Eagle Financial Services Q4 net interest income $12.3 million
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On January 24, 2024, the Board of Directors announced a quarterly common stock cash dividend of $0.30 per common share, payable on February 16, 2024, to shareholders of record on February 5, 2024.
Select highlights for the fourth quarter (compared to the third quarter of 2023) include:
Noninterest expenses decreased $853 thousand or 6.0% during the quarter.
Return on average total equity increased to 9.33% during the quarter from 8.87%.
Total noninterest bearing deposits increased $5.7 million or 1.32% during the quarter.
Total loan interest income was $19.4 million and $20.2 million for the quarters ended December 31, 2023 and September 30, 2023, respectively.
Total loan interest income was $15.1 million for the quarter ended December 31, 2022.
Total loan interest income increased $4.3 million or 28.5% from the quarter ended December 31, 2022 to the quarter ended December 31, 2023.
Average loans for the quarter ended December 31, 2023 were $1.45 billion compared to $1.26 billion for the quarter ended December 31, 2022.
The tax equivalent yield on average loans for the quarter ended December 31, 2023 was 5.32%, an increase of 54 basis points from the 4.78% average yield for the same time period in 2022.
The decrease in loan interest income during the fourth quarter of 2023 compared to the third quarter of 2023 is mainly due to the decrease in the average loans outstanding during the period, partly related to the sale of the marine finance line of business during the third quarter of 2023.
The majority of the increase compared to December 31, 2022 in yield can be attributed to the current rising interest rate environment.
Interest and dividend income from the investment portfolio was $932 thousand for the quarter ended December 31, 2023 compared to $931 thousand for the quarter ended September 30, 2023.
Interest income and dividend income from the investment portfolio was $879 thousand for the quarter ended December 31, 2022.
Total interest expense was $9.7 million for the three months ended December 31, 2023 and $9.3 million and $2.9 million for three months ended September 30, 2023 and December 31, 2022, respectively.
The increase in interest expense resulted from increases on rates paid on deposit accounts and Federal Home Loan Bank advances entered into during 2022 and 2023 with varying interest rates and terms.
The average cost of interest-bearing liabilities increased 11 and 184 basis points when comparing the quarter ended December 31, 2023 to the quarters ended September 30, 2023 and December 31, 2022, respectively.
The average balance of interest-bearing liabilities increased $13.3 million from the quarter ended September 30, 2023 to the quarter ended December 31, 2023.
The average balance of interest-bearing liabilities increased $327.0 million from the quarter ended December 31, 2022 to the same period in 2023.
In addition to the growth in interest-bearing liabilities, there has been a shift in the mix of interest-bearing deposits towards higher interest-bearing deposits.
Net interest income for the quarter ended December 31, 2023 was $12.3 million reflecting a decrease of 4.9% from the quarter ended September 30, 2023 and a decrease of 7.3% from the quarter ended December 31, 2022.
Net interest income was $12.9 million and $13.3 million for the quarters ended September 30, 2023 and December 31, 2022, respectively.
The decrease in net interest income from the quarter ended December 31, 2022 resulted primarily from the significant increase in the cost of funds during the year.
Net income for the quarter ended December 31, 2023 was $2.4 million reflecting an increase of 3.3% from the quarter ended September 30, 2023 and a decrease of 25.1% from the quarter ended December 31, 2022.
The increase from the quarter ended September 30, 2023 was due to several factors that occurred in the third quarter including one-time overhead expenses related to the sale of the marine finance line of business partially offset by the gain related to the sale.
The decrease in net income from the quarter ended December 31, 2022 was mainly driven by the increased funding costs for deposits and increased salaries and employee benefits expenses to hire and retain employees.
While the beginning and ending number of FTEs remained fairly consistent from December 31, 2022 to December 31, 2023, salary and medical insurance costs have increased along with the salary impact of the employees that were a part of the marine finance line of business for the first eight months of 2023, as discussed below.
Net income was $2.3 million for the three-month period ended September 30, 2023 and $3.2 million for the quarter ended December 31, 2022.
The net interest margin was 2.85% for the quarter ended December 31, 2023.
For the quarters ended September 30, 2023 and December 31, 2022, the net interest margin was 2.93% and 3.68%, respectively.
The Company's net interest margin is not a measurement under accounting principles generally accepted in the United States, but it is a common measure used by the financial services industry to determine how profitably earning assets are funded.
Noninterest income was $3.7 million for the quarter ended December 31, 2023, which represented a decrease of $556 thousand or 13.2% from the $4.2 million for the three months ended September 30, 2023.
Noninterest income for the quarter ended December 31, 2022 was $3.1 million.
The decrease from the quarter ended September 30, 2023 was mainly due to the sale of the marine finance line of business, which resulted in a net gain of $463 thousand during the third quarter.
The increase from the quarter ended December 31, 2022 was due to the growth of the wealth management division along with an increase in production of saleable mortgage loans which resulted in a higher gain on sale of loans held for sale.
Noninterest expense decreased $853 thousand, or 6.0%, to $13.3 million for the quarter ended December 31, 2023 from $14.1 million for the quarter ended September 30, 2023.
Noninterest expense was $11.5 million for the quarter ended December 31, 2022, representing an increase of $1.7 million or 15.0% when comparing the quarter ended December 31, 2023 to the quarter ended December 31, 2022.
An increase in salaries and benefits expenses was noted between December 31, 2023 and December 31, 2022.
Annual pay increases, newly hired employees, incentive plan accruals and increased insurance costs have attributed to these increases.
FTEs remained stable at 241 when comparing December 31, 2022 to December 31, 2023.
FTE's rose to 275 at June 30, 2023 prior to the sale of the marine finance line of business on August 23, 2023.
While there was some reduction in overhead costs by having the marine finance line of business in operation only through August 2023, there was approximately $1.5 million in additional expense recognized during the third quarter due to its sale.
These costs included a change in control agreement, accelerated deferred compensation expenses, legal costs and advisory firm expenses.
The decrease in noninterest expense between the quarters ended September 30, 2023 and December 31, 2023 was largely related to these additional expenses from the sale.
See below for further discussion regarding the sale of the marine finance line of business.
An increase in FDIC assessment was also noted between the quarters ended December 31, 2023 and 2022.
This increase is due to the growth in the Company, along with a two-basis point increase in the assessment rate charged by the FDIC.
This increase in assessment rate applies to all financial institutions. ■