Jefferson Security Bank Reports Financial Results for the Second Quarter of 2022

Jefferson Security Bank (OTC Pink: JFWV) reported net income of $833 thousand for the quarter ended June 30, 2022, representing a decrease of $173 thousand, or 17.2% when compared to net income of $1.0 million for the quarter ended June 30, 2021. Diluted earnings per share were $3.02 for the second quarter of 2022, compared to $3.65 for the second quarter of 2021. For the six months ended June 30, 2022, net income was $1.6 million, representing a decrease of $164 thousand or 9.2%, compared to $1.8 million for the same period in 2021. Diluted earnings per share were $5.89 and $6.45 for the first six months of 2022 and 2021, respectively. Annualized return on average assets and average equity for June 30, 2022 were 0.75% and 12.30%, respectively, compared to 0.90% and 11.64%, respectively, for June 30, 2021.

Earnings for the second quarter and first six months of 2022 were impacted by an increase in provision for loan losses resulting from strong loan growth. The Bank’s provision for loan losses was $140 thousand for the second quarter and $215 thousand for the first six months of 2022, compared to no provision for loan losses for the second quarter and $80 thousand for the first six months of 2021. In addition, results for the second quarter and first six months of 2022 compared to the same periods in 2021 reflect lower income on Small Business Administration (SBA) Paycheck Protection Program (PPP) loans, due to a reduction in PPP loan forgiveness as the program nears its conclusion. PPP interest and fees recognized in the second quarter and first six months of 2022 totaled $72 thousand and $300 thousand, respectively, compared to $245 thousand and $407 thousand in the second quarter and first six months of 2021, respectively.

“Our performance through the second quarter benefitted from solid organic loan growth, improved interest income and strong asset quality; however, these positive changes were in part offset by increased expense related to provision for loan losses and higher staffing levels,” said President and Chief Executive Officer, Cindy Kitner. “With loan and deposit growth exceeding expectations, expanding our team has allowed us to better serve our valued communities and deliver excellent customer service. As we move into the second half of 2022, we are keenly focused on intentionally managing the growth of our balance sheet, increasing our net interest margin and maintaining a disciplined approach to expense management,” said Kitner.

As of June 30, 2022, total assets increased $34.6 million or 8.4%, to $448.9 million compared to total assets of $414.3 million as of June 30, 2021. Loans, net of the allowance for loan losses, increased $23.4 million or 9.4% to $272.7 million as of June 30, 2022, compared to $249.3 million as of June 30, 2021. As of June 30, 2022, loan growth excluding PPP loans was $36.2 million or 15.6% when compared to June 30, 2021. Deposits totaled $425.6 million at June 30, 2022, representing an increase of $46.3 million or 12.2%, when compared to $379.3 million at June 30, 2021. Since December 31, 2021, total assets increased $22.1 million, loans, net of the allowance for loans losses, increased $27.9 million, and total deposits increased $34.9 million. Loan growth, excluding PPP loans, was $33.5 million when comparing June 30, 2022 to December 31, 2021.

The allowance for loan losses as of June 30, 2022 was $3.0 million, or 1.11% of total loans compared to $2.8 million, or 1.14% as of December 31, 2021 and $2.8 million, or 1.12% as of June 30, 2021. Credit quality metrics have continued to improve with noncurrent loans to total loans declining to 0.13% as of June 30, 2022, compared to 0.36% as of December 31, 2021 and 1.05% as of June 30, 2021. The Bank closely monitors the loan portfolio with a focus on credit quality and risk management.

Total shareholder’s equity was $20.0 million as of June 30, 2022, representing a decline from $33.0 million at December 31, 2021. This resulted in book value declining to $72.71 per share at June 30, 2022 compared to $119.52 per share at December 31, 2021 and $114.04 per share at June 30, 2021. Shareholder’s equity and book value per share were negatively impacted by the significant increase in market interest rates and related impact on accumulated other comprehensive loss. The decline in equity related to the change in net unrealized losses on the investment portfolio of $14.2 million, when comparing June 30, 2022 to December 31, 2021. While the unrealized losses recognized in shareholder’s equity will decline over time or if market interest rates decline, management continues to closely monitor the Bank’s capital position based on growth expectations and market fluctuations. The decline of shareholder’s equity related to unrealized losses and gains on the investment portfolio does not impact the Bank’s regulatory capital ratios under current capital requirements. As of June 30, 2022, the Bank was considered well-capitalized with a Tier 1 leverage ratio of 8.08%, common equity Tier 1 risk-based capital ratio of 14.43%, Tier 1 risk-based capital ratio of 14.43% and total risk-based capital ratio of 15.63%.

About Jefferson Security Bank

Jefferson Security Bank is an independent community bank evolving with the needs of the customers and the communities it serves. Serving individuals, businesses and community organizations, Jefferson Security Bank strives to support entrepreneurial efforts within its target markets. Delivering long-term value to its shareholders is at the core of the organization’s culture. Jefferson Security Bank is a West Virginia state-chartered bank that was formed and opened for business on May 19, 1869, making it the oldest bank in Jefferson County, West Virginia. The bank provides general banking services in Berkeley County and Jefferson County, West Virginia, and Washington County, Maryland. Visit www.JSB.bank for more information.

This press release may contain forward-looking statements, as defined by federal securities laws, which may involve significant risks and uncertainties. The statements are based on estimates and assumptions made by management in conjunction with other factors deemed appropriate under the circumstances. Actual results could differ materially from current projections.

Offices:                          

105 East Washington Street, Shepherdstown, WV  (304-876-9000)

7994 Martinsburg Pike, Shepherdstown, WV  (304-876-2800)

873 East Washington Street, Suite 100, Charles Town, WV   (304-725-9752)

277 Mineral Drive, Suite 1, Inwood, WV   (304-229-6000)

1861 Edwin Miller Boulevard, Martinsburg, WV   (304-264-0900)

103 West Main Street, Sharpsburg, MD   (301-432-3900)

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