Partners Bancorp(PTRS) - 2022 Q1 - Quarterly Report

Financial Performance - The Company reported a significant increase in net interest income, driven by a rise in interest rates, resulting in a net interest margin of 3.5% for the quarter ended March 31, 2022, compared to 3.2% for the same period in 2021[212]. - Net income attributable to the Company for Q1 2022 was $2.1 million, a 93.5% increase from $1.1 million in Q1 2021, resulting in earnings per share of $0.12[225]. - Net interest income for Q1 2022 was $11.9 million, up from $10.9 million in Q1 2021, while the provision for credit losses decreased significantly to $65 thousand from $1.74 million[241]. - The annualized return on average assets and return on average equity for Q1 2022 were 0.51% and 6.17%, respectively, compared to 0.29% and 3.28% in Q1 2021[229]. - Noninterest income decreased by $959 thousand, or 42.5%, compared to the same period in 2021, primarily due to a significant drop in mortgage banking income[293]. - Noninterest expense increased by $548 thousand, or 5.6%, compared to the same period in 2021, driven by higher operational costs[297]. Asset and Deposit Growth - The Company’s total assets increased to $1.2 billion as of March 31, 2022, up from $1.1 billion at the end of 2021, indicating a growth in the asset base[212]. - The Company reported a 10% increase in total deposits, reaching $900 million as of March 31, 2022, compared to $818 million in the previous year[212]. - Total assets as of March 31, 2022, were $1.69 billion, reflecting a 2.7% increase from $1.645 billion at the end of 2021[231]. - Total deposits increased by $48.6 million, or 3.4%, to $1.49 billion as of March 31, 2022, driven by organic growth and customer demand for liquidity[232]. - Average total deposits increased from $1.30 billion to $1.46 billion, a rise of $166.6 million, or 12.8%, for the three months ended March 31, 2022[325]. Loan Portfolio and Credit Quality - The Company’s loan portfolio showed a growth of 8%, totaling $750 million as of March 31, 2022, driven by increased demand for commercial loans[212]. - Loans, net of unamortized discounts, rose to $1.15 billion, a 3.2% increase from $1.11 billion at the end of 2021, with organic growth contributing approximately $17.8 million[232]. - Nonperforming assets decreased to $6.1 million, down from $9.8 million at the end of 2021, with nonaccrual loans also declining to $6.1 million[236]. - The provision for credit losses in Q1 2022 was $65 thousand, a decrease of $1.7 million, or 96.3%, from $1.7 million in Q1 2021, primarily due to reduced qualitative adjustments related to the COVID-19 pandemic[266]. - The allowance for credit losses to total loans ratio was 1.26% as of March 31, 2022, compared to 1.31% at the end of 2021[237]. Merger and Expansion - The proposed merger with OceanFirst Financial Corp. is anticipated to yield cost savings and revenue synergies, although there are risks associated with the integration process and regulatory approvals[215]. - The Company is actively pursuing organic growth opportunities, including expansion into the Greater Washington market, which is expected to enhance its market presence and customer base[214]. - The company experienced a $17.8 million increase in loans related to the expansion into the Greater Washington market, offset by $2.3 million in forgiveness payments under the PPP[311]. Economic and Regulatory Environment - The ongoing COVID-19 pandemic has impacted operations, with management implementing response plans that have allowed for a return to normal branch operations as of March 31, 2022[217]. - The Company’s management remains cautious about future economic conditions, particularly regarding inflation and interest rate volatility, which could impact financial performance[209]. - The Federal Open Markets Committee raised Federal Funds target rates by 25 basis points in March 2022, marking the first increase since December 2018[253]. - The Company anticipates that the current and projected interest rate environment will lead to an expanded net interest margin[253]. Capital and Liquidity - Virginia Partners' Tier 1 risk-weighted capital ratio was 10.7% as of March 31, 2022, down from 11.3% at the end of 2021, while still exceeding regulatory requirements[234]. - The Company’s liquidity position included cash and cash equivalents totaling $345.9 million at March 31, 2022, compared to $338.8 million at December 31, 2021[344]. - The Tier 1 Leverage Ratio for The Bank of Delmarva was 8.2% as of March 31, 2022, compared to 4.0% previously[341]. - The Company continues to assess the impact of the COVID-19 pandemic on its loan portfolio, with delinquencies and nonperforming assets not materially impacted as of March 31, 2022[267].