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Asset and Deposit Growth Propels Lyons Bancorp’s First Quarter 2023 Earnings

Lyons Bancorp, Inc., the parent financial holding company of The Lyons National Bank (LNB), reported first quarter 2023 earnings of $1.16 per common share as compared to $1.12 per common share reported for the same period last year, a 3.5% increase. Both numbers are reported on a fully diluted basis.  Continued balance sheet growth drove the increase in earnings. At March 31, 2023, assets totaled $1.85 billion, an 11% increase from the $1.67 billion reported at March 31, 2022. Asset growth was primarily driven by loans, which also grew 11%. On March 31, 2023, loans totaled $1.30 billion, compared to $1.18 billion on March 31, 2022. With the Federal Reserve Bank (FRB) maintaining its course of increasing short-term interest rates, albeit at a slower pace, the Bank used the proceeds from all maturing investments to help fund its loan growth. Deposits increased 12% to $1.72 billion on March 31, 2023, compared to $1.53 billion at March 31, 2022.  Shareholder equity was $131.90 million at March 31, 2023, versus $116.12 million at March 31, 2022. Considering the mark-to-market of the Bank’s investment portfolio, Tangible Shareholder Equity was $95.29 million on March 31, 2023, compared to $96.12 million at March 31, 2022. The Bank accrued $1.23 million in income taxes in the first quarter.

Higher market interest rates prompted the Bank to raise the rates it pays to its depositors resulting in a lower Net Interest Margin (NIM). At March 31, 2023, the Bank’s NIM was 2.86% compared to 2.99% on March 31, 2022. Net Interest Margin is the difference between the amount of revenue the Bank generates from its assets, namely loans and investments, and expenses it pays on deposits. To help partially offset the drop in the Bank’s NIM, it improved its Efficiency Ratio to 63.99% at March 31, 2023, from 65.30% at March 31, 2022. The Efficiency Ratio calculates how much of each dollar earned is spent making that dollar. “Our team drew on their years of experience to maintain our earnings momentum in the first quarter,” said Robert A. Schick, Board Chairman. “The combination of inflation with the aggressive stance the Federal Reserve Bank is taking towards increasing interest rates makes this a difficult business environment for all banks.”

All asset quality measurements remain excellent. As the recovery of prior loans charged off exceeded the amount of current loans charged off, the Bank recorded a net recovery of $11 thousand in charged off loans in the first quarter. The amount of nonperforming loans fell by approximately $500K. Even so, consistent with its conservative nature, the Bank set aside an additional $340 thousand in its provision for possible loan losses in the first quarter of 2023. As a result of the Bank formally adopting the Current Expected Credit Losses (CECL) accounting standard at December 31, 2022, it transferred approximately $2 million in excess reserves from its Allowance for Loan and Lease Losses (ALLL) to its equity account.

As spreads between asset and deposit yields narrowed, the Bank’s return on average assets fell to 0.93% from 0.98%. However, its return on average shareholder equity increased to 18.44% from 14.98%

Lyons Bancorp, Inc. is the financial holding company for The Lyons National Bank. The Lyons National Bank is a community bank with offices in Lyons, Clyde, Macedon, Newark, Ontario and Wolcott in Wayne County; Penn Yan in Yates County; Jordan in Onondaga County; Geneva, Canandaigua and Farmington in Ontario County; Waterloo in Seneca County, Perinton in Monroe County and Auburn in Cayuga County. The Lyons National Bank has one subsidiary, Lyons Realty Associates Corp