Q2 2023 Financial Highlights
August 8, 2023
For the six months ended June 30, 2023, net income was $2.3 million, a decrease of $438,000, or 16%, in comparison to the same period in 2022. Loan growth continues to be strong, with ending loan balances increasing $110 million, or 32%, compared to a year ago. However, the cost of funds was elevated as demand deposit accounts experienced attrition starting in 2022 as client banks saw excess liquidity leave their institutions. The Bank continued to manage the cost of funds in the rising rate environment by successfully launching a money market deposit account late in December 2022 versus more expensive alternative funding such as certificates of deposits or borrowings.
“We are pleased with our financial performance halfway through the year, especially in light of the market disruption, higher interest rates and a slowing economy. Our loan pipeline remains strong and deposits continue to grow, showing the confidence our clients have in the health and strength of ACBB. The focus of the organization is on preparing for the regulatory requirements of FDICIA as our expansion and growth takes us over $1 billion in assets,” said Craig Howie, President and CEO of Atlantic Community Bankers Bank.
Net Interest Income and Balance Sheet
Net interest income for the first six months of 2023 was $9.8 million, an increase of $2.4 million, or 33%, from the same period a year ago. The increase was primarily due to higher rates and volume of loans, driving interest income from $9.2 million for the first six months of 2022 to $19.7 million in the same period in the current year. Subsequently, interest expense also increased primarily driven by a shift in funding mix from noninterest bearing deposits to interest bearing money market deposit accounts, going from $1.8 million for the first six months of 2022 to $9.9 million in the same period in the current year.
In the first six months of the year, a provision for credit losses of $382,000 was recorded in comparison to a release of $850,000 in the prior year. The Bank implemented FASB ASU 2016-13, Current Expected Credit Losses, in the first quarter of 2023, which resulted in a further release of reserves on day 1 of adoption. The provision recorded in 2023 is driven by significant growth within the loan portfolio, as asset quality remains pristine in the portfolio with no delinquencies or net charge-offs as of June 30, 2023. There is one nonaccrual loan, which is paying consistently, with a balance of $41,000 as of June 30, 2023.
For the first six months of the year, noninterest income was $5.1 million, a decrease of $1.4 million, or 21%, from the prior year, driven by lower analysis service fee income due to paying a higher earnings credit. The prior year included the sale of the Bank’s headquarters building for $715,000. Excluding this, the decrease in noninterest income compared to the prior year was $646,000 or 11%.
For the first six months of the year, noninterest expense was $11.4 million, an increase of $335,000, or 3%, from the prior year, driven by higher salaries and benefits partially offset by lower passthrough and Pennsylvania bank shares tax expenses.
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