SVB&T Corporation, Parent Company of Springs Valley Bank & Trust Company, Reports 2022 Fourth Quarter and Annual Earnings and Declares Quarterly Dividend

JASPER, IN / ACCESSWIRE / February 14, 2023 / SVB&T Corporation (OTCQX:SVBT), parent company of Springs Valley Bank & Trust Company, today announced 2022 fourth quarter unaudited earnings of $1.43 million or $1.30 earnings per share (EPS), a 17.12% increase over the same prior year period earnings on a per share basis. This fourth quarter 2022 performance translates to a return on average assets (ROAA) of 1.06%, compared to the same prior year period of 0.98%.

SVB&T Corporation also announced that its Board of Directors declared a quarterly dividend of $0.18 per share of the Corporation's common stock. The quarterly dividend is payable on or about April 14, 2023, to shareholders of record as of the close of business on March 15, 2023.The dividend declared is a 12.50% annualized increase (adjusted for the stock split that occurred in March 2022) over the total dividend declared for the 2022 fiscal year.

Net interest income before provision expense for the fourth quarter ended December 31, 2022 was $4.87 million compared to $4.73 million for the same period in 2021. Interest income increased $1.08 million compared to the prior year fourth quarter, primarily due to increased loan balances and increased interest rates on loans resulting from the increasing rate environment. Interest expense increased $947,000 compared to the same prior year quarter, again due to the rising interest rate environment and increased deposit balances. Provision expense marginally increased by $38,000 over the prior year fourth quarter. Additionally, noninterest income decreased approximately $14,000 to $1.96 million from $1.98 million. The reduced income can primarily be attributed to slightly lower revenue from the Financial Advisory Group, resulting from a down equities market for much of the quarter compared to the fourth quarter of 2021, and reduced revenue from sold mortgages because mortgage volume has decreased, as one would expect, due to the rising interest rate environment and its effect primarily on mortgage refinancing as compared to 2021 volume. That said, noninterest income generation continues to be a strategic focus of SVB&T's by growing the Financial Advisory Group, increasing sold loan income, expanding electronic banking services, and other avenues, to continue to reduce margin dependence. Noninterest expense decreased $178,000 to $4.80 million from $4.98 million, attributable to decreases in professional services fees and in other general operating expenses, the largest of which being decreased salary and employee benefits expenses, including healthcare claims and profit sharing.

Quarter over trailing quarter earnings decreased approximately $191,000 or 11.77%. The earnings decrease was driven by higher interest expense, primarily due to the increase in deposit balances and rates as the rate environment continues to move higher, elevated provision for loan losses, and reduced sold loan income in the fourth quarter of 2022.

SVB&T Corporation book value (adjusted for the 2022 stock split) has decreased from $51.54 per share as of December 31, 2021, to $50.31 as of December 31, 2022, a 2.39% decrease. The book value decrease can be attributed to the unrealized loss position on the securities portfolio, resulting from the increasing rate environment. This is not a material issue for the Corporation as tangible capital is still at a healthy level close to 10%, and the securities portfolio is maintained to provide diversification and liquidity rather than generating gains on sales of securities. SVB&T Corporation stock closed at $46.75 per share on the OTCQX exchange on December 31, 2022. In February of 2021, the Corporation's Board of Directors authorized a share repurchase program through December 31, 2022. Under the program, the Corporation is authorized to repurchase, from time to time as the Corporation deems appropriate, shares of SVB&T Corporation's common stock with an aggregate purchase price of up to $2.00 million. As of December 31, 2022, SVB&T has repurchased (adjusted for 2022 stock split) 24,400 shares, with an average purchase price of $40.59, under the program.

Total assets increased $70.47 million to $560.57 million on December 31, 2022, compared to December 31, 2021 assets of $490.10 million. Total loans before allowance increased $65.82 million to $453.04 million on December 31, 2022, from $387.22 million on December 31, 2021. The loan growth was primarily generated through commercial and agriculture real estate, commercial lines of credit, commercial nonreal estate, and consumer real estate lending. Springs Valley experienced substantial loan demand throughout 2022 and has a healthy pipeline heading into 2023 as well. The Bank does intend to strategically manage growth in 2023 to alleviate some of the pressure on the funding side of the balance sheet. Allowance as a percent of total loans was 1.55% as of December 31, 2022, compared to 1.88% as of December 31, 2021. Springs Valley conservatively provided to the allowance for loan losses during 2020 and 2021 out of an abundance of caution for potential future credit concerns that could result from the economic impact of the Covid-19 pandemic. Total deposits increased $82.31 million to $469.22 million on December 31, 2022, from $386.91 million on December 31, 2021. Noninterest-bearing deposits increased by approximately $3.69 million due primarily to increases in business accounts. Interest-bearing deposits have increased by approximately $78.62 million. These increases generally occurred across the board in most interest-bearing deposit categories with the largest increases occurring in Springs Valley's reciprocal deposit products and retail CDs, as well as increases due to the utilization of wholesale funding in the form of brokered deposits and short-term public fund CDs in order to fund the impressive loan growth Springs Valley originated in 2022.

Year to date (YTD) unaudited earnings for the twelve months ended December 31, 2022 were $6.35 million or $5.78 EPS, a 13.73% decrease over the same prior year period earnings on a per share basis. This YTD performance translates to an ROAA of 1.21%, compared to the same prior year period of 1.48%.

Net interest income before provision expense for the twelve months ended December 31, 2022 was $18.39 million compared to $18.76 million for the same period in 2021, a decrease of $367,000. Interest income increased approximately $844,000 as compared to the same prior year period, even with the absence in 2022 of the PPP loan origination fee income that was recognized in 2021 and the reversal of interest income in 2022 due to moving a large USDA guaranteed loan to nonaccrual status in the second quarter of 2022. The interest income increase was driven primarily by higher loan balances and increasing interest rates due to the external rate environment. Additionally, interest expense increased by $1.21 million over the same period due to increased balances and rates on interest-bearing deposits across the board, including the utilization of higher cost funding in the form of brokered CDs and public fund CDs to fund the substantial loan growth generated in 2022. YTD provision expense decreased by $313,000, compared to the same prior year period, as the Bank had a sufficient coverage ratio to adequately cover risk in the loan portfolio, and therefore less provision was needed in 2022. Total noninterest income increased $62,000 to $8.65 million YTD December 2022 from $8.59 million for the same period in 2021. The largest contributing factors to the positive variance were increased Financial Advisory Group income, Financial Services income from annuity sales in the first quarter of 2022, electronic banking income, servicing fees from sold loans, and a gain on sale of other real estate owned (OREO) in the first quarter of 2022. Growing noninterest income to reduce margin dependence continues to be a strategic focus of Springs Valley Bank & Trust. Noninterest expense increased $1.24 million to $18.52 million YTD December 2022 from $17.28 million for the same period in 2021. This expense increase was largely driven by various overhead components that have been necessary to build out the infrastructure to support the future growth of Springs Valley Bank & Trust and serve a growing customer base. The largest components of this expense have been increased salary and employee benefits expenses, additional data processing expenses, and higher advertising and marketing expenses.

"While I have experienced several tumultuous economic periods accompanied by volatile interest rate environments over the course of my four-decades in community banking, never have the increases come with the magnitude and velocity (seven increases totaling 425 basis points, with most of that occurring in the last two quarters) as we experienced in 2022," remarked President and CEO, Jamie Shinabarger. "The FOMC's actions in response to inflation have caused wholesale and other funding sources (FHLB advances, public funds, brokered CDs, subordinated debt, etc.) to explode in terms of cost. While rates on retail deposits are lagging, there remains considerable pressure on those as well," Shinabarger added. Connecting the dots, Mr. Shinabarger went on to say, "From June to December of 2022, SVB&T Corporation's consolidated monthly cost on average assets increased from 0.44% to 1.26% or 82 basis points, while the monthly spread between yield and cost contracted by only 12 basis points (6/30 spread of 3.67%; 12/30 spread of 3.55%). Stated another way, variable assets repricing higher and new loan originations offset over 85% of the negative impact of the cost to fund the Corporation's assets during the last half of 2022."

While the short-term expectation of rate movements continues to favor increases through at least mid-2023, it remains to be seen how much higher and how long these higher rates will remain. "We budgeted softer loan growth in 2023, knowing that demand would be dampened by higher rates, that funding costs would eat into our margin, and that credit deterioration could start to show as a result of stressed business cash flows. It's a pretty simple but challenging strategy: managing core funding costs will be the watchword for 2023, and Springs Valleys' full relationship customers will command the best rates on both sides of the balance sheet," Shinabarger concluded.

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For more information contact: Ryan Heim, Treasurer & CFO, SVB&T Corporation, at 812.634.4889 or rheim@svbt.com.

SVB&T Corporation is headquartered at 8482 West State Road 56, French Lick, Indiana 47432 with administrative offices at 1500 Main Street, Jasper, Indiana 47546. Its subsidiary, Springs Valley Bank & Trust Company, has locations in Dubois, Daviess, Gibson, and Orange Counties, offering full-service bank and financial services. Springs Valley has products and services for all types of families and businesses, including checking and savings accounts, certificates of deposit, electronic services, online consumer and mortgage applications, and a variety of other loan options. Springs Valley Bank is a member of FDIC and is an Equal Housing Lender.

In addition, the company has a full-service financial advisory group managed by experienced, talented professionals specializing in estate planning, tax planning, and wealth management. Investment services are also offered by a licensed, professional Springs Valley representative. Trust and investment products are not deposits; not insured by the FDIC; not a deposit or other obligation of, or guaranteed by, the depository institution; not insured by any Federal Government Agency; and may lose value - subject to investment risks, including possible loss of the principal amount invested.

More information can be found online at www.svbt.bank. The Corporation's stock is traded on the OTCQX trading platform under ticker symbol SVBT (www.otcmarkets.com).

Information conveyed in this press release regarding SVB&T Corporation's and its subsidiaries' anticipated future performance is forward-looking and therefore involves risks and uncertainties that could cause the results or developments to differ significantly from those indicated in these statements. These risks and uncertainties include, but are not limited to, risks and uncertainties inherent in general and local banking, as well as mortgage conditions, competitive factors specific to markets in which the company and its subsidiaries operate, future interest rate levels, changes in local real estate markets, legislative and regulatory decisions, capital market conditions, and/or other factors.

Selected Consolidated Financial Data of SVB&T Corporation
(In Thousands, Except Shares Outstanding and Per Share Data)

SOURCE: SVB&T Corporation