PARTNERS BANCORP [PTRS] Filings

10-Q 1 ptrs-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
or
☐	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: 001-39285

Partners Bancorp

(Exact name of registrant as specified in its charter)

Maryland	52-1559535
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2245 Northwood Drive, Salisbury, Maryland	21801
(Address of principal executive offices)	(Zip Code)

410-548-1100

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	PTRS	Nasdaq Capital Market

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller 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 Exchange Act). Yes ☐ No ☒

As of August 11, 2023, there were 17,985,577 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.

Table of Contents

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION



		Page
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)		3

Consolidated Statements of Income (Unaudited)		4

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)		5

Consolidated Statements of Stockholders' Equity (Unaudited)		6

Consolidated Statements of Cash Flows (Unaudited)		7

Notes to Consolidated Financial Statements (Unaudited)		8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		48

Item 3. Quantitative and Qualitative Disclosures About Market Risk		83

Item 4. Controls and Procedures		83

PART II OTHER INFORMATION


Item 1. Legal Proceedings		83

Item 1A. Risk Factors		83

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		83

Item 3. Defaults Upon Senior Securities		84

Item 4. Mine Safety Disclosures		84

Item 5. Other Information		84

EXHIBIT INDEX		85

SIGNATURES		86

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS.

PARTNERS BANCORP

CONSOLIDATED BALANCE SHEETS



	June 30,		December 31,
	2023		2022
(Dollars in thousands, except per share amounts)	(Unaudited)		*

ASSETS
Cash and due from banks	$	16,011	$	14,678
Interest-bearing deposits in other financial institutions		43,128		103,922
Federal funds sold		17,478		22,990
Cash and cash equivalents		76,617		141,590
Securities available for sale, at fair value		129,259		133,657
Loans held for sale		519		1,314
Loans, less allowance for credit losses of $16,217 at June 30, 2023 and $14,315 at December 31, 2022		1,261,546		1,218,551
Accrued interest receivable		4,440		4,566
Premises and equipment, less accumulated depreciation		14,441		14,857
Restricted stock		6,163		6,512
Operating lease right-of-use assets		4,826		5,065
Financing lease right-of-use assets		1,482		1,550
Other investments		5,364		4,888
Bank owned life insurance		18,940		18,706
Core deposit intangible, net		1,300		1,540
Goodwill		9,582		9,582
Other assets		13,983		12,234
Total assets	$	1,548,462	$	1,574,612
LIABILITIES
Deposits:
Non-interest-bearing demand	$	500,500	$	528,770
Interest-bearing demand		118,842		121,787
Savings and money market		387,596		431,538
Time		311,544		257,510
		1,318,482		1,339,605
Accrued interest payable on deposits		907		267
Short-term borrowings with the Federal Home Loan Bank		31,100		42,000
Long-term borrowings with the Federal Home Loan Bank		19,800		19,800
Subordinated notes payable, net		22,238		22,215
Other borrowings		602		613
Operating lease liabilities		5,230		5,465
Financing lease liabilities		1,941		2,006
Other liabilities		4,855		3,312
Total liabilities		1,405,155		1,435,283
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $0.01, authorized 40,000,000 shares, issued and outstanding 17,985,577 as of June 30, 2023 and 17,973,724 as of December 31, 2022, including 9,338 nonvested shares as of June 30, 2023 and 18,669 nonvested shares as of December 31, 2022		180		180
Surplus		88,785		88,669
Retained earnings		67,097		62,854
Noncontrolling interest in consolidated subsidiaries		592		707
Accumulated other comprehensive loss, net of tax		(13,347)		(13,081)
Total stockholders' equity		143,307		139,329
Total liabilities and stockholders' equity	$	1,548,462	$	1,574,612

* Derived from audited consolidated financial statements.

The Notes to the Unaudited Consolidated Financial Statements are an integral part of these consolidated financial statements.

Table of Contents

PARTNERS BANCORP

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands, except per share amounts)	2023		2022		2023		2022
INTEREST INCOME ON:
Loans, including fees	$	17,118	$	13,209	$	33,269	$	26,103
Investment securities:
Taxable		676		516		1,364		912
Tax-exempt		187		181		372		365
Federal funds sold		306		63		570		80
Other interest income		536		554		1,240		716
		18,823		14,523		36,815		28,176
INTEREST EXPENSE ON:
Deposits		3,163		1,126		5,128		2,369
Borrowings		821		508		1,679		1,013
		3,984		1,634		6,807		3,382
NET INTEREST INCOME		14,839		12,889		30,008		24,794
Provision for credit losses		93		319		393		384
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		14,746		12,570		29,615		24,410
OTHER INCOME:
Service charges on deposit accounts		262		249		509		472
Mortgage banking income, net		104		427		356		718
Impairment loss on restricted stock		—		(1)		—		(1)
Other income		709		778		1,436		1,556
		1,075		1,453		2,301		2,745
OTHER EXPENSES:
Salaries and employee benefits		5,849		5,504		11,854		11,080
Premises and equipment		1,374		1,400		2,776		2,881
(Gains) and operating expenses on other real estate owned, net		—		(2)		—		(9)
Amortization of core deposit intangible		119		132		240		266
Merger related expenses		428		157		1,460		553
Other expenses		3,121		2,723		6,171		5,530
		10,891		9,914		22,501		20,301
INCOME BEFORE TAXES ON INCOME		4,930		4,109		9,415		6,854
Federal and state income taxes		1,250		926		2,436		1,622
NET INCOME	$	3,680	$	3,183	$	6,979	$	5,232
Net loss (income) attributable to noncontrolling interest		84		(4)		115		56
NET INCOME ATTRIBUTABLE TO PARTNERS BANCORP	$	3,764	$	3,179	$	7,094	$	5,288
Earnings per common share:
Basic earnings per share	$	0.21	$	0.18	$	0.39	$	0.29
Diluted earnings per share	$	0.21	$	0.18	$	0.39	$	0.29

The Notes to the Unaudited Consolidated Financial Statements are an integral part of these consolidated financial statements.

Table of Contents

PARTNERS BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2023		2022		2023		2022
NET INCOME	$	3,680	$	3,183	$	6,979	$	5,232
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Unrealized holding losses on securities available for sale arising during the period		(2,052)		(6,783)		(331)		(14,442)
Deferred income tax effect		477		1,549		65		3,365
Other comprehensive loss, net of tax		(1,575)		(5,234)		(266)		(11,077)

TOTAL OTHER COMPREHENSIVE LOSS		(1,575)		(5,234)		(266)		(11,077)
COMPREHENSIVE INCOME (LOSS)	$	2,105	$	(2,051)	$	6,713	$	(5,845)
Comprehensive loss (income) attributable to noncontrolling interest		84		(4)		115		56
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO PARTNERS BANCORP	$	2,189	$	(2,055)	$	6,828	$	(5,789)

The Notes to the Unaudited Consolidated Financial Statements are an integral part of these consolidated financial statements.

Table of Contents

PARTNERS BANCORP

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


For the three months ended:									Accumulated
									Other		Total
	Common				Retained		Noncontrolling		Comprehensive		Stockholders'
(Dollars in thousands, except per share amounts)	Stock		Surplus		Earnings		Interest		Loss		Equity
Balances, March 31, 2022	$	179	$	88,529	$	52,965	$	1,118	$	(5,528)	$	137,263
Net income		—		—		3,179		4		—		3,183
Other comprehensive loss, net of tax		—		—		—		—		(5,234)		(5,234)
Comprehensive loss												(2,051)
Cash dividends, $0.025 per share		—		—		(449)		—		—		(449)
Stock-based compensation expense		—		23		—		—		—		23
Balances, June 30, 2022	$	179	$	88,552	$	55,695	$	1,122	$	(10,762)	$	134,786

Balances, March 31, 2023	$	180	$	88,762	$	64,052	$	676	$	(11,772)	$	141,898
Net income (loss)		—		—		3,764		(84)		—		3,680
Other comprehensive loss, net of tax		—		—		—		—		(1,575)		(1,575)
Comprehensive income												2,105
Cash dividends, $0.040 per share		—		—		(719)		—		—		(719)
Stock-based compensation expense		—		23		—		—		—		23
Balances, June 30, 2023	$	180	$	88,785	$	67,097	$	592	$	(13,347)	$	143,307


For the six months ended:									Accumulated
									Other		Total
	Common				Retained		Noncontrolling		Comprehensive		Stockholders'
(Dollars in thousands, except per share amounts)	Stock		Surplus		Earnings		Interest		Income (Loss)		Equity
Balances, December 31, 2021	$	179	$	88,390	$	51,305	$	1,179	$	315	$	141,368
Net income (loss)		—		—		5,288		(56)		—		5,232
Other comprehensive loss, net of tax		—		—		—		—		(11,077)		(11,077)
Comprehensive loss												(5,845)
Cash dividends, $0.050 per share		—		—		(898)		—		—		(898)
Minority interest equity distribution		—		—		—		(1)		—		(1)
Stock option exercises, net		—		115		—		—		—		115
Stock-based compensation expense		—		47		—		—		—		47
Balances, June 30, 2022	$	179	$	88,552	$	55,695	$	1,122	$	(10,762)	$	134,786

Balances, December 31, 2022	$	180	$	88,669	$	62,854	$	707	$	(13,081)	$	139,329
Net income (loss)		—		—		7,094		(115)		—		6,979
Other comprehensive loss, net of tax		—		—		—		—		(266)		(266)
Comprehensive income												6,713
Cumulative effect adjustment due to the adoption of ASU 2016-13		—		—		(1,412)		—		—		(1,412)
Cash dividends, $0.080 per share		—		—		(1,439)		—		—		(1,439)
Stock option exercises, net		—		69		—		—		—		69
Stock-based compensation expense		—		47		—		—		—		47
Balances, June 30, 2023	$	180	$	88,785	$	67,097	$	592	$	(13,347)	$	143,307

The Notes to the Unaudited Consolidated Financial Statements are an integral part of these consolidated financial statements.

Table of Contents

PARTNERS BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended
	June 30,
(Dollars in thousands)	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,094	$	5,288
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		393		384
Depreciation		837		943
Amortization and accretion		124		250
Loss on equity securities		—		151
Gain on sale of loans held for sale, originated		(334)		(655)
Net gains on other real estate owned, including write‑downs		—		(5)
Increase in bank owned life insurance cash surrender value		(234)		(225)
Stock‑based compensation expense, net of employee tax obligation		47		47
Net accretion of certain acquisition related fair value adjustments		(45)		(175)
Impairment loss on restricted stock		—		1
Changes in assets and liabilities:
Loans held for sale		1,129		1,663
Accrued interest receivable		126		227
Other assets		(946)		(744)
Accrued interest payable on deposits		640		(63)
Other liabilities		903		(453)
Net cash provided by operating activities		9,734		6,634
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale		(1,768)		(35,206)
Purchases of other investments		(476)		(15)
Proceeds from maturities and paydowns of securities available for sale		5,734		7,138
Net increase in loans		(44,538)		(52,804)
Purchases of premises and equipment		(421)		(415)
Proceeds from the sales of foreclosed assets		—

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