Partners Bancorp(PTRS) - 2023 Q1 - Quarterly Report

Financial Performance - Net income attributable to the Company for Q1 2023 was $3.3 million, or $0.19 per share, a 57.9% increase from $2.1 million, or $0.12 per share, in Q1 2022 [257]. - The annualized return on average assets for Q1 2023 was 0.87%, up from 0.51% in Q1 2022 [260]. - The annualized return on average equity for Q1 2023 was 9.65%, compared to 6.17% in Q1 2022 [260]. - The efficiency ratio improved to 70.65% in Q1 2023 from 78.41% in Q1 2022 [260]. - Net interest income increased by $3.3 million, or 27.4%, for the first quarter of 2023, with a net interest margin of 4.14%, up 110 basis points from the same period in 2022 [279]. - Total interest income for the three months ended March 31, 2023, was $18,043 thousand, an increase of $4,339 thousand or 31.6% compared to $13,704 thousand for the same period in 2022 [292]. - Net interest income for the first quarter of 2023 was $15,220 thousand, up from $11,955 thousand in the first quarter of 2022, reflecting an increase of $3,265 thousand or 27.3% [295]. Deposits and Loans - The Company's total deposits decreased by 2.0% as of March 31, 2023, compared to December 31, 2022, indicating minimal deposit outflow in the first quarter [240]. - Total deposits decreased by $27.1 million, or 2.0%, to $1.31 billion as of March 31, 2023, due to competitive pressures and negative industry developments, partially offset by organic growth in interest-bearing deposits [270]. - Total loans increased to $1,247,192 thousand in Q1 2023, up from $1,134,506 thousand in Q1 2022, marking a growth of 9.9% [292]. - Average total deposits decreased from $1.46 billion to $1.32 billion, a decrease of $146.8 million, or 10.0%, for the three months ended March 31, 2023 compared to the same period in 2022 [351]. - The loan-to-deposit ratio increased to 95.3% at March 31, 2023, compared to 92.0% at December 31, 2022 [354]. Credit Quality - The Company maintains an allowance for credit losses to absorb expected losses on existing loans, with provisions charged against operating earnings as needed [235]. - The allowance for credit losses as of March 31, 2023, was $16.1 million, representing 1.29% of total outstanding loans, compared to $14.3 million or 1.16% at December 31, 2022 [303]. - The provision for credit losses in Q1 2023 was $300 thousand, a significant increase of $235 thousand or 362.2% from $65 thousand in Q1 2022 [303]. - Nonperforming assets totaled $2.2 million as of March 31, 2023, a decrease of $33 thousand from December 31, 2022 [268]. - Nonaccrual loans were approximately $2.1 million at March 31, 2023, down from $2.2 million at December 31, 2022 [268]. Market and Economic Conditions - The Company is facing uncertainties related to inflation, rising interest rates, and potential recessionary conditions in the U.S. economy during 2023 or 2024 [240]. - The economic environment, including higher interest rates and inflation, is expected to continue negatively impacting the company's financial position throughout fiscal year 2023 [311]. - The Company anticipates continued increases in overall costs of funds throughout 2023, likely leading to compression of the net interest margin [289]. Mergers and Acquisitions - The Company announced a merger agreement with LINK, where the Company's shareholders will own approximately 56% and LINK shareholders will own approximately 44% of the combined company upon completion [241]. - The Company has terminated the merger agreement with OCFC, with both parties mutually agreeing to bear their own costs and expenses [242]. - The Company incurred $1.0 million in merger-related expenses in Q1 2023, compared to $396 thousand in Q1 2022 [263]. Liquidity and Capital - The Company is well-capitalized and its liquidity position remains strong despite recent volatility in the banking industry [239]. - The Company is closely monitoring liquidity impacts from developments in the banking industry and potential declines in the fair value of its investment securities portfolio [371]. - The Company aims to manage the relationships between interest-sensitive assets and liabilities to protect against interest rate fluctuations [372].