FIRST KEYSTONE CORP [FKYS] Filings

10-Q 1 fkys-20240630x10q.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, 2024


☐	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 every Interactive Data File required to be submitted 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 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 13(a) 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
None	N/A	N/A

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, 6,185,395 shares as of August 7, 2024.

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,
	2024		2023
ASSETS
Cash and due from banks	$	14,292	$	9,462
Interest-bearing deposits in other banks		1,979		7,551
Total cash and cash equivalents		16,271		17,013
Debt securities available-for-sale, at fair value		403,589		392,968
Marketable equity securities, at fair value		1,288		1,482
Restricted investment in bank stocks, at cost		11,493		10,885

Loans		922,189		910,864
Loans held for sale		305		214
Allowance for credit losses		(7,687)		(6,925)
Net loans		914,807		904,153
Premises and equipment, net		19,678		19,611
Operating lease right-of-use assets		1,453		1,472
Accrued interest receivable		5,328		5,201
Cash surrender value of bank owned life insurance		26,336		26,010
Investments in low-income housing partnerships		5,562		5,961
Goodwill		—		19,133
Deferred income taxes		9,351		8,695
Other assets		3,072		3,286
TOTAL ASSETS	$	1,418,228	$	1,415,870

LIABILITIES
Deposits:
Non-interest bearing	$	206,004	$	198,569
Interest bearing		778,205		781,870
Total deposits		984,209		980,439
Short-term borrowings		175,311		153,468
Long-term borrowings		122,000		122,000
Subordinated debentures		25,000		25,000
Operating lease liabilities		1,965		1,976
Accrued interest payable		3,698		2,823
Other liabilities		4,951		8,549
TOTAL LIABILITIES		1,317,134		1,294,255

STOCKHOLDERS’ EQUITY
Preferred stock, par value $2.00 per share; authorized 1,000,000 shares as of June 30, 2024 and December 31, 2023; issued 0 as of June 30, 2024 and December 31, 2023		—		—
Common stock, par value $2.00 per share; authorized 20,000,000 shares as of June 30, 2024 and December 31, 2023; issued 6,417,006 as of June 30, 2024 and 6,352,665 as of December 31, 2023; outstanding 6,185,395 as of June 30, 2024 and 6,121,054 as of December 31, 2023		12,834		12,705
Surplus		44,740		44,004
Retained earnings		79,826		100,260
Accumulated other comprehensive loss		(30,597)		(29,645)
Treasury stock, at cost, 231,611 shares as of June 30, 2024 and December 31, 2023		(5,709)		(5,709)

TOTAL STOCKHOLDERS’ EQUITY		101,094		121,615
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,418,228	$	1,415,870

See accompanying notes to consolidated financial statements.

FIRST KEYSTONE CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)


(Dollars in thousands, except per share data)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023

INTEREST INCOME
Interest and fees on loans	$	12,371	$	10,379	$	24,391	$	20,290
Interest and dividend income on securities:
Taxable		4,666		2,833		9,007		5,701
Tax-exempt		279		261		552		611
Dividends		12		12		24		24
Dividend income on restricted investment in bank stocks		243		162		478		326
Interest on interest-bearing deposits in other banks		22		4		87		6
Total interest income		17,593		13,651		34,539		26,958
INTEREST EXPENSE
Interest on deposits		6,019		3,833		11,973		6,884
Interest on short-term borrowings		2,021		2,302		3,987		4,349
Interest on long-term borrowings		1,278		134		2,556		266
Interest on subordinated debt		274		274		547		547
Total interest expense		9,592		6,543		19,063		12,046
Net interest income		8,001		7,108		15,476		14,912
Provision for credit losses		510		34		774		34
Net interest income after provision for credit losses		7,491		7,074		14,702		14,878
NON-INTEREST INCOME
Trust department		254		248		498		478
Service charges and fees		568		571		1,093		1,096
Increase in cash surrender value of life insurance		164		153		326		302
ATM fees and debit card income		565		566		1,082		1,098
Net gains on sales of mortgage loans		17		17		28		34
Net securities losses		(10)		(69)		(194)		(125)
Other		63		53		132		108
Total non-interest income		1,621		1,539		2,965		2,991
NON-INTEREST EXPENSE
Salaries and employee benefits		4,153		3,733		8,707		8,119
Occupancy, net		536		559		1,101		1,087
Furniture and equipment expense		150		156		302		308
Computer expense		340		406		709		769
Professional services		466		346		899		781
Pennsylvania shares tax		244		241		450		482
FDIC insurance, net		218		178		406		354
ATM and debit card fees		258		278		480		585
Data processing fees		235		357		524		669
Advertising		163		154		267		228
Goodwill Impairment		—		—		19,133		—
Other		903		749		1,833		1,528
Total non-interest expense		7,666		7,157		34,811		14,910
Income before income tax expense (benefit)		1,446		1,456		(17,144)		2,959
Income tax expense (benefit)		66		317		(147)		463
NET INCOME (LOSS)	$	1,380	$	1,139	$	(16,997)	$	2,496
PER SHARE DATA
Net income (loss) per share:
Basic	$	0.23	$	0.19	$	(2.77)	$	0.41
Diluted		0.23		0.19		(2.77)		0.41
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,
	2024		2023

Net income	$	1,380	$	1,139

Other comprehensive loss:
Unrealized net holding losses on debt securities available-for-sale arising during the period, net of income taxes of $(875) and $(993), respectively		(3,295)		(3,736)

Fair value adjustment on derivatives, net of income tax benefit of $167 and $0, respectively		617		—

Total other comprehensive loss		(2,678)		(3,736)

Total comprehensive loss	$	(1,298)	$	(2,597)


(Dollars in thousands)	Six Months Ended
	June 30,
	2024		2023

Net (loss) income	$	(16,997)	$	2,496

Other comprehensive (loss) income:
Unrealized net holding (losses) gains on debt securities available-for-sale arising during the period, net of income taxes of $(1,053) and $32, respectively		(3,962)		120

Less reclassification adjustment for net gains included in net income, net of income taxes of $0 and $(21), respectively (a) (b)		—		(78)

Fair value adjustment on derivatives, net of income tax benefit of $753 and $0, respectively		3,010		—

Total other comprehensive (loss) income		(952)		42

Total comprehensive (loss) income	$	(17,949)	$	2,538

______________________________

(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 (benefit) 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, 2024 AND 2023

(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, 2024	6,352,665	$	12,705	$	44,004	$	100,260	$	(29,645)	$	(5,709)	$	121,615
Net loss							(18,377)						(18,377)
Other comprehensive income, net of taxes									1,726				1,726
Issuance of common stock under dividend reinvestment plan	32,229		65		396								461
Dividends - $0.28 per share							(1,714)						(1,714)
Balance at March 31, 2024	6,384,894	$	12,770	$	44,400	$	80,169	$	(27,919)	$	(5,709)	$	103,711
Net income							1,380						1,380
Other comprehensive loss, net of taxes									(2,678)				(2,678)
Issuance of common stock under dividend reinvestment plan	32,112		64		340								404
Dividends - $0.28 per share							(1,723)						(1,723)
Balance at June 30, 2024	6,417,006	$	12,834	$	44,740	$	79,826	$	(30,597)	$	(5,709)	$	101,094



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

See accompanying notes to consolidated financial statements.

FIRST KEYSTONE CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(Unaudited)


(Dollars in thousands)	2024		2023

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(16,997)	$	2,496
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses on loans		774		34
Provision for credit losses on unfunded commitments		29		45
Goodwill impairment		19,133		—
Depreciation and amortization		553		540
Net premium amortization on securities		285		799
Deferred income tax (benefit) expense		(357)		34
Common stock issued		855		856
Net gains on sales of mortgage loans		(28)		(34)
Proceeds from sales of mortgage loans originated for sale		1,599		1,121
Originations of mortgage loans originated for sale

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