Quarterly Financial Highlights

First Quarter 2022

 
Dear Shareholders:
 
I am pleased to present the financial position of your Company for the first quarter of 2022. The year is off to a good start and we are excited to see what still lies ahead. However, there is uncertainty surrounding the economy. Inflation is running near record highs and the Federal Reserve raised interest rates in March with the expectation of several more hikes to come. Additionally, the war in Ukraine is causing ripple effects impacting not only the United States, but also the entire world. As 2022 progresses, we proceed cautiously, but remain true to our mission and goals.

Total assets of $961 million was an increase of $25.4 million or 2.7% over last year. Cash balances increased by $12.4 million or 45.2% as deposits remain elevated. Investment securities of $222 million grew almost $41.8 million or 23.2% over last year. As cash balances remain high and are not used for loan demand, we deploy the excess into the bond portfolio to enhance our interest income. Loan balances at March 2022 were $645 million or $38.7 million less than a year earlier. As mentioned in previous letters, we expected some decreases as Paycheck Protection Program (PPP) loans continue to be forgiven. Balances of these loans decreased by over $94 million from last year with approximately $16 million remaining. Excluding the PPP loans, several other categories of loans experienced growth year over year including non-residential construction, residential mortgages, multi-family as well as commercial mortgages.
 
Deposit balances ended the quarter at $820 million, an increase of $77.3 million or 10.4% over the previous year. Both personal and business accounts grew from last year in all types except for certificates of deposit. This has remained the case since the beginning of the pandemic, but we do expect some runoff as inflation remains high and other economic factors impact our customers.
 
Borrowings from the Federal Home Loan Bank of Pittsburgh (FHLB) decreased by $47.7 million or 56.6%. Advances of $22.5 million used to fund PPP loans matured in 2021 along with the prepayment of $16 million and regularly scheduled payments and maturities accounting for this substantial reduction. Management strategically used some excess cash not needed to fund customer loans or allocated to the investment portfolio for debt prepayments to position the bank for less interest expense in the future.
 
Net income for the quarter was $3.2 million, $563 thousand or 21.4% higher than the previous year. Loans, including fees increased by $399 thousand or 5.2% over the first quarter of 2021, mainly due to PPP fees which were $278 thousand higher for the same period last year. Investment income grew by $172 thousand over March 31, 2021 due to the increased balance of our portfolio. Brokerage commissions contributed $120 thousand to this increase with several other categories netting the difference. Non-interest expense grew by $280 thousand or 4.9%. Payroll, furniture and equipment as well as marketing expenses all increased over the first quarter of 2021 as we have relocated our Greentown branch and continue working on opening two new branches in 2022. Offsetting these expenses was a reduction in outside professional fees due to the discontinued use of third-party software for PPP processing. Provision expense for the quarter was decreased by $165 thousand or 55% over this time last year. Tax expense increased $185 thousand or 42% as result of the increased income. This resulted in an annualized return on average assets of 1.33% and return on average equity of 12.75%.
 
We are hoping the momentum of the first quarter carries through the remainder of the year. As the bank expands its physical presence, look for news on these projects in future letters, on our website and through social media. Our staff is very excited to serve our existing and potential new customers in all our locations as the bank continues to prudently grow as new opportunities arise.
 
As always, we would like to thank you for your continued support and commitment to your Company. Please take any opportunity to refer family and friends to Dimeco. I welcome your questions or comments.

Peter Bochnovich

President and Chief Executive Officer

Consolidated Financial Highlights

(unaudited)
(dollars in thousands, except per share)
Performance for the three months ended March 31,
2022
 2021 % Increase (decrease)
Interest income
 $9,210 $8,645 6.5%
Interest expense $628 $842 (25.4%)
Net interest income $8,582 $7,803 10.0%
Net income $3,191 $2,628 21.4%
Shareholders' Value (per share) 2022 2021 % Increase (decrease)
Net income - basic $1.26  $1.04 21.2%
Net income - diluted $1.26 $1.04 21.2%
Dividends $.36 $.34 5.9%
Book value $36.74 $38.07 (3.5%)
Market value $44.75 $36.00 24.3%
Market value/book value ratio 121.8% 94.6% 28.8%
*Price/earnings multiple 8.9X 8.7X 2.3%
*Dividend yield 3.22% 3.78% (14.8%)
Financial Ratios 2022 2021 % Increase (decrease)
*Return on average assets 1.33% 1.15% 15.7%
*Return on average equity 12.75% 10.88% 17.2%
Efficiency ratio 59.57% 62.12% (4.1%)
Net interest margin 3.96% 3.78% 4.8%
Shareholders' equity/asset ratio 9.73% 10.23% (4.9%)
Dividend payout ratio 28.57% 32.69% (12.6%)
Nonperforming assets/total assets 1.46% 1.91% (23.6%)
Allowance for loan losses as a % of loans 1.81% 1.58% 14.6%
Net charge-offs/average loans - .02% (100.0%)
Allowance for loan losses/nonaccrual loans
 85.61% 64.25% 33.2%
Allowance for loan losses/nonperforming loans
 84.29% 61.73% 36.5%
Financial Position at March 31, 2022 2021 % Increase (decrease)
Assets $960,681 $935,319 2.7%
Loans $644,618 $683,289 (5.7%)
Deposits $819,556 $742,271 10.4%
Stockholder' equity $93,499 $95,648 (2.2%)
*annualized

Consolidated Balance Sheet

(unaudited) (in thousands)
Assets
 3/31/2022 3/31/2021
Cash and cash equivalents
 $39,846 $27,438
Mortgage loans held for sale
 - $505
Investment securities available for sale
 $221,511 $179,751
Loans, net of allowance for loan losses
 $632,976 $672,484
Premises and equipment $16,361 $12,502
Accrued interest receivable $2,830 $2,977
Other real estate owned $224 $333
Other assets $46,933 $39,329
          Total Assets $960,681 $935,319
Liabilities
 3/31/2022 3/31/2021
Deposits - Noninterest-bearing $197,883 $186,683
Deposits - Interest-bearing $621,673 $555,588
           Total Deposits $819,556 $742,271
Short-term borrowings
 $2,500 $22,500
Other borrowed funds $34,045 $61,721
Accrued interest payable $122 $191
Other liabilities $10,959 $12,988
Total Liabilities $867,182 $839,671
Total Stockholders' Equity $93,499 $95,648
Total Liabilities & Stockholders' Equity
 $960,681 $935,319


Consolidated Statement of Income

 
(unaudited) (in thousands, except per share data) 


 Three months ended Three months ended
Interest Income 3/31/2022 3/31/2021
Loans, including fees $8,040 $7,641
Investment securities $1,109 $937
Other $61 $67
       Total interest income $9,210 $8,645
Interest Expense 3/31/2022 3/31/2021
Deposits $420 $492
Short-term borrowings $4 $17
Other borrowed funds $204 $333
       Total interest expense $628 $842
Net Interest Income $8,582 $7,803
Provision for loan losses $135 $300
Net Interest Income, After Provision for Loan Losses $8,447 $7,503
Noninterest income $1,400 $1,316
Noninterest expense $6,031 $5,751
Income before income taxes $3,816 $3,068
Income taxes $625 $440
Net Income $3,191 $2,628
Earnings per share-basic $1.26 $1.04
Earnings per share-diluted $1.26 $1.04
Average shares outstanding-basic 2,536,721 2,516,759
Average shares outstanding-diluted
 2,542,251 2,528,733