Auburn National Bancorporation, Inc. (Nasdaq: AUBN) reported net
earnings of $2.0 million, or $0.56 per share, for the first quarter
of 2023, compared to $2.1 million, or $0.59 per share, for the
first quarter of 2022.
“The Company’s first quarter 2023 results reflect
loan growth, solid credit quality, and a strong liquidity position.
If not for a negative provision in the year earlier quarter,
earnings overall would have increased,” said David A. Hedges,
President and CEO. “We saw strong revenue growth from the first
quarter of 2022 as our net interest income and margin expanded and
continued to benefit from our low-cost core deposit base,” said Mr.
Hedges.
Total revenue increased approximately 13% in the first quarter
of 2023, compared to the first quarter of 2022, primarily due to
net interest income growth.
Net interest income (tax-equivalent) was $7.2 million for the
first quarter of 2023, a 17% increase compared to $6.2 million for
the first quarter of 2022. This increase was primarily due to
improvements in the Company’s net interest margin. The Company’s
net interest margin (tax-equivalent) was 3.17% in the first quarter
of 2023 compared to 2.43% in the first quarter of 2022. This
increase was primarily due to a more favorable asset mix and higher
yields on interest earning assets. These higher yields on interest
earning assets were partially offset by increased cost of funds.
The cost of funds increased to 71 basis points, compared to 34
basis points in the first quarter of 2022. Average loans for the
first quarter of 2023 were $502.2 million, a 14% increase from the
first quarter of 2022.
Nonperforming assets were $2.7 million, or 0.26% of total
assets, at March 31, 2023, compared to $2.7 million, or 0.27% of
total assets, at December 31, 2022 and $0.8 million or $0.07% of
total assets, at March 31, 2022. The increase in nonperforming
assets since March 31, 2022 was primarily due to the downgrade of
one borrowing relationship during the fourth quarter of 2022 with a
recorded investment of $2.6 million and a corresponding valuation
allowance of $0.5 million. One of the downgraded loans, with a
recorded investment of $1.3 million and a corresponding at March
31, 2023, was paid in full subsequent to March 31, 2023.
At March 31, 2023, the Company’s allowance for credit losses was
$6.8 million, or 1.35% of total loans, compared to $5.8 million, or
1.14% of total loans, at December 31, 2022, and $4.7 million, or
1.09% of total loans, at March 31, 2022. The implementation of
CECL, increased our allowance for credit losses by $1.0 million on
January 1, 2023, or 0.20% of total loans, as a day one transition
adjustment to the new accounting standard.
The Company recorded a provision for credit losses during the
first quarter of 2023 of $0.1 million, compared to a negative
provision for credit losses of $0.3 million during the first
quarter of 2022. The provision for credit losses under CECL
reflects the Company’s credit risk profile, our application of the
new CECL accounting standard and the future economic outlook and
forecasts. Our CECL model is largely influenced by economic factors
including, most notably, the anticipated unemployment rate, which
may be adversely affected by tightening Federal monetary policy.
The negative provision for credit losses during the first quarter
of 2022 was primarily related to a decrease in total loans,
excluding the federally guaranteed PPP loans, during the first
quarter of 2022.
Noninterest income was $0.8 million in the first quarter of
2023, compared to $0.9 million in the first quarter of 2022. The
decrease in noninterest income was primarily due to a decrease in
mortgage lending income of $0.2 million as a result of higher
mortgage market interest rates.
Noninterest expense was $5.6 million in the first quarter of
2023, compared to $4.9 million for the first quarter of 2022. The
increase in noninterest expense was primarily due to an increase in
net occupancy and equipment expense of $0.3 million related to the
Company’s new headquarters, which opened in June 2022, professional
fees expense of $0.1 million, and other noninterest expenses of
$0.3 million.
Income tax expense was $0.3 million for the first quarter of
2023 and 2022, respectively. The Company's effective tax rate for
the first quarter of 2023 was 11.97%, compared to 10.88% in the
first quarter of 2022. The Company’s effective income tax rate is
principally affected by tax-exempt earnings from the Company’s
investment in municipal securities and bank-owned life insurance,
and the benefits of New Markets Tax Credits.
Total assets were $1.0 billion at March 31, 2023 and December
31, 2022, compared with $1.1 billion at March 31, 2022. Loans, net
of unearned income were $505.0 million at March 31, 2023, compared
with $428.4 million and $504.5 million at March 31, 2022 and
December 31, 2022, respectively. The higher levels of loans at
March 31, 2023 and December 31, 2022, as compared with March 31,
2022 reflect growth across all major loan categories, except
commercial and industrial loans, which included PPP loans. Total
deposits were $939.2 million at March 31, 2023 and $950.3 million
at December 31, 2022, compared with $1.0 billion at March 31, 2022.
The 1% decline in total deposits since December 31, 2022 reflects
seasonal fluctuations and limited net outflows to higher yielding
investment alternatives. In comparison, total deposits declined 4%
during the year ended December 31, 2022 due to net outflows to
higher yielding investment alternatives in a rising market rate
environment and increased customer spending. The Company had no
brokered deposits, FHLB advances, or other wholesale funding
sources outstanding at March 31, 2023, December 31, 2022, or March
31, 2022.
At March 31, 2023, the Company's consolidated stockholders'
equity was $73.7 million, or $21.03 per share, compared to $68.0
million, or $19.42 per share, at December 31, 2022, and $86.4
million, or $24.57 per share, at March 31, 2022. The increase from
December 31, 2022 was primarily driven by other comprehensive
income due to the change in unrealized gains/losses on securities
available-for-sale, net of tax, in the first quarter of 2023. Total
unrealized losses declined 13% from $54.7 million on December 31,
2022 to $47.4 million on March 31, 2023. These unrealized losses do
not affect the Bank’s capital for regulatory capital purposes. At
March 31, 2023, the Company’s equity to total assets ratio was
7.24%, compared to 6.65% at December 31, 2022, and 7.79% at March
31, 2022. All of the Company’s securities are classified as
available-for-sale and not held-to-maturity, therefore any changes
in the fair value of the Company’s securities portfolio are fully
reflected in total equity under generally accepted accounting
principles.
The Company paid cash dividends of $0.27 per share in the first
quarter of 2023, an increase of 2% from the same period in 2022.
The Company’s share repurchases of $0.1 million since December 31,
2022 resulted in 2,648 fewer outstanding common shares at March 31,
2023. At March 31, 2023, the Bank’s regulatory capital ratios were
well above the minimum amounts required to be “well capitalized”
under current regulatory standards.
About Auburn National Bancorporation, Inc.
Auburn National Bancorporation, Inc. (the “Company”) is the
parent company of AuburnBank (the “Bank”), with total assets of
approximately $1.0 billion. The Bank is an Alabama
state-chartered bank that is a member of the Federal Reserve
System, which has operated continuously since 1907. Both the
Company and the Bank are headquartered in Auburn, Alabama. The Bank
conducts its business in East Alabama, including Lee County and
surrounding areas. The Bank operates eight full-service branches in
Auburn, Opelika, Valley, and Notasulga, Alabama. The Bank also
operates a loan production office in Phenix City, Alabama.
Additional information about the Company and the Bank may be found
by visiting www.auburnbank.com.
Cautionary Notice Regarding Forward-Looking
Statements
This press release contains “forward-looking statements” within
the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934, including, without limitation, statements
about future financial and operating results, costs and revenues,
the continuing effects of the COVID-19 pandemic and
related government, Federal Reserve monetary and regulatory
actions, including the continuing effects of pandemic-related
economic stimulus and economic conditions generally and in our
markets, loan demand, mortgage lending activity, changes in the mix
of our earning assets (including those generating tax exempt income
or tax credits) and our mix and cost of funds and wholesale
liabilities, net interest margin, yields on earning assets,
securities valuations and performance, effects of inflation,
including Federal Reserve tightening beginning in 2022 of monetary
policies, including reductions in the Federal Reserve’s Treasury
and mortgage-backed securities holdings and increases in the
Federal Reserve’s target federal funds rate, interest rates
(generally and those applicable to our assets and liabilities) and
changes in asset values as a result of interest rate changes,
noninterest income, loan performance, loan deferrals and
modifications, nonperforming assets, other real estate owned,
provision for credit losses, including the continuing effects of
the application of the new CECL accounting standard adopted on
January 1, 2023 and our CECL models, including possible adjustments
to the fair values of securities available for sale in lieu of
other-than-temporary impairments, charge-offs, collateral values,
credit quality, asset sales, insurance claims, and market trends,
as well as statements with respect to our objectives, expectations
and intentions and other statements that are not historical facts.
Actual results may differ from those set forth in the
forward-looking statements.
Forward-looking statements, with respect to our beliefs, plans,
objectives, goals, expectations, anticipations, estimates and
intentions, involve known and unknown risks, uncertainties and
other factors, which may be beyond our control, and which may cause
the actual results, performance, achievements, or financial
condition of the Company or the Bank to be materially different
from future results, performance, achievements, or financial
condition expressed or implied by such forward-looking statements.
You should not expect us to update any forward-looking
statements.
All written or oral forward-looking statements attributable to
us are expressly qualified in their entirety by this cautionary
notice, together with those risks and uncertainties described in
our annual report on Form 10-K for the year ended
December 31, 2022 and otherwise in our other SEC reports and
filings.
Explanation of Certain Unaudited Non-GAAP Financial
Measures
This press release contains financial information determined by
methods other than U.S. generally accepted accounting principles
(“GAAP”). The attached financial highlights include certain
designated net interest income amounts presented on
a tax-equivalent basis, a non-GAAP financial
measure, and the presentation and calculation of the efficiency
ratio, a non-GAAP measure. Management uses
these non-GAAP financial measures in its analysis of the
Company’s performance and believes the presentation of net interest
income on a tax-equivalent basis provides comparability
of net interest income from both taxable
and tax-exempt sources and facilitates comparability
within the industry. Similarly, the efficiency ratio is a common
measure that facilitates comparability with other financial
institutions. Although the Company believes
these non-GAAP financial measures enhance investors’
understanding of its business and performance,
these non-GAAP financial measures should not be
considered an alternative to GAAP. Along with the attached
financial highlights, the Company provides reconciliations between
the GAAP financial measures and these non-GAAP financial
measures.
For additional information, contact:David A. HedgesPresident and
CEO(334) 821-9200
Reports First Quarter Net Earnings |
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Financial Highlights (unaudited) |
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Quarter ended March 31, |
(Dollars in thousands, except per share amounts) |
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2023 |
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2022 |
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Results of Operations |
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Net interest income (a) |
|
$ |
7,217 |
|
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$ |
6,190 |
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Less: tax-equivalent adjustment |
|
|
108 |
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|
|
112 |
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Net interest income (GAAP) |
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7,109 |
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6,078 |
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Noninterest income |
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792 |
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|
908 |
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Total revenue |
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7,901 |
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|
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6,986 |
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Provision for credit losses |
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66 |
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(250 |
) |
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Noninterest expense |
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5,604 |
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4,901 |
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Income tax expense |
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267 |
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254 |
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Net earnings |
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$ |
1,964 |
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$ |
2,081 |
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Per share data: |
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Basic and diluted net earnings |
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$ |
0.56 |
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$ |
0.59 |
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Cash dividends declared |
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$ |
0.27 |
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$ |
0.265 |
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Weighted average shares outstanding: |
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Basic and diluted |
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3,502,143 |
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3,518,657 |
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Shares outstanding, at period end |
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3,500,879 |
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3,516,971 |
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Book value |
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$ |
21.03 |
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$ |
24.57 |
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Common stock price: |
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High |
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$ |
24.50 |
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$ |
34.49 |
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Low |
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22.55 |
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31.75 |
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Period-end |
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22.66 |
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33.21 |
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To earnings ratio |
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7.79 |
x |
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14.44 |
x |
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To book value |
|
|
108 |
% |
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135 |
% |
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Performance ratios: |
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Return on average equity (annualized) |
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11.44 |
% |
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7.97 |
% |
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Return on average assets (annualized) |
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0.77 |
% |
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0.75 |
% |
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Dividend payout ratio |
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48.21 |
% |
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44.92 |
% |
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Other financial data: |
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Net interest margin (a) |
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3.17 |
% |
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2.43 |
% |
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Effective income tax rate |
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11.97 |
% |
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10.88 |
% |
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Efficiency ratio (b) |
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69.97 |
% |
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69.05 |
% |
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Asset Quality: |
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Nonperforming assets: |
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Nonperforming (nonaccrual) loans |
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$ |
2,679 |
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$ |
371 |
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Other real estate owned |
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— |
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374 |
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Total nonperforming assets |
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$ |
2,679 |
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$ |
745 |
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Net charge-offs |
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$ |
3 |
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$ |
31 |
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Allowance for credit losses as a % of: |
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Loans |
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1.35 |
% |
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1.09 |
% |
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Nonperforming loans |
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|
255 |
% |
|
|
1,256 |
% |
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Nonperforming assets as a % of: |
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Loans and other real estate owned |
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0.53 |
% |
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0.17 |
% |
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Total assets |
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0.26 |
% |
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0.07 |
% |
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Nonperforming loans as a % of total loans |
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0.53 |
% |
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0.09 |
% |
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Annualized net charge-offs as a % of average loans |
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— |
% |
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0.03 |
% |
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Selected average balances: |
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Securities |
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$ |
402,684 |
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$ |
435,097 |
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Loans, net of unearned income |
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502,158 |
|
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|
439,713 |
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Total assets |
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1,022,938 |
|
|
|
1,114,407 |
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Total deposits |
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948,393 |
|
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1,003,394 |
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Long-term debt |
|
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— |
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|
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— |
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Total stockholders' equity |
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|
68,655 |
|
|
|
104,493 |
|
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Selected period end balances: |
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|
|
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|
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Securities |
|
$ |
405,692 |
|
|
$ |
417,459 |
|
|
Loans, net of unearned income |
|
|
505,041 |
|
|
|
428,417 |
|
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Allowance for credit losses |
|
|
6,821 |
|
|
|
4,658 |
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Total assets |
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|
1,017,746 |
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|
|
1,109,664 |
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Total deposits |
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|
939,190 |
|
|
|
1,017,742 |
|
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Long-term debt |
|
|
— |
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|
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— |
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Total stockholders' equity |
|
|
73,640 |
|
|
|
86,411 |
|
|
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(a) Tax equivalent. See “Explanation of Certain Unaudited Non-GAAP
Financial Measures” and “Reconciliation |
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of GAAP to non-GAAP Measures (unaudited).” |
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(b) Efficiency ratio is the result of noninterest expense divided
by the sum of noninterest income and |
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tax-equivalent net interest income. See "Reconciliation of GAAP to
non-GAAP Measures (unaudited)" below. |
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Reports First Quarter Net Earnings |
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Reconciliation of GAAP to non-GAAP Measures
(unaudited): |
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Quarter ended March 31, |
|
(Dollars in thousands, except per share amounts) |
|
|
2023 |
|
|
2022 |
|
Net interest income, as reported (GAAP) |
|
$ |
7,109 |
|
$ |
6,078 |
|
Tax-equivalent adjustment |
|
|
108 |
|
|
112 |
|
Net interest income (tax-equivalent) |
|
$ |
7,217 |
|
$ |
6,190 |
|
|
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