Partners Bancorp Reports Results of Operations for the Third Quarter 2023
- Net income increased by 10.4% in Q3 2023 compared to the same period in 2022.
- Pending merger with LINKBANCORP, Inc. is expected to close in Q4 2023.
- None.
SALISBURY, Md., Oct. 27, 2023 (GLOBE NEWSWIRE) -- Partners Bancorp (NASDAQ: PTRS) (the “Company”), the parent company of The Bank of Delmarva (“Delmarva”), Seaford, Delaware, and Virginia Partners Bank (“Virginia Partners”), Fredericksburg, Virginia, reported net income attributable to the Company of
As previously disclosed, on February 22, 2023, the Company and LINKBANCORP, Inc. (“LINK”) (NASDAQ: LNKB), parent company of LINKBANK, announced that they have entered into a definitive agreement and plan of merger pursuant to which the Company will merge into LINK, with LINK surviving, and following which Delmarva and Virginia Partners will each successively merge with and into LINKBANK, with LINKBANK surviving. Upon completion of the transaction, the Company’s shareholders will own approximately
John W. Breda, the Company’s President and Chief Executive Officer, commented, “I am very pleased with our operating results for the third quarter of 2023. Net income in the third quarter of 2023 improved by
Breda continued, “As previously disclosed, early in the fourth quarter of 2023 we announced the receipt of required regulatory approvals from the Federal Deposit Insurance Corporation, the Pennsylvania Department of Banking and Securities, the Virginia State Corporation Commission, the Delaware Office of the State Bank Commissioner and the Maryland Office of the Commissioner of Financial Regulation related to our pending merger with LINK. We continue to be very excited about what the future holds for the combined company.”
Effective January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which replaced the prior incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (or the “CECL Standard”).
The Company’s results for reporting periods beginning after January 1, 2023 are presented under the CECL Standard while prior period amounts continue to be reported in accordance with previously applicable accounting guidance.
The Company’s results of operations for the three months ended September 30, 2023 were directly impacted by the following:
Positive Impacts:
- An increase in net interest income due primarily to an increase in average loan balances and higher yields earned, an increase in the yields earned on average cash and cash equivalents and investment securities balances, and a decrease in average interest-bearing deposit balances, which were partially offset by decreases in average cash and cash equivalents and investment securities balances, higher rates paid on average interest-bearing deposit balances, and an increase in average borrowings balances and higher rates paid;
- A higher net interest margin (tax equivalent basis);
- Recording a lower provision for credit losses due to changes in the assessment of economic factors, and for September 30, 2023, more favorable views on the downside risks to the economic forecast compared to June 30, 2023, and lower net charge-offs, which were partially offset by a higher required reserve on unfunded credit commitments and organic loan growth;
- Recording no losses on sales and calls of investment securities during the three months ended September 30, 2023; and
- Recording gains on sales of other assets during the three months ended September 30, 2023.
Negative Impacts:
- Reduced operating results from Virginia Partners’ majority owned subsidiary Johnson Mortgage Company, LLC and lower mortgage division fees at Delmarva; and
- Incurring
$157 thousand in merger related expenses during the three months ended September 30, 2023 in connection with the Company’s pending merger with LINK, as compared to$167 thousand during the same period of 2022 in connection with the Company’s terminated merger with OceanFirst Financial Corp. (“OceanFirst”).
The Company’s results of operations for the nine months ended September 30, 2023 were directly impacted by the following:
Positive Impacts:
- An increase in net interest income due primarily to increases in average loan and investment securities balances and higher yields earned on each, an increase in the yields earned on average cash and cash equivalents balances, and a decrease in average interest-bearing deposit balances, which were partially offset by a decrease in average cash and cash equivalents balances, higher rates paid on average interest-bearing deposit balances, an increase in average borrowings balances and higher rates paid, and lower net loan fees earned related to the forgiveness of loans originated and funded under the Paycheck Protection Program (“PPP”) of the Small Business Administration;
- A higher net interest margin (tax equivalent basis);
- Recording a lower provision for credit losses due to changes in the assessment of economic factors, and for September 30, 2023, more favorable views on the downside risks to the economic forecast compared to January 1, 2023, lower net charge-offs, and a lower required reserve on unfunded credit commitments, which were partially offset by organic loan growth;
- Recording no losses on sales and calls of investment securities during the nine months ended September 30, 2023;
- Recording no impairment loss on restricted stock during the nine months ended September 30, 2023; and
- Recording gains on sales of other assets during the nine months ended September 30, 2023.
Negative Impacts:
- Reduced operating results from Virginia Partners’ majority owned subsidiary Johnson Mortgage Company, LLC and lower mortgage division fees at Delmarva;
- Recording no gains or operating expenses on other real estate owned, net during the nine months ended September 30, 2023; and
- Incurring
$1.6 million in merger related expenses during the nine months ended September 30, 2023 in connection with the Company’s pending merger with LINK, as compared to$720 thousand during the same period of 2022 in connection with the Company’s terminated merger with OceanFirst.
For the three months ended September 30, 2023, the Company’s annualized return on average assets, annualized return on average equity and efficiency ratio were
For the nine months ended September 30, 2023, the Company’s annualized return on average assets, annualized return on average equity and efficiency ratio were
The increase in net income attributable to the Company for the three and nine months ended September 30, 2023, as compared to the same periods in 2022, was driven by an increase in net interest income and a lower provision for credit losses, which were partially offset by a decrease in other income, an increase in other expenses, and higher federal and state income taxes.
Interest Income and Expense – Three Months Ended September 30, 2023 and 2022
Net interest income and net interest margin
Net interest income in the third quarter of 2023 increased by
The most significant factors impacting net interest income during the three month period ended September 30, 2023 were as follows:
Positive Impacts:
- Increase in average loan balances, primarily due to organic loan growth, and higher loan yields, primarily due to repricing of variable rate loans, higher average yields on new loan originations, and pay-offs of lower yielding fixed rate loans; and
- Higher yields earned on average interest-bearing deposits in other financial institutions, federal funds sold, and investment securities, primarily due to higher interest rates over the comparable periods.
Negative Impacts:
- Decrease in average interest-bearing deposits in other financial institutions and federal funds sold, primarily due to loan growth outpacing deposit growth, and deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, which were partially offset by lower investment securities balances;
- Decrease in average investment securities balances, primarily due to scheduled payments of principal, which was partially offset by management of the investment securities portfolio in light of the Company’s liquidity needs;
- Decrease in average interest-bearing deposit balances and higher rates paid, primarily due to deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, which were partially offset by organic deposit growth; and
- Increase in average borrowings balances and higher rates paid, primarily due to an increase in the average balance of short-term Federal Home Loan Bank advances due to the aforementioned decrease in average interest-bearing deposit balances. The increase in the average balance of short-term Federal Home Loan Bank advances was partially offset by a decrease in the average balance of long-term Federal Home Loan Bank advances resulting from maturities and payoffs of borrowings that were not replaced and scheduled principal curtailments.
Loans
Average loan balances increased by
Investment securities
Average total investment securities balances decreased by
Interest-bearing deposits
Average total interest-bearing deposit balances decreased by
Borrowings
Average total borrowings increased by
Interest Income and Expense – Nine Months Ended September 30, 2023 and 2022
Net interest income and net interest margin
Net interest income during the first nine months of 2023 increased by
The most significant factors impacting net interest income during the nine months ended September 30, 2023 were as follows:
Positive Impacts:
- Increase in average loan balances, primarily due to organic loan growth, and higher loan yields, primarily due to repricing of variable rate loans, higher average yields on new loan originations, and pay-offs of lower yielding fixed rate loans, which were partially offset by lower net loan fees earned related to the forgiveness of loans originated and funded under the PPP;
- Increase in average investment securities balances and higher investment securities yields, primarily due to management of the investment securities portfolio in light of the Company’s liquidity needs, which was partially offset by scheduled payments of principal, and higher interest rates over the comparable periods; and
- Higher yields earned on average interest-bearing deposits in other financial institutions and federal funds sold, primarily due to higher interest rates over the comparable periods.
Negative Impacts:
- Decrease in average interest-bearing deposits in other financial institutions and federal funds sold, primarily due to loan growth outpacing deposit growth, deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, and higher investment securities balances;
- Decrease in average interest-bearing deposit balances and higher rates paid, primarily due to scheduled maturities of time deposits that were not replaced and deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, which were partially offset by organic deposit growth; and
- Increase in average borrowings balances and higher rates paid, primarily due to an increase in the average balance of short-term Federal Home Loan Bank advances due to the aforementioned decrease in average interest-bearing deposit balances. The increase in the average balance of short-term Federal Home Loan Bank advances was partially offset by a decrease in the average balance of long-term Federal Home Loan Bank advances resulting from maturities and payoffs of borrowings that were not replaced and scheduled principal curtailments.
Loans
Average loan balances increased by
Investment securities
Average total investment securities balances increased by
Interest-bearing deposits
Average total interest-bearing deposit balances decreased by
Borrowings
Average total borrowings increased by
Provision for Credit Losses
The provision for credit losses in the third quarter of 2023 was
The provision for credit losses during the three and nine months ended September 30, 2023, as well as the allowance for credit losses as of September 30, 2023, represents management’s best estimate of the impact of current economic trends, forecasts of a potential recession in the U.S. and recent negative banking industry developments associated with multiple high-profile bank failures, on the ability of the Company’s borrowers to repay their loans. Management continues to carefully assess the exposure of the Company’s loan portfolio to economic trends, such as forecasts of a potential recession and the aforementioned recent banking industry developments, and their potential effects on asset quality. As of September 30, 2023, the Company’s delinquencies and nonperforming assets had not been materially impacted by any of the aforementioned factors, trends, forecasts or developments.
Other Income
Other income in the third quarter of 2023 decreased by
- Service charges on deposit accounts increased by
$31 thousand , or12.1% , due primarily to increases in overdraft fees and savings account service charges; - Losses on sales and calls of investment securities decreased by
$5 thousand , or100.0% , due primarily to Virginia Partners recording losses of$5 thousand on sales or calls of investment securities during the third quarter of 2022, as compared to recording no losses on sales or calls of investment securities during the same period of 2023; - Mortgage banking income decreased by
$133 thousand , or57.3% , due primarily to Virginia Partners’ majority owned subsidiary Johnson Mortgage Company, LLC having a lower volume of loan closings as compared to the same period in 2022; - Gains on sales of other assets increased by
$3 thousand , or100.0% , due primarily to Virginia Partners recording gains of$3 thousand on sales of other assets during the third quarter of 2023. There were no gains on sales of other assets for the same period of 2022; and - Other income decreased by
$40 thousand , or5.3% , due primarily to a decrease in debit card income and lower mortgage division fees at Delmarva, which were partially offset by increases in bank owned life insurance, safe deposit box rentals, and other noninterest income.
Other income for the nine months ended September 30, 2023 decreased by
- Service charges on deposit accounts increased by
$68 thousand , or9.4% , due primarily to increases in overdraft fees and savings account service charges; - Losses on sales and calls of investment securities decreased by
$5 thousand , or100.0% , due primarily to Virginia Partners recording losses of$5 thousand on sales or calls of investment securities during the third quarter of 2022, as compared to recording no losses on sales or calls of investment securities during the same period of 2023; - Impairment loss on restricted stock decreased by
$1 thousand , or100.0% , due primarily to Virginia Partners recording the final write-down of its investment in Maryland Financial Bank, which had been going through an orderly liquidation, during the second quarter of 2022. There was no impairment loss on restricted stock for the same period of 2023; - Mortgage banking income decreased by
$495 thousand , or52.1% , due primarily to Virginia Partners’ majority owned subsidiary Johnson Mortgage Company, LLC having a lower volume of loan closings as compared to the same period in 2022; - Gains on sales of other assets increased by
$3 thousand , or100.0% , due primarily to Virginia Partners recording gains of$3 thousand on sales of other assets during the third quarter of 2023. There were no gains on sales of other assets for the same period of 2022; and - Other income decreased by
$160 thousand , or6.9% , due primarily to decreases in safe deposit box rentals and debit card income, and lower mortgage division fees at Delmarva, which were partially offset by increases in bank owned life insurance and other noninterest income.
Other Expenses
Other expenses in the third quarter of 2023 increased by
- Salaries and employee benefits decreased by
$204 thousand , or3.6% , primarily due to lower expenses related to bonus accruals, and a decrease in commissions expense paid due to the decrease in mortgage banking income from Virginia Partners’ majority owned subsidiary Johnson Mortgage Company, LLC and lower mortgage division fees at Delmarva, which were partially offset by increases related to staffing changes and merit increases, higher expenses related to benefit costs and payroll taxes, and a lower impact from deferred loan origination costs; - Premises and equipment increased by
$6 thousand , or0.5% , primarily due to higher expenses related to software amortization and maintenance contracts, which were partially offset by lower expenses related to depreciation and real estate taxes; - Amortization of core deposit intangible decreased by
$13 thousand , or10.2% , primarily due to lower amortization related to the$2.7 million and$1.5 million , respectively, in core deposit intangibles recognized in the Virginia Partners and Liberty Bell Bank acquisitions; - Merger related expenses decreased by
$10 thousand , or6.2% , primarily due to lower legal fees and other costs associated with the pending merger with LINK during the third quarter of 2023, as compared to the legal fees and other costs in the third quarter of 2022 associated with the merger with OceanFirst, that was subsequently terminated in the fourth quarter of 2022; and - Other expenses increased by
$290 thousand , or9.8% , primarily due to higher expenses related to professional services, ATMs, audit and related professional fees, insurance and other, which were partially offset by lower expenses related to FDIC insurance assessments, directors fees, marketing and legal fees.
Other expenses for the nine months ended September 30, 2023 increased by
- Salaries and employee benefits increased by
$570 thousand , or3.4% , primarily due to increases related to staffing changes and merit increases, higher expenses related to benefit costs and payroll taxes, and a lower impact from deferred loan origination costs, which were partially offset by lower expenses related to bonus accruals, and a decrease in commissions expense paid due to the decrease in mortgage banking income from Virginia Partners’ majority owned subsidiary Johnson Mortgage Company, LLC and lower mortgage division fees at Delmarva; - Premises and equipment decreased by
$98 thousand , or2.3% , primarily due to lower expenses related to depreciation, leases, repairs and maintenance and purchased equipment and furniture, the cost of which did not qualify for capitalization, which were partially offset by higher expenses related to software amortization, real estate taxes, maintenance contracts and utilities; - Amortization of core deposit intangible decreased by
$39 thousand , or10.0% , primarily due to lower amortization related to the$2.7 million and$1.5 million , respectively, in core deposit intangibles recognized in the Virginia Partners and Liberty Bell Bank acquisitions; - (Gains) and operating expenses on other real estate owned, net decreased by
$10 thousand , or100.0% , primarily due to no gains on sales or expenses being recorded during the first nine months of 2023, as compared to gains on sales and expenses being recorded during the first nine months of 2022; - Merger related expenses increased by
$897 thousand , or124.6% , primarily due to higher legal fees and other costs associated with the pending merger with LINK during the first nine months of 2023, as compared to the legal fees and other costs in the first nine months of 2022 associated with the merger with OceanFirst, that was subsequently terminated in the fourth quarter of 2022; and - Other expenses increased by
$930 thousand , or11.0% , primarily due to higher expenses related to professional services, ATMs, legal fees, audit and related professional fees, insurance, and other, which were partially offset by lower expenses related to FDIC insurance assessments.
Federal and State Income Taxes
Federal and state income taxes for the three months ended September 30, 2023 increased by
Federal and state income taxes for the nine months ended September 30, 2023 increased by
Virginia Partners is not subject to Virginia state income tax, but instead pays Virginia franchise tax. The Virginia franchise tax paid by Virginia Partners is recorded in the “Other expenses” line item on the Consolidated Statements of Income for the three and nine months ended September 30, 2023 and 2022.
Balance Sheet
Changes in key balance sheet components as of September 30, 2023 compared to December 31, 2022 were as follows:
- Total assets as of September 30, 2023 were
$1.53 billion , a decrease of$41.6 million , or2.6% , from December 31, 2022. Key drivers of this change were decreases in cash and cash equivalents and investment securities available for sale, at fair value, which were partially offset by an increase in total loans held for investment; - Interest-bearing deposits in other financial institutions as of September 30, 2023 were
$23.1 million , a decrease of$80.8 million , or77.7% , from December 31, 2022. Key drivers of this change were loan growth outpacing deposit growth, deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, and a decrease in short-term borrowings with the Federal Home Loan Bank; - Federal funds sold as of September 30, 2023 were
$9.8 million , a decrease of$13.2 million , or57.3% , from December 31, 2022. Key drivers of this change were the aforementioned items noted in the analysis of interest-bearing deposits in other financial institutions; - Investment securities available for sale, at fair value as of September 30, 2023 were
$121.9 million , a decrease of$11.7 million , or8.8% , from December 31, 2022. Key drivers of this change were scheduled payments of principal and an increase in unrealized losses on the investment securities available for sale portfolio as a result of increases in market interest rates; - Loans, net of unamortized discounts on acquired loans of
$1.3 million as of September 30, 2023 were$1.30 billion , an increase of$64.6 million , or5.2% , from December 31, 2022. The key driver of this change was an increase in organic growth, including growth of approximately$4.0 million in loans related to Virginia Partners’ expansion into the Greater Washington market; - Total deposits as of September 30, 2023 were
$1.32 billion , a decrease of$16.6 million , or1.2% , from December 31, 2022. Key drivers of this change were deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, partially offset by organic growth in time deposits; - Total borrowings as of September 30, 2023 were
$52.6 million , a decrease of$32.0 million , or37.8% , from December 31, 2022. The key driver of this change was a decrease in short-term borrowings with the Federal Home Loan Bank; and - Total stockholders’ equity as of September 30, 2023 was
$143.7 million , an increase of$4.3 million , or3.1% , from December 31, 2022. Key drivers of this change were the net income attributable to the Company for the nine months ended September 30, 2023, the proceeds from stock option exercises, and stock-based compensation expense related to restricted stock awards, which were partially offset by a decrease to retained earnings, net of tax, related to the adoption of the CECL Standard, an increase in accumulated other comprehensive (loss), net of tax, and cash dividends paid to shareholders.
Changes in key balance sheet components as of September 30, 2023 compared to September 30, 2022 were as follows:
- Total assets as of September 30, 2023 were
$1.53 billion , a decrease of$117.7 million , or7.1% , from September 30, 2022. Key drivers of this change were decreases in cash and cash equivalents and investment securities available for sale, at fair value, which were partially offset by an increase in total loans held for investment; - Interest-bearing deposits in other financial institutions as of September 30, 2023 were
$23.1 million , a decrease of$187.8 million , or89.0% , from September 30, 2022. Key drivers of this change were loan growth outpacing deposit growth, deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, and a decrease in long-term borrowings with the Federal Home Loan Bank, which were partially offset by a decrease in investment securities available for sale, at fair value, and an increase in short-term borrowings with the Federal Home Loan Bank; - Federal funds sold as of September 30, 2023 were
$9.8 million , a decrease of$14.8 million , or60.1% , from September 30, 2022. Key drivers of this change were the aforementioned items noted in the analysis of interest-bearing deposits in other financial institutions; - Investment securities available for sale, at fair value as of September 30, 2023 were
$121.9 million , a decrease of$9.5 million , or7.3% , from September 30, 2022. Key drivers of this change were scheduled payments of principal and an increase in unrealized losses on the investment securities available for sale portfolio as a result of increases in market interest rates; - Loans, net of unamortized discounts on acquired loans of
$1.3 million as of September 30, 2023 were$1.30 billion , an increase of$93.5 million , or7.8% , from September 30, 2022. The key driver of this change was an increase in organic growth, including growth of approximately$26.7 million in loans related to Virginia Partners’ expansion into the Greater Washington market; - Total deposits as of September 30, 2023 were
$1.32 billion , a decrease of$132.9 million , or9.1% , from September 30, 2022. Key drivers of this change were deposit outflows due to competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023, partially offset by organic growth in time deposits; - Total borrowings as of September 30, 2023 were
$52.6 million , an increase of$3.8 million , or7.8% , from September 30, 2022. The key driver of this change was an increase in short-term borrowings with the Federal Home Loan Bank due to the aforementioned items noted in the analysis of total deposits, which was partially offset by a decrease in long-term borrowings with the Federal Home Loan Bank resulting from maturities and payoffs of borrowings that were not replaced and scheduled principal curtailments, and a decrease in Virginia Partners’ majority owned subsidiary Johnson Mortgage Company, LLC’s warehouse line of credit with another financial institution; and - Total stockholders’ equity as of September 30, 2023 was
$143.7 million , an increase of$9.9 million , or7.4% , from September 30, 2022. Key drivers of this change were the net income attributable to the Company for the period October 1, 2022 through September 30, 2023, the proceeds from stock option exercises, and stock-based compensation expense related to restricted stock awards, which were partially offset by an increase in accumulated other comprehensive (loss), net of tax, a decrease to retained earnings, net of tax, related to the adoption of the CECL Standard, and cash dividends paid to shareholders.
As of September 30, 2023, all of the capital ratios of Delmarva and Virginia Partners continue to exceed regulatory requirements, with total risk-based capital substantially above well-capitalized regulatory requirements.
Asset Quality
The asset quality measures depicted below continue to reflect the Company’s efforts to prudently charge-off loans as losses are identified and maintain an appropriate allowance for credit losses.
The following table depicts the net charge-off activity for the three and nine months ended September 30, 2023 and 2022:
| Net Charge-off Activity | Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | |||||||||||
| Dollars in Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||
| Net charge-offs | $ | 99 | $ | 660 | $ | 37 | $ | 1,640 | ||||
| Net charge-offs /Average loans* | ||||||||||||
| * Annualized for the three and nine months ended September 30, 2023 and 2022, respectively. | ||||||||||||
The following table depicts the level of the allowance for credit losses on loans as of September 30, 2023, December 31, 2022 and September 30, 2022:
| Allowance for Credit Losses on Loans | |||||||||
| Dollars in Thousands | September 30, 2023 | December 31, 2022 | September 30, 2022 | ||||||
| Allowance for credit losses on loans | $ | 16,075 | $ | 14,315 | $ | 13,818 | |||
| Allowance for credit losses on loans/Period end loans | |||||||||
| Allowance for credit losses on loans/Nonaccrual loans | |||||||||
| Allowance for credit losses on loans/Nonperforming loans | |||||||||
The following table depicts the unamortized discounts on acquired loans related to the acquisitions of Liberty Bell Bank and Virginia Partners:
| Unamortized Discounts on Acquired Loans | |||||||||
| Dollars in Thousands | September 30, 2023 | December 31, 2022 | September 30, 2022 | ||||||
| Unamortized discounts on acquired loans | $ | 1,323 | $ | 1,728 | $ | 1,810 | |||
The following table depicts the level of nonperforming assets as of September 30, 2023, December 31, 2022 and September 30, 2022:
| Nonperforming Assets | |||||||||
| Dollars in Thousands | September 30, 2023 | December 31, 2022 | September 30, 2022 | ||||||
| Nonaccrual loans | $ | 1,908 | $ | 2,154 | $ | 4,050 | |||
| Loans past due 90 days and accruing interest | $ | - | $ | 45 | $ | 275 | |||
| Total nonperforming loans | $ | 1,908 | $ | 2,199 | $ | 4,325 | |||
| Other real estate owned, net | $ | - | $ | - | $ | - | |||
| Total nonperforming assets | $ | 1,908 | $ | 2,199 | $ | 4,325 | |||
| Nonperforming assets/Total assets | |||||||||
| Nonperforming assets/Total loans and other real estate owned, net | |||||||||
About Partners Bancorp
Partners Bancorp is the holding company for The Bank of Delmarva and Virginia Partners Bank. The Bank of Delmarva commenced operations in 1896. The Bank of Delmarva’s main office is in Seaford, Delaware and it conducts full service commercial banking through eleven branch locations in Maryland and Delaware, and three branches, operating under the name Liberty Bell Bank, in the South Jersey/Philadelphia metro market. The Bank of Delmarva focuses on serving its local communities, knowing its customers and providing superior customer service. Virginia Partners Bank, headquartered in Fredericksburg, Virginia, was founded in 2008 and has three branches in Fredericksburg, Virginia and operates a full service branch and commercial banking office in Reston, Virginia. In Maryland, Virginia Partners Bank trades under the name Maryland Partners Bank (a division of Virginia Partners Bank), and operates a full service branch and commercial banking office in La Plata, Maryland and a Loan Production Office in Annapolis, Maryland. Virginia Partners Bank also owns a controlling stake in Johnson Mortgage Company, LLC, which is a residential mortgage company headquartered in Newport News, Virginia, with a branch office in Fredericksburg, Virginia. For more information, visit www.partnersbancorp.com, www.bankofdelmarvahb.com and www.vapartnersbank.com.
For further information, please contact John W. Breda, President and Chief Executive Officer, at 410-548-1100 x10233, Lloyd B. Harrison, III, Senior Executive Vice President, at 540-899-2234, J. Adam Sothen, Chief Financial Officer, at 540-322-5521, or Betsy Eicher, Chief Accounting Officer, at 667-253-2904.
Forward-Looking Statements
Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include, without limitation, projections, predictions, expectations, or beliefs about future events or results that are not statements of historical fact. Statements in this press release which express “belief,” “intention,” “expectation,” “potential” and similar expressions, or which use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “may,” “will,” “intend,” “should,” “could,” or similar expressions, identify forward-looking statements. These forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by, and information currently available to, the Company’s management. These statements are inherently uncertain, and there can be no assurance that the underlying assumptions will prove to be accurate. Actual results could differ materially from those anticipated or implied by such statements. Forward-looking statements in this release may include, without limitation, statements related to the completion and benefits of the merger with LINK, statements in Mr. Breda’s quote regarding, among other items, expected future financial performance, strategic business initiatives including growth in the Greater Washington market and the anticipated effects thereof, margin expansion or compression, technology initiatives, asset quality, adequacy of allowances for credit losses and the level of future charge-offs, capital levels, the effect of future market and industry trends and the effects of future interest rate fluctuations. Factors that could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to:
- the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement between the Company and LINK;
- the outcome of any legal proceedings that may be instituted against the Company or LINK;
- the possibility that the proposed transaction will not close when expected or at all because any remaining required regulatory or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated (and the risk that the remaining required regulatory approval may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction);
- the ability of the Company and LINK to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction;
- the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the common stock of either or both parties to the proposed transaction;
- the possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where the Company and LINK do business;
- certain restrictions during the pendency of the proposed transaction that may impact the parties’ ability to pursue certain business opportunities or strategic transactions;
- the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events;
- diversion of management’s attention from ongoing business operations and opportunities;
- the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the merger within the expected timeframes or at all and to successfully integrate the Company’s operations and those of LINK, which may be more difficult, time-consuming or costly than expected;
- revenues following the proposed transaction may be lower than expected;
- the Company’s and LINK’s success in executing their respective business plans and strategies and managing the risks involved in the foregoing;
- the dilution caused by LINK’s issuance of additional shares of its capital stock in connection with the proposed transaction;
- effects of the announcement, pendency or completion of the proposed transaction on the ability of the Company and LINK to retain customers and retain and hire key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally;
- changes in interest rates, such as volatility in yields on U.S. Treasury bonds and increases or volatility in mortgage rates, and the impacts on macroeconomic conditions, customer and client spending and saving behaviors, the Company’s funding costs and the Company’s loan and investment securities portfolios;
- monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve, and the effect of these policies on interest rates and business in our markets;
- general business conditions, as well as conditions within the financial markets, including the impact thereon of unusual and infrequently occurring events, such as the recent bank closures and related negative impact on the banking industry, weather-related disasters, terrorist acts, geopolitical conflicts (such as the wars in Ukraine and the Middle East) or public health events (such as the COVID-19 pandemic), and of governmental and societal responses thereto;
- general economic conditions, in the United States generally and particularly in the markets in which the Company operates and which its loans are concentrated, including the effects of declines in real estate values, increases in unemployment levels and inflation, recession and slowdowns in economic growth;
- changes in the value of securities held in the Company’s investment portfolios;
- changes in the quality or composition of the loan portfolios and the value of the collateral securing those loans;
- changes in the level of net charge-offs on loans and the adequacy of our allowance for credit losses;
- demand for loan products;
- deposit flows;
- the strength of the Company’s counterparties;
- competition from both banks and non-banks;
- demand for financial services in the Company’s market areas;
- reliance on third parties for key services;
- changes in the commercial and residential real estate markets;
- cyber threats, attacks or events;
- expansion of Delmarva’s and Virginia Partners’ product offerings;
- changes in accounting principles, standards, rules and interpretations, and elections by the Company thereunder, and the related impact on the Company’s financial statements;
- potential claims, damages, and fines related to litigation or government actions;
- legislative or regulatory changes and requirements;
- the discontinuation of London Interbank Offered Rate (“LIBOR”) and its impact on the financial markets, and the Company’s ability to manage operational, legal and compliance risks related to the discontinuation of LIBOR and implementation of one or more alternative reference rates; and
- other factors, many of which are beyond the control of the Company.
These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein, and readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this release. For additional information on risk factors that could affect the forward-looking statements contained herein, see the Company’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other reports filed with the Securities and Exchange Commission (“SEC”).
| PARTNERS BANCORP | ||||||
| CONSOLIDATED BALANCE SHEETS | ||||||
| September 30, | September 30, | December 31, | ||||
| 2023 | 2022 | 2022 | ||||
| (Unaudited) | (Unaudited) | * | ||||
| ASSETS | ||||||
| Cash and due from banks | $ | 15,673,670 | $ | 12,783,517 | $ | 14,677,774 |
| Interest bearing deposits in other financial institutions | 23,141,446 | 210,934,967 | 103,921,732 | |||
| Federal funds sold | 9,816,042 | 24,572,501 | 22,989,879 | |||
| Cash and cash equivalents | 48,631,158 | 248,290,985 | 141,589,385 | |||
| Investment securities available for sale, at fair value | 121,920,137 | 131,465,149 | 133,656,642 | |||
| Loans held for sale | 354,219 | 201,245 | 1,314,125 | |||
| Loans, less allowance for credit losses of | 1,281,428,912 | 1,190,142,289 | 1,218,551,209 | |||
| Accrued interest receivable | 4,729,204 | 4,034,632 | 4,566,487 | |||
| Premises and equipment, less accumulated depreciation | 14,115,786 | 15,257,774 | 14,857,298 | |||
| Restricted stock | 5,640,300 | 4,889,150 | 6,512,350 | |||
| Operating lease right-of-use assets | 4,631,333 | 5,290,145 | 5,064,866 | |||
| Finance lease right-of-use assets | 1,447,479 | 1,584,382 | 1,550,156 | |||
| Other investments | 5,362,709 | 4,864,456 | 4,888,118 | |||
| Bank owned life insurance | 19,064,145 | 18,592,308 | 18,706,260 | |||
| Core deposit intangible, net | 1,184,913 | 1,665,517 | 1,540,438 | |||
| Goodwill | 9,581,668 | 9,581,668 | 9,581,668 | |||
| Other assets | 14,941,562 | 14,850,016 | 12,233,494 | |||
| Total assets | $ | 1,533,033,525 | $ | 1,650,709,716 | $ | 1,574,612,496 |
| LIABILITIES | ||||||
| Deposits: | ||||||
| Non-interest bearing demand | $ | 508,793,017 | $ | 568,113,490 | $ | 528,769,800 |
| Interest bearing demand | 111,936,047 | 143,564,095 | 121,786,774 | |||
| Savings and money market | 374,210,060 | 441,230,050 | 431,538,080 | |||
| Time | 328,090,302 | 303,036,620 | 257,510,218 | |||
| 1,323,029,426 | 1,455,944,255 | 1,339,604,872 | ||||
| Accrued interest payable on deposits | 1,071,210 | 189,311 | 267,205 | |||
| Short-term borrowings with the Federal Home Loan Bank | 10,000,000 | - | 42,000,000 | |||
| Long-term borrowings with the Federal Home Loan Bank | 19,800,000 | 25,819,286 | 19,800,000 | |||
| Subordinated notes payable, net | 22,249,377 | 22,203,050 | 22,214,632 | |||
| Other borrowings | 596,103 | 810,771 | 613,423 | |||
| Operating lease liabilities | 5,036,820 | 5,687,948 | 5,464,727 | |||
| Finance lease liabilities | 1,907,394 | 2,035,918 | 2,005,685 | |||
| Other liabilities | 5,684,101 | 4,260,635 | 3,312,977 | |||
| Total liabilities | 1,389,374,431 | 1,516,951,174 | 1,435,283,521 | |||
| COMMITMENTS & CONTINGENCIES | ||||||
| STOCKHOLDERS' EQUITY | ||||||
| Common stock, par value $.01, authorized 40,000,000 shares, issued and outstanding 17,985,577 as of September 30, 2023, 17,961,699 as of September 30, 2022 and 17,973,724 as of December 31, 2022, including 9,338 nonvested shares as of September 30, 2023 and 18,669 nonvested shares as of September 30, 2022 and December 31, 2022, respectively | 179,762 | 179,430 | 179,551 | |||
| Surplus | 88,809,022 | 88,575,750 | 88,669,334 | |||
| Retained earnings | 70,915,709 | 59,355,817 | 62,854,235 | |||
| Noncontrolling interest in consolidated subsidiaries | 515,459 | 727,299 | 707,138 | |||
| Accumulated other comprehensive (loss), net of tax | (16,760,858) | (15,079,754) | (13,081,283) | |||
| Total stockholders' equity | 143,659,094 | 133,758,542 | 139,328,975 | |||
| Total liabilities and stockholders' equity | $ | 1,533,033,525 | $ | 1,650,709,716 | $ | 1,574,612,496 |
| * Derived from audited consolidated financial statements. | ||||||
| The amounts presented in the Consolidated Balance Sheets as of September 30, 2023 and 2022 are unaudited but include all adjustments which, in management's opinion, are necessary for fair presentation. | ||||||
| PARTNERS BANCORP | ||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||
| (Unaudited) | ||||
| Three Months Ended | ||||
| September 30, | ||||
| 2023 | 2022 | |||
| INTEREST INCOME ON: | ||||
| Loans, including fees | $ | 18,224,412 | $ | 14,118,979 |
| Investment securities: | ||||
| Taxable | 690,370 | 606,695 | ||
| Tax-exempt | 187,574 | 180,258 | ||
| Federal funds sold | 252,779 | 352,763 | ||
| Other interest income | 423,281 | 1,197,807 | ||
| 19,778,416 | 16,456,502 | |||
| INTEREST EXPENSE ON: | ||||
| Deposits | 3,778,036 | 1,070,540 | ||
| Borrowings | 721,425 | 511,096 | ||
| 4,499,461 | 1,581,636 | |||
| NET INTEREST INCOME | 15,278,955 | 14,874,866 | ||
| Provision for credit losses | 2,200 | 419,000 | ||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 15,276,755 | 14,455,866 | ||
| OTHER INCOME: | ||||
| Service charges on deposit accounts | 285,363 | 254,646 | ||
| Losses on sales and calls of investment securities | - | (5,322) | ||
| Mortgage banking income | 98,796 | 231,373 | ||
| Gains on sales of other assets | 2,500 | - | ||
| Other income | 720,334 | 760,448 | ||
| 1,106,993 | 1,241,145 | |||
| OTHER EXPENSES: | ||||
| Salaries and employee benefits | 5,483,484 | 5,687,787 | ||
| Premises and equipment | 1,417,751 | 1,411,411 | ||
| Amortization of core deposit intangible | 115,223 | 128,364 | ||
| Merger related expenses | 157,017 | 167,417 | ||
| Other expenses | 3,242,154 | 2,952,597 | ||
| 10,415,629 | 10,347,576 | |||
| INCOME BEFORE TAXES ON INCOME | 5,968,119 | 5,349,435 | ||
| Federal and state income taxes | 1,506,191 | 1,291,996 | ||
| NET INCOME | $ | 4,461,928 | $ | 4,057,439 |
| Net loss attributable to noncontrolling interest | $ | 76,431 | $ | 52,112 |
| Net income attributable to Partners Bancorp | $ | 4,538,359 | $ | 4,109,551 |
| Earnings per common share: | ||||
| Basic | $ | 0.252 | $ | 0.229 |
| Diluted | $ | 0.252 | $ | 0.228 |
| The amounts presented in these Consolidated Statements of Income for the three months ended September 30, 2023 and 2022 are unaudited but include all adjustments which, in management's opinion, are necessary for fair presentation. | ||||
| PARTNERS BANCORP | ||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||
| (Unaudited) | ||||
| Nine Months Ended | ||||
| September 30, | ||||
| 2023 | 2022 | |||
| INTEREST INCOME ON: | ||||
| Loans, including fees | $ | 51,493,246 | $ | 40,222,265 |
| Investment securities: | ||||
| Taxable | 2,054,048 | 1,518,898 | ||
| Tax-exempt | 560,068 | 544,789 | ||
| Federal funds sold | 823,249 | 433,085 | ||
| Other interest income | 1,663,693 | 1,914,186 | ||
| 56,594,304 | 44,633,223 | |||
| INTEREST EXPENSE ON: | ||||
| Deposits | 8,906,033 | 3,439,766 | ||
| Borrowings | 2,400,643 | 1,524,214 | ||
| 11,306,676 | 4,963,980 | |||
| NET INTEREST INCOME | 45,287,628 | 39,669,243 | ||
| Provision for credit losses | 395,700 | 803,000 | ||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 44,891,928 | 38,866,243 | ||
| OTHER INCOME: | ||||
| Service charges on deposit accounts | 794,794 | 726,664 | ||
| Losses on sales and calls of investment securities | - | (5,322) | ||
| Impairment loss on restricted stock | - | (1,182) | ||
| Mortgage banking income | 454,581 | 949,341 | ||
| Gains on sales of other assets | 2,500 | - | ||
| Other income | 2,156,138 | 2,316,576 | ||
| 3,408,013 | 3,986,077 | |||
| OTHER EXPENSES: | ||||
| Salaries and employee benefits | 17,337,018 | 16,767,374 | ||
| Premises and equipment | 4,194,146 | 4,292,286 | ||
| Amortization of core deposit intangible | 355,525 | 394,946 | ||
| (Gains) and operating expenses on other real estate owned, net | - | (9,515) | ||
| Merger related expenses | 1,617,106 | 720,081 | ||
| Other expenses | 9,413,039 | 8,482,749 | ||
| 32,916,834 | 30,647,921 | |||
| INCOME BEFORE TAXES ON INCOME | 15,383,107 | 12,204,399 | ||
| Federal and state income taxes | 3,942,982 | 2,913,930 | ||
| NET INCOME | $ | 11,440,125 | $ | 9,290,469 |
| Net loss attributable to noncontrolling interest | $ | 192,281 | $ | 107,639 |
| Net income attributable to Partners Bancorp | $ | 11,632,406 | $ | 9,398,108 |
| Earnings per common share: | ||||
| Basic | $ | 0.647 | $ | 0.523 |
| Diluted | $ | 0.646 | $ | 0.522 |
| The amounts presented in these Consolidated Statements of Income for the nine months ended September 30, 2023 and 2022 are unaudited but include all adjustments which, in management's opinion, are necessary for fair presentation. | ||||
FAQ
What was Partners Bancorp's net income for Q3 2023?
What is the expected closing date for the merger with LINKBANCORP, Inc.?
