Jefferson Security Bank Reports Fifth Consecutive Year of Record Earnings - Seite 3

The decline in shareholders’ equity related to unrealized losses and gains on the investment portfolio does not impact the Bank’s regulatory capital ratios. At December 31, 2022, the Bank’s regulatory capital ratios exceeded the well capitalized standard based upon regulatory guidelines. The Bank’s Tier 1 capital ratio declined to 8.09% at December 31, 2022 from 8.24% at December 31, 2021. The ratio of Common Equity Tier 1 capital and Tier 1 capital to risk weighted assets was 13.61% and 16.01% at December 31, 2022 and 2021, respectively, and the total risk-based capital ratio was 14.84% and 17.26% at December 31, 2022 and 2021, respectively. The decline in the Bank’s regulatory capital ratios reflect the impact from the significant increase in total assets and historic growth of the loan portfolio. Management maintains regular monitoring of capital planning strategies to support and maintain adequate capital levels.

Available for Sale Securities Transferred to Held to Maturity

During the third quarter of 2022, the Bank transferred 93 municipal securities designated as available for sale with a combined book value of $56.0 million and a market value of $46.5 million to securities designated as held to maturity. The unrealized losses at the time of transfer totaled $9.5 million and are being amortized monthly over the life of the securities with an increase to the carrying value of securities and a decrease to the related accumulated other comprehensive loss impacting total shareholders’ equity. For the third and fourth quarter of 2022, the amortization of the unrealized losses from the transferred securities totaled $110 thousand, or $83 thousand net of tax and $120 thousand, or $90 thousand net of tax, respectively. The net effect of the amortization has no impact on the Bank’s reported net income. The transfer of securities mitigates the further decline in carrying value of these securities and the related impact on accumulated other comprehensive loss in shareholders’ equity resulting from higher market interest rates.

Fourth Quarter Highlights Compared to Third Quarter of 2022

Net income for the fourth quarter of 2022 totaled $1.3 million, an increase of $442 thousand, or 49.22%, from net income of $898 thousand for the third quarter of 2022. During the fourth quarter, net interest income increased by $553 thousand, or 17.06%, from the third quarter of 2022. The increase in net interest income was in part driven by continued growth in loans and rising yields on earning assets along with an interest recovery from one customer relationship. These changes were in part offset by an increase in interest expense as market interest rates and deposit competition has risen. Provision for loan losses totaled $225 thousand, representing an increase of $35 thousand during the fourth quarter, when compared to provision for loan losses of $190 thousand for the third quarter of 2022. This increase is attributed to loan growth as credit quality metrics improved through the fourth quarter of 2022.