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EAGLE FINANCIAL SERVICES, INC. ANNOUNCES 2022 FOURTH QUARTER FINANCIAL RESULTS
EAGLE FINANCIAL SERVICES, INC. ANNOUNCES 2022 FOURTH QUARTER FINANCIAL RESULTS
PR Newswire
BERRYVILLE, Va., Jan. 31, 2023
BERRYVILLE, Va., Jan. 31, 2023 /PRNewswire/ — Eagle Financial Services, Inc. (OTCQX: EFSI), the holding company for Bank of C…
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EAGLE FINANCIAL SERVICES, INC. ANNOUNCES 2022 FOURTH QUARTER FINANCIAL RESULTS
PR Newswire
BERRYVILLE, Va., Jan. 31, 2023
BERRYVILLE, Va., Jan. 31, 2023 /PRNewswire/ -- Eagle Financial Services, Inc. (OTCQX: EFSI), the holding company for Bank of Clarke, whose divisions include Bank of Clarke Wealth Management, announced its fourth quarter 2022 results. Select highlights for the fourth quarter include:
- Net income of $3.2 million
- Basic and diluted earnings per share of $0.92
- Loan activity:
- Sales - $58.6 million
- Net growth - $121.5 million
Brandon Lorey, President and CEO, stated, "The Bank of Clarke and its employees delivered a number of records for Eagle Financial Services, Inc. in 2022, including loan growth, earnings, earnings per share, and revenue, despite a significantly higher interest rate environment driving increased competition for core deposits. For the year, the Bank's commercial and residential lending team along with our niche marine division, LV Finance, delivered loan growth of $338.0 million or 25.5%. The Bank also reached a new after-tax earnings record of $14.5 million translating to a record EPS of $4.17 per share and top line revenue of $62.6 million. Additionally, the Bank's Trust and Wealth Management division broke through the $500 million threshold in Assets Under Management (AUM) over the year and contributed over $1 million in after tax-revenue to the company, more than three times its historical contribution. We continue to remain focused on our customers, community, and shareholders by providing the customer service of Main Street with the product set of Wall Street. Thanks to our phenomenal staff for their continued and tireless work in putting our customers in the center of everything we do, as we work to earn the moniker of being the trusted financial partners for all we serve in the Valley and Northern Virginia."
Income Statement Review
Net income for the quarter ended December 31, 2022 was $3.2 million reflecting a decrease of 21.7% from the quarter ended September 30, 2022 and an increase of 40.0% from the quarter ended December 31, 2021. The decrease from the quarter ended September 30, 2022 was primarily due to the $930 thousand provision for loan losses that was expensed during the fourth quarter of 2022 to keep pace with loan growth. The increase from the quarter ended December 31, 2021 was mainly driven by increased net interest income led by strong loan growth. Net income was $4.1 million for the three-month period ended September 30, 2022 and $2.3 million for the quarter ended December 31, 2021.
Net interest income for the quarter ended December 31, 2022 was $13.3 million reflecting an increase of 2.8% from the quarter ended September 30, 2022 and an increase of 19.5% from the quarter ended December 31, 2021. Net interest income was $12.9 million and $11.1 million for the quarters ended September 30, 2022 and December 31, 2021, respectively. The increase in net interest income from the quarters ended September 30, 2022 and December 31, 2021 resulted primarily from growth in the Company's loan portfolio along with the rising interest rate environment.
Total loan interest income was $15.1 million and $13.3 million for the quarters ended December 31, 2022 and September 30, 2022, respectively. Total loan interest income was $10.7 million for the quarter ended December 31, 2021. Total loan interest income increased $4.4 million or 41.7% from the quarter ended December 31, 2021 to the quarter ended December 31, 2022. Average loans for the quarter ended December 31, 2022 were $1.26 billion compared to $963.9 million for the quarter ended December 31, 2021. The tax equivalent yield on average loans for the quarter ended December 31, 2022 was 4.78%, an increase of 38 basis points from the 4.40% average yield for the same time period in 2021. The majority of this increase in yield can be attributed to the current rising interest rate environment.
Interest and dividend income from the investment portfolio was $879 thousand for the quarter ended December 31, 2022 compared to $932 thousand for the quarter ended September 30, 2022. Interest income and dividend income from the investment portfolio was $784 thousand for the quarter ended December 31, 2021. The decrease in interest and dividend income between the third and fourth quarters of 2022 resulted from the sale of securities during the third quarter of 2022. The increase in interest and dividend income between the quarters ended December 31, 2022 and December 31, 2021 resulted from the increase in yields on securities purchased during 2022. Average investments for the quarter ended December 31, 2022 were $154.3 million compared to $197.1 million for the quarter ended December 31, 2021. The tax equivalent yield on average investments for the quarter ended December 31, 2022 was 2.26%, up 19 basis points from 2.07% for the quarter ended September 30, 2022 and up 62 basis points from 1.64% for the quarter ended December 31, 2021.
Total interest expense was $2.9 million for the three months ended December 31, 2022 and $1.5 million and $373 thousand for three months ended September 30, 2022 and December 31, 2021, respectively. The increase in interest expense resulted from increases on rates paid on deposit accounts, the subordinated notes that the Company issued on March 31, 2022, which are currently paying a 4.5% fixed rate, and Federal Home Loan Bank advances of $175 million entered into during the third and fourth quarters of 2022. The average cost of interest-bearing liabilities increased 57 and 103 basis points when comparing the quarter ended December 31, 2022 to the quarters ended September 30, 2022 and December 31, 2021, respectively. The average balance of interest-bearing liabilities increased $65.6 million from the quarter ended September 30, 2022 to the quarter ended December 31, 2022. The average balance of interest-bearing liabilities increased $225.6 million from the quarter ended December 31, 2021 to the same period in 2022.
The net interest margin was 3.68% for the quarter ended December 31, 2022. For the quarters ended September 30, 2022 and December 31, 2021, the net interest margin was 3.72% and 3.67%, respectively. The Company's net interest margin is not a measurement under accounting principles generally accepted in the United States, but it is a common measure used by the financial services industry to determine how profitably earning assets are funded. The Company's net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets. Tax equivalent net interest income is calculated by grossing up interest income for the amounts that are non-taxable (i.e., municipal income) then subtracting interest expense. The tax rate utilized is 21%.
Noninterest income was $3.1 million for the quarter ended December 31, 2022, which represented a decrease of $75 thousand or 2.4% from the $3.2 million for the three months ended September 30, 2022. Noninterest income for the quarter ended December 31, 2021 was $3.4 million. The $273 thousand or 8.1% decrease between the quarters ended December 31, 2021 and December 31, 2022 was driven mainly by lower gains on the sale of loans held for sale which were largely impacted by the rising interest rate environment.
Noninterest expense increased $490 thousand, or 4.4%, to $11.5 million for the quarter ended December 31, 2022 from $11.1 million for the quarter ended September 30, 2022. The largest increase was in other operating expenses, which includes loan expense. This increase was due mainly to the high loan volume experienced during the fourth quarter of 2022. Noninterest expense was $11.9 million for the quarter ended December 31, 2021, representing a decrease of $335 thousand or 2.8% when comparing the quarter ended December 31, 2022 to the quarter ended December 31, 2021. An increase in salaries and benefits expenses was noted between the fourth quarter of 2022 and the same period in 2021. Annual pay increases, newly hired employees, incentive plan accruals and increased insurance costs have attributed to these increases. The number of full-time equivalent employees (FTEs) has increased from 221 at December 31, 2021, to 241 at December 31, 2022. This increase was offset by a large decrease in professional fees and more specifically, legal expenses. Legal expenses were higher in the fourth quarter of 2021 primarily from the expansion of the Bank's wealth management business line and also its build out of the marine lending division. Approximately $2.0 million of those expenses were one-time fees.
Asset Quality and Provision for Loan Losses
Nonperforming assets consist of nonaccrual loans, loans 90 days or more past due and still accruing, other real estate owned (foreclosed properties), and repossessed assets. Nonperforming assets increased from $2.4 million or 0.16% of total assets at September 30, 2022 to $2.6 million or 0.16% of total assets at December 31, 2022. Nonperforming assets were $2.8 million at December 31, 2021. Total nonaccrual loans were $2.2 million at December 31, 2022 and $2.4 million at September 30, 2022. Nonaccrual loans were $2.7 million at December 31, 2021. The majority of all nonaccrual loans are secured by real estate and management evaluates the financial condition of these borrowers and the value of any collateral on these loans. The results of these evaluations are used to estimate the amount of losses which may be realized on the disposition of these nonaccrual loans. Other real estate owned was $108 thousand and zero at December 31, 2022 and September 30, 2022, respectively.
The Company may, under certain circumstances, restructure loans in troubled debt restructurings as a concession to a borrower when the borrower is experiencing financial distress. Formal, standardized loan restructuring programs are not utilized by the Company. Each loan considered for restructuring is evaluated based on customer circumstances and may include modifications to one or more loan provision. Such restructured loans are included in impaired loans but may not necessarily be nonperforming loans. At December 31, 2022, the Company had 28 troubled debt restructurings totaling $4.6 million. Approximately $4.4 million or 26 loans are performing loans, while the remaining loans are on non-accrual status. At September 30, 2022, the Company had 26 troubled debt restructurings totaling $4.4 million. Approximately $4.2 million or 24 loans were performing loans, while the remaining loans were on non-accrual status.
The Company realized $454 thousand in net charge-offs for the quarter ended December 31, 2022 versus $895 thousand in net recoveries for the three months ended September 30, 2022. During the three months ended December 31, 2021, $39 thousand in net recoveries were recognized. The amount of provision for loan losses reflects the results of the Bank's analysis used to determine the adequacy of the allowance for loan losses. The Company recorded $930 thousand in provision for loan loss for the quarter ended December 31, 2022 due to the significant growth of the loan portfolio during the quarter. The Company recognized provision for loan losses of zero and $300 thousand for the quarters ended September 30, 2022 and December 31, 2021, respectively. The lack of provision for the quarter ended September 30, 2022 was due to the large net recovery that was recognized during the quarter. The provision for the quarter ended December 31, 2021 resulted mostly from loan growth during the quarter. The ratio of allowance for loan losses to total loans was 0.85% at December 31, 2022 and 0.89% at September 30, 2022. The ratio of allowance for loan losses to total loans was 0.89% at December 31, 2021. The decrease in the ratio of the allowance for loan losses to total loans is mainly attributable to the type of new loans that are being originated in the portfolio. The majority of growth has been in the commercial real estate and marine loan pools, which have a lower allocation percentage than the overall portfolio. The ratio of allowance for loan losses to total nonaccrual loans was 518.86% at December 31, 2022. The ratio of allowance for loan losses to total nonaccrual loans was 442.59% and 488.85% at September 30, 2022 and December 31, 2021, respectively. Management's judgment in determining the level of the allowance is based on evaluations of the collectability of loans while taking into consideration such factors as trends in delinquencies and charge-offs, changes in the nature and volume of the loan portfolio, current economic conditions that may affect a borrower's ability to repay and the value of collateral, overall portfolio quality and review of specific potential losses. The Company is committed to maintaining an allowance at a level that adequately reflects the risk inherent in the loan portfolio.
Total Consolidated Assets
Total consolidated assets of the Company at December 31, 2022 were $1.62 billion, which represented an increase of $143.6 million or 9.75% from total assets of $1.47 billion at September 30, 2022. At December 31, 2021, total consolidated assets were $1.30 billion. Total net loans increased $121.5 million from $1.19 billion at September 30, 2022 to $1.31 billion at December 31, 2022. During the quarter ended December 31, 2022, $58.6 million in loans were sold. The Company sold $961 thousand in mortgage loans on the secondary market and $57.7 million of loans from the commercial and consumer loan portfolios. These loan sales resulted in net gains of $55 thousand. Total securities increased $2.0 million from $156.4 million at September 30, 2022, to $158.4 million at December 31, 2022. At December 31, 2021, total investment securities were $193.4 million and net loans were $976.9 million. The growth in total loans and total assets was largely due to organic loan portfolio growth as the Company expands lending types and markets.
Deposits and Other Borrowings
Total deposits increased to $1.26 billion as of December 31, 2022 when compared to September 30, 2022 deposits of $1.25 billion. At December 31, 2021 total deposits were $1.18 billion. The growth in deposits was mainly organic growth as the Company continues to expand and grow into newer market areas.
The Company had $175.0 million and $75.0 million, respectively, in outstanding borrowings from the Federal Home Loan Bank of Atlanta at December 31, 2022 and September 30, 2022. There were no outstanding borrowings from the Federal Home Loan Bank as of December 31, 2021. At December 31, 2022, the Company had $33.0 million outstanding in fed funds purchased. There were no outstanding fed funds purchased as of September 30, 2022 or December 31, 2021. These borrowings were used mainly to fund the strong loan growth that occurred during the quarter ended December 31, 2022.
On March 31, 2022, the Company entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers and accredited institutional investors, pursuant to which the Company issued 4.50% Fixed-to-Floating Rate Subordinated Notes due 2032, in the aggregate principal amount of $30.0 million.
Equity
Shareholders' equity was $101.7 million and $98.5 million at December 31, 2022 and September 30, 2022, respectively. Shareholders' equity was $110.3 million at December 31, 2021. The decrease in shareholder's equity at December 31, 2022 in comparison to December 31, 2021 was driven by the other comprehensive loss from the unrealized loss on available for sale securities. The book value of the Company at December 31, 2022 was $29.15 per common share. Total common shares outstanding were 3,490,086 at December 31, 2022. On January 25, 2023, the board of directors declared a $0.30 per common share cash dividend for shareholders of record as of February 6, 2023 and payable on February 17, 2023.
Cautionary Note Regarding Forward-Looking Statements
Certain information contained in this discussion may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company's future operations and are generally identified by phrases such as "the Company expects," "the Company believes" or words of similar import. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.
Factors that could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to: changes in interest rates and general economic conditions; the effects of the COVID-19 pandemic, including on the Company's credit quality and business operations, as well as its impact on general economic and financial market conditions; the legislative and regulatory climate; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and Federal Reserve; the quality or composition of the Company's loan or investment portfolios; demand for loan products; deposit flows; competition; demand for financial services in the Company's market area; acquisitions and dispositions; the Company's ability to keep pace with new technologies; a failure in or breach of the Company's operational or security systems or infrastructure, or those of third-party vendors or other service providers, including as a result of cyberattacks; the Company's capital and liquidity requirements; changes in tax and accounting rules, principles, policies and guidelines; and other factors included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 and other filings with the Securities and Exchange Commission.
EAGLE FINANCIAL SERVICES, INC. | ||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||
4Q22 | 3Q22 | 2Q22 | 1Q22 | 4Q21 | ||||||||||||||||
Net Income (dollars in thousands) | $ | 3,197 | $ | 4,082 | $ | 3,992 | $ | 3,250 | $ | 2,283 | ||||||||||
Earnings per share, basic | $ | 0.92 | $ | 1.17 | $ | 1.14 | $ | 0.94 | $ | 0.66 | ||||||||||
Earnings per share, diluted | $ | 0.92 | $ | 1.17 | $ | 1.14 | $ | 0.94 | $ | 0.66 | ||||||||||
Return on average total assets | 0.83 | % | 1.12 | % | 1.16 | % | 0.99 | % | 0.70 | % | ||||||||||
Return on average total equity | 12.70 | % | 15.93 | % | 15.86 | % | 12.08 | % | 8.20 | % | ||||||||||
Dividend payout ratio | 32.61 | % | 24.79 | % | 24.56 | % | 29.79 | % | 42.42 | % | ||||||||||
Fee revenue as a percent of total revenue | 14.92 | % | 16.11 | % | 15.73 | % | 15.32 | % | 15.16 | % | ||||||||||
Net interest margin(1) | 3.68 | % | 3.72 | % | 3.70 | % | 3.61 | % | 3.67 | % | ||||||||||
Yield on average earning assets | 4.48 | % | 4.14 | % | 3.93 | % | 3.73 | % | 3.79 | % | ||||||||||
Rate on average interest-bearing liabilities | 1.25 | % | 0.68 | % | 0.38 | % | 0.21 | % | 0.22 | % | ||||||||||
Net interest spread | 3.23 | % | 3.46 | % | 3.55 | % | 3.52 | % | 3.57 | % | ||||||||||
Tax equivalent adjustment to net interest income | $ | 20 | $ | 32 | $ | 25 | $ | 27 | $ | 32 | ||||||||||
Non-interest income to average assets | 0.80 | % | 0.87 | % | 1.12 | % | 0.99 | % | 1.04 | % | ||||||||||
Non-interest expense to average assets | 2.99 | % | 3.04 | % | 3.07 | % | 3.02 | % | 3.66 | % | ||||||||||
Efficiency ratio(2) | 70.53 | % | 65.73 | % | 66.62 | % | 68.87 | % | 81.53 | % | ||||||||||
(1) | The net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets. Tax equivalent interest income is calculated by grossing up interest income for the amounts that are non-taxable (i.e., municipal income) then subtracting interest expense. The rate utilized is 21%. See the table below for the quarterly tax equivalent net interest income and the reconciliation of net interest income to tax equivalent net interest income. The Company's net interest margin is a common measure used by the financial service industry to determine how profitable earning assets are funded. Because the Company earns a fair amount of nontaxable interest income due to the mix of securities in its investment security portfolio, net interest income for the ratio is calculated on a tax equivalent basis as described above. |
(2) | The efficiency ratio is not a measurement under accounting principles generally accepted in the United States. It is calculated by dividing non-interest expense by the sum of tax equivalent net interest income and non-interest income excluding gains and losses on the investment portfolio and sales of repossessed assets. The tax rate utilized is 21%. See the table below for the quarterly tax equivalent net interest income and a reconciliation of net interest income to tax equivalent net interest income. The Company calculates this ratio in order to evaluate its overhead structure or how effectively it is operating. An increase in the ratio from period to period indicates the Company is losing a larger percentage of its income to expenses. The Company believes that the efficiency ratio is a reasonable measure of profitability. |
EAGLE FINANCIAL SERVICES, INC. | ||||||||||||||||||||
4Q22 | 3Q22 | 2Q22 | 1Q22 | 4Q21 | ||||||||||||||||
BALANCE SHEET RATIOS | ||||||||||||||||||||
Loans to deposits | 104.72 | % | 95.83 | % | 91.01 | % | 82.96 | % | 83.73 | % | ||||||||||
Average interest-earning assets to average-interest | 155.58 | % | 161.11 | % | 166.35 | % | 173.69 | % | 173.49 | % | ||||||||||
PER SHARE DATA | ||||||||||||||||||||
Dividends | $ | 0.30 | $ | 0.29 | $ | 0.28 | $ | 0.28 | $ | 0.28 | ||||||||||
Book value | 29.15 | 28.28 | 28.58 | 29.37 | 32.22 | |||||||||||||||
Tangible book value | 29.15 | 28.28 | 28.58 | 29.37 | 32.22 | |||||||||||||||
SHARE PRICE DATA | ||||||||||||||||||||
Closing price | $ | 35.95 | $ | 36.92 | $ | 35.44 | $ | 35.45 | $ | 34.65 | ||||||||||
Diluted earnings multiple(1) | 9.77 | 7.89 | 7.77 | 9.43 | 13.13 | |||||||||||||||
Book value multiple(2) | 1.23 | 1.31 | 1.24 | 1.21 | 1.08 | |||||||||||||||
COMMON STOCK DATA | ||||||||||||||||||||
Outstanding shares at end of period | 3,490,086 | 3,483,571 | 3,481,188 | 3,477,020 | 3,454,128 | |||||||||||||||
Weighted average shares outstanding | 3,489,764 | 3,487,555 | 3,479,573 | 3,472,332 | 3,451,383 | |||||||||||||||
Weighted average shares outstanding, diluted | 3,489,764 | 3,482,820 | 3,479,591 | 3,472,332 | 3,451,383 | |||||||||||||||
CAPITAL RATIOS | ||||||||||||||||||||
Common equity Tier 1 capital ratio | 8.80 | % | 9.35 | % | 9.67 | % | 10.19 | % | 10.72 | % | ||||||||||
Tier 1 risk-based capital ratio | 8.80 | % | 9.35 | % | 9.67 | % | 10.19 | % | 10.72 | % | ||||||||||
Total risk-based capital ratio | 10.34 | % | 10.98 | % | 11.33 | % | 11.94 | % | 11.58 | % | ||||||||||
Tier 1 leverage ratio | 7.84 | % | 8.09 | % | 8.34 | % | 8.44 | % | 8.57 | % | ||||||||||
Total equity to total assets | 6.29 | % | 6.69 | % | 7.09 | % | 7.43 | % | 8.46 | % | ||||||||||
CREDIT QUALITY | ||||||||||||||||||||
Net charge-offs to average loans | 0.04 | % | (0.08) | % | (0.02) | % | 0.00 | % | — | % | ||||||||||
Total non-performing loans to total loans | 0.19 | % | 0.20 | % | 0.19 | % | 0.26 | % | 0.28 | % | ||||||||||
Total non-performing assets to total assets | 0.16 | % | 0.16 | % | 0.15 | % | 0.19 | % | 0.21 | % | ||||||||||
Non-accrual loans to: | ||||||||||||||||||||
total loans | 0.16 | % | 0.20 | % | 0.18 | % | 0.26 | % | 0.28 | % | ||||||||||
total assets | 0.13 | % | 0.16 | % | 0.14 | % | 0.19 | % | 0.21 | % | ||||||||||
Allowance for loan losses to: | ||||||||||||||||||||
total loans | 0.85 | % | 0.89 | % | 0.88 | % | 0.91 | % | 0.89 | % | ||||||||||
non-performing assets | 433.45 | % | 442.59 | % | 472.67 | % | 357.47 | % | 317.68 | % | ||||||||||
non-accrual loans | 518.86 | % | 442.59 | % | 488.85 | % | 357.47 | % | 322.70 | % | ||||||||||
NON-PERFORMING ASSETS: | ||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Loans delinquent over 90 days | $ | 318 | $ | — | $ | 69 | $ | — | $ | 43 | ||||||||||
Non-accrual loans | 2,162 | 2,427 | 2,015 | 2,606 | 2,723 | |||||||||||||||
Other real estate owned and repossessed assets | 108 | — | — | — | — | |||||||||||||||
NET LOAN CHARGE-OFFS (RECOVERIES): | ||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Loans charged off | $ | 491 | $ | 80 | $ | 41 | $ | 47 | $ | 42 | ||||||||||
(Recoveries) | (37) | (975) | (213) | (35) | (81) | |||||||||||||||
Net charge-offs (recoveries) | 454 | (895) | (172) | 12 | (39) | |||||||||||||||
PROVISION FOR LOAN LOSSES (dollars in | $ | 930 | $ | — | $ | 360 | $ | 540 | $ | 300 | ||||||||||
ALLOWANCE FOR LOAN LOSS SUMMARY | ||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Balance at the beginning of period | $ | 10,742 | $ | 9,847 | $ | 9,315 | $ | 8,787 | $ | 8,448 | ||||||||||
Provision | 930 | — | 360 | 540 | 300 | |||||||||||||||
Net charge-offs (recoveries) | 454 | (895) | (172) | 12 | (39) | |||||||||||||||
Balance at the end of period | $ | 11,218 | $ | 10,742 | $ | 9,847 | $ | 9,315 | $ | 8,787 | ||||||||||
(1) | The diluted earnings multiple (or price earnings ratio) is calculated by dividing the period's closing market price per share by total equity per weighted average shares outstanding, diluted for the period. The diluted earnings multiple is a measure of how much an investor may be willing to pay for $1.00 of the Company's earnings. |
(2) | The book value multiple (or price to book ratio) is calculated by dividing the period's closing market price per share by the period's book value per share. The book value multiple is a measure used to compare the Company's market value per share to its book value per share. |
EAGLE FINANCIAL SERVICES, INC. | ||||||||||||||||||||
Unaudited | Unaudited | Unaudited | Unaudited | Audited | ||||||||||||||||
Assets | ||||||||||||||||||||
Cash and due from banks | $ | 66,531 | $ | 30,782 | $ | 31,457 | $ | 86,965 | $ | 63,840 | ||||||||||
Federal funds sold | 363 | 5,153 | 680 | 8,945 | 228 | |||||||||||||||
Securities available for sale, at fair value | 158,389 | 156,361 | 181,162 | 194,554 | 193,370 | |||||||||||||||
Loans held for sale | 153 | 90 | 399 | 843 | 876 | |||||||||||||||
Loans, net of allowance for loan losses | 1,312,565 | 1,191,099 | 1,110,993 | 1,012,144 | 976,933 | |||||||||||||||
Bank premises and equipment, net | 18,064 | 17,972 | 18,155 | 18,333 | 18,249 | |||||||||||||||
Bank owned life insurance | 23,862 | 23,731 | 23,593 | 23,415 | 23,236 | |||||||||||||||
Other assets | 36,790 | 47,932 | 36,074 | 29,096 | 26,306 | |||||||||||||||
Total assets | $ | 1,616,717 | $ | 1,473,120 | $ | 1,402,513 | $ | 1,374,295 | $ | 1,303,038 | ||||||||||
Liabilities and Shareholders' Equity | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Noninterest bearing demand deposits | $ | 478,750 | $ | 491,184 | $ | 477,540 | $ | 489,426 | $ | 470,355 | ||||||||||
Savings and interest-bearing demand | 627,431 | 632,081 | 638,951 | 619,224 | 583,296 | |||||||||||||||
Time deposits | 157,894 | 130,849 | 115,022 | 122,673 | 123,584 | |||||||||||||||
Total deposits | $ | 1,264,075 | $ | 1,254,114 | $ | 1,231,513 | $ | 1,231,323 | $ | 1,177,235 | ||||||||||
Federal funds purchased | 32,980 | — | 28,575 | — | — | |||||||||||||||
Federal Home Loan Bank advances | 175,000 | 75,000 | — | — | — | |||||||||||||||
Subordinated debt | 29,377 | 29,360 | 29,343 | 29,327 | — | |||||||||||||||
Other liabilities | 13,556 | 16,146 | 13,592 | 11,542 | 15,523 | |||||||||||||||
Commitments and contingent liabilities | — | — | — | — | — | |||||||||||||||
Total liabilities | $ | 1,514,988 | $ | 1,374,620 | $ | 1,303,023 | $ | 1,272,192 | $ | 1,192,758 | ||||||||||
Shareholders' Equity | ||||||||||||||||||||
Preferred stock, $10 par value | — | — | — | — | — | |||||||||||||||
Common stock, $2.50 par value | 8,619 | 8,600 | 8,594 | 8,586 | 8,556 | |||||||||||||||
Surplus | 13,278 | 13,003 | 12,594 | 12,260 | 12,115 | |||||||||||||||
Retained earnings | 100,278 | 98,128 | 95,058 | 92,040 | 89,764 | |||||||||||||||
Accumulated other comprehensive (loss) | (20,446) | (21,231) | (16,756) | (10,783) | (155) | |||||||||||||||
Total shareholders' equity | $ | 101,729 | $ | 98,500 | $ | 99,490 | $ | 102,103 | $ | 110,280 | ||||||||||
Total liabilities and shareholders' | $ | 1,616,717 | $ | 1,473,120 | $ | 1,402,513 | $ | 1,374,295 | $ | 1,303,038 | ||||||||||
EAGLE FINANCIAL SERVICES, INC. | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Interest and Dividend Income | ||||||||||||||||
Interest and fees on loans | $ | 15,117 | $ | 10,665 | $ | 50,682 | $ | 39,871 | ||||||||
Interest on federal funds sold | 15 | — | 30 | — | ||||||||||||
Interest and dividends on securities available for sale: | ||||||||||||||||
Taxable interest income | 815 | 676 | 3,292 | 2,272 | ||||||||||||
Interest income exempt from federal income taxes | 4 | 98 | 221 | 419 | ||||||||||||
Dividends | 60 | 10 | 109 | 45 | ||||||||||||
Interest on deposits in banks | 153 | 16 | 352 | 69 | ||||||||||||
Total interest and dividend income | $ | 16,164 | $ | 11,465 | $ | 54,686 | $ | 42,676 | ||||||||
Interest Expense | ||||||||||||||||
Interest on deposits | $ | 1,474 | $ | 373 | $ | 2,941 | $ | 1,677 | ||||||||
Interest on federal funds purchased | 151 | — | 170 | — | ||||||||||||
Interest on Federal Home Loan Bank advances | 891 | — | 1,295 | — | ||||||||||||
Interest on subordinated debt | 392 | — | 1,067 | — | ||||||||||||
Total interest expense | $ | 2,908 | $ | 373 | $ | 5,473 | $ | 1,677 | ||||||||
Net interest income | $ | 13,256 | $ | 11,092 | $ | 49,213 | $ | 40,999 | ||||||||
Provision For Loan Losses | 930 | 300 | 1,830 | 1,483 | ||||||||||||
Net interest income after provision for loan losses | $ | 12,326 | $ | 10,792 | $ | 47,383 | $ | 39,516 | ||||||||
Noninterest Income | ||||||||||||||||
Income from fiduciary activities | $ | 1,072 | $ | 922 | $ | 4,149 | $ | 1,891 | ||||||||
Service charges on deposit accounts | 423 | 366 | 1,618 | 1,087 | ||||||||||||
Other service charges and fees | 944 | 903 | 3,943 | 5,252 | ||||||||||||
(Loss) on the sale of bank premises and equipment | (8) | — | (11) | — | ||||||||||||
(Loss) gain on sales of AFS securities | — | — | (737) | 24 | ||||||||||||
Gain on sale of loans HFS | 331 | 813 | 1,875 | 1,658 | ||||||||||||
Officer insurance income | 219 | 160 | 714 | 527 | ||||||||||||
Other operating income | 108 | 198 | 1,794 | 881 | ||||||||||||
Total noninterest income | $ | 3,089 | $ | 3,362 | $ | 13,345 | $ | 11,320 | ||||||||
Noninterest Expenses | ||||||||||||||||
Salaries and employee benefits | $ | 6,857 | $ | 5,881 | $ | 25,730 | $ | 21,854 | ||||||||
Occupancy expenses | 506 | 484 | 2,068 | 1,803 | ||||||||||||
Equipment expenses | 307 | 251 | 1,121 | 959 | ||||||||||||
Advertising and marketing expenses | 332 | 185 | 770 | 659 | ||||||||||||
Stationery and supplies | 64 | 30 | 199 | 155 | ||||||||||||
ATM network fees | 233 | 288 | 1,210 | 1,135 | ||||||||||||
Other real estate owned expenses | 34 | 4 | 34 | 41 | ||||||||||||
Loss on the sale of other real estate owned | — | 73 | — | 201 | ||||||||||||
FDIC assessment | 184 | 197 | 614 | 606 | ||||||||||||
Computer software expense | 270 | 244 | 960 | 996 | ||||||||||||
Bank franchise tax | 233 | 198 | 886 | 781 | ||||||||||||
Professional fees | 409 | 2,642 | 2,019 | 3,760 | ||||||||||||
Data processing fees | 393 | 348 | 1,779 | 1,541 | ||||||||||||
Other operating expenses | 1,726 | 1,058 | 5,667 | 3,558 | ||||||||||||
Total noninterest expenses | $ | 11,548 | $ | 11,883 | $ | 43,057 | $ | 38,049 | ||||||||
Income before income taxes | $ | 3,867 | $ | 2,271 | $ | 17,671 | $ | 12,787 | ||||||||
Income Tax Expense | 670 | (12) | 3,150 | 1,766 | ||||||||||||
Net income | $ | 3,197 | $ | 2,283 | $ | 14,521 | $ | 11,021 | ||||||||
Earnings Per Share | ||||||||||||||||
Net income per common share, basic | $ | 0.92 | $ | 0.66 | $ | 4.17 | $ | 3.20 | ||||||||
Net income per common share, diluted | $ | 0.92 | $ | 0.66 | $ | 4.17 | $ | 3.20 | ||||||||
EAGLE FINANCIAL SERVICES, INC. | ||||||||||||||||||||||||
For the Year Ended | ||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Average | Income/ | Average | Average | Income/ | Average | |||||||||||||||||||
Assets: | Balance | Expense | Yield | Balance | Expense | Yield | ||||||||||||||||||
Securities: | ||||||||||||||||||||||||
Taxable | $ | 172,501 | $ | 3,401 | 1.97 | % | $ | 162,717 | $ | 2,317 | 1.42 | % | ||||||||||||
Tax-Exempt (1) | 8,305 | 280 | 3.37 | % | 15,936 | 530 | 3.33 | % | ||||||||||||||||
Total Securities | $ | 180,806 | $ | 3,681 | 2.04 | % | $ | 178,653 | $ | 2,847 | 1.59 | % | ||||||||||||
Loans: | ||||||||||||||||||||||||
Taxable | $ | 1,121,429 | $ | 50,509 | 4.50 | % | $ | 889,035 | $ | 39,643 | 4.46 | % | ||||||||||||
Non-accrual | 2,350 | — | — | % | 4,024 | — | — | % | ||||||||||||||||
Tax-Exempt (1) | 5,671 | 218 | 3.85 | % | 6,734 | 289 | 4.29 | % | ||||||||||||||||
Total Loans | $ | 1,129,450 | $ | 50,727 | 4.49 | % | $ | 899,793 | $ | 39,932 | 4.44 | % | ||||||||||||
Federal funds sold | 5,311 | 30 | 0.57 | % | 223 | — | 0.10 | % | ||||||||||||||||
Interest-bearing deposits in other banks | 27,251 | 352 | 1.29 | % | 68,868 | 69 | 0.10 | % | ||||||||||||||||
Total earning assets | $ | 1,340,468 | $ | 54,790 | 4.09 | % | $ | 1,143,513 | $ | 42,848 | 3.75 | % | ||||||||||||
Allowance for loan losses | (9,852) | (7,980) | ||||||||||||||||||||||
Total non-earning assets | 95,639 | 83,146 | ||||||||||||||||||||||
Total assets | $ | 1,426,255 | $ | 1,218,679 | ||||||||||||||||||||
Liabilities and Shareholders' Equity: | ||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||
NOW accounts | $ | 173,843 | $ | 663 | 0.38 | % | $ | 145,652 | $ | 312 | 0.21 | % | ||||||||||||
Money market accounts | 270,725 | 1,155 | 0.43 | % | 225,960 | 583 | 0.26 | % | ||||||||||||||||
Savings accounts | 179,709 | 130 | 0.07 | % | 156,861 | 92 | 0.06 | % | ||||||||||||||||
Time deposits: | ||||||||||||||||||||||||
$250,000 and more | 62,757 | 560 | 0.89 | % | 67,287 | 411 | 0.61 | % | ||||||||||||||||
Less than $250,000 | 62,907 | 433 | 0.69 | % | 58,565 | 279 | 0.48 | % | ||||||||||||||||
Total interest-bearing deposits | $ | 749,941 | $ | 2,941 | 0.39 | % | $ | 654,325 | $ | 1,677 | 0.26 | % | ||||||||||||
Federal funds purchased | 7,882 | 170 | 2.16 | % | 1 | — | 0.36 | % | ||||||||||||||||
Federal Home Loan Bank advances | 39,589 | 1,295 | 3.27 | % | — | — | — | % | ||||||||||||||||
Subordinated debt | 22,193 | 1,067 | 4.81 | % | — | — | ||||||||||||||||||
Total interest-bearing liabilities | $ | 819,605 | $ | 5,473 | 0.67 | % | $ | 654,326 | $ | 1,677 | 0.26 | % | ||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||
Demand deposits | 485,061 | 443,662 | ||||||||||||||||||||||
Other Liabilities | 18,293 | 12,521 | ||||||||||||||||||||||
Total liabilities | $ | 1,322,959 | $ | 1,110,509 | ||||||||||||||||||||
Shareholders' equity | 103,296 | 108,170 | ||||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 1,426,255 | $ | 1,218,679 | ||||||||||||||||||||
Net interest income | $ | 49,317 | $ | 41,171 | ||||||||||||||||||||
Net interest spread | 3.42 | % | 3.49 | % | ||||||||||||||||||||
Interest expense as a percent of average earning | 0.41 | % | 0.15 | % | ||||||||||||||||||||
Net interest margin | 3.68 | % | 3.60 | % | ||||||||||||||||||||
(1) Income and yields are reported on tax-equivalent basis using a federal tax rate of 21%. |
EAGLE FINANCIAL SERVICES, INC. | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Average | Income/ | Average | Average | Income/ | Average | |||||||||||||||||||
Assets: | Balance | Expense | Yield | Balance | Expense | Yield | ||||||||||||||||||
Securities: | ||||||||||||||||||||||||
Taxable | $ | 153,747 | $ | 875 | 2.26 | % | $ | 182,802 | $ | 687 | 1.49 | % | ||||||||||||
Tax-Exempt (1) | 533 | 5 | 4.15 | % | 14,318 | 124 | 3.46 | % | ||||||||||||||||
Total Securities | $ | 154,280 | $ | 880 | 2.26 | % | $ | 197,120 | $ | 811 | 1.64 | % | ||||||||||||
Loans: | ||||||||||||||||||||||||
Taxable | $ | 1,245,038 | $ | 15,045 | 4.79 | % | $ | 957,695 | $ | 10,643 | 4.42 | % | ||||||||||||
Non-accrual | 2,311 | — | — | % | 3,416 | — | — | % | ||||||||||||||||
Tax-Exempt (1) | 9,492 | 91 | 3.82 | % | 2,804 | 27 | 3.80 | % | ||||||||||||||||
Total Loans | $ | 1,256,841 | $ | 15,136 | 4.78 | % | $ | 963,915 | $ | 10,670 | 4.40 | % | ||||||||||||
Federal funds sold | 3,609 | 15 | 1.70 | % | 215 | — | 0.13 | % | ||||||||||||||||
Interest-bearing deposits in other banks | 20,305 | 153 | 2.98 | % | 48,473 | 16 | 0.13 | % | ||||||||||||||||
Total earning assets | $ | 1,432,724 | $ | 16,184 | 4.48 | % | $ | 1,206,307 | $ | 11,497 | 3.79 | % | ||||||||||||
Allowance for loan losses | (10,657) | (8,583) | ||||||||||||||||||||||
Total non-earning assets | 108,753 | 90,757 | ||||||||||||||||||||||
Total assets | $ | 1,530,820 | $ | 1,288,481 | ||||||||||||||||||||
Liabilities and Shareholders' Equity: | ||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||
NOW accounts | $ | 177,190 | $ | 318 | 0.71 | % | $ | 154,889 | $ | 79 | 0.20 | % | ||||||||||||
Money market accounts | 280,439 | 578 | 0.82 | % | 250,326 | 143 | 0.23 | % | ||||||||||||||||
Savings accounts | 177,565 | 40 | 0.09 | % | 166,438 | 25 | 0.06 | % | ||||||||||||||||
Time deposits: | ||||||||||||||||||||||||
$250,000 and more | 64,223 | 296 | 1.83 | % | 65,670 | 66 | 0.40 | % | ||||||||||||||||
Less than $250,000 | 75,395 | 242 | 1.27 | % | 57,981 | 60 | 0.41 | % | ||||||||||||||||
Total interest-bearing deposits | $ | 774,812 | $ | 1,474 | 0.75 | % | $ | 695,304 | $ | 373 | 0.21 | % | ||||||||||||
Federal funds purchased | 26,476 | 151 | 2.26 | % | 1 | — | 0.64 | % | ||||||||||||||||
Federal Home Loan Bank advances | 90,217 | 891 | 3.92 | % | — | — | — | % | ||||||||||||||||
Subordinated debt | 29,366 | 392 | 5.29 | % | — | — | ||||||||||||||||||
Total interest-bearing liabilities | $ | 920,871 | $ | 2,908 | 1.25 | % | $ | 695,305 | $ | 373 | 0.22 | % | ||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||
Demand deposits | 493,373 | 468,801 | ||||||||||||||||||||||
Other Liabilities | 16,737 | 13,892 | ||||||||||||||||||||||
Total liabilities | $ | 1,430,981 | $ | 1,177,998 | ||||||||||||||||||||
Shareholders' equity | 99,839 | 110,483 | ||||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 1,530,820 | $ | 1,288,481 | ||||||||||||||||||||
Net interest income | $ | 13,276 | $ | 11,124 | ||||||||||||||||||||
Net interest spread | 3.23 | % | 3.57 | % | ||||||||||||||||||||
Interest expense as a percent of average earning | 0.81 | % | 0.12 | % | ||||||||||||||||||||
Net interest margin | 3.68 | % | 3.67 | % | ||||||||||||||||||||
(1) Income and yields are reported on tax-equivalent basis using a federal tax rate of 21%. |
EAGLE FINANCIAL SERVICES, INC. | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||||||||||||
GAAP Financial Measurements: | ||||||||||||||||||||
Interest Income - Loans | $ | 15,117 | $ | 13,282 | $ | 11,663 | $ | 10,620 | $ | 10,665 | ||||||||||
Interest Income - Securities and Other Interest-Earnings | 1,047 | 1,084 | 984 | 889 | 800 | |||||||||||||||
Interest Expense - Deposits | 1,474 | 714 | 383 | 370 | 373 | |||||||||||||||
Interest Expense - Other Borrowings | 1,434 | 753 | 345 | — | — | |||||||||||||||
Total Net Interest Income | $ | 13,256 | $ | 12,899 | $ | 11,919 | $ | 11,139 | $ | 11,092 | ||||||||||
Non-GAAP Financial Measurements: | ||||||||||||||||||||
Add: Tax Benefit on Tax-Exempt Interest Income - | $ | 19 | $ | 16 | $ | 5 | $ | 5 | $ | 6 | ||||||||||
Add: Tax Benefit on Tax-Exempt Interest Income - | 1 | 16 | 20 | 22 | 26 | |||||||||||||||
Total Tax Benefit on Tax-Exempt Interest Income | $ | 20 | $ | 32 | $ | 25 | $ | 27 | $ | 32 | ||||||||||
Tax-Equivalent Net Interest Income | $ | 13,276 | $ | 12,931 | $ | 11,944 | $ | 11,166 | $ | 11,124 | ||||||||||
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SOURCE Eagle Financial Services, Inc.
Uncategorized
February Employment Situation
By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…
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By Paul Gomme and Peter Rupert
The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.
Temporary help services employment continues a steep decline after a sharp post-pandemic rise.
Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.
The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.
The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.
Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.
As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.
Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.
The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.
unemployment pandemic unemploymentUncategorized
Mortgage rates fall as labor market normalizes
Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.
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Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.
The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.
From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250
Below is an explanation of how we got here with the labor market, which all started during COVID-19.
1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.
2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.
Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.
3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too
Total employment data
4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels.
From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.
Here are the jobs that were created and lost in the previous month:
In this jobs report, the unemployment rate for education levels looks like this:
- Less than a high school diploma: 6.1%
- High school graduate and no college: 4.2%
- Some college or associate degree: 3.1%
- Bachelor’s degree or higher: 2.2%
Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.
recession unemployment covid-19 fed federal reserve mortgage rates recession recovery unemploymentUncategorized
Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month
Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month
Last month we though that the January…
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Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush.
What happened? Let's take a closer look.
On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.
Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.
Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K, a 124K revision, which was the biggest one-month negative revision in two years!
Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.
In the past month the Biden department of goalseeking stuff higher before revising it lower, has revised the following data sharply lower:
— zerohedge (@zerohedge) August 30, 2023
- Jobs
- JOLTS
- New Home sales
- Housing Starts and Permits
- Industrial Production
- PCE and core PCE
To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).
And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...
... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...
... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.
While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.
But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).
This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.
There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).
Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!
But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!
The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!
Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...
... but there has been zero job-creation for native born workers since June 2018!
This is a huge issue - especially at a time of an illegal alien flood at the southwest border...
... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.
Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.
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