First Keystone Corporation
Annual Report 2020

Plain-text annual report

FIRST FIRST KEYSTONE KEYSTONE CORPORATION CORPORATION firstkeystonecorp.fkc.bank firstkeystonecorp.fkc.bank FINANCIAL HIGHLIGHTS (Dollars in thousands, except per share data) 2020 2019 2018 2017 2016 SUMMARY OF OPERATIONS Interest income Interest expense Net interest income Provision for loan losses Net income PER COMMON SHARE DATA Net income Dividends BALANCE SHEET DATA Total assets Total securities Net loans Total deposits Total stockholders’ equity PERFORMANCE RATIOS Return on average assets Return on average equity Dividend payout Average equity to average assets $ 39,567 6,360 33,207 1,200 11,837 $ 38,527 10,243 28,284 450 10,227 $ 35,573 8,620 26,953 200 9,211 $ 32,268 6,548 25,720 267 8,648 $ 31,643 5,282 26,361 2,083 9,472 $ 2.03 1.08 $ 1.77 1.08 $ 1.60 1.08 $ 1.52 1.08 $ 1.68 1.08 $1,179,047 $1,007,226 $1,012,000 279,861 317,614 599,647 640,727 671,553 761,628 116,756 128,752 368,357 712,677 937,488 144,242 $990,121 350,218 551,910 778,146 116,719 $984,283 379,641 515,025 725,982 109,685 1.09% 8.61% 53.29% 12.72% 1.02% 8.17% 61.08% 12.42% 0.92% 8.05% 67.26% 11.39% 0.86% 7.54% 71.05% 11.45% 0.96% 8.23% 64.30% 11.68% Dollars in thousands LOANS # OF NEW LOANS 2019 2020 1,125 1,533 DEPOSITS # OF NEW CORE DEPOSITS 2019 3,785 2020 3,681 TOTAL NEW LOANS $154,562 210,927 TOTAL NEW CORE DEPOSITS $30,115 $50,497 2020 LOAN PORTFOLIO BREAKDOWN 2020 DEPOSIT BREAKDOWN 74% 16% 6% 3% 1% 79% COMMERCIAL HOME EQUITY MORTGAGES CONSUMER & OTHER SBA PAYCHECK PROTECTION PROGRAM (PPP) CORE DEPOSITS (CHECKING, SAVINGS & MONEY MARKETS) 21% TIME DEPOSITS (CERTIFICATES OF DEPOSIT) NET INCOME Per Share 2019 2020 $1.77 $2.03 PERFORMANCE RETURN ON ASSETS 2019 1.02% 2020 1.09% RETURN ON EQUITY 8.17% 8.61% How we generated $45,579 in revenue: 69% $31,530 INCOME STATEMENT IN GRAPHIC FORM MAJOR COMPONENTS OF OTHER INCOME S N A O L N O E M O C N I 18% $8,037 S E I T I R U C E S E M O C N I 13% $6,012 E M O C N I R E H T O TRUST DEPARTMENT 2019 2020 $971 $995 GAINS ON SALES OF MORTGAGE LOANS $277 $604 ATM FEES & DEBIT CARD INCOME $1,650 $1,849 Dollars in thousands How we used our $45,579 in income: 30% $13,687 26% $11,837 16% $7,329 D A E H R E V O R E H T O 11% $4,946 S R O T I S O P E D O T D A P I 8% $3,589 , S R E T U P M O C I S G N D L I U B T N E M P I U Q E & 3% $1,577 E M O C N I X A T E S N E P X E Dollars in thousands S E E Y O L P M E T I F O R P I 3% $1,414 G N W O R R O B S T S O C 3% $1,200 S N O I S I V O R P N A O L R O F S E S S O L TO OUR SHAREHOLDERS Making Connections and Corporate Culture At First Keystone we are committed to connecting with each other and building a culture that will benefit our employees, customers, communities and shareholders. As we focused on meeting the challenges of increasing revenue from core operating functions and reducing expenses, all while improving our day-to-day interactions and increasing productivity, COVID-19 presented its own unique challenges in 2020. Thanks to the dedication of our team of employees, we successfully executed our Business Continuity and Pandemic Plans. We continue to provide quality customer service and promote the benefits of banking with First Keystone Community Bank while being mindful that employee and customer safety are our number one concerns. I am happy to report the financial progress we made in 2020, and look forward to seeing you in 2021 and beyond. Financial Highlights: For the fiscal year ended December 31, 2020, First Keystone Corporation reported earnings of $11,837,000, as compared to $10,227,000 for 2019, an increase of $1,610,000 or 15.7%. Net income per share increased to $2.03 in 2020 as compared to $1.77 in 2019. Annual dividends per share remained consistent at $1.08. The increase in net income in 2020 was primarily the result of increased loan growth, $610,000 in SBA loan fees, and lower short-term rates paid on liabilities. Interest income for 2020 was $39,567,000, an increase of $1,040,000 or 2.7% as compared to $38,527,000 in 2019. Interest income was higher in 2020 due to positive loan portfolio growth, primarily in commercial loans. At December 31, 2020 total loans were $720,610,000, an increase of $72,878,000 or 11.3%. Loan growth was centered in commercial real estate loans, while residential mortgage loans declined slightly. The securities portfolio increased in 2020 to $366,711,000 with increases in asset-backed and private mortgage- backed securities, taxable and tax-exempt municipals, and subordinated debt investments. We will continue our emphasis on loan growth in 2021 as a primary driver of net interest income. Decreased interest rates and less reliance on borrowings due to increased deposit balances resulted in lower interest expense for the Corporation in 2020. Total deposits increased by $175,860,000 or 23.1% in 2020 as compared to 2019. Interest bearing deposits increased by $112,009,000 or 17.9%. Throughout 2020, the Federal Reserve decreased the federal-funds rate by 1.5%, resulting in a target range of 0.00% - 0.25% at year-end. The Corporation is actively monitoring and restructuring its portfolios, which includes scenarios for a rates- down environment, and continued strategies for core deposit growth. Non-interest income, excluding net securities gains, increased by $52,000 or 0.9% for the year ended December 31, 2020 as compared to the same period in 2019. Service charges and fees on deposits decreased by $531,000, mainly due to fewer overdraft charges and several deposit related fees waived during the COVID-19 pandemic. This was offset by an increase in ATM and debit card income of $199,000 in 2020. Gains on sales of mortgage loans provided income of $604,000 in 2020 as compared to $277,000 in 2019, an increase of $327,000. Non-interest expense amounted to $24,605,000, an increase of $1,183,000, or 5.1% in 2020. Expenses associated with employees (salaries and employee benefits) continue to be the largest non-interest expenditure. The increase in 2020 was mainly due to an increase in commissions and referral fees associated with loan growth and retail non-deposit activity, as well as a 30.0% increase in medical insurances for employees. Income tax expense was $1,577,000 for 2020 as compared to $1,114,000 for 2019, making the effective tax rate 11.8% in 2020 as compared to 9.8% in 2019. The increase in the effective tax rate for 2020 was due to a net decrease in tax- exempt investments in and loans to state and local units of government, plus higher overall operating income. To maintain our effective tax rate in 2021, the Corporation holds a portfolio of tax-exempt bonds in the securities portfolio, originates tax-free loans, and receives tax credits from investments in low- income housing partnerships. Total assets increased to $1,179,047,000 in 2020 from $1,007,226,000 in 2019. As noted above, total loans increased 11.3% with much of the growth in commercial real estate loans. In addition, the Corporation issued $25,000,000 in subordinated debt in the fourth quarter of 2020 to enable further leveraged growth. Stockholders’ Equity at year-end 2020 was $144,242,000. The Bank’s financial condition remains strong as evidenced by a total risk-based capital ratio of 17.05% and a tier 1 leverage capital ratio of 10.81% at year-end 2020. These key ratios are well above that which federal regulators require for a financial institution to be “well capitalized”. Additional details and related financial information may be found in the Management’s Discussion and Analysis and Financial Statements and notes sections of the 2020 Form 10-K. In conclusion, the solid year we experienced in 2020 makes me optimistic that we can continue that trend in 2021. We are well positioned for continued financial performance in future years as an independent, community bank and financial services provider. We thank and recognize our employees, officers and Board of Directors for their outstanding efforts. We also thank you, our shareholders and customers, for your continued support and confidence. Elaine A. Woodland President and Chief Executive Officer KEYSTONE ADVANTAGE MESSAGE First Keystone Community Bank In a year when just about everything was turned upside down and no one was really sure what would happen next, the dedicated bankers at First Keystone Community Bank did what they do best - made sure their customers’ needs were being met, no matter what challenge presented itself. At a time when most events were canceled and churches, schools and businesses were forced to close their doors, First Keystone quickly made the changes needed to stay up and running, so we could continue to service our customers in a professional and timely manner. Flexibility became a key word throughout the bank. Several employees performed their daily duties remotely from home environments, while others were redirected to different branch and back office locations so that social distancing and business continuity protocols could remain in place. When our lobbies were closed for a short period, some staff members took on new roles to help where the need was greatest. To obtain signatures or complete required paperwork, employees met with clients in bank parking lots and customers were accommodated with after-hours meetings, if necessary. Staffing at all drive-thru locations was increased to meet the heavy demands of this unique situation. And just like many of our business partners, social distancing signs and plastic barriers became the norm for everyone’s protection. While many of the workplace variations are still in place and working well, our staff continues to make every effort to remain as safe as possible. There is a lot of hand washing, mask wearing, and sanitizing going on during every hour of every day. As soon as we were able, our lobbies were cautiously reopened, and with all the changes we made, no one missed a beat. However, FKCB employees wanted to do more to help the communities where we live and work and reach out to help those that were hit especially hard with job loss, illness or financial setbacks. For example, First Keystone has always dedicated one Friday each month as “Denim Day,” a day when employees make a donation to a specified charity, each can then wear jeans. It was decided to change the frequency to every Friday and raise as much money as possible, with the goal of including several significant donations to our regional food banks and various non-profit agencies. At a time when the need was so great, First Keystone Community Bank employees donated $10,700 toward these goals. Many of our employees also stepped outside of their normal routines to lend a hand when the Paycheck Protection Program (PPP) loans became available from the Small Business Administration. To help our business customers weather this storm, we needed all hands on-deck to process loan applications and the related documents in a timely manner. First Keystone employees rallied together and processed 492 loans in 2020, with approximately $32 million dollars being put back into communities to keep businesses running and ensure their employees were paid. There are still many more continuing to be processed for 2021. Putting customers’ needs first is at the top of First Keystone Community Bank’s priority list. We want our customers to be safe and secure in the bank, as well as with the products and services they use to conduct their banking transactions. With this in mind, it’s the perfect time for our customers to evaluate their personal financial situation. Has anything changed that would impact your finances? This includes a career change, job loss, recent marriage or divorce, welcoming a new family member, buying a house, moving to a new address, or perhaps you’ve recently retired. Each of these life events can alter your overall economic picture and create the need for you to rethink your financial path. But even if none of these changes have happened for you, it’s still a good time to sit down and review your banking account and services, such as checking and savings accounts, online banking, retirement plans and more to ensure they continue to serve your lifestyle. When you’re ready, we’re here to help you by discussing your current situation and providing the assistance that will keep you on the right track. Whether acting as your local experienced banker or standing proudly as your neighbor, from the front-line tellers to the Board of Directors, everyone at First Keystone has a common goal to help you succeed. In the best of times or the worst of times, a vital part of the day-to-day operations at First Keystone Community Bank is partnering with our customers and the communities we serve. We look forward to seeing you in the future! PUTTING CUSTOMERS’ NEEDS FIRST IS AT THE TOP OF FIRST KEYSTONE COMMUNITY BANK’S PRIORITY LIST. FIRST KEYSTONE CORPORATION BOARD OF DIRECTORS ROBERT A. BULL Chairman Attorney - Bull & Bull LLP JOHN E. ARNDT Vice Chairman Owner - Arndt Insurance Agency DAVID R. SARACINO Secretary Retired Vice President & CFO First Keystone Community Bank D. MATTHEW BOWER President - Don E. Bower, Inc. ROBERT E. BULL Retired Attorney - Bull & Bull LLP MICHAEL L. JEZEWSKI President/Owner - Delta Electrical Systems, Inc. NANCY J. MARR Owner/President - Marr Development Companies WILLIAM E. RINEHART President/Owner - Gray Chrysler Dodge Jeep Ram and Gray Chevrolet ELAINE A. WOODLAND President & Chief Executive Officer of First Keystone Community Bank JEROME F. FABIAN Director Emeritus Retired Owner/President Tile Distributors of America, Inc. JOHN G. GERLACH Director Emeritus Retired President First Keystone Community Bank, Pocono Division DR. JOSEPH B. CONAHAN, JR. Director Emeritus Ophthalmologist ROBERT A. BULL Chairman OFFICERS ELAINE A. WOODLAND President & Chief Executive Officer JOHN E. ARNDT Vice Chairman DIANE C.A. ROSLER Chief Financial Officer/Treasurer DAVID R. SARACINO Secretary CHERYL L. WYNINGS Assistant Secretary FIRST KEYSTONE COMMUNITY BANK OFFICERS* ROBERT A. BULL Chairman of the Board JOHN E. ARNDT Vice Chairman DAVID R. SARACINO Secretary ELAINE A. WOODLAND President Chief Executive Officer EXECUTIVE OFFICERS JONATHAN LITTLEWOOD Vice President Chief Lending Officer MARK J. MCDONALD Senior Vice President Chief Credit Officer DIANE C.A. ROSLER Senior Vice President Chief Financial Officer & Cashier JEFFREY T. WOZNIAK Senior Vice President Senior IT Manager & Information Security Officer OFFICERS VICE PRESIDENT JODI L. ALLEY Loan Operations Manager STACIA L. ARNAUD Commercial Services Officer ANTHONY P. CARTIGLIA Commercial Services Officer JUNE GEORGE Branch Administrator EDGAR A. GOWER, JR. Commercial Services Officer BRENDA L. GRASLEY Consumer Loan Manager TINA M. GRAY Regional Branch Administrator ASSISTANT VICE PRESIDENT TIFFANY BIENKOWSKI Credit Analyst II SANDRA L. COLE Community Office Manager JOHN DOUGHERTY Community Office Manager LAUREN DUANE Business Deposit Specialist JILLIAN GUENTHER Fraud Manager & BSA Officer KIMBERLY A. HELLER Human Resource Manager AMANDA JARSKI Credit Analyst II ASSISTANT CASHIER LEE A. HESS Loan Review Officer & Security Officer JASON P. HOLLOWAY Commercial Services Officer REBECCA A. HOOPER Senior Trust Officer DONNA KEEFER Training/Systems Support Manager BRIAN M. KLINEFELTER Credit Department Manager KEVIN KRIEGER Compliance Officer & CRA Officer MARISOL LOPEZ Regional Branch Administrator LINDA M. MESHINSKI Regional Branch Administrator EUGENE W. MORRISON Commercial Services Officer MICHAEL REIS Commercial Services Officer MICHAEL C. SANTIAGO Commercial Services Officer FRANCES I. SEWARD Regional Branch Administrator LEIGHTON B. WALSH Mortgage Services Manager CHRISTOPHER ZLOBIK Deposit Operations Officer KATHLEEN M. JARSKI Community Office Manager RACHEL JENNINGS Post-Closing Document Specialist STEVEN M. KOTCH Loan Workout Officer KRISTI A. MCCLINTOCK Commercial Loan Document Specialist THOMAS MCGRATH Commercial Services Officer LAURIE NUDO Community Office Manager MARY E. PASCUCCI HR and Training Specialist KIMBERLY S. SHINER Community Office Manager SHERRI A. SITLER Deposit Review Officer NATALIE J. STACKHOUSE Accounting Manager KIMBERLY A. VOLKEL Community Office Manager DAVID WARHO Technology Systems Engineer CHERYL L. WYNINGS Executive Administrative Assistant SHANE DAVIS Accountant I & Systems Administrator STACY GORDNER Accounting Reporting Analyst HERBERT HARMON, JR. Facilities Manager LILIANA HENRICKSON Community Office Manager MICHELLE E. KOZAK Marketing Manager MARTIN B. LEANDRI Financial Consultant ANGELA MACKERT Community Office Manager ASHLEY MILLOWAY Mortgage Loan Consultant KIM MURREN Keystone Banker III BONNIE NEVEL Deposit Processing Supervisor TERRI ROMANOWSKI Assistant Community Office Manager CINDY THORNE Trust Officer OFFICER MEGAN BOONE Electronic Processing Coordinator NIKKI DIETTERICK Keystone Banker III LEVI DILTZ Network Analyst YOLANDA FRANCIS Community Office Manager MELANIE GOLOMB Credit Analyst I ALEXIS KISHBAUGH Computer Applications Analyst CINDY LAIDACKER HR and Training Specialist CHRISTOPHER MATTHEWS Credit Analyst II TINA ROTH IRA/HSA Specialist CONNER WELCH Credit Analyst II *Officers as of December 31, 2020 CORPORATE INFORMATION THE CORPORATION DIVIDEND REINVESTMENT First Keystone Corporation is a bank holding company incorporated under the Pennsylvania Business Corporation Laws. Its assets consist primarily of the assets of its wholly-owned subsidiary, First Keystone Community Bank. First Keystone Community Bank serves Columbia, Montour, Luzerne, Monroe and Northampton Counties. The Bank engages in general banking business and also provides fiduciary services. CORPORATE HEADQUARTERS First Keystone Corporation 111 West Front Street Berwick, PA 18603 Telephone: 570-752-3671 Fax: 570-752-4022 NOTICE OF ANNUAL MEETING The 2021 Annual Meeting of Shareholders will be held at 10:00 a.m., Eastern Daylight Time, on Thursday, May 6, 2021 by virtual meeting by visiting: www.fkyscorp.com/annualmeeting ANNUAL REPORT ON FORM 10-K The Annual Report on Form 10-K as filed with the Securities and Exchange Commission may be obtained, without charge, by contacting: Cheryl Wynings Investor Relations P.O. Box 289 Berwick, PA 18603 Telephone: 1-888-759-2266, extension 1175 Locally: 570-752-3671, extension 1175 TRANSFER AGENT AND REGISTRAR To change or transfer registration of your stock, report a lost certificate, or other related inquiries, please contact our transfer agent at: American Stock Transfer & Trust Company 6201 15th Avenue Brooklyn, NY 11219 1-800-937-5449 www.astfinancial.com DIRECT DEPOSIT Shareholders may have their cash dividends deposited directly into the account of their choice at any banking institution, with no charge. Additional information and enrollment materials for direct deposit can be obtained by calling 1-800-937-5449. The Plan, open to residents of Pennsylvania, provides the opportunity to have dividends automatically reinvested into First Keystone Corporation stock. Participants in the Plan may also elect to make cash contributions to purchase additional shares of common stock. For information regarding the Plan, contact the Plan Administrator at: AST Plan Administration Department Wall Street Station P.O.Box 922 New York, NY 10269-0560 1-800-937-5449 help@astfinancial.com INVESTOR INFORMATION Information regarding First Keystone Corporation is available online at firstkeystonecorp.fkc.bank. The website also includes additional information of interest to shareholders such as: historical stock prices, dividend declarations, press releases and governance documents. Requests for information or assistance regarding the corporation should be directed to Shareholder Relations at 1-888-759-2266, extension 1175 Locally: 570-752-3671, extension 1175 STOCK LISTING First Keystone Corporation common stock is traded on OTC Pink under the symbol “FKYS”. STOCK PURCHASE INQUIRIES The following brokerage firms make a market in First Keystone Corporation common stock: RBC Dain Rauscher, 800-223-4207 Janney Montgomery Scott LLC, 800-526-6397 Stifel Nicholaus & Co. Inc., 800-679-5446 Boenning & Scattergood, Inc., 800-883-1212 INDEPENDENT PUBLIC ACCOUNTANTS Baker Tilly US, LLP 99 Wood Avenue South, Suite 801 Iselin, NJ 08830-2734 Telephone: 848-467-3909 OFFICE LOCATIONS HANOVER TOWNSHIP OFFICE 1540 Sans Souci Highway Hanover Township, PA 18706 570-825-7352 BRODHEADSVILLE OFFICE 2022 Route 209 Brodheadsville, PA 18322 570-402-2008 MAIN OFFICE 111 West Front Street Berwick, PA 18603 570-752-3671 NESCOPECK OFFICE 437 West Third Street Nescopeck, PA 18635 570-759-2767 SALEM TOWNSHIP OFFICE 400 Fowler Avenue Berwick, PA 18603 570-759-2628 FREAS AVENUE OFFICE 701 Freas Avenue Berwick, PA 18603 570-752-1244 DANVILLE OFFICE 1049 Bloom Road Danville, PA 17821 570-275-8000 BRIAR CREEK OFFICE 50 Briar Creek Plaza Berwick, PA 18603 570-802-0541 KINGSTON OFFICE 299 Wyoming Avenue Kingston, PA 18704 570-718-1110 SCOTT TOWNSHIP OFFICE 2301 Columbia Boulevard Bloomsburg, PA 17815 570-784-0354 STROUDSBURG OFFICE 559 Main Street Stroudsburg, PA 18360 570-424-9700 MIFFLINVILLE OFFICE 133 West Third Street Mifflinville, PA 18631 570-752-5750 MOUNTAINHOME OFFICE 1154 Route 390 Cresco, PA 18326 570-595-9700 888-759-2266 | www.fkc.bank SWIFTWATER OFFICE 2070 Route 611 Swiftwater, PA 18370 570-839-7880 MOUNTAIN TOP OFFICE 18 North Mountain Boulevard Mountain Top, PA 18707 570-715-0720 PLYMOUTH OFFICE 463 West Main Street Plymouth, PA 18651 570-719-1400 DALLAS OFFICE 2325 Memorial Highway Dallas, PA 18612 570-674-1030 SHICKSHINNY OFFICE 107 South Main Street Shickshinny, PA 18655 570-542-6060 LOAN PROCESSING OFFICE 559 Main Street, Suite 114 Bethlehem, PA 18018 610-419-1412 FIRST FIRST FIRST KEYSTONE KEYSTONE KEYSTONE CORPORATION CORPORATION CORPORATION firstkeystonecorp.fkc.bank firstkeystonecorp.fkc.bank firstkeystonecorp.fkc.bank 

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