LINKBANCORP(LNKB) - 2022 Q3 - Quarterly Report

PART I Item 1 - Financial Statements (Unaudited) Unaudited financial statements show significant asset, loan, and deposit growth, driven by organic expansion and the 2021 merger, with net income improving from prior-year losses Consolidated Balance Sheets Total assets grew to $1.14 billion, driven by increased loans and cash, funded by deposits, while equity rose from an IPO despite comprehensive losses Consolidated Balance Sheet Highlights (in Thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $1,144,873 | $932,763 | | Cash and cash equivalents | $74,796 | $22,590 | | Net loans | $859,400 | $711,664 | | Securities available for sale | $78,698 | $103,783 | | Goodwill and other intangible assets | $36,955 | $37,152 | | Total Liabilities | $1,007,931 | $823,140 | | Total deposits | $951,710 | $771,665 | | Subordinated debt | $40,526 | $20,696 | | Total Shareholders' Equity | $136,942 | $109,623 | Consolidated Statements of Operations The company achieved net income in Q3 and YTD 2022, a significant improvement from prior-year losses, driven by substantial growth in net interest income post-merger Key Operating Results (in Thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $8,670 | $3,348 | $24,000 | $9,027 | | Provision for loan losses | $515 | $457 | $1,190 | $548 | | Total noninterest income | $1,041 | $371 | $2,449 | $1,558 | | Total noninterest expense | $7,045 | $6,601 | $19,387 | $10,703 | | Net Income (Loss) | $1,772 | $(2,797) | $4,902 | $(499) | | Diluted EPS | $0.17 | $(0.45) | $0.48 | $(0.08) | - The significant net loss in Q3 2021 was primarily due to $3.9 million in merger-related expenses, which were absent in Q3 2022[14] Consolidated Statements of Comprehensive (Loss) Income Total comprehensive loss for Q3 and YTD 2022 was primarily due to significant unrealized losses on available-for-sale securities from rising interest rates Comprehensive (Loss) Income (in Thousands) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $1,772 | $(2,797) | $4,902 | $(499) | | Other Comprehensive (Loss) Income, net of tax | $(3,541) | $(473) | $(10,208) | $(885) | | Total Comprehensive (Loss) Income | $(1,769) | $(3,270) | $(5,306) | $(1,384) | Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $136.9 million, primarily from IPO proceeds and net income, partially offset by dividends and comprehensive loss - In Q3 2022, the company issued 5,101,205 shares of common stock, raising net proceeds of $34.7 million through its Initial Public Offering (IPO)[18][21] - Dividends declared for the nine months ended September 30, 2022, totaled $2.2 million, or $0.225 per share[21] Consolidated Statements of Cash Flows Cash and cash equivalents increased by $52.2 million, driven by financing activities like deposits and IPO proceeds, largely funding investing activities including loan growth Cash Flow Summary for Nine Months Ended Sep 30 (in Thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,751 | $5,417 | | Net cash (used in) provided by investing activities | $(165,342) | $30,499 | | Net cash provided by financing activities | $212,797 | $34,466 | | Increase in cash and cash equivalents | $52,206 | $70,382 | | Cash and cash equivalents at beginning of period | $22,590 | $33,162 | | Cash and cash equivalents at end of period | $74,796 | $103,544 | Notes to Consolidated Financial Statements (Unaudited) Notes detail accounting policies, including the GNBF reverse acquisition and September 2022 IPO, along with breakdowns of key financial statement components - The merger with GNB Financial Services, Inc. (GNBF) on September 18, 2021, was accounted for as a reverse acquisition, with GNBF as the accounting acquirer. Historical financial statements prior to this date are those of GNBF[32][53] - In September 2022, the company completed its IPO, issuing 5,101,205 shares of common stock at $7.50 per share and receiving net proceeds of $34.7 million[31] - The company plans to adopt ASU 2016-13 (CECL) for fiscal years beginning after December 15, 2022, and expects to recognize a one-time cumulative-effect adjustment to the allowance for loan losses[48] Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the positive impact of the GNBF merger, driving substantial growth in net interest income, profitability, and assets, supported by organic growth and capital raises Financial Highlights Financial highlights for the first nine months of 2022 include significant net income, expanded net interest margin, robust organic growth, and successful capital raises - Net income for the nine months ended Sep 30, 2022 was $4.9 million, a $5.4 million increase from a net loss of $499 thousand in the same period of 2021[166] - Net interest margin for the first nine months of 2022 was 3.40%, a 67 basis point increase from the same period in 2021[166] - The company completed a $20.0 million subordinated debt issuance in April 2022 and an IPO raising $34.7 million in net proceeds in September 2022[169] Comparison of Financial Condition at September 30, 2022 and December 31, 2021 Total assets increased by 23% to $1.14 billion, driven by loan growth funded by deposits, while equity rose from IPO proceeds despite comprehensive losses Loan Portfolio Change (in thousands) | Loan Type | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Commercial real estate | $482,367 | $338,749 | $143,618 | | Residential real estate | $251,832 | $231,302 | $20,530 | | Paycheck Protection Program | $933 | $23,774 | $(22,841) | | Total Loans | $863,984 | $715,039 | $148,945 | Deposit Composition Change (in thousands) | Deposit Type | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Demand, noninterest-bearing | $184,857 | $129,243 | $55,614 | | Money market and savings | $266,743 | $205,843 | $60,900 | | Demand, interest-bearing | $305,934 | $256,258 | $49,676 | | Total deposits | $951,710 | $771,665 | $180,045 | - Asset quality remained strong, with non-performing loans at 0.23% of total gross loans at September 30, 2022, compared to 0.20% at year-end 2021[174] Comparison of Operating Results for the Three Months Ended September 30, 2022 and 2021 Q3 2022 saw net income of $1.8 million, a significant improvement from prior-year loss, driven by increased net interest income and margin expansion - Net interest income increased by $5.3 million (159%) in Q3 2022 compared to Q3 2021, primarily due to a $5.2 million increase from higher volumes of interest-earning assets, mainly loans[186] - The net interest margin increased to 3.51% in Q3 2022 from 2.72% in Q3 2021[183][186] - Non-interest expense increased by $444 thousand, as a $3.1 million rise in salaries and benefits was largely offset by the absence of $3.9 million in merger-related expenses from the prior-year period[192] Comparison of Operating Results for the Nine Months Ended September 30, 2022 and 2021 Net income for the nine months ended September 30, 2022, significantly improved to $4.9 million, driven by substantial net interest income growth and margin expansion - Net interest income for the nine-month period increased by $15.0 million, with $12.7 million of the increase attributed to higher volumes of interest-earning assets[203] - The net interest margin for the nine months ended Sep 30, 2022 was 3.40%, up from 2.73% in the prior year period[200][203] - The provision for loan losses increased to $1.2 million from $548 thousand in the prior year period, primarily attributed to growth in the commercial real estate loan portfolio[206][207] Liquidity, Commitments, and Capital Resources The company maintains strong liquidity through deposits and significant borrowing capacity, with the Bank remaining well-capitalized under regulatory standards - The company has available borrowing capacity of approximately $290.4 million with the FHLB and $51 million in lines of credit with correspondent banks as of September 30, 2022[216] - The Bank met all capital requirements to be considered "well capitalized" as of September 30, 2022[217] Item 3 - Quantitative and Qualitative Disclosures About Market Risk Disclosure regarding market risk is not provided as it is not required for smaller reporting companies - Disclosure about market risk is not required for smaller reporting companies[221] Item 4 - Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[222] - No material changes to internal control over financial reporting occurred during the quarter ended September 30, 2022[223] PART II Item 1 - Legal Proceedings The company is not involved in any material pending legal proceedings beyond routine ordinary course of business matters - The company is not involved in any material pending legal proceedings outside of the ordinary course of business[224] Item 1A - Risk Factors No material changes to risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2021[225] Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds The company completed its IPO in September 2022, generating $34.7 million in net proceeds from the sale of 5.1 million shares at $7.50 each Initial Public Offering (IPO) Summary | Metric | Value | | :--- | :--- | | Shares Sold | 5,101,205 | | Price Per Share | $7.50 | | Gross Proceeds | $38.3 million | | Offering Expenses | $3.6 million | | Net Proceeds | $34.7 million | - From the net proceeds, approximately $20.0 million was contributed to the Bank, and $14.7 million was retained by LINKBANCORP, Inc.[228] Item 3 - Defaults Upon Senior Securities There were no defaults upon senior securities - There were no defaults upon senior securities[229] Item 4 - Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable to the company[229] Item 5 - Other Information No other information was reported under this item - No other information was reported under this item[229] Item 6 - Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, officer certifications, and XBRL data files - Exhibits filed include officer certifications (31.1, 31.2), Section 1350 certification (32), and Inline XBRL documents (101 series)[230]