☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Pennsylvania | | 25-1424278 | | ||
(State or other jurisdiction of incorporation or organization) | | | (I.R.S. Employer Identification No.) |
| Main & Franklin Streets, P.O. Box 430, Johnstown, PA | | | 15907-0430 | |
| (Address of principal executive offices) | | | (Zip Code) | |
| Title Of Each Class | | | Trading Symbol | | | Name of Each Exchange On Which Registered | |
| Common Stock | | | ASRV | | | The NASDAQ Stock Market LLC | |
| 8.45% Beneficial Unsecured Securities, Series A (AmeriServ Financial Capital Trust I) | | | ASRVP | | | The NASDAQ Stock Market LLC | |
Large accelerated filer | | | Accelerated filer | | | Non-accelerated filer | |||||
| | Smaller reporting company | | ||||||||
| Emerging growth company | |
Class | | | Outstanding at | | |
| Common Stock, par value $0.01 | | 17,384,355 | |
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| Page No. | | |||||||
PART I. FINANCIAL INFORMATION: | | | | | | | | ||
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PART II. OTHER INFORMATION | | | | | | | | ||
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Item 2. | | | | | 49 | | | ||
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| | | June 30, 2019 | | | December 31, 2018 | | ||||||
ASSETS | | | | | | | | | | | | | |
Cash and due from depository institutions | | | | $ | 21,609 | | | | | $ | 27,970 | | |
Interest bearing deposits | | | | | 3,286 | | | | | | 2,740 | | |
Short-term investments in money market funds | | | | | 3,246 | | | | | | 4,184 | | |
Total cash and cash equivalents | | | | | 28,141 | | | | | | 34,894 | | |
Investment securities: | | | | | | | | | | | | | |
Available for sale, at fair value | | | | | 151,088 | | | | | | 146,731 | | |
Held to maturity (fair value $40,775 on June 30, 2019 and $40,324 on December 31, 2018) | | | | | 39,752 | | | | | | 40,760 | | |
Loans held for sale | | | | | 1,324 | | | | | | 847 | | |
Loans | | | | | 889,170 | | | | | | 862,604 | | |
Less: Unearned income | | | | | 413 | | | | | | 322 | | |
Allowance for loan losses | | | | | 8,102 | | | | | | 8,671 | | |
Net loans | | | | | 880,655 | | | | | | 853,611 | | |
Premises and equipment: | | | | | | | | | | | | | |
Operating lease right-of-use asset | | | | | 890 | | | | | | — | | |
Financing lease right-of-use asset | | | | | 3,207 | | | | | | — | | |
Other premises and equipment, net | | | | | 14,809 | | | | | | 13,348 | | |
Accrued interest income receivable | | | | | 3,916 | | | | | | 3,489 | | |
Goodwill | | | | | 11,944 | | | | | | 11,944 | | |
Bank owned life insurance | | | | | 38,652 | | | | | | 38,395 | | |
Net deferred tax asset | | | | | 3,710 | | | | | | 3,637 | | |
Federal Home Loan Bank stock | | | | | 4,763 | | | | | | 4,520 | | |
Federal Reserve Bank stock | | | | | 2,125 | | | | | | 2,125 | | |
Other assets | | | | | 5,607 | | | | | | 6,379 | | |
TOTAL ASSETS | | | | $ | 1,190,583 | | | | | $ | 1,160,680 | | |
LIABILITIES | | | | | | | | | | | | | |
Non-interest bearing deposits | | | | $ | 158,293 | | | | | $ | 150,627 | | |
Interest bearing deposits | | | | | 810,187 | | | | | | 798,544 | | |
Total deposits | | | | | 968,480 | | | | | | 949,171 | | |
Short-term borrowings | | | | | 35,190 | | | | | | 41,029 | | |
Advances from Federal Home Loan Bank | | | | | 53,124 | | | | | | 46,721 | | |
Operating lease liabilities | | | | | 907 | | | | | | — | | |
Financing lease liabilities | | | | | 3,253 | | | | | | — | | |
Guaranteed junior subordinated deferrable interest debentures, net | | | | | 12,947 | | | | | | 12,939 | | |
Subordinated debt, net | | | | | 7,499 | | | | | | 7,488 | | |
Total borrowed funds | | | | | 112,920 | | | | | | 108,177 | | |
Other liabilities | | | | | 7,707 | | | | | | 5,355 | | |
TOTAL LIABILITIES | | | | | 1,089,107 | | | | | | 1,062,703 | | |
SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | |
Common stock, par value $0.01 per share; 30,000,000 shares authorized; 26,648,728 shares issued and 17,384,355 shares outstanding on June 30, 2019; 26,609,811 shares issued and 17,619,303 shares outstanding on December 31, 2018 | | | | | 266 | | | | | | 266 | | |
Treasury stock at cost, 9,264,373 shares on June 30, 2019 and 8,990,508 shares on December 31, 2018 | | | | | (81,741) | | | | | | (80,579) | | |
Capital surplus | | | | | 145,883 | | | | | | 145,782 | | |
Retained earnings | | | | | 49,618 | | | | | | 46,733 | | |
Accumulated other comprehensive loss, net | | | | | (12,550) | | | | | | (14,225) | | |
TOTAL SHAREHOLDERS’ EQUITY | | | | | 101,476 | | | | | | 97,977 | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | $ | 1,190,583 | | | | | $ | 1,160,680 | | |
|
September 30, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Cash and due from depository institutions | $ | 20,267 | $ | 25,107 | ||||
Interest bearing deposits | 2,718 | 3,066 | ||||||
Short-term investments in money market funds | 5,690 | 5,900 | ||||||
Total cash and cash equivalents | 28,675 | 34,073 | ||||||
Investment securities: | ||||||||
Available for sale | 129,446 | 127,077 | ||||||
Held to maturity (fair value $39,059 on September 30, 2017 and $30,420 on December 31, 2016) | 38,997 | 30,665 | ||||||
Loans held for sale | 1,780 | 3,094 | ||||||
Loans | 896,648 | 884,240 | ||||||
Less: Unearned income | 438 | 476 | ||||||
Allowance for loan losses | 10,346 | 9,932 | ||||||
Net loans | 885,864 | 873,832 | ||||||
Premises and equipment, net | 12,658 | 11,694 | ||||||
Accrued interest income receivable | 3,503 | 3,116 | ||||||
Goodwill | 11,944 | 11,944 | ||||||
Bank owned life insurance | 37,716 | 37,903 | ||||||
Net deferred tax asset | 9,255 | 10,655 | ||||||
Federal Home Loan Bank stock | 4,429 | 3,359 | ||||||
Federal Reserve Bank stock | 2,125 | 2,125 | ||||||
Other assets | 4,524 | 4,243 | ||||||
TOTAL ASSETS | $ | 1,170,916 | $ | 1,153,780 | ||||
LIABILITIES | ||||||||
Non-interest bearing deposits | $ | 182,396 | $ | 188,808 | ||||
Interest bearing deposits | 784,525 | 778,978 | ||||||
Total deposits | 966,921 | 967,786 | ||||||
Short-term borrowings | 33,593 | 12,754 | ||||||
Advances from Federal Home Loan Bank | 44,042 | 45,542 | ||||||
Guaranteed junior subordinated deferrable interest debentures, net | 12,919 | 12,908 | ||||||
Subordinated debt, net | 7,459 | 7,441 | ||||||
Total borrowed funds | 98,013 | 78,645 | ||||||
Other liabilities | 8,872 | 11,954 | ||||||
TOTAL LIABILITIES | 1,073,806 | 1,058,385 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common stock, par value $0.01 per share; 30,000,000 shares authorized; 26,585,403 shares issued and 18,281,224 outstanding on September 30, 2017; 26,521,291 shares issued and 18,903,472 outstanding on December 31, 2016 | 266 | 265 | ||||||
Treasury stock at cost, 8,304,179 shares on September 30, 2017 and 7,617,819 on December 31, 2016 | (77,586 | ) | (74,829 | ) | ||||
Capital surplus | 145,704 | 145,535 | ||||||
Retained earnings | 39,450 | 36,001 | ||||||
Accumulated other comprehensive loss, net | (10,724 | ) | (11,577 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 97,110 | 95,395 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,170,916 | $ | 1,153,780 |
| | | Three months ended June 30, | | | Six months ended June 30, | | ||||||||||||||||||
| | | 2019 | | | 2018 | | | 2019 | | | 2018 | | ||||||||||||
INTEREST INCOME | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest and fees on loans | | | | $ | 10,994 | | | | | $ | 10,125 | | | | | $ | 21,412 | | | | | $ | 19,943 | | |
Interest bearing deposits | | | | | 7 | | | | | | 5 | | | | | | 13 | | | | | | 9 | | |
Short-term investments in money market funds | | | | | 59 | | | | | | 47 | | | | | | 128 | | | | | | 90 | | |
Investment securities: | | | | | | | | | | | | | | | | | | | | | | | | | |
Available for sale | | | | | 1,314 | | | | | | 1,101 | | | | | | 2,633 | | | | | | 2,130 | | |
Held to maturity | | | | | 391 | | | | | | 325 | | | | | | 743 | | | | | | 648 | | |
Total Interest Income | | | | | 12,765 | | | | | | 11,603 | | | | | | 24,929 | | | | | | 22,820 | | |
INTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits | | | | | 2,867 | | | | | | 1,973 | | | | | | 5,597 | | | | | | 3,754 | | |
Short-term borrowings | | | | | 136 | | | | | | 170 | | | | | | 238 | | | | | | 262 | | |
Advances from Federal Home Loan Bank | | | | | 261 | | | | | | 192 | | | | | | 496 | | | | | | 378 | | |
Financing lease liabilities | | | | | 29 | | | | | | — | | | | | | 59 | | | | | | — | | |
Guaranteed junior subordinated deferrable interest debentures | | | | | 281 | | | | | | 280 | | | | | | 561 | | | | | | 560 | | |
Subordinated debt | | | | | 130 | | | | | | 130 | | | | | | 260 | | | | | | 260 | | |
Total Interest Expense | | | | | 3,704 | | | | | | 2,745 | | | | | | 7,211 | | | | | | 5,214 | | |
NET INTEREST INCOME | | | | | 9,061 | | | | | | 8,858 | | | | | | 17,718 | | | | | | 17,606 | | |
Provision (credit) for loan losses | | | | | — | | | | | | 50 | | | | | | (400) | | | | | | 100 | | |
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR LOAN LOSSES | | | | | 9,061 | | | | | | 8,808 | | | | | | 18,118 | | | | | | 17,506 | | |
NON-INTEREST INCOME | | | | | | | | | | | | | | | | | | | | | | | | | |
Wealth management fees | | | | | 2,419 | | | | | | 2,447 | | | | | | 4,815 | | | | | | 4,873 | | |
Service charges on deposit accounts | | | | | 317 | | | | | | 357 | | | | | | 627 | | | | | | 740 | | |
Net gains on sale of loans | | | | | 107 | | | | | | 119 | | | | | | 169 | | | | | | 217 | | |
Mortgage related fees | | | | | 77 | | | | | | 72 | | | | | | 121 | | | | | | 111 | | |
Net realized gains (losses) on investment securities | | | | | 30 | | | | | | — | | | | | | 30 | | | | | | (148) | | |
Bank owned life insurance | | | | | 129 | | | | | | 133 | | | | | | 257 | | | | | | 265 | | |
Other income | | | | | 578 | | | | | | 553 | | | | | | 1,243 | | | | | | 1,258 | | |
Total Non-Interest Income | | | | | 3,657 | | | | | | 3,681 | | | | | | 7,262 | | | | | | 7,316 | | |
NON-INTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | | | | | |
Salaries and employee benefits | | | | | 6,348 | | | | | | 6,218 | | | | | | 12,649 | | | | | | 12,311 | | |
Net occupancy expense | | | | | 622 | | | | | | 611 | | | | | | 1,280 | | | | | | 1,281 | | |
Equipment expense | | | | | 387 | | | | | | 378 | | | | | | 748 | | | | | | 769 | | |
Professional fees | | | | | 1,249 | | | | | | 1,252 | | | | | | 2,369 | | | | | | 2,436 | | |
Supplies, postage and freight | | | | | 140 | | | | | | 164 | | | | | | 313 | | | | | | 332 | | |
Miscellaneous taxes and insurance | | | | | 294 | | | | | | 258 | | | | | | 571 | | | | | | 539 | | |
Federal deposit insurance expense | | | | | 80 | | | | | | 155 | | | | | | 160 | | | | | | 317 | | |
Other expense | | | | | 1,336 | | | | | | 1,256 | | | | | | 2,659 | | | | | | 2,418 | | |
Total Non-Interest Expense | | | | | 10,456 | | | | | | 10,292 | | | | | | 20,749 | | | | | | 20,403 | | |
PRETAX INCOME | | | | | 2,262 | | | | | | 2,197 | | | | | | 4,631 | | | | | | 4,419 | | |
Provision for income tax expense | | | | | 470 | | | | | | 453 | | | | | | 961 | | | | | | 908 | | |
NET INCOME | | | | | 1,792 | | | | | | 1,744 | | | | | | 3,670 | | | | | | 3,511 | | |
PER COMMON SHARE DATA: | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | | | $ | 0.10 | | | | | $ | 0.10 | | | | | $ | 0.21 | | | | | $ | 0.19 | | |
Average number of shares outstanding | | | | | 17,476 | | | | | | 18,038 | | | | | | 17,527 | | | | | | 18,058 | | |
Diluted: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | | | $ | 0.10 | | | | | $ | 0.10 | | | | | $ | 0.21 | | | | | $ | 0.19 | | |
Average number of shares outstanding | | | | | 17,560 | | | | | | 18,140 | | | | | | 17,611 | | | | | | 18,158 | | |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
INTEREST INCOME | ||||||||||||||||
Interest and fees on loans | $ | 9,855 | $ | 9,462 | $ | 29,189 | $ | 28,336 | ||||||||
Interest bearing deposits | 3 | 2 | 8 | 11 | ||||||||||||
Short-term investments in money market funds | 42 | 31 | 93 | 54 | ||||||||||||
Investment securities: | ||||||||||||||||
Available for sale | 973 | 779 | 2,819 | 2,324 | ||||||||||||
Held to maturity | 314 | 202 | 877 | 562 | ||||||||||||
Total Interest Income | 11,187 | 10,476 | 32,986 | 31,287 | ||||||||||||
INTEREST EXPENSE | ||||||||||||||||
Deposits | 1,618 | 1,391 | 4,558 | 3,975 | ||||||||||||
Short-term borrowings | 44 | 2 | 130 | 49 | ||||||||||||
Advances from Federal Home Loan Bank | 178 | 166 | 511 | 484 | ||||||||||||
Guaranteed junior subordinated deferrable interest debentures | 280 | 280 | 840 | 840 | ||||||||||||
Subordinated debt | 130 | 131 | 390 | 389 | ||||||||||||
Total Interest Expense | 2,250 | 1,970 | 6,429 | 5,737 | ||||||||||||
NET INTEREST INCOME | 8,937 | 8,506 | 26,557 | 25,550 | ||||||||||||
Provision for loan losses | 200 | 300 | 750 | 3,650 | ||||||||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 8,737 | 8,206 | 25,807 | 21,900 | ||||||||||||
NON-INTEREST INCOME | ||||||||||||||||
Trust and investment advisory fees | 2,045 | 2,035 | 6,292 | 6,234 | ||||||||||||
Service charges on deposit accounts | 409 | 433 | 1,168 | 1,252 | ||||||||||||
Net gains on sale of loans | 217 | 260 | 517 | 552 | ||||||||||||
Mortgage related fees | 69 | 132 | 227 | 293 | ||||||||||||
Net realized gains on investment securities | 56 | 60 | 115 | 177 | ||||||||||||
Bank owned life insurance | 143 | 169 | 594 | 505 | ||||||||||||
Other income | 690 | 572 | 2,033 | 1,827 | ||||||||||||
Total Non-Interest Income | 3,629 | 3,661 | 10,946 | 10,840 | ||||||||||||
NON-INTEREST EXPENSE | ||||||||||||||||
Salaries and employee benefits | 6,005 | 5,901 | 17,994 | 17,935 | ||||||||||||
Net occupancy expense | 634 | 656 | 1,947 | 2,083 | ||||||||||||
Equipment expense | 343 | 419 | 1,196 | 1,264 | ||||||||||||
Professional fees | 1,213 | 1,330 | 3,828 | 3,987 | ||||||||||||
Supplies, postage and freight | 161 | 181 | 516 | 530 | ||||||||||||
Miscellaneous taxes and insurance | 319 | 287 | 924 | 866 | ||||||||||||
Federal deposit insurance expense | 156 | 189 | 468 | 556 | ||||||||||||
Other expense | 1,283 | 1,393 | 3,643 | 3,885 | ||||||||||||
Total Non-Interest Expense | 10,114 | 10,356 | 30,516 | 31,106 | ||||||||||||
PRETAX INCOME | 2,252 | 1,511 | 6,237 | 1,634 | ||||||||||||
Provision for income tax expense | 701 | 446 | 1,949 | 474 | ||||||||||||
NET INCOME | 1,551 | 1,065 | 4,288 | 1,160 | ||||||||||||
Preferred stock dividends | — | — | — | 15 | ||||||||||||
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS | $ | 1,551 | $ | 1,065 | $ | 4,288 | $ | 1,145 | ||||||||
PER COMMON SHARE DATA: | ||||||||||||||||
Basic: | ||||||||||||||||
Net income | $ | 0.08 | $ | 0.06 | $ | 0.23 | $ | 0.06 | ||||||||
Average number of shares outstanding | 18,380 | 18,899 | 18,590 | 18,893 | ||||||||||||
Diluted: | ||||||||||||||||
Net income | $ | 0.08 | $ | 0.06 | $ | 0.23 | $ | 0.06 | ||||||||
Average number of shares outstanding | 18,481 | 18,957 | 18,689 | 18,947 | ||||||||||||
Cash dividends declared | $ | 0.015 | $ | 0.015 | $ | 0.045 | $ | 0.035 |
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | | ||||||||||||||||||
| | | 2019 | | | 2018 | | | 2019 | | | 2018 | | ||||||||||||
COMPREHENSIVE INCOME | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | | | $ | 1,792 | | | | | $ | 1,744 | | | | | $ | 3,670 | | | | | $ | 3,511 | | |
Other comprehensive income (loss), before tax: | | | | | | | | | | | | | | | | | | | | | | | | | |
Pension obligation change for defined benefit plan | | | | | 403 | | | | | | 390 | | | | | | (1,433) | | | | | | 1,434 | | |
Income tax effect | | | | | (85) | | | | | | (82) | | | | | | 301 | | | | | | (301) | | |
Unrealized holding gains (losses) on available for sale securities arising during period | | | | | 1,820 | | | | | | (824) | | | | | | 3,583 | | | | | | (2,490) | | |
Income tax effect | | | | | (382) | | | | | | 173 | | | | | | (752) | | | | | | 523 | | |
Reclassification adjustment for (gains) losses on available for sale securities included in net income | | | | | (30) | | | | | | — | | | | | | (30) | | | | | | 148 | | |
Income tax effect | | | | | 6 | | | | | | — | | | | | | 6 | | | | | | (31) | | |
Other comprehensive income (loss) | | | | | 1,732 | | | | | | (343) | | | | | | 1,675 | | | | | | (717) | | |
Comprehensive income | | | | $ | 3,524 | | | | | $ | 1,401 | | | | | $ | 5,345 | | | | | $ | 2,794 | | |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
COMPREHENSIVE INCOME | ||||||||||||||||
Net income | $ | 1,551 | $ | 1,065 | $ | 4,288 | $ | 1,160 | ||||||||
Other comprehensive income, before tax: | ||||||||||||||||
Pension obligation change for defined benefit plan | 396 | 263 | 870 | 1,030 | ||||||||||||
Income tax effect | (135 | ) | (89 | ) | (297 | ) | (349 | ) | ||||||||
Unrealized holding gains (losses) on available for sale securities arising during period | 176 | (191 | ) | 538 | 1,417 | |||||||||||
Income tax effect | (60 | ) | 65 | (182 | ) | (483 | ) | |||||||||
Reclassification adjustment for gains on available for sale securities included in net income | (56 | ) | (60 | ) | (115 | ) | (177 | ) | ||||||||
Income tax effect | 19 | 20 | 39 | 60 | ||||||||||||
Other comprehensive income | 340 | 8 | 853 | 1,498 | ||||||||||||
Comprehensive income | $ | 1,891 | $ | 1,073 | $ | 5,141 | $ | 2,658 |
| | | Three months ended June 30, | | | Six months ended June 30, | | ||||||||||||||||||
| | | 2019 | | | 2018 | | | 2019 | | | 2018 | | ||||||||||||
COMMON STOCK | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | | | | 266 | | | | | | 266 | | | | | | 266 | | | | | | 266 | | |
New common shares issued for exercise of stock options | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Balance at end of period | | | | | 266 | | | | | | 266 | | | | | | 266 | | | | | | 266 | | |
TREASURY STOCK | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | | | | (81,055) | | | | | | (78,678) | | | | | | (80,579) | | | | | | (78,233) | | |
Treasury stock, purchased at cost (161,554 shares for the three months ended June 30, 2019 and 273,865 and 105,663 shares for the six months ended June 30, 2019 and 2018, respectively) | | | | | (686) | | | | | | — | | | | | | (1,162) | | | | | | (445) | | |
Balance at end of period | | | | | (81,741) | | | | | | (78,678) | | | | | | (81,741) | | | | | | (78,678) | | |
CAPITAL SURPLUS | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | | | | 145,870 | | | | | | 145,739 | | | | | | 145,782 | | | | | | 145,707 | | |
New common shares issued for exercise of stock options (5,233 and 11,291 shares for the three months ended June 30, 2019 and 2018, respectively and 38,917 and 22,108 shares for the six months ended June 30, 2019 and 2018, respectively) | | | | | 11 | | | | | | 28 | | | | | | 96 | | | | | | 56 | | |
Stock option expense | | | | | 2 | | | | | | 4 | | | | | | 5 | | | | | | 8 | | |
Balance at end of period | | | | | 145,883 | | | | | | 145,771 | | | | | | 145,883 | | | | | | 145,771 | | |
RETAINED EARNINGS | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | | | | 48,262 | | | | | | 41,807 | | | | | | 46,733 | | | | | | 40,312 | | |
Net income | | | | | 1,792 | | | | | | 1,744 | | | | | | 3,670 | | | | | | 3,511 | | |
Cash dividend declared on common stock | | | | | (436) | | | | | | (360) | | | | | | (785) | | | | | | (632) | | |
Balance at end of period | | | | | 49,618 | | | | | | 43,191 | | | | | | 49,618 | | | | | | 43,191 | | |
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | | | | (14,282) | | | | | | (13,324) | | | | | | (14,225) | | | | | | (12,950) | | |
Other comprehensive income (loss) | | | | | 1,732 | | | | | | (343) | | | | | | 1,675 | | | | | | (717) | | |
Balance at end of period | | | | | (12,550) | | | | | | (13,667) | | | | | | (12,550) | | | | | | (13,667) | | |
TOTAL STOCKHOLDERS’ EQUITY | | | | $ | 101,476 | | | | | $ | 96,883 | | | | | $ | 101,476 | | | | | $ | 96,883 | | |
Nine months ended September 30, | ||||||||
2017 | 2016 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 4,288 | $ | 1,160 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
Provision for loan losses | 750 | 3,650 | ||||||
Depreciation expense | 1,224 | 1,306 | ||||||
Net amortization of investment securities | 346 | 342 | ||||||
Net realized gains on investment securities available for sale | (115 | ) | (177 | ) | ||||
Net gains on loans held for sale | (517 | ) | (552 | ) | ||||
Amortization of deferred loan fees | (117 | ) | (174 | ) | ||||
Origination of mortgage loans held for sale | (34,045 | ) | (42,549 | ) | ||||
Sales of mortgage loans held for sale | 35,876 | 37,327 | ||||||
(Increase) decrease in accrued interest income receivable | (387 | ) | 50 | |||||
Decrease in accrued interest payable | (18 | ) | (18 | ) | ||||
Earnings on bank owned life insurance | (427 | ) | (505 | ) | ||||
Deferred income taxes | 975 | (280 | ) | |||||
Amortization of deferred issuance costs | 29 | 29 | ||||||
Stock based compensation expense | 170 | 89 | ||||||
Other, net | (2,492 | ) | (2,000 | ) | ||||
Net cash provided by (used in) operating activities | 5,540 | (2,302 | ) | |||||
INVESTING ACTIVITIES | ||||||||
Purchases of investment securities – available for sale | (27,581 | ) | (24,896 | ) | ||||
Purchases of investment securities – held to maturity | (9,465 | ) | (8,633 | ) | ||||
Proceeds from sales of investment securities – available for sale | 8,143 | 8,966 | ||||||
Proceeds from maturities of investment securities – available for sale | 17,341 | 18,750 | ||||||
Proceeds from maturities of investment securities – held to maturity | 1,054 | 2,166 | ||||||
Purchases of regulatory stock | (12,894 | ) | (8,833 | ) | ||||
Proceeds from redemption of regulatory stock | 11,824 | 10,106 | ||||||
Long-term loans originated | (122,029 | ) | (145,189 | ) | ||||
Principal collected on long-term loans | 112,626 | 120,875 | ||||||
Loans purchased or participated | (6,121 | ) | (4,948 | ) | ||||
Loans sold or participated | 2,800 | 18,900 | ||||||
Proceeds from sale of other real estate owned | 60 | 99 | ||||||
Proceeds from life insurance policies | 614 | — | ||||||
Purchases of premises and equipment | (2,188 | ) | (1,012 | ) | ||||
Net cash used in investing activities | (25,816 | ) | (13,649 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net (decrease) increase in deposit balances | (865 | ) | 59,442 | |||||
Net increase (decrease) in other short-term borrowings | 20,839 | (40,847 | ) | |||||
Principal borrowings on advances from Federal Home Loan Bank | 9,500 | 7,042 | ||||||
Principal repayments on advances from Federal Home Loan Bank | (11,000 | ) | (6,000 | ) | ||||
Preferred stock redemption | — | (21,000 | ) | |||||
Purchase of treasury stock | (2,757 | ) | — | |||||
Common stock dividends | (839 | ) | (661 | ) | ||||
Preferred stock dividends | — | (15 | ) | |||||
Net cash provided by (used in) financing activities | 14,878 | (2,039 | ) | |||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (5,398 | ) | (17,990 | ) | ||||
CASH AND CASH EQUIVALENTS AT JANUARY 1 | 34,073 | 48,510 | ||||||
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 | $ | 28,675 | $ | 30,520 |
| | | Six months ended June 30, | | |||||||||
| | | 2019 | | | 2018 | | ||||||
OPERATING ACTIVITIES | | | | | | | | | | | | | |
Net income | | | | $ | 3,670 | | | | | $ | 3,511 | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | |
Provision (credit) for loan losses | | | | | (400) | | | | | | 100 | | |
Depreciation and amortization expense | | | | | 927 | | | | | | 812 | | |
Net amortization of investment securities | | | | | 133 | | | | | | 193 | | |
Net realized (gains) losses on investment securities – available for sale | | | | | (30) | | | | | | 148 | | |
Net gains on loans held for sale | | | | | (169) | | | | | | (217) | | |
Amortization of deferred loan fees | | | | | (60) | | | | | | (67) | | |
Origination of mortgage loans held for sale | | | | | (11,437) | | | | | | (14,768) | | |
Sales of mortgage loans held for sale | | | | | 11,129 | | | | | | 14,455 | | |
(Increase) decrease in accrued interest receivable | | | | | (427) | | | | | | 139 | | |
Increase (decrease) in accrued interest payable | | | | | 167 | | | | | | (73) | | |
Earnings on bank owned life insurance | | | | | (257) | | | | | | (265) | | |
Deferred income taxes | | | | | 685 | | | | | | 83 | | |
Stock compensation expense | | | | | 5 | | | | | | 8 | | |
Net change in operating leases | | | | | (25) | | | | | | — | | |
Other, net | | | | | 214 | | | | | | (156) | | |
Net cash provided by operating activities | | | | | 4,125 | | | | | | 3,903 | | |
INVESTING ACTIVITIES | | | | | | | | | | | | | |
Purchase of investment securities – available for sale | | | | | (10,663) | | | | | | (22,460) | | |
Purchase of investment securities – held to maturity | | | | | — | | | | | | (2,405) | | |
Proceeds from sales of investment securities – available for sale | | | | | 530 | | | | | | 4,479 | | |
Proceeds from maturities of investment securities – available for sale | | | | | 9,263 | | | | | | 8,629 | | |
Proceeds from maturities of investment securities – held to maturity | | | | | 971 | | | | | | 2,193 | | |
Purchase of regulatory stock | | | | | (8,977) | | | | | | (9,603) | | |
Proceeds from redemption of regulatory stock | | | | | 8,734 | | | | | | 8,331 | | |
Long-term loans originated | | | | | (105,659) | | | | | | (83,755) | | |
Principal collected on long-term loans | | | | | 95,377 | | | | | | 82,138 | | |
Loan participations purchased | | | | | (20,982) | | | | | | (2,643) | | |
Loan participations sold | | | | | 4,605 | | | | | | 1,500 | | |
Proceeds from sale of other real estate owned | | | | | 198 | | | | | | 22 | | |
Purchase of premises and equipment | | | | | (2,214) | | | | | | (294) | | |
Net cash used in investing activities | | | | | (28,817) | | | | | | (13,868) | | |
FINANCING ACTIVITIES | | | | | | | | | | | | | |
Net increase (decrease) in deposit balances | | | | | 19,309 | | | | | | (19,769) | | |
Net increase (decrease) in other short-term borrowings | | | | | (5,839) | | | | | | 33,848 | | |
Principal borrowings on advances from Federal Home Loan Bank | | | | | 8,403 | | | | | | 3,740 | | |
Principal repayments on advances from Federal Home Loan Bank | | | | | (2,000) | | | | | | (6,000) | | |
Principal payments on financing lease liabilities | | | | | (83) | | | | | | — | | |
Stock options exercised | | | | | 96 | | | | | | 56 | | |
Purchase of treasury stock | | | | | (1,162) | | | | | | (445) | | |
Common stock dividends | | | | | (785) | | | | | | (632) | | |
Net cash provided by financing activities | | | | | 17,939 | | | | | | 10,798 | | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | | | | (6,753) | | | | | | 833 | | |
CASH AND CASH EQUIVALENTS AT JANUARY 1 | | | | | 34,894 | | | | | | 34,188 | | |
CASH AND CASH EQUIVALENTS AT JUNE 30 | | | | $ | 28,141 | | | | | $ | 35,021 | | |
the amendment will be affected by the portfolio composition and quality at the adoption date as well as economic conditions and forecasts at that time.
In June 2016, the FASB issued ASU 2016-13,Financial Instruments
In January 2017, the FASB issued ASU No. 2017-03 “Accounting Changes and Error Corrections (Topic 250) and Investments — Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings.” ASU 2017-03 provides amendments that add paragraph 250-10-S99-6 which includes the text of “SEC Staff Announcement: Disclosure of the Impact That Recently Issued Accounting Standards Will Have on the Financial Statements of a Registrant When Such Standards Are Adopted in a Future Period (in accordance with Staff Accounting Bulletin (SAB) Topic 11.M). This announcement applies to ASU No. 2014-09,Revenue from Contracts with Customers (Topic 606); ASU No. 2016-02,Leases (Topic 842); and ASU 2016-03,Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments.payment. The Company has enhanced its disclosures regardingdetermined that since rentals and renewals occur consistently over time, revenue is recognized on a basis consistent with the impact that recently issued accounting standards adopted in a future period will have on its accountingduration of the performance obligation. Gains and disclosures in this footnote.
In March 2017, the FASB issued ASU 2017-07,Compensation — Retirement Benefits (Topic 715). The amendments in this Update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. This Update is not expected to have a significant impactlosses on the Company’s financial statements.
In March 2017,sale of other real estate owned are recognized at the FASB issued ASU 2017-08,Receivables — Nonrefundable Feescompletion of the property sale when the buyer obtains control of the real estate and Other Costs (Subtopic 310-20).all the performance obligations of the Company have been satisfied.
| | | Three months ended June 30, | | | Six months ended June 30, | | ||||||||||||||||||
| | | 2019 | | | 2018 | | | 2019 | | | 2018 | | ||||||||||||
Noninterest income: | | | | | | | | | | | | | | | | | | | | | | | | | |
In-scope of Topic 606 | | | | | | | | | | | | | | | | | | | | | | | | | |
Wealth management fees | | | | $ | 2,419 | | | | | $ | 2,447 | | | | | $ | 4,815 | | | | | $ | 4,873 | | |
Service charges on deposit accounts | | | | | 317 | | | | | | 357 | | | | | | 627 | | | | | | 740 | | |
Other | | | | | 435 | | | | | | 435 | | | | | | 854 | | | | | | 852 | | |
Noninterest income (in-scope of topic 606) | | | | | 3,171 | | | | | | 3,239 | | | | | | 6,296 | | | | | | 6,465 | | |
Noninterest income (out-of-scope of topic 606) | | | | | 486 | | | | | | 442 | | | | | | 966 | | | | | | 851 | | |
Total noninterest income | | | | $ | 3,657 | | | | | $ | 3,681 | | | | | $ | 7,262 | | | | | $ | 7,316 | | |
should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. This Update is not expected to have a significant impact on the Company’s financial statements.
| | | Three months ended June 30, | | | Six months ended June 30, | | ||||||||||||||||||
| | | 2019 | | | 2018 | | | 2019 | | | 2018 | | ||||||||||||
| | | (In thousands, except per share data) | | |||||||||||||||||||||
Numerator: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | | | $ | 1,792 | | | | | $ | 1,744 | | | | | $ | 3,670 | | | | | $ | 3,511 | | |
Denominator: | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average common shares outstanding (basic) | | | | | 17,476 | | | | | | 18,038 | | | | | | 17,527 | | | | | | 18,058 | | |
Effect of stock options | | | | | 84 | | | | | | 102 | | | | | | 84 | | | | | | 100 | | |
Weighted average common shares outstanding (diluted) | | | | | 17,560 | | | | | | 18,140 | | | | | | 17,611 | | | | | | 18,158 | | |
Earnings per common share: | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | | $ | 0.10 | | | | | $ | 0.10 | | | | | $ | 0.21 | | | | | $ | 0.19 | | |
Diluted | | | | | 0.10 | | | | | | 0.10 | | | | | | 0.21 | | | | | | 0.19 | | |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Numerator: | ||||||||||||||||
Net income | $ | 1,551 | $ | 1,065 | $ | 4,288 | $ | 1,160 | ||||||||
Preferred stock dividends | — | — | — | (15 | ) | |||||||||||
Net income available to common shareholders | $ | 1,551 | $ | 1,065 | $ | 4,288 | $ | 1,145 | ||||||||
Denominator: | ||||||||||||||||
Weighted average common shares outstanding (basic) | 18,380 | 18,899 | 18,590 | 18,893 | ||||||||||||
Effect of stock options | 101 | 58 | 99 | 54 | ||||||||||||
Weighted average common shares outstanding (diluted) | 18,481 | 18,957 | 18,689 | 18,947 | ||||||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.08 | $ | 0.06 | $ | 0.23 | $ | 0.06 | ||||||||
Diluted | 0.08 | 0.06 | 0.23 | 0.06 |
| | | June 30, 2019 | | |||||||||||||||||||||
| | | Cost Basis | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Fair Value | | ||||||||||||
US Agency | | | | $ | 7,489 | | | | | $ | 54 | | | | | $ | — | | | | | $ | 7,543 | | |
US Agency mortgage-backed securities | | | | | 90,523 | | | | | | 1,602 | | | | | | (167) | | | | | | 91,958 | | |
Municipal | | | | | 13,994 | | | | | | 499 | | | | | | (22) | | | | | | 14,471 | | |
Corporate bonds | | | | | 37,312 | | | | | | 258 | | | | | | (454) | | | | | | 37,116 | | |
Total | | | | $ | 149,318 | | | | | $ | 2,413 | | | | | $ | (643) | | | | | $ | 151,088 | | |
September 30, 2017 | ||||||||||||||||
Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
US Agency | $ | 5,435 | $ | 1 | $ | (34 | ) | $ | 5,402 | |||||||
US Agency mortgage-backed securities | 80,756 | 866 | (382 | ) | 81,240 | |||||||||||
Taxable municipal | 7,203 | 30 | (166 | ) | 7,067 | |||||||||||
Corporate bonds | 35,886 | 327 | (476 | ) | 35,737 | |||||||||||
Total | $ | 129,280 | $ | 1,224 | $ | (1,058 | ) | $ | 129,446 |
| | | June 30, 2019 | | |||||||||||||||||||||
| | | Cost Basis | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Fair Value | | ||||||||||||
US Agency mortgage-backed securities | | | | $ | 9,501 | | | | | $ | 197 | | | | | $ | (18) | | | | | $ | 9,680 | | |
Municipal | | | | | 24,216 | | | | | | 881 | | | | | | (44) | | | | | | 25,053 | | |
Corporate bonds and other securities | | | | | 6,035 | | | | | | 49 | | | | | | (42) | | | | | | 6,042 | | |
Total | | | | $ | 39,752 | | | | | $ | 1,127 | | | | | $ | (104) | | | | | $ | 40,775 | | |
September 30, 2017 | ||||||||||||||||
Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
US Agency mortgage-backed securities | $ | 10,081 | $ | 194 | $ | (23 | ) | $ | 10,252 | |||||||
Taxable municipal | 22,873 | 222 | (314 | ) | 22,781 | |||||||||||
Corporate bonds and other securities | 6,043 | 29 | (46 | ) | 6,026 | |||||||||||
Total | $ | 38,997 | $ | 445 | $ | (383 | ) | $ | 39,059 |
| | | December 31, 2018 | | |||||||||||||||||||||
| | | Cost Basis | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Fair Value | | ||||||||||||
US Agency | | | | $ | 7,685 | | | | | $ | 4 | | | | | $ | (160) | | | | | $ | 7,529 | | |
US Agency mortgage-backed securities | | | | | 90,169 | | | | | | 516 | | | | | | (1,158) | | | | | | 89,527 | | |
Municipal | | | | | 13,301 | | | | | | 114 | | | | | | (234) | | | | | | 13,181 | | |
Corporate bonds | | | | | 37,359 | | | | | | 131 | | | | | | (996) | | | | | | 36,494 | | |
Total | | | | $ | 148,514 | | | | | $ | 765 | | | | | $ | (2,548) | | | | | $ | 146,731 | | |
December 31, 2016 | ||||||||||||||||
Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
US Agency | $ | 400 | $ | — | $ | (2 | ) | $ | 398 | |||||||
US Agency mortgage-backed securities | 88,738 | 1,132 | (686 | ) | 89,184 | |||||||||||
Taxable municipal | 3,793 | 3 | (174 | ) | 3,622 | |||||||||||
Corporate bonds | 34,403 | 194 | (724 | ) | 33,873 | |||||||||||
Total | $ | 127,334 | $ | 1,329 | $ | (1,586 | ) | $ | 127,077 |
| | | December 31, 2018 | | |||||||||||||||||||||
| | | Cost Basis | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Fair Value | | ||||||||||||
US Agency mortgage-backed securities | | | | $ | 9,983 | | | | | $ | 78 | | | | | $ | (132) | | | | | $ | 9,929 | | |
Municipal | | | | | 24,740 | | | | | | 131 | | | | | | (404) | | | | | | 24,467 | | |
Corporate bonds and other securities | | | | | 6,037 | | | | | | 13 | | | | | | (122) | | | | | | 5,928 | | |
Total | | | | $ | 40,760 | | | | | $ | 222 | | | | | $ | (658) | | | | | $ | 40,324 | | |
December 31, 2016 | ||||||||||||||||
Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
US Agency mortgage-backed securities | $ | 11,177 | $ | 180 | $ | (79 | ) | $ | 11,278 | |||||||
Taxable municipal | 13,441 | 70 | (348 | ) | 13,163 | |||||||||||
Corporate bonds and other securities | 6,047 | 15 | (83 | ) | 5,979 | |||||||||||
Total | $ | 30,665 | $ | 265 | $ | (510 | ) | $ | 30,420 |
Maintaining investment quality is a primary objective of the Company’s investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody’s Investor’s Service or Standard & Poor’s rating of “A.” At SeptemberJune 30, 2017, 57.8%2019 and December 31, 2018, 57.5% of the portfolio was rated “AAA” as compared to 63.5% at December 31, 2016.. Approximately 12.8%8.7% of the portfolio was either rated below “A” or unrated at SeptemberJune 30, 20172019 as compared to 10.1%10.0% at December 31, 2016.
The Company sold $937,000$530,000 AFS securities in the thirdsecond quarter and first six months of 20172019 resulting in $56,000 of gross investment security gains and sold $8.1 million AFS securities in the first nine months of 2017 resulting in $115,000$30,000 of gross investment security gains. The Company sold $1.5 millionno AFS securities induring the thirdsecond quarter of 20162018. Total proceeds from the sale of AFS securities for the first six months of 2018 were $4.5 million resulting in $60,000$15,000 of gross investment security gains and sold $9.0 million AFS securities in the first nine months of 2016 resulting in $183,000$163,000 of gross investment security gains and $6,000 of gross investment security losses.
2018.
| | | June 30, 2019 | | |||||||||||||||||||||||||||||||||
| | | Less than 12 months | | | 12 months or longer | | | Total | | |||||||||||||||||||||||||||
| | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | ||||||||||||||||||
US Agency | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
US Agency mortgage-backed securities | | | | | — | | | | | | — | | | | | | 21,440 | | | | | | (185) | | | | | | 21,440 | | | | | | (185) | | |
Municipal | | | | | — | | | | | | — | | | | | | 2,468 | | | | | | (66) | | | | | | 2,468 | | | | | | (66) | | |
Corporate bonds and other securities | | | | | 4,922 | | | | | | (77) | | | | | | 18,182 | | | | | | (419) | | | | | | 23,104 | | | | | | (496) | | |
Total | | | | $ | 4,922 | | | | | $ | (77) | | | | | $ | 42,090 | | | | | $ | (670) | | | | | $ | 47,012 | | | | | $ | (747) | | |
September 30, 2017 | ||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
US Agency | $ | 3,990 | $ | (33 | ) | $ | 399 | $ | (1 | ) | $ | 4,389 | $ | (34 | ) | |||||||||
US Agency mortgage-backed securities | 38,127 | (321 | ) | 3,239 | (84 | ) | 41,366 | (405 | ) | |||||||||||||||
Taxable municipal | 11,724 | (377 | ) | 2,172 | (103 | ) | 13,896 | (480 | ) | |||||||||||||||
Corporate bonds and other securities | 12,414 | (205 | ) | 10,265 | (317 | ) | 22,679 | (522 | ) | |||||||||||||||
Total | $ | 66,255 | $ | (936 | ) | $ | 16,075 | $ | (505 | ) | $ | 82,330 | $ | (1,441 | ) |
| | | December 31, 2018 | | |||||||||||||||||||||||||||||||||
| | | Less than 12 months | | | 12 months or longer | | | Total | | |||||||||||||||||||||||||||
| | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | ||||||||||||||||||
US Agency | | | | $ | 244 | | | | | $ | (6) | | | | | $ | 5,631 | | | | | $ | (154) | | | | | $ | 5,875 | | | | | $ | (160) | | |
US Agency mortgage-backed securities | | | | | 17,718 | | | | | | (177) | | | | | | 39,983 | | | | | | (1,113) | | | | | | 57,701 | | | | | | (1,290) | | |
Municipal | | | | | 6,601 | | | | | | (71) | | | | | | 15,880 | | | | | | (567) | | | | | | 22,481 | | | | | | (638) | | |
Corporate bonds and other securities | | | | | 15,221 | | | | | | (440) | | | | | | 17,038 | | | | | | (678) | | | | | | 32,259 | | | | | | (1,118) | | |
Total | | | | $ | 39,784 | | | | | $ | (694) | | | | | $ | 78,532 | | | | | $ | (2,512) | | | | | $ | 118,316 | | | | | $ | (3,206) | ��� | |
|
December 31, 2016 | ||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
US Agency | $ | 398 | $ | (2 | ) | $ | — | $ | — | $ | 398 | $ | (2 | ) | ||||||||||
US Agency mortgage-backed securities | 49,918 | (703 | ) | 1,576 | (62 | ) | 51,494 | (765 | ) | |||||||||||||||
Taxable municipal | 13,301 | (522 | ) | — | — | 13,301 | (522 | ) | ||||||||||||||||
Corporate bonds and other securities | 20,380 | (570 | ) | 6,762 | (237 | ) | 27,142 | (807 | ) | |||||||||||||||
Total | $ | 83,997 | $ | (1,797 | ) | $ | 8,338 | $ | (299 | ) | $ | 92,335 | $ | (2,096 | ) |
Contractual maturities of securities at SeptemberJune 30, 20172019 are shown below (in thousands). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. The weighted average duration of the total investment securities portfolio at SeptemberJune 30, 20172019 is 44.237.2 months and is higherlower than the duration at December 31, 20162018 which was 41.244.1 months. The duration remains within our internal established guideline range of 24 to 60 months which we believe is appropriate to maintain proper levels of liquidity, interest rate risk, market valuation sensitivity and profitability.
| | | June 30, 2019 | | |||||||||||||||||||||
| | | Available for sale | | | Held to maturity | | ||||||||||||||||||
| | | Cost Basis | | | Fair Value | | | Cost Basis | | | Fair Value | | ||||||||||||
Within 1 year | | | | $ | 2,500 | | | | | $ | 2,502 | | | | | $ | 1,000 | | | | | $ | 995 | | |
After 1 year but within 5 years | | | | | 20,264 | | | | | | 20,319 | | | | | | 5,178 | | | | | | 5,196 | | |
After 5 years but within 10 years | | | | | 44,101 | | | | | | 44,554 | | | | | | 20,018 | | | | | | 20,696 | | |
After 10 years but within 15 years | | | | | 28,373 | | | | | | 28,849 | | | | | | 8,201 | | | | | | 8,477 | | |
Over 15 years | | | | | 54,080 | | | | | | 54,864 | | | | | | 5,355 | | | | | | 5,411 | | |
Total | | | | $ | 149,318 | | | | | $ | 151,088 | | | | | $ | 39,752 | | | | | $ | 40,775 | | |
September 30, 2017 | ||||||||||||||||
Available for sale | Held to maturity | |||||||||||||||
Cost Basis | Fair Value | Cost Basis | Fair Value | |||||||||||||
Within 1 year | $ | 1,400 | $ | 1,399 | $ | 2,000 | $ | 1,975 | ||||||||
After 1 year but within 5 years | 11,706 | 11,718 | 1,551 | 1,533 | ||||||||||||
After 5 years but within 10 years | 45,805 | 45,999 | 14,562 | 14,639 | ||||||||||||
After 10 years but within 15 years | 27,738 | 27,609 | 14,924 | 14,824 | ||||||||||||
Over 15 years | 42,631 | 42,721 | 5,960 | 6,088 | ||||||||||||
Total | $ | 129,280 | $ | 129,446 | $ | 38,997 | $ | 39,059 |
| | | June 30, 2019 | | | December 31, 2018 | | ||||||
Commercial: Commercial and industrial | | | | $ | 172,428 | | | | | $ | 158,279 | | |
Commercial loans secured by owner occupied real estate | | | | | 83,003 | | | | | | 91,905 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 375,673 | | | | | | 356,543 | | |
Real estate – residential mortgage | | | | | 239,916 | | | | | | 237,964 | | |
Consumer | | | | | 17,737 | | | | | | 17,591 | | |
Loans, net of unearned income | | | | $ | 888,757 | | | | | $ | 862,282 | | |
|
September 30, 2017 | December 31, 2016 | |||||||
Commercial | $ | 160,918 | $ | 171,529 | ||||
Commercial loans secured by real estate | 469,348 | 446,598 | ||||||
Real estate – mortgage | 246,881 | 245,765 | ||||||
Consumer | 19,063 | 19,872 | ||||||
Loans, net of unearned income | $ | 896,210 | $ | 883,764 |
| | | Three months ended June 30, 2019 | | |||||||||||||||||||||||||||
| | | Balance at March 31, 2019 | | | Charge- Offs | | | Recoveries | | | Provision (Credit) | | | Balance at June 30, 2019 | | |||||||||||||||
Commercial | | | | $ | 2,614 | | | | | $ | — | | | | | $ | — | | | | | $ | (76) | | | | | $ | 2,538 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 3,373 | | | | | | — | | | | | | 13 | | | | | | 39 | | | | | | 3,425 | | |
Real estate – residential mortgage | | | | | 1,213 | | | | | | (10) | | | | | | 68 | | | | | | (53) | | | | | | 1,218 | | |
Consumer | | | | | 125 | | | | | | (88) | | | | | | 12 | | | | | | 75 | | | | | | 124 | | |
Allocation for general risk | | | | | 782 | | | | | | — | | | | | | — | | | | | | 15 | | | | | | 797 | | |
Total | | | | $ | 8,107 | | | | | $ | (98) | | | | | $ | 93 | | | | | $ | — | | | | | $ | 8,102 | | |
|
| | | Three months ended June 30, 2018 | | |||||||||||||||||||||||||||
| | | Balance at March 31, 2018 | | | Charge- Offs | | | Recoveries | | | Provision (Credit) | | | Balance at June 30, 2018 | | |||||||||||||||
Commercial | | | | $ | 3,984 | | | | | $ | (412) | | | | | $ | 4 | | | | | $ | (10) | | | | | $ | 3,566 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 3,550 | | | | | | — | | | | | | 13 | | | | | | 123 | | | | | | 3,686 | | |
Real estate – residential mortgage | | | | | 1,267 | | | | | | (103) | | | | | | 67 | | | | | | 22 | | | | | | 1,253 | | |
Consumer | | | | | 142 | | | | | | (53) | | | | | | 23 | | | | | | 13 | | | | | | 125 | | |
Allocation for general risk | | | | | 989 | | | | | | — | | | | | | — | | | | | | (98) | | | | | | 891 | | |
Total | | | | $ | 9,932 | | | | | $ | (568) | | | | | $ | 107 | | | | | $ | 50 | | | | | $ | 9,521 | | |
|
| | | Six months ended June 30, 2019 | | |||||||||||||||||||||||||||
| | | Balance at December 31, 2018 | | | Charge- Offs | | | Recoveries | | | Provision (Credit) | | | Balance at June 30, 2019 | | |||||||||||||||
Commercial | | | | $ | 3,057 | | | | | $ | — | | | | | $ | 5 | | | | | $ | (524) | | | | | $ | 2,538 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 3,389 | | | | | | (63) | | | | | | 24 | | | | | | 75 | | | | | | 3,425 | | |
Real estate – residential mortgage | | | | | 1,235 | | | | | | (71) | | | | | | 76 | | | | | | (22) | | | | | | 1,218 | | |
Consumer | | | | | 127 | | | | | | (170) | | | | | | 30 | | | | | | 137 | | | | | | 124 | | |
Allocation for general risk | | | | | 863 | | | | | | — | | | | | | — | | | | | | (66) | | | | | | 797 | | |
Total | | | | $ | 8,671 | | | | | $ | (304) | | | | | $ | 135 | | | | | $ | (400) | | | | | $ | 8,102 | | |
|
| | | Six months ended June 30, 2018 | | |||||||||||||||||||||||||||
| | | Balance at December 31, 2017 | | | Charge- Offs | | | Recoveries | | | Provision (Credit) | | | Balance at June 30, 2018 | | |||||||||||||||
Commercial | | | | $ | 4,298 | | | | | $ | (574) | | | | | $ | 12 | | | | | $ | (170) | | | | | $ | 3,566 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 3,666 | | | | | | — | | | | | | 26 | | | | | | (6) | | | | | | 3,686 | | |
Real estate – residential mortgage | | | | | 1,102 | | | | | | (217) | | | | | | 77 | | | | | | 291 | | | | | | 1,253 | | |
Consumer | | | | | 128 | | | | | | (152) | | | | | | 35 | | | | | | 114 | | | | | | 125 | | |
Allocation for general risk | | | | | 1,020 | | | | | | — | | | | | | — | | | | | | (129) | | | | | | 891 | | |
Total | | | | $ | 10,214 | | | | | $ | (943) | | | | | $ | 150 | | | | | $ | 100 | | | | | $ | 9,521 | | |
|
Three months ended September 30, 2017 | ||||||||||||||||||||
Balance at June 30, 2017 | Charge-Offs | Recoveries | Provision (Credit) | Balance at September 30, 2017 | ||||||||||||||||
Commercial | $ | 3,825 | $ | (228 | ) | $ | 9 | $ | 561 | $ | 4,167 | |||||||||
Commercial loans secured by real estate | 4,487 | — | 3 | (644 | ) | 3,846 | ||||||||||||||
Real estate-mortgage | 1,151 | (109 | ) | 72 | 50 | 1,164 | ||||||||||||||
Consumer | 138 | (42 | ) | 50 | (7 | ) | 139 | |||||||||||||
Allocation for general risk | 790 | — | — | 240 | 1,030 | |||||||||||||||
Total | $ | 10,391 | $ | (379 | ) | $ | 134 | $ | 200 | $ | 10,346 |
Three months ended September 30, 2016 | ||||||||||||||||||||
Balance at June 30, 2016 | Charge-Offs | Recoveries | Provision (Credit) | Balance at September 30, 2016 | ||||||||||||||||
Commercial | $ | 4,322 | $ | (295 | ) | $ | 115 | $ | 92 | $ | 4,234 | |||||||||
Commercial loans secured by real estate | 3,274 | (13 | ) | 2 | 85 | 3,348 | ||||||||||||||
Real estate-mortgage | 1,075 | (104 | ) | 24 | 77 | 1,072 | ||||||||||||||
Consumer | 135 | (57 | ) | 8 | 53 | 139 | ||||||||||||||
Allocation for general risk | 940 | — | — | (7 | ) | 933 | ||||||||||||||
Total | $ | 9,746 | $ | (469 | ) | $ | 149 | $ | 300 | $ | 9,726 |
Nine months ended September 30, 2017 | ||||||||||||||||||||
Balance at December 31, 2016 | Charge-Offs | Recoveries | Provision (Credit) | Balance at September 30, 2017 | ||||||||||||||||
Commercial | $ | 4,041 | $ | (228 | ) | $ | 22 | $ | 332 | $ | 4,167 | |||||||||
Commercial loans secured by real estate | 3,584 | (14 | ) | 8 | 268 | 3,846 | ||||||||||||||
Real estate-mortgage | 1,169 | (263 | ) | 165 | 93 | 1,164 | ||||||||||||||
Consumer | 151 | (138 | ) | 112 | 14 | 139 | ||||||||||||||
Allocation for general risk | 987 | — | — | 43 | 1,030 | |||||||||||||||
Total | $ | 9,932 | $ | (643 | ) | $ | 307 | $ | 750 | $ | 10,346 |
Nine months ended September 30, 2016 | ||||||||||||||||||||
Balance at December 31, 2015 | Charge-Offs | Recoveries | Provision (Credit) | Balance at September 30, 2016 | ||||||||||||||||
Commercial | $ | 4,244 | $ | (3,648 | ) | $ | 126 | $ | 3,512 | $ | 4,234 | |||||||||
Commercial loans secured by real estate | 3,449 | (13 | ) | 38 | (126 | ) | 3,348 | |||||||||||||
Real estate-mortgage | 1,173 | (150 | ) | 86 | (37 | ) | 1,072 | |||||||||||||
Consumer | 151 | (302 | ) | 18 | 272 | 139 | ||||||||||||||
Allocation for general risk | 904 | — | — | 29 | 933 | |||||||||||||||
Total | $ | 9,921 | $ | (4,113 | ) | $ | 268 | $ | 3,650 | $ | 9,726 |
The provision expense, charge-offs and recoveries were at more typical levelsloan losses in the first nine months of 2017. The allocation amount to commercial loans secured by real estate (CRE) in the third quarter of 2017 reflects an improvement in the level of delinquency and the level of classified assets since the end of the second quarter of 20172019 as one large CRE credit was upgraded and another transferred into non-accrual status (see further discussioncompared to a $50,000 provision recorded in the second quarter of 2018. For the first six months of 2019, the Company recorded a $400,000 loan loss provision recovery compared to a $100,000 provision expense recorded in the first six months of 2018. The 2019 provision recovery reflects our overall strong asset quality, sectionreduced level of the MD&A). The substantially higher than typical provisioncriticized loans and net loan charge-offs, and the lower six-month average loan portfolio balances. For the first six months of 2019, the Company experienced net loan charge-offs of $169,000, or 0.04% of total loans, compared to net loan charge-offs of $793,000, or 0.18% of total loans, in the first threesix months 2016 for the commercial portfolio was necessary to resolve the Company’s only meaningful direct loan exposure to the energy industry. These loans were related to a single borrower in the fracking industry who had filed for bankruptcy protection in the fourth quarter of 2015. With the bankruptcy changing from Chapter 11 (reorganization) to Chapter 7 (liquidation) late in the first quarter of 2016,2018. Overall, the Company concluded thatcontinued to maintain outstanding asset quality as its previously established reserves on these non-accrualnon-performing assets totaled $1.7 million, or only 0.19% of total loans, were not sufficientat June 30, 2019. The allowance for loan losses provided 482% coverage of non-performing assets, and 0.91% of total loans, at June 30, 2019, compared to cover the discounted collateral values that resulted from the liquidation process.
The following tables summarize the loan portfolio and allowance for loan loss by the primary segments of the loan portfolio (in thousands).
| | | At June 30, 2019 | | |||||||||||||||||||||||||||||||||
| | | Commercial | | | Commercial Loans Secured by Non-Owner Occupied Real Estate | | | Real Estate- Residential Mortgage | | | Consumer | | | Allocation for General Risk | | | Total | | ||||||||||||||||||
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | | | $ | 750 | | | | | $ | 10 | | | | | $ | — | | | | | $ | — | | | | | | | | | | | $ | 760 | | |
Collectively evaluated for impairment | | | | | 254,681 | | | | | | 375,663 | | | | | | 239,916 | | | | | | 17,737 | | | | | | | | | | | | 887,997 | | |
Total loans | | | | $ | 255,431 | | | | | $ | 375,673 | | | | | $ | 239,916 | | | | | $ | 17,737 | | | | | | | | | | | $ | 888,757 | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Specific reserve allocation | | | | $ | 78 | | | | | $ | 10 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 88 | | |
General reserve allocation | | | | | 2,460 | | | | | | 3,415 | | | | | | 1,218 | | | | | | 124 | | | | | | 797 | | | | | | 8,014 | | |
Total allowance for loan losses | | | | $ | 2,538 | | | | | $ | 3,425 | | | | | $ | 1,218 | | | | | $ | 124 | | | | | $ | 797 | | | | | $ | 8,102 | | |
|
| | | At December 31, 2018 | | |||||||||||||||||||||||||||||||||
| | | Commercial | | | Commercial Loans Secured by Non-Owner Occupied Real Estate | | | Real Estate- Residential Mortgage | | | Consumer | | | Allocation for General Risk | | | Total | | ||||||||||||||||||
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | | �� | $ | — | | | | | $ | 11 | | | | | $ | — | | | | | $ | — | | | | | | | | | | | $ | 11 | | |
Collectively evaluated for impairment | | | | | 250,184 | | | | | | 356,532 | | | | | | 237,964 | | | | | | 17,591 | | | | | | | | | | | | 862,271 | | |
Total loans | | | | $ | 250,184 | | | | | $ | 356,543 | | | | | $ | 237,964 | | | | | $ | 17,591 | | | | | | | | | | | $ | 862,282 | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Specific reserve allocation | | | | $ | — | | | | | $ | 11 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 11 | | |
General reserve allocation | | | | | 3,057 | | | | | | 3,378 | | | | | | 1,235 | | | | | | 127 | | | | | | 863 | | | | | | 8,660 | | |
Total allowance for loan losses | | | | $ | 3,057 | | | | | $ | 3,389 | | | | | $ | 1,235 | | | | | $ | 127 | | | | | $ | 863 | | | | | $ | 8,671 | | |
At September 30, 2017 | ||||||||||||||||||||||||
Loans: | Commercial | Commercial Loans Secured by Real Estate | Real Estate- Mortgage | Consumer | Allocation for General Risk | Total | ||||||||||||||||||
Individually evaluated for impairment | $ | 1,458 | $ | 2,465 | $ | — | $ | — | $ | 3,923 | ||||||||||||||
Collectively evaluated for impairment | 159,460 | 466,883 | 246,881 | 19,063 | 892,287 | |||||||||||||||||||
Total loans | $ | 160,918 | $ | 469,348 | $ | 246,881 | $ | 19,063 | $ | 896,210 | ||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Specific reserve allocation | $ | 860 | $ | 28 | $ | — | $ | — | $ | — | $ | 888 | ||||||||||||
General reserve allocation | 3,307 | 3,818 | 1,164 | 139 | 1,030 | 9,458 | ||||||||||||||||||
Total allowance for loan losses | $ | 4,167 | $ | 3,846 | $ | 1,164 | $ | 139 | $ | 1,030 | $ | 10,346 |
At December 31, 2016 | ||||||||||||||||||||||||
Loans: | Commercial | Commercial Loans Secured by Real Estate | Real Estate- Mortgage | Consumer | Allocation for General Risk | Total | ||||||||||||||||||
Individually evaluated for impairment | $ | 496 | $ | 178 | $ | — | $ | — | $ | 674 | ||||||||||||||
Collectively evaluated for impairment | 171,033 | 446,420 | 245,765 | 19,872 | 883,090 | |||||||||||||||||||
Total loans | $ | 171,529 | $ | 446,598 | $ | 245,765 | $ | 19,872 | $ | 883,764 | ||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Specific reserve allocation | $ | 496 | $ | 31 | $ | — | $ | — | $ | — | $ | 527 | ||||||||||||
General reserve allocation | 3,545 | 3,553 | 1,169 | 151 | 987 | 9,405 | ||||||||||||||||||
Total allowance for loan losses | $ | 4,041 | $ | 3,584 | $ | 1,169 | $ | 151 | $ | 987 | $ | 9,932 |
The segments of the Company’s loan portfolio are disaggregated to a levelinto classes that allows management to monitor risk and performance. The loan segmentsclasses used are consistent with the internal reports evaluated by the Company’s management and Board of Directors to monitor risk and performance within various segments of its loan portfolio and therefore, no further disaggregation into classes is necessary.portfolio. The overall risk profile for the commercial loan segment is effected by non-ownerincludes both the commercial and industrial
Management evaluates for possible impairment any individual loan in the commercial or commercial real estate segment with a loan balance in excess of $100,000 that is in nonaccrual status or classified as a Troubled Debt Restructure (TDR). Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired, or are classified as a TDR.
The value of the property is adjusted to appropriately reflect the above listed factors and the value is discounted to reflect the value impact of a forced or distressed sale, any outstanding senior liens, any outstanding unpaid real estate taxes, transfer taxes and closing costs that would occur with sale of the real estate. If the Assigned Risk Department personnel determine that a reasonable value cannot be derived based on available information, a new appraisal is ordered. The determination of the need for a new appraisal, versus completion of a property valuation by the Bank’s Assigned Risk Department personnel rests with the Assigned Risk Department and not the originating account officer.
| | | June 30, 2019 | | |||||||||||||||||||||||||||
| | | Impaired Loans with Specific Allowance | | | Impaired Loans with no Specific Allowance | | | Total Impaired Loans | | |||||||||||||||||||||
| | | Recorded Investment | | | Related Allowance | | | Recorded Investment | | | Recorded Investment | | | Unpaid Principal Balance | | |||||||||||||||
Commercial | | | | $ | 750 | | | | | $ | 78 | | | | | $ | — | | | | | $ | 750 | | | | | $ | 750 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 10 | | | | | | 10 | | | | | | — | | | | | | 10 | | | | | | 32 | | |
Total impaired loans | | | | $ | 760 | | | | | $ | 88 | | | | | $ | — | | | | | $ | 760 | | | | | $ | 782 | | |
|
| | | December 31, 2018 | | |||||||||||||||||||||||||||
| | | Impaired Loans with Specific Allowance | | | Impaired Loans with no Specific Allowance | | | Total Impaired Loans | | |||||||||||||||||||||
| | | Recorded Investment | | | Related Allowance | | | Recorded Investment | | | Recorded Investment | | | Unpaid Principal Balance | | |||||||||||||||
Commercial loans secured by non-owner occupied real estate | | | | $ | 11 | | | | | $ | 11 | | | | | $ | — | | | | | $ | 11 | | | | | $ | 33 | | |
Total impaired loans | | | | $ | 11 | | | | | $ | 11 | | | | | $ | — | | | | | $ | 11 | | | | | $ | 33 | | |
September 30, 2017 | ||||||||||||||||||||
Impaired Loans with Specific Allowance | Impaired Loans with no Specific Allowance | Total Impaired Loans | ||||||||||||||||||
Recorded Investment | Related Allowance | Recorded Investment | Recorded Investment | Unpaid Principal Balance | ||||||||||||||||
Commercial | $ | 1,448 | $ | 860 | $ | 10 | $ | 1,458 | $ | 1,458 | ||||||||||
Commercial loans secured by real estate | 151 | 28 | 2,314 | 2,465 | 2,499 | |||||||||||||||
Total impaired loans | $ | 1,599 | $ | 888 | $ | 2,324 | $ | 3,923 | $ | 3,957 |
December 31, 2016 | ||||||||||||||||||||
Impaired Loans with Specific Allowance | Impaired Loans with no Specific Allowance | Total Impaired Loans | ||||||||||||||||||
Recorded Investment | Related Allowance | Recorded Investment | Recorded Investment | Unpaid Principal Balance | ||||||||||||||||
Commercial | $ | 496 | $ | 496 | $ | — | $ | 496 | $ | 517 | ||||||||||
Commercial loans secured by real estate | 162 | 31 | 16 | 178 | 209 | |||||||||||||||
Total impaired loans | $ | 658 | $ | 527 | $ | 16 | $ | 674 | $ | 726 |
The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods indicated (in thousands).
| | | Three months ended June 30, | | | Six months ended June 30, | | ||||||||||||||||||
| | | 2019 | | | 2018 | | | 2019 | | | 2018 | | ||||||||||||
Average loan balance: | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | | $ | 375 | | | | | $ | 457 | | | | | $ | 250 | | | | | $ | 709 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 11 | | | | | | 13 | | | | | | 11 | | | | | | 191 | | |
Average investment in impaired loans | | | | $ | 386 | | | | | $ | 470 | | | | | $ | 261 | | | | | $ | 900 | | |
Interest income recognized: | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | | $ | 4 | | | | | $ | — | | | | | $ | 4 | | | | | $ | — | | |
Commercial loans secured by non-owner occupied real estate | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Interest income recognized on a cash basis on impaired loans | | | | $ | 4 | | | | | $ | — | | | | | $ | 4 | | | | | $ | — | | |
|
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Average loan balance: | ||||||||||||||||
Commercial | $ | 1,302 | $ | 821 | $ | 816 | $ | 992 | ||||||||
Commercial loans secured by real estate | 1,316 | 283 | 825 | 449 | ||||||||||||
Average investment in impaired loans | $ | 2,618 | $ | 1,104 | $ | 1,641 | $ | 1,441 | ||||||||
Interest income recognized: | ||||||||||||||||
Commercial | $ | 9 | $ | 1 | $ | 24 | $ | 9 | ||||||||
Commercial loans secured by real estate | — | — | 2 | 8 | ||||||||||||
Interest income recognized on a cash basis on impaired loans | $ | 9 | $ | 1 | $ | 26 | $ | 17 |
| | | June 30, 2019 | | |||||||||||||||||||||||||||
| | | Pass | | | Special Mention | | | Substandard | | | Doubtful | | | Total | | |||||||||||||||
Commercial and industrial | | | | $ | 167,272 | | | | | $ | 3,471 | | | | | $ | 1,685 | | | | | $ | — | | | | | $ | 172,428 | | |
Commercial loans secured by owner occupied real estate | | | | | 80,162 | | | | | | 1,679 | | | | | | 1,162 | | | | | | — | | | | | | 83,003 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 369,242 | | | | | | 6,234 | | | | | | 187 | | | | | | 10 | | | | | | 375,673 | | |
Total | | | | $ | 616,676 | | | | | $ | 11,384 | | | | | $ | 3,034 | | | | | $ | 10 | | | | | $ | 631,104 | | |
September 30, 2017 | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
Commercial | $ | 158,169 | $ | 76 | $ | 2,423 | $ | 250 | $ | 160,918 | ||||||||||
Commercial loans secured by real estate | 448,766 | 16,524 | 4,044 | 14 | 469,348 | |||||||||||||||
Total | $ | 606,935 | $ | 16,600 | $ | 6,467 | $ | 264 | $ | 630,266 |
December 31, 2016 | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
Commercial | $ | 168,116 | $ | 1,087 | $ | 1,830 | $ | 496 | $ | 171,529 | ||||||||||
Commercial loans secured by real estate | 436,318 | 7,497 | 2,767 | 16 | 446,598 | |||||||||||||||
Total | $ | 604,434 | $ | 8,584 | $ | 4,597 | $ | 512 | $ | 618,127 |
| | | December 31, 2018 | | |||||||||||||||||||||||||||
| | | Pass | | | Special Mention | | | Substandard | | | Doubtful | | | Total | | |||||||||||||||
Commercial and industrial | | | | $ | 154,510 | | | | | $ | 2,089 | | | | | $ | 1,680 | | | | | $ | — | | | | | $ | 158,279 | | |
Commercial loans secured by owner occupied real estate | | | | | 86,997 | | | | | | 3,769 | | | | | | 1,139 | | | | | | — | | | | | | 91,905 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 349,954 | | | | | | 6,316 | | | | | | 262 | | | | | | 11 | | | | | | 356,543 | | |
Total | | | | $ | 591,461 | | | | | $ | 12,174 | | | | | $ | 3,081 | | | | | $ | 11 | | | | | $ | 606,727 | | |
| | | June 30, 2019 | | |||||||||
| | | Performing | | | Non-Performing | | ||||||
Real estate – residential mortgage | | | | $ | 239,052 | | | | | $ | 864 | | |
Consumer | | | | | 17,737 | | | | | | — | | |
Total | | | | $ | 256,789 | | | | | $ | 864 | | |
|
| | | December 31, 2018 | | |||||||||
| | | Performing | | | Non-Performing | | ||||||
Real estate – residential mortgage | | | | $ | 236,754 | | | | | $ | 1,210 | | |
Consumer | | | | | 17,591 | | | | | | — | | |
Total | | | | $ | 254,345 | | | | | $ | 1,210 | | |
September 30, 2017 | ||||||||
Performing | Non-Performing | |||||||
Real estate-mortgage | $ | 245,479 | $ | 1,402 | ||||
Consumer | 19,056 | 7 | ||||||
Total | $ | 264,535 | $ | 1,409 |
December 31, 2016 | ||||||||
Performing | Non-Performing | |||||||
Real estate-mortgage | $ | 244,836 | $ | 929 | ||||
Consumer | 19,872 | — | ||||||
Total | $ | 264,708 | $ | 929 |
Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans (in thousands).
| | | June 30, 2019 | | |||||||||||||||||||||||||||||||||||||||
| | | Current | | | 30 – 59 Days Past Due | | | 60 – 89 Days Past Due | | | 90 Days Past Due | | | Total Past Due | | | Total Loans | | | 90 Days Past Due and Still Accruing | | |||||||||||||||||||||
Commercial and industrial | | | | $ | 172,428 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 172,428 | | | | | $ | — | | |
Commercial loans secured by owner occupied real estate | | | | | 83,003 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 83,003 | | | | | | — | | |
Commercial loans secured by non-owner occupied real estate | | | | | 375,673 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 375,673 | | | | | | — | | |
Real estate – residential mortgage | | | | | 235,940 | | | | | | 2,723 | | | | | | 779 | | | | | | 474 | | | | | | 3,976 | | | | | | 239,916 | | | | | | — | | |
Consumer | | | | | 17,508 | | | | | | 220 | | | | | | 9 | | | | | | — | | | | | | 229 | | | | | | 17,737 | | | | | | — | | |
Total | | | | $ | 884,552 | | | | | $ | 2,943 | | | | | $ | 788 | | | | | $ | 474 | | | | | $ | 4,205 | | | | | $ | 888,757 | | | | | $ | — | | |
|
September 30, 2017 | ||||||||||||||||||||||||||||
Current | 30 – 59 Days Past Due | 60 – 89 Days Past Due | 90 Days Past Due | Total Past Due | Total Loans | 90 Days Past Due and Still Accruing | ||||||||||||||||||||||
Commercial | $ | 159,529 | $ | 1,228 | $ | — | $ | 161 | $ | 1,389 | $ | 160,918 | $ | — | ||||||||||||||
Commercial loans secured by real estate | 461,506 | 5,358 | — | 2,484 | 7,842 | 469,348 | — | |||||||||||||||||||||
Real estate-mortgage | 242,793 | 2,488 | 861 | 739 | 4,088 | 246,881 | — | |||||||||||||||||||||
Consumer | 18,978 | 73 | 12 | — | 85 | 19,063 | — | |||||||||||||||||||||
Total | $ | 882,806 | $ | 9,147 | $ | 873 | $ | 3,384 | $ | 13,404 | $ | 896,210 | $ | — |
December 31, 2016 | ||||||||||||||||||||||||||||
Current | 30 – 59 Days Past Due | 60 – 89 Days Past Due | 90 Days Past Due | Total Past Due | Total Loans | 90 Days Past Due and Still Accruing | ||||||||||||||||||||||
Commercial | $ | 171,292 | $ | 237 | $ | — | $ | — | $ | 237 | $ | 171,529 | $ | — | ||||||||||||||
Commercial loans secured by real estate | 446,477 | 121 | — | — | 121 | 446,598 | — | |||||||||||||||||||||
Real estate-mortgage | 241,802 | 2,856 | 610 | 497 | 3,963 | 245,765 | — | |||||||||||||||||||||
Consumer | 19,795 | 50 | 27 | — | 77 | 19,872 | — | |||||||||||||||||||||
Total | $ | 879,366 | $ | 3,264 | $ | 637 | $ | 497 | $ | 4,398 | $ | 883,764 | $ | — |
| | | December 31, 2018 | | |||||||||||||||||||||||||||||||||||||||
| | | Current | | | 30 – 59 Days Past Due | | | 60 – 89 Days Past Due | | | 90 Days Past Due | | | Total Past Due | | | Total Loans | | | 90 Days Past Due and Still Accruing | | |||||||||||||||||||||
Commercial and industrial | | | | $ | 158,279 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 158,279 | | | | | $ | — | | |
Commercial loans secured by owner occupied real estate | | | | | 91,905 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 91,905 | | | | | | — | | |
Commercial loans secured by non-owner occupied real estate | | | | | 355,963 | | | | | | 580 | | | | | | — | | | | | | — | | | | | | 580 | | | | | | 356,543 | | | | | | — | | |
Real estate – residential mortgage | | | | | 232,465 | | | | | | 3,651 | | | | | | 472 | | | | | | 1,376 | | | | | | 5,499 | | | | | | 237,964 | | | | | | — | | |
Consumer | | | | | 17,408 | | | | | | 153 | | | | | | 30 | | | | | | — | | | | | | 183 | | | | | | 17,591 | | | | | | — | | |
Total | | | | $ | 856,020 | | | | | $ | 4,384 | | | | | $ | 502 | | | | | $ | 1,376 | | | | | $ | 6,262 | | | | | $ | 862,282 | | | | | $ | — | | |
| | | June 30, 2019 | | | December 31, 2018 | | ||||||
Non-accrual loans | | | | | | | | | | | | | |
Commercial loans secured by non-owner occupied real estate | | | | $ | 10 | | | | | $ | 11 | | |
Real estate – residential mortgage | | | | | 864 | | | | | | 1,210 | | |
Total | | | | | 874 | | | | | | 1,221 | | |
Other real estate owned | | | | | | | | | | | | | |
Commercial loans secured by owner occupied real estate | | | | | — | | | | | | 157 | | |
Real estate – residential mortgage | | | | | 57 | | | | | | — | | |
Total | | | | | 57 | | | | | | 157 | | |
TDR’s not in non-accrual | | | | | | | | | | | | | |
Commercial and industrial | | | | | 750 | | | | | | — | | |
Total | | | | | 750 | | | | | | — | | |
Total non-performing assets including TDR | | | | $ | 1,681 | | | | | $ | 1,378 | | |
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned | | | | | 0.19% | | | | | | 0.16% | | |
September 30, 2017 | December 31, 2016 | |||||||
Non-accrual loans | ||||||||
Commercial | $ | 461 | $ | 496 | ||||
Commercial loans secured by real estate | 2,785 | 178 | ||||||
Real estate-mortgage | 1,402 | 929 | ||||||
Consumer | 7 | — | ||||||
Total | 4,655 | 1,603 | ||||||
Other real estate owned | ||||||||
Real estate-mortgage | 39 | 21 | ||||||
Total | 39 | 21 | ||||||
TDR’s not in non-accrual | 678 | — | ||||||
Total non-performing assets including TDR | $ | 5,372 | $ | 1,624 | ||||
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned | 0.60 | % | 0.18 | % |
The Company had no loans past due 90 days or more for the periods presented which were accruing interest.
| | | Three months ended June 30, | | | Six months ended June 30, | | ||||||||||||||||||
| | | 2019 | | | 2018 | | | 2019 | | | 2018 | | ||||||||||||
Interest income due in accordance | | | | | | | | | | | | | | | | | | | | | | | | | |
with original terms | | | | $ | 14 | | | | | $ | 22 | | | | | $ | 29 | | | | | $ | 49 | | |
Interest income recorded | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Net reduction in interest income | | | | $ | 14 | | | | | $ | 22 | | | | | $ | 29 | | | | | $ | 49 | | |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Interest income due in accordance with original terms | $ | 32 | $ | 20 | $ | 65 | $ | 99 | ||||||||
Interest income recorded | — | — | — | — | ||||||||||||
Net reduction in interest income | $ | 32 | $ | 20 | $ | 65 | $ | 99 |
Consistent with accounting and regulatory guidance, the Bank recognizes a TDR when the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that would not normally be considered. Regardless of the form of concession granted, the Bank’s objective in offering a TDR is to increase the probability of repayment of the borrower’s loan.
To be considered a TDR,both of the following criteria must be met:
Factors that indicate a borrower is experiencing financial difficulties include, but are not limited to:
Factors that indicate that a concession has been granted include, but are not limited to:
The determination of whether a restructured loan is a TDR requires consideration of all of the facts and circumstances surrounding the modification. No single factor is determinative of whether a restructuring is a TDR. An overall general decline in the economy or some deterioration in a borrower’s financial condition does not automatically mean that the borrower is experiencing financial difficulty. Accordingly, determination of whether a modification is a TDR involves a large degree of judgment.
The following table details the loansloan modified as TDRsa TDR during the ninethree and six month periodperiods ended SeptemberJune 30, 20172019 (dollars in thousands).
Loans in accrual status | | | # of Loans | | | Current Balance | | | Concession Granted | | ||||||
Commercial and industrial | | | | | 1 | | | | | $ | 750 | | | | Extension of maturity date with a below market interest rate | |
Loans in non-accrual status | # of Loans | Current Balance | Concession Granted | |||||||||
Commercial loan | 2 | $ | 678 | Extension of maturity date with interest only period |
The following table details the loans modified as TDRs during the nine month period ended September 30, 2016 (dollars in thousands).
Loans in non-accrual status | # of Loans | Current Balance | Concession Granted | |||||||||
Commercial loan | 2 | $ | 507 | Extension of maturity date with interest only period |
In all instances where loans have been modified in troubled debt restructurings the pre- and post-modified balances are the same. The specific ALL reserve forCompany had no loans modified as TDR’s was $390,000during the three and $507,000 as of Septembersix month periods ending June 30, 2017 and 2016, respectively. 2018.
Once a loan is classified The specific ALL reserve for loans modified as a TDR, this classification will remain until documented improvement in the financial positionTDR’s was $88,000 and $11,000 as of the borrower supports confidence that all principalJune 30, 2019 and interest will be paid according to terms. Additionally, the customer must have re-established a track record of timely payments according to the restructured contract terms for a minimum of six consecutive months prior to consideration for removing the loan from non-accrual TDR status. However, a loan will continue to be on non-accrual status until, consistent with our policy, the borrower has made a minimum of an additional six consecutive monthly payments in accordance with the terms of the loan.
The Company had no loans that were classified as TDR’s or were subsequently modified during each 12-month period prior to the current reporting periods, which begin January 1, 2018 and 2017 and 2016 (nine(six month periods) and JulyApril 1, 20172018 and 20162017 (three month periods), respectively, and that subsequently defaulted during these reporting periods.
Foreclosed assets acquired in settlement of loans carried at fair value less estimated costs to sell are included in the other assets on the Consolidated Balance Sheet. As of September 30, 2017 and December 31, 2016, a total of $39,000 and $21,000, respectively of residential real estate foreclosed assets were included in other assets. As of September 30, 2017, the Company had initiated formal foreclosure procedures on $297,000 of consumer residential mortgages.
| | | At June 30, 2019 | | ||||||||||||
Type | | | Maturing | | | Amount | | | Weighted Average Rate | | ||||||
Open Repo Plus | | | Overnight | | | | $ | 35,190 | | | | | | 2.46% | | |
Advances | | | 2019 | | | | | 10,500 | | | | | | 1.53 | | |
| | | 2020 | | | | | 16,729 | | | | | | 1.74 | | |
| | | 2021 | | | | | 9,496 | | | | | | 2.28 | | |
| | | 2022 | | | | | 9,831 | | | | | | 2.68 | | |
| | | 2023 | | | | | 5,568 | | | | | | 2.48 | | |
| | | 2024 and over | | | | | 1,000 | | | | | | 2.26 | | |
Total advances | | | | | | | | 53,124 | | | | | | 2.06 | | |
Total FHLB borrowings | | | | | | | $ | 88,314 | | | | | | 2.22% | | |
|
| | | At December 31, 2018 | | ||||||||||||
Type | | | Maturing | | | Amount | | | Weighted Average Rate | | ||||||
Open Repo Plus | | | Overnight | | | | $ | 41,029 | | | | | | 2.62% | | |
Advances | | | 2019 | | | | | 12,500 | | | | | | 1.51 | | |
| | | 2020 | | | | | 16,729 | | | | | | 1.74 | | |
| | | 2021 | | | | | 9,496 | | | | | | 2.28 | | |
| | | 2022 | | | | | 6,996 | | | | | | 2.86 | | |
| | | 2023 | | | | | 1,000 | | | | | | 2.86 | | |
Total advances | | | | | | | | 46,721 | | | | | | 1.98 | | |
Total FHLB borrowings | | | | | | | $ | 87,750 | | | | | | 2.28% | | |
|
At September 30, 2017 | ||||||||||||
Type | Maturing | Amount | Weighted Average Rate | |||||||||
Open Repo Plus | Overnight | $ | 33,593 | 0.94 | % | |||||||
Advances | 2017 | 1,000 | 0.88 | |||||||||
2018 | 12,000 | 1.48 | ||||||||||
2019 | 12,500 | 1.51 | ||||||||||
2020 | 13,542 | 1.67 | ||||||||||
2021 and over | 5,000 | 1.68 | ||||||||||
Total advances | 44,042 | 1.57 | ||||||||||
Total FHLB borrowings | $ | 77,635 | 1.30 | % |
At December 31, 2016 | ||||||||||||
Type | Maturing | Amount | Weighted Average Rate | |||||||||
Open Repo Plus | Overnight | $ | 12,754 | 0.74 | % | |||||||
Advances | 2017 | 12,000 | 1.06 | |||||||||
2018 | 12,000 | 1.48 | ||||||||||
2019 | 12,500 | 1.51 | ||||||||||
2020 | 8,042 | 1.59 | ||||||||||
2021 and over | 1,000 | 1.60 | ||||||||||
Total advances | 45,542 | 1.37 | ||||||||||
Total FHLB borrowings | $ | 58,296 | 1.23 | % |
| | | Three months ended June 30, 2019 | | | Six months ended June 30, 2019 | | ||||||
Lease cost | | | | | | | | | | | | | |
Financing lease cost: | | | | | | | | | | | | | |
Amortization of right-of-use asset | | | | $ | 65 | | | | | $ | 129 | | |
Interest expense | | | | | 29 | | | | | | 59 | | |
Operating lease cost | | | | | 29 | | | | | | 58 | | |
Total lease cost | | | | $ | 123 | | | | | $ | 246 | | |
| | | Operating | | | Financing | | ||||||
Weighted-average remaining term (years) | | | | | 12.2 | | | | | | 17.4 | | |
Weighted-average discount rate | | | | | 3.44% | | | | | | 3.59% | | |
On August 11, 2011, pursuant
| | | Operating | | | Financing | | ||||||
Undiscounted cash flows due: | | | | | | | | | | | | | |
Within 1 year | | | | $ | 117 | | | | | $ | 299 | | |
After 1 year but within 2 years | | | | | 119 | | | | | | 282 | | |
After 2 years but within 3 years | | | | | 117 | | | | | | 276 | | |
After 3 years but within 4 years | | | | | 75 | | | | | | 278 | | |
After 4 years but within 5 years | | | | | 69 | | | | | | 251 | | |
After 5 years | | | | | 624 | | | | | | 3,126 | | |
Total undiscounted cash flows | | | | | 1,121 | | | | | | 4,512 | | |
Discount on cash flows | | | | | (214) | | | | | | (1,259) | | |
Total lease liabilities | | | | $ | 907 | | | | | $ | 3,253 | | |
On January 27, 2016, the Company redeemed the Series E Preferred Stock, at a redemption price of 100% of the liquidation amount plus accrued but unpaid dividends, after receiving approval from its federal banking regulator and the US Treasury.
| | | Three months ended June 30, 2019 | | | Three months ended June 30, 2018 | | ||||||||||||||||||||||||||||||
| | | Net Unrealized Gains and (Losses) on Investment Securities AFS(1) | | | Defined Benefit Pension Items(1) | | | Total(1) | | | Net Unrealized Gains and (Losses) on Investment Securities AFS(1) | | | Defined Benefit Pension Items(1) | | | Total(1) | | ||||||||||||||||||
Beginning balance | | | | $ | (16) | | | | | $ | (14,266) | | | | | $ | (14,282) | | | | | $ | (1,526) | | | | | $ | (11,798) | | | | | $ | (13,324) | | |
Other comprehensive income (loss) before reclassifications | | | | | 1,438 | | | | | | 29 | | | | | | 1,467 | | | | | | (651) | | | | | | 3 | | | | | | (648) | | |
Amounts reclassified from accumulated other comprehensive loss | | | | | (24) | | | | | | 289 | | | | | | 265 | | | | | | — | | | | | | 305 | | | | | | 305 | | |
Net current period other comprehensive income (loss) | | | | | 1,414 | | | | | | 318 | | | | | | 1,732 | | | | | | (651) | | | | | | 308 | | | | | | (343) | | |
Ending balance | | | | $ | 1,398 | | | | | $ | (13,948) | | | | | $ | (12,550) | | | | | $ | (2,177) | | | | | $ | (11,490) | | | | | $ | (13,667) | | |
Three months ended September 30, 2017 | Three months ended September 30, 2016 | |||||||||||||||||||||||
Net Unrealized Gains and (Losses) on Investment Securities AFS(1) | Defined Benefit Pension Items(1) | Total(1) | Net Unrealized Gains and (Losses) on Investment Securities AFS(1) | Defined Benefit Pension Items(1) | Total(1) | |||||||||||||||||||
Beginning balance | $ | 30 | $ | (11,094 | ) | $ | (11,064 | ) | $ | 1,791 | $ | (7,856 | ) | $ | (6,065 | ) | ||||||||
Other comprehensive income (loss) before reclassifications | 116 | 261 | 377 | (126 | ) | 174 | 48 | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | (37 | ) | — | (37 | ) | (40 | ) | — | (40 | ) | ||||||||||||||
Net current period other comprehensive income (loss) | 79 | 261 | 340 | (166 | ) | 174 | 8 | |||||||||||||||||
Ending balance | $ | 109 | $ | (10,833 | ) | $ | (10,724 | ) | $ | 1,625 | $ | (7,682 | ) | $ | (6,057 | ) |
| | | Six months ended June 30, 2019 | | | Six months ended June 30, 2018 | | ||||||||||||||||||||||||||||||
| | | Net Unrealized Gains and (Losses) on Investment Securities AFS(1) | | | Defined Benefit Pension Items(1) | | | Total(1) | | | Net Unrealized Gains and (Losses) on Investment Securities AFS(1) | | | Defined Benefit Pension Items(1) | | | Total(1) | | ||||||||||||||||||
Beginning balance | | | | $ | (1,409) | | | | | $ | (12,816) | | | | | $ | (14,225) | | | | | $ | (327) | | | | | $ | (12,623) | | | | | $ | (12,950) | | |
Other comprehensive income (loss) before reclassifications | | | | | 2,831 | | | | | | (1,710) | | | | | | 1,121 | | | | | | (1,967) | | | | | | 616 | | | | | | (1,351) | | |
Amounts reclassified from accumulated other comprehensive loss | | | | | (24) | | | | | | 578 | | | | | | 554 | | | | | | 117 | | | | | | 517 | | | | | | 634 | | |
Net current period other comprehensive income (loss) | | | | | 2,807 | | | | | | (1,132) | | | | | | 1,675 | | | | | | (1,850) | | | | | | 1,133 | | | | | | (717) | | |
Ending balance | | | | $ | 1,398 | | | | | $ | (13,948) | | | | | $ | (12,550) | | | | | $ | (2,177) | | | | | $ | (11,490) | | | | | $ | (13,667) | | |
Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | |||||||||||||||||||||||
Net Unrealized Gains and (Losses) on Investment Securities AFS(1) | Defined Benefit Pension Items(1) | Total(1) | Net Unrealized Gains and (Losses) on Investment Securities AFS(1) | Defined Benefit Pension Items(1) | Total(1) | |||||||||||||||||||
Beginning balance | $ | (171 | ) | $ | (11,406 | ) | $ | (11,577 | ) | $ | 808 | $ | (8,363 | ) | $ | (7,555 | ) | |||||||
Other comprehensive income before reclassifications | 356 | 573 | 929 | 934 | 681 | 1,615 | ||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | (76 | ) | — | (76 | ) | (117 | ) | — | (117 | ) | ||||||||||||||
Net current period other comprehensive income | 280 | 573 | 853 | 817 | 681 | 1,498 | ||||||||||||||||||
Ending balance | $ | 109 | $ | (10,833 | ) | $ | (10,724 | ) | $ | 1,625 | $ | (7,682 | ) | $ | (6,057 | ) |
| | | Amount reclassified from accumulated other comprehensive loss(1) | | | |||||||||||
Details about accumulated other comprehensive loss components | | | For the three months ended June 30, 2019 | | | For the three months ended June 30, 2018 | | | Affected line item in the consolidated statement of operations | | ||||||
Realized gains on sale of securities | | | | $ | (30) | | | | | $ | — | | | | Net realized (gains) losses on investment securities | |
| | | | | 6 | | | | | | — | | | | Provision for income tax expense | |
| | | | $ | (24) | | | | | $ | — | | | | Net of tax | |
Amortization of estimated defined benefit pension plan loss | | | | $ | 366 | | | | | $ | 386 | | | | Other expense | |
| | | | | (77) | | | | | | (81) | | | | Provision for income tax expense | |
| | | | $ | 289 | | | | | $ | 305 | | | | Net of tax | |
Total reclassifications for the period | | | | $ | 265 | | | | | $ | 305 | | | | Net income | |
Amount reclassified from accumulated other comprehensive loss(1) | ||||||||||||
Details about accumulated other comprehensive loss components | For the three months ended September 30, 2017 | For the three months ended September 30, 2016 | Affected line item in the consolidated statement of operations | |||||||||
Realized gains on sale of securities | ||||||||||||
$ | (56 | ) | $ | (60 | ) | Net realized gains on investment securities | ||||||
19 | 20 | Provision for income tax expense | ||||||||||
$ | (37 | ) | $ | (40 | ) | Net of tax | ||||||
Total reclassifications for the period | $ | (37 | ) | $ | (40 | ) | Net income |
| | | Amount reclassified from accumulated other comprehensive loss(1) | | | |||||||||||
Details about accumulated other comprehensive loss components | | | For the six months ended June 30, 2019 | | | For the six months ended June 30, 2018 | | | Affected line item in the consolidated statement of operations | | ||||||
Realized (gains) losses on sale of securities | | | | $ | (30) | | | | | $ | 148 | | | | Net realized (gains) losses on investment securities | |
| | | | | 6 | | | | | | (31) | | | | Provision for income tax expense | |
| | | | $ | (24) | | | | | $ | 117 | | | | Net of tax | |
Amortization of estimated defined benefit pension plan loss | | | | $ | 732 | | | | | $ | 654 | | | | Other expense | |
| | | | | (154) | | | | | | (137) | | | | Provision for income tax expense | |
| | | | $ | 578 | | | | | $ | 517 | | | | Net of tax | |
Total reclassifications for the period | | | | $ | 554 | | | | | $ | 634 | | | | Net income | |
Amount reclassified from accumulated other comprehensive loss(1) | ||||||||||||
Details about accumulated other comprehensive loss components | For the nine months ended September 30, 2017 | For the nine months ended September 30, 2016 | Affected line item in the consolidated statement of operations | |||||||||
Realized gains on sale of securities | ||||||||||||
$ | (115 | ) | $ | (177 | ) | Net realized gains on investment securities | ||||||
39 | 60 | Provision for income tax expense | ||||||||||
$ | (76 | ) | $ | (117 | ) | Net of tax | ||||||
Total reclassifications for the period | $ | (76 | ) | $ | (117 | ) | Net income |
M.D. & A.
| | | At June 30, 2019 | | |||||||||||||||||||||||||||||||||
| | | COMPANY | | | BANK | | | MINIMUM REQUIRED FOR CAPITAL ADEQUACY PURPOSES | | | TO BE WELL CAPITALIZED UNDER PROMPT CORRECTIVE ACTION REGULATIONS* | | ||||||||||||||||||||||||
| | | AMOUNT | | | RATIO | | | AMOUNT | | | RATIO | | | RATIO | | | RATIO | | ||||||||||||||||||
Total Capital (To Risk Weighted Assets) | | | | $ | 130,532 | | | | | | 13.14% | | | | | $ | 117,702 | | | | | | 11.91% | | | | | | 8.00% | | | | | | 10.00% | | |
Common Equity Tier 1 (To Risk Weighted Assets) | | | | | 102,082 | | | | | | 10.28 | | | | | | 108,631 | | | | | | 10.99 | | | | | | 4.50 | | | | | | 6.50 | | |
Tier 1 Capital (To Risk Weighted Assets) | | | | | 113,962 | | | | | | 11.47 | | | | | | 108,631 | | | | | | 10.99 | | | | | | 6.00 | | | | | | 8.00 | | |
Tier 1 Capital (To Average Assets) | | | | | 113,962 | | | | | | 9.73 | | | | | | 108,631 | | | | | | 9.40 | | | | | | 4.00 | | | | | | 5.00 | | |
| | | At December 31, 2018 | | |||||||||||||||||||||||||||||||||
| | | COMPANY | | | BANK | | | MINIMUM REQUIRED FOR CAPITAL ADEQUACY PURPOSES | | | TO BE WELL CAPITALIZED UNDER PROMPT CORRECTIVE ACTION REGULATIONS* | | ||||||||||||||||||||||||
| | | AMOUNT | | | RATIO | | | AMOUNT | | | RATIO | | | RATIO | | | RATIO | | ||||||||||||||||||
Total Capital (To Risk Weighted Assets) | | | | $ | 129,178 | | | | | | 13.53% | | | | | $ | 115,451 | | | | | | 12.14% | | | | | | 8.00% | | | | | | 10.00% | | |
Common Equity Tier 1 (To Risk Weighted Assets) | | | | | 100,258 | | | | | | 10.50 | | | | | | 105,891 | | | | | | 11.14 | | | | | | 4.50 | | | | | | 6.50 | | |
Tier 1 Capital (To Risk Weighted Assets) | | | | | 112,130 | | | | | | 11.74 | | | | | | 105,891 | | | | | | 11.14 | | | | | | 6.00 | | | | | | 8.00 | | |
Tier 1 Capital (To Average Assets) | | | | | 112,130 | | | | | | 9.71 | | | | | | 105,891 | | | | | | 9.28 | | | | | | 4.00 | | | | | | 5.00 | | |
AT SEPTEMBER 30, 2017 | ||||||||||||||||||||||||
COMPANY | BANK | MINIMUM REQUIRED FOR CAPITAL ADEQUACY PURPOSES | TO BE WELL CAPITALIZED UNDER PROMPT CORRECTIVE ACTION REGULATIONS* | |||||||||||||||||||||
AMOUNT | RATIO | AMOUNT | RATIO | RATIO | RATIO | |||||||||||||||||||
(IN THOUSANDS, EXCEPT RATIOS) | ||||||||||||||||||||||||
Total Capital (To Risk Weighted Assets) | $ | 126,357 | 13.08 | % | $ | 109,915 | 11.44 | % | 8.00 | % | 10.00 | % | ||||||||||||
Tier 1 Common Equity (To Risk Weighted Assets) | 95,839 | 9.92 | 98,695 | 10.28 | 4.50 | 6.50 | ||||||||||||||||||
Tier 1 Capital (To Risk Weighted Assets) | 107,678 | 11.15 | 98,695 | 10.28 | 6.00 | 8.00 | ||||||||||||||||||
Tier 1 Capital (To Average Assets) | 107,678 | 9.32 | 98,695 | 8.68 | 4.00 | 5.00 |
AT DECEMBER 31, 2016 | ||||||||||||||||||||||||
COMPANY | BANK | MINIMUM REQUIRED FOR CAPITAL ADEQUACY PURPOSES | TO BE WELL CAPITALIZED UNDER PROMPT CORRECTIVE ACTION REGULATIONS* | |||||||||||||||||||||
AMOUNT | RATIO | AMOUNT | RATIO | RATIO | RATIO | |||||||||||||||||||
(IN THOUSANDS, EXCEPT RATIOS) | ||||||||||||||||||||||||
Total Capital (To Risk Weighted Assets) | $ | 125,131 | 13.15 | % | $ | 107,618 | 11.35 | % | 8.00 | % | 10.00 | % | ||||||||||||
Tier 1 Common Equity (To Risk Weighted Assets) | 95,028 | 9.99 | 96,796 | 10.21 | 4.50 | 6.50 | ||||||||||||||||||
Tier 1 Capital (To Risk Weighted Assets) | 106,868 | 11.23 | 96,796 | 10.21 | 6.00 | 8.00 | ||||||||||||||||||
Tier 1 Capital (To Average Assets) | 106,868 | 9.35 | 96,796 | 8.61 | 4.00 | 5.00 |
The Company can use various interest rate contracts, such as interest rate swaps, caps, floors and swaptions to help manage interest rate and market valuation risk exposure, which is incurred in normal recurrent banking activities. The Company can use derivative instruments, primarily interest rate swaps, to manage interest rate risk and match the rates on certain assets by hedging the fair value of certain fixed rate debt, which converts the debt to variable rates and by hedging the cash flow variability associated with certain variable rate debt by converting the debt to fixed rates.
Pittsburgh National Bank (PNC). In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay PNC the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. These transactions allow the Company’s customers to effectively convert a variable rate loan to a fixed rate. Because the Company acts as an intermediary for its customers, changes in the fair value of the underlying derivative contracts offset each other and do not significantly impact the Company’s results of operations. The Company received $139,000 in fees on the transactions.
| | | At June 30, 2019 | | ||||||||||||||||||||||||
| | | HEDGE TYPE | | | AGGREGATE NOTIONAL AMOUNT | | | WEIGHTED AVERAGE RATE RECEIVED/(PAID) | | | REPRICING FREQUENCY | | | INCREASE (DECREASE) IN INTEREST EXPENSE | | | |||||||||||
SWAP ASSETS | | | FAIR VALUE | | | | $ | 22,628 | | | | | | 4.78% | | | | MONTHLY | | | | $ | 16 | | | | ||
SWAP LIABILITIES | | | FAIR VALUE | | | | | (22,628) | | | | | | (4.78) | | | | MONTHLY | | | | | (16) | | | | ||
NET EXPOSURE | | | | | | | | — | | | | | | — | | | | | | | | | — | | | | ||
|
| | | At June 30, 2018 | | ||||||||||||||||||||||||
| | | HEDGE TYPE | | | AGGREGATE NOTIONAL AMOUNT | | | WEIGHTED AVERAGE RATE RECEIVED/(PAID) | | | REPRICING FREQUENCY | | | INCREASE (DECREASE) IN INTEREST EXPENSE | | | |||||||||||
SWAP ASSETS | | | FAIR VALUE | | | | $ | 16,681 | | | | | | 4.04% | | | | MONTHLY | | | | $ | (33) | | | | ||
SWAP LIABILITIES | | | FAIR VALUE | | | | | (16,681) | | | | | | (4.04) | | | | MONTHLY | | | | | 33 | | | | ||
NET EXPOSURE | | | | | | | | — | | | | | | — | | | | | | | | | — | | | |
HEDGE TYPE | AGGREGATE NOTIONAL AMOUNT | WEAIGHTED AVERAGE RATE RECEIVED/ (PAID) | REPRICING FREQUENCY | INCREASE (DECREASE) IN INTEREST EXPENSE | ||||||||||||||||
SWAP ASSETS | FAIR VALUE | $ | 17,057,388 | 3.42 | % | MONTHLY | $ | (72,920 | ) | |||||||||||
SWAP LIABILITIES | FAIR VALUE | (17,057,388 | ) | (3.42 | ) | MONTHLY | 72,920 | |||||||||||||
NET EXPOSURE | — | — | — |
The Company monitors and controls all derivative products with a comprehensive Board of Director approved hedging policy.Hedging Policy. This policy permits a total maximum notional amount outstanding of $500 million for interest rate swaps, interest rate caps/floors, and swaptions. All hedge transactions must be approved in advance by the Investment Asset/Liability Committee (ALCO) of the Board of Directors.Directors, unless otherwise approved, as per the terms, within the Board of Directors approved Hedging Policy. The Company had no caps or floors outstanding at SeptemberJune 30, 2017.
| | | Three months ended June 30, 2019 | | | Six months ended June 30, 2019 | | ||||||||||||||||||
| | | Total revenue | | | Net income (loss) | | | Total revenue | | | Net income (loss) | | ||||||||||||
Retail banking | | | | $ | 6,859 | | | | | $ | 1,176 | | | | | $ | 13,533 | | | | | $ | 2,357 | | |
Commercial banking | | | | | 4,676 | | | | | | 1,706 | | | | | | 9,095 | | | | | | 3,473 | | |
Wealth management | | | | | 2,440 | | | | | | 444 | | | | | | 4,857 | | | | | | 888 | | |
Investment/Parent | | | | | (1,257) | | | | | | (1,534) | | | | | | (2,505) | | | | | | (3,048) | | |
Total | | | | $ | 12,718 | | | | | $ | 1,792 | | | | | $ | 24,980 | | | | | $ | 3,670 | | |
|
| | | Three months ended June 30, 2018 | | | Six months ended June 30, 2018 | | ||||||||||||||||||
| | | Total revenue | | | Net income (loss) | | | Total revenue | | | Net income (loss) | | ||||||||||||
Retail banking | | | | $ | 6,220 | | | | | $ | 754 | | | | | $ | 12,358 | | | | | $ | 1,460 | | |
Commercial banking | | | | | 4,512 | | | | | | 1,640 | | | | | | 8,967 | | | | | | 3,200 | | |
Wealth management | | | | | 2,466 | | | | | | 432 | | | | | | 4,909 | | | | | | 940 | | |
Investment/Parent | | | | | (659) | | | | | | (1,082) | | | | | | (1,312) | | | | | | (2,089) | | |
Total | | | | $ | 12,539 | | | | | $ | 1,744 | | | | | $ | 24,922 | | | | | $ | 3,511 | | |
Three months ended September 30, 2017 | Nine months ended September 30, 2017 | |||||||||||||||
Total revenue | Net income (loss) | Total revenue | Net income (loss) | |||||||||||||
Retail banking | $ | 6,443 | $ | 794 | $ | 19,138 | $ | 2,159 | ||||||||
Commercial banking | 4,722 | 1,412 | 14,269 | 4,295 | ||||||||||||
Trust | 2,223 | 335 | 6,804 | 991 | ||||||||||||
Investment/Parent | (822 | ) | (990 | ) | (2,708 | ) | (3,157 | ) | ||||||||
Total | $ | 12,556 | $ | 1,551 | $ | 37,503 | $ | 4,288 |
Three months ended September 30, 2016 | Nine months ended September 30, 2016 | |||||||||||||||
Total revenue | Net income (loss) | Total revenue | Net income (loss) | |||||||||||||
Retail banking | $ | 6,653 | $ | 857 | $ | 19,543 | $ | 2,335 | ||||||||
Commercial banking | 4,757 | 1,352 | 14,123 | 1,884 | ||||||||||||
Trust | 2,125 | 195 | 6,504 | 740 | ||||||||||||
Investment/Parent | (1,368 | ) | (1,339 | ) | (3,780 | ) | (3,799 | ) | ||||||||
Total | $ | 12,167 | $ | 1,065 | $ | 36,390 | $ | 1,160 |
| | | Three months ended June 30, | | | Six months ended June 30, | | ||||||||||||||||||
| | | 2019 | | | 2018 | | | 2019 | | | 2018 | | ||||||||||||
Components of net periodic benefit cost | | | | | | | | | | | | | | | | | | | | | | | | | |
Service cost | | | | $ | 374 | | | | | $ | 409 | | | | | $ | 748 | | | | | $ | 818 | | |
Interest cost | | | | | 402 | | | | | | 303 | | | | | | 804 | | | | | | 606 | | |
Expected return on plan assets | | | | | (762) | | | | | | (711) | | | | | | (1,524) | | | | | | (1,422) | | |
Recognized net actuarial loss | | | | | 366 | | | | | | 386 | | | | | | 732 | | | | | | 772 | | |
Net periodic pension cost | | | | $ | 380 | | | | | $ | 387 | | | | | $ | 760 | | | | | $ | 774 | | |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Components of net periodic benefit cost | ||||||||||||||||
Service cost | $ | 390 | $ | 368 | $ | 1,170 | $ | 1,104 | ||||||||
Interest cost | 326 | 344 | 978 | 1,032 | ||||||||||||
Expected return on plan assets | (631 | ) | (563 | ) | (1,893 | ) | (1,689 | ) | ||||||||
Recognized net actuarial loss | 367 | 314 | 1,101 | 942 | ||||||||||||
Net periodic pension cost | $ | 452 | $ | 463 | $ | 1,356 | $ | 1,389 |
and Financial Instruments
The following tables presenttable presents the assets reportedand liability measured and recorded on the Consolidated Balance Sheets on a recurring basis at their fair value as of SeptemberJune 30, 20172019 and December 31, 2016,2018, by level within the fair value hierarchy. Financial assetshierarchy (in thousands).
| | | Fair Value Measurements at June 30, 2019 | | |||||||||||||||||||||
| | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | ||||||||||||
Equity securities | | | | $ | 328 | | | | | $ | 328 | | | | | $ | — | | | | | $ | — | | |
Available for sale securities: | | | | | | | | | | | | | | | | | | | | | | | | | |
US Agency | | | | | 7,543 | | | | | | — | | | | | | 7,543 | | | | | | — | | |
US Agency mortgage-backed securities | | | | | 91,958 | | | | | | — | | | | | | 91,958 | | | | | | — | | |
Municipal | | | | | 14,471 | | | | | | — | | | | | | 14,471 | | | | | | — | | |
Corporate bonds | | | | | 37,116 | | | | | | — | | | | | | 37,116 | | | | | | — | | |
Fair value swap asset | | | | | 930 | | | | | | — | | | | | | 930 | | | | | | — | | |
Fair value swap liability | | | | | (930) | | | | | | — | | | | | | (930) | | | | | | — | | |
| | | Fair Value Measurements at December 31, 2018 | | |||||||||||||||||||||
| | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | ||||||||||||
Available for sale securities: | | | | | | | | | | | | | | | | | | | | | | | | | |
US Agency | | | | $ | 7,529 | | | | | $ | — | | | | | $ | 7,529 | | | | | $ | — | | |
US Agency mortgage-backed securities | | | | | 89,527 | | | | | | — | | | | | | 89,527 | | | | | | — | | |
Municipal | | | | | 13,181 | | | | | | — | | | | | | 13,181 | | | | | | — | | |
Corporate bonds | | | | | 36,494 | | | | | | — | | | | | | 36,494 | | | | | | — | | |
Fair value swap asset | | | | | 257 | | | | | | — | | | | | | 257 | | | | | | — | | |
Fair value swap liability | | | | | (257) | | | | | | — | | | | | | (257) | | | | | | — | | |
Assets and liability measured at fair valueRecorded on a recurring basis are summarized below (in thousands):
Fair Value Measurements at September 30, 2017 Using | ||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
US Agency securities | $ | 5,402 | $ | — | $ | 5,402 | $ | — | ||||||||
US Agency mortgage-backed securities | 81,240 | — | 81,240 | — | ||||||||||||
Taxable municipal | 7,067 | — | 7,067 | — | ||||||||||||
Corporate bonds | 35,737 | — | 35,737 | — | ||||||||||||
Fair value swap asset | 84 | — | — | 84 | ||||||||||||
Fair value swap liability | (84 | ) | — | — | (84 | ) |
Fair Value Measurements at December 31, 2016 Using | ||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
US Agency securities | $ | 398 | $ | — | $ | 398 | $ | — | ||||||||
US Agency mortgage-backed securities | 89,184 | — | 89,184 | — | ||||||||||||
Taxable municipal | 3,622 | — | 3,622 | — | ||||||||||||
Corporate bonds | 33,873 | — | 33,873 | — |
Assets Measured on a Non-recurring Basis
Loans considered impaired are loans for which, based on current information and events, it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. As detailed in the allowance for loan loss footnote, impaired loans are reported at the fair value of the underlying collateral if the repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on observable market data which at times are discounted. At SeptemberJune 30, 2017,2019, impaired loans with a carrying value of $3.9 million$760,000 were reduced by a specific valuation allowance totaling $888,000$88,000 resulting in a net fair value of $3.0 million.$672,000. At December 31, 2016,2018, impaired loans with a carrying value of $674,000$11,000 were reduced by a specific valuation allowance totaling $527,000$11,000 resulting in a net fair value of $147,000.
zero.
Fair Value Measurements at September 30, 2017 Using | ||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Impaired loans | $ | 3,035 | $ | — | $ | — | $ | 3,035 | ||||||||
Other real estate owned | 39 | — | — | 39 |
Fair Value Measurements at December 31, 2016 Using | ||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Impaired loans | $ | 147 | $ | — | $ | — | $ | 147 | ||||||||
Other real estate owned | 21 | — | — | 21 |
September 30, 2017 | Quantitative Information About Level 3 Fair Value Measurements | |||||||||||||||
Fair Value Estimate | Valuation Techniques | Unobservable Input | Range (Wgtd Ave) | |||||||||||||
Impaired loans | $ | 3,035 | Appraisal of collateral(1),(3) | Appraisal adjustments(2) | 40% to 77%(42%) | |||||||||||
Other real estate owned | 39 | Appraisal of collateral(1),(3) | Appraisal adjustments(2) Liquidation expenses | 43% to 45%(43%) 2% to 206%(64%) |
December 31, 2016 | Quantitative Information About Level 3 Fair Value Measurements | |||||||||||||||
Fair Value Estimate | Valuation Techniques | Unobservable Input | Range (Wgtd Ave) | |||||||||||||
Impaired loans | $ | 147 | Appraisal of collateral(1),(3) | Appraisal adjustments(2) | 40% to 99%(45%) | |||||||||||
Other real estate owned | 21 | Appraisal of collateral(1),(3) | Appraisal adjustments(2) Liquidation expenses | 20% to 77%(42%) 3% to 199%(37%) |
| | | Fair Value Measurements at June 30, 2019 | | |||||||||||||||||||||
| | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | ||||||||||||
Impaired loans | | | | $ | 672 | | | | | $ | — | | | | | $ | — | | | | | $ | 672 | | |
Other real estate owned | | | | | 57 | | | | | | — | | | | | | — | | | | | | 57 | | |
| | | Fair Value Measurements at December 31, 2018 | | |||||||||||||||||||||
| | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | ||||||||||||
Impaired loans | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Other real estate owned | | | | | 157 | | | | | | — | | | | | | — | | | | | | 157 | | |
June 30, 2019 | | | Quantitative Information About Level 3 Fair Value Measurements | | ||||||||||||
| Fair Value Estimate | | | Valuation Techniques | | | Unobservable Input | | | Range (Wgtd Avg) | | |||||
Impaired loans | | | | $ | 672 | | | | Appraisal of collateral(1),(3) | | | Appraisal adjustments(2) | | | 0% to 100% (12%) | |
Other real estate owned | | | | | 57 | | | | Appraisal of collateral(1),(3) | | | Appraisal adjustments(2) Liquidation expenses | | | 0% to 44% (35%) 12% to 114% (28%) | |
December 31, 2018 | | Quantitative Information About Level 3 Fair Value Measurements | | |||||||||||||
| Fair Value Estimate | | | Valuation Techniques | | | Unobservable Input | | | Range (Wgtd Avg) | | |||||
Impaired loans | | | | $ | — | | | | Appraisal of | | | Appraisal adjustments(2) | | | 100% (100%) | |
Other real estate owned | | | | | 157 | | | | Appraisal of collateral(1),(3) | | | Appraisal adjustments(2) Liquidation expenses | | | 0% to 39% (8%) 21% to 195% (40%) | |
Fair values have been determined by the Company using independent third party valuations that use the best available data (Level 2) and an estimation methodology (Level 3) the Company believes is suitable for each category of financial instruments. Management believes that cash and cash equivalents, bank
| | | June 30, 2019 | | |||||||||||||||||||||||||||
| | | Carrying Value | | | Fair Value | | | (Level 1) | | | (Level 2) | | | (Level 3) | | |||||||||||||||
FINANCIAL ASSETS: | | | | | |||||||||||||||||||||||||||
Investment securities – HTM | | | | $ | 39,752 | | | | | $ | 40,775 | | | | | $ | — | | | | | $ | 37,817 | | | | | $ | 2,958 | | |
Loans held for sale | | | | | 1,324 | | | | | | 1,362 | | | | | | 1,362 | | | | | | — | | | | | | — | | |
Loans, net of allowance for loan loss and unearned income | | | | | 880,655 | | | | | | 879,993 | | | | | | — | | | | | | — | | | | | | 879,993 | | |
FINANCIAL LIABILITIES: | | | | | |||||||||||||||||||||||||||
Deposits with no stated maturities | | | | $ | 674,243 | | | | | $ | 651,367 | | | | | $ | — | | | | | $ | — | | | | | $ | 651,367 | | |
Deposits with stated maturities | | | | | 294,237 | | | | | | 294,452 | | | | | | — | | | | | | — | | | | | | 294,452 | | |
All other borrowings(1) | | | | | 73,570 | | | | | | 77,545 | | | | | | — | | | | | | 77,545 | | | |
| | | December 31, 2018 | | |||||||||||||||||||||||||||
| | | Carrying Value | | | Fair Value | | | (Level 1) | | | (Level 2) | | | (Level 3) | | |||||||||||||||
FINANCIAL ASSETS: | | | | | |||||||||||||||||||||||||||
Investment securities – HTM | | | | $ | 40,760 | | | | | $ | 40,324 | | | | | $ | — | | | | | $ | 37,398 | | | | | $ | 2,926 | | |
Loans held for sale | | | | | 847 | | | | | | 871 | | | | | | 871 | | | | | | — | | | | | | — | | |
Loans, net of allowance for loan loss and unearned income | | | | | 853,611 | | | | | | 836,122 | | | | | | — | | | | | | — | | | | | | 836,122 | | |
FINANCIAL LIABILITIES: | | | | | |||||||||||||||||||||||||||
Deposits with no stated maturities | | | | $ | 671,666 | | | | | $ | 627,323 | | | | | $ | — | | | | | $ | — | | | | | $ | 627,323 | | |
Deposits with stated maturities | | | | | 277,505 | | | | | | 277,010 | | | | | | — | | | | | | — | | | | | | 277,010 | | |
All other borrowings(1) | | | | | 67,148 | | | | | | 69,692 | | | | | | — | | | | | | — | | | | | | 69,692 | | |
September 30, 2017 | ||||||||||||||||||||
Carrying Value | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
FINANCIAL ASSETS: | ||||||||||||||||||||
Cash and cash equivalents | $ | 28,675 | $ | 28,675 | $ | 28,675 | $ | — | $ | — | ||||||||||
Investment securities – AFS | 129,446 | 129,446 | — | 129,446 | — | |||||||||||||||
Investment securities – HTM | 38,997 | 39,059 | — | 36,105 | 2,954 | |||||||||||||||
Regulatory stock | 6,554 | 6,554 | 6,554 | — | — | |||||||||||||||
Loans held for sale | 1,780 | 1,801 | 1,801 | — | — | |||||||||||||||
Loans, net of allowance for loan loss and unearned income | 885,864 | 884,359 | — | — | 884,359 | |||||||||||||||
Accrued interest income receivable | 3,503 | 3,503 | 3,503 | — | — | |||||||||||||||
Bank owned life insurance | 37,716 | 37,716 | 37,716 | — | — | |||||||||||||||
Fair value swap asset | 84 | 84 | — | — | 84 | |||||||||||||||
FINANCIAL LIABILITIES: | �� | |||||||||||||||||||
Deposits with no stated maturities | $ | 707,566 | $ | 707,566 | $ | 707,566 | $ | — | $ | — | ||||||||||
Deposits with stated maturities | 259,355 | 260,498 | — | — | 260,498 | |||||||||||||||
Short-term borrowings | 33,593 | 33,593 | 33,593 | — | — | |||||||||||||||
All other borrowings | 64,420 | 67,962 | — | — | 67,962 | |||||||||||||||
Accrued interest payable | 1,622 | 1,622 | 1,622 | — | — | |||||||||||||||
Fair value swap liability | 84 | 84 | — | — | 84 |
December 31, 2016 | ||||||||||||||||||||
Carrying Value | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
FINANCIAL ASSETS: | ||||||||||||||||||||
Cash and cash equivalents | $ | 34,073 | $ | 34,073 | $ | 34,073 | $ | — | $ | — | ||||||||||
Investment securities – AFS | 127,077 | 127,077 | — | 127,077 | — | |||||||||||||||
Investment securities – HTM | 30,665 | 30,420 | — | 27,473 | 2,947 | |||||||||||||||
Regulatory stock | 5,484 | 5,484 | 5,484 | — | — | |||||||||||||||
Loans held for sale | 3,094 | 3,158 | 3,158 | — | — | |||||||||||||||
Loans, net of allowance for loan loss and unearned income | 873,832 | 869,960 | — | — | 869,960 | |||||||||||||||
Accrued interest income receivable | 3,116 | 3,116 | 3,116 | — | — | |||||||||||||||
Bank owned life insurance | 37,903 | 37,903 | 37,903 | — | — | |||||||||||||||
FINANCIAL LIABILITIES: | ||||||||||||||||||||
Deposits with no stated maturities | $ | 708,062 | $ | 708,062 | $ | 708,062 | $ | — | $ | — | ||||||||||
Deposits with stated maturities | 259,724 | 261,446 | — | — | 261,446 | |||||||||||||||
Short-term borrowings | 12,754 | 12,754 | 12,754 | — | — | |||||||||||||||
All other borrowings | 65,891 | 69,348 | — | — | 69,348 | |||||||||||||||
Accrued interest payable | 1,640 | 1,640 | 1,640 | — | — |
The fair value of cash and cash equivalents, regulatory stock, accrued interest income receivable, short-term borrowings, and accrued interest payable are equal to the current carrying value.
The fair value of investment securities is equal to the available quoted market price for similar securities. The fair value measurements consider observable data that may include dealer quoted market spreads, cash flows, the US Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. The Level 3 securities are valued by discounted cash flows using the US Treasury rate for the remaining term of the securities.
Loans held for sale are priced individually at market rates on the day that the loan is locked for commitment with an investor. All loans in the held for sale account conform to Fannie Mae underwriting guidelines, with the specific intent of the loan being purchased by an investor at the predetermined rate structure. Loans in the held for sale account have specific delivery dates that must be executed to protect the pricing commitment (typically a 30, 45, or 60 day lock period).
The net loan portfolio has been valued using a present value discounted cash flow. The discount rate used in these calculations is based upon the treasury yield curve adjusted for non-interest operating costs, credit loss, current market prices and assumed prepayment risk.
The fair value of bank owned life insurance is based upon the cash surrender value of the underlying policies and matches the book value.
Deposits with stated maturities have been valued using a present value discounted cash flow with a discount rate approximating current market for similar assets and liabilities. Deposits with no stated maturities have an estimated fair value equal to both the amount payable on demand and the recorded book balance.
The fair value of all other borrowings is based on the discounted value of contractual cash flows. The discount rates are estimated using rates currently offered for similar instruments with similar remaining maturities.
The fair values of the fair value swaps used forinclude advances from Federal Home Loan Bank, guaranteed junior subordinated deferrable interest rate risk management represents the amount the Company would have expected to receive or pay to terminate such agreements.
Commitments to extend creditdebentures, and standby letters of credit are financial instruments generally not subject to sale, and fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, is not considered material for disclosure. The contractual amounts of unfunded commitments are presented in Note 16.
subordinated debt.
The loan portfolio attained the second highest quarterly average level since the third quarter of 2016. Deposits on average in the third quarter of 2017 were at an all-time record and at $981 million are almost within reach of one billionnet income for the first time ever. However, these are static numbers measured at a point in time but revenues were not static. Revenues measure the payments by third party customers for products and services. In the third quarter of 2017, AmeriServ recorded a 5% increase in gross revenues when compared with the third quarter of 2016. At the very same time through the first ninesix months of 2017, AmeriServ non-interest expenses have declined by almost $600,000. This combination of increasing revenues and declining expenses enabled AmeriServ2019. Overall, our Company is well positioned to report its best quarter since the third quarter of 2015.
The Federal Reserve has begun to increase interest rates from the virtually zero level of the last eight years. While it has been anbuild on again, off again proposition at the Fed, national interest rates have been on the increase since a year ago. Management took advantage of these higher rates to begin to reformat the securities portfolio. This process has produced a 31% increasethis positive momentum in the securities portfolio revenue over the third quarter of 2016, while controlling the level of risk in the portfolio.
Banking is not a static industry, for it is a reflection of the dynamics at work in the national economy, the regional economy and the local economy. Each of these economies is a reflection of the millions of individual decisions by Americans pursuing their own separate initiatives. It then becomes the responsibility of the Board and this Management team to plot a course which accommodates these complexities. There is no formula which has ever been fool proof. Rather it is the daily balancing of risk against reward that decides the winners and losers.
Given these larger forces at work, AmeriServ is and should conduct itself as a financial franchise in transition. It has grown from a weak source of loans in its markets to an active lender. AmeriServ has now completed over four consecutive years when it has loaned over 90% of its deposits to smaller and mid-sized local and regional business and consumers. This is a full 10% more than similar sized community banks in the United States. We believe lending to small businesses is our role in keeping the economy recovering from its series of negative events.
Also during those same four years of active lending, AmeriServ’s loan losses have been less than a third of the losses of similar sized community banks in the United States.
Concurrently, AmeriServ’s stand-alone Trust and Wealth Management Company has been transitioning. It now has approximately $2 billion of assets under management and administration. More thansecond half of that $2 billion is investments2019 in retirement savings programs. AmeriServ provides investment guidance, safekeepingboth our community banking and administrative support so thatwealth management businesses. We will continue to utilize our friends and neighbors can devote their energiesBanking for Life message to their professions and careers. It is a very positive program and one which we are proud to watch grow.
During the first nine months of 2017, the AmeriServ Board of Directors conducted a complete review of its structure and activities. The Board confirmed its committee-oriented management structure. It defined its role as one of oversight and not of management. It is clear that the role of the Board is to represent not themselves but every AmeriServ shareholder. The full Board discussed this report of the Corporate Governance Committee and adopted it unanimously on July 15, 2017. This vote has set in motion a transition within the Board to be certain that the interest of the shareholders should be pre-eminent throughout the Company.
The economy has been continuing its slow recovery so this has been a good time to analyze the course and to structure the Company to be both relevant and rewarding in the days ahead. A new strategic plan, a reconstituted Board of Directors, and a rededication to continue the improvements in profitability have resulted. The positive impact has been demonstrated by the third quarter results. The eight cents level of earnings per share during the quarter provides a solid base for the hope of continued growth in earnings.
…PERFORMANCE OVERVIEW…2018
| | | Three months ended June 30, 2019 | | | Three months ended June 30, 2018 | | ||||||
Net income | | | | $ | 1,792 | | | | | $ | 1,744 | | |
Diluted earnings per share | | | | | 0.10 | | | | | | 0.10 | | |
Return on average assets (annualized) | | | | | 0.61% | | | | | | 0.60% | | |
Return on average equity (annualized) | | | | | 7.24% | | | | | | 7.30% | | |
Three months ended September 30, 2017 | Three months ended September 30, 2016 | |||||||
Net income | $ | 1,551 | $ | 1,065 | ||||
Net income available to common shareholders | 1,551 | 1,065 | ||||||
Diluted earnings per share | 0.08 | 0.06 | ||||||
Return on average assets (annualized) | 0.53 | % | 0.37 | % | ||||
Return on average equity (annualized) | 6.37 | % | 4.27 | % |
The Company reported third quarter 2017 net income available to common shareholders of $1,551,000, or $0.08 per diluted common share. This earnings performance represented an increase of $486,000, or 45.6%, from the third quarter of 2016 where net income available to common shareholders totaled $1,065,000, or $0.06 per diluted common share. The improved earnings in the third quarter of 2017 resulted from a favorable combination of increased total revenue, reduced non-interest expense and a controlled loan loss provision. The balance sheet is well positioned for higher interest rates as demonstrated in the form of increased net interest income in the third quarter of 2017. Additionally, the Company benefited from several profitability improvement initiatives.
…NET.....NET INTEREST INCOME AND MARGIN…MARGIN..... The Company’s net interest income represents the amount by which interest income on average earning assets exceeds interest paid on average interest bearing liabilities. Net interest income is a primary source of the Company’s earnings, and it is effected by interest rate fluctuations as well as changes in the amount and mix of average earning assets and average interest bearing liabilities. The following table compares the Company’s net interest income performance for the thirdsecond quarter of 20172019 to the thirdsecond quarter of 20162018 (in thousands, except percentages):
| | | Three months ended June 30, 2019 | | | Three months ended June 30, 2018 | | | $ Change | | | % Change | | ||||||||||||
Interest income | | | | $ | 12,765 | | | | | $ | 11,603 | | | | | $ | 1,162 | | | | | | 10.0% | | |
Interest expense | | | | | 3,704 | | | | | | 2,745 | | | | | | 959 | | | | | | 34.9 | | |
Net interest income | | | | $ | 9,061 | | | | | $ | 8,858 | | | | | $ | 203 | | | | | | 2.3 | | |
Net interest margin | | | | | 3.30% | | | | | | 3.28% | | | | | | 0.02% | | | | | | N/M | | |
Three months ended September 30, 2017 | Three months ended September 30, 2016 | $ Change | % Change | |||||||||||||
Interest income | $ | 11,187 | $ | 10,476 | $ | 711 | 6.8 | % | ||||||||
Interest expense | 2,250 | 1,970 | 280 | 14.2 | ||||||||||||
Net interest income | $ | 8,937 | $ | 8,506 | $ | 431 | 5.1 | |||||||||
Net interest margin | 3.28 | % | 3.15 | % | 0.13 | N/M |
additional securities and grow the portfolio. As a result, interest on investments increased between the thirdsecond quarter of 20172019 and the thirdsecond quarter of 20162018 by $318,000$279,000, or 31.4%19.6%.
between years.
34.9%, when compared to 2018.
| | | 2019 | | | 2018 | | ||||||||||||||||||||||||||||||
| | | Average Balance | | | Interest Income/ Expense | | | Yield/ Rate | | | Average Balance | | | Interest Income/ Expense | | | Yield/ Rate | | ||||||||||||||||||
Interest earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans and loans held for sale, net of unearned income | | | | $ | 883,315 | | | | | $ | 11,000 | | | | | | 4.94% | | | | | $ | 882,675 | | | | | $ | 10,130 | | | | | | 4.56% | | |
Short-term investment in money market funds and bank deposits | | | | | 6,833 | | | | | | 66 | | | | | | 3.79 | | | | | | 7,670 | | | | | | 52 | | | | | | 2.64 | | |
Investment securities – AFS | | | | | 158,579 | | | | | | 1,314 | | | | | | 3.34 | | | | | | 143,357 | | | | | | 1,101 | | | | | | 3.07 | | |
Investment securities – HTM | | | | | 40,982 | | | | | | 391 | | | | | | 3.73 | | | | | | 39,264 | | | | | | 325 | | | | | | 3.31 | | |
Total investment securities | | | | | 199,561 | | | | | | 1,705 | | | | | | 3.42 | | | | | | 182,621 | | | | | | 1,426 | | | | | | 3.12 | | |
Total interest earning assets/interest income | | | | | 1,089,709 | | | | | | 12,771 | | | | | | 4.66 | | | | | | 1,072,966 | | | | | | 11,608 | | | | | | 4.31 | | |
Non-interest earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | | | | 19,367 | | | | | | | | | | | | | | | | | | 21,857 | | | | | | | | | | | | | | |
Premises and equipment | | | | | 18,795 | | | | | | | | | | | | | | | | | | 12,345 | | | | | | | | | | | | | | |
Other assets | | | | | 63,251 | | | | | | | | | | | | | | | | | | 62,406 | | | | | | | | | | | | | | |
Allowance for loan losses | | | | | (8,184) | | | | | | | | | | | | | | | | | | (10,035) | | | | | | | | | | | | | | |
TOTAL ASSETS | | | | $ | 1,182,938 | | | | | | | | | | | | | | | | | $ | 1,159,539 | | | | | | | | | | | | | | |
Interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest bearing deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest bearing demand | | | | $ | 169,029 | | | | | $ | 424 | | | | | | 1.01% | | | | | $ | 129,026 | | | | | $ | 261 | | | | | | 0.81% | | |
Savings | | | | | 97,884 | | | | | | 41 | | | | | | 0.17 | | | | | | 99,268 | | | | | | 41 | | | | | | 0.17 | | |
Money markets | | | | | 235,058 | | | | | | 662 | | | | | | 1.13 | | | | | | 248,983 | | | | | | 601 | | | | | | 0.97 | | |
Time deposits | | | | | 323,080 | | | | | | 1,740 | | | | | | 2.16 | | | | | | 295,164 | | | | | | 1,070 | | | | | | 1.45 | | |
Total interest bearing deposits | | | | | 825,051 | | | | | | 2,867 | | | | | | 1.39 | | | | | | 772,441 | | | | | | 1,973 | | | | | | 1.02 | | |
Short-term borrowings | | | | | 20,363 | | | | | | 136 | | | | | | 2.64 | | | | | | 33,731 | | | | | | 170 | | | | | | 1.99 | | |
Advances from Federal Home Loan Bank | | | | | 50,571 | | | | | | 261 | | | | | | 2.07 | | | | | | 44,998 | | | | | | 192 | | | | | | 1.71 | | |
Guaranteed junior subordinated deferrable interest debentures | | | | | 13,085 | | | | | | 281 | | | | | | 8.60 | | | | | | 13,085 | | | | | | 280 | | | | | | 8.57 | | |
Subordinated debt | | | | | 7,650 | | | | | | 130 | | | | | | 6.80 | | | | | | 7,650 | | | | | | 130 | | | | | | 6.80 | | |
Lease liabilities | | | | | 4,188 | | | | | | 29 | | | | | | 2.81 | | | | | | — | | | | | | — | | | | | | — | | |
Total interest bearing liabilities/interest expense | | | | | 920,908 | | | | | | 3,704 | | | | | | 1.61 | | | | | | 871,905 | | | | | | 2,745 | | | | | | 1.26 | | |
Non-interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Demand deposits | | | | | 155,250 | | | | | | | | | | | | | | | | | | 183,323 | | | | | | | | | | | | | | |
Other liabilities | | | | | 7,409 | | | | | | | | | | | | | | | | | | 8,471 | | | | | | | | | | | | | | |
Shareholders’ equity | | | | | 99,371 | | | | | | | | | | | | | | | | | | 95,840 | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | $ | 1,182,938 | | | | | | | | | | | | | | | | | $ | 1,159,539 | | | | | | | | | | | | | | |
Interest rate spread | | | | | | | | | | | | | | | | | 3.05 | | | | | | | | | | | | | | | | | | 3.05 | | |
Net interest income/Net interest margin | | | | | | | | | | | 9,067 | | | | | | 3.30% | | | | | | | | | | | | 8,863 | | | | | | 3.28% | | |
Tax-equivalent adjustment | | | | | | | | | | | (6) | | | | | | | | | | | | | | | | | | (5) | | | | | | | | |
Net Interest Income | | | | | | | | | | $ | 9,061 | | | | | | | | | | | | | | | | | $ | 8,858 | | | | | | | | |
|
2017 | 2016 | |||||||||||||||||||||||
Average Balance | Interest Income/ Expense | Yield/ Rate | Average Balance | Interest Income/ Expense | Yield/ Rate | |||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||
Loans and loans held for sale, net of unearned income | $ | 892,198 | $ | 9,865 | 4.35 | % | $ | 893,143 | $ | 9,469 | 4.17 | % | ||||||||||||
Interest bearing deposits | 1,026 | 3 | 1.26 | 1,065 | 2 | 0.59 | ||||||||||||||||||
Short-term investment in money market funds | 8,921 | 42 | 1.86 | 20,797 | 31 | 0.58 | ||||||||||||||||||
Investment securities – AFS | 136,084 | 973 | 2.86 | 121,567 | 779 | 2.56 | ||||||||||||||||||
Investment securities – HTM | 38,700 | 314 | 3.25 | 27,041 | 202 | 2.99 | ||||||||||||||||||
Total investment securities | 174,784 | 1,287 | 2.95 | 148,608 | 981 | 2.64 | ||||||||||||||||||
Total interest earning assets/interest income | 1,076,929 | 11,197 | 4.11 | 1,063,613 | 10,483 | 3.89 | ||||||||||||||||||
Non-interest earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 22,082 | 21,675 | ||||||||||||||||||||||
Premises and equipment | 12,467 | 11,887 | ||||||||||||||||||||||
Other assets | 67,240 | 68,660 | ||||||||||||||||||||||
Allowance for loan losses | (10,537 | ) | (9,794 | ) | ||||||||||||||||||||
TOTAL ASSETS | $ | 1,168,181 | $ | 1,156,041 | ||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||
Interest bearing deposits: | ||||||||||||||||||||||||
Interest bearing demand | $ | 131,493 | $ | 180 | 0.54 | % | $ | 111,040 | $ | 84 | 0.29 | % | ||||||||||||
Savings | 98,184 | 41 | 0.17 | 96,593 | 41 | 0.17 | ||||||||||||||||||
Money markets | 277,948 | 380 | 0.54 | 285,358 | 308 | 0.43 | ||||||||||||||||||
Time deposits | 292,054 | 1,017 | 1.38 | 302,610 | 958 | 1.26 | ||||||||||||||||||
Total interest bearing deposits | 799,679 | 1,618 | 0.80 | 795,601 | 1,391 | 0.70 | ||||||||||||||||||
Short-term borrowings | 13,179 | 44 | 1.29 | 1,309 | 2 | 0.53 | ||||||||||||||||||
Advances from Federal Home Loan Bank | 45,997 | 178 | 1.53 | 49,852 | 166 | 1.32 | ||||||||||||||||||
Guaranteed junior subordinated deferrable interest debentures | 13,085 | 280 | 8.57 | 13,085 | 280 | 8.57 | ||||||||||||||||||
Subordinated debt | 7,650 | 130 | 6.80 | 7,650 | 131 | 6.88 | ||||||||||||||||||
Total interest bearing liabilities/interest expense | 879,590 | 2,250 | 1.02 | 867,497 | 1,970 | 0.90 | ||||||||||||||||||
Non-interest bearing liabilities: | ||||||||||||||||||||||||
Demand deposits | 181,356 | 181,365 | ||||||||||||||||||||||
Other liabilities | 10,628 | 7,931 | ||||||||||||||||||||||
Shareholders’ equity | 96,607 | 99,248 | ||||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,168,181 | $ | 1,156,041 | ||||||||||||||||||||
Interest rate spread | 3.09 | 2.99 | ||||||||||||||||||||||
Net interest income/Net interest margin | 8,947 | 3.28 | % | 8,513 | 3.15 | % | ||||||||||||||||||
Tax-equivalent adjustment | (10 | ) | (7 | ) | ||||||||||||||||||||
Net Interest Income | $ | 8,937 | $ | 8,506 |
…NON-INTEREST INCOME…2018.
…NON-INTEREST EXPENSE…
…PERFORMANCE OVERVIEW…2018
| | | Six months ended June 30, 2019 | | | Six months ended June 30, 2018 | | ||||||
Net income | | | | $ | 3,670 | | | | | $ | 3,511 | | |
Diluted earnings per share | | | | | 0.21 | | | | | | 0.19 | | |
Return on average assets (annualized) | | | | | 0.63% | | | | | | 0.61% | | |
Return on average equity (annualized) | | | | | 7.53% | | | | | | 7.42% | | |
Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | |||||||
Net income | $ | 4,288 | $ | 1,160 | ||||
Net income available to common shareholders | 4,288 | 1,145 | ||||||
Diluted earnings per share | 0.23 | 0.06 | ||||||
Return on average assets (annualized) | 0.49 | % | 0.14 | % | ||||
Return on average equity (annualized) | 5.98 | % | 1.54 | % |
The
…NETCompany’s ongoing common stock buyback program.
| | | Six months ended June 30, 2019 | | | Six months ended June 30, 2018 | | | $ Change | | | % Change | | ||||||||||||
Interest income | | | | $ | 24,929 | | | | | $ | 22,820 | | | | | $ | 2,109 | | | | | | 9.2% | | |
Interest expense | | | | | 7,211 | | | | | | 5,214 | | | | | | 1,997 | | | | | | 38.3 | | |
Net interest income | | | | $ | 17,718 | | | | | $ | 17,606 | | | | | $ | 112 | | | | | | 0.6 | | |
Net interest margin | | | | | 3.27% | | | | | | 3.28% | | | | | | (0.01) | | | | | | N/M | | |
Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | $ Change | % Change | |||||||||||||
Interest income | $ | 32,986 | $ | 31,287 | $ | 1,699 | 5.4 | % | ||||||||
Interest expense | 6,429 | 5,737 | 692 | 12.1 | ||||||||||||
Net interest income | $ | 26,557 | $ | 25,550 | $ | 1,007 | 3.9 | |||||||||
Net interest margin | 3.27 | % | 3.23 | % | 0.04 | N/M |
2017. The Company has also benefitted from a higher level of income from loan charges.2018. Overall, total interest income increased by $1.7$2.1 million, or 5.4%9.2%, in the first nine monthshalf of 2017.
2019, as compared to the same period in 2018.
Nineand municipal securities for the six months ended SeptemberJune 30, 2019 and 2018 was $12,000 and $11,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table. Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material.
| | | 2019 | | | 2018 | | ||||||||||||||||||||||||||||||
| | | Average Balance | | | Interest Income/ Expense | | | Yield/ Rate | | | Average Balance | | | Interest Income/ Expense | | | Yield/ Rate | | ||||||||||||||||||
Interest earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans and loans held for sale, net of unearned income | | | | $ | 871,742 | | | | | $ | 21,424 | | | | | | 4.90% | | | | | $ | 882,080 | | | | | $ | 19,954 | | | | | | 4.51% | | |
Short-term investment in money market funds and bank deposits | | | | | 7,813 | | | | | | 141 | | | | | | 3.58 | | | | | | 7,914 | | | | | | 99 | | | | | | 2.48 | | |
Investment securities – AFS | | | | | 157,844 | | | | | | 2,633 | | | | | | 3.34 | | | | | | 140,693 | | | | | | 2,130 | | | | | | 3.03 | | |
Investment securities – HTM | | | | | 41,118 | | | | | | 743 | | | | | | 3.61 | | | | | | 39,184 | | | | | | 648 | | | | | | 3.31 | | |
Total investment securities | | | | | 198,962 | | | | | | 3,376 | | | | | | 3.40 | | | | | | 179,877 | | | | | | 2,778 | | | | | | 3.09 | | |
Total interest earning assets/interest income | | | | | 1,078,517 | | | | | | 24,941 | | | | | | 4.62 | | | | | | 1,069,871 | | | | | | 22,831 | | | | | | 4.27 | | |
Non-interest earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | | | | 20,633 | | | | | | | | | | | | | | | | | | 21,858 | | | | | | | | | | | | | | |
Premises and equipment | | | | | 17,053 | | | | | | | | | | | | | | | | | | 12,484 | | | | | | | | | | | | | | |
Other assets | | | | | 62,667 | | | | | | | | | | | | | | | | | | 62,390 | | | | | | | | | | | | | | |
Allowance for loan losses | | | | | (8,425) | | | | | | | | | | | | | | | | | | (10,143) | | | | | | | | | | | | | | |
TOTAL ASSETS | | | | $ | 1,170,445 | | | | | | | | | | | | | | | | | $ | 1,156,460 | | | | | | | | | | | | | | |
|
2017 | 2016 | |||||||||||||||||||||||
Average Balance | Interest Income/ Expense | Yield/ Rate | Average Balance | Interest Income/ Expense | Yield/ Rate | |||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||
Loans and loans held for sale, net of unearned income | $ | 894,088 | $ | 29,219 | 4.33 | % | $ | 887,681 | $ | 28,358 | 4.22 | % | ||||||||||||
Interest bearing deposits | 1,029 | 8 | 1.03 | 1,871 | 11 | 0.71 | ||||||||||||||||||
Short-term investment in money market funds | 8,049 | 93 | 1.52 | 12,987 | 54 | 0.55 | ||||||||||||||||||
Investment securities – AFS | 135,131 | 2,819 | 2.78 | 120,710 | 2,324 | 2.57 | ||||||||||||||||||
Investment securities – HTM | 36,854 | 877 | 3.17 | 24,482 | 562 | 3.06 | ||||||||||||||||||
Total investment securities | 171,985 | 3,696 | 2.87 | 145,192 | 2,886 | 2.65 | ||||||||||||||||||
Total interest earning assets/interest income | 1,075,151 | 33,016 | 4.08 | 1,047,731 | 31,309 | 3.96 | ||||||||||||||||||
Non-interest earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 22,214 | 19,883 | ||||||||||||||||||||||
Premises and equipment | 12,095 | 11,982 | ||||||||||||||||||||||
Other assets | 67,552 | 68,351 | ||||||||||||||||||||||
Allowance for loan losses | (10,290 | ) | (9,777 | ) | ||||||||||||||||||||
TOTAL ASSETS | $ | 1,166,722 | $ | 1,138,170 | ||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||
Interest bearing deposits: | ||||||||||||||||||||||||
Interest bearing demand | $ | 129,923 | $ | 450 | 0.46 | % | $ | 106,983 | $ | 231 | 0.29 | % | ||||||||||||
Savings | 97,852 | 122 | 0.17 | 96,149 | 119 | 0.16 | ||||||||||||||||||
Money markets | 276,958 | 1,047 | 0.51 | 275,226 | 876 | 0.42 | ||||||||||||||||||
Time deposits | 290,598 | 2,939 | 1.35 | 286,966 | 2,749 | 1.28 | ||||||||||||||||||
Total interest bearing deposits | 795,331 | 4,558 | 0.77 | 765,324 | 3,975 | 0.69 | ||||||||||||||||||
Short-term borrowings | 15,390 | 130 | 1.13 | 11,480 | 49 | 0.56 | ||||||||||||||||||
Advances from Federal Home Loan Bank | 45,785 | 511 | 1.49 | 49,356 | 484 | 1.31 | ||||||||||||||||||
Guaranteed junior subordinated deferrable interest debentures | 13,085 | 840 | 8.57 | 13,085 | 840 | 8.57 | ||||||||||||||||||
Subordinated debt | 7,650 | 390 | 6.80 | 7,650 | 389 | 6.78 | ||||||||||||||||||
Total interest bearing liabilities/interest expense | 877,241 | 6,429 | 0.98 | 846,895 | 5,737 | 0.90 | ||||||||||||||||||
Non-interest bearing liabilities: | ||||||||||||||||||||||||
Demand deposits | 181,924 | 182,003 | ||||||||||||||||||||||
Other liabilities | 11,630 | 8,683 | ||||||||||||||||||||||
Shareholders’ equity | 95,927 | 100,589 | ||||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,166,722 | $ | 1,138,170 | ||||||||||||||||||||
Interest rate spread | 3.10 | 3.06 | ||||||||||||||||||||||
Net interest income/Net interest margin | 26,587 | 3.27 | % | 25,572 | 3.23 | % | ||||||||||||||||||
Tax-equivalent adjustment | (30 | ) | (22 | ) | ||||||||||||||||||||
Net Interest Income | $ | 26,557 | $ | 25,550 |
| | | 2019 | | | 2018 | | ||||||||||||||||||||||||||||||
| | | Average Balance | | | Interest Income/ Expense | | | Yield/ Rate | | | Average Balance | | | Interest Income/ Expense | | | Yield/ Rate | | ||||||||||||||||||
Interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest bearing deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest bearing demand | | | | $ | 166,461 | | | | | $ | 833 | | | | | | 1.01% | | | | | $ | 131,202 | | | | | $ | 503 | | | | | | 0.77% | | |
Savings | | | | | 97,867 | | | | | | 81 | | | | | | 0.17 | | | | | | 98,286 | | | | | | 81 | | | | | | 0.17 | | |
Money markets | | | | | 238,393 | | | | | | 1,336 | | | | | | 1.13 | | | | | | 251,325 | | | | | | 1,023 | | | | | | 0.82 | | |
Time deposits | | | | | 319,235 | | | | | | 3,347 | | | | | | 2.11 | | | | | | 294,510 | | | | | | 2,147 | | | | | | 1.47 | | |
Total interest bearing deposits | | | | | 821,956 | | | | | | 5,597 | | | | | | 1.37 | | | | | | 775,323 | | | | | | 3,754 | | | | | | 0.98 | | |
Short-term borrowings | | | | | 17,888 | | | | | | 238 | | | | | | 2.64 | | | | | | 27,996 | | | | | | 262 | | | | | | 1.86 | | |
Advances from Federal Home Loan Bank | | | | | 48,777 | | | | | | 496 | | | | | | 2.04 | | | | | | 45,418 | | | | | | 378 | | | | | | 1.68 | | |
Guaranteed junior subordinated deferrable interest debentures | | | | | 13,085 | | | | | | 561 | | | | | | 8.57 | | | | | | 13,085 | | | | | | 560 | | | | | | 8.57 | | |
Subordinated debt | | | | | 7,650 | | | | | | 260 | | | | | | 6.80 | | | | | | 7,650 | | | | | | 260 | | | | | | 6.80 | | |
Lease liabilities | | | | | 2,797 | | | | | | 59 | | | | | | 4.23 | | | | | | — | | | | | | — | | | | | | — | | |
Total interest bearing liabilities/interest expense | | | | | 912,153 | | | | | | 7,211 | | | | | | 1.59 | | | | | | 869,472 | | | | | | 5,214 | | | | | | 1.21 | | |
Non-interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Demand deposits | | | | | 152,748 | | | | | | | | | | | | | | | | | | 182,769 | | | | | | | | | | | | | | |
Other liabilities | | | | | 7,276 | | | | | | | | | | | | | | | | | | 8,821 | | | | | | | | | | | | | | |
Shareholders’ equity | | | | | 98,268 | | | | | | | | | | | | | | | | | | 95,398 | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | $ | 1,170,445 | | | | | | | | | | | | | | | | | $ | 1,156,460 | | | | | | | | | | | | | | |
Interest rate spread | | | | | | | | | | | | | | | | | 3.03 | | | | | | | | | | | | | | | | | | 3.06 | | |
Net interest income/Net interest margin | | | | | | | | | | | 17,730 | | | | | | 3.27% | | | | | | | | | | | | 17,617 | | | | | | 3.28% | | |
Tax-equivalent adjustment | | | | | | | | | | | (12) | | | | | | | | | | | | | | | | | | (11) | | | | | | | | |
Net Interest Income | | | | | | | | | | $ | 17,718 | | | | | | | | | | | | | | | | | $ | 17,606 | | | | | | | | |
|
…NON-INTEREST INCOME…2019.
…NON-INTEREST EXPENSE… Non-interest expense for the first nine months of 2017 totaled $30.5 million and decreased by $590,000, or 1.9%, from the prior year’s first nine months. Factors contributing to the lower non-interest expense in 2017 included:
…INCOME TAX EXPENSE… The Company recorded an income tax expense of $1.9 million, or an effective tax rate of 31.2%, in the first nine months of 2017. This compares to the income tax expense of $474,000, or an effective tax rate of 29.0% for the first nine months of 2016. The higher income tax expense and effective tax rate was due to the Company’s increased earnings.
…SEGMENT RESULTS… Retail banking’s net income contribution was $794,000 in the third quarter of 2017 and $2.2 million for the first nine months of 2017 which was down by $63,000 and $176,000 from the net income contribution for the same 2016 periods. These decreases to both time periods reflects a higher volume of fixed rate residential mortgage loans being sold in the secondary market resulting in a lower volume held on our balance sheet. Interest expense is also higher between years due to higher deposit totals as certain indexed money market accounts repricing upward with the increases to the fed funds rate. Favorably impacting the retail segments income in both time periods was a lower level of non-interest expense due to the Company’s focus on reducing and controlling costs which resulted in lower employee and occupancy expenses due to the State College branch consolidation. Finally, FDIC insurance expense and miscellaneous expenses are also lower in 2017.
The commercial banking segment reported net income of $1.4 million in the third quarter of 2017 and $4.3 million for the first nine months of 2017 which was $60,000 and $2.4 million higher when compared to the same of 2016 results. The higher level of income for the first nine months of 2017 was due to the lower provision for loan losses. The higher loan loss provision in 2016 was necessary to resolve the troubled energy sector loan that had a significant negative impact to reported net income in 2016. Growth in commercial real estate loans over the past year also contributed to the higher level of net income for both the nine month and quarterly time periods. In addition to the growth experienced in the CRE portfolio, which contributed to the higher level of income quarter versus quarter, the commercial banking segments also benefitted from a lower level of non-interest expense due to the closure of the Harrisonburg, Virginia loan production office and additional operation efficiencies. Also, a decrease in classified assets and the level of delinquency since the second quarter of this year contributed to the lower provision expense.
The trust segment reported net income of $335,000 in the third quarter of 2017 and $991,000 for the first nine months of 2017 which was $140,000 higher than the 2016 quarter and $251,000 higher than the first nine months of 2016. The increases to total income occurred as expenses returned to a more normal level after additional costs were necessary in 2016 to address a trust operations trading error. Also, the higher level of net income results from continued effective management of existing customer accounts as asset market values have improved. Finally, income from the Financial Services business unit increased as wealth management continues to be an important strategic focus of the Company. Additionally, and slightly offsetting the favorable items mentioned above was additional investment in talent, which contributed to higher salaries and benefits expense.
The investment/parent segment reported a net loss of $1.0 million$1,534,000 in the thirdsecond quarter of 20172019 and a net loss of $3.2 million$3,048,000 for the first ninesix months of 2017,2019 which resulted inis a lowergreater loss by $349,000 and $642,000 from the 2016 results$452,000 for the same periods.quarter and $959,000 for the first six months of 2018. The decreasedincreased loss between years is reflectivewas the result of overnight borrowed funds having a higher cost due to the higher level of investment securities onincrease to national interest rates during 2018 and the Company’s balance sheet resulting fromimmediate impact that the Company’s strategic decision to purchase more high quality corporate and taxable municipal securities in 2017. Even with this improvement, this segment continues to feel the most earnings pressure from the continued lowrising interest rate environment.
…BALANCE SHEET….....BALANCE SHEET.....The Company’s total consolidated assets were $1.171$1.19 billion at SeptemberJune 30, 2017,2019, which increased by $17.1$29.9 million, or 1.5%2.6%, from the December 31, 20162018 asset level. The increaseThis change was driven primarily by the growth inan increased level of investment securities, loans, and investment securities.fixed assets. Specifically, total loansinvestment securities grew by $12.4$3.3 million, or 1.4%1.8%, during the periodloans and was complementedloans held for sale increased by an additional $10.7$27.0 million, or 6.8%3.1%, growth in investment securities.
and as a result of the adoption of ASU 2016-02, Leases (Topic 842), the Company reported $4.1 million of right of use assets within the fixed assets line of the Consolidated Balance Sheet at June 30, 2019. These increases were partially offset by a reduction of total cash and cash equilvalents of $6.8 million, or 19.4%.
Additionally, the improved value of the investment securities portfolio had a positive impact on accumulated other comprehensive loss.
…LOAN QUALITY…2019 and improved by 11 basis points when compared to December 31, 2018.
| | | June 30, 2019 | | | December 31, 2018 | | ||||||
Total shareholders’ equity | | | | $ | 101,476 | | | | | $ | 97,977 | | |
Less: Goodwill | | | | | 11,944 | | | | | | 11,944 | | |
Tangible equity | | | | | 89,532 | | | | | | 86,033 | | |
Total assets | | | | | 1,190,583 | | | | | | 1,160,680 | | |
Less: Goodwill | | | | | 11,944 | | | | | | 11,944 | | |
Tangible assets | | | | | 1,178,639 | | | | | | 1,148,736 | | |
Tangible common equity ratio | | | | | 7.60% | | | | | | 7.49% | | |
Total shares outstanding | | | | | 17,384,355 | | | | | | 17,619,303 | | |
Tangible book value per share | | | | $ | 5.15 | | | | | $ | 4.88 | | |
| | | June 30, 2019 | | | December 31, 2018 | | | June 30, 2018 | | |||||||||
Total accruing loan delinquency (past due 30 to 89 days) | | | | $ | 3,253 | | | | | $ | 4,752 | | | | | $ | 3,137 | | |
Total non-accrual loans | | | | | 874 | | | | | | 1,221 | | | | | | 1,000 | | |
Total non-performing assets including TDR* | | | | | 1,681 | | | | | | 1,378 | | | | | | 1,160 | | |
Accruing loan delinquency, as a percentage of total loans, net of unearned income | | | | | 0.37% | | | | | | 0.55% | | | | | | 0.35% | | |
Non-accrual loans, as a percentage of total loans, net of unearned income | | | | | 0.10 | | | | | | 0.14 | | | | | | 0.11 | | |
Non-performing assets, as a percentage of total loans, net of unearned income, and other real estate owned | | | | | 0.19 | | | | | | 0.16 | | | | | | 0.13 | | |
Non-performing assets as a percentage of total assets | | | | | 0.14 | | | | | | 0.12 | | | | | | 0.10 | | |
As a percent of average loans, net of unearned income: | | | | | | | | | | | | | | | | | | | |
Annualized net charge-offs | | | | | 0.04 | | | | | | 0.11 | | | | | | 0.18 | | |
Annualized provision (credit) for loan losses | | | | | (0.09) | | | | | | (0.07) | | | | | | 0.02 | | |
Total classified loans (loans rated substandard or doubtful)** | | | | $ | 3,908 | | | | | $ | 4,302 | | | | | $ | 4,715 | | |
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||
Total accruing loan delinquency (past due 30 to 89 days) | $ | 9,052 | $ | 3,278 | $ | 3,194 | ||||||
Total non-accrual loans | 4,654 | 1,603 | 1,753 | |||||||||
Total non-performing assets including TDR* | 5,372 | 1,624 | 1,907 | |||||||||
Accruing loan delinquency, as a percentage of total loans, net of unearned income | 1.01 | % | 0.37 | % | 0.36 | % | ||||||
Non-accrual loans, as a percentage of total loans, net of unearned income | 0.52 | 0.18 | 0.20 | |||||||||
Non-performing assets, as a percentage of total loans, net of unearned income, and other real estate owned | 0.60 | 0.18 | 0.21 | |||||||||
Non-performing assets as a percentage of total assets | 0.46 | 0.14 | 0.17 | |||||||||
As a percent of average loans, net of unearned income: | ||||||||||||
Annualized net charge-offs | 0.05 | 0.44 | 0.58 | |||||||||
Annualized provision for loan losses | 0.11 | 0.44 | 0.55 | |||||||||
Total classified loans (loans rated substandard or doubtful) | $ | 8,140 | $ | 6,038 | $ | 5,203 |
the debt service on thesebelow 1% of total loans. It is believed that the Company’s loss exposure to these delinquent credits is limited since the loans are secured and have low loan to value ratios.
We also continue to closely monitor the loan portfolio given the continued slow recovery in the regional economy and the number of relatively large-sized commercial and commercial real estate loans within the portfolio. As of SeptemberJune 30, 2017,2019, the 25 largest credits represented 27.2%25.6% of total loans outstanding, which represents a slight increasedecrease from the thirdsecond quarter 2016of 2018 when it was 27.1%26.4%.
…ALLOWANCE
| | | June 30, 2019 | | | December 31, 2018 | | | June 30, 2018 | | |||||||||
Allowance for loan losses | | | | $ | 8,102 | | | | | $ | 8,671 | | | | | $ | 9,521 | | |
Allowance for loan losses as a percentage of each of the following: | | | | | | | | | | | | | | | | | | | |
total loans, net of unearned income | | | | | 0.91% | | | | | | 1.00% | | | | | | 1.07% | | |
total accruing delinquent loans (past due 30 to 89 days) | | | | | 249.06 | | | | | | 182.47 | | | | | | 303.51 | | |
total non-accrual loans | | | | | 927.00 | | | | | | 710.16 | | | | | | 951.15 | | |
total non-performing assets | | | | | 481.98 | | | | | | 629.25 | | | | | | 820.78 | | |
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||
Allowance for loan losses | $ | 10,346 | $ | 9,932 | $ | 9,726 | ||||||
Allowance for loan losses as a percentage of each of the following total loans, net of unearned income | 1.15 | % | 1.12 | % | 1.10 | % | ||||||
total accruing delinquent loans (past due 30 to 89 days) | 114.30 | 302.99 | 304.51 | |||||||||
total non-accrual loans | 222.30 | 619.59 | 554.82 | |||||||||
total non-performing assets | 192.59 | 611.58 | 510.02 |
The Company recorded a $750,000$400,000 loan loss provision recovery in the first six months of 2019 compared to a $100,000 provision expense for loan losses in the first ninesix months of 2017 compared to2018 that resulted in a $3.7 million provision for loan losses in the first nine monthspositive change of 2016 or a decrease of $2.9 million$500,000 between periods. The loan loss provision was at a more typical levelrecovery in 2017 and supports the continuing loan growth and the previously discussed higher2019 reflects our overall strong asset quality, reduced level of criticized loans when compared to 2016. The provision more than covered the low level ofand net loan charge-offs, incurred duringand the nine months.
…LIQUIDITY…lower six-month average loan portfolio balances.
2019.
believe that the holding company has strong liquidity to meet its trust preferred debt service requirements, its subordinated debt interest payments, its increased common stock dividends,dividend, and support itsthe common stock repurchase program.
…CAPITAL
On January 24, 2017, the Company’s Board of Directors approved a new common stock repurchase program which calls for AmeriServ Financial, Inc. to buy back up to 5% or approximately 945,000 shares of its outstanding common stock during the next 18 months. 2019.
On January 1, 2015, U.S. federal banking agencies implemented the new Basel III capital standards which establish the minimum capital levels in addition to be considered well-capitalized and revise the well capitalized requirements under the federal banking regulations prompt corrective action requirements under banking regulations. action. Under the Basel III capital standards, the minimum capital ratios are:
| | | Minimum capital ratio | | |||
Common equity tier 1 capital to risk-weighted assets | | | | | 4.5% | | |
Tier 1 capital to risk-weighted assets | | | | | 6.0 | | |
Total capital to risk-weighted assets | | | | | 8.0 | | |
Tier 1 capital to total average consolidated assets | | | | | 4.0 | | |
…INTEREST
Interest Rate Scenario | | | Variability of Net Interest Income | | | Change in Market Value of Portfolio Equity | | ||||||
200bp increase | | | | | 4.5% | | | | | | 24.1% | | |
100bp increase | | | | | 2.8 | | | | | | 14.9 | | |
100bp decrease | | | | | (4.2) | | | | | | (23.6) | | |
Interest Rate Scenario | Variability of Net Interest Income | Change in Market Value of Portfolio Equity | ||||||
200bp increase | 2.3 | % | 21.7 | % | ||||
100bp increase | 1.6 | 12.9 | ||||||
100bp decrease | (2.0 | ) | (18.0 | ) |
…OFF
Commercial and commercial real estate loans are the largest category of credits and the most sensitive to changes in assumptions and judgments underlying the determination of the allowance for loan loss.losses. Approximately $8.0$6.0 million, or 77%74%, of the total allowance for loan losses at SeptemberJune 30, 20172019 has been allocated to these two loan categories. This allocation also considers other relevant factors such as actual versus estimated losses, economic trends, delinquencies, levels of non-performing and TDRtroubled debt restructured (TDR) loans, concentrations of credit, trends in loan volume, experience and depth of management, examination and audit results, effects of any changes in lending policies and trends in policy, financial information and documentation exceptions. To the extent actual outcomes differ from management estimates, additional provision for loan losses may be required that would adversely impact earnings in future periods.
In relation to recording the provision for income taxes, management must estimate the future tax rates applicable to the reversal of tax differences, make certain assumptions regarding whether tax differences are permanent or temporary and the related timing of the expected reversal. Also, estimates are made as to whether taxable operating income in future periods will be sufficient to fully recognize any gross deferred tax assets. If recovery is not likely, we must increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. Alternatively, we may make estimates about the potential usage of deferred tax assets that decrease our valuation allowances. As of SeptemberJune 30, 2017,2019, we believe that all of the deferred tax assets recorded on our balance sheet will ultimately be recovered and that no valuation allowances were needed.
The challenge
Item 3.…QUANTITATIVE3.....QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK…RISK.....The Company manages market risk, which for the Company is primarily interest rate risk, through its asset liability management process and committee, see further discussion in Interest Rate Sensitivity section of the M.D. & A.
Period | | | Total number of shares purchased | | | Average price paid per share | | | Total number of shares purchased as part of publicly announced plan | | | Maximum number of shares that may yet be purchased under the plan | | ||||||||||||
April 1 – 30, 2019 | | | | | 6,000 | | | | | $ | 4.18 | | | | | | 6,000 | | | | | | 520,000 | | |
May 1 – 31, 2019 | | | | | 101,008 | | | | | | 4.25 | | | | | | 101,008 | | | | | | 418,992 | | |
June 1 – 30, 2019 | | | | | 54,546 | | | | | | 4.25 | | | | | | 54,546 | | | | | | 364,446 | | |
Total | | | | | 161,554 | | | | | | | | | | | | 161,554 | | | | | | | | |
Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plan | Maximum number of shares that may yet be purchased under the plan | ||||||||||||
July 1 – 31, 2017 | 33,400 | $ | 4.02 | 33,400 | 445,644 | |||||||||||
August 1 – 31, 2017 | 123,631 | 4.05 | 123,631 | 322,013 | ||||||||||||
September 1 – 30, 2017 | 63,373 | 3.99 | 63,373 | 258,640 | ||||||||||||
Total | 220,404 | $ | 4.03 | 220,404 |
In first six months of 2017, the Company was able to repurchase 465,956 shares at an average price of $4.01. On a year to date basis the Board of Director approved repurchase plan had a total of 686,360 shares repurchased at an average price of $4.02. This represents approximately 73% of the authorized repurchase plan.
None
AmeriServ Financial, Inc.Registrant
| | AmeriServ Financial, Inc. Registrant | | ||
| Date: August 12, 2019 | | | /s/ Jeffrey A. Stopko Jeffrey A. Stopko President and Chief Executive Officer | |
| Date: August 12, 2019 | | | /s/ Michael D. Lynch Michael D. Lynch Senior Vice President and Chief Financial Officer | |
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