FIRST KEYSTONE CORP [FKYS] Filings

10-Q 1 fkys-20230630x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 000-21344

FIRST KEYSTONE CORPORATION

(Exact name of registrant as specified in its charter)


Pennsylvania		23-2249083
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


111 West Front Street, Berwick, PA		18603
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (570) 752-3671

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol	Name of each exchange on which registered
Common stock	FKYS	OTC: Pink

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

Common Stock, $2 Par Value, 6,064,772 shares as of August 4, 2023.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST KEYSTONE CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
(Dollars in thousands, except share and per share data)	June 30,		December 31,
	2023		2022
ASSETS
Cash and due from banks	$	12,597	$	9,441
Interest-bearing deposits in other banks		1,178		1,297
Total cash and cash equivalents		13,775		10,738
Debt securities available-for-sale, at fair value		331,580		373,444
Marketable equity securities, at fair value		1,476		1,699
Restricted investment in bank stocks, at cost		8,617		7,136

Loans		871,239		858,398
Loans held for sale		—		71
Allowance for credit losses		(7,157)		(8,274)
Net loans		864,082		850,195
Premises and equipment, net		19,764		19,024
Operating lease right-of-use assets		1,523		1,541
Accrued interest receivable		4,173		4,391
Cash surrender value of bank owned life insurance		25,691		25,389
Investments in low-income housing partnerships		5,491		3,763
Goodwill		19,133		19,133
Deferred income taxes		8,879		9,129
Other assets		3,715		3,612
TOTAL ASSETS	$	1,307,899	$	1,329,194

LIABILITIES
Deposits:
Non-interest bearing	$	220,519	$	231,754
Interest bearing		715,322		761,745
Total deposits		935,841		993,499
Short-term borrowings		193,359		153,418
Long-term borrowings		25,000		25,000
Subordinated debentures		25,000		25,000
Operating lease liabilities		2,019		2,029
Accrued interest payable		1,171		563
Other liabilities		4,324		9,299
TOTAL LIABILITIES		1,186,714		1,208,808

STOCKHOLDERS’ EQUITY
Preferred stock, par value $2.00 per share; authorized 1,000,000 shares as of June 30, 2023 and December 31, 2022; issued 0 as of June 30, 2023 and December 31, 2022		—		—
Common stock, par value $2.00 per share; authorized 20,000,000 shares as of June 30, 2023 and December 31, 2022; issued 6,296,383 as of June 30, 2023 and 6,250,763 as of December 31, 2022; outstanding 6,064,772 as of June 30, 2023 and 6,019,152 as of December 31, 2022		12,593		12,502
Surplus		43,217		42,439
Retained earnings		100,600		100,712
Accumulated other comprehensive loss		(29,516)		(29,558)
Treasury stock, at cost, 231,611 shares as of June 30, 2023 and December 31, 2022		(5,709)		(5,709)

TOTAL STOCKHOLDERS’ EQUITY		121,185		120,386
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,307,899	$	1,329,194

See accompanying notes to consolidated financial statements.

FIRST KEYSTONE CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


(Dollars in thousands, except per share data)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022

INTEREST INCOME
Interest and fees on loans	$	10,379	$	8,486	$	20,290	$	16,662
Interest and dividend income on securities:
Taxable		2,833		1,716		5,701		3,287
Tax-exempt		261		849		611		1,685
Dividends		12		11		24		24
Dividend income on restricted investment in bank stocks		162		49		326		70
Interest on interest-bearing deposits in other banks		4		—		6		12
Total interest income		13,651		11,111		26,958		21,740
INTEREST EXPENSE
Interest on deposits		3,833		706		6,884		1,391
Interest on short-term borrowings		2,302		182		4,349		210
Interest on long-term borrowings		134		168		266		358
Interest on subordinated debt		274		274		547		544
Total interest expense		6,543		1,330		12,046		2,503
Net interest income		7,108		9,781		14,912		19,237
Provision for credit losses		34		218		34		437
Net interest income after provision for credit losses		7,074		9,563		14,878		18,800
NON-INTEREST INCOME
Trust department		248		268		478		518
Service charges and fees		571		549		1,096		1,058
Increase in cash surrender value of life insurance		153		148		302		296
ATM fees and debit card income		566		558		1,098		1,067
Net gains (losses) on sales of mortgage loans		17		—		34		(34)
Net securities losses		(69)		(68)		(125)		(131)
Other		53		59		108		129
Total non-interest income		1,539		1,514		2,991		2,903
NON-INTEREST EXPENSE
Salaries and employee benefits		3,733		3,462		8,119		7,016
Occupancy, net		559		478		1,087		970
Furniture and equipment expense		156		147		308		302
Computer expense		406		358		769		728
Professional services		346		370		781		668
Pennsylvania shares tax		241		324		482		648
FDIC insurance, net		178		120		354		257
ATM and debit card fees		278		242		585		370
Data processing fees		357		251		669		509
Advertising		154		118		228		190
Other		749		725		1,528		1,453
Total non-interest expense		7,157		6,595		14,910		13,111
Income before income tax expense		1,456		4,482		2,959		8,592
Income tax expense		317		660		463		1,227
NET INCOME	$	1,139	$	3,822	$	2,496	$	7,365
PER SHARE DATA
Net income per share:
Basic	$	0.19	$	0.64	$	0.41	$	1.24
Diluted		0.19		0.64		0.41		1.24
Dividends per share		0.28		0.28		0.56		0.56

See accompanying notes to consolidated financial statements.

FIRST KEYSTONE CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)


(Dollars in thousands)	Three Months Ended
	June 30,
	2023		2022

Net income	$	1,139	$	3,822

Other comprehensive loss:
Unrealized net holding losses on debt securities available-for-sale arising during the period, net of income taxes of $(993) and $(2,850), respectively		(3,736)		(10,723)

Less reclassification adjustment for net gains included in net income, net of income taxes of $(0) and $(6), respectively (a) (b)		—		(21)

Total other comprehensive loss		(3,736)		(10,744)

Total Comprehensive Loss	$	(2,597)	$	(6,922)


(Dollars in thousands)	Six Months Ended
	June 30,
	2023		2022

Net income:	$	2,496	$	7,365

Other comprehensive income (loss):
Unrealized net holding gains (losses) on debt securities available-for-sale arising during the period, net of income taxes of $32 and $(7,445), respectively		120		(28,006)

Less reclassification adjustment for net gains included in net income, net of income taxes of $(21) and $(6), respectively (a) (b)		(78)		(21)

Total other comprehensive income (loss)		42		(28,027)

Total Comprehensive Income (Loss)	$	2,538	$	(20,662)

______________________________

(a)

Gross amounts are included in net securities losses on the consolidated statements of income in non-interest income.

(b)

Income tax amounts are included in income tax expense on the consolidated statements of income.

See accompanying notes to consolidated financial statements.

FIRST KEYSTONE CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited)


								Accumulated
(Dollars in thousands, except								Other				Total
per share data)	Common Stock					Retained		Comprehensive		Treasury		Stockholders’
	Shares	Amount		Surplus		Earnings		Loss		Stock		Equity
Balance at January 1, 2023	6,250,763	$	12,502	$	42,439	$	100,712	$	(29,558)	$	(5,709)	$	120,386
Cumulative effect of adoption of ASU No. 2016-13							768						768
Net income							1,357						1,357
Other comprehensive income, net of taxes									3,778				3,778
Issuance of common stock under dividend reinvestment plan	20,787		41		381								422
Dividends - $0.28 per share							(1,685)						(1,685)
Balance at March 31, 2023	6,271,550	$	12,543	$	42,820	$	101,152	$	(25,780)	$	(5,709)	$	125,026
Net Income							1,139						1,139
Other comprehensive loss, net of taxes									(3,736)				(3,736)
Issuance of common stock under dividend reinvestment plan	24,833		50		397								447
Dividends - $0.28 per share							(1,691)						(1,691)
Balance at June 30, 2023	6,296,383	$	12,593	$	43,217	$	100,600	$	(29,516)	$	(5,709)	$	121,185


								Accumulated
(Dollars in thousands, except								Other				Total
per share data)	Common Stock					Retained		Comprehensive		Treasury		Stockholders’
	Shares	Amount		Surplus		Earnings		Loss		Stock		Equity

Balance at January 1, 2022	6,178,835	$	12,358	$	40,940	$	93,378	$	7,588	$	(5,709)	$	148,555
Net income							3,543						3,543
Other comprehensive loss, net of taxes									(17,282)				(17,282)
Issuance of common stock under dividend reinvestment plan	16,297		32		372								404
Dividends - $0.28 per share							(1,665)						(1,665)
Balance at March 31, 2022	6,195,132	$	12,390	$	41,312	$	95,256	$	(9,694)	$	(5,709)	$	133,555
Net Income							3,822						3,822
Other comprehensive loss, net of taxes									(10,744)				(10,744)
Issuance of common stock under dividend reinvestment plan	17,840		36		379								415
Dividends - $0.28 per share							(1,669)						(1,669)
Balance at June 30, 2022	6,212,972	$	12,426	$	41,691	$	97,409	$	(20,438)	$	(5,709)	$	125,379

See accompanying notes to consolidated financial statements.

FIRST KEYSTONE CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited)


(Dollars in thousands)	2023		2022

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,496	$	7,365
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for credit losses		34		437
Provision (credit) for credit losses on unfunded commitments		45		(60)
Depreciation and amortization		540		528
Net premium amortization on securities		799		1,633
Deferred income tax expense (benefit)		34		(25)
Common stock issued		856		805
Net (gains) losses on sales of mortgage loans		(34)		34
Proceeds from sales of mortgage loans originated for sale		1,121		4,429
Originations of mortgage loans originated for sale		(1,016)		(6,068)
Net securities losses		125		131
Decrease (increase) in accrued interest receivable		218		(112)
Increase in cash surrender value of bank owned life insurance		(302)		(296)
Net losses on disposals of premises and equipment		2		10
Increase in other assets		(87)		(639)
Amortization of investment in low-income housing partnerships

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10-Q	[2022-05-06]
10-K	[2022-03-14]
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10-Q	[2021-05-07]
10-K	[2021-03-15]
10-Q	[2020-11-16]
10-Q	[2020-08-07]
10-Q	[2020-05-08]
10-K	[2020-03-13]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-05-09]
10-K	[2019-03-18]
10-Q	[2018-11-08]
10-Q	[2018-08-08]
10-Q	[2018-05-09]
10-K	[2018-03-16]
10-Q	[2017-11-08]
10-Q	[2017-08-07]
10-Q	[2017-05-09]
10-K	[2017-03-17]
10-Q	[2016-11-08]
10-Q	[2016-08-08]
10-Q	[2016-05-10]
10-K	[2016-03-15]
10-Q	[2015-11-06]
10-Q	[2015-08-07]
10-Q	[2015-05-08]
10-K	[2015-03-16]
10-Q	[2014-11-07]
10-Q	[2014-08-08]
10-Q	[2014-05-09]
10-K	[2014-03-14]
10-Q	[2013-11-07]
10-Q	[2013-08-08]
10-Q	[2013-05-09]
10-K	[2013-03-18]
10-Q	[2012-11-09]
10-Q	[2012-08-09]
10-Q	[2012-05-10]
10-K	[2012-03-15]