SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 2019March 31, 2020
☐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 001-35021
EVANS BANCORP, INC.
(Exact name of registrant as specified in its charter)
New York 16-1332767
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Grimsby Drive, Hamburg, NY 14075
(Address of principal executive offices) (Zip Code)
(716) 926-2000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.50 par value | EVBN | NYSE American |
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.
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Large |
| Accelerated |
Non-accelerated |
| Smaller |
Emerging |
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If an emerging growth company, indicate by checkmark 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 ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $.50 par value, 4,923,8794,943,540 shares as of OctoberApril 30, 2019.
2020.
EVANS BANCORP, INC. AND SUBSIDIARIES
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PART 1. FINANCIAL INFORMATION | PAGE | |||
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Item 1. | Financial Statements |
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| Unaudited Consolidated Balance Sheets – | 1 | ||
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4 | ||||
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Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||
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Item 3. | ||||
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Item 4. | ||||
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PART II. OTHER INFORMATION |
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Item 1. | ||||
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Item 1A. | ||||
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Item 2. | ||||
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Item 3. | ||||
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Item 4. | ||||
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Item 5. | ||||
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Item 6. | ||||
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ITEM 1 - FINANCIAL STATEMENTS |
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EVANS BANCORP, INC. AND SUBSIDIARIES |
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UNAUDITED CONSOLIDATED BALANCE SHEETS |
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SEPTEMBER 30, 2019 AND DECEMBER 31, 2018 |
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March 31, 2020 AND DECEMBER 31, 2019 |
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(in thousands, except share and per share amounts) |
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| September 30, |
| December 31, |
| March 31, |
| December 31, | ||||
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| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
ASSETS |
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Cash and due from banks |
| $ | 19,587 |
| $ | 13,997 |
| $ | 11,262 |
| $ | 10,577 |
Interest-bearing deposits at banks |
| 14,757 |
| 25,918 |
| 40,706 |
| 28,280 | ||||
Securities: |
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Available for sale, at fair value (amortized cost: $133,176 at September 30, 2019; |
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| 134,457 |
| 132,104 | |||||||
$135,274 at December 31, 2018) |
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Held to maturity, at amortized cost (fair value: $2,542 at September 30, 2019; |
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| 2,520 |
| 1,685 | |||||||
$1,674 at December 31, 2018) |
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Available for sale, at fair value (amortized cost: $156,011 at March 31, 2020; |
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| 159,191 |
| 127,922 | |||||||
$127,217 at December 31, 2019) |
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Held to maturity, at amortized cost (fair value: $2,963 at March 31, 2020; |
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| 2,847 |
| 2,386 | |||||||
$2,392 at December 31, 2019) |
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Federal Home Loan Bank common stock, at cost |
| 1,588 |
| 1,474 |
| 1,588 |
| 1,588 | ||||
Federal Reserve Bank common stock, at cost |
| 1,950 |
| 1,929 |
| 1,961 |
| 1,956 | ||||
Loans, net of allowance for loan losses of $15,382 at September 30, 2019 |
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and $14,784 at December 31, 2018 |
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| 1,204,410 |
| 1,141,146 | |||||||
Properties and equipment, net of accumulated depreciation of $20,364 at September 30, 2019 |
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and $19,416 at December 31, 2018 |
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| 13,946 |
| 10,485 | |||||||
Loans, net of allowance for loan losses of $18,157 at March 31, 2020 |
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and $15,175 at December 31, 2019 |
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| 1,228,049 |
| 1,211,356 | |||||||
Properties and equipment, net of accumulated depreciation of $20,998 at March 31, 2020 |
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and $20,682 at December 31, 2019 |
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| 13,951 |
| 13,754 | |||||||
Goodwill and intangible assets |
| 12,657 |
| 12,992 |
| 13,421 |
| 12,545 | ||||
Bank-owned life insurance |
| 29,254 |
| 28,403 |
| 29,578 |
| 29,418 | ||||
Operating lease right-of-use asset (see Note 1) |
| 3,862 |
| - | ||||||||
Operating lease right-of-use asset |
| 3,577 |
| 3,720 | ||||||||
Other assets |
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| 16,744 |
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| 18,074 |
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| 18,680 |
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| 16,728 |
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TOTAL ASSETS |
| $ | 1,455,732 |
| $ | 1,388,207 |
| $ | 1,524,811 |
| $ | 1,460,230 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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LIABILITIES |
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Deposits: |
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Demand |
| $ | 271,633 |
| $ | 231,902 |
| $ | 273,623 |
| $ | 263,717 |
NOW |
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| 141,384 |
| 110,450 |
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| 159,223 |
| 140,654 | ||
Savings |
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| 568,156 |
| 571,479 |
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| 625,773 |
| 587,142 | ||
Time |
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| 277,633 |
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| 301,227 |
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| 268,978 |
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| 275,927 |
Total deposits |
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| 1,258,806 |
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| 1,215,058 |
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| 1,327,597 |
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| 1,267,440 |
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Securities sold under agreement to repurchase |
| 7,418 |
| 3,142 |
| 2,572 |
| 2,425 | ||||
Other borrowings |
| 10,000 |
| 10,000 |
| 10,000 |
| 10,000 | ||||
Operating lease liability (see Note 1) |
| 4,302 |
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Operating lease liability |
| 4,002 |
| 4,154 | ||||||||
Other liabilities |
| 19,007 |
| 17,031 |
| 21,214 |
| 16,428 | ||||
Junior subordinated debentures |
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| 11,330 |
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| 11,330 |
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| 11,330 |
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| 11,330 |
Total liabilities |
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| 1,310,863 |
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| 1,256,561 |
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| 1,376,715 |
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| 1,311,777 |
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STOCKHOLDERS' EQUITY: |
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Common stock, $.50 par value, 10,000,000 shares authorized; 4,920,381 |
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and 4,852,868 shares issued at September 30, 2019 and December 31, 2018, |
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respectively, and 4,920,196 and 4,852,868 outstanding at September 30, 2019 |
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and December 31, 2018, respectively |
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| 2,462 |
| 2,429 | |||||||
Common stock, $.50 par value, 10,000,000 shares authorized; 4,942,802 |
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and 4,929,593 shares issued at March 31, 2020 and December 31, 2019, |
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respectively, and 4,942,802 and 4,929,283 outstanding at March 31, 2020 |
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and December 31, 2019, respectively |
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| 2,474 |
| 2,467 | |||||||
Capital surplus |
| 62,736 |
| 61,225 |
| 63,679 |
| 63,302 | ||||
Treasury stock, at cost, 185 and 0 shares at September 30, 2019 and |
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December 31, 2018, respectively |
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Treasury stock, at cost, 0 and 310 shares at March 31, 2020 and |
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December 31, 2019, respectively |
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Retained earnings |
| 81,525 |
| 73,345 |
| 82,604 |
| 85,267 | ||||
Accumulated other comprehensive loss, net of tax |
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| (1,854) |
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| (5,353) |
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| (661) |
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| (2,583) |
Total stockholders' equity |
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| 144,869 |
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| 131,646 |
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| 148,096 |
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| 148,453 |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 1,455,732 |
| $ | 1,388,207 |
| $ | 1,524,811 |
| $ | 1,460,230 |
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See Notes to Unaudited Consolidated Financial Statements |
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1
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EVANS BANCORP, INC. AND SUBSIDIARIES |
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UNAUDITED CONSOLIDATED STATEMENTS OF INCOME |
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THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 |
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THREE MONTHS ENDED MARCH 31, 2020 AND 2019 |
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(in thousands, except share and per share amounts) |
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| Three Months Ended September 30, |
| Three Months Ended March 31, | ||||||||
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| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
INTEREST INCOME |
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Loans |
| $ | 15,645 |
| $ | 13,676 |
| $ | 14,546 |
| $ | 14,362 |
Interest-bearing deposits at banks |
| 159 |
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| 63 |
| 181 |
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| 249 | ||
Securities: |
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Taxable |
| 993 |
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| 805 |
| 1,049 |
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| 801 | ||
Non-taxable |
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| 48 |
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| 146 |
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| 47 |
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| 130 |
Total interest income |
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| 16,845 |
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| 14,690 |
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| 15,823 |
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| 15,542 |
INTEREST EXPENSE |
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Deposits |
| 3,038 |
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| 2,412 |
| 2,876 |
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| 2,843 | ||
Other borrowings |
| 45�� |
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| 51 |
| 47 |
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| 45 | ||
Junior subordinated debentures |
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| 141 |
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| 141 |
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| 124 |
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| 146 |
Total interest expense |
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| 3,224 |
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| 2,604 |
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| 3,047 |
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| 3,034 |
NET INTEREST INCOME |
| 13,621 |
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| 12,086 |
| 12,776 |
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| 12,508 | ||
PROVISION FOR LOAN LOSSES |
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| (431) |
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| 252 |
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| 2,999 |
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| 538 |
NET INTEREST INCOME AFTER |
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PROVISION FOR LOAN LOSSES |
| 14,052 |
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| 11,834 |
| 9,777 |
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| 11,970 | ||
NON-INTEREST INCOME |
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Deposit service charges |
| 687 |
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| 571 |
| 628 |
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| 533 | ||
Insurance service and fees |
| 3,225 |
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| 3,215 |
| 2,425 |
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| 2,442 | ||
Loss on sale of securities |
| - |
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Gain on loans sold |
| 43 |
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| 6 |
| 51 |
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| 26 | ||
Bank-owned life insurance |
| 160 |
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| 165 |
| 160 |
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| 159 | ||
Loss on tax credit investment |
| - |
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| (165) |
| (2,475) |
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| - | ||
Refundable state historic tax credit |
| - |
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| 150 |
| 1,857 |
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| - | ||
Interchange fee income |
| 438 |
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| 413 |
| 382 |
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| 421 | ||
Other |
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| 611 |
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| 507 |
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| 310 |
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| 614 |
Total non-interest income |
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| 5,164 |
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| 4,764 |
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| 3,338 |
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| 4,195 |
NON-INTEREST EXPENSE |
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Salaries and employee benefits |
| 7,644 |
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| 7,090 |
| 7,797 |
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| 7,160 | ||
Occupancy |
| 853 |
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| 795 |
| 861 |
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| 836 | ||
Advertising and public relations |
| 231 |
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| 258 |
| 269 |
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| 167 | ||
Professional services |
| 1,009 |
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| 588 |
| 1,374 |
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| 745 | ||
Technology and communications |
| 1,057 |
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| 874 |
| 1,096 |
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| 893 | ||
Amortization of intangibles |
| 112 |
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| 112 |
| 130 |
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| 112 | ||
FDIC insurance |
| - |
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| 295 |
| 179 |
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| 207 | ||
Other |
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| 1,370 |
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| 1,445 |
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| 1,164 |
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| 1,104 |
Total non-interest expense |
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| 12,276 |
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| 11,457 |
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| 12,870 |
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| 11,224 |
INCOME BEFORE INCOME TAXES |
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| 6,940 |
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| 5,141 |
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| 245 |
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| 4,941 |
INCOME TAX PROVISION |
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| 1,776 |
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| 346 |
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| 41 |
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| 1,221 |
NET INCOME |
| $ | 5,164 |
| $ | 4,795 |
| $ | 204 |
| $ | 3,720 |
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Net income per common share-basic |
| $ | 1.05 |
| $ | 0.99 |
| $ | 0.04 |
| $ | 0.77 |
Net income per common share-diluted |
| $ | 1.04 |
| $ | 0.97 |
| $ | 0.04 |
| $ | 0.75 |
Weighted average number of common shares outstanding |
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| 4,918,740 |
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| 4,824,318 |
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| 4,936,947 |
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| 4,855,815 |
Weighted average number of diluted shares outstanding |
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| 4,976,639 |
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| 4,940,822 |
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| 4,992,214 |
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| 4,932,451 |
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See Notes to Unaudited Consolidated Financial Statements |
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EVANS BANCORP, INC. AND SUBSIDIARIES | |||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||
THREE MONTHS ENDED MARCH 31, 2020 AND 2019 | |||||||||||
(in thousands) |
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| Three Months Ended March 31, | ||||||||
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| 2020 |
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NET INCOME |
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| $ | 204 |
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| $ | 3,720 |
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OTHER COMPREHENSIVE INCOME, NET OF TAX: |
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Unrealized gain on available-for-sale securities |
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| 1,835 |
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| 1,303 |
Defined benefit pension plans: |
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Amortization of prior service cost |
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| 5 |
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| 6 |
Amortization of actuarial loss |
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| 82 |
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| 61 |
Total |
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| 87 |
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| 67 |
OTHER COMPREHENSIVE INCOME, NET OF TAX |
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| 1,922 |
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| 1,370 | ||
COMPREHENSIVE INCOME |
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| $ | 2,126 |
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| $ | 5,090 |
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See Notes to Unaudited Consolidated Financial Statements |
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EVANS BANCORP, INC. AND SUBSIDIARIES |
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UNAUDITED CONSOLIDATED STATEMENTS OF INCOME |
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NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 |
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(in thousands, except share and per share amounts) |
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| Nine Months Ended September 30, | ||||
| 2019 |
| 2018 | ||
INTEREST INCOME |
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Loans | $ | 45,149 |
| $ | 39,238 |
Interest-bearing deposits at banks |
| 564 |
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| 88 |
Securities: |
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Taxable |
| 2,736 |
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| 2,465 |
Non-taxable |
| 263 |
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| 512 |
Total interest income |
| 48,712 |
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| 42,303 |
INTEREST EXPENSE |
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Deposits |
| 8,883 |
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| 5,669 |
Other borrowings |
| 135 |
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| 509 |
Junior subordinated debentures |
| 431 |
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| 391 |
Total interest expense |
| 9,449 |
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| 6,569 |
NET INTEREST INCOME |
| 39,263 |
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| 35,734 |
PROVISION FOR LOAN LOSSES |
| 197 |
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| 1,678 |
NET INTEREST INCOME AFTER |
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PROVISION FOR LOAN LOSSES |
| 39,066 |
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| 34,056 |
NON-INTEREST INCOME |
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Deposit service charges |
| 1,822 |
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| 1,605 |
Insurance service and fees |
| 8,568 |
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| 7,132 |
Gain (loss) on sale of securities |
| 42 |
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| (98) |
Gain on loans sold |
| 105 |
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| 6 |
Bank-owned life insurance |
| 492 |
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| 514 |
Loss on tax credit investment |
| - |
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| (165) |
Refundable state historic tax credit |
| - |
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| 150 |
Interchange fee income |
| 1,299 |
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| 1,325 |
Other |
| 1,761 |
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| 1,720 |
Total non-interest income |
| 14,089 |
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| 12,189 |
NON-INTEREST EXPENSE |
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Salaries and employee benefits |
| 22,273 |
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| 20,192 |
Occupancy |
| 2,561 |
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| 2,280 |
Advertising and public relations |
| 612 |
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| 708 |
Professional services |
| 2,683 |
|
| 1,867 |
Technology and communications |
| 3,049 |
|
| 2,485 |
Amortization of intangibles |
| 336 |
|
| 168 |
FDIC insurance |
| 357 |
|
| 773 |
Other |
| 3,778 |
|
| 3,388 |
Total non-interest expense |
| 35,649 |
|
| 31,861 |
INCOME BEFORE INCOME TAXES |
| 17,506 |
|
| 14,384 |
INCOME TAX PROVISION |
| 4,240 |
|
| 2,479 |
NET INCOME | $ | 13,266 |
| $ | 11,905 |
|
|
|
|
|
|
Net income per common share-basic | $ | 2.71 |
| $ | 2.48 |
Net income per common share-diluted | $ | 2.68 |
| $ | 2.41 |
Weighted average number of common shares outstanding |
| 4,889,029 |
|
| 4,807,684 |
Weighted average number of diluted shares outstanding |
| 4,957,689 |
|
| 4,933,485 |
|
|
|
|
|
|
See Notes to Unaudited Consolidated Financial Statements |
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME | |||||||||||
THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 | |||||||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, | ||||||||
|
|
|
| 2019 |
|
|
|
| 2018 | ||
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
| $ | 5,164 |
|
|
|
| $ | 4,795 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: |
|
|
|
|
|
| |||||
Unrealized gain (loss) on available-for-sale securities |
|
|
|
| 523 |
|
|
|
|
| (738) |
Defined benefit pension plans: |
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
|
| 6 |
|
|
|
|
| 7 |
Amortization of actuarial loss |
|
|
|
| 62 |
|
|
|
|
| 33 |
Total |
|
|
|
| 68 |
|
|
|
|
| 40 |
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX |
|
| 591 |
|
|
|
|
| (698) | ||
COMPREHENSIVE INCOME |
|
|
| $ | 5,755 |
|
|
|
| $ | 4,097 |
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Consolidated Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
EVANS BANCORP, INC. AND SUBSIDIARIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY |
|
|
| ||||||||||||
THREE MONTHS ENDED MARCH 31, 2020 AND 2019 |
|
|
|
|
| ||||||||||
(in thousands, except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
| |
|
| Common |
| Capital |
| Retained |
| Comprehensive |
|
|
| ||||
|
| Stock |
| Surplus |
| Earnings |
| Loss |
| Total | |||||
Balance, December 31, 2018 |
| $ | 2,429 |
| $ | 61,225 |
| $ | 73,345 |
| $ | (5,353) |
| $ | 131,646 |
Net Income |
|
|
|
|
|
|
|
| 3,720 |
|
|
|
|
| 3,720 |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
| 1,370 |
|
| 1,370 |
Cash dividends ($0.52 per common share) |
|
|
|
|
|
|
|
| (2,527) |
|
|
|
|
| (2,527) |
Stock compensation expense |
|
|
|
|
| 201 |
|
|
|
|
|
|
|
| 201 |
Reissued 500 restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
Issued 4,934 restricted shares, net of forfeitures |
|
| 2 |
|
| (2) |
|
|
|
|
|
|
|
| - |
Issued 2,514 shares in stock option exercises |
|
| 1 |
|
| 24 |
|
|
|
|
|
|
|
| 25 |
Balance, March 31, 2019 |
| $ | 2,432 |
| $ | 61,448 |
| $ | 74,538 |
| $ | (3,983) |
| $ | 134,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019 |
| $ | 2,467 |
| $ | 63,302 |
| $ | 85,267 |
| $ | (2,583) |
| $ | 148,453 |
Net Income |
|
|
|
|
|
|
|
| 204 |
|
|
|
|
| 204 |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
| 1,922 |
|
| 1,922 |
Cash dividends ($0.58 per common share) |
|
|
|
|
|
|
|
| (2,867) |
|
|
|
|
| (2,867) |
Stock compensation expense |
|
|
|
|
| 257 |
|
|
|
|
|
|
|
| 257 |
Reissued 310 restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
Issued 5,930 restricted shares, net of forfeitures |
|
| 3 |
|
| (3) |
|
|
|
|
|
|
|
| - |
Issued 7,279 shares in stock option exercises |
|
| 4 |
|
| 123 |
|
|
|
|
|
|
|
| 127 |
Balance, March 31, 2020 |
| $ | 2,474 |
| $ | 63,679 |
| $ | 82,604 |
| $ | (661) |
| $ | 148,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Consolidated Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME | |||||||||||
NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 | |||||||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Month Ended September 30, | |||||||
|
|
|
| 2019 |
|
|
|
| 2018 | ||
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
| $ | 13,266 |
|
|
|
| $ | 11,905 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: |
|
|
|
|
|
| |||||
Unrealized gain (loss) on available-for-sale securities |
|
|
|
| 3,297 |
|
|
|
|
| (2,782) |
Defined benefit pension plans: |
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
|
| 17 |
|
|
|
|
| 18 |
Amortization of actuarial loss |
|
|
|
| 185 |
|
|
|
|
| 100 |
Total |
|
|
|
| 202 |
|
|
|
|
| 118 |
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX |
|
| 3,499 |
|
|
|
|
| (2,664) | ||
COMPREHENSIVE INCOME |
|
|
| $ | 16,765 |
|
|
|
| $ | 9,241 |
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Consolidated Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY |
|
|
|
| ||||||||||||
THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 |
|
|
|
|
|
| ||||||||||
(in thousands, except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
| |
|
| Common |
| Capital |
| Retained |
| Comprehensive |
|
|
|
| ||||
|
| Stock |
| Surplus |
| Earnings |
| Loss |
| Total |
| |||||
Balance, June 30, 2018 |
| $ | 2,413 |
| $ | 60,220 |
| $ | 66,325 |
| $ | (5,383) |
| $ | 123,575 |
|
Net Income |
|
|
|
|
|
|
|
| 4,795 |
|
|
|
|
| 4,795 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
| (698) |
|
| (698) |
|
Cash dividends ($0.46 per common share) |
|
|
|
|
|
|
|
| (2,218) |
|
|
|
|
| (2,218) |
|
Stock compensation expense |
|
|
|
|
| 198 |
|
|
|
|
|
|
|
| 198 |
|
Issued 8,196 shares in stock option exercises |
|
| 4 |
|
| 4 |
|
|
|
|
|
|
|
| 8 |
|
Balance, September 30, 2018 |
| $ | 2,417 |
| $ | 60,422 |
| $ | 68,902 |
| $ | (6,081) |
| $ | 125,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019 |
| $ | 2,460 |
| $ | 62,353 |
| $ | 78,919 |
| $ | (2,445) |
| $ | 141,287 |
|
Net Income |
|
|
|
|
|
|
|
| 5,164 |
|
|
|
|
| 5,164 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
| 591 |
|
| 591 |
|
Cash dividends ($0.52 per common share) |
|
|
|
|
|
|
|
| (2,558) |
|
|
|
|
| (2,558) |
|
Stock compensation expense |
|
|
|
|
| 243 |
|
|
|
|
|
|
|
| 243 |
|
Issued 4,703 shares in stock option exercises |
|
| 2 |
|
| 140 |
|
|
|
|
|
|
|
| 142 |
|
Reissued 2,261 shares in stock option exercises |
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Balance, September 30, 2019 |
| $ | 2,462 |
| $ | 62,736 |
| $ | 81,525 |
| $ | (1,854) |
| $ | 144,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Consolidated Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVANS BANCORP, INC. AND SUBSIDIARIES | ||||||
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
THREE MONTHS ENDED MARCH 31, 2020 AND 2019 | ||||||
(in thousands) | ||||||
|
| Three Months Ended March 31, | ||||
|
|
| 2020 |
|
| 2019 |
OPERATING ACTIVITIES: |
|
|
|
|
|
|
Interest received |
| $ | 15,968 |
| $ | 15,323 |
Fees received |
|
| 4,113 |
|
| 4,424 |
Interest paid |
|
| (2,248) |
|
| (2,999) |
Cash paid to employees and vendors |
|
| (11,362) |
|
| (12,685) |
Income taxes paid |
|
| (103) |
|
| - |
Proceeds from sale of loans held for sale |
|
| 3,739 |
|
| 2,071 |
Originations of loans held for sale |
|
| (3,335) |
|
| (2,045) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
| 6,772 |
|
| 4,089 |
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
Available for sales securities: |
|
|
|
|
|
|
Purchases |
|
| (46,322) |
|
| (10,568) |
Proceeds from sales, maturities, calls, and payments |
|
| 17,430 |
|
| 5,523 |
Held to maturity securities: |
|
|
|
|
|
|
Purchases |
|
| (511) |
|
| (224) |
Proceeds from maturities, calls, and payments |
|
| 50 |
|
| 10 |
Cash paid for bank-owned life insurance |
|
| - |
|
| (360) |
Additions to properties and equipment |
|
| (491) |
|
| (426) |
Purchase of tax credit investment |
|
| (3,116) |
|
| (19) |
Insurance agency acquisition |
|
| (683) |
|
| - |
Net increase in loans |
|
| (20,449) |
|
| (29,454) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
| (54,092) |
|
| (35,518) |
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
Proceeds (repayments) from short-term borrowings, net |
|
| 147 |
|
| (660) |
Net increase in deposits |
|
| 60,157 |
|
| 60,665 |
Issuance of common stock |
|
| 127 |
|
| 25 |
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 60,431 |
|
| 60,030 |
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
| 13,111 |
|
| 28,601 |
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
Beginning of period |
|
| 38,857 |
|
| 39,915 |
End of period |
| $ | 51,968 |
| $ | 68,516 |
|
|
|
|
|
|
|
See Notes to Unaudited Consolidated Financial Statements |
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY |
|
|
| ||||||||||||
NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 |
|
|
|
|
| ||||||||||
(in thousands, except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
| |
|
| Common |
| Capital |
| Retained |
| Comprehensive |
|
|
| ||||
|
| Stock |
| Surplus |
| Earnings |
| Loss |
| Total | |||||
Balance, December 31, 2017 |
| $ | 2,394 |
| $ | 59,444 |
| $ | 59,921 |
| $ | (3,417) |
| $ | 118,342 |
Cumulative-effect adjustment due to change in accounting principle |
|
|
|
|
|
|
|
| 1,496 |
|
|
|
|
| 1,496 |
Net Income |
|
|
|
|
|
|
|
| 11,905 |
|
|
|
|
| 11,905 |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
| (2,664) |
|
| (2,664) |
Cash dividends ($0.92 per common share) |
|
|
|
|
|
|
|
| (4,420) |
|
|
|
|
| (4,420) |
Stock compensation expense |
|
|
|
|
| 597 |
|
|
|
|
|
|
|
| 597 |
Reissued 1,057 restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
Issued 14,940 restricted shares, net of forfeitures |
|
| 8 |
|
| (8) |
|
|
|
|
|
|
|
| - |
Issued 3,205 shares under Dividend Reinvestment Plan |
|
| 2 |
|
| 142 |
|
|
|
|
|
|
|
| 144 |
Issued 3,898 shares in Employee Stock Purchase Plan |
|
| 2 |
|
| 151 |
|
|
|
|
|
|
|
| 153 |
Issued 22,096 shares in stock option exercises |
|
| 11 |
|
| 96 |
|
|
|
|
|
|
|
| 107 |
Balance, September 30, 2018 |
| $ | 2,417 |
| $ | 60,422 |
| $ | 68,902 |
| $ | (6,081) |
| $ | 125,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018 |
| $ | 2,429 |
| $ | 61,225 |
| $ | 73,345 |
| $ | (5,353) |
| $ | 131,646 |
Net Income |
|
|
|
|
|
|
|
| 13,266 |
|
|
|
|
| 13,266 |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
| 3,499 |
|
| 3,499 |
Cash dividends ($1.04 per common share) |
|
|
|
|
|
|
|
| (5,086) |
|
|
|
|
| (5,086) |
Stock compensation expense |
|
|
|
|
| 692 |
|
|
|
|
|
|
|
| 692 |
Reissued 500 restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
Issued 20,757 restricted shares, net of forfeitures |
|
| 12 |
|
| (12) |
|
|
|
|
|
|
|
| - |
Issued 3,866 shares under Dividend Reinvestment Plan |
|
| 2 |
|
| 137 |
|
|
|
|
|
|
|
| 139 |
Issued 6,183 shares in Employee Stock Purchase Plan |
|
| 3 |
|
| 195 |
|
|
|
|
|
|
|
| 198 |
Issued 32,516 shares in stock option exercises |
|
| 16 |
|
| 499 |
|
|
|
|
|
|
|
| 515 |
Reissued 3,506 shares in stock option exercises |
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
Balance, September 30, 2019 |
| $ | 2,462 |
| $ | 62,736 |
| $ | 81,525 |
| $ | (1,854) |
| $ | 144,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Consolidated Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVANS BANCORP, INC. AND SUBSIDIARIES |
|
|
|
|
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
|
|
|
|
THREE MONTHS ENDED MARCH 31, 2020 AND 2019 |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||
|
|
| 2020 |
|
| 2019 |
|
|
|
|
|
|
|
RECONCILIATION OF NET INCOME TO NET CASH |
|
|
|
|
|
|
PROVIDED BY OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 204 |
| $ | 3,720 |
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash |
|
|
|
|
|
|
provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
| 538 |
|
| 505 |
Deferred tax (benefit) expense |
|
| (1,001) |
|
| 12 |
Provision for loan losses |
|
| 2,999 |
|
| 538 |
Loss on tax credit investment |
|
| 2,475 |
|
| 148 |
Changes in refundable state historic tax credit |
|
| (1,857) |
|
| 17 |
Gain on loans sold |
|
| (51) |
|
| (26) |
Stock compensation expense |
|
| 257 |
|
| 201 |
Proceeds from sale of loans held for sale |
|
| 3,739 |
|
| 2,071 |
Originations of loans held for sale |
|
| (3,335) |
|
| (2,045) |
Changes in assets and liabilities affecting cash flow: |
|
|
|
|
|
|
Other assets |
|
| (225) |
|
| (4,528) |
Other liabilities |
|
| 3,029 |
|
| 3,476 |
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
| $ | 6,772 |
| $ | 4,089 |
|
|
|
|
|
|
|
See Notes to Unaudited Consolidated Financial Statements |
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVANS BANCORP, INC. AND SUBSIDIARIES | ||||||
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 | ||||||
(in thousands) | ||||||
|
| Nine Months Ended September 30, | ||||
|
|
| 2019 |
|
| 2018 |
OPERATING ACTIVITIES: |
|
|
|
|
|
|
Interest received |
| $ | 48,957 |
| $ | 42,157 |
Fees received |
|
| 13,404 |
|
| 10,897 |
Interest paid |
|
| (9,226) |
|
| (6,221) |
Cash paid to employees and vendors |
|
| (36,888) |
|
| (30,188) |
Income taxes (paid) refund |
|
| (1,586) |
|
| 475 |
Proceeds from sale of loans held for resale |
|
| 7,698 |
|
| 409 |
Originations of loans held for resale |
|
| (7,733) |
|
| (1,686) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
| 14,626 |
|
| 15,843 |
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
Available for sales securities: |
|
|
|
|
|
|
Purchases |
|
| (46,893) |
|
| (47,863) |
Proceeds from sales, maturities, calls, and payments |
|
| 48,694 |
|
| 54,476 |
Held to maturity securities: |
|
|
|
|
|
|
Purchases |
|
| (1,141) |
|
| (156) |
Proceeds from maturities, calls, and payments |
|
| 307 |
|
| 4,120 |
Cash paid for bank-owned life insurance |
|
| (360) |
|
| - |
Proceeds from bank-owned life insurance claims |
|
| - |
|
| 675 |
Additions to properties and equipment |
|
| (4,513) |
|
| (757) |
Proceeds from sales of assets |
|
| 185 |
|
|
|
Proceeds from equity securities sales |
|
| - |
|
| 1,960 |
Purchase of tax credit investment |
|
| - |
|
| (3,877) |
Insurance agency acquisitions |
|
| - |
|
| (5,000) |
Net increase in loans |
|
| (62,823) |
|
| (90,665) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
| (66,544) |
|
| (87,087) |
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
Proceeds (repayments) from short-term borrowings, net |
|
| 4,275 |
|
| (84,560) |
Net increase in deposits |
|
| 43,748 |
|
| 164,394 |
Dividends paid |
|
| (2,528) |
|
| (2,202) |
Issuance of common stock |
|
| 852 |
|
| 404 |
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 46,347 |
|
| 78,036 |
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
| (5,571) |
|
| 6,792 |
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
Beginning of period |
|
| 39,915 |
|
| 21,330 |
End of period |
| $ | 34,344 |
| $ | 28,122 |
|
|
|
|
|
|
|
See Notes to Unaudited Consolidated Financial Statements |
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVANS BANCORP, INC. AND SUBSIDIARIES |
|
|
|
|
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
|
|
|
|
NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
| Nine Months Ended September 30, | ||||
|
|
| 2019 |
|
| 2018 |
|
|
|
|
|
|
|
RECONCILIATION OF NET INCOME TO NET CASH |
|
|
|
|
|
|
PROVIDED BY OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 13,266 |
| $ | 11,905 |
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash |
|
|
|
|
|
|
provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
| 1,505 |
|
| 1,352 |
Deferred tax (benefit) expense |
|
| (201) |
|
| 414 |
Provision for loan losses |
|
| 197 |
|
| 1,678 |
Loss on tax credit investment |
|
| - |
|
| 165 |
Refundable state historic tax credit received |
|
| - |
|
| 2,101 |
Net gain on sales of assets |
|
| (3) |
|
| - |
(Gain) loss on sales of securities |
|
| (42) |
|
| 98 |
Gain on loans sold |
|
| (105) |
|
| (6) |
Change in fair value of equity securities |
|
| - |
|
| (245) |
Stock compensation expense |
|
| 692 |
|
| 597 |
Proceeds from sale of loans held for resale |
|
| 7,698 |
|
| 409 |
Originations of loans held for resale |
|
| (7,733) |
|
| (1,686) |
Changes in assets and liabilities affecting cash flow: |
|
|
|
|
|
|
Other assets |
|
| (5,508) |
|
| (3,262) |
Other liabilities |
|
| 4,860 |
|
| 2,323 |
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
| $ | 14,626 |
| $ | 15,843 |
|
|
|
|
|
|
|
See Notes to Unaudited Consolidated Financial Statements |
|
|
|
|
|
|
8
EVANS BANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2020 AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2019 AND 2018
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies followed by Evans Bancorp, Inc. (the “Company”), a financial holding company, and its two direct, wholly-owned subsidiaries: (i) Evans Bank, National Association (the “Bank”), and the Bank’s subsidiaries, Evans National Leasing, Inc. (“ENL”), and Evans National Holding Corp. (“ENHC”); and (ii) Evans National Financial Services, LLC (“ENFS”), and ENFS’s subsidiary, The Evans Agency, LLC (“TEA”), and TEA’s subsidiaries, Frontier Claims Services, Inc. (“FCS”) and ENB Associates Inc. (“ENBA”), in the preparation of the accompanying interim unaudited consolidated financial statements conform with U.S. generally accepted accounting principles (“GAAP”) and with general practice within the industries in which it operates. Except as the context otherwise requires, the Company and its direct and indirect subsidiaries are collectively referred to in this report as the “Company.”
The results of operations for the three and nine month periods ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018 (“10-K”). The Company’s significant accounting policies are disclosed in Note 1 to the 10-K.
The Financial Accounting Standards Board (“FASB”) establishes changes to U.S. GAAP in the form of accounting standards updates (“ASUs”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs when they are issued by FASB. ASUs listed below were adopted by the Company during itsthe current fiscal year. ASUsyear are not listed below did notexpected to have a material impact on the Company’s consolidated financial position, results of operations, cash flows or disclosures.
On JanuaryThe accompanying unaudited consolidated financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019 (“10-K”). The Company’s significant accounting policies are disclosed in Note 1 to the 10-K.
The results of operations for the three month period ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year.
The Company’s first quarter 2020 results were impacted by the Coronavirus Disease 2019 ("COVID-19") pandemic, as the United States operates under a state of emergency and New York State has issued orders that, subject to limited exceptions, all individuals stay at home and non‑essential businesses cease all activities. The Company has remained open despite these orders because banks have been identified as providing essential services. The Company has been serving its customers through a variety of channels, including drive-up windows, limited appointment hours for personal meetings at certain branches, mobile banking, on-line banking, remote deposit capture and call centers. During the first quarter of 2020, the Company adopted ASU 2016-02began processing Leasespayment deferrals for up to three months for both consumers and all subsequent amendments (collectively, “ASU 2016-02”).business borrowers, and temporarily waiving certain service fees to assist customers who are experiencing financial hardship. The objectiveFederal Reserve decreased the range for the federal funds target rate by 0.5 percent on March 3, 2020, and by another 1.0 percent on March 16, 2020, reaching a current range of this ASU is to0.0 - 0.25 percent. Economic trends and conditions reflecting the impact of COVID-19 have resulted in an increase transparency and comparability among organizations by recognizing lease assets and lease liabilitiesin estimate of expected credit losses in the Company’s loan portfolio as the Company believes that COVID-19 could have a material effect on the balance sheet and disclosing key information about leasing arrangementscustomers’ ability to meet that objective. The main difference between previous GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. Under this new guidance, a lessee should recognize in the statement of financial position a liability to make lease payments and a right-of-use (“ROU”) asset representing its right to use the underlying asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. their borrowing obligations.
ASU 2016-02 required a modified retrospective transition approach, applying the new standard to all leases existing at the date of initial application. The Company elected to use the effective date, January 1, 2019, as our date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification.
Under ASU 2016-02, leases are classified as finance or operating, with the classification affecting the pattern and classification of expense recognition in the income statement. The Company’s leases, consisting of property leases for certain of our bank branches and insurance agency offices, are classified as operating leases. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As these leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of lease payments. Our lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
9
ASU 2016-02 had an impact on the Company’s consolidated balance sheets, but did not have an impact on the consolidated statements of income or the consolidated statements of cash flows. The most significant impacts upon adoption on January 1, 2019 were the recognition of $4.3 million of ROU assets and $4.7 million of lease liabilities, including $0.4 million of liabilities that were reported in other liabilities in the Company’s December 31, 2018 consolidated balance sheet. ROU assets and lease liability were $3.9 million and $4.3 million, respectively, at September 30, 2019. Operating lease expenses during the three and nine month periods ended September 30, 2019 were $178 thousand and $535 thousand, respectively, and are included in other non-interest expense on the consolidated statement of income. Cash paid for amounts included in the measurement of lease liabilities during the three and nine month periods ended September 30, 2019 were $185 thousand and $553 thousand, respectively, and are included in cash flows from operating activities on the consolidated statement of cash flows. The weighted average discount rate related to the Company’s leases was 3.5% as of September 30, 2019. The weighted average remaining lease term related to the Company’s leases was 8.7 years as of September 30, 2019. Future minimum lease payments under non-cancellable leases as of September 30, 2019 were as follows:
|
|
|
|
|
|
|
| Year Ending December 31, |
2019 (excluding the nine months ended September 30, 2019) | $ | 185 |
2020 |
| 748 |
2021 |
| 682 |
2022 |
| 694 |
2023 |
| 589 |
Thereafter |
| 2,091 |
Total future minimum lease payments |
| 4,989 |
Less imputed interest |
| 687 |
Total | $ | 4,302 |
|
|
|
107
2. SECURITIES
The amortized cost of securities and their approximate fair value at September 30, 2019March 31, 2020 and December 31, 20182019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| September 30, 2019 |
| March 31, 2020 | ||||||||||||||||||||
|
| (in thousands) |
| (in thousands) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| Amortized |
| Unrealized |
| Fair |
| Amortized |
| Unrealized |
| Fair | ||||||||||||
|
| Cost |
| Gains |
| Losses |
| Value |
| Cost |
| Gains |
| Losses |
| Value | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
U.S. government agencies |
| $ | 28,958 |
| $ | 361 |
| $ | (14) |
| $ | 29,305 |
| $ | 34,137 |
| $ | 769 |
| $ | - |
| $ | 34,906 |
States and political subdivisions |
|
| 3,723 |
|
| 70 |
|
| (7) |
|
| 3,786 |
|
| 3,286 |
|
| 57 |
|
| (6) |
|
| 3,337 |
Total debt securities |
| $ | 32,681 |
| $ | 431 |
| $ | (21) |
| $ | 33,091 |
| $ | 37,423 |
| $ | 826 |
| $ | (6) |
| $ | 38,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
FNMA |
| $ | 35,678 |
| $ | 455 |
| $ | (66) |
| $ | 36,067 |
| $ | 41,012 |
| $ | 1,338 |
| $ | (20) |
| $ | 42,330 |
FHLMC |
| 16,506 |
| 122 |
| (21) |
| 16,607 |
| 14,441 |
| 497 |
| - |
| 14,938 | ||||||||
GNMA |
| 3,518 |
| 17 |
| (13) |
| 3,522 |
| 3,180 |
| 66 |
| (1) |
| 3,245 | ||||||||
SBA |
| 14,447 |
| 231 |
| (43) |
| 14,635 |
| 22,398 |
| 171 |
| (229) |
| 22,340 | ||||||||
CMO |
|
| 30,346 |
|
| 316 |
|
| (127) |
|
| 30,535 |
|
| 37,557 |
|
| 624 |
|
| (86) |
|
| 38,095 |
Total mortgage-backed securities |
| $ | 100,495 |
| $ | 1,141 |
| $ | (270) |
| $ | 101,366 |
| $ | 118,588 |
| $ | 2,696 |
| $ | (336) |
| $ | 120,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total securities designated as available for sale |
| $ | 133,176 |
| $ | 1,572 |
| $ | (291) |
| $ | 134,457 |
| $ | 156,011 |
| $ | 3,522 |
| $ | (342) |
| $ | 159,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
States and political subdivisions |
| $ | 2,520 |
| $ | 30 |
| $ | (8) |
| $ | 2,542 |
| $ | 2,847 |
| $ | 116 |
| $ | - |
| $ | 2,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities designated as held to maturity |
| $ | 2,520 |
| $ | 30 |
| $ | (8) |
| $ | 2,542 |
| $ | 2,847 |
| $ | 116 |
| $ | - |
| $ | 2,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| December 31, 2018 |
| December 31, 2019 | ||||||||||||||||||||
|
| (in thousands) |
| (in thousands) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| Amortized |
| Unrealized |
| Fair |
| Amortized |
| Unrealized |
| Fair | ||||||||||||
|
| Cost |
| Gains |
| Losses |
| Value |
| Cost |
| Gains |
| Losses |
| Value | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
U.S. government agencies |
| $ | 34,597 |
| $ | 2 |
| $ | (671) |
| $ | 33,928 |
| $ | 27,951 |
| $ | 225 |
| $ | (21) |
| $ | 28,155 |
States and political subdivisions |
|
| 22,168 |
|
| 69 |
|
| (64) |
|
| 22,173 |
|
| 3,289 |
|
| 69 |
|
| (7) |
|
| 3,351 |
Total debt securities |
| $ | 56,765 |
| $ | 71 |
| $ | (735) |
| $ | 56,101 |
| $ | 31,240 |
| $ | 294 |
| $ | (28) |
| $ | 31,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
FNMA |
| $ | 27,747 |
| $ | 21 |
| $ | (729) |
| $ | 27,039 |
| $ | 34,395 |
| $ | 330 |
| $ | (53) |
| $ | 34,672 |
FHLMC |
| 14,645 |
| 11 |
| (431) |
| 14,225 |
| 15,390 |
| 137 |
| (13) |
| 15,514 | ||||||||
GNMA |
| 1,660 |
| 6 |
| (36) |
| 1,630 |
| 3,421 |
| 16 |
| (24) |
| 3,413 | ||||||||
SBA |
| 9,432 |
| - |
| (299) |
| 9,133 |
| 13,752 |
| 90 |
| (70) |
| 13,772 | ||||||||
CMO |
|
| 25,025 |
|
| 6 |
|
| (1,055) |
|
| 23,976 |
|
| 29,019 |
|
| 190 |
|
| (164) |
|
| 29,045 |
Total mortgage-backed securities |
| $ | 78,509 |
| $ | 44 |
| $ | (2,550) |
| $ | 76,003 |
| $ | 95,977 |
| $ | 763 |
| $ | (324) |
| $ | 96,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total securities designated as available for sale |
| $ | 135,274 |
| $ | 115 |
| $ | (3,285) |
| $ | 132,104 |
| $ | 127,217 |
| $ | 1,057 |
| $ | (352) |
| $ | 127,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
States and political subdivisions |
| $ | 1,685 |
| $ | 11 |
| $ | (22) |
| $ | 1,674 |
| $ | 2,386 |
| $ | 24 |
| $ | (18) |
| $ | 2,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities designated as held to maturity |
| $ | 1,685 |
| $ | 11 |
| $ | (22) |
| $ | 1,674 |
| $ | 2,386 |
| $ | 24 |
| $ | (18) |
| $ | 2,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118
Available for sale securities with a total fair value of $91$121 million and $94$102 million at September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.
The scheduled maturities of debt and mortgage-backed securities at September 30, 2019March 31, 2020 and December 31, 20182019 are summarized below. All maturity amounts are contractual maturities. Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations with or without call premiums.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
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|
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|
|
|
|
| September 30, 2019 |
| December 31, 2018 |
| March 31, 2020 |
| December 31, 2019 | ||||||||||||||||
|
| Amortized |
| Estimated |
| Amortized |
| Estimated |
| Amortized |
| Estimated |
| Amortized |
| Estimated | ||||||||
|
| cost |
| fair value |
| cost |
| fair value |
| cost |
| fair value |
| cost |
| fair value | ||||||||
|
|
| (in thousands) |
|
| (in thousands) |
|
| (in thousands) |
|
| (in thousands) | ||||||||||||
|
|
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|
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|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
Debt securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less |
| $ | 4,000 |
| $ | 3,986 |
| $ | 5,074 |
| $ | 5,075 |
| $ | 6,004 |
| $ | 6,045 |
| $ | 6,005 |
| $ | 6,014 |
Due after one year through five years |
|
| 6,534 |
|
| 6,566 |
|
| 22,637 |
|
| 22,448 |
|
| 4,636 |
|
| 4,770 |
|
| 6,481 |
|
| 6,626 |
Due after five years through ten years |
|
| 22,147 |
|
| 22,539 |
|
| 28,870 |
|
| 28,391 |
|
| 23,283 |
|
| 23,907 |
|
| 18,754 |
|
| 18,866 |
Due after ten years |
|
| - |
|
| - |
|
| 184 |
|
| 187 |
|
| 3,500 |
|
| 3,521 |
|
| - |
|
| - |
|
|
| 32,681 |
|
| 33,091 |
|
| 56,765 |
|
| 56,101 |
|
| 37,423 |
|
| 38,243 |
|
| 31,240 |
|
| 31,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
available for sale |
|
| 100,495 |
|
| 101,366 |
|
| 78,509 |
|
| 76,003 |
|
| 118,588 |
|
| 120,948 |
|
| 95,977 |
|
| 96,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 133,176 |
| $ | 134,457 |
| $ | 135,274 |
| $ | 132,104 |
| $ | 156,011 |
| $ | 159,191 |
| $ | 127,217 |
| $ | 127,922 |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less |
| $ | 1,124 |
| $ | 1,125 |
| $ | 693 |
| $ | 693 |
| $ | 1,650 |
| $ | 1,664 |
| $ | 1,139 |
| $ | 1,140 |
Due after one year through five years |
|
| 861 |
|
| 885 |
|
| 811 |
|
| 811 |
|
| 662 |
|
| 706 |
|
| 712 |
|
| 732 |
Due after five years through ten years |
|
| 54 |
|
| 54 |
|
| 93 |
|
| 89 |
|
| 54 |
|
| 58 |
|
| 54 |
|
| 54 |
Due after ten years |
|
| 481 |
|
| 478 |
|
| 88 |
|
| 81 |
|
| 481 |
|
| 535 |
|
| 481 |
|
| 466 |
Total |
| $ | 2,520 |
| $ | 2,542 |
| $ | 1,685 |
| $ | 1,674 |
| $ | 2,847 |
| $ | 2,963 |
| $ | 2,386 |
| $ | 2,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual maturities of the Company’s mortgage-backed securities generally exceed ten years; however, the effective lives may be significantly shorter due to prepayments of the underlying loans and due to the nature of these securities.
Information regarding unrealized losses within the Company’s available for sale and held to maturity securities at September 30, 2019March 31, 2020 and December 31, 20182019 is summarized below. The securities are primarily U.S. government-guaranteed agency securities or municipal securities.
129
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|
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| ||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| September 30, 2019 |
| March 31, 2020 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
| Less than 12 months |
|
| 12 months or longer |
|
| Total |
|
| Less than 12 months |
|
| 12 months or longer |
|
| Total | ||||||||||||||||||
|
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
|
| (in thousands) |
|
| (in thousands) | ||||||||||||||||||||||||||||||
Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
U.S. government agencies |
| $ | - |
| $ | - |
| $ | 3,986 |
| $ | (14) |
| $ | 3,986 |
| $ | (14) |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
States and political subdivisions |
|
| - |
|
| - |
|
| 181 |
|
| (7) |
|
| 181 |
|
| (7) |
|
| - |
|
| - |
|
| 181 |
|
| (6) |
|
| 181 |
|
| (6) |
Total debt securities |
| $ | - |
| $ | - |
| $ | 4,167 |
| $ | (21) |
| $ | 4,167 |
| $ | (21) |
| $ | - |
| $ | - |
| $ | 181 |
| $ | (6) |
| $ | 181 |
| $ | (6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
FNMA |
| $ | 3,386 |
| $ | (21) |
| $ | 6,181 |
| $ | (45) |
| $ | 9,567 |
| $ | (66) |
| $ | 1,422 |
| $ | (19) |
| $ | 13 |
| $ | (1) |
| $ | 1,435 |
| $ | (20) |
FHLMC |
| 3,046 |
| (7) |
| 1,300 |
|
| (14) |
|
| 4,346 |
| (21) |
| - |
| - |
| - |
|
| - |
|
| - |
| - | ||||||||
GNMA |
| 2,030 |
| (10) |
| 776 |
|
| (3) |
|
| 2,806 |
| (13) |
| 85 |
| (1) |
| - |
|
| - |
|
| 85 |
| (1) | ||||||||
SBA |
| 3,519 |
| (43) |
| - |
|
| - |
|
| 3,519 |
| (43) |
| 11,962 |
| (229) |
| - |
|
| - |
|
| 11,962 |
| (229) | ||||||||
CMO |
|
| 1,722 |
|
| (13) |
|
| 9,494 |
|
| (114) |
|
| 11,216 |
|
| (127) |
|
| 7,560 |
|
| (84) |
|
| 1,015 |
|
| (2) |
|
| 8,575 |
|
| (86) |
Total mortgage-backed securities |
| $ | 13,703 |
| $ | (94) |
| $ | 17,751 |
| $ | (176) |
| $ | 31,454 |
| $ | (270) |
| $ | 21,029 |
| $ | (333) |
| $ | 1,028 |
| $ | (3) |
| $ | 22,057 |
| $ | (336) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Held to Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
States and political subdivisions |
| $ | 496 |
| $ | (7) |
| $ | 423 |
| $ | (1) |
| $ | 919 |
| $ | (8) |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
securities |
| $ | 14,199 |
| $ | (101) |
| $ | 22,341 |
| $ | (198) |
| $ | 36,540 |
| $ | (299) |
| $ | 21,029 |
| $ | (333) |
| $ | 1,209 |
| $ | (9) |
| $ | 22,238 |
| $ | (342) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| December 31, 2018 |
| December 31, 2019 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
| Less than 12 months |
|
| 12 months or longer |
|
| Total |
|
| Less than 12 months |
|
| 12 months or longer |
|
| Total | ||||||||||||||||||
|
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
|
| (in thousands) |
|
| (in thousands) | ||||||||||||||||||||||||||||||
Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
U.S. government agencies |
| $ | 9,931 |
| $ | (49) |
| $ | 21,144 |
| $ | (622) |
| $ | 31,075 |
| $ | (671) |
| $ | 1,976 |
| $ | (18) |
| $ | 3,997 |
| $ | (3) |
| $ | 5,973 |
| $ | (21) |
States and political subdivisions |
|
| 5,218 |
|
| (15) |
|
| 6,893 |
|
| (49) |
|
| 12,111 |
|
| (64) |
|
| - |
|
| - |
|
| 181 |
|
| (7) |
|
| 181 |
|
| (7) |
Total debt securities |
| $ | 15,149 |
| $ | (64) |
| $ | 28,037 |
| $ | (671) |
| $ | 43,186 |
| $ | (735) |
| $ | 1,976 |
| $ | (18) |
| $ | 4,178 |
| $ | (10) |
| $ | 6,154 |
| $ | (28) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
FNMA |
| $ | 2,637 |
| $ | (21) |
| $ | 23,667 |
| $ | (708) |
| $ | 26,304 |
| $ | (729) |
| $ | 5,355 |
| $ | (38) |
| $ | 3,630 |
| $ | (15) |
| $ | 8,985 |
| $ | (53) |
FHLMC |
| 1,895 |
| (25) |
| 11,899 |
|
| (406) |
|
| 13,794 |
| (431) |
| - |
| - |
| 1,242 |
|
| (13) |
|
| 1,242 |
| (13) | ||||||||
GNMA |
| - |
| - |
| 926 |
|
| (36) |
|
| 926 |
| (36) |
| 2,091 |
| (22) |
| 770 |
|
| (2) |
|
| 2,861 |
| (24) | ||||||||
SBA |
| - |
| - |
| 9,133 |
|
| (299) |
|
| 9,133 |
| (299) |
| 5,171 |
| (70) |
| - |
|
| - |
|
| 5,171 |
| (70) | ||||||||
CMO |
|
| - |
|
| - |
|
| 23,127 |
|
| (1,055) |
|
| 23,127 |
|
| (1,055) |
|
| 5,706 |
|
| (36) |
|
| 8,911 |
|
| (128) |
|
| 14,617 |
|
| (164) |
Total mortgage-backed securities |
| $ | 4,532 |
| $ | (46) |
| $ | 68,752 |
| $ | (2,504) |
| $ | 73,284 |
| $ | (2,550) |
| $ | 18,323 |
| $ | (166) |
| $ | 14,553 |
| $ | (158) |
| $ | 32,876 |
| $ | (324) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Held to Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
States and political subdivisions |
| $ | 156 |
| $ | - |
| $ | 722 |
| $ | (22) |
| $ | 878 |
| $ | (22) |
| $ | 227 |
| $ | (1) |
| $ | 2,165 |
| $ | (17) |
| $ | 2,392 |
| $ | (18) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
securities |
| $ | 19,837 |
| $ | (110) |
| $ | 97,511 |
| $ | (3,197) |
| $ | 117,348 |
| $ | (3,307) |
| $ | 20,526 |
| $ | (185) |
| $ | 20,896 |
| $ | (185) |
| $ | 41,422 |
| $ | (370) |
1310
Management has assessed the securities available for sale in an unrealized loss position at September 30, 2019March 31, 2020 and December 31, 20182019 and determined the decline in fair value below amortized cost to be temporary. In making this determination, management considered the period of time the securities were in a loss position, the percentage decline in comparison to the securities’ amortized cost, and the financial condition of the issuer (primarily government or government-sponsored enterprises). In addition, management does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost. Management believes the decline in fair value is primarily related to market interest rate fluctuations and not to the credit deterioration of the individual issuers.
The Company has not recorded any other-than-temporary impairment (“OTTI”) charges as of September 30, 2019March 31, 2020 and did not record any OTTI charges during 2018.2019. The credit worthiness of the Company’s securities portfolio is largely reliant on the ability of U.S. government sponsored agencies such as Federal Home Loan Bank (“FHLB”), Federal National Mortgage Association (“FNMA”), Government National Mortgage Association (“GNMA”), and Federal Home Loan Mortgage Corporation (“FHLMC”), and municipalities throughout New York State to meet their obligations. In addition, dysfunctional markets could materially alter the liquidity, interest rate, and pricing risk of the portfolio. The stable past performance is not a guarantee for similar performance of the Company’s securities portfolio in future periods.
Fair value is defined in ASC Topic 820 “Fair Value Measurement” as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
There are three levels of inputs to fair value measurement:
|
|
|
|
| |
| Level 1 inputs are quoted prices for identical instruments in active markets; |
| |
| Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and |
| |
| Level 3 inputs are unobservable inputs. |
Observable market data should be used when available.
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE ON A RECURRING BASIS
The following table presents, for each of the fair-value hierarchy levels as defined in this footnote, those financial instruments which are measured at fair value on a recurring basis as of September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(in thousands) |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
| ||||||||||||||||
March 31, 2020 |
|
|
|
|
|
|
|
| ||||||||||||||||
Securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
US government agencies |
| $ | - |
| $ | 29,305 |
| $ | - |
| $ | 29,305 |
| $ | - |
| $ | 34,906 |
| $ | - |
| $ | 34,906 |
States and political subdivisions |
| - |
|
| 3,786 |
| - |
|
| 3,786 |
| - |
|
| 3,337 |
| - |
|
| 3,337 | ||||
Mortgage-backed securities |
| - |
|
| 101,366 |
| - |
|
| 101,366 |
| - |
|
| 120,948 |
| - |
|
| 120,948 | ||||
Mortgage servicing rights |
| - |
|
| - |
|
| 527 |
| 527 |
| - |
|
| - |
|
| 485 |
| 485 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
December 31, 2018 |
|
|
|
|
|
|
|
| ||||||||||||||||
December 31, 2019 |
|
|
|
|
|
|
|
| ||||||||||||||||
Securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
US government agencies |
| $ | - |
| $ | 33,928 |
| $ | - |
| $ | 33,928 |
| $ | - |
| $ | 28,155 |
| $ | - |
| $ | 28,155 |
States and political subdivisions |
| - |
|
| 22,173 |
| - |
|
| 22,173 |
| - |
|
| 3,351 |
| - |
|
| 3,351 | ||||
Mortgage-backed securities |
| - |
|
| 76,003 |
| - |
|
| 76,003 |
| - |
|
| 96,416 |
| - |
|
| 96,416 | ||||
Mortgage servicing rights |
| - |
|
| - |
|
| 609 |
| 609 |
| - |
|
| - |
|
| 555 |
| 555 |
1411
Securities available for sale
Fair values for securities are determined using independent pricing services and market-participating brokers. The Company’s independent pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information for structured securities, cash flow and, when available, loan performance data. Because many fixed income securities do not trade on a daily basis, the evaluated pricing applications apply information as applicable through processes, such as benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations. In addition, model processes, such as the Option Adjusted Spread model, are used to assess interest rate impact and develop prepayment scenarios. The models and the process take into account market convention. For each asset class, a team of evaluators gathers information from market sources and integrates relevant credit information, perceived market movements and sector news into the evaluated pricing applications and models. The Company’s service provider may occasionally determine that it does not have sufficient verifiable information to value a particular security. In these cases the Company will utilize valuations from another pricing service.
Management believes that it has a sufficient understanding of the third party service’s valuation models, assumptions and inputs used in determining the fair value of securities to enable management to maintain an appropriate system of internal control. On a quarterly basis, the Company reviews changes in the market value of its security portfolio. Individual changes in valuations are reviewed for consistency with general interest rate movements and any known credit concerns for specific securities. Additionally, on an annual basis, the Company has its entire security portfolio priced by a second pricing service to determine consistency with another market evaluator. If, during the Company’s review or when comparing with another servicer, a material difference between pricing evaluations were to exist, the Company would submit an inquiry to the service provider regarding the data used to value a particular security. If the Company determines it has market information that would support a different valuation than the initial evaluation it can submit a challenge for a change to that security’s valuation.
Securities available for sale are classified as Level 2 in the fair value hierarchy as the valuation provided by the third-party provider uses observable market data.
1512
Mortgage servicing rights
Mortgage servicing rights (“MSRs”) do not trade in an active, open market with readily observable prices. Accordingly, the Company obtains the fair value of the MSRs using a third-party pricing provider. The provider determines the fair value by discounting projected net servicing cash flows of the remaining servicing portfolio. The valuation model used by the provider considers market loan prepayment predictions and other economic factors which management considers to be significant unobservable inputs. The fair value of MSRs is mostly affected by changes in mortgage interest rates since rate changes cause the loan prepayment acceleration factors to increase or decrease. Management has a sufficient understanding of the third party service’s valuation models, assumptions and inputs used in determining the fair value of MSRs to enable management to maintain an appropriate system of internal control. MSRs are classified within Level 3 of the fair value hierarchy as the valuation is model driven and primarily based on unobservable inputs.
The following table summarizes the changes in fair value for MSRs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, |
| Three months ended March 31, | ||||||||
(in thousands) |
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
Mortgage servicing rights - July 1 |
| $ | 570 |
| $ | 635 | ||||||
Mortgage servicing rights - January 1 |
| $ | 555 |
| $ | 609 | ||||||
Gains/(Losses) included in earnings |
|
| (71) |
|
| 3 |
|
| (103) |
|
| (40) |
Additions from loan sales |
|
| 28 |
|
| 4 |
|
| 33 |
|
| 18 |
Mortgage servicing rights - September 30 |
| $ | 527 |
| $ | 642 | ||||||
Mortgage servicing rights - March 31 |
| $ | 485 |
| $ | 587 |
|
|
|
|
|
|
|
|
| Nine months ended September 30, | ||||
(in thousands) |
| 2019 |
| 2018 | ||
Mortgage servicing rights - January 1 |
| $ | 609 |
| $ | 586 |
Gains/(Losses) included in earnings |
|
| (154) |
|
| 52 |
Additions from loan sales |
|
| 72 |
|
| 4 |
Mortgage servicing rights - September 30 |
| $ | 527 |
| $ | 642 |
Quantitative information about the significant unobservable inputs used in the fair value measurement of MSRs at the respective dates is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
| December 31, 2018 |
| March 31, 2020 |
| December 31, 2019 | ||||
Servicing fees |
| 0.25 | % |
| 0.25 | % |
| 0.25 | % |
| 0.25 | % |
Discount rate |
| 9.00 | % |
| 9.00 | % |
| 9.00 | % |
| 9.00 | % |
Prepayment rate (CPR) |
| 8.62 | % |
| 6.52 | % |
| 8.75 | % |
| 8.21 | % |
16
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE ON A NONRECURRING BASIS
The Company is required, on a nonrecurring basis, to adjust the carrying value of certain assets or provide valuation allowances related to certain assets using fair value measurements. The following table presents for each of the fair-value hierarchy levels as defined in this footnote, those financial instruments which are measured at fair value on a nonrecurring basis at September 30, 2019March 31, 2020 and December 31, 2018:2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Collateral dependent impaired loans |
| $ | - |
| $ | - |
| $ | 15,500 |
| $ | 15,500 |
| $ | - |
| $ | - |
| $ | 17,263 |
| $ | 17,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Collateral dependent impaired loans |
| $ | - |
| $ | - |
| $ | 20,590 |
| $ | 20,590 |
| $ | - |
| $ | - |
| $ | 15,735 |
| $ | 15,735 |
Collateral dependent impaired loans
The Company evaluates and values impaired loans at the time the loan is identified as impaired, and the fair values of such loans are estimated using Level 3 inputs in the fair value hierarchy. Each loan’s collateral has a unique appraisal and management’s discount of the value is based on factors unique to each impaired loan. The significant unobservable input in determining the fair value is management’s subjective discount on appraisals of the collateral securing the loan. Collateral may consist of real estate and/or business assets including equipment, inventory and/or accounts receivable and the value of these assets is determined based on appraisals by qualified licensed appraisers hired by the Company. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or management’s expertise and knowledge of the client and the client’s business.
1713
The Company has an appraisal policy in which appraisals are obtained upon a commercial loan being downgraded on the Company’s internal loan rating scale to a special mention or a substandard depending on the amount of the loan, the type of loan and the type of collateral. All impaired commercial loans are graded substandard or worse on the internal loan rating scale. For consumer loans, the Company obtains appraisals when a loan becomes 90 days past due or is determined to be impaired, whichever occurs first. Subsequent to the downgrade or reaching 90 days past due, if the loan remains outstanding and impaired for at least one year more, management may require another follow-up appraisal. Between receipts of updated appraisals, if necessary, management may perform an internal valuation based on any known changing conditions in the marketplace such as sales of similar properties, a change in the condition of the collateral, or feedback from local appraisers. Collateral dependent impaired loans had a gross value of $16.0$18.2 million, with an allowance for loan loss of $0.5$0.9 million, at September 30, 2019March 31, 2020 compared with $21.7$16.0 million and $1.1$0.3 million, respectively, at December 31, 2018.2019.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The table below depicts the estimated fair values of the Company’s financial instruments, including those that are not measured and reported at fair value on a recurring basis or nonrecurring basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| September 30, 2019 |
| December 31, 2018 |
| March 31, 2020 |
| December 31, 2019 | ||||||||||||||||
|
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| Fair | ||||||||
|
| Amount |
| Value |
| Amount |
| Value |
| Amount |
| Value |
| Amount |
| Value | ||||||||
|
|
| (in thousands) |
|
| (in thousands) |
|
| (in thousands) |
|
| (in thousands) | ||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 34,344 |
| $ | 34,344 |
| $ | 39,915 |
| $ | 39,915 |
| $ | 51,968 |
| $ | 51,968 |
| $ | 38,857 |
| $ | 38,857 |
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Available for sale securities |
| 134,457 |
|
| 134,457 |
|
| 132,104 |
|
| 132,104 |
| 159,191 |
|
| 159,191 |
|
| 127,922 |
|
| 127,922 | ||
FHLB and FRB stock |
| 3,538 |
|
| 3,538 |
|
| 3,403 |
|
| 3,403 |
| 3,549 |
|
| N/A |
|
| 3,544 |
|
| N/A | ||
Level 3: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Held to maturity securities |
| 2,520 |
|
| 2,542 |
|
| 1,685 |
|
| 1,674 |
| 2,847 |
|
| 2,963 |
|
| 2,386 |
|
| 2,392 | ||
Loans, net |
| 1,204,410 |
|
| 1,214,285 |
|
| 1,141,146 |
|
| 1,131,891 |
| 1,228,049 |
|
| 1,258,020 |
|
| 1,211,356 |
|
| 1,222,386 | ||
Mortgage servicing rights |
| 527 |
|
| 527 |
|
| 609 |
|
| 609 |
| 485 |
|
| 485 |
|
| 555 |
|
| 555 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Demand deposits |
| $ | 271,633 |
| $ | 271,633 |
| $ | 231,902 |
| $ | 231,902 |
| $ | 273,623 |
| $ | 273,623 |
| $ | 263,717 |
| $ | 263,717 |
NOW deposits |
| 141,384 |
|
| 141,384 |
|
| 110,450 |
|
| 110,450 |
| 159,223 |
|
| 159,223 |
|
| 140,654 |
|
| 140,654 | ||
Savings deposits |
| 568,156 |
|
| 568,156 |
|
| 571,479 |
|
| 571,479 |
| 625,773 |
|
| 625,773 |
|
| 587,142 |
|
| 587,142 | ||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Securities sold under agreement to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
repurchase |
| 7,418 |
|
| 7,418 |
|
| 3,142 |
|
| 3,142 |
| 2,572 |
|
| 2,572 |
|
| 2,425 |
|
| 2,425 | ||
Other borrowed funds |
| 10,000 |
|
| 9,981 |
|
| 10,000 |
|
| 9,854 |
| 10,000 |
|
| 10,002 |
|
| 10,000 |
|
| 9,997 | ||
Junior subordinated debentures |
| 11,330 |
|
| 11,330 |
|
| 11,330 |
|
| 11,330 |
| 11,330 |
|
| 11,330 |
|
| 11,330 |
|
| 11,330 | ||
Level 3: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Time deposits |
| 277,633 |
|
| 278,276 |
|
| 301,227 |
|
| 298,999 |
| 268,978 |
|
| 271,259 |
|
| 275,927 |
|
| 277,051 |
1814
4. LOANS AND THE ALLOWANCE FOR LOAN LOSSES
Loan Portfolio Composition
The following table presents selected information on the composition of the Company’s loan portfolio as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
| ||
|
| September 30, 2019 |
| December 31, 2018 |
| March 31, 2020 |
| December 31, 2019 | ||||
Mortgage loans on real estate: |
| (in thousands) |
| (in thousands) | ||||||||
Residential mortgages |
| $ | 160,112 |
| $ | 158,404 |
| $ | 156,125 |
| $ | 158,572 |
Commercial and multi-family |
| 632,786 |
|
| 592,507 |
| 666,651 |
|
| 645,036 | ||
Construction-Residential |
| 890 |
|
| 113 |
| 298 |
|
| 1,067 | ||
Construction-Commercial |
| 90,825 |
|
| 105,196 |
| 96,698 |
|
| 97,848 | ||
Home equities |
|
| 69,771 |
|
| 70,546 |
|
| 67,629 |
|
| 69,351 |
Total real estate loans |
|
| 954,384 |
|
| 926,766 |
|
| 987,401 |
|
| 971,874 |
|
|
|
|
|
|
|
|
|
|
| ||
Commercial and industrial loans |
| 262,144 |
|
| 226,057 |
| 256,157 |
|
| 251,197 | ||
Consumer and other loans |
| 1,684 |
|
| 1,520 |
| 1,223 |
|
| 1,926 | ||
Net deferred loan origination costs |
|
| 1,580 |
|
| 1,587 |
|
| 1,425 |
|
| 1,534 |
Total gross loans |
|
| 1,219,792 |
|
| 1,155,930 |
|
| 1,246,206 |
|
| 1,226,531 |
|
|
|
|
|
|
|
|
|
|
| ||
Allowance for loan losses |
| (15,382) |
|
| (14,784) |
| (18,157) |
|
| (15,175) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net |
| $ | 1,204,410 |
| $ | 1,141,146 |
| $ | 1,228,049 |
| $ | 1,211,356 |
The Bank sells certain fixed rate residential mortgages to FNMA while maintaining the servicing rights for those mortgages. In the three month and nine month periods ended September 30,March 31, 2020 and March 31, 2019, the Bank sold mortgages to FNMA totaling $3.0$3.7 million, and $7.6$2.0 million, respectively, compared with $0.4 million mortgages sold duringrespectively. At March 31, 2020 and December 31, 2019, the three and nine month periods ended September 30, 2018., The Bank had a loan servicing portfolio principal balance of $74$78 million and $73$76 million, at September 30, 2019 and December 31, 2018, respectively, upon which it earned servicing fees. The value of the mortgage servicing rights for that portfolio was $0.5 million and $0.6 million at September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively. No loans were held for sale at March 31, 2020. At September 30, 2019 and December 31, 20182019 there were $0.5 million and $0.4$0.7 million in residential mortgages held for sale, respectively.sale. The Company has never been contacted by FNMA to repurchase any loans due to improper documentation or fraud.
As noted in Note 1, these financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. Disclosures related to the basis for accounting for loans, the method for recognizing interest income on loans, the policy for placing loans on nonaccrual status and the subsequent recording of payments and resuming accrual of interest, the policy for determining past due status, a description of the Company’s accounting policies and methodology used to estimate the allowance for loan losses, the policy for charging-off loans, the accounting policies for impaired loans, and more descriptive information on the Company’s credit risk ratings are all contained in the Notes to the Audited Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2019. Unless otherwise noted in this Form 10-Q, the policies and methodology described in the Annual Report for the year ended December 31, 20182019 are consistent with those utilized by the Company in the three and nine month periodsperiod ended September 30, 2019.March 31, 2020.
1915
Credit Quality Indicators
The Bank monitors the credit risk in its loan portfolio by reviewing certain credit quality indicators (“CQI”). The primary CQI for its commercial mortgage and commercial and industrial (“C&I”) portfolios is the individual loan’s credit risk rating. The following list provides a description of the credit risk ratings that are used internally by the Bank when assessing the adequacy of its allowance for loan losses:
· | Acceptable or better |
· | Watch |
· | Special Mention |
· | Substandard |
· | Doubtful |
· | Loss |
The Company’s consumer loans, including residential mortgages and home equities, are not individually risk rated or reviewed in the Company’s loan review process. Unlike commercial customers, consumer loan customers are not required to provide the Company with updated financial information. Consumer loans also carry smaller balances. Given the lack of updated information after the initial underwriting of the loan and small size of individual loans, the Company uses delinquency status as the primary credit quality indicator for consumer loans. However, once a consumer loan is identified as impaired, it is individually evaluated for impairment.
The following tables provide data, at the class level, of credit quality indicators of certain loans for the dates specified:
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| ||||||||
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| ||||||||
September 30, 2019 | ||||||||||||||||||||||||
March 31, 2020 | March 31, 2020 | |||||||||||||||||||||||
(in thousands) | (in thousands) | (in thousands) | ||||||||||||||||||||||
Corporate Credit Exposure – By Credit Rating |
| Commercial Real Estate Construction |
| Commercial and Multi-Family Mortgages |
| Total Commercial Real Estate |
| Commercial and Industrial |
| Commercial Real Estate Construction |
| Commercial and Multi-Family Mortgages |
| Total Commercial Real Estate |
| Commercial and Industrial | ||||||||
Acceptable or better |
| $ | 60,844 |
| $ | 452,715 |
| $ | 513,559 |
| $ | 173,384 |
| $ | 73,866 |
| $ | 476,629 |
| $ | 550,495 |
| $ | 184,214 |
Watch |
|
| 20,811 |
|
| 153,660 |
|
| 174,471 |
|
| 70,187 |
|
| 12,493 |
|
| 165,806 |
|
| 178,299 |
|
| 50,615 |
Special Mention |
|
| 6,191 |
|
| 19,792 |
|
| 25,983 |
|
| 9,373 |
|
| 8,133 |
|
| 11,024 |
|
| 19,157 |
|
| 11,836 |
Substandard |
|
| 2,979 |
|
| 6,619 |
|
| 9,598 |
|
| 9,200 |
|
| 2,206 |
|
| 13,192 |
|
| 15,398 |
|
| 9,492 |
Doubtful/Loss |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
Total |
| $ | 90,825 |
| $ | 632,786 |
| $ | 723,611 |
| $ | 262,144 |
| $ | 96,698 |
| $ | 666,651 |
| $ | 763,349 |
| $ | 256,157 |
|
|
|
|
|
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| ||||||||
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| ||||||||
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| ||||||||
December 31, 2018 | ||||||||||||||||||||||||
December 31, 2019 | December 31, 2019 | |||||||||||||||||||||||
(in thousands) | (in thousands) | (in thousands) | ||||||||||||||||||||||
Corporate Credit Exposure – By Credit Rating |
| Commercial Real Estate Construction |
| Commercial and Multi-Family Mortgages |
| Total Commercial Real Estate |
| Commercial and Industrial |
| Commercial Real Estate Construction |
| Commercial and Multi-Family Mortgages |
| Total Commercial Real Estate |
| Commercial and Industrial | ||||||||
Acceptable or better |
| $ | 65,932 |
| $ | 466,294 |
| $ | 532,226 |
| $ | 155,687 |
| $ | 73,646 |
| $ | 451,297 |
| $ | 524,943 |
| $ | 165,255 |
Watch |
|
| 30,628 |
|
| 109,409 |
|
| 140,037 |
|
| 57,366 |
|
| 13,380 |
|
| 171,277 |
|
| 184,657 |
|
| 68,665 |
Special Mention |
|
| - |
|
| 10,583 |
|
| 10,583 |
|
| 4,105 |
|
| 8,359 |
|
| 15,725 |
|
| 24,084 |
|
| 7,631 |
Substandard |
|
| 8,636 |
|
| 6,221 |
|
| 14,857 |
|
| 8,870 |
|
| 2,463 |
|
| 6,737 |
|
| 9,200 |
|
| 9,646 |
Doubtful/Loss |
|
| - |
|
| - |
|
| - |
|
| 29 |
|
| - |
|
| - |
|
| - |
|
| - |
Total |
| $ | 105,196 |
| $ | 592,507 |
| $ | 697,703 |
| $ | 226,057 |
| $ | 97,848 |
| $ | 645,036 |
| $ | 742,884 |
| $ | 251,197 |
|
|
|
|
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|
|
|
2016
Past Due Loans
The following tables provide an analysis of the age of the recorded investment in loans that are past due as of the dates indicated:
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|
|
|
September 30, 2019 | ||||||||||||||||||||||||||||||||||
March 31, 2020 | March 31, 2020 | |||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | (in thousands) | ||||||||||||||||||||||||||||||||
|
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|
|
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|
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|
| Current |
|
|
|
|
|
|
|
|
| Non-accruing |
| Total |
| Current |
|
|
|
|
|
|
|
|
| Non-accruing |
| Total | ||||||
|
| Balance | 30-59 days |
| 60-89 days |
| 90+ days |
| Loans |
| Balance |
| Balance | 30-59 days |
| 60-89 days |
| 90+ days |
| Loans |
| Balance | ||||||||||||
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial | $ | 256,920 |
| $ | 173 |
| $ | 806 |
| $ | - |
| $ | 4,245 |
| $ | 262,144 | $ | 245,230 |
| $ | 1,094 |
| $ | 2,613 |
| $ | - |
| $ | 7,220 |
| $ | 256,157 |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| 158,290 |
|
| - |
|
| 285 |
|
| - |
|
| 1,537 |
|
| 160,112 |
| 151,557 |
|
| 3,160 |
|
| - |
|
| - |
|
| 1,408 |
|
| 156,125 |
Construction |
| 890 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 890 |
| 298 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 298 |
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| 627,253 |
|
| - |
|
| - |
|
| - |
|
| 5,533 |
|
| 632,786 |
| 650,625 |
|
| 10,009 |
|
| - |
|
| - |
|
| 6,017 |
|
| 666,651 |
Construction |
| 89,228 |
|
| - |
|
| - |
|
| - |
|
| 1,597 |
|
| 90,825 |
| 93,488 |
|
| 1,892 |
|
| - |
|
| - |
|
| 1,318 |
|
| 96,698 |
Home equities |
| 68,499 |
|
| 345 |
|
| - |
|
| - |
|
| 927 |
|
| 69,771 |
| 66,552 |
|
| 302 |
|
| 24 |
|
| - |
|
| 751 |
|
| 67,629 |
Consumer and other |
| 1,672 |
|
| 12 |
|
| - |
|
| - |
|
| - |
|
| 1,684 |
| 1,206 |
|
| 11 |
|
| 3 |
|
| 3 |
|
| - |
|
| 1,223 |
Total Loans | $ | 1,202,752 |
| $ | 530 |
| $ | 1,091 |
| $ | - |
| $ | 13,839 |
| $ | 1,218,212 | $ | 1,208,956 |
| $ | 16,468 |
| $ | 2,640 |
| $ | 3 |
| $ | 16,714 |
| $ | 1,244,781 |
Note: Loan balances do not include $1.61.4 million in net deferred loan origination costs as of September March30, 2019.31, 2020.
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|
December 31, 2018 | ||||||||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
|
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|
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|
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|
|
| Current |
|
|
|
|
|
|
|
|
| Non-accruing |
| Total |
|
|
| Current |
|
|
|
|
|
|
|
|
| Non-accruing |
| Total | ||||||
|
| Balance | 30-59 days |
| 60-89 days |
| 90+ days |
| Loans |
| Balance |
|
|
| Balance | 30-59 days |
| 60-89 days |
| 90+ days |
| Loans |
| Balance | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial | $ | 217,625 |
| $ | 6,173 |
| $ | 565 |
| $ | - |
| $ | 1,694 |
| $ | 226,057 | Commercial and industrial |
| $ | 245,658 |
| $ | 705 |
| $ | - |
| $ | - |
| $ | 4,834 |
| $ | 251,197 |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| 154,063 |
|
| 2,546 |
|
| 332 |
|
| - |
|
| 1,463 |
|
| 158,404 | Residential |
|
| 153,630 |
|
| 2,616 |
|
| 888 |
|
| - |
|
| 1,438 |
|
| 158,572 |
Construction |
| 113 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 113 | Construction |
|
| 865 |
|
| - |
|
| 202 |
|
| - |
|
| - |
|
| 1,067 |
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| 582,016 |
|
| 4,546 |
|
| - |
|
| - |
|
| 5,945 |
|
| 592,507 | Commercial |
|
| 630,016 |
|
| 3,482 |
|
| 5,879 |
|
| - |
|
| 5,659 |
|
| 645,036 |
Construction |
| 95,204 |
|
| 1,027 |
|
| 329 |
|
| - |
|
| 8,636 |
|
| 105,196 | Construction |
|
| 92,667 |
|
| 2,886 |
|
| 720 |
|
| - |
|
| 1,575 |
|
| 97,848 |
Home equities |
| 69,094 |
|
| 123 |
|
| 76 |
|
| - |
|
| 1,253 |
|
| 70,546 | Home equities |
|
| 67,868 |
|
| 354 |
|
| 239 |
|
| - |
|
| 890 |
|
| 69,351 |
Consumer and other |
| 1,514 |
|
| 5 |
|
| 1 |
|
| - |
|
| - |
|
| 1,520 | Consumer and other |
|
| 1,907 |
|
| 15 |
|
| 4 |
|
| - |
|
| - |
|
| 1,926 |
Total Loans | $ | 1,119,629 |
| $ | 14,420 |
| $ | 1,303 |
| $ | - |
| $ | 18,991 |
| $ | 1,154,343 | Total Loans |
| $ | 1,192,611 |
| $ | 10,058 |
| $ | 7,932 |
| $ | - |
| $ | 14,396 |
| $ | 1,224,997 |
Note: Loan balances do not include $1.61.5 million in net deferred loan origination costs as of December 31, 2018.2019.
2117
Allowance for loan losses
The following tables present the activity in the allowance for loan losses according to portfolio segment for the ninethree month periods ended September 30, 2019March 31, 2020 and 2018:2019:
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| ||
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|
September 30, 2019 | ||||||||||||||||||||||||||||||||||||
March 31, 2020 | March 31, 2020 | |||||||||||||||||||||||||||||||||||
|
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|
(in thousands) |
| Commercial and Industrial |
| Commercial Real Estate Mortgages* |
| Consumer and Other |
| Residential Mortgages* |
| Home Equities |
| Total |
| Commercial and Industrial |
| Commercial Real Estate Mortgages* |
| Consumer and Other |
| Residential Mortgages* |
| Home Equities |
| Total | ||||||||||||
Allowance for loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Beginning balance |
| $ | 4,368 |
| $ | 8,844 |
| $ | 106 |
| $ | 1,121 |
| $ | 345 |
| $ | 14,784 |
| $ | 4,547 |
| $ | 9,005 |
| $ | 155 |
| $ | 1,071 |
| $ | 397 |
| $ | 15,175 |
Charge-offs |
|
| (248) |
|
| (56) |
|
| (94) |
|
| - |
|
| - |
|
| (398) |
|
| (17) |
|
| - |
|
| (15) |
|
| (29) |
|
| (4) |
|
| (65) |
Recoveries |
|
| 786 |
|
| - |
|
| 13 |
|
| - |
|
| - |
|
| 799 |
|
| 32 |
|
| - |
|
| 16 |
|
| - |
|
| - |
|
| 48 |
Provision (Credit) |
|
| 290 |
|
| 152 |
|
| 114 |
|
| (325) |
|
| (34) |
|
| 197 |
|
| 1,013 |
|
| 1,583 |
|
| (65) |
|
| 376 |
|
| 92 |
|
| 2,999 |
Ending balance |
| $ | 5,196 |
| $ | 8,940 |
| $ | 139 |
| $ | 796 |
| $ | 311 |
| $ | 15,382 |
| $ | 5,575 |
| $ | 10,588 |
| $ | 91 |
| $ | 1,418 |
| $ | 485 |
| $ | 18,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Individually evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
for impairment |
| $ | 635 |
| $ | 13 |
| $ | 21 |
| $ | 35 |
| $ | - |
| $ | 704 |
| $ | 1,012 |
| $ | 6 |
| $ | - |
| $ | - |
| $ | - |
| $ | 1,018 |
Collectively evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for impairment |
|
| 4,561 |
|
| 8,927 |
|
| 118 |
|
| 761 |
|
| 311 |
|
| 14,678 |
|
| 4,563 |
|
| 10,582 |
|
| 91 |
|
| 1,418 |
|
| 485 |
|
| 17,139 |
Total |
| $ | 5,196 |
| $ | 8,940 |
| $ | 139 |
| $ | 796 |
| $ | 311 |
| $ | 15,382 |
| $ | 5,575 |
| $ | 10,588 |
| $ | 91 |
| $ | 1,418 |
| $ | 485 |
| $ | 18,157 |
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Individually evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
for impairment |
| $ | 6,016 |
| $ | 7,708 |
| $ | 21 |
| $ | 2,915 |
| $ | 1,498 |
| $ | 18,158 |
| $ | 7,456 |
| $ | 7,872 |
| $ | - |
| $ | 2,591 |
| $ | 1,252 |
| $ | 19,171 |
Collectively evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for impairment |
|
| 256,128 |
|
| 715,903 |
|
| 1,663 |
|
| 158,087 |
|
| 68,273 |
|
| 1,200,054 |
|
| 248,701 |
|
| 755,477 |
|
| 1,223 |
|
| 153,832 |
|
| 66,377 |
|
| 1,225,610 |
Total |
| $ | 262,144 |
| $ | 723,611 |
| $ | 1,684 |
| $ | 161,002 |
| $ | 69,771 |
| $ | 1,218,212 |
| $ | 256,157 |
| $ | 763,349 |
| $ | 1,223 |
| $ | 156,423 |
| $ | 67,629 |
| $ | 1,244,781 |
* Includes construction loans
Note: Loan balances do not include $1.61.4 million in net deferred loan origination costs as of September 30, 2019.March 31, 2020.
2218
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| ||
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|
September 30, 2018 | ||||||||||||||||||||||||||||||||||||
March 31, 2019 | March 31, 2019 | |||||||||||||||||||||||||||||||||||
|
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|
|
(in thousands) |
| Commercial and Industrial |
| Commercial Real Estate Mortgages* |
| Consumer and Other |
| Residential Mortgages* |
| Home Equities |
| Total |
| Commercial and Industrial |
| Commercial Real Estate Mortgages* |
| Consumer and Other |
| Residential Mortgages* |
| Home Equities |
| Total | ||||||||||||
Allowance for loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Beginning balance |
| $ | 5,204 |
| $ | 7,409 |
| $ | 109 |
| $ | 950 |
| $ | 347 |
| $ | 14,019 |
| $ | 4,368 |
| $ | 8,844 |
| $ | 106 |
| $ | 1,121 |
| $ | 345 |
| $ | 14,784 |
Charge-offs |
|
| (67) |
|
| (262) |
|
| (83) |
|
| (86) |
|
| (11) |
|
| (509) |
|
| (121) |
|
| - |
|
| (23) |
|
| - |
|
| - |
|
| (144) |
Recoveries |
|
| 18 |
|
| - |
|
| 6 |
|
| - |
|
| 1 |
|
| 25 |
|
| 22 |
|
| - |
|
| 7 |
|
| - |
|
| - |
|
| 29 |
Provision (Credit) |
|
| (574) |
|
| 1,923 |
|
| 50 |
|
| 290 |
|
| (11) |
|
| 1,678 |
|
| 485 |
|
| 205 |
|
| 21 |
|
| (168) |
|
| (5) |
|
| 538 |
Ending balance |
| $ | 4,581 |
| $ | 9,070 |
| $ | 82 |
| $ | 1,154 |
| $ | 326 |
| $ | 15,213 |
| $ | 4,754 |
| $ | 9,049 |
| $ | 111 |
| $ | 953 |
| $ | 340 |
| $ | 15,207 |
|
|
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|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
| ||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
| ||
Individually evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
| ||
for impairment |
| $ | 113 |
| $ | 950 |
| $ | 23 |
| $ | 70 |
| $ | - |
| $ | 1,156 |
| $ | 499 |
| $ | 579 |
| $ | 22 |
| $ | 70 |
| $ | - |
| $ | 1,170 |
Collectively evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for impairment |
|
| 4,468 |
|
| 8,120 |
|
| 59 |
|
| 1,084 |
|
| 326 |
|
| 14,057 |
|
| 4,255 |
|
| 8,470 |
|
| 89 |
|
| 883 |
|
| 340 |
|
| 14,037 |
Total |
| $ | 4,581 |
| $ | 9,070 |
| $ | 82 |
| $ | 1,154 |
| $ | 326 |
| $ | 15,213 |
| $ | 4,754 |
| $ | 9,049 |
| $ | 111 |
| $ | 953 |
| $ | 340 |
| $ | 15,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Individually evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
for impairment |
| $ | 2,925 |
| $ | 18,267 |
| $ | 23 |
| $ | 2,687 |
| $ | 1,907 |
| $ | 25,809 |
| $ | 4,293 |
| $ | 15,536 |
| $ | 22 |
| $ | 2,963 |
| $ | 1,661 |
| $ | 24,475 |
Collectively evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for impairment |
|
| 244,216 |
|
| 660,314 |
|
| 1,368 |
|
| 154,062 |
|
| 68,206 |
|
| 1,128,166 |
|
| 237,216 |
|
| 694,316 |
|
| 1,416 |
|
| 158,230 |
|
| 68,116 |
|
| 1,159,294 |
Total |
| $ | 247,141 |
| $ | 678,581 |
| $ | 1,391 |
| $ | 156,749 |
| $ | 70,113 |
| $ | 1,153,975 |
| $ | 241,509 |
| $ | 709,852 |
| $ | 1,438 |
| $ | 161,193 |
| $ | 69,777 |
| $ | 1,183,769 |
* Includes construction loans
Note: Loan balances do not include $1.61.7 million in net deferred loan origination costs as of September 30, 2018.March 31, 2019.
23
The following tables present the activity in the allowance for loan losses according to portfolio segment for the three month periods ended September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 | ||||||||||||||||||
($ in thousands) |
| Commercial and Industrial |
| Commercial Real Estate Mortgages* |
| Consumer and Other |
| Residential Mortgages* |
| Home Equities |
| Total | ||||||
Allowance for loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 5,272 |
| $ | 8,637 |
| $ | 130 |
| $ | 883 |
| $ | 326 |
| $ | 15,248 |
Charge-offs |
|
| (91) |
|
| (55) |
|
| (40) |
|
| - |
|
| - |
|
| (186) |
Recoveries |
|
| 747 |
|
| - |
|
| 4 |
|
| - |
|
| - |
|
| 751 |
Provision (Credit) |
|
| (732) |
|
| 358 |
|
| 45 |
|
| (87) |
|
| (15) |
|
| (431) |
Ending balance |
| $ | 5,196 |
| $ | 8,940 |
| $ | 139 |
| $ | 796 |
| $ | 311 |
| $ | 15,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 | ||||||||||||||||||
($ in thousands) |
| Commercial and Industrial |
| Commercial Real Estate Mortgages* |
| Consumer and Other |
| Residential Mortgages* |
| Home Equities |
| Total | ||||||
Allowance for loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 4,341 |
| $ | 9,445 |
| $ | 90 |
| $ | 1,025 |
| $ | 334 |
| $ | 15,235 |
Charge-offs |
|
| - |
|
| (262) |
|
| (19) |
|
| - |
|
| - |
|
| (281) |
Recoveries |
|
| 5 |
|
| - |
|
| 2 |
|
| - |
|
| - |
|
| 7 |
Provision (Credit) |
|
| 235 |
|
| (113) |
|
| 9 |
|
| 129 |
|
| (8) |
|
| 252 |
Ending balance |
| $ | 4,581 |
| $ | 9,070 |
| $ | 82 |
| $ | 1,154 |
| $ | 326 |
| $ | 15,213 |
2419
Impaired Loans
The following tables provide data, at the class level, for impaired loans as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
| At September 30, 2019 |
|
| At March 31, 2020 | ||||||||||||||||||||||||||||||
|
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized |
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized | ||||||||||
With no related allowance recorded: | With no related allowance recorded: | (in thousands) | With no related allowance recorded: | (in thousands) | ||||||||||||||||||||||||||||||||
Commercial and industrial |
| $ | 3,096 |
| $ | 3,346 |
| $ | - |
| $ | 3,269 |
| $ | 62 |
| $ | 92 |
| $ | 2,008 |
| $ | 2,322 |
| $ | - |
| $ | 2,223 |
| $ | 30 |
| $ | 1 |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Residential |
| 2,576 |
| 2,805 |
| - |
| 2,652 |
| 105 |
| 50 |
| 2,591 |
| 2,870 |
| - |
| 2,672 |
| 17 |
| 16 | ||||||||||||
Construction |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - | ||||||||||||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commercial |
| 5,914 |
| 6,389 |
| - |
| 6,188 |
| 180 |
| 30 |
| 6,120 |
| 6,643 |
| - |
| 6,358 |
| 64 |
| 22 | ||||||||||||
Construction |
| 1,353 |
| 1,353 |
| - |
| 1,353 |
| 6 |
| 50 |
| 1,318 |
| 1,352 |
| - |
| 1,335 |
| 15 |
| - | ||||||||||||
Home equities |
| 1,498 |
| 1,699 |
| - |
| 1,563 |
| 49 |
| 25 |
| 1,252 |
| 1,463 |
| - |
| 1,301 |
| 12 |
| 6 | ||||||||||||
Consumer and other |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
Total impaired loans |
| $ | 14,437 |
| $ | 15,592 |
| $ | - |
| $ | 15,025 |
| $ | 402 |
| $ | 247 |
| $ | 13,289 |
| $ | 14,650 |
| $ | - |
| $ | 13,889 |
| $ | 138 |
| $ | 45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
| At September 30, 2019 |
|
| At March 31, 2020 | ||||||||||||||||||||||||||||||
|
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized |
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized | ||||||||||
With a related allowance recorded: | With a related allowance recorded: | (in thousands) | With a related allowance recorded: | (in thousands) | ||||||||||||||||||||||||||||||||
Commercial and industrial |
| $ | 2,920 |
| $ | 2,991 |
| $ | 635 |
| $ | 2,990 |
| $ | 76 |
| $ | 64 |
| $ | 5,448 |
| $ | 5,525 |
| $ | 1,012 |
| $ | 5,516 |
| $ | 76 |
| $ | 2 |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Residential |
| 339 |
| 350 |
| 35 |
| 341 |
| 13 |
| 1 |
| - |
| - |
| - |
| - |
| - |
| - | ||||||||||||
Construction |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - | ||||||||||||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commercial |
| 197 |
| 197 |
| 6 |
| 197 |
| 5 |
| 4 |
| 434 |
| 443 |
| 6 |
| 437 |
| 6 |
| - | ||||||||||||
Construction |
| 244 |
| 246 |
| 7 |
| 244 |
| 4 |
| 9 |
| - |
| - |
| - |
| - |
| - |
| - | ||||||||||||
Home equities |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - | ||||||||||||
Consumer and other |
|
| 21 |
|
| 24 |
|
| 21 |
|
| 22 |
|
| - |
|
| 1 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
Total impaired loans |
| $ | 3,721 |
| $ | 3,808 |
| $ | 704 |
| $ | 3,794 |
| $ | 98 |
| $ | 79 |
| $ | 5,882 |
| $ | 5,968 |
| $ | 1,018 |
| $ | 5,953 |
| $ | 82 |
| $ | 2 |
2520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
| At September 30, 2019 |
|
| At March 31, 2020 | ||||||||||||||||||||||||||||||
|
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized |
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized | ||||||||||
Total: |
|
| (in thousands) |
|
| (in thousands) | ||||||||||||||||||||||||||||||
Commercial and industrial |
| $ | 6,016 |
| $ | 6,337 |
| $ | 635 |
| $ | 6,259 |
| $ | 138 |
| $ | 156 |
| $ | 7,456 |
| $ | 7,847 |
| $ | 1,012 |
| $ | 7,739 |
| $ | 106 |
| $ | 3 |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Residential |
| 2,915 |
| 3,155 |
| 35 |
| 2,993 |
| 118 |
| 51 |
| 2,591 |
| 2,870 |
| - |
| 2,672 |
| 17 |
| 16 | ||||||||||||
Construction |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - | ||||||||||||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commercial |
| 6,111 |
| 6,586 |
| 6 |
| 6,385 |
| 185 |
| 34 |
| 6,554 |
| 7,086 |
| 6 |
| 6,795 |
| 70 |
| 22 | ||||||||||||
Construction |
| 1,597 |
| 1,599 |
| 7 |
| 1,597 |
| 10 |
| 59 |
| 1,318 |
| 1,352 |
| - |
| 1,335 |
| 15 |
| - | ||||||||||||
Home equities |
| 1,498 |
| 1,699 |
| - |
| 1,563 |
| 49 |
| 25 |
| 1,252 |
| 1,463 |
| - |
| 1,301 |
| 12 |
| 6 | ||||||||||||
Consumer and other |
|
| 21 |
|
| 24 |
|
| 21 |
|
| 22 |
|
| - |
|
| 1 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
Total impaired loans |
| $ | 18,158 |
| $ | 19,400 |
| $ | 704 |
| $ | 18,819 |
| $ | 500 |
| $ | 326 |
| $ | 19,171 |
| $ | 20,618 |
| $ | 1,018 |
| $ | 19,842 |
| $ | 220 |
| $ | 47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
| At December 31, 2018 |
|
| At December 31, 2019 | ||||||||||||||||||||||||||||||
|
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized |
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized | ||||||||||
With no related allowance recorded: | With no related allowance recorded: | (in thousands) | With no related allowance recorded: | (in thousands) | ||||||||||||||||||||||||||||||||
Commercial and industrial |
| $ | 1,633 |
| $ | 2,611 |
| $ | - |
| $ | 1,785 |
| $ | 116 |
| $ | 65 |
| $ | 3,798 |
| $ | 4,112 |
| $ | - |
| $ | 4,046 |
| $ | 118 |
| $ | 143 |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Residential |
| 2,289 |
| 2,483 |
| - |
| 2,337 |
| 45 |
| 69 |
| 2,744 |
| 3,003 |
| - |
| 2,823 |
| 73 |
| 63 | ||||||||||||
Construction |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - | ||||||||||||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commercial |
| 6,538 |
| 6,914 |
| - |
| 6,733 |
| 220 |
| 115 |
| 6,019 |
| 6,521 |
| - |
| 6,293 |
| 225 |
| 72 | ||||||||||||
Construction |
| 116 |
| 116 |
| - |
| 143 |
| - |
| 12 |
| 1,335 |
| 1,352 |
| - |
| 1,344 |
| 23 |
| 50 | ||||||||||||
Home equities |
| 1,887 |
| 2,058 |
| - |
| 1,952 |
| 71 |
| 43 |
| 1,453 |
| 1,687 |
| - |
| 1,525 |
| 64 |
| 30 | ||||||||||||
Consumer and other |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
Total impaired loans |
| $ | 12,463 |
| $ | 14,182 |
| $ | - |
| $ | 12,950 |
| $ | 452 |
| $ | 304 |
| $ | 15,349 |
| $ | 16,675 |
| $ | - |
| $ | 16,031 |
| $ | 503 |
| $ | 358 |
2621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
| At December 31, 2018 |
|
| At December 31, 2019 | ||||||||||||||||||||||||||||||
|
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized |
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized | ||||||||||
With a related allowance recorded: | With a related allowance recorded: | (in thousands) | With a related allowance recorded: | (in thousands) | ||||||||||||||||||||||||||||||||
Commercial and industrial |
| $ | 2,068 |
| $ | 2,095 |
| $ | 249 |
| $ | 2,098 |
| $ | 17 |
| $ | 125 |
| $ | 2,760 |
| $ | 2,808 |
| $ | 442 |
| $ | 2,764 |
| $ | 109 |
| $ | 63 |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Residential |
| 525 |
| 556 |
| 85 |
| 520 |
| 22 |
| 3 |
| 60 |
| 62 |
| 5 |
| 61 |
| 3 |
| 1 | ||||||||||||
Construction |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - | ||||||||||||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commercial |
| - |
| - |
| - |
| - |
| - |
| - |
| 197 |
| 197 |
| 4 |
| 197 |
| 8 |
| 4 | ||||||||||||
Construction |
| 8,636 |
| 8,975 |
| 716 |
| 8,793 |
| 379 |
| 113 |
| 240 |
| 246 |
| 5 |
| 242 |
| 8 |
| 9 | ||||||||||||
Home equities |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - | ||||||||||||
Consumer and other |
|
| 23 |
|
| 27 |
|
| 23 |
|
| 23 |
|
| - |
|
| 2 |
|
| 21 |
|
| 23 |
|
| 21 |
|
| 22 |
|
| - |
|
| 1 |
Total impaired loans |
| $ | 11,252 |
| $ | 11,653 |
| $ | 1,073 |
| $ | 11,434 |
| $ | 418 |
| $ | 243 |
| $ | 3,278 |
| $ | 3,336 |
| $ | 477 |
| $ | 3,286 |
| $ | 128 |
| $ | 78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
| At December 31, 2018 |
|
| At December 31, 2019 | ||||||||||||||||||||||||||||||
|
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized |
|
| Recorded Investment |
| Unpaid Principal Balance |
| Related Allowance |
| Average Recorded Investment |
| Interest Income Foregone |
| Interest Income Recognized | ||||||||||
Total: |
|
| (in thousands) |
|
| (in thousands) | ||||||||||||||||||||||||||||||
Commercial and industrial |
| $ | 3,701 |
| $ | 4,706 |
| $ | 249 |
| $ | 3,883 |
| $ | 133 |
| $ | 190 |
| $ | 6,558 |
| $ | 6,920 |
| $ | 442 |
| $ | 6,810 |
| $ | 227 |
| $ | 206 |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Residential |
| 2,814 |
| 3,039 |
| 85 |
| 2,857 |
| 67 |
| 72 |
| 2,804 |
| 3,065 |
| 5 |
| 2,884 |
| 76 |
| 64 | ||||||||||||
Construction |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - | ||||||||||||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commercial |
| 6,538 |
| 6,914 |
| - |
| 6,733 |
| 220 |
| 115 |
| 6,216 |
| 6,718 |
| 4 |
| 6,490 |
| 233 |
| 76 | ||||||||||||
Construction |
| 8,752 |
| 9,091 |
| 716 |
| 8,936 |
| 379 |
| 125 |
| 1,575 |
| 1,598 |
| 5 |
| 1,586 |
| 31 |
| 59 | ||||||||||||
Home equities |
| 1,887 |
| 2,058 |
| - |
| 1,952 |
| 71 |
| 43 |
| 1,453 |
| 1,687 |
| - |
| 1,525 |
| 64 |
| 30 | ||||||||||||
Consumer and other |
|
| 23 |
|
| 27 |
|
| 23 |
|
| 23 |
|
| - |
|
| 2 |
|
| 21 |
|
| 23 |
|
| 21 |
|
| 22 |
|
| - |
|
| 1 |
Total impaired loans |
| $ | 23,715 |
| $ | 25,835 |
| $ | 1,073 |
| $ | 24,384 |
| $ | 870 |
| $ | 547 |
| $ | 18,627 |
| $ | 20,011 |
| $ | 477 |
| $ | 19,317 |
| $ | 631 |
| $ | 436 |
2722
Troubled debt restructurings
The following tables summarize the loans that were classified as troubled debt restructurings (“TDRs”) as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
| September 30, 2019 |
|
| March 31, 2020 | ||||||||||||||||||
|
|
| (in thousands) |
|
| (in thousands) | ||||||||||||||||||
|
|
| Total |
|
| Nonaccruing |
|
| Accruing |
|
| Related Allowance |
|
| Total |
|
| Nonaccruing |
|
| Accruing |
|
| Related Allowance |
Commercial and industrial |
| $ | 1,977 |
| $ | 206 |
| $ | 1,771 |
| $ | 65 |
| $ | 2,017 |
| $ | 1,781 |
| $ | 236 |
| $ | 396 |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Residential |
| 1,832 |
|
| 454 |
|
| 1,378 |
|
| 6 |
| 1,681 |
|
| 498 |
|
| 1,183 |
|
| - | ||
Construction |
| - |
|
| - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| - | ||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Commercial and multi-family |
| 3,854 |
|
| 3,276 |
|
| 578 |
|
| - |
| 3,577 |
|
| 3,040 |
|
| 537 |
|
| - | ||
Construction |
| - |
|
| - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| - | ||
Home equities |
| 696 |
|
| 125 |
|
| 571 |
|
| - |
| 671 |
|
| 170 |
|
| 501 |
|
| - | ||
Consumer and other |
|
| 21 |
|
| - |
|
| 21 |
|
| 21 |
|
| - |
|
| - |
|
| - |
|
| - |
Total TDR loans |
| $ | 8,380 |
| $ | 4,061 |
| $ | 4,319 |
| $ | 92 |
| $ | 7,946 |
| $ | 5,489 |
| $ | 2,457 |
| $ | 396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
| December 31, 2018 |
|
| December 31, 2019 | ||||||||||||||||||
|
|
| (in thousands) |
|
| (in thousands) | ||||||||||||||||||
|
|
| Total |
|
| Nonaccruing |
|
| Accruing |
|
| Related Allowance |
|
| Total |
|
| Nonaccruing |
|
| Accruing |
|
| Related Allowance |
Commercial and industrial |
| $ | 2,282 |
| $ | 275 |
| $ | 2,007 |
| $ | 154 |
| $ | 2,052 |
| $ | 328 |
| $ | 1,724 |
| $ | 26 |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Residential |
| 1,617 |
|
| 266 |
|
| 1,351 |
|
| 14 |
| 1,815 |
|
| 449 |
|
| 1,366 |
|
| - | ||
Construction |
| - |
|
| - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| - | ||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Commercial and multi-family |
| 4,164 |
|
| 3,571 |
|
| 593 |
|
| - |
| 3,632 |
|
| 3,075 |
|
| 557 |
|
| - | ||
Construction |
| 8,753 |
|
| 8,637 |
|
| 116 |
|
| 716 |
| - |
|
| - |
|
| - |
|
| - | ||
Home equities |
| 756 |
|
| 122 |
|
| 634 |
|
| - |
| 738 |
|
| 175 |
|
| 563 |
|
| - | ||
Consumer and other |
|
| 23 |
|
| - |
|
| 23 |
|
| 23 |
|
| 21 |
|
| - |
|
| 21 |
|
| 21 |
Total TDR loans |
| $ | 17,595 |
| $ | 12,871 |
| $ | 4,724 |
| $ | 907 |
| $ | 8,258 |
| $ | 4,027 |
| $ | 4,231 |
| $ | 47 |
Any TDR that is placed on non-accrual is not reverted back to accruing status until the borrower makes timely payments as contracted for at least six months and future collection under the revised terms is probable. All of the Company’s restructurings were allowed in an effort to maximize its ability to collect on loans where borrowers were experiencing financial difficulty.
The reserve for a TDR is based upon the present value of the future expected cash flows discounted at the loan’s original effective interest rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent. This reserve methodology is used because all TDR loans are considered impaired. As of September 30, 2019,March 31, 2020, there were no commitments to lend additional funds to debtors owing on loans whose terms have been modified in TDRs.
The Company’s TDRs have various agreements that involve deferral of principal payments, or interest-only payments, for a period (usually 12 months or less) to allow the borrower time to improve cash flow or sell the property. Other common concessions leading to the designation of a TDR are lines of credit that are termed-out and/or extensions of maturities at rates that are less than the prevailing market rates given the risk profile of the borrower.
Federal banking regulators issued interagency statements that included guidance on accounting for loan modifications in light of the economic impact of the Coronavirus Disease 2019 (COVID-19) pandemic on March 22, 2020 and April 7, 2020. The guidance interprets
2823
current accounting standards and indicates that a lender can conclude that a borrower is not experiencing financial difficulty if short-term modifications are made in response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to the loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented. The agencies confirmed, in working with the staff of the FASB, that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were less than 30 days past due on its contractual payments prior to any relief are not TDRs.
The following tables show the data for TDR activity by the type of concession granted to the borrower for the three and nine month periods ended September 30March 31, 20192020 and 2018:2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, 2019 |
| Three months ended September 30, 2018 | ||||||||||||
|
| (Recorded Investment in thousands) |
| (Recorded Investment in thousands) | ||||||||||||
Troubled Debt Restructurings by Type of Concession |
| Number of Contracts |
|
| Pre-Modification Outstanding Recorded Investment |
|
| Post-Modification Outstanding Recorded Investment |
| Number of Contracts |
|
| Pre-Modification Outstanding Recorded Investment |
|
| Post-Modification Outstanding Recorded Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extension of maturity |
| 1 |
| $ | 21 |
| $ | 21 |
| 1 |
| $ | 46 |
| $ | 46 |
Term-out line of credit |
| 1 |
|
| 42 |
|
| 42 |
| - |
|
| - |
|
| - |
Residential Real Estate & Construction: |
| - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
Extension of maturity and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest rate reduction |
| 3 |
|
| 307 |
|
| 307 |
| - |
|
| - |
|
| - |
Commercial Real Estate & Construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferral of principal |
| - |
|
| - |
|
| - |
| 1 |
|
| 8,768 |
|
| 8,768 |
Home Equities: |
|
|
|
| - |
|
| - |
| - |
|
| - |
|
| - |
Extension of maturity and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest rate reduction |
| 1 |
|
| 110 |
|
| 110 |
| - |
|
| - |
|
| - |
Consumer and other loans |
| - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, 2019 |
| Nine months ended September 30, 2018 | ||||||||||||
|
| (Recorded Investment in thousands) |
| (Recorded Investment in thousands) | ||||||||||||
Troubled Debt Restructurings by Type of Concession |
| Number of Contracts |
|
| Pre-Modification Outstanding Recorded Investment |
|
| Post-Modification Outstanding Recorded Investment |
| Number of Contracts |
|
| Pre-Modification Outstanding Recorded Investment |
|
| Post-Modification Outstanding Recorded Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extension of maturity |
| 1 |
| $ | 21 |
| $ | 21 |
| 1 |
| $ | 46 |
| $ | 46 |
Term-out line of credit |
| 1 |
|
| 42 |
|
| 42 |
| 1 |
|
| 29 |
|
| 29 |
Combination of concessions |
| - |
|
| - |
|
| - |
| 1 |
|
| 63 |
|
| 63 |
Residential Real Estate & Construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extension of maturity and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest rate reduction |
| 3 |
|
| 307 |
|
| 307 |
| - |
|
| - |
|
| - |
Commercial Real Estate & Construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferral of principal |
| - |
|
| - |
|
| - |
| 1 |
|
| 8,768 |
|
| 8,768 |
Extension of maturity |
| - |
|
| - |
|
| - |
| 1 |
|
| 181 |
|
| 181 |
Combination of concessions |
| - |
|
| - |
|
| - |
| 1 |
|
| 154 |
|
| 154 |
Home Equities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferral of principal |
| - |
|
| - |
|
| - |
| 1 |
|
| 100 |
|
| 100 |
Extension of maturity and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest rate reduction |
| 3 |
|
| 390 |
|
| 390 |
| - |
|
| - |
|
| - |
Consumer and other loans |
| - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended March 31, 2020 |
| Three months ended March 31, 2019 | ||||||||||||
|
| (Recorded Investment in thousands) |
| (Recorded Investment in thousands) | ||||||||||||
Troubled Debt Restructurings by Type of Concession |
| Number of Contracts |
|
| Pre-Modification Outstanding Recorded Investment |
|
| Post-Modification Outstanding Recorded Investment |
| Number of Contracts |
|
| Pre-Modification Outstanding Recorded Investment |
|
| Post-Modification Outstanding Recorded Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial |
|
|
| $ |
|
| $ |
|
|
|
| $ |
|
| $ |
|
Residential Real Estate & Construction: |
|
|
|
| - |
|
| - |
| - |
|
| - |
|
| - |
Combination of concessions |
| 1 |
|
| 56 |
|
| 56 |
| - |
|
| - |
|
| - |
Commercial Real Estate & Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equities: |
|
|
|
| - |
|
| - |
| - |
|
| - |
|
| - |
Extension of maturity and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest rate reduction |
| - |
|
| - |
|
| - |
| 1 |
|
| 109 |
|
| 109 |
Consumer and other loans |
| - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
Other |
| - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
The general practice of the Bank is to work with borrowers so that they are able to repay their loan in full. If a borrower continues to be delinquent or cannot meet the terms of a TDR and the loan is determined to be uncollectible, the loan will be charged-off to its collateral value. A loan is considered in default when the loan is 90 days past due. Loans which were classified as TDRs during the previous 12 months which defaulted during the ninethree month periods ended September 30,March 31, 2020 and 2019 and 2018 were not material.
5. COMMON EQUITY AND EARNINGS PER SHARE DATA
The common stock per share information is based upon the weighted average number of shares outstanding during each period. For the three and nine month periods ended September 30,March 31, 2020 and 2019, the Company had an average of 57,89955,267 and 68,66076,636 dilutive shares outstanding, respectively. The Company had an average of 116,504 and 125,801 dilutive shares outstanding for the three and nine month periods ended September 30, 2018.
Potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive and not included in calculating diluted earnings per share. For the three and nine month periodsperiod ended September 30,March 31, 2020 and 2019, there was an average of 82,64281,770 and 85,57946,220 potentially anti-dilutive shares outstanding, respectively, that were not included in calculating diluted earnings per share because their effect was anti-dilutive. For the three and nine month periods ended September 30, 2018 there were no anti-dilutive shares outstanding.
24
6. OTHER COMPREHENSIVE INCOME
The following tables summarize the changes in the components of accumulated other comprehensive income (loss) during the three months ended March 31, 2020 and nine month periods ended September 30, 2019 and 2018:2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at June 30, 2019 |
| Net Change |
| Balance at September 30, 2019 |
| Balance at December 31, 2019 |
| Net Change |
| Balance at March 31, 2020 | ||||||
|
| (in thousands) |
| (in thousands) | ||||||||||||||
Net unrealized gain on investment securities |
| $ | 426 |
| $ | 523 |
| $ | 949 |
| $ | 522 |
| $ | 1,835 |
| $ | 2,357 |
Net defined benefit pension plan adjustments |
|
| (2,871) |
|
| 68 |
|
| (2,803) |
|
| (3,105) |
|
| 87 |
|
| (3,018) |
Total |
| $ | (2,445) |
| $ | 591 |
| $ | (1,854) |
| $ | (2,583) |
| $ | 1,922 |
| $ | (661) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at June 30, 2018 |
| Net Change |
| Balance at September 30, 2018 |
| Balance at December 31, 2018 |
| Net Change |
| Balance at March 31, 2019 | ||||||
|
| (in thousands) |
| (in thousands) | ||||||||||||||
Net unrealized loss on investment securities |
| $ | (3,093) |
| $ | (738) |
| $ | (3,831) | |||||||||
Net unrealized (loss) gain on investment securities |
| $ | (2,348) |
| $ | 1,303 |
| $ | (1,045) | |||||||||
Net defined benefit pension plan adjustments |
|
| (2,290) |
|
| 40 |
|
| (2,250) |
|
| (3,005) |
|
| 67 |
|
| (2,938) |
Total |
| $ | (5,383) |
| $ | (698) |
| $ | (6,081) |
| $ | (5,353) |
| $ | 1,370 |
| $ | (3,983) |
|
|
|
|
|
|
|
|
|
|
|
| Balance at December 31, 2018 |
| Net Change |
| Balance at September 30, 2019 | |||
|
| (in thousands) | |||||||
Net unrealized (loss) gain on investment securities |
| $ | (2,348) |
| $ | 3,297 |
| $ | 949 |
Net defined benefit pension plan adjustments |
|
| (3,005) |
|
| 202 |
|
| (2,803) |
Total |
| $ | (5,353) |
| $ | 3,499 |
| $ | (1,854) |
|
|
|
|
|
|
|
|
|
|
|
| Balance at December 31, 2017 |
| Net Change |
| Balance at September 30, 2018 | |||
|
| (in thousands) | |||||||
Net unrealized loss on investment securities |
| $ | (1,049) |
| $ | (2,782) |
| $ | (3,831) |
Net defined benefit pension plan adjustments |
|
| (2,368) |
|
| 118 |
|
| (2,250) |
Total |
| $ | (3,417) |
| $ | (2,664) |
| $ | (6,081) |
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Three months ended September 30, 2019 |
| Three months ended September 30, 2018 |
| Three months ended March 31, 2020 |
| Three months ended March 31, 2019 | ||||||||||||||||||||||||||||
|
| (in thousands) |
| (in thousands) |
| (in thousands) |
| (in thousands) | ||||||||||||||||||||||||||||
|
| Before-Tax Amount |
| Income Tax (Provision) Benefit |
| Net-of-Tax Amount |
| Before-Tax Amount |
| Income Tax (Provision) Benefit |
| Net-of-Tax Amount |
| Before-Tax Amount |
| Income Tax (Provision) Benefit |
| Net-of-Tax Amount |
| Before-Tax Amount |
| Income Tax (Provision) Benefit |
| Net-of-Tax Amount | ||||||||||||
Unrealized gain (loss) on investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Unrealized gain on investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unrealized gain (loss) on investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Unrealized gain on investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
securities |
| $ | 705 |
| $ | (182) |
| $ | 523 |
| $ | (1,002) |
| $ | 264 |
| $ | (738) |
| $ | 2,475 |
| $ | (640) |
| $ | 1,835 |
| $ | 1,761 |
| $ | (458) |
| $ | 1,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Defined benefit pension plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Reclassifications from accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
comprehensive income for gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amortization of prior service cost (a) |
| $ | 7 |
| $ | (1) |
| $ | 6 |
| $ | 8 |
| $ | (1) |
| $ | 7 |
| $ | 8 |
| $ | (3) |
| $ | 5 |
| $ | 8 |
| $ | (2) |
| $ | 6 |
Amortization of actuarial loss (a) |
|
| 82 |
|
| (20) |
|
| 62 |
| 43 |
| (10) |
| 33 |
|
| 113 |
|
| (31) |
|
| 82 |
| 83 |
| (22) |
| 61 | ||||||
Net change |
|
| 89 |
|
| (21) |
|
| 68 |
|
| 51 |
|
| (11) |
|
| 40 |
|
| 121 |
|
| (34) |
|
| 87 |
|
| 91 |
|
| (24) |
|
| 67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
| $ | 794 |
| $ | (203) |
| $ | 591 |
| $ | (951) |
| $ | 253 |
| $ | (698) | ||||||||||||||||||
Other comprehensive income |
| $ | 2,596 |
| $ | (674) |
| $ | 1,922 |
| $ | 1,852 |
| $ | (482) |
| $ | 1,370 |
(a) | Included in net periodic pension cost, as described in Note 9 – “Net Periodic Benefit Costs” |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, 2019 |
| Nine months ended September 30, 2018 | ||||||||||||||
|
| (in thousands) |
| (in thousands) | ||||||||||||||
|
| Before-Tax Amount |
| Income Tax (Provision) Benefit |
| Net-of-Tax Amount |
| Before-Tax Amount | �� | Income Tax (Provision) Benefit |
| Net-of-Tax Amount | ||||||
Unrealized gain (loss) on investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities |
| $ | 4,451 |
| $ | (1,154) |
| $ | 3,297 |
| $ | (3,761) |
| $ | 979 |
| $ | (2,782) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications from accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive income for gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost (a) |
| $ | 23 |
| $ | (6) |
| $ | 17 |
| $ | 24 |
| $ | (6) |
| $ | 18 |
Amortization of actuarial loss (a) |
|
| 248 |
|
| (63) |
|
| 185 |
|
| 127 |
|
| (27) |
|
| 100 |
Net change |
|
| 271 |
|
| (69) |
|
| 202 |
|
| 151 |
|
| (33) |
|
| 118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
| $ | 4,722 |
| $ | (1,223) |
| $ | 3,499 |
| $ | (3,610) |
| $ | 946 |
| $ | (2,664) |
|
|
3125
The Company comprises two primary business segments, banking and insurance agency activities. The following tables set forth information regarding these segments for the three and nine month periods ended September 30March 31, 20192020 and 2018.2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, 2019 |
| Three months ended March 31, 2020 | ||||||||||||||
|
|
| Banking |
|
| Insurance Agency |
|
|
|
|
| Banking |
|
| Insurance Agency |
|
|
|
|
|
| Activities |
|
| Activities |
|
| Total |
|
| Activities |
|
| Activities |
|
| Total |
|
|
| (in thousands) |
|
| (in thousands) | ||||||||||||
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) |
| $ | 13,652 |
| $ | (31) |
| $ | 13,621 |
| $ | 12,779 |
| $ | (3) |
| $ | 12,776 |
(Credit) provision for loan losses |
|
| (431) |
|
| - |
|
| (431) | |||||||||
Provision for loan losses |
|
| 2,999 |
|
| - |
|
| 2,999 | |||||||||
Net interest income (expense) after |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
provision for loan losses |
|
| 14,083 |
|
| (31) |
|
| 14,052 |
|
| 9,780 |
|
| (3) |
|
| 9,777 |
Non-interest income |
|
| 1,777 |
|
| 162 |
|
| 1,939 | |||||||||
Insurance service and fees |
|
| 130 |
|
| 3,095 |
|
| 3,225 |
|
| 113 |
|
| 2,312 |
|
| 2,425 |
Other non-interest income |
|
| 913 |
|
| - |
|
| 913 | |||||||||
Amortization expense |
|
| - |
|
| 112 |
|
| 112 |
|
| - |
|
| 130 |
|
| 130 |
Non-interest expense |
|
| 9,778 |
|
| 2,386 |
|
| 12,164 | |||||||||
Other non-interest expense |
|
| 10,720 |
|
| 2,020 |
|
| 12,740 | |||||||||
Income before income taxes |
|
| 6,212 |
|
| 728 |
|
| 6,940 |
|
| 86 |
|
| 159 |
|
| 245 |
Income tax provision |
|
| 1,587 |
|
| 189 |
|
| 1,776 |
|
| - |
|
| 41 |
|
| 41 |
Net income |
| $ | 4,625 |
| $ | 539 |
| $ | 5,164 |
| $ | 86 |
| $ | 118 |
| $ | 204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, 2018 |
| Three months ended March 31, 2019 | ||||||||||||||
|
|
| Banking |
|
| Insurance Agency |
|
|
|
|
| Banking |
|
| Insurance Agency |
|
|
|
|
|
| Activities |
|
| Activities |
|
| Total |
|
| Activities |
|
| Activities |
|
| Total |
|
|
| (in thousands) |
|
| (in thousands) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) |
| $ | 12,118 |
| $ | (32) |
| $ | 12,086 |
| $ | 12,541 |
| $ | (33) |
| $ | 12,508 |
Provision for loan losses |
|
| 252 |
|
| - |
|
| 252 |
|
| 538 |
|
| - |
|
| 538 |
Net interest income (expense) after |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
provision for loan losses |
|
| 11,866 |
|
| (32) |
|
| 11,834 |
|
| 12,003 |
|
| (33) |
|
| 11,970 |
Non-interest income |
|
| 1,549 |
|
| - |
|
| 1,549 | |||||||||
Insurance service and fees |
|
| 148 |
|
| 3,067 |
|
| 3,215 |
|
| 119 |
|
| 2,323 |
|
| 2,442 |
Other non-interest income |
|
| 1,753 |
|
| - |
|
| 1,753 | |||||||||
Amortization expense |
|
| - |
|
| 112 |
|
| 112 |
|
| - |
|
| 112 |
|
| 112 |
Non-interest expense |
|
| 9,247 |
|
| 2,098 |
|
| 11,345 | |||||||||
Other non-interest expense |
|
| 9,086 |
|
| 2,026 |
|
| 11,112 | |||||||||
Income before income taxes |
|
| 4,316 |
|
| 825 |
|
| 5,141 |
|
| 4,789 |
|
| 152 |
|
| 4,941 |
Income tax provision |
|
| 116 |
|
| 230 |
|
| 346 |
|
| 1,181 |
|
| 40 |
|
| 1,221 |
Net income |
| $ | 4,200 |
| $ | 595 |
| $ | 4,795 |
| $ | 3,608 |
| $ | 112 |
| $ | 3,720 |
3226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, 2019 | |||||||
|
|
| Banking |
|
| Insurance Agency |
|
|
|
|
|
| Activities |
|
| Activities |
|
| Total |
|
|
| (in thousands) | ||||||
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) |
| $ | 39,360 |
| $ | (97) |
| $ | 39,263 |
Provision for loan losses |
|
| 197 |
|
| - |
|
| 197 |
Net interest income (expense) after |
|
|
|
|
|
|
|
|
|
provision for loan losses |
|
| 39,163 |
|
| (97) |
|
| 39,066 |
Non-interest income |
|
| 5,359 |
|
| 162 |
|
| 5,521 |
Insurance service and fees |
|
| 377 |
|
| 8,191 |
|
| 8,568 |
Amortization expense |
|
| - |
|
| 336 |
|
| 336 |
Non-interest expense |
|
| 28,775 |
|
| 6,538 |
|
| 35,313 |
Income before income taxes |
|
| 16,124 |
|
| 1,382 |
|
| 17,506 |
Income tax provision |
|
| 3,880 |
|
| 360 |
|
| 4,240 |
Net income |
| $ | 12,244 |
| $ | 1,022 |
| $ | 13,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, 2018 | |||||||
|
|
| Banking |
|
| Insurance Agency |
|
|
|
|
|
| Activities |
|
| Activities |
|
| Total |
|
|
| (in thousands) | ||||||
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) |
| $ | 35,822 |
| $ | (88) |
| $ | 35,734 |
Provision for loan losses |
|
| 1,678 |
|
| - |
|
| 1,678 |
Net interest income (expense) after |
|
|
|
|
|
|
|
|
|
provision for loan losses |
|
| 34,144 |
|
| (88) |
|
| 34,056 |
Non-interest income |
|
| 5,057 |
|
| - |
|
| 5,057 |
Insurance service and fees |
|
| 449 |
|
| 6,683 |
|
| 7,132 |
Amortization expense |
|
| - |
|
| 168 |
|
| 168 |
Non-interest expense |
|
| 26,436 |
|
| 5,257 |
|
| 31,693 |
Income before income taxes |
|
| 13,214 |
|
| 1,170 |
|
| 14,384 |
Income tax provision |
|
| 2,159 |
|
| 320 |
|
| 2,479 |
Net income |
| $ | 11,055 |
| $ | 850 |
| $ | 11,905 |
33
8. CONTINGENT LIABILITIES AND COMMITMENTS
The unaudited consolidated financial statements do not reflect various commitments and contingent liabilities, which arise in the normal course of business, and which involve elements of credit risk, interest rate risk and liquidity risk. These commitments and contingent liabilities consist of commitments to extend credit and standby letters of credit. A summary of the Bank’s commitments and contingent liabilities is as follows:
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
| March 31, |
| December 31, | ||||
|
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
|
| (in thousands) |
| (in thousands) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit |
| $ | 347,081 |
| $ | 290,785 |
| $ | 333,067 |
| $ | 331,974 |
Standby letters of credit |
|
| 4,432 |
|
| 3,379 |
|
| 3,775 |
|
| 4,309 |
Total |
| $ | 351,513 |
| $ | 294,164 |
| $ | 336,842 |
| $ | 336,283 |
Commitments to extend credit and standby letters of credit include some exposure to credit loss in the event of nonperformance by the customer. The Bank’s credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded on the Company’s unaudited consolidated balance sheets. Because these instruments have fixed maturity dates, and because they may expire without being drawn upon, they do not necessarily represent cash requirements of the Bank. The Bank did not incur any losses on its commitments and did not record a reserve for its commitments during the first ninethree months of 20192020 or during 2018.2019.
Certain lending commitments for construction residential mortgage loans are considered derivative instruments under the guidelines of GAAP. The changes in the fair value of these commitments, due to interest rate risk, are not recorded on the consolidated balance sheets as the fair value of these derivatives is not considered to be material.
On January 31, 2008, the Bank froze its defined benefit pension plan. The plan covered substantially all Bank employees. The plan provides benefits that are based on the employees’ compensation and years of service. Under the freeze, eligible employees will receive, at retirement, the benefits already earned through January 31, 2008, but have not accrued any additional benefits since then. As a result, service cost is no longer incurred.
The Bank uses an actuarial method of amortizing prior service cost and unrecognized net gains or losses which result from actual expense and assumptions being different than those that are projected. The amortization method the Bank used recognized the prior service cost and net gains or losses over the average remaining service period of active employees.
The Bank also maintains a nonqualified supplemental executive retirement plan covering certain members of the Company’s senior management. The Bank uses an actuarial method of amortizing unrecognized net gains or losses which result from actual expense and assumptions being different than those that are projected. The amortization method the Bank uses recognizes the net gains or losses over the average remaining service period of active employees.
The following table presents the net periodic cost for the Bank’s defined benefit pension plan and supplemental executive retirement plan for the three months ended March 31, 2020 and nine month periods ended September 30, 2019 and 2018:2019:
3427
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|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
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|
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|
|
|
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|
|
|
|
|
|
|
| Three months ended September 30, |
|
| Three months ended March 31, | ||||||||||||||||||
|
|
| (in thousands) |
|
| (in thousands) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| Supplemental Executive |
|
|
|
|
|
|
| Supplemental Executive | ||||||||
|
| Pension Benefits |
| Retirement Plan |
| Pension Benefits |
| Retirement Plan | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | - |
| $ | - |
| $ | 37 |
| $ | 47 |
| $ | - |
| $ | - |
| $ | 39 |
| $ | 36 |
Interest cost |
|
| 55 |
|
| 51 |
|
| 51 |
|
| 34 |
|
| 50 |
|
| 55 |
|
| 38 |
|
| 50 |
Expected return on plan assets |
|
| (70) |
|
| (78) |
|
| - |
|
| - |
|
| (81) |
|
| (69) |
|
| - |
|
| - |
Amortization of prior service cost |
|
| - |
|
| - |
|
| 7 |
|
| 8 |
|
| - |
|
| - |
|
| 8 |
|
| 8 |
Amortization of the net loss |
|
| 24 |
|
| 21 |
|
| 58 |
|
| 22 |
|
| 25 |
|
| 24 |
|
| 88 |
|
| 59 |
Net periodic cost (benefit) |
| $ | 9 |
| $ | (6) |
| $ | 153 |
| $ | 111 |
| $ | (6) |
| $ | 10 |
| $ | 173 |
| $ | 153 |
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, | |||||||||
|
|
| (in thousands) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Supplemental Executive | ||||
|
| Pension Benefits |
| Retirement Plan | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | - |
| $ | - |
| $ | 109 |
| $ | 141 |
Interest cost |
|
| 165 |
|
| 153 |
|
| 151 |
|
| 102 |
Expected return on plan assets |
|
| (208) |
|
| (234) |
|
| - |
|
| - |
Amortization of prior service cost |
|
| - |
|
| - |
|
| 23 |
|
| 24 |
Amortization of the net loss |
|
| 72 |
|
| 63 |
|
| 176 |
|
| 64 |
Net periodic cost (benefit) |
| $ | 29 |
| $ | (18) |
| $ | 459 |
| $ | 331 |
The components of net periodic benefit cost other than the service cost component are included in the line item “other expense” in the income statement.
10. REVENUE RECOGNITION OF NON-INTEREST INCOME
A description of the Company’s material revenue streams in non-interest income accounted for under ASC 606 follows:
Insurance Service and Fees: Insurance services revenue relates to various revenue streams from services provided by TEA and the Bank:
· | TEA earns commission revenue from selling commercial and personal property and casualty (“P&C”) insurance as well as employee benefits (“EB”) solutions to commercial customers. |
TEA has agreements with various insurance companies to sell policies to customers on behalf of the carriers. The performance obligation for TEA is to sell annual P&C policies to commercial customers and consumers. This performance obligation is met when a new policy is sold or when an existing policy renews. The policies are generally one year terms. In the agreements with the respective insurance companies, a commission rate is agreed upon. The commission is recognized at the time of the sale of the policy or when a policy renews.
35
TEA has signed contracts with insurance carriers that enable TEA to sell benefit plans to commercial customers on behalf of the insurance carriers. The performance obligation for TEA is to sell the plans to commercial customers. After the initial sale when the customer signs an agreement to purchase the offered benefit plan, the performance obligation is met each month when a customer continues utilizing benefit plans from the carrier. The customer does not commit to a specific length of time with the carrier. In the agreements with the respective insurance companies, a commission rate is agreed upon. Revenue is recognized each month when the customer continues with the benefit plan sold by TEA.
· | TEA also earns contingent profit sharing revenue. The insurance companies measure the loss ratio for TEA’s customers and pay TEA according to how profitable TEA customers are. |
TEA has signed written agreements with insurance carriers that document payouts to TEA based on the loss ratios of its customers. The performance obligation for TEA is to maintain a customer base with loss ratios below the agreed upon thresholds. In the contracts with the insurance companies, payout rates based on loss ratios are documented. The consideration is variable as loss ratios vary based on customer experience. TEA’s performance obligation is over the course of the year as its customers’ performance with insurance carriers is measured throughout the year as losses occur. Due to the variable nature of contingent profit sharing revenue, TEA will accrue contingent profit sharing revenue throughout the year based on recent historical results. As loss events occur and overall performance becomes known to TEA, accrual adjustments will be made until the cash is ultimately received.
· | Financial services commission revenue from the Bank related to wealth management such as life insurance, annuities, and mutual funds sales is also included in the “insurance service and fees” line of the income statement. |
28
The Company earns wealth management fees from its contracts with customers for certain financial services. Fees that are transaction-based are recognized at the point in time that the transaction is executed. Other related services provided include financial planning services and the fees the Bank earns are recognized when the services are rendered.
· | Insurance claims services revenue is recorded at FCS. |
FCS has signed agreements with insurance companies to perform claims services including investigative and adjustment services related to residential and commercial lines. The performance obligation is for FCS to investigate the insurance claims and inspecting the damage to determine the extent of the insurance company’s liability. FCS is paid based on time and materials expended to investigate the claim. The rates paid are determined in the agreement between FCS and the respective insurance companies. Upon completion of its claims inspection work, FCS bills the insurance company for services rendered and recognizes the revenue earned.
A disaggregation of the total insurance service and other fees for the three months ended March 31, 2020 and nine month periods ended September 30, 2019 and 2018 is provided in the tables below:
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, | |||
|
| 2019 |
|
| 2018 |
|
| (in thousands) | |||
Commercial property and casualty insurance commissions | $ | 1,382 |
| $ | 1,330 |
Personal property and casualty insurance commissions |
| 863 |
|
| 917 |
Employee benefits sales commissions |
| 287 |
|
| 241 |
Profit sharing and contingent revenue |
| 430 |
|
| 486 |
Wealth management and other financial services |
| 142 |
|
| 151 |
Insurance claims services revenue |
| 96 |
|
| 65 |
Other insurance-related revenue |
| 25 |
|
| 25 |
Total insurance service and other fees | $ | 3,225 |
| $ | 3,215 |
36
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
| ||
|
| Nine months ended September 30, |
| Three months ended March 31, | ||||||
|
| 2019 |
| 2018 |
| 2020 |
|
| 2019 | |
| (in thousands) |
| (in thousands) | |||||||
Commercial property and casualty insurance commissions | $ | 3,267 |
| $ | 2,665 | $ | 867 |
| $ | 842 |
Personal property and casualty insurance commissions |
| 2,618 |
| 2,249 |
| 754 |
| 750 | ||
Employee benefits sales commissions |
| 869 |
| 664 |
| 379 |
| 293 | ||
Profit sharing and contingent revenue |
| 939 |
| 790 |
| 206 |
| 257 | ||
Wealth management and other financial services |
| 405 |
| 462 |
| 121 |
| 124 | ||
Insurance claims services revenue |
| 397 |
| 234 |
| 55 |
| 146 | ||
Other insurance-related revenue |
| 73 |
|
| 68 |
| 43 |
|
| 30 |
Total insurance service and other fees | $ | 8,568 |
| $ | 7,132 | $ | 2,425 |
| $ | 2,442 |
11. RECENT ACCOUNTING PRONOUNCEMENTS
Note 1 contains detailsASUs adopted by the Company during the current fiscal year are not expected to have a material impact on the impactCompany’s consolidated financial position, results of accounting pronouncements adopted during the nine months ended September 30, 2019.operations, cash flows or disclosures. The following standards will be adopted in future periods. ASUs not listed below are not expected to have a material impact on the Company’s consolidated financial position, results of operations, cash flows or disclosures.
ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. – Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. Both financial institutions and users of their financial statements expressed concern that current GAAP restricts the ability to record credit losses that are expected, but do not yet meet the “probable” threshold. The main objective of this ASU (commonly known as the Current Expected Credit Loss Impairment Model, or CECL, in the industry) is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in CECL replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The life of loan loss concept presents complexities that can decrease capital, and add both volatility to the allowance for loan losses estimates and additional costs. Changes in expectations of future economic conditions will play a large role in CECL and can significantly affect the credit loss estimate. The Company is developing its approach for determining expected credit losses under the new guidance, including the licensing of new software and the development of processes to track loan performance. The total impact of CECL to the Company’s financial statements is unknown but may be material. On October 16, 2019, the FASB affirmed its decision to amend the effective date for theThe amendments in CECL are effective for smaller reporting companies tofor fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is allowed for fiscal years beginning after December 15, 2018.permitted. The Company intends to early adopt CECL effective January 1, 2021. Implementation of CECL will be a significant project for the Company through the projected implementation date of January 1, 2021.2022.
ASU 2018-13, 2019-12,Disclosure Framework – Changes toSimplifying the Disclosure RequirementsAccounting for Fair Value MeasurementIncome Taxes – The amendments in this ASU modifysimplify the disclosure requirements on fair value measurements.accounting for income taxes by removing the following exceptions: 1. Exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income); 2. Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; 3. Exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign
29
equity method investment becomes a subsidiary; and 4. Exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments also simplify the accounting for income taxes by doing the following: 1. Requiring that an entity recognize a franchise tax (or similar tax) that is partially based on changesincome as an income based tax and account for any incremental amount incurred as a non-income-based tax; 2. Requiring that an entity evaluate when a step up in unrealized gainsthe tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and losses,when it should be considered a separate transaction; 3. Specifying that an entity is not required to allocate the rangeconsolidated amount of current and weighted averagedeferred tax expense to a legal entity that is not subject to tax in its separate financial statements. However, an entity may elect to do so (on an entity-by-entity basis) for a legal entity that is both not subject to tax and disregarded by the taxing authority; 4. Requiring that an entity reflect the effect of significant unobservable inputs usedan enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date; and 5. Making minor Codification improvements for income taxes related to develop Level 3 fair value measurements,employee stock ownership plans and investments in qualified affordable housing projects accounted for using the narrative descriptionequity method.
The amendments in this ASU related to separate financial statements of measurement uncertaintylegal entities that are not subject to tax should be applied prospectivelyon a retrospective basis for onlyall periods presented. The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the most recent interimbeginning of the fiscal year of adoption. The amendments related to franchise taxes that are partially based on income should be applied on either a retrospective basis for all periods presented or annual period presented ina modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the initialbeginning of the fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. on a prospective basis. Early adoption of the amendments in an interim period would require recognition of any adjustments as of the beginning of the annual period that includes that interim period.
The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Adoption2020. Early adoption is permitted. The Company is evaluating the impact that the guidance will have on its consolidated financial statements.
12. ACQUISITIONS
On May 1, 2020, the Company completed the acquisition of this ASU will impactFSB Bancorp, Inc., a Maryland corporation and the Company’s disclosures but will not impactparent holding company of Fairport Savings Bank (“FSB”). On that date, FSB was merged into Evans Bank, a wholly owned banking subsidiary of the Company’s financial condition,Company. FSB operated 4 banking offices in New York at the date of acquisition. After application of the election, allocation and proration procedures contained in the merger agreement, the Company paid $17.1 million in cash and issued 422,625 shares of Evans Bancorp, Inc. common stock in exchange for all of the shares of common stock of FSB Bancorp, Inc. outstanding at the time of the acquisition.
The acquisition of FSB was completed subsequent to the first quarter of 2020, thus FSB’s balance sheet and results of operations or cash flows.are not included in the Company’s consolidated financial statements for the period ended March 31, 2020. The Company is currently in the process of allocating the purchase price to the fair values of the assets and liabilities acquired in conjunction with the acquisition. As of December 31, 2019, FSB reported $323 million of assets, including $275 million of loans (predominantly residential real estate loans) and $23 million of investment securities, and $292 million of liabilities, including $236 million of deposits.
The Company incurred $0.5 million of merger-related expenses during the three months ended March 31, 2020, consisting largely of professional services of attorneys, accountants, investment bankers and other advisors. There were no merger-related expenses incurred during three months ended March 31, 2019.
ASU 2018-14, Disclosure Framework – ChangesThe Company’s leases, consisting of property leases for certain of our bank branches and insurance agency offices, are classified as operating leases. Operating lease Right of Use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets were $3.6 million and $3.7 million as of March 31, 2020 and December 31, 2019, respectively. Lease liabilities were $4.0 million and $4.2 million as of March 31, 2020 and December 31, 2019, respectively. As these leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of lease payments. Our lease terms include options to extend or terminate the Disclosure Requirements for Defined Benefit Plans – The amendments in this ASU remove disclosureslease when it is reasonably certain that no longerwe will exercise that option. Leases with an initial term of 12 months or less are considered cost beneficial, clarifynot recorded on the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this ASU are effective for fiscal years ending after December 15, 2020. Adoption of this ASU will impact the Company’s disclosures but will not impact the Company’s financial condition, results of operations or cash flows.balance sheet.
3730
Lease expense is recognized on a straight-line basis over the lease term. Operating lease expenses were $0.2 million during the three-month periods ended March 31, 2020 and 2019 and are included in other non-interest expense on the consolidated statement of income. Cash paid for amounts included in the measurement of lease liabilities were $0.2 million during the three-month periods ended March 31, 2020 and 2019 and are included in cash flows from operating activities on the consolidated statement of cash flows. The weighted average discount rate related to the Company’s leases was 3.5% as of March 31, 2020. The weighted average remaining lease term related to the Company’s leases was 8.4 years as of March 31, 2020. Future minimum lease payments under non-cancellable leases as of March 31, 2020 were as follows:
|
|
|
|
|
|
|
| Year Ending December 31, |
2020 (excluding the three months ended March 31, 2020) | $ | 562 |
2021 |
| 682 |
2022 |
| 694 |
2023 |
| 589 |
2024 |
| 452 |
Thereafter |
| 1,640 |
Total future minimum lease payments |
| 4,619 |
Less imputed interest |
| 617 |
Total | $ | 4,002 |
|
|
|
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. When used in this report, or in the documents incorporated by reference herein, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” and similar expressions identify such forward-looking statements. These forward-looking statements include statements regarding the Company’s business plans, prospects, growth and operating strategies, statements regarding the asset quality of the Company’s loan and investment portfolios, and estimates of the Company’s risks and future costs and benefits.
These forward-looking statements are based largely on the expectations of the Company’s management and are subject to a number of risks and uncertainties, including but not limited to: general economic conditions, either nationally or in the Company’s market areas, that are worse than expected; increased competition among depository or other financial institutions; inflation and changes in the interest rate environment that reduce the Company’s margins or reduce the fair value of financial instruments; changes in laws or government regulations affecting financial institutions, including changes in regulatory fees, monetary policy, and capital requirements; the Company’s ability to enter new markets successfully and capitalize on growth opportunities; the Company’s ability to successfully integrate acquired entities; loan losses in excess of the Company’s allowance for loan losses; changes in accounting pronouncements and practices, as adopted by financial institution regulatory agencies, the Financial Accounting Standards Board and the Public Company Accounting Oversight Board; the impact of such changes in accounting pronouncements and practices being greater than anticipated; the ability to realize the benefit of deferred tax assets; changes in tax policies, rates and regulations of federal, state and local tax authorities; changes in consumer spending, borrowing and saving habits; changes in the Company’s organization, compensation and benefit plans; and other factors discussed elsewhere in this Quarterly Report on Form 10-Q, as well as in the Company’s periodic reports filed with the SEC, in particular the “Risk Factors” discussed in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2019. Many of these factors are beyond the Company’s control and are difficult to predict. In addition, the COVID-19 pandemic in the United States is expected to have a complex and significant impact on the economy, the banking industry and the Company in future periods. While the full impact of COVID-19 on future financial results is uncertain and not currently predictable, the Company believes that impact could have a material effect on customers’ ability to meet their borrowing obligations.
Because of these and other uncertainties, the Company’s actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. Forward-looking statements speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new, updated information, future events or otherwise, except to the extent required by law.
31
Impact of Covid-19
Effects on Our Market Area – The Company’s commercial and consumer banking products and services are offered primarily in New York State, where governmental responses to the COVID-19 pandemic have led to a broad curtailment of economic activity beginning in March 2020. The Governor of New York has issued a series of orders, including an order that, subject to limited exceptions, all individuals stay at home and non‑essential businesses cease all activities. The Company has remained open despite these orders because banks have been identified as providing essential services. The Company has been serving its customers through a variety of channels, including drive-up windows, limited appointment hours for personal meetings at certain branches, mobile banking, on-line banking, remote deposit capture and call centers.
Policy and Regulatory Developments – Federal, state and local governments and regulatory authorities have enacted and issued a range of policy responses to the COVID-19 pandemic, including the following:
· | The Federal Reserve decreased the range for the federal funds target rate by 0.5 percent on March 3, 2020, and by another 1.0 percent on March 16, 2020, reaching a current range of 0.0 - 0.25 percent. |
· | On March 27, 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security Act (CARES Act), which established a $2 trillion economic stimulus package, including cash payments to individuals, supplemental unemployment insurance benefits and a $349 billion loan program administered through the U.S. Small Business Administration (SBA), referred to as the paycheck protection program (PPP). Under the PPP, small businesses, sole proprietorships, independent contractors and self-employed individuals may apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. The Company is participating as a lender in the PPP. In addition, the CARES Act provides financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. |
· | On April 7, 2020, federal banking regulators issued a revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions, which, among other things, encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19, and stated that institutions generally do not need to categorize COVID-19-related modifications as TDRs and that the agencies will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as TDRs. |
· | On April 9, 2020, the Federal Reserve announced additional measures aimed at supporting small and mid-sized businesses, as well as state and local governments impacted by COVID-19. The Federal Reserve announced the Main Street Business Lending Program, which establishes two new loan facilities intended to facilitate lending to small and mid-sized businesses. The program is designed for businesses with up to 10,000 employees or $2.5 billion in 2019 revenues. To obtain a loan, borrowers must confirm that they are seeking financial support because of COVID-19 and that they will not use proceeds from the loan to pay off debt. The Federal Reserve also stated that it would provide additional funding to banks offering PPP loans to struggling small businesses. Lenders participating in the PPP will be able to exclude loans financed by the facility from their leverage ratio. In addition, the Federal Reserve created a Municipal Liquidity Facility to support state and local governments. The facility will make short-term financing available to cities with a population of more than one million or counties with a population of greater than two million. The Federal Reserve expanded both the size and scope its Primary and Secondary Market Corporate Credit Facilities. This will allow companies that were investment grade before the onset of COVID-19 but then subsequently downgraded after March 22, 2020 to gain access to the facility. Finally, the Federal Reserve announced that its Term Asset-Backed Securities Loan Facility will be scaled up in scope to include the triple A-rated tranche of commercial mortgage-backed securities and newly issued collateralized loan obligations. |
Effects on Our Business – The Company currently expects that the COVID-19 pandemic and the specific developments referred to above could have a significant impact on is business. In particular, it is anticipated that a significant portion of the Company’s borrowers in the hotel, entertainment, the personal services industry, certain restaurants and some manufacturers will continue to endure significant economic distress, which has caused, and may continue to cause, them to draw on their existing lines of credit and adversely affect their ability to repay existing indebtedness, and may adversely impact the value of collateral. These developments, together with economic conditions generally, are also expected to impact the Company’s commercial real estate portfolio, particularly with respect to real estate with exposure to these industries, and the value of certain collateral securing our loans.
The Company’s Response – We have taken numerous steps in response to the COVID-19 pandemic, including the following:
· | The Company is actively working with loan customers and providing prudent loan modification terms, including the implementation of a customer payment deferral program to assist both consumers and business borrowers that may be experiencing financial hardship due to COVID-19 related challenges. Through April 28, 2020, the Company granted payment deferrals for up to three months for 216 consumer borrowers and 186 business borrowers, representing $374 million on the Company's loan balances. The Company anticipates that it will continue receiving financial hardship payment deferral requests throughout the second quarter of 2020. |
32
· | The Company was proactive in providing updated guidance to its customers on the government’s Paycheck Protection Plan program as it was rolled out. In total, as of April 28, 2020, there are 1,213 PPP requests in the Company’s pipeline, representing approximately $180 million. This level of activity is double what the Company typically provides in a year’s normal production. |
· | To assist customers who are experiencing financial hardship during this unprecedented time, the Company is waiving the following fees, effective March 20, 2020 and continuing through May 15, 2020: |
o | ATM transactions fees charged by Evans for all customers |
o | All early withdrawal fees on CDs |
o | Mobile deposit fees for business customers |
o | Monthly fees to business customers for Deposit Express (Remote Capture) |
· | The Company continues to promote its digital banking options. Customers are encouraged to utilize online and mobile banking tools, and our customer service and retail departments are fully staffed and available to assist customers remotely. We have closed all branches to customer activity indefinitely, except for drive-up and appointment only services. We continue to pay all employees according to their normal work schedule, even if their work has been reduced. No employees have been furloughed. Employees whose job responsibilities can be effectively carried out remotely are working from home. Employees whose critical duties require their continued presence on-site are observing social distancing and cleaning protocols. |
Acquisitions
On May 1, 2020, the Company completed the acquisition of FSB Bancorp, Inc., a Maryland corporation and the parent holding company of Fairport Savings Bank (“FSB”). On that date, FSB was merged into Evans Bank, a wholly owned banking subsidiary of the Company. FSB operated 4 banking offices in New York at the date of acquisition. The acquisition of FSB was completed subsequent to the first quarter of 2020, thus FSB’s balance sheet and results of operations are not included in the Company’s consolidated financial statements for the period ended March 31, 2020. The Company is currently in the process of allocating the purchase price to the fair values of the assets and liabilities acquired in conjunction with the acquisition. As of December 31, 2019, FSB reported $323 million of assets, including $275 million of loans (predominantly residential real estate loans) and $23 million of investment securities, and $292 million of liabilities, including $236 million of deposits.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
The Company’s Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are prepared in accordance with U.S. GAAP and follow general practices within the industries in which it operates. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the Company’s Unaudited Consolidated Financial Statements and Notes. These estimates, assumptions, and judgments are based on information available as of the date of the Unaudited Consolidated Financial Statements. Accordingly, as this information changes, the Unaudited Consolidated Financial Statements could reflect different estimates, assumptions, and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments, and as such, have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available. When third-party information is not available, valuation adjustments are estimated in good faith by management primarily through the use of internal cash flow modeling techniques. Refer to Note 3 – “Fair Value Measurements” to the Company’s Unaudited Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for further detail on fair value measurement.
Significant accounting policies followed by the Company are presented in Note 1 – “Organization and Summary of Significant Accounting Policies” to the Audited Consolidated Financial Statements included in Item 8 in its Annual Report on Form 10-K for the year ended December 31, 2018.2019. These policies, along with the disclosures presented in the other Notes to the Company's Audited Consolidated Financial Statements contained in its Annual Report on Form 10-K and in this financial review, provide information on how significant assets and liabilities are presented in the Company’s Unaudited Consolidated Financial Statements and how those values are determined.
38
Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan losses and valuation of goodwill to be the accounting areas that require the most subjective or complex judgments, and, as such, could be most subject to revision as new information becomes available.
33
Allowance for Loan Losses
The allowance for loan losses represents management’s estimate of probable incurred losses in the Company’s loan portfolio. Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment on the part of management and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan portfolio also represents the largest asset type on the Company’s Unaudited Consolidated Balance Sheets. Note 1 to the Audited Consolidated Financial Statements included in Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 20182019 describes the methodology used to determine the allowance for loan losses.
Goodwill
The amount of goodwill reflected in the Company’s Unaudited Consolidated Financial Statements is required to be tested by management for impairment on at least an annual basis. The test for impairment of goodwill on the identified reporting unit is considered a critical accounting estimate because it requires judgment on the part of management and the use of estimates related to the growth assumptions and market multiples used in the valuation model. The goodwill impairment testing is performed annually as of December 31. No impairment charges were incurred in the most recent test and the fair value of the tested reporting unit substantially exceeded its carrying value. There were no triggering events
Changes in the nine-monthmacroeconomic environment resulting from the COVID-19 pandemic was a triggering event in the three month period ended September 30, 2019March 31, 2020 that resulted in the Company considering an interim impairment test. The Company had $10.9 million in goodwill as of March 31, 2020, all of which stems from the acquisition of various insurance agencies and is allocated to the insurance agency reporting unit. The Company evaluated the currently available information of the economic impact of the pandemic in relation to the nature of the insurance agency’s operations and the results of the December 31, 2019 goodwill impairment test which concluded that the fair value of the tested reporting unit substantially exceeded its carrying value. The Company determined that it is more likely than not that the reporting unit’s fair value will continue to exceed its carrying amount.
3934
ANALYSIS OF FINANCIAL CONDITION
Loan Activity
Total gross loans were $1.2 billion at September 30, 2019,March 31, 2020, a $7$20 million or 1% increase from June 30, 2019 and a $64 million or 6%2% increase from December 31, 2018.2019 and a $61 million or 5% increase from March 31, 2019.
Loans secured by real estate were $954$987 million at September 30, 2019,March 31, 2020, reflecting a $12$15 million or 1%2% increase from $942 million at June 30, 2019 and a $27 million or 3% increase from $927$972 million at December 31, 2018.2019 and a $46 million or 5% increase from $941 million at March 31, 2019. Commercial real estate loans, including construction loans, were $724$763 million at September 30, 2019, $13March 31, 2020, $20 million or 2%3% higher than the $711 million balance at the end of the second quarter of 2019 and $26 million or 4% higher than the $698$743 million balance at the end of the fourth quarter of 2018.2019 and $53 million or 8% higher than the balance at March 31, 2019. Commercial real estate is the largest part of the Company’s loan portfolio and has historically been the highest growth segment of the portfolio. The marketCompany’s Western New York footprint continued to experience strong demand for commercial real estate induring the Company’s footprint in Western New York has been strong in recent years.first quarter of 2020. The demand, along with the Company’s dedicated resources to commercial real estate lending, led to 7%strong growth at an annualized growth rate of 11% in the thirdfirst quarter of 2019.2020.
ResidentialIn the first quarter of 2020, residential mortgage originations were $6$5 million in the third and second quarters of 2019, compared with $14the previous quarter’s originations of $9 million in last year’s third quarter. The Company originated $19 million in residential mortgages in the first nine months of 2019, compared to $35and $7 million in the first nine monthsquarter of 2018. The decrease in residential mortgage originations is attributable to reduced staffing in 2019. Residential mortgages sold in the thirdfirst quarter of 20192020 equated to approximately 49%71% of the residential mortgages originated by the Company during the quarter, as compared with 43%59% in the secondfourth quarter of 2019 and 3% in the third quarter of 2018. Residential mortgages sold31% in the first nine monthsquarter of 2019 were 41% of residential mortgages originated during the period compared with 1% in the first nine months of 2018.2019. Management decides to keep or sell residential mortgage loans at the time of origination based on interest rate risk management and the risk-adjusted return of alternative investment sources such as mortgage-backed securities.
The Company has also focused on growth opportunities in commercial and industrial (“C&I”) lending as a way to diversify its overall loan portfolio. The C&I portfolio was $262$256 million at September 30, 2019,March 31, 2020, representing a $6$5 million or 2% decrease from $268 million at June 30, 2019 but a $36 million or 16% increase from $226$251 million at December 31, 2018.2019, and $14 million or 6% higher than the $242 million balance at March 31, 2019. The increase in C&I balances during the first nine months of 2019quarter equates to a 21%an 8% annualized growth rate. C&I lending is a critical component of the Company’s strategy as C&I relationships can often include core deposits.
Credit Quality of Loan Portfolio
Total non-performingNon-performing loans, defined as accruing loans greater than 90 days past due and nonaccrual loans, totaled $14$17 million, or 1.13%1.34% of total loans outstanding at September 30, 2019,March 31, 2020, compared with $11$14 million, or 0.91% of total loans outstanding, as of June 30, 2019 and $19 million, or 1.64%1.17% of total loans outstanding, as of December 31, 2018.2019 and $20 million, or 1.69% of total loans outstanding, as of March 31, 2019. The increase in non-performing loans compared within the secondfirst quarter of 2019 reflects $2.3 million related to a single2020 reflected higher C&I relationship that was changed toand commercial real estate nonaccrual status during the third quarter of 2019. The decrease in non-performing loans compared with December 31, 2018 is due to a payoff of a single commercial construction loan of $8 million that was in nonaccrual status. loans.
Commercial credits graded as “special mention” and “substandard,” or the criticized loan portfolio, were $54$56 million at September 30, 2019,March 31, 2020, a $11$5 million increase from $43 million at June 30, 2019 and $16 million increase from $38$51 million at December 31, 2018.2019 and an $8 million increase from $48 million at March 31, 2019. The increase in criticized loans in the thirdfirst quarter of 2019 includes $82020 primarily reflected a $5 million in commercial real estate loans and $3 million in C&I loansloan that werewas downgraded to criticizedspecial mention status during the quarter. In comparison to December 31, 2018, the increase includes $20 million in commercial real estate loans and $9 million in C&I loans that were downgraded to criticized in the first nine months of 2019, offset by paydowns of $13 million including the paydown of a single commercial construction loan of $8 million. The level of criticized loans can fluctuate as new information is constantly received on the Company’s borrowers and their financial circumstances change over time. As noted in Note 4 to the Company’s Unaudited Financial Statements included in Part I of this Quarterly Report on Form 10-Q, internal risk ratings are the credit quality indicators used by the Company’s management to determine the appropriate allowance for loan losses for commercial credits. “Special mention” and “substandard” loans are weaker credits with a higher risk of loss and are categorized as “criticized” credits rather than “pass” or “watch” credits.
The Company maintains an allowance for loan losses that in management’s judgment appropriately reflects losses inherent in the loan portfolio. The allowance for loan losses totaled $15.4$18.2 million at September 30, 2019, $15.2 million at June 30, 2019, and $14.8 million at December 31, 2018. At the end of September 30, 2019 and June 30, 2019 the allowance for loan losses was 1.26%or 1.46% of total loans outstanding at March 31, 2020, compared with 1.28%$15.2 million or 1.24% of total loans outstanding as of December 31, 2018.2019 and $15.2 million or 1.28% at March 31, 2019. The Company released $0.4 million in allowance for loan losses in the third quarter of 2019, compared to $0.1recorded $3.0 million in provision for loan losses in the secondfirst quarter of 2019, and $0.32020, compared with $0.1 million provision for loan loss in last year’s third quarter. The release of allowance for loan losses induring the thirdfourth quarter of 2019 reflectsand $0.5 million provision for loan losses in last year’s first quarter. The $3.0 million provision for loan losses for the first quarter of 2020 includes a decrease$2.2 million reserve build in net loan charge-offsresponse to economic trends and conditions which have been significantly impacted by the COVID-19 pandemic. The remaining provision was due to a single commercial loan recovery of $0.7 million, partially offset by an increase in non-performing loans.specific reserve levels on impaired loans and strong loan growth. The $0.1 million release of allowance for loan losses for the fourth quarter of 2019 was due to improved asset quality on impaired loans and marginal loan growth in that quarter.
4035
Investing Activities
Total investment securities were $137$162 million at September 30, 2019 and June 30, 2019March 31, 2020, compared with $134$130 million at December 31, 2018.2019 and $141 million at March 31, 2019. Interest-bearing deposits at other banks, which consist of overnight funds kept at correspondent banks and the Federal Reserve, decreased to $15were $41 million at September 30, 2019 from $46 million at June 30, 2019 and $26March 31, 2020 compared to $28 million at December 31, 2018.2019, and $56 million at March 31, 2019. The primary objectives of the Company’s investment portfolio are to provide liquidity, provide collateral to secure municipal deposits, and maximize income while preserving safety of principal. With the flattened yield curve there is a reduced advantage to purchasing longer-term investment securities. Average investment securities and interest-bearing cash were 12%14% of average interest-earning assets in the thirdfirst quarter of 2020, compared with 12% in the fourth quarter of 2019 and 2018, compared with 13%14% in the second quarter of 2019.last year’s first quarter.
The Company’s highest concentration in its securities portfolio was in available-for-saleavailable for sale U.S. government sponsored mortgage-backed securities at 75%, 74% and 56% of total investment securities at September 30, 2019 compared with 70% at June 30,March 31, 2020, December 31, 2019 and 57% at DecemberMarch 31, 2018.2019, respectively. The concentration in tax-advantaged debt securities issued by state and political subdivisions was 4%, 4% and U.S. government-sponsored agency bonds was 5% and 21%, respectively,16% of the total securities portfolio at September 30, 2019, compared with 4% and 26% at June 30,March 31, 2020, December 31, 2019, and 18%March 31, 2019, respectively. The concentration in U.S. government-sponsored agency bonds was 22%, 22% and 25%28% of the total securities portfolio at March 31, 2020, December 31, 2018.2019, and March 31, 2019, respectively.
The total net unrealized gain position of the available-for-sale investment portfolio was $1.3 million and $0.6$3.2 million at September 30,March 31, 2020, compared with $0.7 million at December 31, 2019 and June 30, 2019, respectively, compared with a net unrealized loss position of $3.2$1.4 million at DecemberMarch 31, 2018. The changes in unrealized gains and losses during 2019 resulted primarily from a rebalancing of the investment portfolio.2019. The securities in an unrealized lossgain position at the end of the thirdfirst quarter of 20192020 reflect differencesa decrease in market interest rates rather than a reduction in credit concerns. Management believes that the credit quality of the securities portfolio as a whole is strong.
The Company monitors extension and prepayment risk in the securities portfolio to limit potential exposures. The Company has no direct exposure to subprime mortgages, nor does the Company hold private mortgage-backed securities, credit default swaps, or FNMA or FHLMC preferred stock investments in its investment portfolio.
Funding Activities
Total deposits at March 31, 2020 were $1.26$1.33 billion, at September 30, 2019 compared with $1.28 billion at June 30, 2019. Total deposits increased $44a $60 million or 4%5% increase from $1.22$1.27 billion at December 31, 2018.2019 and a $52 million or 4% increase from $1.28 billion at March 31, 2019. The increase duringgrowth in the first ninethree months of 20192020 reflects growth in municipal savings of $21 million or 16%, NOW deposits of $19 million or 13%, and $8 million or 2% of consumer savings deposits. Commercial savings and demand deposits of $40both grew by $10 million NOW deposits (interest-bearing checking accounts) of $31 million,each or 8% and 4%, respectively. The increases were offset by a $24 million decrease in time deposits of $7 million or 3%. The year-over-year increase was primarily due to NOW deposit growth of $37 million, or 30%, and demand deposit growth of $31 million or 13%. Savings deposits increased $7 million, which reflected $15 million in additional consumer deposits, partially offset by a $3decrease of $8 million decrease in savings deposits.municipal balances. Time deposits decreased $24 million, or 8%, of which $15 million were brokered. Further discussion of deposit growth and changes in deposit mix are in the “Analysis of Results of Operations.” Due to the transactional nature of demand deposits, average balances are a useful metric to meaningfully measure sustained growth rates. Average demand deposits were $282 million in the first quarter of 2020, a 3% increase from $273 million in the fourth quarter of 2019, and 16% higher than the $242 million average balance in the first quarter of 2019. Of the Company’s $40 million in average demand deposit growth over the prior year’s first quarter, $23 million was in commercial accounts.
The Company had $10 million in other borrowings at September 30, 2019March 31, 2020 and December 31, 2018.2019. This represents a single $10 million long-term advance with the FHLBNYFederal Home Loan Bank of New York (“FHLBNY”) scheduled to mature in the second quarter of 2020. The Company’s use of its overnight line of credit with FHLBNY varies depending on its ability to fund investment and loan growth with deposits along with the line usage’s impact on interest rate risk. There were no overnight borrowings at September 30, 2019.March 31, 2020.
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ANALYSIS OF RESULTS OF OPERATIONS
Average Balance Sheet
The following tables present the significant categories of the assets and liabilities of the Company, interest income and interest expense, and the corresponding yields earned and rates paid for the periods indicated. The assets and liabilities are presented as daily averages. The average loan balances include both performing and non-performing loans. Investments are included at book value. Yields are presented on a non-tax-equivalent basis.
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| Three months ended September 30, 2019 |
| Three months ended September 30, 2018 |
| Three months ended March 31, 2020 |
| Three months ended March 31, 2019 | ||||||||||||||||||||||||||||
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| Interest |
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ASSETS |
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Interest-earning assets: |
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Loans, net |
| $ | 1,202,634 |
| $ | 15,645 |
| 5.16 | % |
| $ | 1,127,173 |
| $ | 13,676 |
| 4.81 | % |
| $ | 1,219,230 |
| $ | 14,546 |
| 4.80 | % |
| $ | 1,153,067 |
| $ | 14,362 |
| 5.05 | % |
Taxable securities |
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| 140,006 |
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| 993 |
| 2.81 | % |
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| 120,004 |
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| 805 |
| 2.66 | % |
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| 129,966 |
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| 1,049 |
| 3.25 | % |
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| 120,099 |
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| 801 |
| 2.70 | % |
Tax-exempt securities |
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| 3,725 |
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| 48 |
| 5.11 | % |
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| 25,118 |
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| 146 |
| 2.31 | % |
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| 6,063 |
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| 47 |
| 3.12 | % |
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| 21,150 |
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| 130 |
| 2.49 | % |
Interest bearing deposits at banks |
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| 24,661 |
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| 159 |
| 2.56 | % |
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| 12,641 |
|
| 63 |
| 1.98 | % |
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| 57,319 |
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| 181 |
| 1.27 | % |
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| 44,024 |
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| 249 |
| 2.29 | % |
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Total interest-earning assets |
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| 1,371,026 |
| $ | 16,845 |
| 4.87 | % |
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| 1,284,936 |
| $ | 14,690 |
| 4.54 | % |
|
| 1,412,578 |
| $ | 15,823 |
| 4.51 | % |
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| 1,338,340 |
| $ | 15,542 |
| 4.71 | % |
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|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
| 14,522 |
|
|
|
|
|
|
|
| 14,095 |
|
|
|
|
|
|
|
| 14,424 |
|
|
|
|
|
|
|
| 13,515 |
|
|
|
|
|
|
Premises and equipment, net |
|
| 12,850 |
|
|
|
|
|
|
|
| 10,428 |
|
|
|
|
|
|
|
| 13,807 |
|
|
|
|
|
|
|
| 10,501 |
|
|
|
|
|
|
Other assets |
|
| 62,141 |
|
|
|
|
|
|
|
| 62,879 |
|
|
|
|
|
|
|
| 61,573 |
|
|
|
|
|
|
|
| 62,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
| $ | 1,460,539 |
|
|
|
|
|
|
| $ | 1,372,338 |
|
|
|
|
|
|
| $ | 1,502,382 |
|
|
|
|
|
|
| $ | 1,424,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' EQUITY | LIABILITIES & STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES & STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW |
| $ | 134,008 |
| $ | 151 |
| 0.45 | % |
| $ | 115,417 |
| $ | 79 |
| 0.27 | % |
| $ | 144,564 |
| $ | 181 |
| 0.50 | % |
| $ | 112,571 |
| $ | 82 |
| 0.30 | % |
Savings |
|
| 591,585 |
|
| 1,346 |
| 0.90 | % |
|
| 581,484 |
|
| 1,023 |
| 0.70 | % |
|
| 605,103 |
|
| 1,316 |
| 0.87 | % |
|
| 591,641 |
|
| 1,174 |
| 0.80 | % |
Time deposits |
|
| 281,798 |
|
| 1,541 |
| 2.17 | % |
|
| 274,275 |
|
| 1,310 |
| 1.89 | % |
|
| 274,576 |
|
| 1,379 |
| 2.02 | % |
|
| 298,586 |
|
| 1,587 |
| 2.16 | % |
Other borrowed funds |
|
| 10,000 |
|
| 43 |
| 1.71 | % |
|
| 11,035 |
|
| 50 |
| 1.80 | % |
|
| 10,000 |
|
| 45 |
| 1.81 | % |
|
| 10,000 |
|
| 43 |
| 1.74 | % |
Junior subordinated debentures |
|
| 11,317 |
|
| 141 |
| 4.94 | % |
|
| 11,330 |
|
| 141 |
| 4.94 | % |
|
| 11,330 |
|
| 124 |
| 4.40 | % |
|
| 11,330 |
|
| 146 |
| 5.23 | % |
Securities sold U/A to repurchase |
|
| 3,917 |
|
| 2 |
| 0.20 | % |
|
| 3,384 |
|
| 1 |
| 0.12 | % |
|
| 3,378 |
|
| 2 |
| 0.24 | % |
|
| 4,416 |
|
| 2 |
| 0.18 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
| 1,032,625 |
| $ | 3,224 |
| 1.24 | % |
|
| 996,925 |
| $ | 2,604 |
| 1.04 | % |
|
| 1,048,951 |
| $ | 3,047 |
| 1.17 | % |
|
| 1,028,544 |
| $ | 3,034 |
| 1.20 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
| 261,089 |
|
|
|
|
|
|
|
| 233,393 |
|
|
|
|
|
|
|
| 281,624 |
|
|
|
|
|
|
|
| 242,030 |
|
|
|
|
|
|
Other |
|
| 22,231 |
|
|
|
|
|
|
|
| 17,045 |
|
|
|
|
|
|
|
| 22,127 |
|
|
|
|
|
|
|
| 21,219 |
|
|
|
|
|
|
Total liabilities |
| $ | 1,315,945 |
|
|
|
|
|
|
| $ | 1,247,363 |
|
|
|
|
|
|
| $ | 1,352,702 |
|
|
|
|
|
|
| $ | 1,291,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
| 144,594 |
|
|
|
|
|
|
|
| 124,975 |
|
|
|
|
|
|
|
| 149,680 |
|
|
|
|
|
|
|
| 132,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
| $ | 1,460,539 |
|
|
|
|
|
|
| $ | 1,372,338 |
|
|
|
|
|
|
| $ | 1,502,382 |
|
|
|
|
|
|
| $ | 1,424,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
| $ | 13,621 |
|
|
|
|
|
|
| $ | 12,086 |
|
|
|
|
|
|
| $ | 12,776 |
|
|
|
|
|
|
| $ | 12,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
|
|
|
|
| 3.94 | % |
|
|
|
|
|
|
| 3.73 | % |
|
|
|
|
|
|
| 3.64 | % |
|
|
|
|
|
|
| 3.79 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread |
|
|
|
|
|
|
| 3.63 | % |
|
|
|
|
|
|
| 3.50 | % |
|
|
|
|
|
|
| 3.34 | % |
|
|
|
|
|
|
| 3.51 | % |
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| Nine months ended September 30, 2019 |
| Nine months ended September 30, 2018 | ||||||||||||||
|
| Average |
| Interest |
|
|
|
| Average |
| Interest |
|
|
| ||||
|
| Outstanding |
| Earned/ |
| Yield/ |
| Outstanding |
| Earned/ |
| Yield/ | ||||||
|
| Balance |
| Paid |
| Rate |
| Balance |
| Paid |
| Rate | ||||||
|
| (dollars in thousands) |
| (dollars in thousands) | ||||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net |
| $ | 1,179,875 |
| $ | 45,149 |
| 5.12 | % |
| $ | 1,097,814 |
| $ | 39,238 |
| 4.78 | % |
Taxable securities |
|
| 132,264 |
|
| 2,736 |
| 2.77 | % |
|
| 124,487 |
|
| 2,465 |
| 2.65 | % |
Tax-exempt securities |
|
| 12,227 |
|
| 263 |
| 2.88 | % |
|
| 29,106 |
|
| 512 |
| 2.35 | % |
Interest bearing deposits at banks |
|
| 32,202 |
|
| 564 |
| 2.34 | % |
|
| 6,582 |
|
| 88 |
| 1.79 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
| 1,356,568 |
| $ | 48,712 |
| 4.80 | % |
|
| 1,257,989 |
| $ | 42,303 |
| 4.50 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
| 13,845 |
|
|
|
|
|
|
|
| 13,902 |
|
|
|
|
|
|
Premises and equipment, net |
|
| 11,318 |
|
|
|
|
|
|
|
| 10,469 |
|
|
|
|
|
|
Other assets |
|
| 62,054 |
|
|
|
|
|
|
|
| 58,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
| $ | 1,443,785 |
|
|
|
|
|
|
| $ | 1,341,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW |
| $ | 123,443 |
| $ | 345 |
| 0.37 | % |
| $ | 116,736 |
| $ | 233 |
| 0.27 | % |
Regular savings |
|
| 596,250 |
|
| 3,835 |
| 0.86 | % |
|
| 570,182 |
|
| 2,617 |
| 0.61 | % |
Time deposits |
|
| 289,998 |
|
| 4,703 |
| 2.17 | % |
|
| 227,929 |
|
| 2,819 |
| 1.65 | % |
Other borrowed funds |
|
| 10,014 |
|
| 130 |
| 1.74 | % |
|
| 38,052 |
|
| 499 |
| 1.75 | % |
Junior subordinated debentures |
|
| 11,326 |
|
| 431 |
| 5.09 | % |
|
| 11,330 |
|
| 391 |
| 4.61 | % |
Securities sold U/A to repurchase |
|
| 3,729 |
|
| 5 |
| 0.18 | % |
|
| 6,892 |
|
| 10 |
| 0.19 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
| 1,034,760 |
| $ | 9,449 |
| 1.22 | % |
|
| 971,121 |
| $ | 6,569 |
| 0.90 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
| 249,157 |
|
|
|
|
|
|
|
| 232,082 |
|
|
|
|
|
|
Other |
|
| 21,356 |
|
|
|
|
|
|
|
| 15,634 |
|
|
|
|
|
|
Total liabilities |
| $ | 1,305,273 |
|
|
|
|
|
|
| $ | 1,218,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
| 138,512 |
|
|
|
|
|
|
|
| 122,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
| $ | 1,443,785 |
|
|
|
|
|
|
| $ | 1,341,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
| $ | 39,263 |
|
|
|
|
|
|
| $ | 35,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
|
|
|
|
| 3.87 | % |
|
|
|
|
|
|
| 3.80 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread |
|
|
|
|
|
|
| 3.58 | % |
|
|
|
|
|
|
| 3.60 | % |
4337
Net Income
Net income was $5.2$0.2 million, or $1.04$0.04 per diluted share, in the thirdfirst quarter of 2019,2020, compared with $4.4$3.7 million, or $0.88$0.75 per diluted share, in both the secondfourth and first quarters of 2019. The Company’s first quarter 2020 results included a $3.0 million provision for loan loss compared with a release of $0.1 million form the allowance for loan losses in the fourth quarter of 2019 and $4.8a provision of $0.5 million or $0.97 per diluted share, in last year’s third quarter. The increase over comparative periods reflectsthe first quarter of 2019. Economic trends and conditions reflecting the impact of COVID-19 at the end of the first quarter resulted in higher net interestestimates of expected credit losses in the Company’s loan portfolio compared with prior quarter estimates. While the full impact of COVID-19 on future financial results is uncertain and not currently predictable, the Company believes that impact could have a material effect on customers’ ability to meet their borrowing obligations. Also impacting the current quarter was lower non-interest income due to loan growtha historic rehabilitation tax credit transaction and a decrease in loan loss provision, partially offset by an increase inhigher non-interest expense.expense due to salaries and benefit expenses and merger costs related to the FSB acquisition. Return on average equity was 14.29%0.55% for the thirdfirst quarter of 2019,2020, compared with 12.71%10.16% in the secondfourth quarter of 2019 and 15.35%11.19% in the thirdfirst quarter of 2018.2019.
Other Results of Operations – Quarterly Comparison
Net interest income increased $0.5 million, or 4%,remained relatively flat from the secondfourth quarter of 2019, and $1.5but increased $0.3 million, or 13%2%, from the prior-year third quarter to $13.6 million in the third quarter of 2019.first quarter. The increases wereyear-over-year increase was driven by average interest-earning asset growth, particularly in the commercial loan portfolio, partially offset by an increase in interest expense.portfolio. Average commercial loans, including commercial real estate and commercial and industrial loans, were $983 million,$1.0 billion, up $18$72 million from the 2019 second quarter and $65 million from the 2018 thirdfirst quarter. The third quarter of 2019 also included $0.2 million of interest related to the recovery of a single commercial loan that was charged-off in a previous period.
ThirdFirst quarter net interest margin of 3.94%. When excluding the interest related to the recovery, net interest margin was 3.89%, an increase of 23.64% declined 3 basis points from the 2019 secondfourth quarter and 1615 basis points from the thirdfirst quarter of 2018. The modest increase from the linked quarter resulted from changes in the mix of interest earning assets reflecting the utilization of cash to achieve loan growth, while the change from the prior year reflects increased yields on loans, offset by higher funding costs, reflecting higher interest rates and competitive deposit market pricing. Excluding the interest related2019 largely due to the recovery,Federal Reserve’s decrease of the fed funds rate during the first quarter of 2020. The lower yield on loans increased 30 basis points when compared with the thirdfourth quarter of 2018.2019 and the first quarter of 2019 reflects a decrease of 12 and 25 basis points, respectively. The cost of interest-bearing liabilities was 1.17% in the first quarter of 2020, compared with 1.24% in the third quarter of 2019, compared with 1.23% in the secondfourth quarter of 2019 and 1.04%1.20% in the third quarter of 2018.
The Company released $0.4 million of allowance for loan losses in the thirdfirst quarter of 2019. Provision for loan lossesThe average cost of time deposits was $0.1 million2.02% in the secondfirst quarter of 2020, compared with 2.09% in the fourth quarter of 2019 and $0.32.16% in the first quarter of 2019. Average time deposits comprised 21% of average total deposits during the first quarter of 2020, compared with 22% in the fourth quarter of 2019, and 24% in and the first quarter of 2019. The Company has brokered time deposits as part of its funding strategy. Average brokered time deposits were $27 million during the first quarter of 2020 and $28 million in the thirdfourth quarter of 2018. 2019, and $41 million in the first quarter of 2019.
The $3.0 million provision for loan losses for the first quarter of 2020 includes a $2.2 million reserve build in response to economic trends and conditions which have been significantly impacted by the COVID-19 pandemic. The remaining provision was due to an increase in specific reserve levels on impaired loans and strong loan growth. The $0.1 million release of allowance for loan losses duringfor the thirdfourth quarter of 2019 reflects a decrease in net loan charge-offswas due to the single commercialimproved asset quality on impaired loans and marginal loan recovery of $0.7 million, partially offset by an increasegrowth in non-performing loans.that quarter.
Non-interest income was $5.2$3.3 million in the thirdfirst quarter of 2019,2020, compared with $4.7$4.0 million in the secondfourth quarter of 2019 and $4.8$4.2 million in the prior year thirdfirst quarter. The first quarter of 2020 included a $0.6 million net reduction of non-interest income related to an investment in an historic rehabilitation tax credit. There were no significant historic tax credit transactions in the fourth and first quarters of 2019.
The Company is actively engaged in the community by financing historic rehabilitation projects in the City of Buffalo and enhances its yield by investing in the related tax credits. When a project is completed, the Company begins to recognize tax benefits with an associated reduction in the investment. In the first quarter of 2020, the reduction to net income related to the historic rehabilitation tax credit was $0.4 million as a $1.9 million refundable New York State tax credit was recorded in non-interest income and a corresponding $0.2 million tax benefit was realized in income tax expense, offset by a $2.5 million write-off on the investment. The write-off was contemplated when management priced the initial investment in the tax credit project. This transaction reduces our annual effective tax rate from 25.4% to 16.7%, providing additional tax benefits throughout 2020.
Insurance revenue of $2.4 million increased $0.3 million from the fourth quarter of 2019 and remained relatively flat from last year’s first quarter. The increase in non-interest income compared withinsurance service and fee revenue from the prior quarter is primarily due to seasonally higher insurance revenue. Other income in the thirdfourth quarter of 2019 includes $0.2 million of insurance proceeds related to legalreflects seasonally higher policy renewals for institutional clients, including businesses and professional fees incurred to respond to a data security incident and related matters.municipalities.
Non-interest expenses of $12.3$12.9 million in the thirdfirst quarter of 2020 increased 6% from the fourth quarter of 2019 increased 7%and 15% from the prior-year periodperiod. Salaries and 1%benefits costs were $7.8 million in the first quarter of 2020, an increase of 6% from the secondfourth quarter of 2019.2019 and 9% from last year’s first quarter. The most significant componentincrease from the fourth quarter of the increase was2019 included seasonally higher salariesemployee benefits expenses. Salaries and employee benefit costs as a result of severance andbenefits expense incudes the addition of strategic personnel hires to support the Company’s continued growth. Salaries and employee benefits costs were $7.6 million in the third quarter of 2019, an increase of 8% from last year’s third quarter.
Professional services fees was relatively flat compared to the second quarter of 2019, but was $0.4 million higher than last year’s third quarter. The increase in professional service fees includes $0.2 million related to legal and professional fees incurred to respond to a data security incident and related matters, plus incremental project costs designed to enhance technology and continue to be prepared to respond to future threats which impact the banking industry at large. The increase from the prior year period also includes $0.1 million of broker commissions related to our employee benefits insurance business, and generally higher legal and accounting expenses.
Technology and communications expenses were $1.1 million in the thirdfirst quarter of 2020 and secondthe fourth quarter of 2019, an increase of $0.2 million from the last year’s thirdfirst quarter. The increase in technology and communications wasTechnology expenses increased from the prior year period due to higher software costs and volume related ATM card fees and online banking activity.
The third quarter of 2019 FDIC insurance expense was offset by the application of the FDIC’s small bank assessment credit.
The Company’s efficiency ratio improved to 64.8% compared with 67.5% in the second quarter of 2019activity and 66.9% in last year’s third quarter.
Income tax expense was $1.8 million, or an effective tax rate of 25.6%, for the third quarter of 2019 compared with 22.1% in the second quarter of 2019 and 6.7% in the third quarter of 2018. Last year’s third quarter income taxes were reduced by $0.7 million due to a change in estimate of when certain state historic tax credits will be taxable for federal purposes. Historic tax credit transactions lowered the effective tax rate by 13.8% in the third quarter of 2018.software costs.
4438
Other Results of Operations – Year-to-Date Comparison
Net interest incomeProfessional services expense was $39.3$1.4 million forin the first nine monthsquarter of 2020, compared with $1.1 million in the fourth quarter of 2019 a $3.5and $0.7 million or 10% increase fromin last year’s first quarter. The first quarter of 2020 professional service fees included $0.5 million in merger-related costs associated with the first nine monthsacquisition of 2018.Fairport Savings Bank. The increase in net interest income is attributableremaining variance to a $99 million or 8% increase in average interest-earning assets and $0.2 millionthe prior-year period was the result of interestexpenses related to the recovery of a single commercial loan that was previously written-off. The increase in average interest-earning assets reflects average loan growth of $82 million or 7% to $1.2 billion during the first nine months of 2019 compared to the first nine months of 2018. Most of the growth was in commercial loans, including $46 million in average commercial real estate loans and $15 million in average C&I loans. Additionally, average interest-bearing deposits at banks increased $26 million during the first nine months of 2019 compared to the first nine months of 2018.consulting services associated with business intelligence data systems.
The Company’s net interest margin of 3.87% in the first nine months of 2019 was 7 basis points higher than the first nine months of 2018. The yield on average interest-earning assets increased 30 basis points from 4.50% to 4.80%. Average loan yields increased 34 basis points from 4.78% to 5.12%, reflecting the benefit of variable loan re-pricing as short-term interest rates rise. The cost of interest-bearing liabilities was 1.22%, or 32 basis points higher in the first nine months of 2019 when compared with the first nine months of 2018. In reaction to the competitive deposit market the Company has increased promotional pricing on certain deposit products, primarily time deposits. The rate paid on average time deposits increased from 1.65% in the first nine months of 2018 to 2.17% during the first nine months of 2019. The higher overall cost of interest-bearing liabilities also reflects a shift in the Company’s funding mix as the average balance of higher cost time deposits increased. Average time deposits were 28% of total interest-bearing liabilities in the nine-month period ended September 30, 2019, compared with 23% in the first nine months of 2018.
The Company recorded $0.2 million in provision for loan losses in the first nine months period ended September 30, 2019, compared with $1.7 million in the nine-month period ended September 30, 2018. The decrease in provision for loan losses during the first nine months of 2019 compared with the prior year period reflects a decrease in non-performing loans during the current year period, primarily due to the paydown of a single commercial construction loan of $8 million, and a decrease in net loan charge-offs due to the single commercial loan recovery of $0.7 million.
Non-interest income for the first nine months of 2019 increased $1.9 million from the prior year period to $14.1 million. The increase was a result of higher insurance service and fees revenue of $1.4 million resulting from the 2018 acquisition of Richardson and Stout, Inc., and higher deposit service charges of $0.2 million.
Total non-interest expense increased to $35.6 million in the first nine months of 2019, 12% higher than the nine-month period ended September 30, 2018. The increase was mostly attributable to an increase in salaries and employee benefits costs. Salaries and employee benefits costs were $22.3 million for the first nine months of 2019, a $2.1 million or 10% increase from $20.2 million in the prior year period. The year-over-year increase in salary and benefits expense reflects severance and strategic personnel hires to support the Company’s growth. Professional services expenses increased $0.8 million to $2.7 million, primarily due to $0.2 million related to legal and professional fees incurred to respond to a data security incident and related matters, $0.2 million of broker commissions related to our employee benefits insurance business and generally higher legal and accounting expenses. Technology and communications expenses increased $0.6 million to $3.0 million, reflecting higher software costs and volume relating to ATM card fees and online banking activity. FDIC insurance was $0.4 million lower in the first nine months of 2019 when compared to the first nine months of 2018 as a result of lower non-performing assets and the FDIC’s small bank assessment credit.
The Company’sGAAP efficiency ratio, for the first nine months of 2019 was 66.2%, compared with 66.0% during the prior-year period. The slight increase in the ratio reflects the increase in non-interestor noninterest expenses partially offsetdivided by the increase insum of net interest income and non-interest income.
The Company recordednoninterest income, tax expense of $4.2 million for the nine-month period ended September 30, 2019, compared with $2.5 millionwas 79.9% in the first nine monthsquarter of 2018. The2020, 72.5% in the fourth quarter of 2019, and 67.2% in the first quarter of 2019.
Income tax expense was less than $0.1 million, or an effective tax rate of 16.7%, for the first nine monthsquarter of 2020 compared with $1.0 million, or an effective tax rate of 20.9% in the fourth quarter of 2019 was 24.2%and $1.2 million, or an effective tax rate of 24.7%, compared with 17.2% in last year’s first quarter. Excluding the comparable 2018 period. The impact of the historic tax credits oncredit transaction, the first quarter 2020 effective tax rate for the first nine months of 2018 was 5.0%25.4%. Income taxes for the first nine months of 2018 were reduced by $0.7 million due to a change in estimate of when certain state historic tax credits will be taxable for federal purposes.
45
CAPITAL
The Company consistently maintains regulatory capital ratios significantly above the federal “well capitalized” standard, including a Tier 1 leverage ratio of 10.11%9.92% at September 30, 2019,March 31, 2020, compared with 9.99% at June 30, 2019 and 9.73%10.33% at December 31, 2018.2019 and 9.74% at March 31, 2019. Book value per share increased to $29.44was $29.96 at September 30, 2019,March 31, 2020, compared with $28.74 at June 30, 2019, and $27.13$30.11 at December 31, 2018.2019, and $27.66 at March 31, 2019.
On August 22, 2019,February 18, 2020, the Company declared a semi-annual cash dividend of $0.52$0.58 per share on the Company’s outstanding common stock. The dividend was paid on OctoberApril 2, 20192020 to shareholders of record as of September 11,March 12, 2020. This semi-annual dividend represents a $0.06, or 12% increase from its previous semi-annual dividend paid in October 2019. For the full year of 2019, cash dividends totaled $1.04, up 13% over 2018.
LIQUIDITY
The Bank utilizes cash flows from the investment portfolio and federal funds sold balances to manage the liquidity requirements related to loan demand and deposit fluctuations. The Bank also has many borrowing options. The Company uses the Federal Home Loan Bank of New YorkFHLBNY as its primary source of overnight funds and also has one long-term advance with FHLBNY. The Company had $10 million in borrowed funds at FHLBNY at September 30, 2019March 31, 2020 and December 31, 2018.2019. The Company’s use of its overnight line of credit with FHLBNY varies depending on its ability to fund investment and loan growth with core deposits along with the line usage’s impact on interest rate risk. The Company’s funding strategy has resulted in significant time deposit growth, resulting in less usage of the FHLBNY overnight line of credit. The Company has pledged sufficient collateral in the form of residential and commercial real estate loans at FHLBNY that meets FHLB collateral requirements. As a member of the FHLB, the Bank is able to borrow funds at competitive rates. Advances of up to $280$316 million can be drawn on the FHLB via an Overnight Line of Credit Agreement between the Bank and the FHLB. The Bank also has the ability to purchase up to $18 million in federal funds from its correspondent banks. By placing sufficient collateral in safekeeping at the Federal Reserve Bank, the Bank could borrow at the discount window. The Bank’s liquidity needs also can be met by more aggressively pursuing time deposits, or accessing the brokered time deposit market, including the Certificate of Deposit Account Registry Service (“CDARS”) network.
Cash flows from the Bank’s investment portfolio are laddered, so that securities mature at regular intervals, to provide funds from principal and interest payments at various times as liquidity needs may arise. Contractual maturities are also laddered, with consideration as to the volatility of market prices. At September 30, 2019,March 31, 2020, approximately 4%5% of the Bank’s securities had contractual maturity dates of one year or less and approximately 9%8% had maturity dates of five years or less. Additionally, mortgage-backed securities, which comprise 74%75% of the investment portfolio at September 30, 2019,March 31, 2020, provide consistent cash flows for the Bank.
The Company’s primary source of liquidity is dividends from the Bank. Additionally, the Company has access to capital markets as a funding source.
Management, on an ongoing basis, closely monitors the Company’s liquidity position for compliance with internal policies and believes that available sources of liquidity are adequate to meet funding needs in the normal course of business. As part of that monitoring process, management calculates the 90-day liquidity each month by analyzing the cash needs of the Bank. Included in the calculation are liquid assets and potential liabilities. Management stresses the potential liabilities calculation to ensure a strong liquidity position. Included in the calculation are assumptions of some significant deposit run-off as well as funds needed for loan closings and investment purchases. In the Company’s internal stress test at September 30, 2019,March 31, 2020, the Company had net short-term liquidity of $202$256 million as compared with $249$209 million at December 31, 2018.2019. Available assets of $154$207 million, divided by public and purchased funds of $292$303 million, resulted in a long-term liquidity ratio of 53%68% at September 30, 2019,March 31, 2020, compared with 63%59% at December 31, 2018.2019.
Management does not anticipate engaging in any activities, either currently or in the long term, for which adequate funding would not be available and which would therefore result in significant pressure on liquidity.
39
The Company believes that the Bank maintains a sufficient level of U.S. government and government agency securities and New York State municipal bonds that can be pledged as collateral for municipal deposits.
46
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Additional information responsive to this Item is contained in the Liquidity section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, which information is incorporated herein by reference.
Market risk is the risk of loss from adverse changes in market prices and/or interest rates of the Bank’s financial instruments. The primary market risk that the Company is exposed to is interest rate risk. The core banking activities of lending and deposit-taking expose the Bank to interest rate risk, which occurs when assets and liabilities reprice at different times and by different amounts as interest rates change. As a result, net interest income earned by the Bank is subject to the effects of changing interest rates. The Bank measures interest rate risk by calculating the variability of net interest income in future periods under various interest rate scenarios using projected balances for interest-earning assets and interest-bearing liabilities. Management’s philosophy toward interest rate risk management is to limit the variability of net interest income to changes in net interest rates. The balances of financial instruments used in the projections are based on expected growth from forecasted business opportunities, anticipated prepayments of loans, and expected maturities of investment securities, loans, and deposits. Management supplements the modeling technique described above with analysis of market values of the Bank’s financial instruments and changes to such market values given changes in the interest rates.
The Bank’s Asset-Liability Committee, which includes members of senior management, monitors the Bank’s interest rate sensitivity with the aid of a model that considers the impact of ongoing lending and deposit taking activities, as well as interrelationships in the magnitude and timing of the repricing of financial instruments, including the effect of changing interest rates on expected prepayments and maturities. When deemed prudent, management has taken actions, and intends to do so in the future, to mitigate exposure to interest rate risk through the use of on- or off-balance sheet financial instruments. Possible actions include, but are not limited to, changing the pricing of loan and deposit products, and modifying the composition of interest-earning assets and interest-bearing liabilities, and reliance on other financial instruments used for interest rate risk management purposes.
4740
The following table demonstrates the possible impact of changes in interest rates on the Bank’s net interest income over a 12-month period of time:
SENSITIVITY OF NET INTEREST INCOME TO CHANGES IN INTEREST RATES
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| Calculated increase (decrease) |
| Calculated increase (decrease) | ||||||||
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| in projected annual net interest income |
| in projected annual net interest income | ||||||||
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| (in thousands) |
| (in thousands) | ||||||||
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| September 30, 2019 |
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| December 31, 2018 |
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| March 31, 2020 |
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| December 31, 2019 |
Changes in interest rates |
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+200 basis points |
| $ | (51) |
| $ | 1,598 |
| $ | (1,932) |
| $ | (32) |
+100 basis points |
|
| 2,153 |
|
| 2,825 |
|
| 1,291 |
|
| 2,327 |
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-100 basis points |
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| (2,292) |
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| (3,026) |
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| NM |
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| (2,455) |
-200 basis points |
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| NM |
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| NM |
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| NM |
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| NM |
Many assumptions were utilized by management to calculate the impact that changes in interest rates may have on the Bank’s net interest income. The more significant assumptions related to the rate of prepayments of mortgage-related assets, loan and deposit volumes and pricing, and deposit maturities. The Bank assumed immediate changes in rates including 200 basis point rate changes. In the 200 basis point rate reduction scenario, the applicable rate changes may be limited to lesser amounts such that interest rates are not less than zero. The assumptions in the Company’s projections are inherently uncertain and, as a result, the Bank cannot precisely predict the impact of changes in interest rates on net interest income. Actual results may differ significantly due to the timing, magnitude, and frequency of interest rate changes in market conditions and interest rate differentials (spreads) between maturity/repricing categories, as well as any actions such as those previously described, which management may take to counter such changes. In light of the uncertainties and assumptions associated with the process, the amounts presented in the table and changes in such amounts are not considered significant to the Bank’s projected net interest income.
ITEM 4 - CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2019March 31, 2020 (the end of the period covered by this Report). Based on that evaluation, the Company’s principal executive and principal financial officers concluded that as of September 30, 2019March 31, 2020 the Company’s disclosure controls and procedures were effective.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No changes in the Company’s internal control over financial reporting were identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the fiscal quarter ended September 30, 2019March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
4841
The nature of the Company’s business generates a certain amount of litigation involving matters arising in the ordinary course of business.
In the opinion of management, there are no proceedings pending to which the Company is a party or to which its property is subject, which, if determined adversely, would have a material effect on the Company’s results of operations or financial condition.
There have been noIn addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factor represents a material changes inupdate and addition to the risk factors relating to the Company to thosepreviously disclosed in response to Item 1A. Part I ofthe Company’s Annual Report on Form 10-K10- K for the fiscal year ended December 31, 2018.2019 as filed with the Securities and Exchange Commission.
The Economic Impact of the COVID-19 Outbreak Has Adversely Affected, and is Likely to Continue to Adversely Affect, the Company’s Business and Results of Operations
In December 2019, a novel coronavirus was reported in China, and, in March 2020, the World Health Organization declared COVID-19 a pandemic. On March 12, 2020 the President of the United States declared the COVID-19 outbreak in the United States a national emergency. The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments, including New York, have ordered non-essential businesses to close and residents to shelter in place at home. This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the COVID-19 outbreak, more than 26 million people nationwide have filed claims for unemployment, and stock markets have declined in value and in particular bank stocks have significantly declined in value. In response to the COVID-19 outbreak, the Federal Reserve has reduced the benchmark fed funds rate to a target range of 0% to 0.25%, and the yields on 10 and 30-year treasury notes have declined to historic lows. Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and recently passed legislation has provided relief from reporting loan classifications due to modifications related to the COVID-19 outbreak. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry. In particular, the spread of the coronavirus has caused the Company to modify business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. The Company has many employees working remotely and may take further actions required by government authorities or that the Company determines are in the best interests of its employees, customers and business partners.
Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on the Company’s business. The extent of such impact will depend on future developments, which are highly uncertain, including the extent to which the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company may be subject to the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:
· | demand for the Company’s products and services may decline, making it difficult to grow assets and income; |
· | if the economy is unable to substantially reopen, and high levels of unemployment continue, for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; |
· | collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; |
· | the Company’s allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect net income; |
· | the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments; |
· | as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on the Company’s assets may decline to a greater extent than the decline in its cost of interest-bearing liabilities, reducing its net interest margin and spread and reducing net income; |
· | a material decrease in net income or a net loss over several quarters could result in a decrease in the rate or a cancellation of the Company’s semi-annual cash dividend; |
· | cyber security risks are increased as the result of an increase in the number of employees working remotely; and |
· | the Company relies on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on the Company’s operations. |
42
Moreover, the Company’s future success and profitability substantially depends on its executive officers and directors, many of whom have held positions with the Company for many years. The unanticipated loss or unavailability of key employees due to the outbreak could harm the Company’s ability to execute its business strategy. The Company may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability. Any one or a combination of the factors identified above could negatively impact the Company’s business, financial condition and results of operations and prospects.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In the third quarter of 2019, the Company did not purchase shares of its common stock.
Issuer Purchases of Equity Securities
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Period |
| Total Number of Shares Purchased |
| Average Price Paid per Share |
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
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| January 2020: |
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| - |
| $ | - |
| - |
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| February 2020: |
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| - |
| $ | - |
| - |
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| March 2020: |
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Total: |
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| $ | - |
| - |
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ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
(Not Applicable.)
ITEM 4 – MINE SAFETY DISCLOSURE
(Not Applicable.)
(Not Applicable.)
49
The following exhibits are filed as a part of this report:
43
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| EXHIBIT INDEX | ||
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Exhibit No. |
| Name | ||
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101 |
| The following materials from Evans Bancorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended |
5044
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Evans Bancorp, Inc.
DATE
October 31, 2019May 5, 2020
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/s/ David J. Nasca |
David J. Nasca |
President and CEO |
(Principal Executive Officer) |
DATE
October 31, 2019May 5, 2020
|
/s/ John B. Connerton |
John B. Connerton |
Treasurer |
(Principal Financial Officer and Principal Accounting Officer) |
5145