Q3 2023 Financial Highlights

November 2, 2023

For the nine months ended September 30, 2023, net income was $4.1 million, an increase of $107 thousand, or 3%, in comparison to the same period in 2022. Loan growth continues to be strong with ending loan balances increasing $119 million, or 32%, compared to a year ago, driving interest income to record levels. Cost of funds continues to rise as the Bank relies on money market deposit accounts and certificate of deposits as demand deposits see attrition with liquidity leaving our client banks.

“Our financial performance remains strong in a challenging economic environment. Sustained loan growth, higher interest rates and effective management of our funding costs have fueled strong net interest income growth. In addition, we have been very intentional with our expense management in the face of the market uncertainty ahead. We continue to enhance the value proposition for our clients and shareholders with new products and service offerings like faster payments through FedNow® and our Accounts Payable automation partnership with AvidXchange™,” said Craig Howie, President and CEO of Atlantic Community Bankers Bank.

Net Interest Income and Balance Sheet

Net interest income, before provision, for the nine months of 2023 was $15.2 million, an increase of $3.7 million, or 32%, from the same period a year ago. The increase is driven by higher rates and volume of loans, nearly doubling interest income from $15.2 million for nine months of 2022 to $30.5 million in the same period of the current year. Subsequently, interest expense also increased primarily driven by a shift in funding mix from non-interest bearing deposits to interest bearing money market deposit accounts, going from $3.7 million for nine months of 2022 to $15.3 million in the same period in the current year. The money market deposit accounts have been a successful product for the Bank in managing its cost of funds while serving the clients’ needs in offering a product for those with excess liquidity to earn a competitive rate on balances.

Asset Quality

In the first nine months of the year, a provision for credit losses of $682 thousand was recorded in comparison to a release of $850 thousand in the prior year. The provision recorded in 2023 is driven by significant growth within the loan portfolio as asset quality continues to be strong with no delinquencies or net charge-offs as of September 30, 2023. There is one nonaccrual loan, which is paying consistent, with a balance of $32 thousand as of September 30, 2023.

Noninterest Income

For the first nine months of the year, non-interest income was $7.6 million, a decrease of $1.6 million, or 18%, from the prior year driven by lower analysis service fee income due to paying a higher earnings credit attributed to raising interest rates. Both years include onetime gains (2023 includes $277k of escrow release from the 2021 sale of the Bank’s Subsidiary and 2022 includes the sale of the Bank’s headquarters building for $715 thousand), which excluded, show non-interest income trailing the prior year by $1.2 million or 14%. The higher earnings credit offsetting analysis service fee income to maintain and attract clients will be a continued headwind into next year as rates are expected to remain elevated.

Noninterest Expense

For the first nine months of the year, non-interest expense was $16.7 million, an increase of $297 thousand, or 2%, from the prior year, driven by higher salaries and benefits partially offset by lower passthrough and Pennsylvania Bank shares tax expenses. Overall, the Bank has activated prudent spending measures with continued margin compression and slowing of non-interest income.

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