FOR IMMEDIATE RELEASE - August 15, 2023
Contact:
Jenna Kesecker, CPA
Executive Vice President and Chief Financial Officer
304-876-9016
Jefferson Security Reports Financial Results for the Six Months and Second Quarter of 2023
Shepherdstown, West Virginia – Jefferson Security Bank (OTC Pink: JFWV) reported unaudited net income for the six months ended June 30, 2023 of $1.7 million, representing an increase of $67 thousand or 4.1%, compared to $1.6 million for the same period in 2022. Basic and diluted earnings per share were $6.13 and $5.89 for the first six months of 2023 and 2022, respectively. Annualized return on average assets and average equity for June 30, 2023 were 0.72% and 14.39%, respectively, compared to 0.75% and 12.30%, respectively, for June 30, 2022. Net income for the quarter ended June 30, 2023 was $805 thousand, representing a decrease of $28 thousand, or 3.3%, when compared to net income of $833 thousand for the quarter ended June 30, 2022 and a decrease of $80 thousand, or 9.0%, when compared to net income of $885 thousand for the first quarter of 2023. Basic and diluted earnings per share were $2.92 for the second quarter of 2023, compared to $3.02 for the second quarter of 2022 and $3.21 for the first quarter of 2023.
“Over this year, our financial performance has continued to benefit from of our ability to organically grow loans in a prudent manner, while maintaining excellent credit quality,” said President and Chief Executive Officer, Cindy Kitner. “As seen across the banking industry, we are experiencing the impacts of more deposit competition with the increase in interest rates. This has resulted in higher levels of funding costs causing compression on our net interest margin. We understand that we are operating in a competitive environment and will remain focused on ensuring the strength of our balance sheet, capital and liquidity. We have a proven team that is committed to community banking which will help us continue to maintain core deposit relationships. As we move through the remainder of 2023, we will stay diligent with expense management and prioritize strategic initiatives focused on operational efficiencies.”
Net Interest Income
For the six months ended June 30, 2023, net interest income totaled $6.2 million, representing an increase of $235 thousand, or 4.0%, when compared to $5.9 million for the same period in 2022. This resulted from an increase in interest income of $2.1 million which was partially offset by an increase in interest expense of $1.9 million.
For the second quarter of 2023, net interest income totaled $3.0 million, representing an increase of $29 thousand from the second quarter of 2022. Interest and fees on loans totaled $3.8 million for the second quarter of 2023, representing an increase of $1.0 million, or 37.0%, when compared to $2.7 million for the second quarter of 2022. This increase was primarily attributed to higher loan yields from both loans repricing and new production, resulting in an increase in the average balance of the portfolio. Interest income from securities totaled $758 thousand for the second quarter of 2023, representing an increase of $61 thousand over the same quarter in 2022. Improved earnings on the loan and investment portfolios were in part offset by an increase of $1.1 million in total interest expense, with $1.6 million in total interest expense for the second quarter 2023 compared to $461 thousand for the same period in 2022. When comparing the second quarter of 2023 to the same period in 2022, interest expense on deposits increased $641 thousand and interest expense on borrowings increased $461 thousand.
Net interest income for the second quarter 2023 declined $84 thousand, or 2.7%, compared to the first quarter of 2023. This decline was primarily driven by net interest margin pressure resulting from higher funding costs, including a slight shift from noninterest bearing deposits to interest bearing deposits.
The net interest margin was 2.79% for the second quarter of 2023, compared with 2.89% for the second quarter of 2022 and 2.88% for the first quarter of 2023.
Balance Sheet
As of June 30, 2023, total assets increased $14.0 million, or 3.0%, to $475.2 million compared to total assets of $461.2 million as of December 31, 2022. The Bank generated organic loan growth with loans, net of the allowance for credit losses, increasing $18.9 million, or 6.2%, to $323.1 million as of June 30, 2023, compared to loans, net of the allowance for loans losses, of $304.2 million as of December 31, 2022. The growth in loans is primarily reflected in an increase in the residential mortgage portfolio. The investment portfolio decreased $6.5 million, or 5.1%, to $122.0 million as of June 30, 2023, compared to $128.5 million as of December 31, 2022.
Total liabilities increased $12.7 million, or 2.9%, due primarily to an increase of $12.2 million in total borrowings, which increased to $33.6 million as of June 30, 2023 from $21.4 million as of December 31, 2022. Total deposits were unchanged at $414.8 million at June 30, 2023 and December 31, 2022. Noninterest bearing deposits represented 30.7% of total deposits at June 30, 2023 a decline from 31.5% at December 31, 2022. The Bank has experienced some deposit migration from noninterest bearing deposits or lower interest bearing deposits to higher interest bearing deposits.
The Bank maintains sufficient balance sheet liquidity with a net loan to deposit ratio of 77.9% at June 30, 2023. Liquidity through both on and off balance sheet sources, include cash and cash equivalents; unpledged available for sale securities at fair value; FHLB and Federal Reserve borrowing capacities; and unsecured correspondent bank lines of credit. In total, on and off balance sheet liquidity sources totaled approximately $216.7 million as of June 30, 2023.
At June 30, 2023, shareholders’ equity totaled $23.8 million, representing an increase of $1.3 million, or 5.6%, from $22.5 million at December 31, 2022. As of June 30, 2023, book value per share improved to $86.23 per share from $81.64 per share at December 31, 2022. At June 30, 2023, the Bank’s regulatory capital ratios exceeded the well capitalized standard based upon regulatory guidelines with a Tier 1 capital ratio of 8.07%, Tier 1 capital to risk weighted assets ratio of 13.40% and total risk-based capital to risk weighted assets ratio of 14.66%.
Asset Quality
The Bank’s asset quality remained strong at June 30, 2023. Nonaccrual loans totaled $54 thousand at June 30, 2023 and December 31, 2022, respectively. Total past due loans still accruing interest totaled $229 thousand and $17 thousand at June 30, 2023 and December 31, 2022, respectively. Loans past due more than 90 days and still accruing interest totaled $131 thousand at June 30, 2023. There were no loans past due more than 90 days and still accruing interest at December 31, 2022.
Net recoveries totaled $1 thousand for the second quarter of 2023, while net charge offs were $1 thousand for the first quarter of 2023 and net charge offs were $4 thousand for the second quarter of 2022. Net charge offs netted to $0 for the first six months of 2023 compared to $5 thousand in net recoveries for the same period in 2022.
Allowance for Credit Losses
At June 30, 2023, the allowance for credit losses on loans totaled $3.7 million, or 1.13%, of total loans, compared to $3.5 million, or 1.12%, of total loans at December 31, 2022. This increase was attributed to growth in the loan portfolio with no changes to the specific reserve component of the allowance for credit losses on loans. Credit quality metrics have remained strong with noncurrent loans to total loans at 0.06% as of June 30, 2023, compared to 0.02% as of December 31, 2022 and 0.13% as of June 30, 2022. The Bank closely monitors the loan portfolio with a focus on credit quality and risk management.
The Bank’s provision for credit losses totaled $29 thousand for the second quarter of 2023, compared to $140 thousand for the second quarter of 2022 and $18 thousand for the first quarter 2023. The second quarter of 2023 provision expense was comprised of a provision for credit losses on loans of $75 thousand and a $46 thousand provision reversal for unfunded commitments. The allowance for credit losses on unfunded commitments declined to $107 thousand at June 30, 2023, compared to $153 thousand at March 31, 2023.
Balance Sheet Comparison to June 30, 2022
As of June 30, 2023, total assets increased $26.3 million, or 5.9%, to $475.2 million compared to total assets of $448.9 million as of June 30, 2022. Loans, net of the allowance for credit losses, increased $50.5 million, or 18.5%, to $323.1 million as of June 30, 2023, compared to loans, net of the allowance for loan losses, of $272.6 million as of June 30, 2022. The investment portfolio decreased $13.1 million, or 9.7% to $122.0 million as of June 30, 2023, compared to $135.1 million as of June 30, 2022.
About Jefferson Security Bank
Jefferson Security Bank is an independent community bank evolving with the needs of the customers and the communities it serves. Serving individuals, businesses and community organizations, Jefferson Security Bank strives to support entrepreneurial efforts within its target markets. Delivering long-term value to its shareholders is at the core of the organization’s culture. Jefferson Security Bank is a West Virginia state-chartered bank that was formed and opened for business on May 19, 1869, making it the oldest bank in Jefferson County, West Virginia. The bank provides general banking services in Berkeley County and Jefferson County, West Virginia, and Washington County, Maryland. Visit www.JSB.bank for more information
This press release may contain forward-looking statements, as defined by federal securities laws, which may involve significant risks and uncertainties. The statements are based on estimates and assumptions made by management in conjunction with other factors deemed appropriate under the circumstances. Actual results could differ materially from current projections.
Offices:
105 East Washington Street, Shepherdstown, WV (304-876-9000)
7994 Martinsburg Pike, Shepherdstown, WV (304-876-2800)
873 East Washington Street, Suite 100, Charles Town, WV (304-725-9752)
277 Mineral Drive, Suite 1, Inwood, WV (304-229-6000)
1861 Edwin Miller Boulevard, Martinsburg, WV (304-264-0900)
103 West Main Street, Sharpsburg, MD (301-432-3900)