debit card | 254 | 154 | 160 | 143 | 158 | ||||||||||
| FDIC insurance premiums | 149 | 150 | 172 | 150 | 138 | ||||||||||
| Telephone and communication | 110 | 112 | 112 | 105 | 96 | ||||||||||
| Amortization of core deposit intangibles | 107 | 108 | 107 | 108 | 68 | ||||||||||
| Other acquisition related expenses | — | — | 14 | 256 | 225 | ||||||||||
| Other general and administrative | 931 | 933 | 790 | 807 | 721 | ||||||||||
| Total | 1,551 | 1,457 | 1,355 | 1,569 | 1,406 | ||||||||||
| Total noninterest expenses | $ | 9,765 | $ | 10,125 | $ | 10,544 | $ | 10,151 | $ | 9,957 | |||||
| Twelve Months Ended December 31 | Variance | ||||||||||||
| 2022 | 2021 | Amount | % | ||||||||||
| Compensation and benefits | $ | 21,449 | $ | 20,059 | $ | 1,390 | 6.93 | % | |||||
| Furniture and equipment | 3,217 | 2,904 | 313 | 10.78 | % | ||||||||
| Professional services | 2,946 | 3,065 | (119 | ) | (3.88)% | ||||||||
| Occupancy | 2,327 | 2,016 | 311 | 15.43 | % | ||||||||
| Loan and collection | 1,574 | 1,293 | 281 | 21.73 | % | ||||||||
| Data processing | 1,551 | 2,271 | (720 | ) | (31.70)% | ||||||||
| Advertising and promotional | 1,589 | 1,328 | 261 | 19.65 | % | ||||||||
| Other | |||||||||||||
| ATM and debit card | 711 | 555 | 156 | 28.11 | % | ||||||||
| FDIC insurance premiums | 621 | 525 | 85 | 21.96 | % | ||||||||
| Telephone and communication | 439 | 400 | 39 | 9.75 | % | ||||||||
| Amortization of core deposit intangibles | 430 | 270 | 160 | 59.26 | % | ||||||||
| Other acquisition related expenses | 270 | 289 | (19 | ) | (6.57)% | ||||||||
| Other general and administrative | 3,461 | 2,688 | 773 | 28.76 | % | ||||||||
| Total | 5,932 | 4,727 | 1,205 | 25.49 | % | ||||||||
| Total noninterest expenses | $ | 40,585 | $ | 37,663 | $ | 2,922 | 7.76 | % | |||||
Compensation and benefits includes salaries, commissions and incentives, employee benefits, and payroll taxes. Compensation and benefits increased in 2022 due to an increase in the size of the organization, merit increases, and market based adjustments. While there continues to be meaningful wage pressure, we expect a modest increase in overall compensation and benefits as further increases due to merit increases and market based adjustments will be partially offset by declines in commissions as loan originations are expected to decline.
Furniture and equipment and occupancy expenses primarily consist of depreciation, repairs and maintenance, certain service contracts, and other related items. These expenses are expected to approximate current levels in 2023.
Professional services include expenses relating to third-party professional services. These services include, but are not limited to, regulatory, auditing, consulting, and legal. The decline in these expenses during the fourth quarter of 2022 is primarily due to a decrease in audit fees. These expenses are expected to increase slightly into 2023 due to our continued increase size and complexity.
Loan and collection includes expenses related to the origination and collection of loans. These expenses are expected to decline in future periods as loan growth is expected to moderate in 2023.
Data processing primarily includes the expenses relating to our core data processor. These expenses trended downward during the third and fourth quarters of 2022 due to receipt of renewal incentives from our core data processor. Data processing expenses are expected to normalize into 2023 as these renewal incentives wind down.
Advertising and promotional includes media costs and any donations or sponsorships. The annual increase in such expenses is a result of enhanced marketing efforts to attract new and expand existing customer loan and deposit account relationships. Total advertising and promotional expenses are expected to moderately increase into 2023.
ATM and debit card expenses fluctuate based on customer and non-customer utilization of ATMs and customer debit card volumes. The increase in ATM and debit card expenses during the fourth quarter is due to an increase in customer disputes resulting from fraudulent debit card activity. We expect these fees to approximate current levels into 2023.
FDIC insurance premiums typically fluctuate each period based on the size of the balance sheet, capital position and overall risk profile. FDIC insurance premiums are expected to increase in 2023 primarily due to the FDIC increasing its assessment rate for all insured institutions effective January 1, 2023.
Telephone and communication includes expenses relating to our communication systems. These expenses are expected to approximate current levels into 2023.
Amortization of core deposit intangibles relates to the core deposits acquired from Community Bancorp, Inc. on December 31, 2016 and FSB on December 1, 2021. These core deposit intangibles are being amortized using an accelerated sum-of-years-digits method over their estimated useful lives of seven years.
Other acquisition related expenses includes expenses related to the acquisition of FSB. We do not anticipate recording additional expenses related to the acquisition of FSB in future periods.
Other general and administrative includes miscellaneous other expense items, none of which are individually significant. Other general and administrative expenses are expected to increase slightly in future periods.
Balance Sheet Breakdown and Analysis
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| ASSETS | |||||||||||||||
| Cash and due from banks | $ | 57,844 | $ | 43,345 | $ | 38,510 | $ | 80,133 | $ | 83,446 | |||||
| Total investment securities | 125,049 | 129,886 | 136,725 | 151,579 | 164,942 | ||||||||||
| Residential mortgage loans held-for-sale, at fair value | 493 | 62 | 664 | 3,038 | 6,783 | ||||||||||
| Gross loans | 1,436,166 | 1,350,851 | 1,232,892 | 1,139,351 | 1,100,092 | ||||||||||
| Less allowance for loan losses | 13,000 | 12,200 | 11,000 | 11,000 | 10,500 | ||||||||||
| Net loans | 1,423,166 | 1,338,651 | 1,221,892 | 1,128,351 | 1,089,592 | ||||||||||
| All other assets | 88,447 | 83,182 | 76,516 | 72,400 | 73,038 | ||||||||||
| Total assets | $ | 1,694,999 | $ | 1,595,126 | $ | 1,474,307 | $ | 1,435,501 | $ | 1,417,801 | |||||
| . | |||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||
| Total deposits | $ | 1,332,883 | $ | 1,345,209 | $ | 1,231,543 | $ | 1,252,892 | $ | 1,228,298 | |||||
| Total borrowed funds | 222,350 | 116,600 | 111,000 | 52,000 | 50,000 | ||||||||||
| Accrued interest payable and other liabilities | 13,679 | 11,687 | 13,198 | 9,263 | 15,048 | ||||||||||
| Total liabilities | 1,568,912 | 1,473,496 | 1,355,741 | 1,314,155 | 1,293,346 | ||||||||||
| Total shareholders' equity | 126,087 | 121,630 | 118,566 | 121,346 | 124,455 | ||||||||||
| Total liabilities and shareholders' equity | $ | 1,694,999 | $ | 1,595,126 | $ | 1,474,307 | $ | 1,435,501 | $ | 1,417,801 | |||||
| 12/31/2022 vs 9/30/2022 | 12/31/2022 vs 12/31/2021 | |||||||||||||
| Variance | Variance | |||||||||||||
| Amount | % | Amount | % | |||||||||||
| ASSETS | ||||||||||||||
| Cash and due from banks | $ | 14,499 | 33.45 | % | $ | (25,602 | ) | (30.68)% | ||||||
| Total investment securities | (4,837 | ) | (3.72)% | (39,893 | ) | (24.19)% | ||||||||
| Residential mortgage loans held-for-sale, at fair value | 431 | 695.16 | % | (6,290 | ) | (92.73)% | ||||||||
| Gross loans | 85,315 | 6.32 | % | 336,074 | 30.55 | % | ||||||||
| Less allowance for loan losses | 800 | 6.56 | % | 2,500 | 23.81 | % | ||||||||
| Net loans | 84,515 | 6.31 | % | 333,574 | 30.61 | % | ||||||||
| All other assets | 5,265 | 6.33 | % | 15,409 | 21.10 | % | ||||||||
| Total assets | $ | 99,873 | 6.26 | % | $ | 277,198 | 19.55 | % | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
| Total deposits | $ | (12,326 | ) | (0.92)% | $ | 104,585 | 8.51 | % | ||||||
| Total borrowed funds | 105,750 | 90.69 | % | 172,350 | 344.70 | % | ||||||||
| Accrued interest payable and other liabilities | 1,992 | 17.04 | % | (1,369 | ) | (9.10)% | ||||||||
| Total liabilities | 95,416 | 6.48 | % | 275,566 | 21.31 | % | ||||||||
| Total shareholders' equity | 4,457 | 3.66 | % | 1,632 | 1.31 | % | ||||||||
| Total liabilities and shareholders' equity | $ | 99,873 | 6.26 | % | $ | 277,198 | 19.55 | % | ||||||
Cash and due from banks
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||||||||||
| Cash and due from banks | ||||||||||||||||||
| Noninterest bearing | $ | 28,216 | $ | 29,530 | $ | 26,085 | $ | 23,715 | $ | 28,475 | ||||||||
| Interest bearing | 29,628 | 13,815 | 12,425 | 56,418 | 54,971 | |||||||||||||
| Total | $ | 57,844 | $ | 43,345 | $ | 38,510 | $ | 80,133 | $ | 83,446 | ||||||||
| 12/31/2022 vs 9/30/2022 | 12/31/2022 vs 12/31/2021 | |||||||||||||||||
| Variance | Variance | |||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||
| Cash and due from banks | ||||||||||||||||||
| Noninterest bearing | $ | (1,314 | ) | (4.45)% | $ | (259 | ) | (0.91)% | ||||||||||
| Interest bearing | 15,813 | 114.46 | % | (25,343 | ) | (46.10)% | ||||||||||||
| Total | $ | 14,499 | 33.45 | % | $ | (25,602 | ) | (30.68)% | ||||||||||
Cash and due from banks fluctuates from period to period based on loan demand and variances in deposit accounts.
Primary and secondary liquidity sources
The following table outlines our primary and secondary sources of liquidity as of:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Cash and cash equivalents | $ | 57,844 | $ | 43,345 | $ | 38,510 | $ | 80,133 | $ | 83,446 | |||||
| Fair value of unpledged investment securities | 103,819 | 109,685 | 115,586 | 132,364 | 143,431 | ||||||||||
| FHLB borrowing availability | 144,567 | 78,000 | 83,000 | 140,000 | 140,000 | ||||||||||
| Unsecured lines of credit | 26,500 | 26,500 | 26,500 | 26,500 | 26,500 | ||||||||||
| Funds available through the Fed Discount Window | 113 | 115 | 125 | 125 | 200 | ||||||||||
| Parent company line of credit | 1,650 | 2,400 | 3,000 | 5,000 | 7,000 | ||||||||||
| PPPLF | — | — | 429 | 583 | 2,172 | ||||||||||
| Total liquidity sources | $ | 334,493 | $ | 260,045 | $ | 267,150 | $ | 384,705 | $ | 402,749 | |||||
The increase in FHLB borrowing availability during the fourth quarter of 2022 is due to approval from the FHLB to allow us to pledge eligible commercial real estate loans.
Investment securities
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||||||||||||
| Available-for-sale | ||||||||||||||||||||
| U.S. Government and federal agency | $ | 24,394 | $ | 26,391 | $ | 27,391 | $ | 28,396 | $ | 30,406 | ||||||||||
| State and municipal | 22,709 | 22,743 | 22,863 | 24,949 | 25,010 | |||||||||||||||
| Mortgage backed residential | 56,293 | 58,313 | 60,672 | 63,532 | 66,874 | |||||||||||||||
| Certificates of deposit | 7,426 | 8,166 | 8,914 | 9,917 | 10,172 | |||||||||||||||
| Collateralized mortgage obligations - agencies | 25,925 | 26,560 | 27,733 | 28,968 | 30,180 | |||||||||||||||
| Unrealized gain/(loss) on available-for-sale securities | (14,184 | ) | (14,698 | ) | (13,509 | ) | (6,900 | ) | (468 | ) | ||||||||||
| Total available-for-sale | 122,563 | 127,475 | 134,064 | 148,862 | 162,174 | |||||||||||||||
| Held-to-maturity state and municipal | 1,171 | 1,173 | 1,386 | 1,509 | 1,512 | |||||||||||||||
| Equity securities | 1,315 | 1,238 | 1,275 | 1,208 | 1,256 | |||||||||||||||
| Total investment securities | $ | 125,049 | $ | 129,886 | $ | 136,725 | $ | 151,579 | $ | 164,942 | ||||||||||
| 12/31/2022 vs 9/30/2022 | 12/31/2022 vs 12/31/2021 | |||||||||||||||||||
| Variance | Variance | |||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||
| Available-for-sale | ||||||||||||||||||||
| U.S. Government and federal agency | (1,997 | ) | (7.57)% | $ | (6,012 | ) | (19.77)% | |||||||||||||
| State and municipal | (34 | ) | (0.15)% | (2,301 | ) | (9.20)% | ||||||||||||||
| Mortgage backed residential | (2,020 | ) | (3.46)% | (10,581 | ) | (15.82)% | ||||||||||||||
| Certificates of deposit | (740 | ) | (9.06)% | (2,746 | ) | (27.00)% | ||||||||||||||
| Collateralized mortgage obligations - agencies | (635 | ) | (2.39)% | (4,255 | ) | (14.10)% | ||||||||||||||
| Unrealized gain/(loss) on available-for-sale securities | 514 | (3.50)% | (13,716 | ) | 2,930.77 | % | ||||||||||||||
| Total available-for-sale | (4,912 | ) | (3.85)% | (39,611 | ) | (24.43)% | ||||||||||||||
| Held-to-maturity state and municipal | (2 | ) | (0.17)% | (341 | ) | (22.55)% | ||||||||||||||
| Equity securities | 77 | 6.22 | % | 59 | 4.70 | % | ||||||||||||||
| Total investment securities | $ | (4,837 | ) | (3.72)% | $ | (39,893 | ) | (24.19)% | ||||||||||||
The amortized cost and fair value of AFS investment securities as of December 31, 2022 were as follows:
| Maturing | ||||||||||||||||||
| Due in One Year or Less | After One Year But Within Five Years | After Five Years But Within Ten Years | After Ten Years | Securities with Variable Monthly Payments or Noncontractual Maturities | Total | |||||||||||||
| U.S. Government and federal agency | $ | 1,988 | $ | 22,406 | $ | — | $ | — | $ | — | $ | 24,394 | ||||||
| State and municipal | 2,046 | 10,859 | 8,222 | 1,582 | — | 22,709 | ||||||||||||
| Mortgage backed residential | — | 56,293 | 56,293 | |||||||||||||||
| Certificates of deposit | 4,701 | 2,725 | — | — | — | 7,426 | ||||||||||||
| Collateralized mortgage obligations - agencies | — | — | — | — | 25,925 | 25,925 | ||||||||||||
| Total amortized cost | $ | 8,735 | $ | 35,990 | $ | 8,222 | $ | 1,582 | $ | 82,218 | $ | 136,747 | ||||||
| Fair value | $ | 8,608 | $ | 32,981 | $ | 7,235 | $ | 1,457 | $ | 72,282 | $ | 122,563 | ||||||
The amortized cost and fair value of HTM investment securities as of December 31, 2022 were as follows:
| Maturing | ||||||||||||||||||
| Due in One Year or Less | After One Year But Within Five Years | After Five Years But Within Ten Years | After Ten Years | Securities with Variable Monthly Payments or Noncontractual Maturities | Total | |||||||||||||
| State and municipal | $ | 288 | $ | 578 | $ | 305 | $ | — | $ | — | $ | 1,171 | ||||||
| Fair value | $ | 286 | $ | 567 | $ | 293 | $ | — | $ | — | $ | 1,146 | ||||||
Due to robust loan demand, there were no purchases of investments in 2022. This strategy, coupled with the increase in the our unrealized loss position due to increases in market interest rates, has led to a reduction of the overall size of the investment portfolio.
Residential mortgage loans held-for-sale, at fair value
Loans HFS represent the fair value of loans that have been committed to be sold to the secondary market, but have not yet been delivered. The level of loans HFS fluctuates based on loan demand as well as the timing of loan deliveries to the secondary market.
Loans and allowance for loan losses
As outlined in the following tables, we have been extremely successful at growing our loan portfolio over the past 12 months while maintaining strong credit quality metrics. We expect loan demand to moderate in future periods.
The following tables outline the composition and changes in the loan portfolio as of:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||||||||||||
| Commercial, net of PPP loans | $ | 106,616 | $ | 107,531 | $ | 108,054 | $ | 94,810 | $ | 91,529 | ||||||||||
| PPP loans | — | — | 429 | 583 | 2,172 | |||||||||||||||
| Commercial real estate | 869,496 | 820,165 | 745,416 | 698,275 | 656,818 | |||||||||||||||
| Total commercial loans | 976,112 | 927,696 | 853,899 | 793,668 | 750,519 | |||||||||||||||
| Residential mortgage | 406,408 | 368,971 | 327,574 | 297,940 | 298,799 | |||||||||||||||
| Home equity | 47,768 | 47,928 | 44,648 | 40,609 | 42,220 | |||||||||||||||
| Total residential real estate loans | 454,176 | 416,899 | 372,222 | 338,549 | 341,019 | |||||||||||||||
| Consumer | 5,878 | 6,256 | 6,771 | 7,134 | 8,554 | |||||||||||||||
| Gross loans | 1,436,166 | 1,350,851 | 1,232,892 | 1,139,351 | 1,100,092 | |||||||||||||||
| Allowance for loan and lease losses | (13,000 | ) | (12,200 | ) | (11,000 | ) | (11,000 | ) | (10,500 | ) | ||||||||||
| Loans, net | $ | 1,423,166 | $ | 1,338,651 | $ | 1,221,892 | $ | 1,128,351 | $ | 1,089,592 | ||||||||||
| Memo items: | ||||||||||||||||||||
| Gross loans, net of PPP loans | $ | 1,436,166 | $ | 1,350,851 | $ | 1,232,463 | $ | 1,138,768 | $ | 1,097,920 | ||||||||||
| Residential mortgage loans serviced for others | $ | 647,121 | $ | 660,490 | $ | 678,117 | $ | 688,745 | $ | 687,233 | ||||||||||
| 12/31/2022 vs 9/30/2022 | 12/31/2022 vs 12/31/2021 | |||||||||||||||||||
| Variance | Variance | |||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||
| Commercial, net of PPP loans | $ | (915 | ) | (0.85)% | $ | 15,087 | 16.48 | % | ||||||||||||
| PPP loans | — | N/M | (2,172 | ) | (100.00)% | |||||||||||||||
| Commercial real estate | 49,331 | 6.01 | % | 212,678 | 32.38 | % | ||||||||||||||
| Total commercial loans | 48,416 | 5.22 | % | 225,593 | 30.06 | % | ||||||||||||||
| Residential mortgage | 37,437 | 10.15 | % | 107,609 | 36.01 | % | ||||||||||||||
| Home equity | (160 | ) | (0.33)% | 5,548 | 13.14 | % | ||||||||||||||
| Total residential real estate loans | 37,277 | 8.94 | % | 113,157 | 33.18 | % | ||||||||||||||
| Consumer | (378 | ) | (6.04)% | (2,676 | ) | (31.28)% | ||||||||||||||
| Gross loans | 85,315 | 6.32 | % | 336,074 | 30.55 | % | ||||||||||||||
| Allowance for loan and lease losses | (800 | ) | 6.56 | % | (2,500 | ) | 23.81 | % | ||||||||||||
| Loans, net | $ | 84,515 | 6.31 | % | $ | 333,574 | 30.61 | % | ||||||||||||
| Memo items: | ||||||||||||||||||||
| Gross loans, net of PPP loans | $ | 85,315 | 6.32 | % | $ | 338,246 | 30.81 | % | ||||||||||||
| Residential mortgage loans serviced for others | $ | (13,369 | ) | (2.02)% | $ | (40,112 | ) | (5.84)% | ||||||||||||
The following table presents historical loan balances by portfolio segment and impairment evaluation as of:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Loans collectively evaluated for impairment | |||||||||||||||
| Commercial and industrial | $ | 106,616 | $ | 107,531 | $ | 108,483 | $ | 94,899 | $ | 93,207 | |||||
| Commercial real estate | 869,313 | 819,982 | 745,025 | 697,818 | 656,818 | ||||||||||
| Residential mortgage | 404,308 | 367,652 | 326,481 | 296,883 | 297,626 | ||||||||||
| Home equity | 47,728 | 47,887 | 44,607 | 40,568 | 42,138 | ||||||||||
| Consumer | 5,871 | 6,251 | 6,771 | 7,134 | 8,554 | ||||||||||
| Subtotal | 1,433,836 | 1,349,303 | 1,231,367 | 1,137,302 | 1,098,343 | ||||||||||
| Loans individually evaluated for impairment | |||||||||||||||
| Commercial and industrial | — | — | — | 494 | 494 | ||||||||||
| Commercial real estate | 183 | 183 | 391 | 457 | — | ||||||||||
| Residential mortgage | 2,100 | 1,319 | 1,093 | 1,057 | 1,173 | ||||||||||
| Home equity | 40 | 41 | 41 | 41 | 82 | ||||||||||
| Consumer | 7 | 5 | — | — | — | ||||||||||
| Subtotal | 2,330 | 1,548 | 1,525 | 2,049 | 1,749 | ||||||||||
| Gross Loans | $ | 1,436,166 | $ | 1,350,851 | $ | 1,232,892 | $ | 1,139,351 | $ | 1,100,092 | |||||
The following table presents historical allowance for loan losses allocations by portfolio segment and impairment evaluation as of:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Loans collectively evaluated for impairment | |||||||||||||||
| Commercial and industrial | $ | 1,094 | $ | 1,129 | $ | 1,074 | $ | 837 | $ | 743 | |||||
| Commercial real estate | 7,480 | 7,126 | 6,437 | 6,716 | 6,350 | ||||||||||
| Residential mortgage | 3,878 | 3,458 | 3,061 | 3,007 | 2,940 | ||||||||||
| Home equity | 370 | 370 | 345 | 364 | 379 | ||||||||||
| Consumer | 128 | 90 | 74 | 63 | 77 | ||||||||||
| Subtotal | 12,950 | 12,173 | 10,991 | 10,987 | 10,489 | ||||||||||
| Loans individually evaluated for impairment | |||||||||||||||
| Commercial and industrial | — | — | — | — | — | ||||||||||
| Commercial real estate | — | — | — | — | — | ||||||||||
| Residential mortgage | 43 | 27 | 9 | 13 | 11 | ||||||||||
| Home equity | — | — | — | — | — | ||||||||||
| Consumer | 7 | — | — | — | — | ||||||||||
| Subtotal | 50 | 27 | 9 | 13 | 11 | ||||||||||
| Allowance for loan losses | $ | 13,000 | $ | 12,200 | $ | 11,000 | $ | 11,000 | $ | 10,500 | |||||
| Commercial and industrial | $ | 1,094 | $ | 1,129 | $ | 1,074 | $ | 837 | $ | 743 | |||||
| Commercial real estate | 7,480 | 7,126 | 6,437 | 6,716 | 6,350 | ||||||||||
| Residential mortgage | 3,921 | 3,485 | 3,070 | 3,020 | 2,951 | ||||||||||
| Home equity | 370 | 370 | 345 | 364 | 379 | ||||||||||
| Consumer | 135 | 90 | 74 | 63 | 77 | ||||||||||
| Allowance for loan losses | $ | 13,000 | $ | 12,200 | $ | 11,000 | $ | 11,000 | $ | 10,500 | |||||
The following table summarizes our current, past due, and nonaccrual loans as of:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Accruing interest | |||||||||||||||
| Current | $ | 1,428,691 | $ | 1,346,141 | $ | 1,228,082 | $ | 1,132,961 | $ | 1,094,141 | |||||
| Past due 30-89 days | 5,182 | 3,131 | 2,802 | 4,099 | 3,971 | ||||||||||
| Past due 90 days or more | — | 71 | 525 | 284 | 276 | ||||||||||
| Total accruing interest | 1,433,873 | 1,349,343 | 1,231,409 | 1,137,344 | 1,098,388 | ||||||||||
| Nonaccrual | 2,293 | 1,508 | 1,483 | 2,007 | 1,704 | ||||||||||
| Total loans | $ | 1,436,166 | $ | 1,350,851 | $ | 1,232,892 | $ | 1,139,351 | $ | 1,100,092 | |||||
| Total loans past due and in nonaccrual status | $ | 7,475 | $ | 4,710 | $ | 4,810 | $ | 6,390 | $ | 5,951 | |||||
The following table summarizes the our nonperforming assets as of:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Nonaccrual loans | $ | 2,293 | $ | 1,508 | $ | 1,483 | $ | 2,007 | $ | 1,704 | |||||
| Accruing loans past due 90 days or more | — | 71 | 525 | 284 | 276 | ||||||||||
| Total nonperforming loans | 2,293 | 1,579 | 2,008 | 2,291 | 1,980 | ||||||||||
| Other real estate owned | 293 | 293 | 383 | 383 | 383 | ||||||||||
| Total nonperforming assets | $ | 2,586 | $ | 1,872 | $ | 2,391 | $ | 2,674 | $ | 2,363 | |||||
The following table summarizes our charge-offs, recoveries, provision for loan losses and ALLL as of, and for the three-month periods ended:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Total charge-offs | $ | 58 | $ | 40 | $ | 533 | $ | 9 | $ | 48 | |||||
| Total recoveries | 11 | 9 | 8 | 7 | 10 | ||||||||||
| Net charge-offs (recoveries) | $ | 47 | $ | 31 | $ | 525 | $ | 2 | $ | 38 | |||||
| Provision for loan losses | $ | 847 | $ | 1,231 | $ | 525 | $ | 502 | $ | 38 | |||||
The following table summarizes the our primary asset quality measures as of:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Nonperforming loans to gross loans | 0.16 | % | 0.12 | % | 0.16 | % | 0.20 | % | 0.18 | % | |||||
| Nonperforming assets to total assets | 0.15 | % | 0.12 | % | 0.16 | % | 0.19 | % | 0.17 | % | |||||
| Allowance for loan losses to gross loans | 0.91 | % | 0.90 | % | 0.89 | % | 0.97 | % | 0.95 | % | |||||
| Allowance for loan losses to gross loans, net of PPP loans | 0.91 | % | 0.90 | % | 0.89 | % | 0.97 | % | 0.96 | % | |||||
| Net charge-offs (recoveries) to QTD average gross loans | — | % | — | % | 0.04 | % | — | % | — | % | |||||
| Provision for loan losses to QTD average gross loans | 0.06 | % | 0.10 | % | 0.04 | % | 0.05 | % | — | % | |||||
The following table summarizes our net unamortized discounts on purchased loans as of:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||||||
| Net unamortized premium (discount) on purchased loans | $ | — | $ | (25 | ) | $ | (51 | ) | $ | (76 | ) | $ | (101 | ) | |||||
The following table summarizes the average loan size as of:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Commercial and industrial | $ | 311 | $ | 314 | $ | 309 | $ | 264 | $ | 192 | |||||
| Commercial real estate | 890 | 851 | 802 | 756 | 715 | ||||||||||
| Total commercial loans | 740 | 711 | 667 | 618 | 533 | ||||||||||
| Residential mortgage | 225 | 217 | 208 | 193 | 188 | ||||||||||
| Home equity | 52 | 52 | 50 | 46 | 38 | ||||||||||
| Total residential real estate loans | 166 | 159 | 151 | 140 | 126 | ||||||||||
| Consumer | 13 | 14 | 14 | 14 | 15 | ||||||||||
| Gross loans | $ | 323 | $ | 311 | $ | 292 | $ | 271 | $ | 235 | |||||
The tables below summarize total PPP fee income for the periods ended:
| Year to Date December 31 | Variance | |||||||||||||
| 2022 | 2021 | Amount | % | |||||||||||
| PPP fees recognized | $ | 24 | $ | 3,208 | $ | (3,184 | ) | (99.25)% | ||||||
| PPP referral fee income | — | 431 | (431 | ) | (100.00)% | |||||||||
| Total PPP fees recognized | $ | 24 | $ | 3,639 | $ | (3,615 | ) | (99.34)% | ||||||
All other assets
The following tables outline the composition and changes in other assets as of:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||||||
| Premises and equipment, net | $ | 15,571 | $ | 16,100 | $ | 16,459 | $ | 16,696 | $ | 16,957 | |||||||||
| Federal Home Loan Bank stock | 10,215 | 5,760 | 4,140 | 3,337 | 3,708 | ||||||||||||||
| Corporate owned life insurance | 26,697 | 26,522 | 26,350 | 26,136 | 25,970 | ||||||||||||||
| Mortgage servicing rights | 8,666 | 8,795 | 8,588 | 8,155 | 7,836 | ||||||||||||||
| Accrued interest receivable | 4,002 | 3,300 | 2,798 | 2,784 | 2,817 | ||||||||||||||
| Goodwill | 8,853 | 8,853 | 8,853 | 8,853 | 8,853 | ||||||||||||||
| Other assets | |||||||||||||||||||
| Core deposit intangibles | 836 | 943 | 1,051 | 1,158 | 1,266 | ||||||||||||||
| Right-of-use assets | 1,204 | 1,065 | 1,159 | 1,110 | 1,150 | ||||||||||||||
| Other real estate owned | 293 | 293 | 383 | 383 | 383 | ||||||||||||||
| Other | 12,110 | 11,551 | 6,735 | 3,788 | 4,098 | ||||||||||||||
| Total | 14,443 | 13,852 | 9,328 | 6,439 | 6,897 | ||||||||||||||
| All other assets | $ | 88,447 | $ | 83,182 | $ | 76,516 | $ | 72,400 | $ | 73,038 | |||||||||
| 12/31/2022 vs 9/30/2022 | 12/31/2022 vs 12/31/2021 | ||||||||||||||||||
| Variance | Variance | ||||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||||
| Premises and equipment, net | $ | (529 | ) | (3.29)% | $ | (1,386 | ) | (8.17)% | |||||||||||
| Federal Home Loan Bank stock | 4,455 | 77.34 | % | 6,507 | 175.49 | % | |||||||||||||
| Corporate owned life insurance | 175 | 0.66 | % | 727 | 2.80 | % | |||||||||||||
| Mortgage servicing rights | (129 | ) | (1.47)% | 830 | 10.59 | % | |||||||||||||
| Accrued interest receivable | 702 | 21.27 | % | 1,185 | 42.07 | % | |||||||||||||
| Goodwill | — | — | % | — | — | % | |||||||||||||
| Other assets | |||||||||||||||||||
| Core deposit intangibles | (107 | ) | (11.35)% | (430 | ) | (33.97)% | |||||||||||||
| Right-of-use assets | 139 | 13.05 | % | 54 | 4.70 | % | |||||||||||||
| Other real estate owned | — | — | % | (90 | ) | (23.50)% | |||||||||||||
| Other | 559 | 4.84 | % | 8,012 | 195.51 | % | |||||||||||||
| Total | 591 | 4.27 | % | 7,546 | 109.41 | % | |||||||||||||
| All other assets | $ | 5,265 | 6.33 | % | $ | 15,409 | 21.10 | % | |||||||||||
The increase in FHLB stock throughout 2022 is a direct result of an increase in FHLB borrowings utilized to fund our robust loan growth.
Mortgage servicing rights increased in in the first three quarters of 2022 due to increases in market interest rates, as a significant portion of the our residential mortgage servicing portfolio was booked throughout the past several years at historically low interest rates. However, due to a reduction in loan originations, the value of mortgage servicing rights declined in the fourth quarter as the servicing portfolio has declined. This trend is expected to continue into 2023.
Other assets increased in 2022 primarily due to an increase in deferred tax assets related to unrealized losses in our available-for-sale investment portfolio.
Total deposits
The following tables outline the composition and changes in the deposit portfolio as of:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||||||
| Noninterest bearing demand | $ | 461,390 | $ | 500,204 | $ | 493,262 | $ | 480,230 | $ | 459,254 | |||||||||
| Interest bearing | |||||||||||||||||||
| Savings | 351,066 | 380,118 | 368,849 | 377,170 | 360,204 | ||||||||||||||
| Money market demand | 170,459 | 213,672 | 144,606 | 135,051 | 125,391 | ||||||||||||||
| NOW | 176,620 | 148,775 | 118,707 | 126,461 | 141,480 | ||||||||||||||
| Time deposits | 173,348 | 102,440 | 106,119 | 133,980 | 141,969 | ||||||||||||||
| Total deposits | $ | 1,332,883 | $ | 1,345,209 | $ | 1,231,543 | $ | 1,252,892 | $ | 1,228,298 | |||||||||
| 12/31/2022 vs 9/30/2022 | 12/31/2022 vs 12/31/2021 | ||||||||||||||||||
| Variance | Variance | ||||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||||
| Noninterest bearing demand | $ | (38,814 | ) | (7.76)% | $ | 2,136 | 0.47 | % | |||||||||||
| Interest bearing | |||||||||||||||||||
| Savings | (29,052 | ) | (7.64)% | (9,138 | ) | (2.54)% | |||||||||||||
| Money market demand | (43,213 | ) | (20.22)% | 45,068 | 35.94 | % | |||||||||||||
| NOW | 27,845 | 18.72 | % | 35,140 | 24.84 | % | |||||||||||||
| Time deposits | 70,908 | 69.22 | % | 31,379 | 22.10 | % | |||||||||||||
| Total deposits | $ | (12,326 | ) | (0.92)% | $ | 104,585 | 8.51 | % | |||||||||||
In the fourth quarter of 2022, we (like many financial institutions) experienced significant pressure to remain competitive on retail deposit rates. Despite actively matching market rates when appropriate, this highly competitive environment led to a decline in deposits in the fourth quarter. These declines were partially offset by increases in brokered deposits and borrowed funds (see "Total borrowed funds" and "Wholesale funding sources" below). While overall market liquidity continues to tighten and be extremely competitive, we have strategic initiatives in place to grow core market deposits in 2023.
Total borrowed funds
The following tables outline the composition and changes in borrowed funds as of:
| 12/31/22 | 9/30/22 | 6/30/22 | 3/31/22 | 12/31/21 | |||||||||||||
| Federal Home Loan Bank borrowings | $ | 202,000 | $ | 97,000 | $ | 92,000 | $ | 35,000 | $ | 35,000 | |||||||
| Subordinated debentures | 14,000 | 14,000 | 14,000 | 14,000 | 14,000 | ||||||||||||
| Other borrowings | 6,350 | 5,600 | 5,000 | 3,000 | 1,000 | ||||||||||||
| Total borrowed funds | $ | 222,350 | $ | 116,600 | $ | 111,000 | $ | 52,000 | $ | 50,000 | |||||||
| 12/31/2022 vs 9/30/2022 | 12/31/2022 vs 12/31/2021 | ||||||||||||||||
| Variance | Variance | ||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||
| Federal Home Loan Bank borrowings | $ | 105,000 | 108.25 | % | $ | 167,000 | 477.14 | % | |||||||||
| Subordinated debentures | — | — | % | — | — | % | |||||||||||
| Other borrowings | 750 | 13.39 | % | 5,350 | 535.00 | % | |||||||||||
| Total borrowed funds | $ | 105,750 | 90.69 | % | $ | 172,350 | 344.70 | % | |||||||||
We utilize a mix of borrowed funds and organic deposit growth to fund loan demand. The increase in Federal Home Loan Bank borrowings in 2022 was the result of the highly competitive deposit landscape and the growth of our loan portfolio, which grew
Wholesale funding sources
The following tables outline the composition and changes in wholesale funding sources as of:
| 12/31/22 | 9/30/22 | 6/30/22 | 3/31/22 | 12/31/21 | |||||||||||||||
| Federal Home Loan Bank borrowings | $ | 202,000 | $ | 97,000 | $ | 92,000 | $ | 35,000 | $ | 35,000 | |||||||||
| Subordinated debentures | 14,000 | 14,000 | 14,000 | 14,000 | 14,000 | ||||||||||||||
| Other borrowings | 6,350 | 5,600 | 5,000 | 3,000 | 1,000 | ||||||||||||||
| Brokered NOW accounts | 40,009 | — | — | — | — | ||||||||||||||
| Brokered time deposits | 70,000 | 20,000 | 20,000 | 20,000 | 20,000 | ||||||||||||||
| Internet time deposits | 990 | 1,986 | 1,743 | 1,743 | 1,743 | ||||||||||||||
| Total wholesale funds | $ | 333,349 | $ | 138,586 | $ | 132,743 | $ | 73,743 | $ | 71,743 | |||||||||
| 12/31/2022 vs 9/30/2022 | 12/31/2022 vs 12/31/2021 | ||||||||||||||||||
| Variance | Variance | ||||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||||
| Federal Home Loan Bank borrowings | $ | 105,000 | 108.25 | % | 167,000 | 477.14 | % | ||||||||||||
| Subordinated debentures | — | — | % | — | — | % | |||||||||||||
| Other borrowings | 750 | 13.39 | % | 5,350 | 535.00 | % | |||||||||||||
| Brokered NOW accounts | 40,009 | N/A | 40,009 | N/A | |||||||||||||||
| Brokered time deposits | 50,000 | 250.00 | % | 50,000 | 250.00 | % | |||||||||||||
| Internet time deposits | (996 | ) | (50.15)% | (753 | ) | (43.20)% | |||||||||||||
| Total wholesale funds | $ | 194,763 | 140.54 | % | $ | 261,606 | 364.64 | % | |||||||||||
As noted above, the increased competition for deposits in the fourth quarter, coupled with strong loan growth has led to an increased utilization of wholesale funding sources. As loan growth is expected to moderate in 2023, we expect our reliance on wholesale funding to decline.
Accrued interest payable and other liabilities
Accrued interest payable and other liabilities includes accrued interest payable, federal income taxes payable, deferred federal income taxes payable, and all other liabilities (none of which are individually significant).
Total shareholders' equity
The following tables outline the composition and changes in shareholders equity as of:
| 12/31/22 | 9/30/22 | 6/30/22 | 3/31/22 | 12/31/21 | ||||||||||||||||
| Common stock | $ | 73,569 | $ | 73,460 | $ | 73,324 | $ | 74,132 | $ | 75,366 | ||||||||||
| Retained earnings | 63,044 | 59,080 | 55,469 | 52,393 | 49,714 | |||||||||||||||
| Accumulated other comprehensive (loss) income | (10,526 | ) | (10,910 | ) | (10,227 | ) | (5,179 | ) | (625 | ) | ||||||||||
| Total shareholders' equity | $ | 126,087 | $ | 121,630 | $ | 118,566 | $ | 121,346 | $ | 124,455 | ||||||||||
| 12/31/2022 vs 9/30/2022 | 12/31/2022 vs 12/31/2021 | |||||||||||||||||||
| Variance | Variance | |||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||
| Common stock | $ | 109 | 0.15 | % | $ | (1,797 | ) | (2.38)% | ||||||||||||
| Retained earnings | 3,964 | 6.71 | % | 13,330 | 26.81 | % | ||||||||||||||
| Accumulated other comprehensive (loss) income | 384 | (3.52)% | (9,901 | ) | 1584.16 | % | ||||||||||||||
| Total shareholders' equity | $ | 4,457 | 3.66 | % | $ | 1,632 | 1.31 | % | ||||||||||||
The Board of Directors has authorized the repurchase up to
| Three Months Ended | |||||||||||||||
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Number of Shares Repurchased | — | — | 35,000 | 51,461 | 78,285 | ||||||||||
| Dollar Amount of Shares Repurchased | $ | — | $ | — | $ | 935 | $ | 1,501 | $ | 2,193 | |||||
| Weighted Average Share Price | $ | — | $ | — | $ | 26.71 | $ | 29.17 | $ | 28.01 | |||||
| Twelve Months Ended December 31 | ||||||
| 2022 | 2021 | |||||
| Number of Shares Repurchased | 86,461 | 229,697 | ||||
| Dollar Amount of Shares Repurchased | $ | 2,436 | $ | 6,061 | ||
| Weighted Average Share Price | $ | 28.17 | $ | 26.39 | ||
Stock Performance
The following graph compares the cumulative total shareholder return on our common stock for the last five years with the cumulative total return on the ABA NASDAQ Community Bank Index (NASDAQ: ABAQ) over the same period. The graph assumes the value of an investment in our common stock and the ABA NASDAQ Community Bank Index was
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/0ce8e0a9-f82d-4c67-909f-2261ee275df7
| Date | FETM | ABAQ Index | ||||
| 12/31/2017 | $ | 100.00 | $ | 100.00 | ||
| 12/31/2018 | 112.50 | 83.38 | ||||
| 12/31/2019 | 136.39 | 100.33 | ||||
| 12/31/2020 | 120.87 | 85.85 | ||||
| 12/31/2021 | 155.83 | 113.62 | ||||
| 12/31/2022 | 125.53 | 102.99 | ||||
Abbreviations and Acronyms
| ABA: American Bankers Association | GAAP: Generally Accepted Accounting Principles |
| ACH: Automated Clearing House | HFS: Held-for-sale |
| AFS: Available-for-sale | HTM: Held-to-maturity |
| AIR: Accrued interest receivable | HFS: Held-for-sale |
| ALLL: Allowance for loan losses | HTM: Held-to-maturity |
| AOCI: Accumulated other comprehensive income | IRA: Individual retirement account |
| ARRC: Alternative Reference Rates Committee | ITM: Interactive Teller Machine |
| ASC: Accounting Standards Codification | LIBOR: London Interbank Offered Rate |
| ASU: Accounting Standards Update | MSR: Mortgage servicing rights |
| ATM: Automated teller machine | N/M: Not meaningful |
| CARES Act: Coronavirus Aid, Relief, and Economic Security Act | NASDAQ: National Association of Securities Dealers Automated Quotations |
| CDI: Core deposit intangible | NOW: Negotiable order of withdrawal |
| CET1: Common equity tier 1 | NSF: Non-sufficient funds |
| COLI: Corporate owned life insurance | OCI: Other comprehensive income |
| COVID-19: Coronavirus Disease 2019 | OIS: Overnight Index Swap |
| DRIP: Dividend Reinvestment Plan | OREO: Other real estate owned |
| EPS: Earnings Per Common Share | OTTI: Other-than-temporary impairment |
| ESOP: Employee Stock Ownership Plan | PPP: Paycheck Protection Program |
| FASB: Financial Accounting Standards Board | PPPLF: Paycheck Protection Program Liquidity Facility |
| FDIC: Federal Deposit Insurance Corporation | QTD: Quarter-to-date |
| FHLB: Federal Home Loan Bank | SAB: Staff Accounting Bulletin |
| FHLLC: Fentura Holdings LLC | SBA: U.S. Small Business Administration |
| FHLMC: Federal Home Loan Mortgage Corporation | SEC: Securities and Exchange Commission |
| FNMA: Federal National Mortgage Association | SERP: Supplemental Executive Retirement Plan |
| FRB: Federal Reserve Bank | SOFR: Secured Overnight Funding Rate |
| FSB: Farmers State Bank of Munith | TDR: Troubled debt restructuring |
| FTE: Fully taxable equivalent | |
About Fentura Financial, Inc. and The State Bank
Fentura Financial, Inc. is the holding company for The State Bank. It was formed in 1987 and is traded on the OTCQX exchange under the symbol FETM, and has been recognized as one of the Top 50 performing stocks on that exchange.
The State Bank is a full-service, 5-Star Bauer Financial rated commercial, retail and trust bank headquartered in Fenton, Michigan. It currently operates 19 full-service branches located in Genesee, Ingham, Jackson, Livingston, Oakland, Saginaw, and Shiawassee Counties. The State Bank’s commercial department provides a comprehensive array of products including lines of credit, term loans, commercial mortgages, SBA loans and a full-suite of cash management products. The retail department offers personal checking, savings, time and IRA deposit accounts and a wide array of loan products including home equity, auto and personal loans. The residential loan department offers construction, purchase and refinance residential mortgage loans. The wealth management department offers a full-service suite of trust and portfolio management services. More information can be found at www.thestatebank.com or www.fentura.com.
Cautionary Statement: This press release contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning future growth in earning assets and net income. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.
| Contacts: | Ronald L. Justice | Aaron D. Wirsing |
| President & CEO | Chief Financial Officer | |
| Fentura Financial, Inc. | Fentura Financial, Inc. | |
| 810.714.3902 | 810.714.3925 | |
| ron.justice@thestatebank.com | aaron.wirsing@thestatebank.com |
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