Dollars in thousands except per share amounts. Certain items in the prior period financial statements have been reclassified to conform with the September 30, 2022 presentation.
FENTON, Mich., Nov. 01, 2022 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX: FETM) announces quarterly results of net income of $4,009 and $10,569 for the three and nine months ended September 30, 2022.
Ronald L. Justice, President and CEO, stated, "Our solid quarterly performance is reflective of a strong increase in net interest income from significant balance sheet growth. Both, balance sheet growth and rate trends during the quarter resulted in an improved net interest margin as well. Partially offsetting net interest income increase were reduction in gains on the sale of residential mortgages and provisions to the allowance for loan and lease losses. Provision increases were based on maintaining an appropriate reserve due to loan growth. We continue to monitor economic trend and concerns expressed in the market relating to a slowdown, but are encouraged by local loan demand and strong asset quality trends."
Following is a discussion of our financial performance as of, and for the three and nine months ended September 30, 2022. At the end of this document is a list of abbreviations and acronyms.
Results of Operations
The following table outlines our QTD results of operations and provides certain performance measures as of, and for the three months ended:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| INCOME STATEMENT DATA | ||||||||||||||||||||
| Interest income | $ | 15,726 | $ | 13,411 | $ | 12,301 | $ | 11,749 | $ | 11,584 | ||||||||||
| Interest expense | 1,738 | 785 | 599 | 645 | 653 | |||||||||||||||
| Net interest income | 13,988 | 12,626 | 11,702 | 11,104 | 10,931 | |||||||||||||||
| Provision for loan losses | 1,231 | 525 | 502 | 38 | (436 | ) | ||||||||||||||
| Noninterest income | 2,377 | 2,778 | 2,792 | 3,097 | 2,899 | |||||||||||||||
| Noninterest expenses | 10,125 | 10,544 | 10,151 | 9,957 | 9,453 | |||||||||||||||
| Federal income tax expense | 1,000 | 859 | 757 | 864 | 958 | |||||||||||||||
| Net income | $ | 4,009 | $ | 3,476 | $ | 3,084 | $ | 3,342 | $ | 3,855 | ||||||||||
| PER SHARE | ||||||||||||||||||||
| Earnings | $ | 0.91 | $ | 0.79 | $ | 0.69 | $ | 0.74 | $ | 0.84 | ||||||||||
| Dividends | $ | 0.09 | $ | 0.09 | $ | 0.09 | $ | 0.08 | $ | 0.08 | ||||||||||
| Tangible book value(1) | $ | 25.22 | $ | 24.53 | $ | 24.97 | $ | 25.43 | $ | 26.53 | ||||||||||
| Quoted market value | ||||||||||||||||||||
| High | $ | 25.20 | $ | 27.85 | $ | 29.25 | $ | 28.28 | $ | 26.25 | ||||||||||
| Low | $ | 23.00 | $ | 24.40 | $ | 27.10 | $ | 25.75 | $ | 25.60 | ||||||||||
| Close(1) | $ | 23.00 | $ | 25.00 | $ | 27.90 | $ | 28.28 | $ | 25.75 | ||||||||||
| PERFORMANCE RATIOS | ||||||||||||||||||||
| Return on average assets | 1.02 | % | 0.96 | % | 0.86 | % | 0.98 | % | 1.16 | % | ||||||||||
| Return on average shareholders' equity | 12.96 | % | 11.55 | % | 10.53 | % | 10.56 | % | 12.26 | % | ||||||||||
| Return on average tangible shareholders' equity | 14.10 | % | 12.60 | % | 11.49 | % | 10.87 | % | 12.63 | % | ||||||||||
| Efficiency ratio | 61.87 | % | 68.45 | % | 70.04 | % | 70.11 | % | 68.35 | % | ||||||||||
| Yield on earning assets (FTE) | 4.27 | % | 3.96 | % | 3.70 | % | 3.67 | % | 3.69 | % | ||||||||||
| Rate on interest bearing liabilities | 0.75 | % | 0.38 | % | 0.29 | % | 0.33 | % | 0.34 | % | ||||||||||
| Net interest margin to earning assets (FTE) | 3.79 | % | 3.73 | % | 3.52 | % | 3.47 | % | 3.48 | % | ||||||||||
| BALANCE SHEET DATA(1) | ||||||||||||||||||||
| Total investment securities | $ | 129,886 | $ | 136,725 | $ | 151,579 | $ | 164,942 | $ | 138,476 | ||||||||||
| Gross loans | $ | 1,350,851 | $ | 1,232,892 | $ | 1,139,351 | $ | 1,100,092 | $ | 1,015,177 | ||||||||||
| Allowance for loan losses | $ | 12,200 | $ | 11,000 | $ | 11,000 | $ | 10,500 | $ | 10,500 | ||||||||||
| Total assets | $ | 1,595,126 | $ | 1,474,307 | $ | 1,435,501 | $ | 1,417,801 | $ | 1,329,300 | ||||||||||
| Total deposits | $ | 1,345,209 | $ | 1,231,543 | $ | 1,252,892 | $ | 1,228,298 | $ | 1,144,291 | ||||||||||
| Borrowed funds | $ | 116,600 | $ | 111,000 | $ | 52,000 | $ | 50,000 | $ | 50,000 | ||||||||||
| Total shareholders' equity | $ | 121,630 | $ | 118,566 | $ | 121,346 | $ | 124,455 | $ | 124,809 | ||||||||||
| Net loans to total deposits | 99.51 | % | 99.22 | % | 90.06 | % | 88.71 | % | 87.80 | % | ||||||||||
| Common shares outstanding | 4,434,937 | 4,429,357 | 4,459,544 | 4,496,701 | 4,569,935 | |||||||||||||||
| QTD BALANCE SHEET AVERAGES | ||||||||||||||||||||
| Total assets | $ | 1,558,040 | $ | 1,449,874 | $ | 1,448,545 | $ | 1,353,694 | $ | 1,323,912 | ||||||||||
| Earning assets | $ | 1,464,233 | $ | 1,360,658 | $ | 1,348,647 | $ | 1,273,650 | $ | 1,248,018 | ||||||||||
| Interest bearing liabilities | $ | 917,888 | $ | 826,708 | $ | 831,200 | $ | 773,082 | $ | 756,545 | ||||||||||
| Total shareholders' equity | $ | 122,695 | $ | 120,659 | $ | 118,759 | $ | 125,500 | $ | 124,720 | ||||||||||
| Total tangible shareholders' equity | $ | 112,829 | $ | 110,686 | $ | 108,862 | $ | 121,933 | $ | 121,120 | ||||||||||
| Earned common shares outstanding | 4,408,399 | 4,417,447 | 4,451,607 | 4,520,962 | 4,582,401 | |||||||||||||||
| Unvested stock grants | 24,460 | 24,460 | 27,466 | 20,671 | 20,671 | |||||||||||||||
| Total common shares outstanding | 4,432,859 | 4,441,907 | 4,479,073 | 4,541,633 | 4,603,072 | |||||||||||||||
| ASSET QUALITY | ||||||||||||||||||||
| Nonperforming loans to gross loans(1) | 0.12 | % | 0.16 | % | 0.20 | % | 0.18 | % | 0.82 | % | ||||||||||
| Nonperforming assets to total assets(1) | 0.12 | % | 0.16 | % | 0.19 | % | 0.17 | % | 0.63 | % | ||||||||||
| Allowance for loan losses to gross loans(1) | 0.90 | % | 0.89 | % | 0.97 | % | 0.95 | % | 1.03 | % | ||||||||||
| Allowance for loan losses to gross loans, net of PPP loans(1) | 0.90 | % | 0.89 | % | 0.97 | % | 0.96 | % | 1.04 | % | ||||||||||
| Net charge-offs (recoveries) to QTD average gross loans | — | % | 0.04 | % | — | % | — | % | (0.01 | )% | ||||||||||
| Provision for loan losses to QTD average gross loans | 0.10 | % | 0.04 | % | 0.05 | % | — | % | (0.04 | )% | ||||||||||
| CAPITAL RATIOS(1) | ||||||||||||||||||||
| Total capital to risk weighted assets | 10.96 | % | 11.36 | % | 12.07 | % | 12.22 | % | 13.63 | % | ||||||||||
| Tier 1 capital to risk weighted assets | 10.07 | % | 10.50 | % | 11.13 | % | 11.30 | % | 12.64 | % | ||||||||||
| CET1 capital to risk weighted assets | 9.04 | % | 9.39 | % | 9.94 | % | 10.07 | % | 11.33 | % | ||||||||||
| Tier 1 leverage ratio | 8.91 | % | 9.30 | % | 9.07 | % | 9.13 | % | 10.21 | % | ||||||||||
| (1) At end of period | ||||||||||||||||||||
The following table outlines the Corporation's YTD results of operations and provides certain performance measures as of, and for the nine months ended:
| 9/30/2022 | 9/30/2021 | 9/30/2020 | 9/30/2019 | 9/30/2018 | ||||||||||||||||
| INCOME STATEMENT DATA | ||||||||||||||||||||
| Interest income | $ | 41,438 | $ | 35,161 | $ | 34,355 | $ | 32,465 | $ | 26,419 | ||||||||||
| Interest expense | 3,122 | 2,091 | 4,952 | 6,469 | 3,901 | |||||||||||||||
| Net interest income | 38,316 | 33,070 | 29,403 | 25,996 | 22,518 | |||||||||||||||
| Provision for loan losses | 2,258 | (218 | ) | 4,652 | 899 | 767 | ||||||||||||||
| Noninterest income | 7,947 | 10,983 | 14,964 | 6,034 | 6,574 | |||||||||||||||
| Noninterest expenses | 30,820 | 27,706 | 23,713 | 19,808 | 18,403 | |||||||||||||||
| Federal income tax expense | 2,616 | 3,328 | 3,271 | 2,297 | 1,817 | |||||||||||||||
| Net income | $ | 10,569 | $ | 13,237 | $ | 12,731 | $ | 9,026 | $ | 8,105 | ||||||||||
| PER SHARE | ||||||||||||||||||||
| Earnings | $ | 2.39 | $ | 2.86 | $ | 2.73 | $ | 1.94 | $ | 2.23 | ||||||||||
| Dividends | $ | 0.270 | $ | 0.240 | $ | 0.225 | $ | 0.210 | $ | 0.180 | ||||||||||
| Tangible book value(1) | $ | 25.22 | $ | 26.53 | $ | 23.50 | $ | 20.37 | $ | 16.91 | ||||||||||
| Quoted market value | ||||||||||||||||||||
| High | $ | 29.25 | $ | 27.40 | $ | 26.00 | $ | 21.00 | $ | 23.00 | ||||||||||
| Low | $ | 23.00 | $ | 21.90 | $ | 12.55 | $ | 20.05 | $ | 18.88 | ||||||||||
| Close(1) | $ | 23.00 | $ | 25.75 | $ | 16.93 | $ | 21.00 | $ | 21.15 | ||||||||||
| PERFORMANCE RATIOS | ||||||||||||||||||||
| Return on average assets | 0.95 | % | 1.36 | % | 1.45 | % | 1.27 | % | 1.32 | % | ||||||||||
| Return on average shareholders' equity | 11.71 | % | 14.55 | % | 15.79 | % | 12.73 | % | 17.29 | % | ||||||||||
| Return on average tangible shareholders' equity | 12.75 | % | 15.00 | % | 16.40 | % | 13.35 | % | 18.77 | % | ||||||||||
| Efficiency ratio | 66.62 | % | 62.89 | % | 53.45 | % | 61.84 | % | 63.26 | % | ||||||||||
| Yield on earning assets (FTE) | 3.99 | % | 3.83 | % | 4.12 | % | 4.81 | % | 4.59 | % | ||||||||||
| Rate on interest bearing liabilities | 0.49 | % | 0.37 | % | 0.93 | % | 1.43 | % | 0.98 | % | ||||||||||
| Net interest margin to earning assets (FTE) | 3.69 | % | 3.60 | % | 3.52 | % | 3.85 | % | 3.91 | % | ||||||||||
| BALANCE SHEET DATA(1) | ||||||||||||||||||||
| Total investment securities | $ | 129,886 | $ | 138,476 | $ | 78,179 | $ | 62,351 | $ | 79,531 | ||||||||||
| Gross loans | $ | 1,350,851 | $ | 1,015,177 | $ | 1,060,885 | $ | 826,597 | $ | 728,302 | ||||||||||
| Allowance for loan losses | $ | 12,200 | $ | 10,500 | $ | 10,100 | $ | 5,413 | $ | 4,146 | ||||||||||
| Total assets | $ | 1,595,126 | $ | 1,329,300 | $ | 1,284,845 | $ | 978,046 | $ | 909,901 | ||||||||||
| Total deposits | $ | 1,345,209 | $ | 1,144,291 | $ | 1,061,470 | $ | 801,101 | $ | 766,587 | ||||||||||
| Borrowed funds | $ | 116,600 | $ | 50,000 | $ | 96,217 | $ | 69,000 | $ | 74,000 | ||||||||||
| Total shareholders' equity | $ | 121,630 | $ | 124,809 | $ | 114,081 | $ | 99,142 | $ | 66,340 | ||||||||||
| Net loans to total deposits | 99.51 | % | 87.80 | % | 98.99 | % | 102.51 | % | 94.46 | % | ||||||||||
| Common shares outstanding | 4,434,937 | 4,569,935 | 4,691,142 | 4,658,722 | 3,645,402 | |||||||||||||||
| YTD BALANCE SHEET AVERAGES | ||||||||||||||||||||
| Total assets | $ | 1,485,489 | $ | 1,297,657 | $ | 1,171,415 | $ | 950,749 | $ | 820,481 | ||||||||||
| Earning assets | $ | 1,391,179 | $ | 1,230,553 | $ | 1,116,861 | $ | 903,192 | $ | 772,111 | ||||||||||
| Interest bearing liabilities | $ | 858,600 | $ | 748,472 | $ | 711,449 | $ | 606,912 | $ | 528,165 | ||||||||||
| Total shareholders' equity | $ | 120,704 | $ | 121,659 | $ | 107,711 | $ | 94,815 | $ | 62,662 | ||||||||||
| Total tangible shareholders' equity | $ | 110,792 | $ | 117,991 | $ | 103,712 | $ | 90,394 | $ | 57,732 | ||||||||||
| Earned common shares outstanding | 4,425,818 | 4,630,709 | 4,665,951 | 4,641,084 | 3,638,123 | |||||||||||||||
| Unvested stock grants | 25,462 | 21,088 | 13,966 | 9,907 | — | |||||||||||||||
| Total common shares outstanding | 4,451,280 | 4,651,797 | 4,679,917 | 4,650,991 | 3,638,123 | |||||||||||||||
| ASSET QUALITY | ||||||||||||||||||||
| Nonperforming loans to gross loans(1) | 0.12 | % | 0.82 | % | 0.07 | % | 0.11 | % | 0.01 | % | ||||||||||
| Nonperforming assets to total assets(1) | 0.12 | % | 0.63 | % | 0.06 | % | 0.09 | % | 0.03 | % | ||||||||||
| Allowance for loan losses to gross loans(1) | 0.90 | % | 1.03 | % | 0.95 | % | 0.65 | % | 0.57 | % | ||||||||||
| Allowance for loan losses to gross loans, net of PPP loans(1) | 0.90 | % | 1.04 | % | 1.19 | % | 0.65 | % | 0.57 | % | ||||||||||
| Net charge-offs (recoveries) to YTD average gross loans | 0.05 | % | 0.02 | % | 0.03 | % | — | % | 0.03 | % | ||||||||||
| Provision for loan losses to YTD average gross loans | 0.19 | % | (0.02 | )% | 0.44 | % | 0.11 | % | 0.11 | % | ||||||||||
| CAPITAL RATIOS(1) | ||||||||||||||||||||
| Total capital to risk weighted assets | 10.96 | % | 13.63 | % | 15.57 | % | 14.42 | % | 11.31 | % | ||||||||||
| Tier 1 capital to risk weighted assets | 10.07 | % | 12.64 | % | 14.40 | % | 13.73 | % | 10.73 | % | ||||||||||
| CET1 capital to risk weighted assets | 9.04 | % | 11.33 | % | 12.77 | % | 11.96 | % | 8.77 | % | ||||||||||
| Tier 1 leverage ratio | 8.91 | % | 10.21 | % | 9.86 | % | 11.22 | % | 8.90 | % | ||||||||||
| (1)At end of period | ||||||||||||||||||||
Income Statement Breakdown and Analysis
| Quarter to Date | ||||||||||||||||||||
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| GAAP net income | $ | 4,009 | $ | 3,476 | $ | 3,084 | $ | 3,342 | $ | 3,855 | ||||||||||
| Acquisition related items (net of tax) | ||||||||||||||||||||
| Accretion on purchased loans | (20 | ) | (20 | ) | (20 | ) | (154 | ) | (152 | ) | ||||||||||
| Amortization of core deposit intangibles | 85 | 85 | 85 | 54 | 54 | |||||||||||||||
| Amortization on acquired time deposits | (21 | ) | (21 | ) | (21 | ) | 2 | 2 | ||||||||||||
| Other acquisition related expenses | — | 11 | 202 | 178 | 51 | |||||||||||||||
| Total acquisition related items (net of tax) | 44 | 55 | 246 | 80 | (45 | ) | ||||||||||||||
| Other nonrecurring items (net of tax) | ||||||||||||||||||||
| Prepayment penalties collected | (119 | ) | (48 | ) | (162 | ) | (91 | ) | (65 | ) | ||||||||||
| Total other nonrecurring items (net of tax) | (119 | ) | (48 | ) | (162 | ) | (91 | ) | (65 | ) | ||||||||||
| Adjusted net income from operations | $ | 3,934 | $ | 3,483 | $ | 3,168 | $ | 3,331 | $ | 3,745 | ||||||||||
| GAAP net interest income | $ | 13,988 | $ | 12,626 | $ | 11,702 | $ | 11,104 | $ | 10,931 | ||||||||||
| Accretion on purchased loans | (25 | ) | (26 | ) | (25 | ) | (195 | ) | (192 | ) | ||||||||||
| Prepayment penalties collected | (150 | ) | (61 | ) | (205 | ) | (115 | ) | (82 | ) | ||||||||||
| Amortization on acquired time deposits | (27 | ) | (26 | ) | (27 | ) | 3 | 3 | ||||||||||||
| Adjusted net interest income | $ | 13,786 | $ | 12,513 | $ | 11,445 | $ | 10,797 | $ | 10,660 | ||||||||||
| PERFORMANCE RATIOS | ||||||||||||||||||||
| Based on adjusted net income from operations | ||||||||||||||||||||
| Earnings per share | $ | 0.89 | $ | 0.79 | $ | 0.71 | $ | 0.74 | $ | 0.82 | ||||||||||
| Return on average assets | 1.00 | % | 0.96 | % | 0.89 | % | 0.98 | % | 1.12 | % | ||||||||||
| Return on average shareholders' equity | 12.72 | % | 11.58 | % | 10.82 | % | 10.53 | % | 11.91 | % | ||||||||||
| Return on average tangible shareholders' equity | 13.83 | % | 12.62 | % | 11.80 | % | 10.84 | % | 12.27 | % | ||||||||||
| Efficiency ratio | 61.98 | % | 68.16 | % | 68.75 | % | 69.55 | % | 68.74 | % | ||||||||||
| Based on adjusted net interest income | ||||||||||||||||||||
| Yield on earning assets (FTE) | 4.22 | % | 3.93 | % | 3.63 | % | 3.57 | % | 3.60 | % | ||||||||||
| Rate on interest bearing liabilities | 0.74 | % | 0.37 | % | 0.28 | % | 0.33 | % | 0.34 | % | ||||||||||
| Net interest margin to earning assets (FTE) | 3.74 | % | 3.70 | % | 3.44 | % | 3.37 | % | 3.39 | % | ||||||||||
| Year to Date September 30 | Variance | ||||||||||||||
| 2022 | 2021 | Amount | % | ||||||||||||
| GAAP net income | $ | 10,569 | $ | 13,237 | $ | (2,668 | ) | (20.16 | )% | ||||||
| Acquisition related items (net of tax) | |||||||||||||||
| Accretion on purchased loans | (60 | ) | (454 | ) | 394 | (86.78 | )% | ||||||||
| Amortization of core deposit intangibles | 255 | 160 | 95 | 59.38 | % | ||||||||||
| Amortization on acquired time deposits | (63 | ) | 7 | (70 | ) | (1,000.00 | )% | ||||||||
| Other acquisition related expenses | 213 | 51 | 162 | 317.65 | % | ||||||||||
| Total acquisition related items (net of tax) | 345 | (236 | ) | 581 | (246.19 | )% | |||||||||
| Other nonrecurring items (net of tax) | |||||||||||||||
| Prepayment penalties collected | (329 | ) | (115 | ) | (214 | ) | 186.09 | % | |||||||
| Total other nonrecurring items (net of tax) | (329 | ) | (115 | ) | (214 | ) | 186.09 | % | |||||||
| Adjusted net income from operations | $ | 10,585 | $ | 12,886 | $ | (2,301 | ) | (17.86 | )% | ||||||
| GAAP net interest income | $ | 38,316 | $ | 33,070 | $ | 5,246 | 15.86 | % | |||||||
| Accretion on purchased loans | (76 | ) | (575 | ) | 499 | (86.78 | )% | ||||||||
| Prepayment penalties collected | (416 | ) | (145 | ) | (271 | ) | 186.90 | % | |||||||
| Amortization on acquired time deposits | (80 | ) | 9 | (89 | ) | (988.89 | )% | ||||||||
| Adjusted net interest income | $ | 37,744 | $ | 32,359 | $ | 5,385 | 16.64 | % | |||||||
| PERFORMANCE RATIOS | |||||||||||||||
| Based on adjusted net income from operations | |||||||||||||||
| Earnings per share | $ | 2.39 | $ | 2.78 | $ | (0.39 | ) | (14.03 | )% | ||||||
| Return on average assets | 0.95 | % | 1.33 | % | (0.38 | )% | |||||||||
| Return on average shareholders' equity | 11.72 | % | 14.16 | % | (2.44 | )% | |||||||||
| Return on average tangible shareholders' equity | 12.77 | % | 14.60 | % | (1.83 | )% | |||||||||
| Efficiency ratio | 66.16 | % | 63.31 | % | 2.85 | % | |||||||||
| Based on adjusted net interest income | |||||||||||||||
| Yield on earning assets (FTE) | 3.94 | % | 3.75 | % | 0.19 | % | |||||||||
| Rate on interest bearing liabilities | 0.48 | % | 0.37 | % | 0.11 | % | |||||||||
| Net interest margin to earning assets (FTE) | 3.64 | % | 3.52 | % | 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 21%. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances.
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. The Corporation exerts 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 | |||||||||||||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | September 30, 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 | $ | 1,294,302 | $ | 15,004 | 4.60 | % | $ | 1,189,812 | $ | 12,843 | 4.33 | % | $ | 1,000,660 | $ | 11,076 | 4.39 | % | |||||||||||||||
| Taxable investment securities | 121,704 | 443 | 1.44 | % | 129,727 | 441 | 1.36 | % | 113,868 | 372 | 1.30 | % | |||||||||||||||||||||
| Nontaxable investment securities | 14,517 | 83 | 2.27 | % | 15,305 | 86 | 2.25 | % | 17,085 | 95 | 2.21 | % | |||||||||||||||||||||
| Interest earning cash and cash equivalents | 28,384 | 160 | 2.24 | % | 22,269 | 40 | 0.72 | % | 112,917 | 45 | 0.16 | % | |||||||||||||||||||||
| Federal Home Loan Bank stock | 5,326 | 54 | 4.02 | % | 3,545 | 19 | 2.15 | % | 3,488 | 16 | 1.82 | % | |||||||||||||||||||||
| Total earning assets | 1,464,233 | 15,744 | 4.27 | % | 1,360,658 | 13,429 | 3.96 | % | 1,248,018 | 11,604 | 3.69 | % | |||||||||||||||||||||
| Nonearning assets | |||||||||||||||||||||||||||||||||
| Allowance for loan losses | (11,478 | ) | (11,217 | ) | (10,889 | ) | |||||||||||||||||||||||||||
| Premises and equipment, net | 16,315 | 16,695 | 16,465 | ||||||||||||||||||||||||||||||
| Accrued income and other assets | 88,970 | 83,738 | 70,318 | ||||||||||||||||||||||||||||||
| Total assets | $ | 1,558,040 | $ | 1,449,874 | $ | 1,323,912 | |||||||||||||||||||||||||||
| Interest bearing liabilities | |||||||||||||||||||||||||||||||||
| Interest bearing demand deposits | $ | 318,771 | $ | 818 | 1.02 | % | $ | 256,856 | $ | 185 | 0.29 | % | $ | 228,147 | $ | 121 | 0.21 | % | |||||||||||||||
| Savings deposits | 371,020 | 126 | 0.13 | % | 367,917 | 113 | 0.12 | % | 325,161 | 108 | 0.13 | % | |||||||||||||||||||||
| Time deposits | 102,472 | 121 | 0.47 | % | 113,026 | 140 | 0.50 | % | 153,694 | 264 | 0.68 | % | |||||||||||||||||||||
| Borrowed funds | 125,625 | 673 | 2.13 | % | 88,909 | 347 | 1.57 | % | 49,543 | 160 | 1.28 | % | |||||||||||||||||||||
| Total interest bearing liabilities | 917,888 | 1,738 | 0.75 | % | 826,708 | 785 | 0.38 | % | 756,545 | 653 | 0.34 | % | |||||||||||||||||||||
| Noninterest bearing liabilities | |||||||||||||||||||||||||||||||||
| Noninterest bearing deposits | 505,435 | 490,863 | 433,057 | ||||||||||||||||||||||||||||||
| Accrued interest and other liabilities | 12,022 | 11,644 | 9,590 | ||||||||||||||||||||||||||||||
| Shareholders' equity | 122,695 | 120,659 | 124,720 | ||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,558,040 | $ | 1,449,874 | $ | 1,323,912 | |||||||||||||||||||||||||||
| Net interest income (FTE) | $ | 14,006 | $ | 12,644 | $ | 10,951 | |||||||||||||||||||||||||||
| Net interest margin to earning assets (FTE) | 3.79 | % | 3.73 | % | 3.48 | % | |||||||||||||||||||||||||||
| Nine Months Ended | ||||||||||||||||||||||
| September 30, 2022 | September 30, 2021 | |||||||||||||||||||||
| Average Balance | Tax Equivalent Interest | Average Yield / Rate | Average Balance | Tax Equivalent Interest | Average Yield / Rate | |||||||||||||||||
| Interest earning assets | ||||||||||||||||||||||
| Total loans | $ | 1,198,290 | $ | 39,586 | 4.42 | % | $ | 1,032,792 | $ | 33,894 | 4.39 | % | ||||||||||
| Taxable investment securities | 131,792 | 1,324 | 1.34 | % | 87,399 | 896 | 1.37 | % | ||||||||||||||
| Nontaxable investment securities | 15,511 | 261 | 2.25 | % | 17,161 | 300 | 2.34 | % | ||||||||||||||
| Interest earning cash and cash equivalents | 41,440 | 229 | 0.74 | % | 89,713 | 79 | 0.12 | % | ||||||||||||||
| Federal Home Loan Bank stock | 4,146 | 93 | 3.00 | % | 3,488 | 55 | 2.11 | % | ||||||||||||||
| Total earning assets | 1,391,179 | 41,493 | 3.99 | % | 1,230,553 | 35,224 | 3.83 | % | ||||||||||||||
| Nonearning assets | ||||||||||||||||||||||
| Allowance for loan losses | (11,068 | ) | (11,075 | ) | ||||||||||||||||||
| Premises and equipment, net | 16,650 | 16,108 | ||||||||||||||||||||
| Accrued income and other assets | 88,728 | 62,071 | ||||||||||||||||||||
| Total assets | $ | 1,485,489 | $ | 1,297,657 | ||||||||||||||||||
| Interest bearing liabilities | ||||||||||||||||||||||
| Interest bearing demand deposits | $ | 283,828 | $ | 1,140 | 0.54 | % | $ | 219,378 | $ | 364 | 0.22 | % | ||||||||||
| Savings deposits | 367,920 | 359 | 0.13 | % | 318,664 | 325 | 0.14 | % | ||||||||||||||
| Time deposits | 118,320 | 448 | 0.51 | % | 161,219 | 932 | 0.77 | % | ||||||||||||||
| Borrowed funds | 88,532 | 1,175 | 1.77 | % | 49,211 | 470 | 1.28 | % | ||||||||||||||
| Total interest bearing liabilities | 858,600 | 3,122 | 0.49 | % | 748,472 | 2,091 | 0.37 | % | ||||||||||||||
| Noninterest bearing liabilities | ||||||||||||||||||||||
| Noninterest bearing deposits | 489,631 | 417,387 | ||||||||||||||||||||
| Accrued interest and other liabilities | 16,554 | 10,139 | ||||||||||||||||||||
| Shareholders' equity | 120,704 | 121,659 | ||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,485,489 | $ | 1,297,657 | ||||||||||||||||||
| Net interest income (FTE) | $ | 38,371 | $ | 33,133 | ||||||||||||||||||
| Net interest margin to earning assets (FTE) | 3.69 | % | 3.60 | % | ||||||||||||||||||
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 | Nine Months Ended | ||||||||||||||||||||||||||||||||||
| September 30, 2022 | September 30, 2022 | September 30, 2022 | ||||||||||||||||||||||||||||||||||
| Compared To | Compared To | Compared To | ||||||||||||||||||||||||||||||||||
| June 30, 2022 | September 30, 2021 | September 30, 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 | $ | 1,264 | $ | 897 | $ | 2,161 | $ | 3,378 | $ | 550 | $ | 3,928 | $ | 5,459 | $ | 233 | $ | 5,692 | ||||||||||||||||||
| Taxable investment securities | (105 | ) | 107 | 2 | 28 | 43 | 71 | 460 | (32 | ) | 428 | |||||||||||||||||||||||||
| Nontaxable investment securities | (8 | ) | 5 | (3 | ) | (27 | ) | 15 | (12 | ) | (28 | ) | (11 | ) | (39 | ) | ||||||||||||||||||||
| Interest earning cash and cash equivalents | 14 | 106 | 120 | (249 | ) | 364 | 115 | (91 | ) | 241 | 150 | |||||||||||||||||||||||||
| Federal Home Loan Bank stock | 13 | 22 | 35 | 11 | 27 | 38 | 12 | 26 | 38 | |||||||||||||||||||||||||||
| Total changes in interest income | 1,178 | 1,137 | 2,315 | 3,141 | 999 | 4,140 | 5,812 | 457 | 6,269 | |||||||||||||||||||||||||||
| Changes in interest expense | ||||||||||||||||||||||||||||||||||||
| Interest bearing demand deposits | 55 | 578 | 633 | 65 | 632 | 697 | 131 | 645 | 776 | |||||||||||||||||||||||||||
| Savings deposits | 1 | 12 | 13 | 18 | — | 18 | 67 | (33 | ) | 34 | ||||||||||||||||||||||||||
| Time deposits | (12 | ) | (7 | ) | (19 | ) | (74 | ) | (69 | ) | (143 | ) | (102 | ) | (382 | ) | (484 | ) | ||||||||||||||||||
| Borrowed funds | 175 | 151 | 326 | 358 | 155 | 513 | 477 | 228 | 705 | |||||||||||||||||||||||||||
| Total changes in interest expense | 219 | 734 | 953 | 367 | 718 | 1,085 | 573 | 458 | 1,031 | |||||||||||||||||||||||||||
| Net change in net interest income (FTE) | $ | 959 | $ | 403 | $ | 1,362 | $ | 2,774 | $ | 281 | $ | 3,055 | $ | 5,239 | $ | (1 | ) | $ | 5,238 | |||||||||||||||||
| Average Yield/Rate for the Three Months Ended | |||||||||||||||
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | |||||||||||
| Total earning assets | 4.27 | % | 3.96 | % | 3.70 | % | 3.67 | % | 3.69 | % | |||||
| Total interest bearing liabilities | 0.75 | % | 0.38 | % | 0.29 | % | 0.33 | % | 0.34 | % | |||||
| Net interest margin to earning assets (FTE) | 3.79 | % | 3.73 | % | 3.52 | % | 3.47 | % | 3.48 | % | |||||
| Quarter to Date Net Interest Income (FTE) | ||||||||||||||||||||
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Interest income | $ | 15,726 | $ | 13,411 | $ | 12,301 | $ | 11,749 | $ | 11,584 | ||||||||||
| FTE adjustment | 18 | 18 | 19 | 20 | 20 | |||||||||||||||
| Total interest income (FTE) | 15,744 | 13,429 | 12,320 | 11,769 | 11,604 | |||||||||||||||
| Total interest expense | 1,738 | 785 | 599 | 645 | 653 | |||||||||||||||
| Net interest income (FTE) | $ | 14,006 | $ | 12,644 | $ | 11,721 | $ | 11,124 | $ | 10,951 | ||||||||||
As outlined above, increases in net interest income have primarily been driven through increases in volume. This growth has also resulted in increased net interest margins. While this strategy has resulted in increased net interest margins, recent increases in funding costs are now outpacing increases in the yields on interest earnings assets, so we anticipate pressure on net interest margin in future periods.
Noninterest Income
| Three Months Ended | ||||||||||||||||||||
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Net gain on sales of loans | $ | 36 | $ | 182 | $ | 483 | $ | 838 | $ | 1,096 | ||||||||||
| Service charges and fees | ||||||||||||||||||||
| ATM and debit card income | 553 | 577 | 485 | 496 | 495 | |||||||||||||||
| Trust and investment services | 546 | 458 | 598 | 399 | 562 | |||||||||||||||
| Service charges on deposit accounts | 270 | 246 | 241 | 218 | 199 | |||||||||||||||
| Total | 1,369 | 1,281 | 1,324 | 1,113 | 1,256 | |||||||||||||||
| Changes in the fair value of MSR | 207 | 433 | 319 | 407 | (69 | ) | ||||||||||||||
| Change in fair value of equity investments | (39 | ) | (31 | ) | (48 | ) | (9 | ) | (4 | ) | ||||||||||
| Other | ||||||||||||||||||||
| Mortgage servicing fees | 427 | 435 | 444 | 394 | 369 | |||||||||||||||
| Change in cash surrender value of corporate owned life insurance | 172 | 168 | 166 | 168 | 165 | |||||||||||||||
| PPP referral fees | — | — | — | — | 6 | |||||||||||||||
| Other | 205 | 310 | 104 | 186 | 80 | |||||||||||||||
| Total | 804 | 913 | 714 | 748 | 620 | |||||||||||||||
| Total noninterest income | $ | 2,377 | $ | 2,778 | $ | 2,792 | $ | 3,097 | $ | 2,899 | ||||||||||
| Memo items: | ||||||||||||||||||||
| Residential mortgage operations | $ | 670 | $ | 1,050 | $ | 1,246 | $ | 1,639 | $ | 1,396 | ||||||||||
| Nine Months Ended September 30 | Variance | ||||||||||||||
| 2022 | 2021 | Amount | % | ||||||||||||
| Net gain on sales of loans | $ | 701 | $ | 4,194 | $ | (3,493 | ) | (83.29 | )% | ||||||
| Service charges and fees | |||||||||||||||
| ATM and debit card income | 1,615 | 1,454 | 161 | 11.07 | % | ||||||||||
| Trust and investment services | 1,602 | 1,433 | 169 | 11.79 | % | ||||||||||
| Service charges on deposit accounts | 757 | 533 | 224 | 42.03 | % | ||||||||||
| Total | $ | 3,974 | $ | 3,420 | 554 | 16.20 | % | ||||||||
| Changes in the fair value of MSR | 959 | 1,188 | (229 | ) | (19.28 | )% | |||||||||
| Change in fair value of equity investments | (118 | ) | (21 | ) | (97 | ) | 461.90 | % | |||||||
| Other | |||||||||||||||
| Mortgage servicing fees | 1,306 | 1,066 | 240 | 22.51 | % | ||||||||||
| Change in cash surrender value of corporate owned life insurance | 506 | 466 | 40 | 8.58 | % | ||||||||||
| PPP referral fees | — | 431 | (431 | ) | (100.00 | )% | |||||||||
| Other | 619 | 239 | 380 | 159.00 | % | ||||||||||
| Total | 2,431 | 2,202 | 229 | 10.40 | % | ||||||||||
| Total noninterest income | $ | 7,947 | $ | 10,983 | $ | (3,036 | ) | (27.64 | )% | ||||||
| Memo items: | |||||||||||||||
| Residential mortgage operations | $ | 2,966 | $ | 6,448 | (3,482 | ) | (54.00 | )% | |||||||
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 gains down during 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. As a significant portion of the serviced loan portfolio was originated during 2020 and 2021 at lower interest rates, management expects the value of the servicing portfolio to remain strong. During the third quarter, the serviced loan portfolio declined by $17,627. Management expects this trend to continue in future periods.
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 increase in the size of the serviced portfolio.
All Other Noninterest Income
ATM and debit card income represents fees earned on ATM and debit card transactions. The Corporation expects these fees to moderate throughout the remainder of 2022.
Trust and investment services includes income the Corporation 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 increase in income during the third quarter of 2022 is a result of higher demand for fixed annuity products. Trust services and wealth management fees are subject to market fluctuations and interest rate changes.
Service charges on deposit accounts includes fees earned from deposit customers for transaction-based charges, account maintenance and overdraft services. Revenue from service charges has increased throughout 2022 as a result of increased transaction volume as well as more customers utilizing overdraft services offered by the Corporation. Service charges on deposit accounts are expected to approximate current levels for the remainder of 2022.
Change in cash surrender value of corporate owned life insurance increased in 2022 as a result of the purchase of $15,000 in additional corporate owned life insurance policies during the second quarter of 2021. The Corporation expects the change in cash surrender value of corporate owned life insurance to approximate current earnings levels throughout the remainder of 2022.
PPP referral fees earned in 2021 represent fees the Corporation earned from the second round of the PPP loan program through the SBA. As the PPP loan program has ended, the Corporation does 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 | ||||||||||||||||||||
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Compensation and benefits | $ | 5,320 | $ | 5,453 | $ | 5,347 | $ | 5,054 | $ | 5,001 | ||||||||||
| Furniture and equipment | 822 | 805 | 818 | 794 | 761 | |||||||||||||||
| Professional services | 763 | 777 | 812 | 948 | 790 | |||||||||||||||
| Occupancy | 578 | 579 | 604 | 491 | 522 | |||||||||||||||
| Data processing | 363 | 665 | 412 | 622 | 557 | |||||||||||||||
| Loan and collection | 417 | 584 | 311 | 286 | 264 | |||||||||||||||
| Advertising and promotional | 405 | 326 | 278 | 356 | 384 | |||||||||||||||
| Other | ||||||||||||||||||||
| FDIC insurance premiums | 150 | 172 | 150 | 138 | 153 | |||||||||||||||
| ATM and debit card | 154 | 160 | 143 | 158 | 131 | |||||||||||||||
| Telephone and communication | 112 | 112 | 105 | 96 | 80 | |||||||||||||||
| Amortization of core deposit intangibles | 108 | 107 | 108 | 68 | 68 | |||||||||||||||
| Other acquisition related expenses | — | 14 | 256 | 225 | 64 | |||||||||||||||
| Other general and administrative | 933 | 790 | 807 | 721 | 678 | |||||||||||||||
| Total | 1,457 | 1,355 | 1,569 | 1,406 | 1,174 | |||||||||||||||
| Total noninterest expenses | $ | 10,125 | $ | 10,544 | $ | 10,151 | $ | 9,957 | $ | 9,453 | ||||||||||
| Nine Months Ended September 30 | Variance | ||||||||||||||
| 2022 | 2021 | Amount | % | ||||||||||||
| Compensation and benefits | $ | 16,120 | $ | 15,005 | $ | 1,115 | 7.43 | % | |||||||
| Furniture and equipment | 2,445 | 2,110 | 335 | 15.88 | % | ||||||||||
| Professional services | 2,352 | 2,117 | 235 | 11.10 | % | ||||||||||
| Occupancy | 1,761 | 1,525 | 236 | 15.48 | % | ||||||||||
| Data processing | 1,440 | 1,649 | (209 | ) | (12.67 | )% | |||||||||
| Loan and collection | 1,312 | 1,007 | 305 | 30.29 | % | ||||||||||
| Advertising and promotional | 1,009 | 972 | 37 | 3.81 | % | ||||||||||
| Other | |||||||||||||||
| FDIC insurance premiums | 472 | 387 | 85 | 21.96 | % | ||||||||||
| ATM and debit card | 457 | 397 | 60 | 15.11 | % | ||||||||||
| Telephone and communication | 329 | 304 | 25 | 8.22 | % | ||||||||||
| Amortization of core deposit intangibles | 323 | 203 | 120 | 59.11 | % | ||||||||||
| Other acquisition related expenses | 270 | 64 | 206 | 321.88 | % | ||||||||||
| Other general and administrative | 2,530 | 1,966 | 564 | 28.69 | % | ||||||||||
| Total | 4,381 | 3,321 | 1,060 | 31.92 | % | ||||||||||
| Total noninterest expenses | $ | 30,820 | $ | 27,706 | $ | 3,114 | 11.24 | % | |||||||
Compensation and benefits includes salaries, commissions and incentives, employee benefits, and payroll taxes. Compensation and benefits has increased in 2022 due to an increase in the size of the organization, merit increases, and market based adjustments.
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 continue to increase modestly with the size and complexity of the Corporation.
Professional services include expenses relating to third-party professional services. These services include, but are not limited to, regulatory, auditing, consulting, and legal. The annual increase in professional services is primarily due to accounting, legal and other outside services. These expenses are expected to decline slightly throughout the remainder of 2022.
Data processing primarily includes the expenses relating to the Corporation's core data processor. These expenses trended downward during the third quarter of 2022 due to receipt of renewal incentives from the Corporation's core data processor. Data processing is expected to approximate current levels for the remainder of the year.
Loan and collection includes expenses related to the origination and collection of loans. These expenses are expected to decline in future periods as a result of a reduction in loan production.
Advertising and promotional includes the Corporation's media costs and any donations or sponsorships made on behalf of the Corporation. The annual increase in such expenses is a result of the Corporation enhancing its marketing efforts to attract new and expand existing customer loan and deposit account relationships. Total advertising and promotional expenses are expected to approximate current levels for the remainder of 2022.
FDIC insurance premiums typically fluctuate each period based on the size of the Corporation's balance sheet, capital position and overall risk profile. FDIC insurance premiums are also expected to increase in 2023 from an increase in the assessment rate for all FDIC insured institutions.
ATM and debit card expenses fluctuate based on customer and non-customer utilization of ATMs and customer debit card volumes. The Corporation expects these fees to approximate current levels in 2022.
Telephone and communication includes expenses relating to the Corporation's communication systems. These expenses are expected to approximate current levels throughout the remainder of 2022.
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 relates to the Corporation's acquisition of FSB, which closed in the fourth quarter of 2021. The Corporation does 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 typically significant. Other general and administrative expenses are expected to approximate current levels into the foreseeable future.
Balance Sheet Breakdown and Analysis
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Cash and due from banks | $ | 43,345 | $ | 38,510 | $ | 80,133 | $ | 83,446 | $ | 112,861 | ||||||||||
| Total investment securities | 129,886 | 136,725 | 151,579 | 164,942 | 138,476 | |||||||||||||||
| Residential mortgage loans held-for-sale, at fair value | 62 | 664 | 3,038 | 6,783 | 9,702 | |||||||||||||||
| Gross loans | 1,350,851 | 1,232,892 | 1,139,351 | 1,100,092 | 1,015,177 | |||||||||||||||
| Less allowance for loan losses | 12,200 | 11,000 | 11,000 | 10,500 | 10,500 | |||||||||||||||
| Net loans | 1,338,651 | 1,221,892 | 1,128,351 | 1,089,592 | 1,004,677 | |||||||||||||||
| All other assets | 83,182 | 76,516 | 72,400 | 73,038 | 63,584 | |||||||||||||||
| Total assets | $ | 1,595,126 | $ | 1,474,307 | $ | 1,435,501 | $ | 1,417,801 | $ | 1,329,300 | ||||||||||
| . | ||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||||||
| Total deposits | $ | 1,345,209 | $ | 1,231,543 | $ | 1,252,892 | $ | 1,228,298 | $ | 1,144,291 | ||||||||||
| Total borrowed funds | 116,600 | 111,000 | 52,000 | 50,000 | 50,000 | |||||||||||||||
| Accrued interest payable and other liabilities | 11,687 | 13,198 | 9,263 | 15,048 | 10,200 | |||||||||||||||
| Total liabilities | 1,473,496 | 1,355,741 | 1,314,155 | 1,293,346 | 1,204,491 | |||||||||||||||
| Total shareholders' equity | 121,630 | 118,566 | 121,346 | 124,455 | 124,809 | |||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,595,126 | $ | 1,474,307 | $ | 1,435,501 | $ | 1,417,801 | $ | 1,329,300 | ||||||||||
| 9/30/2022 vs 6/30/2022 | 9/30/2022 vs 9/30/2021 | |||||||||||||
| Variance | Variance | |||||||||||||
| Amount | % | Amount | % | |||||||||||
| ASSETS | ||||||||||||||
| Cash and due from banks | $ | 4,835 | 12.56 | % | $ | (69,516 | ) | (61.59 | )% | |||||
| Total investment securities | (6,839 | ) | (5.00 | )% | (8,590 | ) | (6.20 | )% | ||||||
| Residential mortgage loans held-for-sale, at fair value | (602 | ) | (90.66 | )% | (9,640 | ) | (99.36 | )% | ||||||
| Gross loans | 117,959 | 9.57 | % | 335,674 | 33.07 | % | ||||||||
| Less allowance for loan losses | 1,200 | 10.91 | % | 1,700 | 16.19 | % | ||||||||
| Net loans | 116,759 | 9.56 | % | 333,974 | 33.24 | % | ||||||||
| All other assets | 6,666 | 8.71 | % | 19,598 | 30.82 | % | ||||||||
| Total assets | $ | 120,819 | 8.19 | % | $ | 265,826 | 20.00 | % | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
| Total deposits | $ | 113,666 | 9.23 | % | $ | 200,918 | 17.56 | % | ||||||
| Total borrowed funds | 5,600 | 5.05 | % | 66,600 | 133.20 | % | ||||||||
| Accrued interest payable and other liabilities | (1,511 | ) | (11.45 | )% | 1,487 | 14.58 | % | |||||||
| Total liabilities | 117,755 | 8.69 | % | 269,005 | 22.33 | % | ||||||||
| Total shareholders' equity | 3,064 | 2.58 | % | (3,179 | ) | (2.55 | )% | |||||||
| Total liabilities and shareholders' equity | $ | 120,819 | 8.19 | % | $ | 265,826 | 20.00 | % | ||||||
Cash and due from banks
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Cash and due from banks | ||||||||||||||||||||
| Noninterest bearing | $ | 29,530 | $ | 26,085 | $ | 23,715 | $ | 28,475 | $ | 25,693 | ||||||||||
| Interest bearing | 13,815 | 12,425 | 56,418 | 54,971 | 87,168 | |||||||||||||||
| Total | $ | 43,345 | $ | 38,510 | $ | 80,133 | $ | 83,446 | $ | 112,861 | ||||||||||
| 9/30/2022 vs 6/30/2022 | 9/30/2022 vs 9/30/2021 | |||||||||||||||||||
| Variance | Variance | |||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||
| Cash and due from banks | ||||||||||||||||||||
| Noninterest bearing | $ | 3,445 | 13.21 | % | $ | 3,837 | 14.93 | % | ||||||||||||
| Interest bearing | 1,390 | 11.19 | % | (73,353 | ) | (84.15 | )% | |||||||||||||
| Total | $ | 4,835 | 12.56 | % | $ | (69,516 | ) | (61.59 | )% | |||||||||||
Cash and cash equivalents, which is comprised of cash and due from banks, fluctuate from period to period based on loan demand and variances in deposit accounts.
Primary and secondary liquidity sources
The following table outlines the Corporation's primary and secondary sources of liquidity as of:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Cash and cash equivalents | $ | 43,345 | $ | 38,510 | $ | 80,133 | $ | 83,446 | $ | 112,861 | ||||||||||
| Fair value of unpledged investment securities | 109,685 | 115,586 | 132,364 | 143,431 | 127,913 | |||||||||||||||
| FHLB borrowing availability | 78,000 | 83,000 | 140,000 | 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 | 115 | 125 | 125 | 200 | 1,000 | |||||||||||||||
| Parent company line of credit | 2,400 | 3,000 | 5,000 | 7,000 | 7,000 | |||||||||||||||
| PPPLF | — | 429 | 583 | 2,172 | 4,985 | |||||||||||||||
| Total liquidity sources | $ | 260,045 | $ | 267,150 | $ | 384,705 | $ | 402,749 | $ | 420,259 | ||||||||||
Investment securities
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Available-for-sale | ||||||||||||||||||||
| U.S. Government and federal agency | $ | 26,391 | $ | 27,391 | $ | 28,396 | $ | 30,406 | $ | 5,967 | ||||||||||
| State and municipal | 22,743 | 22,863 | 24,949 | 25,010 | 25,227 | |||||||||||||||
| Mortgage backed residential | 58,313 | 60,672 | 63,532 | 66,874 | 67,199 | |||||||||||||||
| Certificates of deposit | 8,166 | 8,914 | 9,917 | 10,172 | 4,190 | |||||||||||||||
| Collateralized mortgage obligations - agencies | 26,560 | 27,733 | 28,968 | 30,180 | 31,732 | |||||||||||||||
| Unrealized gain/(loss) on available-for-sale securities | (14,698 | ) | (13,509 | ) | (6,900 | ) | (468 | ) | 1,432 | |||||||||||
| Total available-for-sale | 127,475 | 134,064 | 148,862 | 162,174 | 135,747 | |||||||||||||||
| Held-to-maturity state and municipal | 1,173 | 1,386 | 1,509 | 1,512 | 1,515 | |||||||||||||||
| Equity securities | 1,238 | 1,275 | 1,208 | 1,256 | 1,214 | |||||||||||||||
| Total investment securities | $ | 129,886 | $ | 136,725 | $ | 151,579 | $ | 164,942 | $ | 138,476 | ||||||||||
| 9/30/2022 vs 6/30/2022 | 9/30/2022 vs 9/30/2021 | |||||||||||||||||||
| Variance | Variance | |||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||
| Available-for-sale | ||||||||||||||||||||
| U.S. Government and federal agency | (1,000 | ) | (3.65 | )% | $ | 20,424 | 342.28 | % | ||||||||||||
| State and municipal | (120 | ) | (0.52 | )% | (2,484 | ) | (9.85 | )% | ||||||||||||
| Mortgage backed residential | (2,359 | ) | (3.89 | )% | (8,886 | ) | (13.22 | )% | ||||||||||||
| Certificates of deposit | (748 | ) | (8.39 | )% | 3,976 | 94.89 | % | |||||||||||||
| Collateralized mortgage obligations - agencies | (1,173 | ) | (4.23 | )% | (5,172 | ) | (16.30 | )% | ||||||||||||
| Unrealized gain/(loss) on available-for-sale securities | (1,189 | ) | 8.80 | % | (16,130 | ) | (1,126.40 | )% | ||||||||||||
| Total available-for-sale | (6,589 | ) | (4.91 | )% | (8,272 | ) | (6.09 | )% | ||||||||||||
| Held-to-maturity state and municipal | (213 | ) | (15.37 | )% | (342 | ) | (22.57 | )% | ||||||||||||
| Equity securities | (37 | ) | (2.90 | )% | 24 | 1.98 | % | |||||||||||||
| Total investment securities | $ | (6,839 | ) | (5.00 | )% | $ | (8,590 | ) | (6.20 | )% | ||||||||||
The amortized cost and fair value of AFS investment securities as of September 30, 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 | $ | 3,989 | $ | 22,402 | $ | — | $ | — | $ | — | $ | 26,391 | ||||||||||||
| State and municipal | 2,050 | 10,875 | 8,236 | 1,582 | — | 22,743 | ||||||||||||||||||
| Mortgage backed residential | — | 58,313 | 58,313 | |||||||||||||||||||||
| Certificates of deposit | 5,442 | 2,724 | — | — | — | 8,166 | ||||||||||||||||||
| Collateralized mortgage obligations - agencies | — | — | — | — | 26,560 | 26,560 | ||||||||||||||||||
| Total amortized cost | $ | 11,481 | $ | 36,001 | $ | 8,236 | $ | 1,582 | $ | 84,873 | $ | 142,173 | ||||||||||||
| Fair value | $ | 11,355 | $ | 32,942 | $ | 7,192 | $ | 1,403 | $ | 74,583 | $ | 127,475 | ||||||||||||
The amortized cost and fair value of HTM investment securities as of September 30, 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 | $ | 289 | $ | 579 | $ | 305 | $ | — | $ | — | $ | 1,173 | ||||||||||||
| Fair value | $ | 286 | $ | 565 | $ | 284 | $ | — | $ | — | $ | 1,135 | ||||||||||||
Throughout 2021, the Corporation expanded its investment portfolio to generate additional interest income. Total investment securities also increased by $35,749 as a part of the acquisition of FSB on December 1, 2021. Due to robust loan demand, there have been no purchases of investments YTD through September 30, 2022. This strategy, coupled with the increase in unrealized losses resulting from increases in market interest rates, 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, the Corporation has been extremely successful at growing its loan portfolio over the past 12 months while maintaining strong credit quality metrics. Management expects loan demand to moderate in future periods.
The following tables outline the composition and changes in the loan portfolio as of:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Commercial, net of PPP loans | $ | 107,531 | $ | 108,054 | $ | 94,810 | $ | 91,529 | $ | 74,308 | ||||||||||
| PPP loans | — | 429 | 583 | 2,172 | 4,985 | |||||||||||||||
| Commercial real estate | 820,165 | 745,416 | 698,275 | 656,818 | 616,358 | |||||||||||||||
| Total commercial loans | 927,696 | 853,899 | 793,668 | 750,519 | 695,651 | |||||||||||||||
| Residential mortgage | 368,971 | 327,574 | 297,940 | 298,799 | 273,478 | |||||||||||||||
| Home equity | 47,928 | 44,648 | 40,609 | 42,220 | 41,902 | |||||||||||||||
| Total residential real estate loans | 416,899 | 372,222 | 338,549 | 341,019 | 315,380 | |||||||||||||||
| Consumer | 6,256 | 6,771 | 7,134 | 8,554 | 4,146 | |||||||||||||||
| Gross loans | 1,350,851 | 1,232,892 | 1,139,351 | 1,100,092 | 1,015,177 | |||||||||||||||
| Allowance for loan and lease losses | (12,200 | ) | (11,000 | ) | (11,000 | ) | (10,500 | ) | (10,500 | ) | ||||||||||
| Loans, net | $ | 1,338,651 | $ | 1,221,892 | $ | 1,128,351 | $ | 1,089,592 | $ | 1,004,677 | ||||||||||
| Memo items: | ||||||||||||||||||||
| Gross loans, net of PPP loans | $ | 1,350,851 | $ | 1,232,463 | $ | 1,138,768 | $ | 1,097,920 | $ | 1,010,192 | ||||||||||
| Residential mortgage loans serviced for others | $ | 660,490 | $ | 678,117 | $ | 688,745 | $ | 687,233 | $ | 591,399 | ||||||||||
| 9/30/2022 vs 6/30/2022 | 9/30/2022 vs 9/30/2021 | |||||||||||||||||||
| Variance | Variance | |||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||
| Commercial, net of PPP loans | $ | (523 | ) | (0.48 | )% | $ | 33,223 | 44.71 | % | |||||||||||
| PPP loans | (429 | ) | (100.00 | )% | (4,985 | ) | (100.00 | )% | ||||||||||||
| Commercial real estate | 74,749 | 10.03 | % | 203,807 | 33.07 | % | ||||||||||||||
| Total commercial loans | 73,797 | 8.64 | % | 232,045 | 33.36 | % | ||||||||||||||
| Residential mortgage | 41,397 | 12.64 | % | 95,493 | 34.92 | % | ||||||||||||||
| Home equity | 3,280 | 7.35 | % | 6,026 | 14.38 | % | ||||||||||||||
| Total residential real estate loans | 44,677 | 12.00 | % | 101,519 | 32.19 | % | ||||||||||||||
| Consumer | (515 | ) | (7.61 | )% | 2,110 | 50.89 | % | |||||||||||||
| Gross loans | 117,959 | 9.57 | % | 335,674 | 33.07 | % | ||||||||||||||
| Allowance for loan and lease losses | (1,200 | ) | 10.91 | % | (1,700 | ) | 16.19 | % | ||||||||||||
| Loans, net | $ | 116,759 | 9.56 | % | $ | 333,974 | 33.24 | % | ||||||||||||
| Memo items: | ||||||||||||||||||||
| Gross loans, net of PPP loans | $ | 118,388 | 9.61 | % | $ | 340,659 | 33.72 | % | ||||||||||||
| Residential mortgage loans serviced for others | $ | (17,627 | ) | (2.60 | )% | $ | 69,091 | 11.68 | % | |||||||||||
The following table presents historical loan balances by portfolio segment and impairment evaluation as of:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Loans collectively evaluated for impairment | ||||||||||||||||||||
| Commercial and industrial | $ | 107,531 | $ | 108,483 | $ | 94,899 | $ | 93,207 | $ | 79,252 | ||||||||||
| Commercial real estate | 819,982 | 745,025 | 697,818 | 656,818 | 609,382 | |||||||||||||||
| Residential mortgage | 367,652 | 326,481 | 296,883 | 297,626 | 272,463 | |||||||||||||||
| Home equity | 47,887 | 44,607 | 40,568 | 42,138 | 41,840 | |||||||||||||||
| Consumer | 6,251 | 6,771 | 7,134 | 8,554 | 4,146 | |||||||||||||||
| Subtotal | 1,349,303 | 1,231,367 | 1,137,302 | 1,098,343 | 1,007,083 | |||||||||||||||
| Loans individually evaluated for impairment | ||||||||||||||||||||
| Commercial and industrial | — | — | 494 | 494 | 41 | |||||||||||||||
| Commercial real estate | 183 | 391 | 457 | — | 6,976 | |||||||||||||||
| Residential mortgage | 1,319 | 1,093 | 1,057 | 1,173 | 1,015 | |||||||||||||||
| Home equity | 41 | 41 | 41 | 82 | 62 | |||||||||||||||
| Consumer | 5 | — | — | — | — | |||||||||||||||
| Subtotal | 1,548 | 1,525 | 2,049 | 1,749 | 8,094 | |||||||||||||||
| Gross Loans | $ | 1,350,851 | $ | 1,232,892 | $ | 1,139,351 | $ | 1,100,092 | $ | 1,015,177 | ||||||||||
The following table presents historical allowance for loan losses allocations by portfolio segment and impairment evaluation as of:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Loans collectively evaluated for impairment | ||||||||||||||||||||
| Commercial and industrial | $ | 1,129 | $ | 1,074 | $ | 837 | $ | 743 | $ | 613 | ||||||||||
| Commercial real estate | 7,126 | 6,437 | 6,716 | 6,350 | 6,104 | |||||||||||||||
| Residential mortgage | 3,458 | 3,061 | 3,007 | 2,940 | 3,066 | |||||||||||||||
| Home equity | 370 | 345 | 364 | 379 | 410 | |||||||||||||||
| Consumer | 90 | 74 | 63 | 77 | 53 | |||||||||||||||
| Unallocated | — | — | — | — | — | |||||||||||||||
| Subtotal | 12,173 | 10,991 | 10,987 | 10,489 | 10,246 | |||||||||||||||
| Loans individually evaluated for impairment | ||||||||||||||||||||
| Commercial and industrial | — | — | — | — | — | |||||||||||||||
| Commercial real estate | — | — | — | — | 250 | |||||||||||||||
| Residential mortgage | 27 | 9 | 13 | 11 | 4 | |||||||||||||||
| Home equity | — | — | — | — | — | |||||||||||||||
| Consumer | — | — | — | — | — | |||||||||||||||
| Unallocated | — | — | — | — | — | |||||||||||||||
| Subtotal | 27 | 9 | 13 | 11 | 254 | |||||||||||||||
| Allowance for loan losses | $ | 12,200 | $ | 11,000 | $ | 11,000 | $ | 10,500 | $ | 10,500 | ||||||||||
| Commercial and industrial | $ | 1,129 | $ | 1,074 | $ | 837 | $ | 743 | $ | 613 | ||||||||||
| Commercial real estate | 7,126 | 6,437 | 6,716 | 6,350 | 6,354 | |||||||||||||||
| Residential mortgage | 3,485 | 3,070 | 3,020 | 2,951 | 3,070 | |||||||||||||||
| Home equity | 370 | 345 | 364 | 379 | 410 | |||||||||||||||
| Consumer | 90 | 74 | 63 | 77 | 53 | |||||||||||||||
| Unallocated | — | — | — | — | — | |||||||||||||||
| Allowance for loan losses | $ | 12,200 | $ | 11,000 | $ | 11,000 | $ | 10,500 | $ | 10,500 | ||||||||||
The following table summarizes the Corporation's current, past due, and nonaccrual loans as of:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Accruing interest | ||||||||||||||||||||
| Current | $ | 1,346,141 | $ | 1,228,082 | $ | 1,132,961 | $ | 1,094,141 | $ | 1,004,220 | ||||||||||
| Past due 30-89 days | 3,131 | 2,802 | 4,099 | 3,971 | 2,596 | |||||||||||||||
| Past due 90 days or more | 71 | 525 | 284 | 276 | 364 | |||||||||||||||
| Total accruing interest | 1,349,343 | 1,231,409 | 1,137,344 | 1,098,388 | 1,007,180 | |||||||||||||||
| Nonaccrual | 1,508 | 1,483 | 2,007 | 1,704 | 7,997 | |||||||||||||||
| Total loans | $ | 1,350,851 | $ | 1,232,892 | $ | 1,139,351 | $ | 1,100,092 | $ | 1,015,177 | ||||||||||
| Total loans past due and in nonaccrual status | $ | 4,710 | $ | 4,810 | $ | 6,390 | $ | 5,951 | $ | 10,957 | ||||||||||
The following table summarizes the Corporation's nonperforming assets as of:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Nonaccrual loans | $ | 1,508 | $ | 1,483 | $ | 2,007 | $ | 1,704 | $ | 7,997 | ||||||||||
| Accruing loans past due 90 days or more | 71 | 525 | 284 | 276 | 364 | |||||||||||||||
| Total nonperforming loans | 1,579 | 2,008 | 2,291 | 1,980 | 8,361 | |||||||||||||||
| Other real estate owned | 293 | 383 | 383 | 383 | — | |||||||||||||||
| Total nonperforming assets | $ | 1,872 | $ | 2,391 | $ | 2,674 | $ | 2,363 | $ | 8,361 | ||||||||||
The following table summarizes our charge-offs, recoveries, provision for loan losses and ALLL as of, and for the three-month periods ended:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Total charge-offs | $ | 40 | $ | 533 | $ | 9 | $ | 48 | $ | 4 | ||||||||||
| Total recoveries | 9 | 8 | 7 | 10 | 140 | |||||||||||||||
| Net charge-offs (recoveries) | $ | 31 | $ | 525 | $ | 2 | $ | 38 | $ | (136 | ) | |||||||||
| Provision for loan losses | $ | 1,231 | $ | 525 | $ | 502 | $ | 38 | $ | (436 | ) | |||||||||
The following table summarizes the Corporation's primary asset quality measures as of:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | |||||||||||
| Nonperforming loans to gross loans | 0.12 | % | 0.16 | % | 0.20 | % | 0.18 | % | 0.82 | % | |||||
| Nonperforming assets to total assets | 0.12 | % | 0.16 | % | 0.19 | % | 0.17 | % | 0.63 | % | |||||
| Allowance for loan losses to gross loans | 0.90 | % | 0.89 | % | 0.97 | % | 0.95 | % | 1.03 | % | |||||
| Allowance for loan losses to gross loans, net of PPP loans | 0.90 | % | 0.89 | % | 0.97 | % | 0.96 | % | 1.04 | % | |||||
| Net charge-offs (recoveries) to QTD average gross loans | — | % | 0.04 | % | — | % | — | % | (0.01 | )% | |||||
| Provision for loan losses to QTD average gross loans | 0.10 | % | 0.04 | % | 0.05 | % | — | % | (0.04 | )% | |||||
The following table summarizes the balance of net unamortized discounts on purchased loans as of:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Net unamortized premium (discount) on purchased loans | $ | (25 | ) | $ | (51 | ) | $ | (76 | ) | $ | (101 | ) | $ | (196 | ) | |||||
The following table summarizes the average loan size as of:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Commercial and industrial | $ | 314 | $ | 309 | $ | 264 | $ | 192 | $ | 217 | ||||||||||
| Commercial real estate | 851 | 802 | 756 | 715 | 791 | |||||||||||||||
| Total commercial loans | 711 | 667 | 618 | 533 | 608 | |||||||||||||||
| Residential mortgage | 217 | 208 | 193 | 188 | 203 | |||||||||||||||
| Home equity | 52 | 50 | 46 | 38 | 47 | |||||||||||||||
| Total residential real estate loans | 159 | 151 | 140 | 126 | 141 | |||||||||||||||
| Consumer | 14 | 14 | 14 | 15 | 25 | |||||||||||||||
| Gross loans | $ | 311 | $ | 292 | $ | 271 | $ | 235 | $ | 287 | ||||||||||
The tables below summarize total PPP fee income for the periods ended:
| Three Months Ended | ||||||||||||||||||||
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| PPP fees recognized | $ | — | $ | — | $ | 24 | $ | 56 | $ | 376 | ||||||||||
| PPP referral fee income | — | — | — | — | 6 | |||||||||||||||
| Total PPP fees recognized | $ | — | $ | — | $ | 24 | $ | 56 | $ | 382 | ||||||||||
| Year to Date September 30 | Variance | |||||||||||||||||||
| 2022 | 2021 | Amount | % | |||||||||||||||||
| PPP fees recognized | $ | 24 | $ | 3,152 | $ | (3,128 | ) | (99.24 | )% | |||||||||||
| PPP referral fee income | — | 431 | (431 | ) | (100.00 | )% | ||||||||||||||
| Total PPP fees recognized | $ | 24 | $ | 3,583 | $ | (3,559 | ) | (99.33 | )% | |||||||||||
All other assets
The following tables outline the composition and changes in other assets as of:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Premises and equipment, net | $ | 16,100 | $ | 16,459 | $ | 16,696 | $ | 16,957 | $ | 16,330 | ||||||||||
| Federal Home Loan Bank stock | 5,760 | 4,140 | 3,337 | 3,708 | 3,488 | |||||||||||||||
| Corporate owned life insurance | 26,522 | 26,350 | 26,136 | 25,970 | 25,803 | |||||||||||||||
| Mortgage servicing rights | 8,795 | 8,588 | 8,155 | 7,836 | 6,454 | |||||||||||||||
| Accrued interest receivable | 3,300 | 2,798 | 2,784 | 2,817 | 2,776 | |||||||||||||||
| Goodwill | 8,853 | 8,853 | 8,853 | 8,853 | 3,219 | |||||||||||||||
| Other assets | ||||||||||||||||||||
| Core deposit intangibles | 943 | 1,051 | 1,158 | 1,266 | 338 | |||||||||||||||
| Right-of-use assets | 1,065 | 1,159 | 1,110 | 1,150 | 1,241 | |||||||||||||||
| Other real estate owned | 293 | 383 | 383 | 383 | — | |||||||||||||||
| Derivatives | 1 | 26 | 164 | 156 | 320 | |||||||||||||||
| Other | 11,550 | 6,709 | 3,624 | 3,942 | 3,615 | |||||||||||||||
| Total | 13,852 | 9,328 | 6,439 | 6,897 | 5,514 | |||||||||||||||
| All other assets | $ | 83,182 | $ | 76,516 | $ | 72,400 | $ | 73,038 | $ | 63,584 | ||||||||||
| 9/30/2022 vs 6/30/2022 | 9/30/2022 vs 9/30/2021 | |||||||||||||||||||
| Variance | Variance | |||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||
| Premises and equipment, net | $ | (359 | ) | (2.18 | )% | $ | (230 | ) | (1.41 | )% | ||||||||||
| Federal Home Loan Bank stock | 1,620 | 39.13 | % | 2,272 | 65.14 | % | ||||||||||||||
| Corporate owned life insurance | 172 | 0.65 | % | 719 | 2.79 | % | ||||||||||||||
| Mortgage servicing rights | 207 | 2.41 | % | 2,341 | 36.27 | % | ||||||||||||||
| Accrued interest receivable | 502 | 17.94 | % | 524 | 18.88 | % | ||||||||||||||
| Goodwill | — | — | % | 5,634 | 175.02 | % | ||||||||||||||
| Other assets | ||||||||||||||||||||
| Core deposit intangibles | (108 | ) | (10.28 | )% | 605 | 178.99 | % | |||||||||||||
| Right-of-use assets | (94 | ) | (8.11 | )% | (176 | ) | (14.18 | )% | ||||||||||||
| Other real estate owned | (90 | ) | (23.50 | )% | 293 | N/M | ||||||||||||||
| Derivatives | (25 | ) | (96.15 | )% | (319 | ) | (99.69 | ) % | ||||||||||||
| Other | 4,841 | 72.16 | % | 7,935 | 219.50 | % | ||||||||||||||
| Total | 4,524 | 48.50 | % | 8,338 | 151.22 | % | ||||||||||||||
| All other assets | $ | 6,666 | 8.71 | % | $ | 19,598 | 30.82 | % | ||||||||||||
The increase in FHLB stock in the second and third quarters of 2022 is a direct result of an increase in FHLB borrowings used to fund loan growth.
Corporate owned life insurance represents the cash surrender value of life insurance policies owned by the Corporation on the lives of key members of management. Increases in corporate owned life are primarily driven from increases in the cash surrender value of the underlying insurance policies.
Over the past twelve months, the Corporation's residential mortgage servicing portfolio has grown by $69,091. The growth of the servicing portfolio and recent increases in residential mortgage rates have directly contributed to increases in the value of mortgage servicing rights.
Goodwill represents the premium paid over the fair market value for a company the Corporation purchases in merger and acquisition activity. The acquisition of FSB in the fourth quarter of 2021 generated an additional $5,634 of goodwill.
The increase in core deposit intangibles in the fourth quarter of 2021 relates to the acquisition of FSB. As a part of the transaction, a core deposit intangible of $995 was identified. Core deposit intangibles are being amortized using the sum-of-the-years digits method.
Other assets have primarily increased due to an increase in deferred tax assets related to unrealized losses in the Corporation's available-for-sale investment portfolio.
Total deposits
The following tables outline the composition and changes in the deposit portfolio as of:
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Noninterest bearing demand | $ | 500,204 | $ | 493,262 | $ | 480,230 | $ | 459,254 | $ | 442,358 | ||||||||||
| Interest bearing | ||||||||||||||||||||
| Savings | 380,118 | 368,849 | 377,170 | 360,204 | 320,724 | |||||||||||||||
| Money market demand | 213,672 | 144,606 | 135,051 | 125,391 | 119,719 | |||||||||||||||
| NOW | 148,775 | 118,707 | 126,461 | 141,480 | 115,114 | |||||||||||||||
| Time deposits | 102,440 | 106,119 | 133,980 | 141,969 | 146,376 | |||||||||||||||
| Total deposits | $ | 1,345,209 | $ | 1,231,543 | $ | 1,252,892 | $ | 1,228,298 | $ | 1,144,291 | ||||||||||
| 9/30/2022 vs 6/30/2022 | 9/30/2022 vs 9/30/2021 | |||||||||||||||||||
| Variance | Variance | |||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||
| Noninterest bearing demand | $ | 6,942 | 1.41 | % | $ | 57,846 | 13.08 | % | ||||||||||||
| Interest bearing | ||||||||||||||||||||
| Savings | 11,269 | 3.06 | % | 59,394 | 18.52 | % | ||||||||||||||
| Money market demand | 69,066 | 47.76 | % | 93,953 | 78.48 | % | ||||||||||||||
| NOW | 30,068 | 25.33 | % | 33,661 | 29.24 | % | ||||||||||||||
| Time deposits | (3,679 | ) | (3.47 | )% | (43,936 | ) | (30.02 | ) % | ||||||||||||
| Total deposits | $ | 113,666 | 9.23 | % | $ | 200,918 | 17.56 | % | ||||||||||||
The Corporation has continued its focus of growing non-contractual deposits while supplementing funding with time deposits. The decrease in time deposits throughout 2022 is primarily due to maturities of municipal time deposits that were not renewed as a result of the interest rate environment at the time of maturity.
Total borrowed funds
The following tables outline the composition and changes in borrowed funds as of:
| 9/30/22 | 6/30/22 | 3/31/22 | 12/31/21 | 9/30/21 | ||||||||||||||||
| Federal Home Loan Bank borrowings | $ | 97,000 | $ | 92,000 | $ | 35,000 | $ | 35,000 | $ | 35,000 | ||||||||||
| Subordinated debentures | 14,000 | 14,000 | 14,000 | 14,000 | 14,000 | |||||||||||||||
| Other borrowings | 5,600 | 5,000 | 3,000 | 1,000 | 1,000 | |||||||||||||||
| Total borrowed funds | $ | 116,600 | $ | 111,000 | $ | 52,000 | $ | 50,000 | $ | 50,000 | ||||||||||
| 9/30/2022 vs 6/30/2022 | 9/30/2022 vs 9/30/2021 | |||||||||||||||||||
| Variance | Variance | |||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||
| Federal Home Loan Bank borrowings | $ | 5,000 | 5.43 | % | $ | 62,000 | 177.14 | % | ||||||||||||
| Subordinated debentures | — | — | % | — | — | % | ||||||||||||||
| Other borrowings | 600 | 12.00 | % | 4,600 | 460.00 | % | ||||||||||||||
| Total borrowed funds | $ | 5,600 | 5.05 | % | $ | 66,600 | 133.20 | % | ||||||||||||
The Corporation utilizes a mix of borrowed funds and organic deposit growth to fund loan demand. The increase in Federal Home Loan Bank borrowings in 2022 is primarily due to the growth of the Corporation's loan portfolio, which grew $118,388, or 9.61%, net of PPP loans, during the quarter.
Wholesale funding sources
The following tables outline the composition and changes in wholesale funding sources as of:
| 9/30/22 | 6/30/22 | 3/31/22 | 12/31/21 | 9/30/21 | ||||||||||||||||
| Federal Home Loan Bank borrowings | $ | 97,000 | $ | 92,000 | $ | 35,000 | $ | 35,000 | $ | 35,000 | ||||||||||
| Subordinated debentures | 14,000 | 14,000 | 14,000 | 14,000 | 14,000 | |||||||||||||||
| Other borrowings | 5,600 | 5,000 | 3,000 | 1,000 | 1,000 | |||||||||||||||
| Brokered time deposits | 20,000 | 20,000 | 20,000 | 20,000 | 20,000 | |||||||||||||||
| Internet time deposits | 1,986 | 1,743 | 1,743 | 1,743 | 2,739 | |||||||||||||||
| Total wholesale funds | $ | 138,586 | $ | 132,743 | $ | 73,743 | $ | 71,743 | $ | 72,739 | ||||||||||
| 9/30/2022 vs 6/30/2022 | 9/30/2022 vs 9/30/2021 | |||||||||||||||||||
| Variance | Variance | |||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||
| Federal Home Loan Bank borrowings | $ | 5,000 | 5.43 | % | 62,000 | 177.14 | % | |||||||||||||
| Subordinated debentures | — | — | % | — | — | % | ||||||||||||||
| Other borrowings | 600 | 12.00 | % | 4,600 | 460.00 | % | ||||||||||||||
| Brokered time deposits | — | — | % | — | — | % | ||||||||||||||
| Internet time deposits | 243 | 13.94 | % | (753 | ) | (27.49 | )% | |||||||||||||
| Total wholesale funds | $ | 5,843 | 4.40 | % | $ | 65,847 | 90.53 | % | ||||||||||||
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:
| 9/30/22 | 6/30/22 | 3/31/22 | 12/31/21 | 9/30/21 | ||||||||||||||||
| Common stock | $ | 73,460 | $ | 73,324 | $ | 74,132 | $ | 75,366 | $ | 77,418 | ||||||||||
| Retained earnings | 59,080 | 55,469 | 52,393 | 49,714 | 46,735 | |||||||||||||||
| Accumulated other comprehensive (loss) income | (10,910 | ) | (10,227 | ) | (5,179 | ) | (625 | ) | 656 | |||||||||||
| Total shareholders' equity | $ | 121,630 | $ | 118,566 | $ | 121,346 | $ | 124,455 | $ | 124,809 | ||||||||||
| 9/30/2022 vs 6/30/2022 | 9/30/2022 vs 9/30/2021 | |||||||||||||||||||
| Variance | Variance | |||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||
| Common stock | $ | 136 | 0.19 | % | $ | (3,958 | ) | (5.11 | )% | |||||||||||
| Retained earnings | 3,611 | 6.51 | % | 12,345 | 26.41 | % | ||||||||||||||
| Accumulated other comprehensive (loss) income | (683 | ) | 6.68 | % | (11,566 | ) | (1763.11 | )% | ||||||||||||
| Total shareholders' equity | $ | 3,064 | 2.58 | % | $ | (3,179 | ) | (2.55 | )% | |||||||||||
The Corporation's Board of Directors has authorized the repurchase up to $10,000 of common stock. As of September 30, 2022, the Corporation has $1,393 of common stock available to repurchase through the program. The following tables outline the number of shares, dollar amount and weighted average share price associated with the common stock repurchase plan for the following periods:
| Three Months Ended | ||||||||||||||||||||
| 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | ||||||||||||||||
| Number of Shares Repurchased | — | 35,000 | 51,461 | 78,285 | 73,714 | |||||||||||||||
| Dollar Amount of Shares Repurchased | $ | — | $ | 935 | $ | 1,501 | $ | 2,193 | $ | 1,929 | ||||||||||
| Weighted Average Share Price | $ | — | $ | 26.71 | $ | 29.17 | $ | 28.01 | $ | 26.17 | ||||||||||
| Nine Months Ended September 30 | ||||||||
| 2022 | 2021 | |||||||
| Number of Shares Repurchased | 86,461 | 151,412 | ||||||
| Dollar Amount of Shares Repurchased | $ | 2,436 | $ | 3,868 | ||||
| Weighted Average Share Price | $ | 28.17 | $ | 25.55 | ||||
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 $100 at September 30, 2017 and all dividends were reinvested.
The graph accompanying this announcement is available at: https://www.globenewswire.com/NewsRoom/AttachmentNg/c704df4c-096d-4f61-9748-900c9a8c8e27
| Date | FETM | ABAQ Index | ||||||
| 9/30/2017 | $ | 100.00 | $ | 100.00 | ||||
| 9/30/2018 | 115.88 | 101.93 | ||||||
| 9/30/2019 | 116.53 | 91.99 | ||||||
| 9/30/2020 | 96.10 | 61.40 | ||||||
| 9/30/2021 | 145.58 | 107.76 | ||||||
| 9/30/2022 | 132.57 | 97.75 | ||||||
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 | |
