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Restrictive Monetary Policy Impacts Lyons Bancorp Earnings

The continued restrictive monetary policy of the Federal Reserve Bank had a negative impact on Lyons Bancorp’s first quarter 2024 earnings. “We continue to grow, make money and add long-term value to the investments of our shareholders,” said Robert A. Schick, Chairman of the Board of Directors. “Just not at the pace of growth we enjoyed in the past. The Fed’s aggressive fight to bring inflation under control means all banks must pay higher interest rates to maintain and increase their deposit levels. Paying more interest on our deposits reduces our net interest income: the difference between what we earn on our loans and investments and what we pay on our deposits. Like most community banks, we derive about 80% of our total pre-tax income from our net interest income. To help our bottom line in the first quarter, we worked diligently to control our non-interest operating expenses. As long as the Federal Reserve continues its present inflation strategy, all banks will face the challenges we tackled in the first quarter.”

On a year-over-year comparison basis, for the first quarter of 2024, Lyons Bancorp, Inc. earned $3.6 million or $1.02 per diluted common share. This compares to $4.1 million or $1.16 per diluted common share for the first quarter of 2023. At March 31, 2024, total assets were $1.95 billion as compared to $1.85 billion at March 31, 2023. Loans totaled $1.40 billion at March 31, 2024, as compared to $1.30 billion at March 31, 2023. Deposits totaled $1.73 billion on March 31, 2024, compared to $1.72 billion at March 31, 2023. Shareholder equity totaled $143 million on March 31, 2024, compared to $132 million on March 31, 2023. The mark-to-market calculation of the Bank’s investment portfolio reduced shareholders’ equity by approximately $39 million on March 31, 2024, as compared to $36 million on March 31, 2023. The Bank’s Tier 1 leverage capital ratio was 7.80% on March 31, 2024, versus 7.53% on March 31, 2023.

On a contiguous quarter basis, first quarter 2024 earnings of $1.02 per diluted common share compares to $1.30 per diluted common share in 2023’s final three months. Note that the last quarter of 2023 benefited from a significant level of non-recurring income which boosted earnings well-above their normal operating level. March 31, 2024, period-end total assets of $1.95 billion compares to December 31, 2023, period-end assets of $1.85 billion. The key driver of our asset growth was the increase in deposits from $1.63 billion at year-end to $1.73 billion on March 31, 2024. Total loans grew modestly from $1.38 billion to $1.40 billion during the quarter. At March 31, 2024, shareholder equity was $143 million compared to $141 million at December 31, 2023.

The Bank’s asset quality remained stellar in the first quarter of 2024, as total charged-off loans were a mere $13 thousand. Loans not performing to their original contract totaled $4 million at the end of the first quarter of 2024, as compared to $3.5 million at December 31, 2023.

As a percentage, the Bank’s March 31, 2024, net interest margin (NIM) of 2.43% compared to 2.50% at December 31, 2023, and 2.86% at March 31, 2023. The decline in the margin reduced the Bank’s March 31, 2024, Return on Average Equity (ROAE) to 13.96% from 19.17% at December 31, 2023, and 18.44% at March 31, 2023. Return on Average Assets (ROAA) also fell. At March 31, 2024, it was 0.78% as compared to 0.99% at December 31, 2023, and 0.93% at March 31, 2023.

Recently, the Board of Directors increased the Bank’s per share quarterly dividend by $0.05, to $0.40 from $0.35 per common share. The higher quarterly dividend will be paid to shareholders in July 2024.

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