LINKBANCORP, Inc. Announces Record Third Quarter Net Income of $7.1 Million
HARRISBURG, Pa., Oct. 28, 2024 /PRNewswire/ -- LINKBANCORP, Inc. (NASDAQ:LNKB) (the "Company"), the parent company of LINKBANK (the "Bank") reported record net income of $7.1 million, or $0.19 per diluted share, for the quarter ended September 30, 2024, demonstrating continued growth compared to net income of $5.8 million, or $0.16 per diluted share, for the linked quarter ended June 30, 2024. Excluding expenses associated with the sale of its New Jersey branches and branch consolidations, adjusted earnings were $7.2 million1, or $0.191 per diluted share for the third quarter of 2024, compared with $6.3 million1, or $0.171 per diluted share for the second quarter of 2024.
Third Quarter 2024 Highlights
Annualized return on average assets was 1.00% for the third quarter of 2024, compared to 0.84% for the the second quarter of 2024. Adjusted return on average assets was 1.02%1 for the third quarter of 2024, compared to 0.91%1 for the second quarter of 2024.
Total deposits2 increased $9.3 million from $2.46 billion at June 30, 2024 to $2.47 billion at September 30, 2024, as strong growth in demand deposit accounts of $54.5 million and retail time deposits of $21.4 million exceeded a $69.4 million decrease in brokered deposits. Excluding loans held for sale, total loans increased $22.7 million to $2.22 billion at September 30, 2024, compared to $2.19 billion at June 30, 2024. Total loans2 increased $8.8 million from $2.31 billion at June 30, 2024 to $2.32 billion at September 30, 2024.
Noninterest income increased $822 thousand quarter-over-quarter to $2.7 million for the third quarter of 2024 compared to $1.9 million for the second quarter of 2024.
Noninterest expense decreased $448 thousand quarter over quarter to $18.5 million in the third quarter of 2024, as the Company continued to execute on post-merger efficiency strategies.
Net interest income before provision for credit losses was $25.0 million for the third quarter of 2024 compared to $24.5 million in the second quarter of 2024. Net interest margin was 3.82% for the third quarter of 2024 compared to 3.83% for the second quarter of 2024.
Non-performing assets were $17.4 million, representing 0.60% of total assets at September 30, 2024, compared to $10.6 million, representing 0.37% of total assets at June 30, 2024. Loans 30-89 days past due at September 30, 2024 were $2.7 million, representing 0.12% of total loans, an improvement compared to $5.2 million or 0.24% of total loans at June 30, 2024. The allowance for credit losses-loans was 1.20% of total loans held for investment at September 30, 2024, unchanged from June 30, 2024.
On May 9, 2024, the Company announced that LINKBANK had entered into a definitive purchase and assumption agreement for the sale of the Bank's banking operations and three branches in New Jersey, including related loans and deposits (the "Branch Sale"). The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the fourth quarter of 2024 or the first quarter of 2025.
As a result of the Branch Sale announcement, associated loans and deposits were reclassified as held for sale, impacting the Company's allowance for credit losses and purchase accounting amortization related to the loans held for sale.
"We are pleased to announce another quarter of record earnings for the third quarter of 2024, representing an annualized 1.00% return on average assets for the quarter and demonstrating solid progress toward achieving our target profitability metrics. This is a result of prioritizing high quality loan and strong core deposit growth, with an emphasis on achieving cost efficiencies from the merger and branch consolidations, while also executing on non-interest income initiatives," said Andrew Samuel, Chief Executive Officer of LINKBANCORP. "As we look to close 2024 with a strong fourth quarter, our teams continue to implement strategies to reduce funding costs and operational expenses and generate additional revenue to support further earnings growth."
1 See Appendix A, Reconciliation to Non-GAAP Financial Measures for the computation of this non-GAAP measure.
2 Total loans and total deposits include balances held for sale in the Branch Sale of $102.3 million and $94.0 million, respectively, at September 30, 2024. These balances were $116.2 million and $96.8 million respectively at June 30, 2024.
Income StatementNet interest income before the provision for credit losses for the third quarter of 2024 was $25.0 million compared to $24.5 million in the second quarter of 2024. Net interest margin was 3.82% for the third quarter of 2024 compared to 3.83% for the second quarter of 2024. Cost of funds decreased to 2.42% for the third quarter of 2024 compared to 2.43% for the second quarter of 2024, while the average yield on interest earning assets decreased from 6.19% for the second quarter of 2024 to 6.16% for the third quarter of 2024 due to the cut in the target federal funds rate.
Noninterest income increased $822 thousand quarter-over-quarter to $2.7 million for the third quarter of 2024 compared to $1.9 million for the second quarter of 2024, and included strong growth in service charges on deposit accounts and gain on sale of loans, as well as increases in merchant fees and swap fee income.
Noninterest expense for the third quarter of 2024 was $18.5 million compared to $18.9 million for the second quarter of 2024. Excluding one-time costs associated with the Branch Sale and branch consolidations of $171 thousand in the third quarter of 2024 and $631 thousand in the second quarter of 2024, adjusted noninterest expense was generally flat at $18.3 million for the second and third quarter of 20241 , as decreases in personnel and occupancy costs were offset by increases in FDIC deposit insurance and fraud-related operating losses.
Income tax expense was $2.0 million for the third quarter of 2024, reflecting an effective tax rate of 22.2%.
1 See Appendix A, Reconciliation to Non-GAAP Financial Measures for the computation of this non-GAAP measure.
Balance SheetTotal assets were $2.88 billion at September 30, 2024 compared to $2.86 billion at June 30, 2024 and $1.26 billion at September 30, 2023. Deposits and net loans as of September 30, 2024 totaled $2.37 billion and $2.19 billion, respectively, compared to deposits and net loans of $2.36 billion and $2.17 billion, respectively, at June 30, 2024 and $1.04 billion and $969.0 million, respectively, at September 30, 2023. Deposits and net loans exclude balances held for sale in the Branch Sale of $94.0 million and $102.3 million, respectively, at September 30, 2024, which are reflected in liabilities held for sale and assets held for sale. These balances were $96.8 million and $116.2 million respectively, at June 30, 2024.
Including loans held for sale, total loans increased $8.8 million, from $2.31 billion at June 30, 2024 to $2.32 billion at September 30, 2024. Total commercial loan commitments for the third quarter of 2024 were $111.0 million with funded balances of $74.8 million. The average commercial loan commitment originated during the third quarter of 2024 totaled approximately $810 thousand with an average outstanding funded balance of $546 thousand.
Including deposits held for sale, total deposits at September 30, 2024 totaled $2.47 billion, an increase of $9.3 million from $2.46 billion at June 30, 2024. This increase included growth of $54.5 million in demand deposit accounts and $21.4 million in retail time deposits, offset by a decrease in brokered deposits of $69.4 million quarter over quarter.
The Company maintains strong on-balance sheet liquidity, as cash and cash equivalents increased to $191.2 million at September 30, 2024 compared to $181.7 million at June 30, 2024.
Shareholders' equity increased from $271.4 million at June 30, 2024 to $277.4 million at September 30, 2024 primarily as a result of a $4.3 million increase in retained earnings. Book value per share increased to $7.42 at September 30, 2024 compared to $7.27 at June 30, 2024. Tangible book value per share increased to $5.26 at September 30, 2024 compared to $5.07 at June 30, 20241.
1 See Appendix A, Reconciliation to Non-GAAP Financial Measures for the computation of this non-GAAP measure.
Asset QualityThe Company recorded a $84 thousand provision for credit losses during the third quarter of 2024, after recording no provision for credit losses in the second quarter of 2024.
As of September 30, 2024, the Company's non-performing assets were $17.4 million, representing 0.60% of total assets, compared to $10.6 million, representing 0.37% of total assets at June 30, 2024. The increase related primarily to a single real estate secured loan acquired in the merger with Partners Bancorp (the "Partners Merger") with an outstanding principal balance of approximately $5.5 million at September 30, 2024. Based on a recent appraisal and application of the Company's reserve methodology, a specific reserve was not needed for this loan as of September 30, 2024.
Loans 30-89 days past due at September 30, 2024 were $2.7 million, representing 0.12% of total loans, an improvement compared to $5.2 million or 0.24% of total loans at June 30, 2024.
The allowance for credit losses-loans was $26.5 million, or 1.20% of total loans held for investment at September 30, 2024, compared to $26.3 million, or 1.20% of total loans held for investment at June 30, 2024. In addition to the recorded provision, the increased allowance resulted from a reallocation of a portion of the allowance for credit losses-unfunded commitments to the allowance for credit losses-loans. The allowance for credit losses-loans to nonperforming assets was 152.73% at September 30, 2024, compared to 248.26% at June 30, 2024.
CapitalThe Bank's regulatory capital ratios were well in excess of regulatory minimums to be considered "well capitalized" as of September 30, 2024. The Bank's Total Capital Ratio and Tier 1 Capital Ratio were 11.44% and 10.62% respectively, at September 30, 2024, compared to 11.09% and 10.30 %, respectively, at June 30, 2024 and 12.92% and 12.37%, respectively, at September 30, 2023. The Company's ratio of Tangible Common Equity to Tangible Assets was 7.02%1 at September 30, 2024.
1 See Appendix A, Reconciliation to Non-GAAP Financial Measures for the computation of this non-GAAP measure.
ABOUT LINKBANCORP, Inc.LINKBANCORP, Inc. was formed in 2018 with a mission to positively impact lives through community banking. Its subsidiary bank, LINKBANK, is a Pennsylvania state-chartered bank serving individuals, families, nonprofits and business clients throughout Pennsylvania, Maryland, Delaware, Virginia, and New Jersey through 26 client solutions centers and www.linkbank.com. LINKBANCORP, Inc. common stock is traded on the Nasdaq Capital Market under the symbol "LNKB". For further company information, visit ir.linkbancorp.com.
Forward Looking StatementsThis press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of current or historical fact and involve substantial risks and uncertainties. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "projects," "may," "will," "should," and other similar expressions can be used to identify forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements include, but are not limited to the following: costs or difficulties associated with newly developed or acquired operations; risks related to the integration of the Partners Merger; the timing and receipt of regulatory approvals to complete the Branch Sale; changes in general economic trends, including inflation and changes in interest rates; increased competition; changes in consumer demand for financial services; our ability to control costs and expenses; adverse developments in borrower industries and, in particular, declines in real estate values; changes in and compliance with federal and state laws that regulate our business and capital levels; our ability to raise capital as needed; and the effects of any cybersecurity breaches. The Company does not undertake, and specifically disclaims, any obligation to publicly revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law. Accordingly, you should not place undue reliance on forward-looking statements.
Given that the Company's merger with Partners Bancorp was completed on November 30, 2023 , reported results prior to the fourth quarter of 2023 included in the following tables reflect legacy LINKBANCORP results only.
LB-ELB-D
LINKBANCORP, Inc. and Subsidiaries
Consolidated Balance Sheet (Unaudited)
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
(In Thousands, except share and per share data)
ASSETS
Noninterest-bearing cash equivalents
$ 15,295
$ 14,516
$ 13,552
$ 13,089
$ 5,447
Interest-bearing deposits with other institutions
175,937
167,141
158,731
67,101
62,532
Cash and cash equivalents
191,232
181,657
172,283
80,190
67,979
Certificates of deposit with other banks
—
—
—
—
249
Securities available for sale, at fair value
149,315
140,121
133,949
115,490
78,779
Securities held to maturity, net of allowance for credit losses
34,155
35,343
36,109
36,223
37,266
Loans receivable, gross
2,215,868
2,193,197
2,129,919
2,128,284
978,912
Allowance for credit losses - loans
(26,542)
(26,288)
(23,842)
(23,767)
(9,964)
Loans receivable, net
2,189,326
2,166,909
2,106,077
2,104,517
968,948
Investments in restricted bank stock
4,904
4,928
4,286
3,965
3,107
Premises and equipment, net
17,623
18,364
20,102
20,130
6,414
Right-of-Use Asset, premises
14,150
13,970
14,577
15,497
9,727
Bank-owned life insurance
51,646
49,616
49,230
48,847
24,732
Goodwill and other intangible assets
80,924
82,129
81,494
82,701
36,715
Deferred tax asset
21,662
22,024
22,717
24,153
6,880
Assets held for sale
104,660
118,362
118,115
115,499
—
Accrued interest receivable and other assets
20,344
25,170
26,730
22,113
14,899
TOTAL ASSETS
$ 2,879,941
$ 2,858,593
$ 2,785,669
$ 2,669,325
$ 1,255,695
LIABILITIES
Deposits:
Demand, noninterest bearing
$ 658,473
$ 661,292
$ 618,277
$ 624,780
$ 210,404
Interest bearing
1,714,179
1,699,220
1,662,124
1,574,019
831,368
Total deposits
2,372,652
2,360,512
2,280,401
2,198,799
1,041,772
Long-term borrowings
40,000
40,000
40,000
—
—
Short-term borrowings
—
—
—
10,000
15,000
Note payable
572
578
584
590
—
Subordinated debt
61,843
61,706
61,573
61,444
40,354
Lease liabilities
14,911
14,746
15,357
16,361
9,728
Liabilities held for sale
94,228
96,916
105,716
99,777
—
Accrued interest payable and other liabilities
18,382
12,726
13,795
16,558
7,490
TOTAL LIABILITIES
2,602,588
2,587,184
2,517,426
2,403,529
1,114,344
SHAREHOLDERS' EQUITY
Preferred stock
—
—
—
—
—
Common stock
370
370
369
369
162
Surplus
264,059
263,795
263,577
263,310
127,856
Retained earnings
15,147
10,826
7,724
4,843
19,062
Accumulated other comprehensive loss
(2,223)
(3,582)
(3,427)
(3,209)
(5,729)
Total equity attributable to parent
277,353
271,409
268,243
265,313
141,351
Noncontrolling interest in consolidated subsidiary
—
—
—
483
—
TOTAL SHAREHOLDERS' EQUITY
277,353
271,409
268,243
265,796
141,351
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 2,879,941
$ 2,858,593
$ 2,785,669
$ 2,669,325
$ 1,255,695
Common shares outstanding
37,361,560
37,356,278
37,348,151
37,340,700
16,235,871
LINKBANCORP, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
Three Months Ended
Nine Months Ended
9/30/2024
6/30/2024
9/30/2023
9/30/2024
9/30/2023
(In Thousands, except share and per share data)
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees
$ 36,856
$ 36,112
$ 13,068
$ 109,093
$ 37,330
Other
3,338
3,337
1,710
9,325
4,765
Total interest and dividend income
40,194
39,449
14,778
118,418
42,095
INTEREST EXPENSE
Deposits
13,292
13,071
5,434
38,210
15,193
Other Borrowings
949
932
550
2,967
1,196
Subordinated Debt
972
962
442
2,892
1,311
Total interest expense
15,213
14,965
6,426
44,069
17,700
NET INTEREST INCOME BEFORE PROVISION FOR (CREDIT TO) CREDIT LOSSES
24,981
24,484
8,352
74,349
24,395
Provision for (credit to) credit losses
84
—
(349)
125
(549)
NET INTEREST INCOME AFTER PROVISION FOR (CREDIT TO) CREDIT LOSSES
24,897
24,484
8,701
74,224
24,944
NONINTEREST INCOME
Service charges on deposit accounts
1,052
865
198
2,697
593
Bank-owned life insurance
430
386
177
1,199
488
Net realized gains (losses) on the sale of debt securities
—
4
—
4
(2,370)
Gain on sale of loans
138
12
—
200
296
Other
1,060
591
505
2,167
905
Total noninterest income
2,680
1,858
880
6,267
(88)
NONINTEREST EXPENSE
Salaries and employee benefits
9,855
9,941
4,193
30,914
12,350
Occupancy
1,440
1,559
701
4,577
2,104
Equipment and data processing
1,640
1,824
934
5,290
2,519
Professional fees
763
788
363
2,299
1,162
FDIC insurance and supervisory fees
812
545
276
1,709
619
Bank Shares Tax
752
760
278
2,103
834
Intangible amortization
1,205
1,204
59
3,616
179
Merger & restructuring expenses
171
631
777
858
1,679
Advertising
163
241
77
505
268
Other
1,651
1,407
336
4,730
1,833
Total noninterest expense
18,452
18,900
7,994
56,601
23,547
Income before income tax expense
9,125
7,442
1,587
23,890
1,309
Income tax expense
2,030
1,638
347
5,265
276
NET INCOME
$ 7,095
$ 5,804
$ 1,240
$ 18,625
$ 1,033
EARNINGS PER SHARE, BASIC
$ 0.19
$ 0.16
$ 0.08
$ 0.50
$ 0.06
EARNINGS PER SHARE, DILUTED
$ 0.19
$ 0.16
$ 0.08
$ 0.50
$ 0.06
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING,
BASIC
36,983,637
36,970,768
16,235,144
36,972,127
15,984,151
DILUTED
37,090,111
37,040,748
16,235,144
37,061,512
15,984,151
(106,474)
(69,980)
—
(89,385)
—
LINKBANCORP, Inc. and Subsidiaries
Financial Highlights (Unaudited)
For the Three Months Ended
For the Nine Months Ended
('Dollars In Thousands, except per share data)
9/30/2024
6/30/2024
9/30/2023
9/30/2024
9/30/2023
Operating Highlights
Net Income
$ 7,095
$ 5,804
$ 1,240
$ 18,625
$ 1,033
Net Interest Income
24,981
24,484
8,352
74,349
24,395
Provision for (credit to) Credit Losses
84
-
(349)
125
(549)
Non-Interest Income
2,680
