Lyons Bancorp, Inc., the parent financial holding company of The Lyons National Bank (LNB), reported earnings of $1.20 per common share for the second quarter of 2023, as compared to $1.16 per common share reported for the first quarter of 2023; a 3.5% increase. Both numbers are reported on a fully diluted basis. Earnings per share were flat when comparing this year’s second quarter to last year’s second quarter. For the first six months of 2023, earnings per share were $2.36 compared to $2.28 for the first six months of 2022, also representing a 3.5% increase.
Contributing to the quarter-over-quarter earnings per share improvement was a slight increase in non-interest income as well as a slight decrease in non-interest expense. Net interest income declined quarter-over-quarter.
Balance sheet growth was negligible in the second quarter. At June 30, 2023, assets totaled $1.859 billion, as compared to $1.854 billion reported at March 31, 2023. Loans grew a modest 2.0% from $1.305 billion at March 31, 2023, to $1.329 billion at June 30, 2023. With the Federal Reserve continuing its upward trek of short-term interest rates, the Bank elected not to re-invest its maturing investment proceeds, using the funds to retire high-cost funding. While deposit growth was also insignificant, the slight increase was counter to the general decline in deposits for many of the Bank’s peers. Deposits totaled $1.719 billion at June 30, 2023, as compared to $1.715 billion at March 31, 2023. Shareholder’s Equity grew to $135 million at June 30, 2023, compared to $132 million at March 31, 2023. Because interest rates increased during the quarter, tangible shareholder equity declined to $94.3 million at June 30, 2023, compared to $95.3 million at March 31, 2023.
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 June 30, 2023, the Bank’s NIM was 2.72% compared to 2.86% on March 31, 2023. 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. The Bank did maintain its Efficiency Ratio at 63.99% at June 30, 2023, the same percentage it recorded at March 31, 2023. The Efficiency Ratio represents how much it costs to generate a dollar of revenue. “The last 12 to15 months have been challenging for banks,” said Robert A. Schick, Board Chairman. “The aggressive stance the Federal Reserve Bank is taking towards increasing interest rates is causing both businesses and individuals to slow or delay many of their expansion projects and/or purchases.”
All asset quality measurements remain excellent. Loans charged off or not performing to their original terms remain insignificant, while at the same time, the Bank continues to set aside additional loan loss reserves.
The Bank’s return on average assets remained at 0.93% for the second quarter ending June 30, 2023. Its return on average shareholder’s equity fell slightly from 18.44% to a still very respectable 17.66%.