☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Pennsylvania | ||||
(State or other jurisdiction of incorporation or organization) | | | 25-1424278 (I.R.S. Employer Identification No.) | |
Main & Franklin Streets, P.O. Box 430, Johnstown, PA | ||||
(Address of principal executive offices) | | | 15907-0430 (Zip Code) | |
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Large accelerated filer | | | Accelerated filer | | | Non-accelerated filer | |||||
| | Smaller reporting company | | ||||||||
| Emerging growth company | |
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Class | | | Outstanding at | | |
| Common Stock, par value $0.01 | | 17,746,691 | |
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PART I. FINANCIAL INFORMATION: | | | |||||||
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PART II. OTHER INFORMATION: | | | |||||||
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| | | September 30, 2018 | | | December 31, 2017 | | ||||||
ASSETS | | | | | | | | | | | | | |
Cash and due from depository institutions | | | | $ | 23,806 | | | | | $ | 26,234 | | |
Interest bearing deposits | | | | | 2,699 | | | | | | 2,698 | | |
Short-term investments in money market funds | | | | | 4,729 | | | | | | 5,256 | | |
Total cash and cash equivalents | | | | | 31,234 | | | | | | 34,188 | | |
Investment securities: | | | | | | | | | | | | | |
Available for sale, at fair value | | | | | 138,753 | | | | | | 129,138 | | |
Held to maturity (fair value $37,345 on September 30, 2018 and $38,811 on December 31, 2017) | | | | | 38,673 | | | | | | 38,752 | | |
Loans held for sale | | | | | 1,041 | | | | | | 3,125 | | |
Loans | | | | | 883,672 | | | | | | 890,032 | | |
Less: Unearned income | | | | | 339 | | | | | | 399 | | |
Allowance for loan losses | | | | | 9,439 | | | | | | 10,214 | | |
Net loans | | | | | 873,894 | | | | | | 879,419 | | |
Premises and equipment, net | | | | | 12,276 | | | | | | 12,734 | | |
Accrued interest income receivable | | | | | 4,007 | | | | | | 3,603 | | |
Goodwill | | | | | 11,944 | | | | | | 11,944 | | |
Bank owned life insurance | | | | | 38,260 | | | | | | 37,860 | | |
Net deferred tax asset | | | | | 5,985 | | | | | | 5,963 | | |
Federal Home Loan Bank stock | | | | | 5,010 | | | | | | 4,675 | | |
Federal Reserve Bank stock | | | | | 2,125 | | | | | | 2,125 | | |
Other assets | | | | | 5,604 | | | | | | 4,129 | | |
TOTAL ASSETS | | | | $ | 1,168,806 | | | | | $ | 1,167,655 | | |
LIABILITIES | | | | | | | | | | | | | |
Non-interest bearing deposits | | | | $ | 152,959 | | | | | $ | 183,603 | | |
Interest bearing deposits | | | | | 791,254 | | | | | | 764,342 | | |
Total deposits | | | | | 944,213 | | | | | | 947,945 | | |
Short-term borrowings | | | | | 61,254 | | | | | | 49,084 | | |
Advances from Federal Home Loan Bank | | | | | 42,545 | | | | | | 46,229 | | |
Guaranteed junior subordinated deferrable interest debentures, net | | | | | 12,935 | | | | | | 12,923 | | |
Subordinated debt, net | | | | | 7,482 | | | | | | 7,465 | | |
Total borrowed funds | | | | | 124,216 | | | | | | 115,701 | | |
Other liabilities | | | | | 3,198 | | | | | | 8,907 | | |
TOTAL LIABILITIES | | | | | 1,071,627 | | | | | | 1,072,553 | | |
SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | |
Common stock, par value $0.01 per share; 30,000,000 shares authorized; 26,609,811 shares issued and 17,767,313 outstanding on September 30, 2018; 26,585,403 shares issued and 18,128,247 outstanding on December 31, 2017 | | | | | 266 | | | | | | 266 | | |
Treasury stock at cost, 8,842,498 shares on September 30, 2018 and 8,457,156 on December 31, 2017 | | | | | (79,941) | | | | | | (78,233) | | |
Capital surplus | | | | | 145,779 | | | | | | 145,707 | | |
Retained earnings | | | | | 45,160 | | | | | | 40,312 | | |
Accumulated other comprehensive loss, net | | | | | (14,085) | | | | | | (12,950) | | |
TOTAL SHAREHOLDERS’ EQUITY | | | | | 97,179 | | | | | | 95,102 | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | $ | 1,168,806 | | | | | $ | 1,167,655 | | |
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March 31, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Cash and due from depository institutions | $ | 22,798 | $ | 26,234 | ||||
Interest bearing deposits | 2,794 | 2,698 | ||||||
Short-term investments in money market funds | 5,002 | 5,256 | ||||||
Total cash and cash equivalents | 30,594 | 34,188 | ||||||
Investment securities: | ||||||||
Available for sale, at fair value | 132,390 | 129,138 | ||||||
Held to maturity (fair value $38,041 on March 31, 2018 and $38,811 on December 31, 2017) | 38,663 | 38,752 | ||||||
Loans held for sale | 843 | 3,125 | ||||||
Loans | 875,249 | 890,032 | ||||||
Less: Unearned income | 376 | 399 | ||||||
Allowance for loan losses | 9,932 | 10,214 | ||||||
Net loans | 864,941 | 879,419 | ||||||
Premises and equipment, net | 12,406 | 12,734 | ||||||
Accrued interest income receivable | 3,555 | 3,603 | ||||||
Goodwill | 11,944 | 11,944 | ||||||
Bank owned life insurance | 37,992 | 37,860 | ||||||
Net deferred tax asset | 5,585 | 5,963 | ||||||
Federal Home Loan Bank stock | 4,265 | 4,675 | ||||||
Federal Reserve Bank stock | 2,125 | 2,125 | ||||||
Other assets | 5,857 | 4,129 | ||||||
TOTAL ASSETS | $ | 1,151,160 | $ | 1,167,655 | ||||
LIABILITIES | ||||||||
Non-interest bearing deposits | $ | 179,137 | $ | 183,603 | ||||
Interest bearing deposits | 765,069 | 764,342 | ||||||
Total deposits | 944,206 | 947,945 | ||||||
Short-term borrowings | 36,895 | 49,084 | ||||||
Advances from Federal Home Loan Bank | 45,969 | 46,229 | ||||||
Guaranteed junior subordinated deferrable interest debentures, net | 12,927 | 12,923 | ||||||
Subordinated debt, net | 7,470 | 7,465 | ||||||
Total borrowed funds | 103,261 | 115,701 | ||||||
Other liabilities | 7,883 | 8,907 | ||||||
TOTAL LIABILITIES | 1,055,350 | 1,072,553 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common stock, par value $0.01 per share; 30,000,000 shares authorized; 26,596,220 shares issued and 18,033,401 outstanding on March 31, 2018; 26,585,403 shares issued and 18,128,247 outstanding on December 31, 2017 | 266 | 266 | ||||||
Treasury stock at cost, 8,562,819 shares on March 31, 2018 and 8,457,156 on December 31, 2017 | (78,678 | ) | (78,233 | ) | ||||
Capital surplus | 145,739 | 145,707 | ||||||
Retained earnings | 41,807 | 40,312 | ||||||
Accumulated other comprehensive loss, net | (13,324 | ) | (12,950 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 95,810 | 95,102 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,151,160 | $ | 1,167,655 |
| | | Three months ended September 30, | | | Nine months ended September 30, | | ||||||||||||||||||
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | ||||||||||||
INTEREST INCOME | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest and fees on loans | | | | $ | 10,607 | | | | | $ | 9,855 | | | | | $ | 30,550 | | | | | $ | 29,189 | | |
Interest bearing deposits | | | | | 5 | | | | | | 3 | | | | | | 14 | | | | | | 8 | | |
Short-term investments in money market funds | | | | | 60 | | | | | | 42 | | | | | | 150 | | | | | | 93 | | |
Investment securities: | | | | | | | | | | | | | | | | | | | | | | | | | |
Available for sale | | | | | 1,144 | | | | | | 973 | | | | | | 3,274 | | | | | | 2,819 | | |
Held to maturity | | | | | 333 | | | | | | 314 | | | | | | 981 | | | | | | 877 | | |
Total Interest Income | | | | | 12,149 | | | | | | 11,187 | | | | | | 34,969 | | | | | | 32,986 | | |
INTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits | | | | | 2,164 | | | | | | 1,618 | | | | | | 5,918 | | | | | | 4,558 | | |
Short-term borrowings | | | | | 267 | | | | | | 44 | | | | | | 529 | | | | | | 130 | | |
Advances from Federal Home Loan Bank | | | | | 199 | | | | | | 178 | | | | | | 577 | | | | | | 511 | | |
Guaranteed junior subordinated deferrable interest debentures | | | | | 280 | | | | | | 280 | | | | | | 840 | | | | | | 840 | | |
Subordinated debt | | | | | 130 | | | | | | 130 | | | | | | 390 | | | | | | 390 | | |
Total Interest Expense | | | | | 3,040 | | | | | | 2,250 | | | | | | 8,254 | | | | | | 6,429 | | |
NET INTEREST INCOME | | | | | 9,109 | | | | | | 8,937 | | | | | | 26,715 | | | | | | 26,557 | | |
Provision for loan losses | | | | | — | | | | | | 200 | | | | | | 100 | | | | | | 750 | | |
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | | | | | 9,109 | | | | | | 8,737 | | | | | | 26,615 | | | | | | 25,807 | | |
NON-INTEREST INCOME | | | | | | | | | | | | | | | | | | | | | | | | | |
Wealth management fees | | | | | 2,359 | | | | | | 2,208 | | | | | | 7,232 | | | | | | 6,758 | | |
Service charges on deposit accounts | | | | | 326 | | | | | | 409 | | | | | | 1,066 | | | | | | 1,168 | | |
Net gains on sale of loans | | | | | 176 | | | | | | 217 | | | | | | 393 | | | | | | 517 | | |
Mortgage related fees | | | | | 54 | | | | | | 69 | | | | | | 165 | | | | | | 227 | | |
Net realized gains (losses) on investment securities | | | | | — | | | | | | 56 | | | | | | (148) | | | | | | 115 | | |
Bank owned life insurance | | | | | 135 | | | | | | 143 | | | | | | 400 | | | | | | 594 | | |
Other income | | | | | 536 | | | | | | 527 | | | | | | 1,794 | | | | | | 1,567 | | |
Total Non-Interest Income | | | | | 3,586 | | | | | | 3,629 | | | | | | 10,902 | | | | | | 10,946 | | |
NON-INTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | | | | | |
Salaries and employee benefits | | | | | 5,815 | | | | | | 5,943 | | | | | | 18,126 | | | | | | 17,808 | | |
Net occupancy expense | | | | | 585 | | | | | | 634 | | | | | | 1,866 | | | | | | 1,947 | | |
Equipment expense | | | | | 335 | | | | | | 343 | | | | | | 1,104 | | | | | | 1,196 | | |
Professional fees | | | | | 1,321 | | | | | | 1,213 | | | | | | 3,757 | | | | | | 3,828 | | |
Supplies, postage and freight | | | | | 159 | | | | | | 161 | | | | | | 491 | | | | | | 516 | | |
Miscellaneous taxes and insurance | | | | | 276 | | | | | | 319 | | | | | | 842 | | | | | | 924 | | |
Federal deposit insurance expense | | | | | 140 | | | | | | 156 | | | | | | 457 | | | | | | 468 | | |
Other expense | | | | | 1,483 | | | | | | 1,345 | | | | | | 3,901 | | | | | | 3,829 | | |
Total Non-Interest Expense | | | | | 10,114 | | | | | | 10,114 | | | | | | 30,544 | | | | | | 30,516 | | |
PRETAX INCOME | | | | | 2,581 | | | | | | 2,252 | | | | | | 6,973 | | | | | | 6,237 | | |
Provision for income tax expense | | | | | 252 | | | | | | 701 | | | | | | 1,133 | | | | | | 1,949 | | |
NET INCOME | | | | | 2,329 | | | | | | 1,551 | | | | | | 5,840 | | | | | | 4,288 | | |
|
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
INTEREST INCOME | ||||||||
Interest and fees on loans | $ | 9,818 | $ | 9,556 | ||||
Interest bearing deposits | 4 | 2 | ||||||
Short-term investments in money market funds | 43 | 24 | ||||||
Investment securities: | ||||||||
Available for sale | 1,029 | 901 | ||||||
Held to maturity | 323 | 265 | ||||||
Total Interest Income | 11,217 | 10,748 | ||||||
INTEREST EXPENSE | ||||||||
Deposits | 1,781 | 1,436 | ||||||
Short-term borrowings | 92 | 19 | ||||||
Advances from Federal Home Loan Bank | 186 | 162 | ||||||
Guaranteed junior subordinated deferrable interest debentures | 280 | 280 | ||||||
Subordinated debt | 130 | 130 | ||||||
Total Interest Expense | 2,469 | 2,027 | ||||||
NET INTEREST INCOME | 8,748 | 8,721 | ||||||
Provision for loan losses | 50 | 225 | ||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 8,698 | 8,496 | ||||||
NON-INTEREST INCOME | ||||||||
Trust and investment advisory fees | 2,278 | 2,166 | ||||||
Service charges on deposit accounts | 383 | 374 | ||||||
Net gains on sale of loans | 98 | 114 | ||||||
Mortgage related fees | 39 | 75 | ||||||
Net realized gains (losses) on investment securities | (148 | ) | 27 | |||||
Bank owned life insurance | 132 | 141 | ||||||
Other income | 853 | 665 | ||||||
Total Non-Interest Income | 3,635 | 3,562 | ||||||
NON-INTEREST EXPENSE | ||||||||
Salaries and employee benefits | 6,093 | 5,948 | ||||||
Net occupancy expense | 670 | 674 | ||||||
Equipment expense | 391 | 419 | ||||||
Professional fees | 1,184 | 1,200 | ||||||
Supplies, postage and freight | 168 | 194 | ||||||
Miscellaneous taxes and insurance | 290 | 294 | ||||||
Federal deposit insurance expense | 162 | 160 | ||||||
Other expense | 1,162 | 1,196 | ||||||
Total Non-Interest Expense | 10,120 | 10,085 | ||||||
PRETAX INCOME | 2,213 | 1,973 | ||||||
Provision for income tax expense | 446 | 625 | ||||||
NET INCOME | $ | 1,767 | $ | 1,348 | ||||
PER COMMON SHARE DATA: | ||||||||
Basic: | ||||||||
Net income | $ | 0.10 | $ | 0.07 | ||||
Average number of shares outstanding | 18,079 | 18,814 | ||||||
Diluted: | ||||||||
Net income | $ | 0.10 | $ | 0.07 | ||||
Average number of shares outstanding | 18,181 | 18,922 | ||||||
Cash dividends declared | $ | 0.015 | $ | 0.015 |
| | | Three months ended September 30, | | | Nine months ended September 30, | | ||||||||||||||||||
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | ||||||||||||
PER COMMON SHARE DATA: | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | | | $ | 0.13 | | | | | $ | 0.08 | | | | | $ | 0.32 | | | | | $ | 0.23 | | |
Average number of shares outstanding | | | | | 17,924 | | | | | | 18,380 | | | | | | 18,013 | | | | | | 18,590 | | |
Diluted: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | | | $ | 0.13 | | | | | $ | 0.08 | | | | | $ | 0.32 | | | | | $ | 0.23 | | |
Average number of shares outstanding | | | | | 18,036 | | | | | | 18,481 | | | | | | 18,117 | | | | | | 18,689 | | |
Cash dividends declared | | | | $ | 0.020 | | | | | $ | 0.015 | | | | | $ | 0.055 | | | | | $ | 0.045 | | |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
COMPREHENSIVE INCOME | ||||||||
Net income | $ | 1,767 | $ | 1,348 | ||||
Other comprehensive income (loss), before tax: | ||||||||
Pension obligation change for defined benefit plan | 1,044 | 77 | ||||||
Income tax effect | (219 | ) | (27 | ) | ||||
Unrealized holding gains (losses) on available for sale securities arising during period | (1,666 | ) | 92 | |||||
Income tax effect | 350 | (30 | ) | |||||
Reclassification adjustment for (gains) losses on available for sale securities included in net income | 148 | (27 | ) | |||||
Income tax effect | (31 | ) | 9 | |||||
Other comprehensive income (loss) | (374 | ) | 94 | |||||
Comprehensive income | $ | 1,393 | $ | 1,442 |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | | ||||||||||||||||||
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | ||||||||||||
COMPREHENSIVE INCOME | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | | | $ | 2,329 | | | | | $ | 1,551 | | | | | $ | 5,840 | | | | | $ | 4,288 | | |
Other comprehensive income (loss), before tax: | | | | | | | | | | | | | | | | | | | | | | | | | |
Pension obligation change for defined benefit plan | | | | | 390 | | | | | | 396 | | | | | | 1,824 | | | | | | 870 | | |
Income tax effect | | | | | (82) | | | | | | (135) | | | | | | (383) | | | | | | (297) | | |
Unrealized holding gains (losses) on available for sale securities arising during period | | | | | (919) | | | | | | 176 | | | | | | (3,409) | | | | | | 538 | | |
Income tax effect | | | | | 193 | | | | | | (60) | | | | | | 716 | | | | | | (182) | | |
Reclassification adjustment for (gains) losses on available for sale securities included in net income | | | | | — | | | | | | (56) | | | | | | 148 | | | | | | (115) | | |
Income tax effect | | | | | — | | | | | | 19 | | | | | | (31) | | | | | | 39 | | |
Other comprehensive income (loss) | | | | | (418) | | | | | | 340 | | | | | | (1,135) | | | | | | 853 | | |
Comprehensive income | | | | $ | 1,911 | | | | | $ | 1,891 | | | | | $ | 4,705 | | | | | $ | 5,141 | | |
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Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 1,767 | $ | 1,348 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for loan losses | 50 | 225 | ||||||
Depreciation expense | 405 | 428 | ||||||
Net amortization of investment securities | 103 | 126 | ||||||
Net realized (gains) losses on investment securities available for sale | 148 | (27 | ) | |||||
Net gains on loans held for sale | (98 | ) | (114 | ) | ||||
Amortization of deferred loan fees | (35 | ) | (51 | ) | ||||
Origination of mortgage loans held for sale | (4,061 | ) | (7,583 | ) | ||||
Sales of mortgage loans held for sale | 6,441 | 8,178 | ||||||
(Increase) decrease in accrued interest income receivable | 48 | (84 | ) | |||||
Decrease in accrued interest payable | (121 | ) | (139 | ) | ||||
Earnings on bank owned life insurance | (132 | ) | (141 | ) | ||||
Deferred income taxes | 447 | 623 | ||||||
Amortization of deferred issuance costs | 9 | 10 | ||||||
Stock based compensation expense | 32 | 42 | ||||||
Other, net | (1,410 | ) | (233 | ) | ||||
Net cash provided by operating activities | 3,593 | 2,608 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchases of investment securities – available for sale | (13,168 | ) | (14,195 | ) | ||||
Purchases of investment securities – held to maturity | (855 | ) | (6,476 | ) | ||||
Proceeds from sales of investment securities – available for sale | 4,479 | 5,653 | ||||||
Proceeds from maturities of investment securities – available for sale | 3,695 | 6,570 | ||||||
Proceeds from maturities of investment securities – held to maturity | 917 | 375 | ||||||
Purchases of regulatory stock | (3,924 | ) | (4,531 | ) | ||||
Proceeds from redemption of regulatory stock | 4,334 | 3,606 | ||||||
Long-term loans originated | (28,694 | ) | (50,495 | ) | ||||
Principal collected on long-term loans | 44,999 | 37,520 | ||||||
Loans purchased or participated | (2,000 | ) | (150 | ) | ||||
Proceeds from sale of other real estate owned | 12 | 23 | ||||||
Purchases of premises and equipment | (77 | ) | (702 | ) | ||||
Net cash provided by (used in) investing activities | 9,718 | (22,802 | ) | |||||
FINANCING ACTIVITIES | ||||||||
Net decrease in deposit balances | (3,739 | ) | (3,010 | ) | ||||
Net increase (decrease) in other short-term borrowings | (12,189 | ) | 20,922 | |||||
Principal borrowings on advances from Federal Home Loan Bank | 1,740 | 3,500 | ||||||
Principal repayments on advances from Federal Home Loan Bank | (2,000 | ) | (3,000 | ) | ||||
Purchase of treasury stock | (445 | ) | (992 | ) | ||||
Common stock dividends | (272 | ) | (283 | ) | ||||
Net cash provided by (used in) financing activities | (16,905 | ) | 17,137 | |||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (3,594 | ) | (3,057 | ) | ||||
CASH AND CASH EQUIVALENTS AT JANUARY 1 | 34,188 | 34,073 | ||||||
CASH AND CASH EQUIVALENTS AT MARCH 31 | $ | 30,594 | $ | 31,016 |
| | | Nine months ended September 30, | | |||||||||
| | | 2018 | | | 2017 | | ||||||
OPERATING ACTIVITIES | | | | | | | | | | | | | |
Net income | | | | $ | 5,840 | | | | | $ | 4,288 | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | |
Provision for loan losses | | | | | 100 | | | | | | 750 | | |
Depreciation expense | | | | | 1,149 | | | | | | 1,224 | | |
Net amortization of investment securities | | | | | 273 | | | | | | 346 | | |
Net realized (gains) losses on investment securities available for sale | | | | | 148 | | | | | | (115) | | |
Net gains on sale of loans | | | | | (393) | | | | | | (517) | | |
Amortization of deferred loan fees | | | | | (115) | | | | | | (117) | | |
Origination of mortgage loans held for sale | | | | | (23,361) | | | | | | (34,045) | | |
Sales of mortgage loans held for sale | | | | | 25,838 | | | | | | 35,876 | | |
Increase in accrued interest income receivable | | | | | (404) | | | | | | (387) | | |
Increase (decrease) in accrued interest payable | | | | | 366 | | | | | | (18) | | |
Earnings on bank owned life insurance | | | | | (400) | | | | | | (427) | | |
Deferred income taxes | | | | | 249 | | | | | | 975 | | |
Stock based compensation expense | | | | | 72 | | | | | | 170 | | |
Other, net | | | | | (5,534) | | | | | | (2,463) | | |
Net cash provided by operating activities | | | | | 3,828 | | | | | | 5,540 | | |
INVESTING ACTIVITIES | | | | | | | | | | | | | |
Purchases of investment securities – available for sale | | | | | (30,371) | | | | | | (27,581) | | |
Purchases of investment securities – held to maturity | | | | | (3,405) | | | | | | (9,465) | | |
Proceeds from sales of investment securities – available for sale | | | | | 4,479 | | | | | | 8,143 | | |
Proceeds from maturities of investment securities – available for sale | | | | | 12,662 | | | | | | 17,341 | | |
Proceeds from maturities of investment securities – held to maturity | | | | | 3,417 | | | | | | 1,054 | | |
Purchases of regulatory stock | | | | | (14,193) | | | | | | (12,894) | | |
Proceeds from redemption of regulatory stock | | | | | 13,858 | | | | | | 11,824 | | |
Long-term loans originated | | | | | (124,519) | | | | | | (122,029) | | |
Principal collected on long-term loans | | | | | 139,836 | | | | | | 112,626 | | |
Loans purchased or participated | | | | | (11,443) | | | | | | (6,121) | | |
Loans sold or participated | | | | | 1,500 | | | | | | 2,800 | | |
Proceeds from sale of other real estate owned | | | | | 34 | | | | | | 60 | | |
Proceeds from life insurance policies | | | | | — | | | | | | 614 | | |
Purchases of premises and equipment | | | | | (691) | | | | | | (2,188) | | |
Net cash used in investing activities | | | | | (8,836) | | | | | | (25,816) | | |
|
| | | Nine months ended September 30, | | |||||||||
| | | 2018 | | | 2017 | | ||||||
FINANCING ACTIVITIES | | | | | | | | | | | | | |
Net decrease in deposit balances | | | | | (3,732) | | | | | | (865) | | |
Net increase in other short-term borrowings | | | | | 12,170 | | | | | | 20,839 | | |
Principal borrowings on advances from Federal Home Loan Bank | | | | | 6,316 | | | | | | 9,500 | | |
Principal repayments on advances from Federal Home Loan Bank | | | | | (10,000) | | | | | | (11,000) | | |
Purchase of treasury stock | | | | | (1,708) | | | | | | (2,757) | | |
Common stock dividends | | | | | (992) | | | | | | (839) | | |
Net cash provided by financing activities | | | | | 2,054 | | | | | | 14,878 | | |
NET DECREASE IN CASH AND CASH EQUIVALENTS | | | | | (2,954) | | | | | | (5,398) | | |
CASH AND CASH EQUIVALENTS AT JANUARY 1 | | | | | 34,188 | | | | | | 34,073 | | |
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 | | | | $ | 31,234 | | | | | $ | 28,675 | | |
|
effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the impact that the Update will have on our consolidated financial statements. The overall impact of 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.
The Company has adopted this standard during the reporting period. On a prospective basis, the Company implemented changes to the measurement of the fair value of financial instruments using an exit
| | | Three months ended September 30, | | | Nine months ended September 30, | | ||||||||||||||||||
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | ||||||||||||
Noninterest income: | | | | | | | | | | | | | | | | | | | | | | | | | |
In-scope of Topic 606 | | | | | | | | | | | | | | | | | | | | | | | | | |
Wealth management fees | | | | $ | 2,359 | | | | | $ | 2,208 | | | | | $ | 7,232 | | | | | $ | 6,758 | | |
Service charges on deposit accounts | | | | | 326 | | | | | | 409 | | | | | | 1,066 | | | | | | 1,168 | | |
Other | | | | | 439 | | | | | | 410 | | | | | | 1,291 | | | | | | 1,236 | | |
Noninterest income (in-scope of topic 606) | | | | | 3,124 | | | | | | 3,027 | | | | | | 9,589 | | | | | | 9,162 | | |
Noninterest income (out-of-scope of topic 606) | | | | | 462 | | | | | | 602 | | | | | | 1,313 | | | | | | 1,784 | | |
Total noninterest income | | | | $ | 3,586 | | | | | $ | 3,629 | | | | | $ | 10,902 | | | | | $ | 10,946 | | |
|
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
Noninterest income: | ||||||||
In-scope of Topic 606 | ||||||||
Trust and investment advisory fees | $ | 2,278 | $ | 2,166 | ||||
Service charges on deposit accounts | 383 | 374 | ||||||
Other | 566 | 540 | ||||||
Noninterest income (in-scope of topic 606) | 3,227 | 3,080 | ||||||
Noninterest income (out-of-scope of topic 606) | 408 | 482 | ||||||
Total noninterest income | $ | 3,635 | $ | 3,562 |
| | | Three months ended September 30, | | | Nine months ended September 30, | | ||||||||||||||||||
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | ||||||||||||
| | | (In thousands, except per share data) | | |||||||||||||||||||||
Numerator: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | | | $ | 2,329 | | | | | $ | 1,551 | | | | | $ | 5,840 | | | | | $ | 4,288 | | |
Denominator: | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average common shares outstanding (basic) | | | | | 17,924 | | | | | | 18,380 | | | | | | 18,013 | | | | | | 18,590 | | |
Effect of stock options | | | | | 112 | | | | | | 101 | | | | | | 104 | | | | | | 99 | | |
Weighted average common shares outstanding (diluted) | | | | | 18,036 | | | | | | 18,481 | | | | | | 18,117 | | | | | | 18,689 | | |
Earnings per common share: | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | | $ | 0.13 | | | | | $ | 0.08 | | | | | $ | 0.32 | | | | | $ | 0.23 | | |
Diluted | | | | | 0.13 | | | | | | 0.08 | | | | | | 0.32 | | | | | | 0.23 | | |
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
(In thousands, except per share data) | ||||||||
Numerator: | ||||||||
Net income | $ | 1,767 | $ | 1,348 | ||||
Denominator: | ||||||||
Weighted average common shares outstanding (basic) | 18,079 | 18,814 | ||||||
Effect of stock options | 102 | 108 | ||||||
Weighted average common shares outstanding (diluted) | 18,181 | 18,922 | ||||||
Earnings per common share: | ||||||||
Basic | $ | 0.10 | $ | 0.07 | ||||
Diluted | 0.10 | 0.07 |
| | | September 30, 2018 | | |||||||||||||||||||||
| | | Cost Basis | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Fair Value | | ||||||||||||
US Agency | | | | $ | 6,731 | | | | | $ | — | | | | | $ | (308) | | | | | $ | 6,423 | | |
US Agency mortgage- backed securities | | | | | 87,075 | | | | | | 232 | | | | | | (2,308) | | | | | | 84,999 | | |
Municipal | | | | | 11,240 | | | | | | 15 | | | | | | (489) | | | | | | 10,766 | | |
Corporate bonds | | | | | 37,380 | | | | | | 92 | | | | | | (907) | | | | | | 36,565 | | |
Total | | | | $ | 142,426 | | | | | $ | 339 | | | | | $ | (4,012) | | | | | $ | 138,753 | | |
|
March 31, 2018 | ||||||||||||||||
Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
US Agency | $ | 6,821 | $ | — | $ | (166 | ) | $ | 6,655 | |||||||
US Agency mortgage-backed securities | 82,648 | 396 | (1,498 | ) | 81,546 | |||||||||||
Taxable municipal | 8,929 | 8 | (347 | ) | 8,590 | |||||||||||
Corporate bonds | 35,922 | 254 | (577 | ) | 35,599 | |||||||||||
Total | $ | 134,320 | $ | 658 | $ | (2,588 | ) | $ | 132,390 |
| | | September 30, 2018 | | |||||||||||||||||||||
| | | Cost Basis | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Fair Value | | ||||||||||||
US Agency mortgage- backed securities | | | | $ | 8,294 | | | | | $ | 65 | | | | | $ | (256) | | | | | $ | 8,103 | | |
Municipal | | | | | 24,341 | | | | | | 25 | | | | | | (956) | | | | | | 23,410 | | |
Corporate bonds and other securities | | | | | 6,038 | | | | | | 10 | | | | | | (216) | | | | | | 5,832 | | |
Total | | | | $ | 38,673 | | | | | $ | 100 | | | | | $ | (1,428) | | | | | $ | 37,345 | | |
|
March 31, 2018 | ||||||||||||||||
Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
US Agency mortgage-backed securities | $ | 8,809 | $ | 99 | $ | (157 | ) | $ | 8,751 | |||||||
Taxable municipal | 23,813 | 69 | (590 | ) | 23,292 | |||||||||||
Corporate bonds and other securities | 6,041 | 33 | (76 | ) | 5,998 | |||||||||||
Total | $ | 38,663 | $ | 201 | $ | (823 | ) | $ | 38,041 |
| | | December 31, 2017 | | |||||||||||||||||||||
| | | Cost Basis | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Fair Value | | ||||||||||||
US Agency | | | | $ | 6,612 | | | | | $ | — | | | | | $ | (40) | | | | | $ | 6,572 | | |
US Agency mortgage- backed securities | | | | | 79,854 | | | | | | 611 | | | | | | (719) | | | | | | 79,746 | | |
Municipal | | | | | 7,198 | | | | | | 27 | | | | | | (189) | | | | | | 7,036 | | |
Corporate bonds | | | | | 35,886 | | | | | | 322 | | | | | | (424) | | | | | | 35,784 | | |
Total | | | | $ | 129,550 | | | | | $ | 960 | | | | | $ | (1,372) | | | | | $ | 129,138 | | |
|
December 31, 2017 | ||||||||||||||||
Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
US Agency | $ | 6,612 | $ | — | $ | (40 | ) | $ | 6,572 | |||||||
US Agency mortgage-backed securities | 79,854 | 611 | (719 | ) | 79,746 | |||||||||||
Taxable municipal | 7,198 | 27 | (189 | ) | 7,036 | |||||||||||
Corporate bonds | 35,886 | 322 | (424 | ) | 35,784 | |||||||||||
Total | $ | 129,550 | $ | 960 | $ | (1,372 | ) | $ | 129,138 |
| | | December 31, 2017 | | |||||||||||||||||||||
| | | Cost Basis | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Fair Value | | ||||||||||||
US Agency mortgage- backed securities | | | | $ | 9,740 | | | | | $ | 149 | | | | | $ | (45) | | | | | $ | 9,844 | | |
Municipal | | | | | 22,970 | | | | | | 203 | | | | | | (238) | | | | | | 22,935 | | |
Corporate bonds and other securities | | | | | 6,042 | | | | | | 38 | | | | | | (48) | | | | | | 6,032 | | |
Total | | | | $ | 38,752 | | | | | $ | 390 | | | | | $ | (331) | | | | | $ | 38,811 | | |
|
December 31, 2017 | ||||||||||||||||
Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
US Agency mortgage-backed securities | $ | 9,740 | $ | 149 | $ | (45 | ) | $ | 9,844 | |||||||
Taxable municipal | 22,970 | 203 | (238 | ) | 22,935 | |||||||||||
Corporate bonds and other securities | 6,042 | 38 | (48 | ) | 6,032 | |||||||||||
Total | $ | 38,752 | $ | 390 | $ | (331 | ) | $ | 38,811 |
Maintaining investment quality is a primary objective of the Company'sCompany’s investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody's Investor'sMoody’s Investor’s Service or Standard & Poor'sPoor’s rating of “A.” At March 31,September 30, 2018, 57.4%57.0% of the portfolio was rated “AAA” as compared to 57.8% at December 31, 2017. Approximately 9.4%9.7% of the portfolio was either rated below “A” or unrated at March 31,September 30, 2018 as compared to 9.7% atand December 31, 2017.
| | | September 30, 2018 | | |||||||||||||||||||||||||||||||||
| | | Less than 12 months | | | 12 months or longer | | | Total | | |||||||||||||||||||||||||||
| | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | ||||||||||||||||||
US Agency | | | | $ | 2,734 | | | | | $ | (109) | | | | | $ | 3,689 | | | | | $ | (199) | | | | | $ | 6,423 | | | | | $ | (308) | | |
US Agency mortgage-backed securities | | | | | 49,544 | | | | | | (1,211) | | | | | | 29,471 | | | | | | (1,353) | | | | | | 79,015 | | | | | | (2,564) | | |
Municipal | | | | | 19,978 | | | | | | (619) | | | | | | 11,847 | | | | | | (826) | | | | | | 31,825 | | | | | | (1,445) | | |
Corporate bonds and other securities | | | | | 21,320 | | | | | | (547) | | | | | | 12,979 | | | | | | (576) | | | | | | 34,299 | | | | | | (1,123) | | |
Total | | | | $ | 93,576 | | | | | $ | (2,486) | | | | | $ | 57,986 | | | | | $ | (2,954) | | | | | $ | 151,562 | | | | | $ | (5,440) | | |
|
March 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 | $ | 6,005 | $ | (165 | ) | $ | 400 | $ | (1 | ) | $ | 6,405 | $ | (166 | ) | |||||||||
US Agency mortgage-backed securities | 51,033 | (985 | ) | 17,925 | (670 | ) | 68,958 | (1,655 | ) | |||||||||||||||
Taxable municipal | 18,562 | (412 | ) | 8,431 | (525 | ) | 26,993 | (937 | ) | |||||||||||||||
Corporate bonds and other securities | 15,181 | (233 | ) | 13,635 | (420 | ) | 28,816 | (653 | ) | |||||||||||||||
Total | $ | 90,781 | $ | (1,795 | ) | $ | 40,391 | $ | (1,616 | ) | $ | 131,172 | $ | (3,411 | ) |
| | | December 31, 2017 | | |||||||||||||||||||||||||||||||||
| | | Less than 12 months | | | 12 months or longer | | | Total | | |||||||||||||||||||||||||||
| | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | | Fair Value | | | Unrealized Losses | | ||||||||||||||||||
US Agency | | | | $ | 5,923 | | | | | $ | (39) | | | | | $ | 399 | | | | | $ | (1) | | | | | $ | 6,322 | | | | | $ | (40) | | |
US Agency mortgage-backed securities | | | | | 36,783 | | | | | | (253) | | | | | | 22,625 | | | | | | (511) | | | | | | 59,408 | | | | | | (764) | | |
Municipal | | | | | 8,657 | | | | | | (109) | | | | | | 7,727 | | | | | | (318) | | | | | | 16,384 | | | | | | (427) | | |
Corporate bonds and other securities | | | | | 7,123 | | | | | | (71) | | | | | | 13,655 | | | | | | (401) | | | | | | 20,778 | | | | | | (472) | | |
Total | | | | $ | 58,486 | | | | | $ | (472) | | | | | $ | 44,406 | | | | | $ | (1,231) | | | | | $ | 102,892 | | | | | $ | (1,703) | | |
|
December 31, 2017 | ||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
US Agency | $ | 5,923 | $ | (39 | ) | $ | 399 | $ | (1 | ) | $ | 6,322 | $ | (40 | ) | |||||||||
US Agency mortgage-backed securities | 36,783 | (253 | ) | 22,625 | (511 | ) | 59,408 | (764 | ) | |||||||||||||||
Taxable municipal | 8,657 | (109 | ) | 7,727 | (318 | ) | 16,384 | (427 | ) | |||||||||||||||
Corporate bonds and other securities | 7,123 | (71 | ) | 13,655 | (401 | ) | 20,778 | (472 | ) | |||||||||||||||
Total | $ | 58,486 | $ | (472 | ) | $ | 44,406 | $ | (1,231 | ) | $ | 102,892 | $ | (1,703 | ) |
Contractual maturities of securities at March 31,September 30, 2018 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 March 31,September 30, 2018 is 46.948.2 months and is higher than the duration at December 31, 2017 which was 44.3 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.
| | | September 30, 2018 | | |||||||||||||||||||||
| | | Available for sale | | | Held to maturity | | ||||||||||||||||||
| | | Cost Basis | | | Fair Value | | | Cost Basis | | | Fair Value | | ||||||||||||
Within 1 year | | | | $ | 48 | | | | | $ | 49 | | | | | $ | 1,000 | | | | | $ | 973 | | |
After 1 year but within 5 years | | | | | 20,140 | | | | | | 19,890 | | | | | | 3,658 | | | | | | 3,471 | | |
After 5 years but within 10 years | | | | | 47,068 | | | | | | 45,673 | | | | | | 18,017 | | | | | | 17,362 | | |
After 10 years but within15 years | | | | | 29,952 | | | | | | 29,194 | | | | | | 11,605 | | | | | | 11,292 | | |
Over 15 years | | | | | 45,218 | | | | | | 43,947 | | | | | | 4,393 | | | | | | 4,247 | | |
Total | | | | $ | 142,426 | | | | | $ | 138,753 | | | | | $ | 38,673 | | | | | $ | 37,345 | | |
|
March 31, 2018 | ||||||||||||||||
Available for sale | Held to maturity | |||||||||||||||
Cost Basis | Fair Value | Cost Basis | Fair Value | |||||||||||||
Within 1 year | $ | 400 | $ | 400 | $ | 2,000 | $ | 1,983 | ||||||||
After 1 year but within 5 years | 14,019 | 13,920 | 2,671 | 2,610 | ||||||||||||
After 5 years but within 10 years | 47,258 | 46,766 | 14,441 | 14,200 | ||||||||||||
After 10 years but within 15 years | 26,940 | 26,332 | 14,789 | 14,556 | ||||||||||||
Over 15 years | 45,703 | 44,972 | 4,762 | 4,692 | ||||||||||||
Total | $ | 134,320 | $ | 132,390 | $ | 38,663 | $ | 38,041 |
| | | September 30, 2018 | | | December 31, 2017 | | ||||||
Commercial: | | | | | | | | | | | | | |
Commercial and industrial | | | | $ | 165,522 | | | | | $ | 159,192 | | |
Commercial loans secured by owner occupied real estate | | | | | 95,594 | | | | | | 89,935 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 363,532 | | | | | | 373,845 | | |
Real estate — residential mortgage | | | | | 240,591 | | | | | | 247,278 | | |
Consumer | | | | | 18,094 | | | | | | 19,383 | | |
Loans, net of unearned income | | | | $ | 883,333 | | | | | $ | 889,633 | | |
|
March 31, 2018 | December 31, 2017 | |||||||
Commercial | $ | 158,776 | $ | 159,192 | ||||
Commercial loans secured by real estate | 451,787 | 463,780 | ||||||
Real estate – mortgage | 244,322 | 247,278 | ||||||
Consumer | 19,988 | 19,383 | ||||||
Loans, net of unearned income | $ | 874,873 | $ | 889,633 |
Loan balances at March 31,September 30, 2018 and December 31, 2017 are net of unearned income of $376,000$339,000 and $399,000, respectively. Real estate-construction loans comprised 3.8%3.9% and 4.1% of total loans, net of unearned income at March 31,September 30, 2018 and December 31, 2017, respectively.
| | | Three months ended September 30, 2018 | | |||||||||||||||||||||||||||
| | | Balance at June 30, 2018 | | | Charge- Offs | | | Recoveries | | | Provision (Credit) | | | Balance at September 30, 2018 | | |||||||||||||||
Commercial | | | | $ | 3,566 | | | | | $ | — | | | | | $ | 17 | | | | | $ | 175 | | | | | $ | 3,758 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 3,686 | | | | | | — | | | | | | 12 | | | | | | (310) | | | | | | 3,388 | | |
Real estate – residential mortgage | | | | | 1,253 | | | | | | (123) | | | | | | 34 | | | | | | 75 | | | | | | 1,239 | | |
Consumer | | | | | 125 | | | | | | (29) | | | | | | 7 | | | | | | 25 | | | | | | 128 | | |
Allocation for general risk | | | | | 891 | | | | | | — | | | | | | — | | | | | | 35 | | | | | | 926 | | |
Total | | | | $ | 9,521 | | | | | $ | (152) | | | | | $ | 70 | | | | | $ | — | | | | | $ | 9,439 | | |
|
| | | Three months ended September 30, 2017 | | |||||||||||||||||||||||||||
| | | Balance at June 30, 2017 | | | Charge- Offs | | | Recoveries | | | Provision (Credit) | | | Balance at September 30, 2017 | | |||||||||||||||
Commercial | | | | $ | 3,824 | | | | | $ | (228) | | | | | $ | 9 | | | | | $ | 562 | | | | | $ | 4,167 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 4,488 | | | | | | — | | | | | | 20 | | | | | | (662) | | | | | | 3,846 | | |
Real estate – residential mortgage | | | | | 1,150 | | | | | | (109) | | | | | | 53 | | | | | | 70 | | | | | | 1,164 | | |
Consumer | | | | | 139 | | | | | | (42) | | | | | | 52 | | | | | | (10) | | | | | | 139 | | |
Allocation for general risk | | | | | 790 | | | | | | — | | | | | | — | | | | | | 240 | | | | | | 1,030 | | |
Total | | | | $ | 10,391 | | | | | $ | (379) | | | | | $ | 134 | | | | | $ | 200 | | | | | $ | 10,346 | | |
|
| | | Nine months ended September 30, 2018 | | |||||||||||||||||||||||||||
| | | Balance at December 31, 2017 | | | Charge- Offs | | | Recoveries | | | Provision (Credit) | | | Balance at September 30, 2018 | | |||||||||||||||
Commercial | | | | $ | 4,298 | | | | | $ | (574) | | | | | $ | 29 | | | | | $ | 5 | | | | | $ | 3,758 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 3,666 | | | | | | — | | | | | | 38 | | | | | | (316) | | | | | | 3,388 | | |
Real estate – residential mortgage | | | | | 1,102 | | | | | | (340) | | | | | | 111 | | | | | | 366 | | | | | | 1,239 | | |
Consumer | | | | | 128 | | | | | | (181) | | | | | | 42 | | | | | | 139 | | | | | | 128 | | |
Allocation for general risk | | | | | 1,020 | | | | | | — | | | | | | — | | | | | | (94) | | | | | | 926 | | |
Total | | | | $ | 10,214 | | | | | $ | (1,095) | | | | | $ | 220 | | | | | $ | 100 | | | | | $ | 9,439 | | |
|
| | | 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 non-owner occupied real estate | | | | | 3,584 | | | | | | (14) | | | | | | 44 | | | | | | 232 | | | | | | 3,846 | | |
Real estate – residential mortgage | | | | | 1,169 | | | | | | (263) | | | | | | 128 | | | | | | 130 | | | | | | 1,164 | | |
Consumer | | | | | 151 | | | | | | (138) | | | | | | 113 | | | | | | 13 | | | | | | 139 | | |
Allocation for general risk | | | | | 987 | | | | | | — | | | | | | — | | | | | | 43 | | | | | | 1,030 | | |
Total | | | | $ | 9,932 | | | | | $ | (643) | | | | | $ | 307 | | | | | $ | 750 | | | | | $ | 10,346 | | |
|
Three months ended March 31, 2018 | ||||||||||||||||||||
Balance at December 31, 2017 | Charge-Offs | Recoveries | Provision (Credit) | Balance at March 31, 2018 | ||||||||||||||||
Commercial | $ | 4,299 | $ | — | $ | 1 | $ | (316 | ) | $ | 3,984 | |||||||||
Commercial loans secured by real estate | 3,666 | (162 | ) | 11 | 35 | 3,550 | ||||||||||||||
Real estate – mortgage | 1,102 | (114 | ) | 19 | 260 | 1,267 | ||||||||||||||
Consumer | 128 | (99 | ) | 12 | 101 | 142 | ||||||||||||||
Allocation for general risk | 1,019 | — | — | (30 | ) | 989 | ||||||||||||||
Total | $ | 10,214 | $ | (375 | ) | $ | 43 | $ | 50 | $ | 9,932 |
Three months ended March 31, 2017 | ||||||||||||||||||||
Balance at December 31, 2016 | Charge-Offs | Recoveries | Provision (Credit) | Balance at March 31, 2017 | ||||||||||||||||
Commercial | $ | 4,041 | $ | — | $ | 7 | $ | (24 | ) | $ | 4,024 | |||||||||
Commercial loans secured by real estate | 3,584 | (14 | ) | 2 | 175 | 3,747 | ||||||||||||||
Real estate – mortgage | 1,169 | (94 | ) | 66 | 26 | 1,167 | ||||||||||||||
Consumer | 151 | (63 | ) | 19 | 42 | 149 | ||||||||||||||
Allocation for general risk | 987 | — | — | 6 | 993 | |||||||||||||||
Total | $ | 9,932 | $ | (171 | ) | $ | 94 | $ | 225 | $ | 10,080 |
The Company recordeddid not record a $50,000 provision for loan losses in the firstthird quarter of 2018 compared to a $225,000$200,000 provision for loan losses in the third quarter of 2017. For the first quarternine months of 2018, the Company recorded a $100,000 provision for loan losses compared to a $750,000 provision for loan losses in
on which reserves had previously been established.
| | | At September 30, 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 | | | | | 261,116 | | | | | | 363,521 | | | | | | 240,591 | | | | | | 18,094 | | | | | | | | | | | | 883,322 | | |
Total loans | | | | $ | 261,116 | | | | | $ | 363,532 | | | | | $ | 240,591 | | | | | $ | 18,094 | | | | | | | | | | | $ | 883,333 | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Specific reserve allocation | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
General reserve allocation | | | | | 3,758 | | | | | | 3,388 | | | | | | 1,239 | | | | | | 128 | | | | | | 926 | | | | | | 9,439 | | |
Total allowance for loan losses | | | | $ | 3,758 | | | | | $ | 3,388 | | | | | $ | 1,239 | | | | | $ | 128 | | | | | $ | 926 | | | | | $ | 9,439 | | |
|
| | | At December 31, 2017 | | |||||||||||||||||||||||||||||||||
| | | 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 | | | | $ | 1,213 | | | | | $ | 547 | | | | | $ | — | | | | | $ | — | | | | | | | | | | | $ | 1,760 | | |
Collectively evaluated for impairment | | | | | 247,914 | | | | | | 373,298 | | | | | | 247,278 | | | | | | 19,383 | | | | | | | | | | | | 887,873 | | |
Total loans | | | | $ | 249,127 | | | | | $ | 373,845 | | | | | $ | 247,278 | | | | | $ | 19,383 | | | | | | | | | | | $ | 889,633 | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Specific reserve allocation | | | | $ | 909 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 909 | | |
General reserve allocation | | | | | 3,389 | | | | | | 3,666 | | | | | | 1,102 | | | | | | 128 | | | | | | 1,020 | | | | | | 9,305 | | |
Total allowance for loan losses | | | | $ | 4,298 | | | | | $ | 3,666 | | | | | $ | 1,102 | | | | | $ | 128 | | | | | $ | 1,020 | | | | | $ | 10,214 | | |
|
At March 31, 2018 | ||||||||||||||||||||||||
Loans: | Commercial | Commercial Loans Secured by Real Estate | Real Estate – Mortgage | Consumer | Allocation for General Risk | Total | ||||||||||||||||||
Individually evaluated for impairment | $ | 913 | $ | 13 | $ | — | $ | — | $ | 926 | ||||||||||||||
Collectively evaluated for impairment | 157,863 | 451,774 | 244,322 | 19,988 | 873,947 | |||||||||||||||||||
Total loans | $ | 158,776 | $ | 451,787 | $ | 244,322 | $ | 19,988 | $ | 874,873 | ||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Specific reserve allocation | $ | 835 | $ | — | $ | — | $ | — | $ | — | $ | 835 | ||||||||||||
General reserve allocation | 3,149 | 3,550 | 1,267 | 142 | 989 | 9,097 | ||||||||||||||||||
Total allowance for loan losses | $ | 3,984 | $ | 3,550 | $ | 1,267 | $ | 142 | $ | 989 | $ | 9,932 |
At December 31, 2017 | ||||||||||||||||||||||||
Loans: | Commercial | Commercial Loans Secured by Real Estate | Real Estate – Mortgage | Consumer | Allocation for General Risk | Total | ||||||||||||||||||
Individually evaluated for impairment | $ | 1,212 | $ | 547 | $ | — | $ | — | $ | 1,759 | ||||||||||||||
Collectively evaluated for impairment | 157,980 | 463,233 | 247,278 | 19,383 | 887,874 | |||||||||||||||||||
Total loans | $ | 159,192 | $ | 463,780 | $ | 247,278 | $ | 19,383 | $ | 889,633 | ||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Specific reserve allocation | $ | 909 | $ | — | $ | — | $ | — | $ | — | $ | 909 | ||||||||||||
General reserve allocation | 3,390 | 3,666 | 1,102 | 128 | 1,019 | 9,305 | ||||||||||||||||||
Total allowance for loan losses | $ | 4,299 | $ | 3,666 | $ | 1,102 | $ | 128 | $ | 1,019 | $ | 10,214 |
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 impacted byincludes both the commercial and industrial and the owner occupied commercial real estate (CRE) loans, which include loans secured by owner occupied nonfarm nonresidential properties, as a meaningful portion of the commercial portfolio is centered in these types of accounts.loan classes. The residential mortgage loan segment is comprised of first lien amortizing residential mortgage loans and home equity loans secured by residential real estate. The consumer loan segment consists primarily of installment loans and overdraft lines of credit connected with customer deposit accounts.
| | | September 30, 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 | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Commercial loans secured by non-owner occupied real estate | | | | | — | | | | | | — | | | | | | 11 | | | | | | 11 | | | | | | 33 | | |
Total impaired loans | | | | $ | — | | | | | $ | — | | | | | $ | 11 | | | | | $ | 11 | | | | | $ | 33 | | |
|
| | | December 31, 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 | | | | $ | 1,202 | | | | | $ | 909 | | | | | $ | 11 | | | | | $ | 1,213 | | | | | $ | 1,215 | | |
Commercial loans secured by non-owner occupied real estate | | | | | — | | | | | | — | | | | | | 547 | | | | | | 547 | | | | | | 600 | | |
Total impaired loans | | | | $ | 1,202 | | | | | $ | 909 | | | | | $ | 558 | | | | | $ | 1,760 | | | | | $ | 1,815 | | |
|
March 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 | $ | 902 | $ | 835 | $ | 11 | $ | 913 | $ | 922 | ||||||||||
Commercial loans secured by real estate | — | — | 13 | 13 | 35 | |||||||||||||||
Total impaired loans | $ | 902 | $ | 835 | $ | 24 | $ | 926 | $ | 957 |
December 31, 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 | $ | 1,201 | $ | 909 | $ | 11 | $ | 1,212 | $ | 1,215 | ||||||||||
Commercial loans secured by real estate | — | — | 547 | 547 | 600 | |||||||||||||||
Total impaired loans | $ | 1,201 | $ | 909 | $ | 558 | $ | 1,759 | $ | 1,815 |
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 September 30, | | | Nine months ended September 30, | |||||||||||||||||
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | |||||||||||
Average loan balance: | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | | $ | — | | | | | $ | 1,302 | | | | | $ | 532 | | | | | $ | 896 |
Commercial loans secured by non-owner occupied real estate | | | | | 12 | | | | | | 1,316 | | | | | | 146 | | | | | | 745 |
Average investment in impaired loans | | | | $ | 12 | | | | | $ | 2,618 | | | | | $ | 678 | | | | | $ | 1,641 |
Interest income recognized: | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | | $ | — | | | | | $ | 7 | | | | | $ | — | | | | | $ | 10 |
Commercial loans secured by non-owner occupied real estate | | | | | — | | | | | | — | | | | | | — | | | | | | — |
Interest income recognized on a cash basis on impaired loans | | | | $ | — | | | | | $ | 7 | | | | | $ | — | | | | | $ | 10 |
|
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
Average loan balance: | ||||||||
Commercial | $ | 1,063 | $ | 490 | ||||
Commercial loans secured by real estate | 280 | 176 | ||||||
Average investment in impaired loans | $ | 1,343 | $ | 666 | ||||
Interest income recognized: | ||||||||
Commercial | $ | 8 | $ | 6 | ||||
Commercial loans secured by real estate | — | 2 | ||||||
Interest income recognized on a cash basis on impaired loans | $ | 8 | $ | 8 |
Management uses a nine point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized. The first five “Pass” categories are aggregated, while the Pass-6, Special Mention, Substandard and Doubtful categories are disaggregated to separate pools. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the
The following table presents the classes of the commercial and commercial real estate loan portfolios summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system (in thousands).
| | | September 30, 2018 | | |||||||||||||||||||||||||||
| | | Pass | | | Special Mention | | | Substandard | | | Doubtful | | | Total | | |||||||||||||||
Commercial and industrial | | | | $ | 155,787 | | | | | $ | 7,985 | | | | | $ | 1,750 | | | | | $ | — | | | | | $ | 165,522 | | |
Commercial loans secured by owner occupied real estate | | | | | 90,629 | | | | | | 3,836 | | | | | | 1,129 | | | | | | — | | | | | | 95,594 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 356,880 | | | | | | 6,373 | | | | | | 268 | | | | | | 11 | | | | | | 363,532 | | |
Total | | | | $ | 603,296 | | | | | $ | 18,194 | | | | | $ | 3,147 | | | | | $ | 11 | | | | | $ | 624,648 | | |
|
| | | December 31, 2017 | | |||||||||||||||||||||||||||
| | | Pass | | | Special Mention | | | Substandard | | | Doubtful | | | Total | | |||||||||||||||
Commercial and industrial | | | | $ | 156,448 | | | | | $ | 500 | | | | | $ | 2,000 | | | | | $ | 244 | | | | | $ | 159,192 | | |
Commercial loans secured by owner occupied real estate | | | | | 87,215 | | | | | | 1,675 | | | | | | 759 | | | | | | 286 | | | | | | 89,935 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 362,805 | | | | | | 10,153 | | | | | | 874 | | | | | | 13 | | | | | | 373,845 | | |
Total | | | | $ | 606,468 | | | | | $ | 12,328 | | | | | $ | 3,633 | | | | | $ | 543 | | | | | $ | 622,972 | | |
|
March 31, 2018 | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
Commercial | $ | 153,689 | $ | 2,140 | $ | 2,704 | $ | 243 | $ | 158,776 | ||||||||||
Commercial loans secured by real estate | 441,330 | 10,112 | 332 | 13 | 451,787 | |||||||||||||||
Total | $ | 595,019 | $ | 12,252 | $ | 3,036 | $ | 256 | $ | 610,563 |
December 31, 2017 | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
Commercial | $ | 153,728 | $ | 2,175 | $ | 2,759 | $ | 530 | $ | 159,192 | ||||||||||
Commercial loans secured by real estate | 452,740 | 10,153 | 874 | 13 | 463,780 | |||||||||||||||
Total | $ | 606,468 | $ | 12,328 | $ | 3,633 | $ | 543 | $ | 622,972 |
It is generally the policy of the Bank that the outstanding balance of any residential mortgage loan that exceeds 90-days past due as to principal and/or interest is transferred to non-accrual status and an evaluation is completed to determine the fair value of the collateral less selling costs, unless the balance is
| | | September 30, 2018 | | |||||||||
| | | Performing | | | Non-Performing | | ||||||
Real estate – residential mortgage | | | | $ | 239,698 | | | | | $ | 893 | | |
Consumer | | | | | 18,094 | | | | | | — | | |
Total | | | | $ | 257,792 | | | | | $ | 893 | | |
|
| | | December 31, 2017 | | |||||||||
| | | Performing | | | Non-Performing | | ||||||
Real estate – residential mortgage | | | | $ | 246,021 | | | | | $ | 1,257 | | |
Consumer | | | | | 19,383 | | | | | | — | | |
Total | | | | $ | 265,404 | | | | | $ | 1,257 | | |
|
March 31, 2018 | ||||||||
Performing | Non-Performing | |||||||
Real estate – mortgage | $ | 243,259 | $ | 1,063 | ||||
Consumer | 19,988 | — | ||||||
Total | $ | 263,247 | $ | 1,063 |
December 31, 2017 | ||||||||
Performing | Non-Performing | |||||||
Real estate – mortgage | $ | 246,021 | $ | 1,257 | ||||
Consumer | 19,383 | — | ||||||
Total | $ | 265,404 | $ | 1,257 |
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).
| | | September 30, 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 | | | | $ | 159,451 | | | | | $ | 6,071 | | | | | $ | — | | | | | $ | — | | | | | $ | 6,071 | | | | | $ | 165,522 | | | | | $ | — | | |
Commercial loans secured by owner occupied real estate | | | | | 95,594 | | | | | | — | | �� | | | | — | | | | | | — | | | | | | — | | | | | | 95,594 | | | | | | — | | |
Commercial loans secured by non-owner occupied real estate | | | | | 363,532 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 363,532 | | | | | | — | | |
Real estate – residential mortgage | | | | | 236,331 | | | | | | 2,505 | | | | | | 1,061 | | | | | | 694 | | | | | | 4,260 | | | | | | 240,591 | | | | | | — | | |
Consumer | | | | | 18,011 | | | | | | 56 | | | | | | 27 | | | | | | — | | | | | | 83 | | | | | | 18,094 | | | | | | — | | |
Total | | | | $ | 872,919 | | | | | $ | 8,632 | | | | | $ | 1,088 | | | | | $ | 694 | | | | | $ | 10,414 | | | | | $ | 883,333 | | | | | $ | — | | |
|
| | | December 31, 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 and industrial | | | | $ | 159,181 | | | | | $ | — | | | | | $ | — | | | | | $ | 11 | | | | | $ | 11 | | | | | $ | 159,192 | | | | | $ | — | | |
Commercial loans secured by owner occupied real estate | | | | | 89,649 | | | | | | — | | | | | | — | | | | | | 286 | | | | | | 286 | | | | | | 89,935 | | | | | | — | | |
Commercial loans secured by non-owner occupied real estate | | | | | 368,073 | | | | | | 5,238 | | | | | | 534 | | | | | | — | | | | | | 5,772 | | | | | | 373,845 | | | | | | — | | |
Real estate – residential mortgage | | | | | 243,393 | | | | | | 2,373 | | | | | | 671 | | | | | | 841 | | | | | | 3,885 | | | | | | 247,278 | | | | | | — | | |
Consumer | | | | | 19,262 | | | | | | 76 | | | | | | 45 | | | | | | — | | | | | | 121 | | | | | | 19,383 | | | | | | — | | |
Total | | | | $ | 879,558 | | | | | $ | 7,687 | | | | | $ | 1,250 | | | | | $ | 1,138 | | | | | $ | 10,075 | | | | | $ | 889,633 | | | | | $ | — | | |
|
March 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 | $ | 158,522 | $ | 243 | $ | — | $ | 11 | $ | 254 | $ | 158,776 | $ | — | ||||||||||||||
Commercial loans secured by real estate | 446,505 | 5,282 | — | — | 5,282 | 451,787 | — | |||||||||||||||||||||
Real estate – mortgage | 240,783 | 1,823 | 686 | 1,030 | 3,539 | 244,322 | — | |||||||||||||||||||||
Consumer | 19,511 | 469 | 8 | — | 477 | 19,988 | — | |||||||||||||||||||||
Total | $ | 865,321 | $ | 7,817 | $ | 694 | $ | 1,041 | $ | 9,552 | $ | 874,873 | $ | — |
December 31, 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 | $ | 159,181 | $ | — | $ | — | $ | 11 | $ | 11 | $ | 159,192 | $ | — | ||||||||||||||
Commercial loans secured by real estate | 457,722 | 5,238 | 534 | 286 | 6,058 | 463,780 | — | |||||||||||||||||||||
Real estate – mortgage | 243,393 | 2,373 | 671 | 841 | 3,885 | 247,278 | — | |||||||||||||||||||||
Consumer | 19,262 | 76 | 45 | — | 121 | 19,383 | — | |||||||||||||||||||||
Total | $ | 879,558 | $ | 7,687 | $ | 1,250 | $ | 1,138 | $ | 10,075 | $ | 889,633 | $ | — |
provides protection against credit risks resulting from other inherent risk factors contained in the Company’s loan portfolio, and recognizes the model and estimation risk associated with the specific and formula driven allowances. The qualitative factors used in the formula driven general reserves are evaluated quarterly (and revised if necessary) by the Company’s management to establish allocations which accommodate each of the listed risk factors.
| | | September 30, 2018 | | | December 31, 2017 | | ||||||
Non-accrual loans | | | | | | | | | | | | | |
Commercial and industrial | | | | $ | — | | | | | $ | 353 | | |
Commercial loans secured by owner occupied real estate | | | | | — | | | | | | 859 | | |
Commercial loans secured by non-owner occupied real estate | | | | | 11 | | | | | | 547 | | |
Real estate – residential mortgage | | | | | 893 | | | | | | 1,257 | | |
Total | | | | | 904 | | | | | | 3,016 | | |
Other real estate owned | | | | | | | | | | | | | |
Commercial loans secured by owner occupied real estate | | | | | 157 | | | | | | — | | |
Real estate – residential mortgage | | | | | 6 | | | | | | 18 | | |
Total | | | | | 163 | | | | | | 18 | | |
TDR’s not in non-accrual | | | | | — | | | | | | — | | |
Total non-performing assets including TDR | | | | $ | 1,067 | | | | | $ | 3,034 | | |
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned | | | | | 0.12% | | | | | | 0.34% | | |
March 31, 2018 | December 31, 2017 | |||||||
Non-accrual loans | ||||||||
Commercial | $ | 913 | $ | 1,212 | ||||
Commercial loans secured by real estate | 13 | 547 | ||||||
Real estate – mortgage | 1,063 | 1,257 | ||||||
Total | 1,989 | 3,016 | ||||||
Other real estate owned | ||||||||
Commercial | 157 | — | ||||||
Real estate-mortgage | 11 | 18 | ||||||
Total | 168 | 18 | ||||||
TDR’s not in non-accrual | — | — | ||||||
Total non-performing assets including TDR | $ | 2,157 | $ | 3,034 | ||||
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned | 0.25 | % | 0.34 | % |
The Company had no loans past due 90 days or more for the periods presented which were accruing interest.
| | | Three months ended September 30, | | | Nine months ended September 30, | | ||||||||||||||||||
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | ||||||||||||
Interest income due in accordance | | | | | | ||||||||||||||||||||
with original terms | | | | $ | 12 | | | | | $ | 32 | | | | | $ | 61 | | | | | $ | 65 | | |
Interest income recorded | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Net reduction in interest income | | | | $ | 12 | | | | | $ | 32 | | | | | $ | 61 | | | | | $ | 65 | | |
|
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
Interest income due in accordance with original terms | $ | 27 | $ | 16 | ||||
Interest income recorded | — | — | ||||||
Net reduction in interest income | $ | 27 | $ | 16 |
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.
ended September 30, 2017 (dollars in thousands).
Loans in non-accrual status | | | # of Loans | | | Current Balance | | | Concession Granted | | ||||||
Commercial loan | | | | | 2 | | | | | $ | 678 | | | | Extension of maturity date with interest only period | |
| | | At September 30, 2018 | | ||||||||||||
Type | | | Maturing | | | Amount | | | Weighted Average Rate | | ||||||
Open Repo Plus | | | Overnight | | | | $ | 61,254 | | | | | | 2.38% | | |
Advances | | | 2018 | | | | | 2,000 | | | | | | 1.61 | | |
| | | 2019 | | | | | 12,500 | | | | | | 1.51 | | |
| | | 2020 | | | | | 16,729 | | | | | | 1.74 | | |
| | | 2021 | | | | | 6,496 | | | | | | 1.98 | | |
| | | 2022 | | | | | 3,820 | | | | | | 2.78 | | |
| | | 2023 and over | | | | | 1,000 | | | | | | 2.86 | | |
Total advances | | | | | | | | 42,545 | | | | | | 1.82 | | |
Total FHLB borrowings | | | | | | | $ | 103,799 | | | | | | 2.15% | | |
|
| | | At December 31, 2017 | | ||||||||||||
Type | | | Maturing | | | Amount | | | Weighted Average Rate | | ||||||
Open Repo Plus | | | Overnight | | | | $ | 49,084 | | | | | | 1.54% | | |
Advances | | | 2018 | | | | | 12,000 | | | | | | 1.48 | | |
| | | 2019 | | | | | 12,500 | | | | | | 1.51 | | |
| | | 2020 | | | | | 16,729 | | | | | | 1.74 | | |
| | | 2021 | | | | | 5,000 | | | | | | 1.75 | | |
Total advances | | | | | | | | 46,229 | | | | | | 1.61 | | |
Total FHLB borrowings | | | | | | | $ | 95,313 | | | | | | 1.57% | | |
|
At March 31, 2018 | ||||||||||||
Type | Maturing | Amount | Weighted Average Rate | |||||||||
Open Repo Plus | Overnight | $ | 36,895 | 1.87 | % | |||||||
Advances | 2018 | 10,000 | 1.52 | |||||||||
2019 | 12,500 | 1.51 | ||||||||||
2020 | 16,729 | 1.74 | ||||||||||
2021 | 6,000 | 1.90 | ||||||||||
2022 | 740 | 2.60 | ||||||||||
Total advances | 45,969 | 1.66 | ||||||||||
Total FHLB borrowings | $ | 82,864 | 1.76 | % |
At December 31, 2017 | ||||||||||||
Type | Maturing | Amount | Weighted Average Rate | |||||||||
Open Repo Plus | Overnight | $ | 49,084 | 1.54 | % | |||||||
Advances | 2018 | 12,000 | 1.48 | |||||||||
2019 | 12,500 | 1.51 | ||||||||||
2020 | 16,729 | 1.74 | ||||||||||
2021 and over | 5,000 | 1.75 | ||||||||||
Total advances | 46,229 | 1.61 | ||||||||||
Total FHLB borrowings | $ | 95,313 | 1.57 | % |
The rate on Open Repo Plus advances can change daily, while the rates on the advances are fixed until the maturity of the advance. All FHLB stock along with an interest in certain residential mortgage, commercial real estate, and CREcommercial and industrial loans with an aggregate statutory value equal to the amount of the advances are pledged as collateral to the FHLB of Pittsburgh to support these borrowings.
| | | Three months ended September 30, 2018 | | | Three months ended September 30, 2017 | | ||||||||||||||||||||||||||||||
| | | 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 | | | | $ | (2,177) | | | | | $ | (11,490) | | | | | $ | (13,667) | | | | | $ | 30 | | | | | $ | (11,094) | | | | | $ | (11,064) | | |
Other comprehensive income (loss) before reclassifications | | | | | (726) | | | | | | (79) | | | | | | (805) | | | | | | 116 | | | | | | 261 | | | | | | 377 | | |
Amounts reclassified from accumulated other comprehensive loss | | | | | — | | | | | | 387 | | | | | | 387 | | | | | | (37) | | | | | | — | | | | | | (37) | | |
Net current period other comprehensive income (loss) | | | | | (726) | | | | | | 308 | | | | | | (418) | | | | | | 79 | | | | | | 261 | | | | | | 340 | | |
Ending balance | | | | $ | (2,903) | | | | | $ | (11,182) | | | | | $ | (14,085) | | | | | $ | 109 | | | | | $ | (10,833) | | | | | $ | (10,724) | | |
|
Three months ended March 31, 2018 | Three months ended March 31, 2017 | |||||||||||||||||||||||
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 | $ | (327 | ) | �� | $ | (12,623 | ) | $ | (12,950 | ) | $ | (171 | ) | $ | (11,406 | ) | $ | (11,577 | ) | |||||
Other comprehensive income (loss) before reclassifications | (1,316 | ) | 517 | (799 | ) | 62 | (210 | ) | (148 | ) | ||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 117 | 308 | 425 | (18 | ) | 260 | 242 | |||||||||||||||||
Net current period other comprehensive income (loss) | (1,199 | ) | 825 | (374 | ) | 44 | 50 | 94 | ||||||||||||||||
Ending balance | $ | (1,526 | ) | $ | (11,798 | ) | $ | (13,324 | ) | $ | (127 | ) | $ | (11,356 | ) | $ | (11,483 | ) |
| | | Nine months ended September 30, 2018 | | | Nine months ended September 30, 2017 | | ||||||||||||||||||||||||||||||
| | | 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 | | | | $ | (327) | | | | | $ | (12,623) | | | | | $ | (12,950) | | | | | $ | (171) | | | | | $ | (11,406) | | | | | $ | (11,577) | | |
Other comprehensive income (loss) before reclassifications | | | | | (2,693) | | | | | | 280 | | | | | | (2,413) | | | | | | 356 | | | | | | 783 | | | | | | 1,139 | | |
Amounts reclassified from accumulated other comprehensive loss | | | | | 117 | | | | | | 1,161 | | | | | | 1,278 | | | | | | (76) | | | | | | (210) | | | | | | (286) | | |
Net current period other comprehensive income (loss) | | | | | (2,576) | | | | | | 1,441 | | | | | | (1,135) | | | | | | 280 | | | | | | 573 | | | | | | 853 | | |
Ending balance | | | | $ | (2,903) | | | | | $ | (11,182) | | | | | $ | (14,085) | | | | | $ | 109 | | | | | $ | (10,833) | | | | | $ | (10,724) | | |
|
| | | Amount reclassified from accumulated other comprehensive loss(1) | | | |||||||||||
Details about accumulated other comprehensive loss components | | | For the three months ended September 30, 2018 | | | For the three months ended September 30, 2017 | | | Affected line item in the consolidated statement of operations | | ||||||
Realized gains on sale of securities | | | | $ | — | | | | | $ | (56) | | | | Net realized gains on investment securities | |
| | | | | — | | | | | | 19 | | | | Provision for income tax expense | |
| | | | $ | — | | | | | $ | (37) | | | | Net of tax | |
Amortization of estimated defined benefit pension plan loss | | | | $ | 490 | | | | | $ | — | | | | Other expense | |
| | | | | (103) | | | | | | — | | | | Provision for income taxes | |
| | | | $ | 387 | | | | | $ | — | | | | Net of tax | |
Total reclassifications for the period | | | | $ | 387 | | | | | $ | (37) | | | | Net income | |
|
Amount reclassified from accumulated other comprehensive loss(1) | ||||||||||||
Details about accumulated other comprehensive loss components | For the three months ended March 31, 2018 | For the three months ended March 31, 2017 | Affected line item in the consolidated statement of operations | |||||||||
Realized (gains) losses on sale of securities | $ | 148 | $ | (27 | ) | Net realized (gains) losses on investment securities | ||||||
(31 | ) | 9 | Provision for income tax expense | |||||||||
$ | 117 | $ | (18 | ) | Net of tax | |||||||
Amortization of estimated defined benefit pension plan loss | $ | 390 | $ | 395 | Other expense | |||||||
(82 | ) | (135 | ) | Provision for income taxes | ||||||||
$ | 308 | $ | 260 | Net of tax | ||||||||
Total reclassifications for the period | $ | 425 | $ | 242 | Net income |
| | | Amount reclassified from accumulated other comprehensive loss(1) | | | |||||||||||
Details about accumulated other comprehensive loss components | | | For the nine months ended September 30, 2018 | | | For the nine months ended September 30, 2017 | | | Affected line item in the consolidated statement of operations | | ||||||
Realized (gains) losses on sale of securities | | | | $ | 148 | | | | | $ | (115) | | | | Net realized (gains) losses on investment securities | |
| | | | | (31) | | | | | | 39 | | | | Provision for income tax expense | |
| | | | $ | 117 | | | | | $ | (76) | | | | Net of tax | |
Amortization of estimated defined benefit pension plan loss | | | | $ | 1,470 | | | | | $ | (318) | | | | Other expense | |
| | | | | (309) | | | | | | 108 | | | | Provision for income taxes | |
| | | | $ | 1,161 | | | | | $ | (210) | | | | Net of tax | |
Total reclassifications for the period | | | | $ | 1,278 | | | | | $ | (286) | | | | Net income | |
|
M.D. & A.
| | | At September 30, 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) | | | | $ | 129,026 | | | | | | 13.13% | | | | | $ | 115,394 | | | | | | 11.76% | | | | | | 8.00% | | | | | | 10.00% | | |
Tier 1 Common Equity (To Risk Weighted Assets) | | | | | 99,320 | | | | | | 10.10 | | | | | | 105,038 | | | | | | 10.71 | | | | | | 4.50 | | | | | | 6.50 | | |
Tier 1 Capital (To Risk Weighted Assets) | | | | | 111,188 | | | | | | 11.31 | | | | | | 105,038 | | | | | | 10.71 | | | | | | 6.00 | | | | | | 8.00 | | |
Tier 1 Capital (To Average Assets) | | | | | 111,188 | | | | | | 9.57 | | | | | | 105,038 | | | | | | 9.16 | | | | | | 4.00 | | | | | | 5.00 | | |
| | | At December 31, 2017 | | |||||||||||||||||||||||||||||||||
| | | 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) | | | | $ | 126,276 | | | | | | 13.21% | | | | | $ | 110,681 | | | | | | 11.64% | | | | | | 8.00% | | | | | | 10.00% | | |
Tier 1 Common Equity (To Risk Weighted Assets) | | | | | 95,882 | | | | | | 10.03 | | | | | | 99,552 | | | | | | 10.47 | | | | | | 4.50 | | | | | | 6.50 | | |
Tier 1 Capital (To Risk Weighted Assets) | | | | | 107,682 | | | | | | 11.26 | | | | | | 99,552 | | | | | | 10.47 | | | | | | 6.00 | | | | | | 8.00 | | |
Tier 1 Capital (To Average Assets) | | | | | 107,682 | | | | | | 9.32 | | | | | | 99,552 | | | | | | 8.75 | | | | | | 4.00 | | | | | | 5.00 | | |
AT MARCH 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) | $ | 127,352 | 13.45 | % | $ | 113,196 | 12.00 | % | 8.00 | % | 10.00 | % | ||||||||||||
Tier 1 Common Equity (To Risk Weighted Assets) | 97,190 | 10.26 | 102,364 | 10.85 | 4.50 | 6.50 | ||||||||||||||||||
Tier 1 Capital (To Risk Weighted Assets) | 109,050 | 11.52 | 102,364 | 10.85 | 6.00 | 8.00 | ||||||||||||||||||
Tier 1 Capital (To Average Assets) | 109,050 | 9.54 | 102,364 | 9.09 | 4.00 | 5.00 |
AT DECEMBER 31, 2017 | ||||||||||||||||||||||||
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) | $ | 126,276 | 13.21 | % | $ | 110,681 | 11.64 | % | 8.00 | % | 10.00 | % | ||||||||||||
Tier 1 Common Equity (To Risk Weighted Assets) | 95,882 | 10.03 | 99,552 | 10.47 | 4.50 | 6.50 | ||||||||||||||||||
Tier 1 Capital (To Risk Weighted Assets) | 107,682 | 11.26 | 99,552 | 10.47 | 6.00 | 8.00 | ||||||||||||||||||
Tier 1 Capital (To Average Assets) | 107,682 | 9.32 | 99,552 | 8.75 | 4.00 | 5.00 |
Additionally, while not a regulatory capital ratio, the Company’s tangible common equity ratio was 7.36%7.37% at March 31,September 30, 2018.
The following table summarizes the interest rate swap transactions that impacted the Company’s first quarternine months of 2018 and 2017 performance.
| | | At September 30, 2018 | | ||||||||||||||||||||||||
| | | HEDGE TYPE | | | AGGREGATE NOTIONAL AMOUNT | | | WEIGHTED AVERAGE RATE RECEIVED/(PAID) | | | REPRICING FREQUENCY | | | INCREASE (DECREASE) IN INTEREST EXPENSE | | | |||||||||||
SWAP ASSETS | | | FAIR VALUE | | | | $ | 19,983,363 | | | | | | 4.20% | | | | MONTHLY | | | | $ | (41,743) | | | | ||
SWAP LIABILITIES | | | FAIR VALUE | | | | | (19,983,363) | | | | | | (4.20) | | | | MONTHLY | | | | | 41,743 | | | | ||
NET EXPOSURE | | | | | | | | — | | | | | | — | | | | | | | | | — | | | | ||
|
| | | At September 30, 2017 | | ||||||||||||||||||||||||
| | | HEDGE TYPE | | | AGGREGATE NOTIONAL AMOUNT | | | WEIGHTED 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 | | | | | | | | — | | | | | | — | | | | | | | | | — | | | | ||
|
AT MARCH 31, 2018 | ||||||||||||||||||||
HEDGE TYPE | AGGREGATE NOTIONAL AMOUNT | WEIGHTED AVERAGE RATE RECEIVED/ (PAID) | REPRICING FREQUENCY | INCREASE (DECREASE) IN INTEREST EXPENSE | ||||||||||||||||
SWAP ASSETS | FAIR VALUE | $ | 16,813,329 | 3.88 | % | MONTHLY | $ | (23,543 | ) | |||||||||||
SWAP LIABILITIES | FAIR VALUE | (16,813,329 | ) | (3.88 | ) | MONTHLY | 23,543 | |||||||||||||
NET EXPOSURE | — | — | — |
AT MARCH 31, 2017 | ||||||||||||||||||||
HEDGE TYPE | AGGREGATE NOTIONAL AMOUNT | WEIGHTED AVERAGE RATE RECEIVED/ (PAID) | REPRICING FREQUENCY | INCREASE (DECREASE) IN INTEREST EXPENSE | ||||||||||||||||
SWAP ASSETS | FAIR VALUE | $ | 5,000,000 | 3.10 | % | MONTHLY | $ | (15,367 | ) | |||||||||||
SWAP LIABILITIES | FAIR VALUE | (5,000,000 | ) | (3.10 | ) | MONTHLY | 15,367 | |||||||||||||
NET EXPOSURE | — | — | — |
The Company monitors and controls all derivative products with a comprehensive Board of Director approved 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, unless otherwise approved, as per the terms, within the Board of Directors approved Hedging Policy. The Company had no caps or floors outstanding at March 31,September 30, 2018.
borrowing activities, general corporate expenses not allocated to the business segments, interest expense on corporate debt, and centralized interest rate risk management. Inter-segment revenues were not material.
| | | Three months ended September 30, 2018 | | | Nine months ended September 30, 2018 | | ||||||||||||||||||
| | | Total revenue | | | Net income (loss) | | | Total revenue | | | Net income (loss) | | ||||||||||||
Retail banking | | | | $ | 6,692 | | | | | $ | 1,145 | | | | | $ | 19,050 | | | | | $ | 2,605 | | |
Commercial banking | | | | | 4,762 | | | | | | 1,876 | | | | | | 13,729 | | | | | | 5,076 | | |
Wealth management | | | | | 2,379 | | | | | | 483 | | | | | | 7,288 | | | | | | 1,423 | | |
Investment/Parent | | | | | (1,138) | | | | | | (1,175) | | | | | | (2,450) | | | | | | (3,264) | | |
Total | | | | $ | 12,695 | | | | | $ | 2,329 | | | | | $ | 37,617 | | | | | $ | 5,840 | | |
|
| | | 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 | | |
Wealth management | | | | | 2,223 | | | | | | 335 | | | | | | 6,804 | | | | | | 991 | | |
Investment/Parent | | | | | (822) | | | | | | (990) | | | | | | (2,708) | | | | | | (3,157) | | |
Total | | | | $ | 12,566 | | | | | $ | 1,551 | | | | | $ | 37,503 | | | | | $ | 4,288 | | |
|
Three months ended March 31, 2018 | ||||||||
Total revenue | Net income (loss) | |||||||
Retail banking | $ | 6,139 | $ | 706 | ||||
Commercial banking | 4,455 | 1,560 | ||||||
Trust | 2,443 | 508 | ||||||
Investment/Parent | (653 | ) | (1,007 | ) | ||||
Total | $ | 12,384 | $ | 1,767 |
Three months ended March 31, 2017 | ||||||||
Total revenue | Net income (loss) | |||||||
Retail banking | $ | 6,243 | $ | 617 | ||||
Commercial banking | 4,725 | 1,472 | ||||||
Trust | 2,326 | 367 | ||||||
Investment/Parent | (1,011 | ) | (1,108 | ) | ||||
Total | $ | 12,283 | $ | 1,348 |
| | | Three months ended September 30, | | | Nine months ended September 30, | | ||||||||||||||||||
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | ||||||||||||
Components of net periodic benefit cost | | | | | | ||||||||||||||||||||
Service cost | | | | $ | 370 | | | | | $ | 390 | | | | | $ | 1,110 | | | | | $ | 1,170 | | |
Interest cost | | | | | 318 | | | | | | 326 | | | | | | 954 | | | | | | 978 | | |
Expected return on plan assets | | | | | (699) | | | | | | (631) | | | | | | (2,097) | | | | | | (1,893) | | |
Special termination benefit liability | | | | | 16 | | | | | | — | | | | | | 48 | | | | | | — | | |
Recognized net actuarial loss | | | | | 387 | | | | | | 367 | | | | | | 1,161 | | | | | | 1,101 | | |
Net periodic pension cost | | | | $ | 392 | | | | | $ | 452 | | | | | $ | 1,176 | | | | | $ | 1,356 | | |
|
Three months ended March 31, | ||||||||
2018 | 2017 | |||||||
Components of net periodic benefit cost | ||||||||
Service cost | $ | 409 | $ | 390 | ||||
Interest cost | 303 | 326 | ||||||
Expected return on plan assets | (711 | ) | (631 | ) | ||||
Recognized net actuarial loss | 386 | 367 | ||||||
Net periodic pension cost | $ | 387 | $ | 452 |
The service cost component of net periodic benefit cost is included in “Salaries and employee benefits” and all other components of net periodic benefit cost are included in “Other expense” in the Consolidated Statements of Operations.
| | | Fair Value Measurements at September 30, 2018 | | |||||||||||||||||||||
| | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | ||||||||||||
US Agency securities | | | | $ | 6,423 | | | | | $ | — | | | | | $ | 6,423 | | | | | $ | — | | |
US Agency mortgage-backed securities | | | | | 84,999 | | | | | | — | | | | | | 84,999 | | | | | | — | | |
Municipal securities | | | | | 10,766 | | | | | | — | | | | | | 10,766 | | | | | | — | | |
Corporate bonds | | | | | 36,565 | | | | | | — | | | | | | 36,565 | | | | | | — | | |
Fair value swap asset | | | | | 812 | | | | | | — | | | | | | 812 | | | | | | — | | |
Fair value swap liability | | | | | (812) | | | | | | — | | | | | | (812) | | | | | | — | | |
| | | Fair Value Measurements at December 31, 2017 | | |||||||||||||||||||||
| | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | ||||||||||||
US Agency securities | | | | $ | 6,572 | | | | | $ | — | | | | | $ | 6,572 | | | | | $ | — | | |
US Agency mortgage-backed securities | | | | | 79,746 | | | | | | — | | | | | | 79,746 | | | | | | — | | |
Municipal securities | | | | | 7,036 | | | | | | — | | | | | | 7,036 | | | | | | — | | |
Corporate bonds | | | | | 35,784 | | | | | | — | | | | | | 35,784 | | | | | | — | | |
Fair value swap asset | | | | | 92 | | | | | | — | | | | | | 92 | | | | | | — | | |
Fair value swap liability | | | | | (92) | | | | | | — | | | | | | (92) | | | | | | — | | |
Fair Value Measurements at March 31, 2018 | ||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
US Agency securities | $ | 6,655 | $ | — | $ | 6,655 | $ | — | ||||||||
US Agency mortgage-backed securities | 81,546 | — | 81,546 | — | ||||||||||||
Taxable municipal | 8,590 | — | 8,590 | — | ||||||||||||
Corporate bonds | 35,599 | — | 35,599 | — | ||||||||||||
Fair value swap asset | 511 | — | 511 | — | ||||||||||||
Fair value swap liability | (511 | ) | — | (511 | ) | — |
Fair Value Measurements at December 31, 2017 | ||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
US Agency securities | $ | 6,572 | $ | — | $ | 6,572 | $ | — | ||||||||
US Agency mortgage-backed securities | 79,746 | — | 79,746 | — | ||||||||||||
Taxable municipal | 7,036 | — | 7,036 | — | ||||||||||||
Corporate bonds | 35,784 | — | 35,784 | — | ||||||||||||
Fair value swap asset | 92 | — | 92 | — | ||||||||||||
Fair value swap liability | (92 | ) | — | (92 | ) | — |
Assets Measured and Recorded on a Non-recurring Basis
$851,000.
| | | Fair Value Measurements at September 30, 2018 | | |||||||||||||||||||||
| | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | ||||||||||||
Impaired loans | | | | $ | 11 | | | | | $ | — | | | | | $ | — | | | | | $ | 11 | | |
Other real estate owned | | | | | 163 | | | | | | — | | | | | | — | | | | | | 163 | | |
| | | Fair Value Measurements at December 31, 2017 | | |||||||||||||||||||||
| | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | ||||||||||||
Impaired loans | | | | $ | 851 | | | | | $ | — | | | | | $ | — | | | | | $ | 851 | | |
Other real estate owned | | | | | 18 | | | | | | — | | | | | | — | | | | | | 18 | | |
| | | Quantitative Information About Level 3 Fair Value Measurements | | ||||||||||||
September 30, 2018 | | | Fair Value Estimate | | | Valuation Techniques | | | Unobservable Input | | | Range (Wgtd Avg) | | |||
Impaired loans | | | | $ | 11 | | | | Appraisal of collateral(1),(3) | | | Appraisal adjustments(2) | | | 0% (0%) | |
Other real estate owned | | | | | 163 | | | | Appraisal of collateral(1),(3) | | | Appraisal adjustments(2) Liquidation expenses | | | 0% to 32% (6%) 21% to 195% (42%) | |
| | | Quantitative Information About Level 3 Fair Value Measurements | | ||||||||||||
December 31, 2017 | | | Fair Value Estimate | | | Valuation Techniques | | | Unobservable Input | | | Range (Wgtd Avg) | | |||
Impaired loans | | | | $ | 851 | | | | Appraisal of collateral(1),(3) | | | Appraisal adjustments(2) | | | 21% to 75% (54%) | |
Other real estate owned | | | | | 18 | | | | Appraisal of collateral(1),(3) | | | Appraisal adjustments(2) Liquidation expenses | | | 16% to 64% (29%) 2% to 206% (79%) | |
Fair Value Measurements at March 31, 2018 | ||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Impaired loans | $ | 91 | $ | — | $ | — | $ | 91 | ||||||||
Other real estate owned | 168 | — | — | 168 |
Fair Value Measurements at December 31, 2017 | ||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Impaired loans | $ | 850 | $ | — | $ | — | $ | 850 | ||||||||
Other real estate owned | 18 | — | — | 18 |
March 31, 2018 | Quantitative Information About Level 3 Fair Value Measurements | |||||||||||||||
Fair Value Estimate | Valuation Techniques | Unobservable Input | Range(Wgtd Avg) | |||||||||||||
Impaired loans | $ | 91 | Appraisal of collateral(1),(3) | Appraisal adjustments(2) | 0% to 100%(90%) | |||||||||||
Other real estate owned | 168 | Appraisal of collateral(1),(3) | Appraisal adjustments(2) Liquidation expenses | 0% to 25%(2%) 0% to 186%(35%) |
December 31, 2017 | Quantitative Information About Level 3 Fair Value Measurements | |||||||||||||||
Fair Value Estimate | Valuation Techniques | Unobservable Input | Range(Wgtd Avg) | |||||||||||||
Impaired loans | $ | 850 | Appraisal of collateral(1),(3) | Appraisal adjustments(2) | 21% to 75%(54%) | |||||||||||
Other real estate owned | 18 | Appraisal of collateral(1),(3) | Appraisal adjustments(2) Liquidation expenses | 16% to 64%(29%) 2% to 206%(79%) |
| | | September 30, 2018 | | |||||||||||||||||||||||||||
| | | Carrying Value | | | Fair Value | | | (Level 1) | | | (Level 2) | | | (Level 3) | | |||||||||||||||
FINANCIAL ASSETS: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | | | $ | 31,234 | | | | | $ | 31,234 | | | | | $ | 31,234 | | | | | $ | — | | | | | $ | — | | |
Investment securities – HTM | | | | | 38,673 | | | | | | 37,345 | | | | | | — | | | | | | 34,510 | | | | | | 2,835 | | |
Regulatory stock | | | | | 7,135 | | | | | | 7,135 | | | | | | 7,135 | | | | | | — | | | | | | — | | |
Loans held for sale | | | | | 1,041 | | | | | | 1,075 | | | | | | 1,075 | | | | | | — | | | | | | — | | |
Loans, net of allowance for loan loss and unearned income | | | | | 873,894 | | | | | | 852,664 | | | | | | — | | | | | | — | | | | | | 852,664 | | |
Accrued interest income receivable | | | | | 4,007 | | | | | | 4,007 | | | | | | 4,007 | | | | | | — | | | | | | — | | |
Bank owned life insurance | | | | | 38,260 | | | | | | 38,260 | | | | | | 38,260 | | | | | | — | | | | | | — | | |
FINANCIAL LIABILITIES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits with no stated maturities | | | | $ | 672,792 | | | | | $ | 672,792 | | | | | $ | 672,792 | | | | | $ | — | | | | | $ | — | | |
Deposits with stated maturities | | | | | 271,421 | | | | | | 270,767 | | | | | | — | | | | | | — | | | | | | 270,767 | | |
Short-term borrowings | | | | | 61,254 | | | | | | 61,254 | | | | | | 61,254 | | | | | | — | | | | | | — | | |
All other borrowings | | | | | 62,962 | | | | | | 65,026 | | | | | | — | | | | | | — | | | | | | 65,026 | | |
Accrued interest payable | | | | | 2,120 | | | | | | 2,120 | | | | | | 2,120 | | | | | | — | | | | | | — | | |
| | | December 31, 2017 | | |||||||||||||||||||||||||||
| | | Carrying Value | | | Fair Value | | | (Level 1) | | | (Level 2) | | | (Level 3) | | |||||||||||||||
FINANCIAL ASSETS: | | | | | | | |||||||||||||||||||||||||
Cash and cash equivalents | | | | $ | 34,188 | | | | | $ | 34,188 | | | | | $ | 34,188 | | | | | $ | — | | | | | $ | — | | |
Investment securities – HTM | | | | | 38,752 | | | | | | 38,811 | | | | | | — | | | | | | 35,859 | | | | | | 2,952 | | |
Regulatory stock | | | | | 6,800 | | | | | | 6,800 | | | | | | 6,800 | | | | | | — | | | | | | — | | |
Loans held for sale | | | | | 3,125 | | | | | | 3,173 | | | | | | 3,173 | | | | | | — | | | | | | — | | |
Loans, net of allowance for loan loss and unearned income | | | | | 879,419 | | | | | | 873,784 | | | | | | — | | | | | | — | | | | | | 873,784 | | |
Accrued interest income receivable | | | | | 3,603 | | | | | | 3,603 | | | | | | 3,603 | | | | | | — | | | | | | — | | |
Bank owned life insurance | | | | | 37,860 | | | | | | 37,860 | | | | | | 37,860 | | | | | | — | | | | | | — | | |
FINANCIAL LIABILITIES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits with no stated maturities | | | | $ | 688,648 | | | | | $ | 688,648 | | | | | $ | 688,648 | | | | | $ | — | | | | | $ | — | | |
Deposits with stated maturities | | | | | 259,297 | | | | | | 260,153 | | | | | | — | | | | | | — | | | | | | 260,153 | | |
Short-term borrowings | | | | | 49,084 | | | | | | 49,084 | | | | | | 49,084 | | | | | | — | | | | | | — | | |
All other borrowings | | | | | 66,617 | | | | | | 69,684 | | | | | | — | | | | | | — | | | | | | 69,684 | | |
Accrued interest payable | | | | | 1,754 | | | | | | 1,754 | | | | | | 1,754 | | | | | | — | | | | | | — | | |
March 31, 2018 | ||||||||||||||||||||
Carrying Value | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
FINANCIAL ASSETS: | ||||||||||||||||||||
Cash and cash equivalents | $ | 30,594 | $ | 30,594 | $ | 30,594 | $ | — | $ | — | ||||||||||
Investment securities – AFS | 132,390 | 132,390 | — | 132,390 | — | |||||||||||||||
Investment securities – HTM | 38,663 | 38,041 | — | 35,084 | 2,957 | |||||||||||||||
Regulatory stock | 6,390 | 6,390 | 6,390 | — | — | |||||||||||||||
Loans held for sale | 843 | 862 | 862 | — | — | |||||||||||||||
Loans, net of allowance for loan loss and unearned income | 864,941 | 850,224 | — | — | 850,224 | |||||||||||||||
Accrued interest income receivable | 3,555 | 3,555 | 3,555 | — | — | |||||||||||||||
Bank owned life insurance | 37,992 | 37,992 | 37,992 | — | — | |||||||||||||||
Fair value swap asset | 511 | 511 | — | 511 | — | |||||||||||||||
FINANCIAL LIABILITIES: | ||||||||||||||||||||
Deposits with no stated maturities | $ | 682,946 | $ | 682,946 | $ | 682,946 | $ | — | $ | — | ||||||||||
Deposits with stated maturities | 261,260 | 261,070 | — | — | 261,070 | |||||||||||||||
Short-term borrowings | 36,895 | 36,895 | 36,895 | — | — | |||||||||||||||
All other borrowings | 66,366 | 68,894 | — | — | 68,894 | |||||||||||||||
Accrued interest payable | 1,633 | 1,633 | 1,633 | — | — | |||||||||||||||
Fair value swap liability | 511 | 511 | — | 511 | — |
December 31, 2017 | ||||||||||||||||||||
Carrying Value | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
FINANCIAL ASSETS: | ||||||||||||||||||||
Cash and cash equivalents | $ | 34,188 | $ | 34,188 | $ | 34,188 | $ | — | $ | — | ||||||||||
Investment securities – AFS | 129,138 | 129,138 | — | 129,138 | — | |||||||||||||||
Investment securities – HTM | 38,752 | 38,811 | — | 35,859 | 2,952 | |||||||||||||||
Regulatory stock | 6,800 | 6,800 | 6,800 | — | — | |||||||||||||||
Loans held for sale | 3,125 | 3,173 | 3,173 | — | — | |||||||||||||||
Loans, net of allowance for loan loss and unearned income | 879,419 | 873,784 | — | — | 873,784 | |||||||||||||||
Accrued interest income receivable | 3,603 | 3,603 | 3,603 | — | — | |||||||||||||||
Bank owned life insurance | 37,860 | 37,860 | 37,860 | — | — | |||||||||||||||
Fair value swap asset | 92 | 92 | — | 92 | — | |||||||||||||||
FINANCIAL LIABILITIES: | ||||||||||||||||||||
Deposits with no stated maturities | $ | 688,648 | $ | 688,648 | $ | 688,648 | $ | — | $ | — | ||||||||||
Deposits with stated maturities | 259,297 | 260,153 | — | — | 260,153 | |||||||||||||||
Short-term borrowings | 49,084 | 49,084 | 49,084 | — | — | |||||||||||||||
All other borrowings | 66,617 | 69,684 | — | — | 69,684 | |||||||||||||||
Accrued interest payable | 1,754 | 1,754 | 1,754 | — | — | |||||||||||||||
Fair value swap liability | 92 | 92 | — | 92 | — |
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. In accordance with ASU 2016-01, the discount rates used to determine fair value incorporate interest rate spreads that reflect factors such as liquidity, credit, and nonperformance risk of the loans.
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 for interest rate risk management represents the amount the Company would have expected to receive or pay to terminate such agreements.
Commitments to extend credit 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 17.
Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values. The Company’s remaining assets and liabilities which are not considered financial instruments have not been valued differently than has been customary under historical cost accounting.
Asset quality continues to be strong, capital levels already meet the Basel III requirements, which are not mandatory until 2019. Net interest margins improved as the Fed rate increases began to take effect.
Recognizing the accelerated pace of change in 21st century life, AmeriServ set forth a new financial service environment. In two locations, State College in Centre County and Richland Township in Cambria County, Pennsylvania, AmeriServ established two state of the art financial centers. These centers can service commercial and consumer borrowers, they can totally accomplish a residential mortgage or a consumer loan, and they can provide counsel and advice on wealth management and retirement planning. No longer must a customer search for counsel or advice, it is all there in the AmeriServ Financial Center. Any service, any product, or even the latest breakthrough in self-service, mobile banking can be made available to customers through the financial center. The AmeriServ Financial Center combines the best of self-service banking40% when compared with the bestfirst nine months of counsel2017. We expect further expansion for the trust company in 2019 and advice.2020.
Banking and wealth management is a dynamic business. We believe our improved performance in the firstthird quarter of 2018, was based on more than the tax legislation. We believe it was result of our firm commitmentAmeriServ has returned nearly 70% to making AmeriServ a 21st century company. It starts with a concern for every shareholdershareholders. The Board and customer. There is a messageManagement remain committed to shareholders in our improved tangible book value and in our increased dividend. There is a messageproviding active capital returns to our customers in our adopting the community financial center service format.
| | | Three months ended September 30, 2018 | | | Three months ended September 30, 2017 | | ||||||
Net income | | | | $ | 2,329 | | | | | $ | 1,551 | | |
Diluted earnings per share | | | | | 0.13 | | | | | | 0.08 | | |
Return on average assets (annualized) | | | | | 0.79% | | | | | | 0.53% | | |
Return on average equity (annualized) | | | | | 9.54% | | | | | | 6.37% | | |
Three months ended March 31, 2018 | Three months ended March 31, 2017 | |||||||
Net income | $ | 1,767 | $ | 1,348 | ||||
Diluted earnings per share | 0.10 | 0.07 | ||||||
Return on average assets (annualized) | 0.62 | % | 0.47 | % | ||||
Return on average equity (annualized) | 7.55 | % | 5.74 | % |
The Company reported firstthird quarter 2018 net income of $1,767,000,$2,329,000, or $0.10$0.13 per diluted common share. This representedearnings performance was a $0.03,$778,000, or 42.9%50.2%, increase in earnings per shareimprovement from the firstthird quarter of 2017 where net income totaled $1,348,000,$1,551,000, or $0.07$0.08 per diluted common share. The improved earnings in the firstthird quarter of 2018 growth resulted from a combination of lower income tax expense, outstanding asset quality and positive operating leverage, and effective capital management.
The Company also announced that its Board of Directors declared a $0.02 per share quarterly common stock cash dividend. This new quarterly dividend amount represents a 33% increase from the previous $0.015 per share quarterly dividend. The cash dividend is payable May 21, 2018 to shareholders of record on May 7, 2018. This increased cash dividend represents an approximate 2.0% annualized yield using a recent common stock price of $4.10 and represents a payout ratio of 20% based upon the Company’s reported first quarter 2018 earnings per share of $0.10.
…NET INTEREST INCOME AND 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 firstthird quarter of 2018 to the firstthird quarter of 2017 (in thousands, except percentages):
| | | Three months ended September 30, 2018 | | | Three months ended September 30, 2017 | | | $ Change | | | % Change | | ||||||||||||
Interest income | | | | $ | 12,149 | | | | | $ | 11,187 | | | | | $ | 962 | | | | | | 8.6% | | |
Interest expense | | | | | 3,040 | | | | | | 2,250 | | | | | | 790 | | | | | | 35.1 | | |
Net interest income | | | | $ | 9,109 | | | | | $ | 8,937 | | | | | $ | 172 | | | | | | 1.9 | | |
Net interest margin | | | | | 3.31% | | | | | | 3.28% | | | | | | 0.03 | | | | | | N/M | | |
Three months ended March 31, 2018 | Three months ended March 31, 2017 | $ Change | % Change | |||||||||||||
Interest income | $ | 11,217 | $ | 10,748 | $ | 469 | 4.4 | % | ||||||||
Interest expense | 2,469 | 2,027 | 442 | 21.8 | ||||||||||||
Net interest income | $ | 8,748 | $ | 8,721 | $ | 27 | 0.3 | |||||||||
Net interest margin | 3.29 | % | 3.27 | % | 0.02 | N/M |
three basis points from the prior year’s third quarter.
in the third quarter of 2018.
of our core deposit base that provides a strong foundation to support our balance sheet. Overall, however, the2018. The runoff of money market deposits has more than offset the growth of term deposit products and resulted in thea decrease in the balance of total deposits.deposits in 2018. Specifically, total deposits averaged $960$956 million infor the firstthird quarter of 2018 which was $15.5$24.7 million, or 1.6%2.5%, lower than the $976$981 million average for the firstthird quarter of 2017. Deposit interest expense in 2018 increased by $345,000, or 24.0%, due to the higher interest rate environment as deposit pricing increased in a controlled, but competitive, manner and certain indexed money market accounts repriced upward after the Federal Reserve interest rate increases. Overall, the Company’s loan to deposit ratio averaged 91.78%93.0% in the firstthird quarter of 2018 which we believe indicates that the Company has ample capacity to grow its loan portfolio.portfolio given the loyalty of its core deposit base. The Company experienced a $97,000,$244,000, or 16.4%38.6%, increase in the interest cost for borrowings in firstthe third quarter of 2018 due to a higher average balance of total borrowed funds and the immediate impact that the increases in the Federal Funds Ratefederal funds rate had on the cost of overnight borrowed funds. Also, a higher level of total borrowed funds, which were necessary to offsetIn the decrease in total deposits caused borrowings interest expense to increase. For the firstthird quarter of 2018, total average FHLB borrowed funds was $91 million, an increase of $68.1 million, increased by $13.7$31.5 million, or 25.2%53.3%, when compareddue to the first quarter of 2017.
decrease in total average deposits.
| | | 2018 | | | 2017 | | ||||||||||||||||||||||||||||||
| | | 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 | | | | $ | 889,702 | | | | | $ | 10,612 | | | | | | 4.69% | | | | | $ | 892,198 | | | | | $ | 9,865 | | | | | | 4.35% | | |
Interest bearing deposits | | | | | 1,023 | | | | | | 5 | | | | | | 2.02 | | | | | | 1,026 | | | | | | 3 | | | | | | 1.26 | | |
Short-term investment in money market funds | | | | | 6,634 | | | | | | 60 | | | | | | 3.54 | | | | | | 8,921 | | | | | | 42 | | | | | | 1.86 | | |
Investment securities – AFS | | | | | 145,715 | | | | | | 1,144 | | | | | | 3.14 | | | | | | 136,084 | | | | | | 973 | | | | | | 2.86 | | |
Investment securities – HTM | | | | | 39,416 | | | | | | 333 | | | | | | 3.38 | | | | | | 38,700 | | | | | | 314 | | | | | | 3.25 | | |
Total investment securities | | | | | 185,131 | | | | | | 1,477 | | | | | | 3.19 | | | | | | 174,784 | | | | | | 1,287 | | | | | | 2.95 | | |
Total interest earning assets/interest income | | | | | 1,082,490 | | | | | | 12,154 | | | | | | 4.43 | | | | | | 1,076,929 | | | | | | 11,197 | | | | | | 4.11 | | |
Non-interest earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | | | | 24,078 | | | | | | | | | | | | | | | | | | 22,082 | | | | | | | | | | | | | | |
Premises and equipment | | | | | 12,283 | | | | | | | | | | | | | | | | | | 12,467 | | | | | | | | | | | | | | |
Other assets | | | | | 61,860 | | | | | | | | | | | | | | | | | | 67,240 | | | | | | | | | | | | | | |
Allowance for loan losses | | | | | (9,636) | | | | | | | | | | | | | | | | | | (10,537) | | | | | | | | | | | | | | |
TOTAL ASSETS | | | | $ | 1,171,075 | | | | | | | | | | | | | | | | | $ | 1,168,181 | | | | | | | | | | | | | | |
Interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest bearing deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest bearing demand | | | | $ | 130,782 | | | | | $ | 267 | | | | | | 0.81% | | | | | $ | 131,493 | | | | | $ | 180 | | | | | | 0.54% | | |
Savings | | | | | 98,763 | | | | | | 41 | | | | | | 0.17 | | | | | | 98,184 | | | | | | 41 | | | | | | 0.17 | | |
Money markets | | | | | 251,000 | | | | | | 547 | | | | | | 0.87 | | | | | | 277,948 | | | | | | 380 | | | | | | 0.54 | | |
Time deposits | | | | | 301,126 | | | | | | 1,309 | | | | | | 1.74 | | | | | | 292,054 | | | | | | 1,017 | | | | | | 1.38 | | |
Total interest bearing deposits | | | | | 781,671 | | | | | | 2,164 | | | | | | 1.10 | | | | | | 799,679 | | | | | | 1,618 | | | | | | 0.80 | | |
Short-term borrowings | | | | | 46,898 | | | | | | 267 | | | | | | 2.23 | | | | | | 13,179 | | | | | | 44 | | | | | | 1.29 | | |
Advances from Federal Home Loan Bank | | | | | 43,816 | | | | | | 199 | | | | | | 1.80 | | | | | | 45,997 | | | | | | 178 | | | | | | 1.53 | | |
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 | | | | | | 130 | | | | | | 6.80 | | |
Total interest bearing liabilities/interest expense | | | | | 893,120 | | | | | | 3,040 | | | | | | 1.35 | | | | | | 879,590 | | | | | | 2,250 | | | | | | 1.02 | | |
Non-interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Demand deposits | | | | | 174,632 | | | | | | | | | | | | | | | | | | 181,356 | | | | | | | | | | | | | | |
Other liabilities | | | | | 6,455 | | | | | | | | | | | | | | | | | | 10,628 | | | | | | | | | | | | | | |
Shareholders’ equity | | | | | 96,868 | | | | | | | | | | | | | | | | | | 96,607 | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | $ | 1,171,075 | | | | | | | | | | | | | | | | | $ | 1,168,181 | | | | | | | | | | | | | | |
Interest rate spread | | | | | | | | | | | | | | | | | 3.08 | | | | | | | | | | | | | | | | | | 3.09 | | |
Net interest income/ Net interest margin | | | | | | | | | | | 9,114 | | | | | | 3.31% | | | | | | | | | | | | 8,947 | | | | | | 3.28% | | |
Tax-equivalent adjustment | | | | | | | | | | | (5) | | | | | | | | | | | | | | | | | | (10) | | | | | | | | |
Net Interest Income | | | | | | | | | | $ | 9,109 | | | | | | | | | | | | | | | | | $ | 8,937 | | | | | | | | |
|
2018 | 2017 | |||||||||||||||||||||||
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 | $ | 881,485 | $ | 9,824 | 4.47 | % | $ | 889,908 | $ | 9,566 | 4.31 | % | ||||||||||||
Interest bearing deposits | 1,025 | 4 | 1.51 | 1,030 | 2 | 0.79 | ||||||||||||||||||
Short-term investment in money market funds | 7,133 | 43 | 2.44 | 7,940 | 24 | 1.19 | ||||||||||||||||||
Investment securities – AFS | 138,027 | 1,029 | 2.98 | 134,140 | 901 | 2.69 | ||||||||||||||||||
Investment securities – HTM | 39,106 | 323 | 3.30 | 34,121 | 265 | 3.11 | ||||||||||||||||||
Total investment securities | 177,133 | 1,352 | 3.05 | 168,261 | 1,166 | 2.77 | ||||||||||||||||||
Total interest earning assets/interest income | 1,066,776 | 11,223 | 4.22 | 1,067,139 | 10,758 | 4.04 | ||||||||||||||||||
Non-interest earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 21,859 | 22,330 | ||||||||||||||||||||||
Premises and equipment | 12,623 | 11,804 | ||||||||||||||||||||||
Other assets | 62,374 | 67,794 | ||||||||||||||||||||||
Allowance for loan losses | (10,251 | ) | (10,053 | ) | ||||||||||||||||||||
TOTAL ASSETS | $ | 1,153,381 | $ | 1,159,014 | ||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||
Interest bearing deposits: | ||||||||||||||||||||||||
Interest bearing demand | $ | 133,379 | $ | 242 | 0.74 | % | $ | 127,531 | $ | 122 | 0.39 | % | ||||||||||||
Savings | 97,304 | 40 | 0.17 | 97,254 | 40 | 0.16 | ||||||||||||||||||
Money markets | 253,665 | 422 | 0.67 | 278,811 | 334 | 0.48 | ||||||||||||||||||
Time deposits | 293,858 | 1,077 | 1.49 | 288,830 | 940 | 1.29 | ||||||||||||||||||
Total interest bearing deposits | 778,206 | 1,781 | 0.93 | 792,426 | 1,436 | 0.73 | ||||||||||||||||||
Short-term borrowings | 22,261 | 92 | 1.64 | 8,863 | 19 | 0.87 | ||||||||||||||||||
Advances from Federal Home Loan Bank | 45,838 | 186 | 1.64 | 45,535 | 162 | 1.44 | ||||||||||||||||||
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 | 130 | 6.80 | ||||||||||||||||||
Total interest bearing liabilities/interest expense | 867,040 | 2,469 | 1.15 | 867,559 | 2,027 | 0.94 | ||||||||||||||||||
Non-interest bearing liabilities: | ||||||||||||||||||||||||
Demand deposits | 182,215 | 183,532 | ||||||||||||||||||||||
Other liabilities | 9,170 | 12,613 | ||||||||||||||||||||||
Shareholders’ equity | 94,956 | 95,310 | ||||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,153,381 | $ | 1,159,014 | ||||||||||||||||||||
Interest rate spread | 3.07 | 3.10 | ||||||||||||||||||||||
Net interest income/Net interest margin | 8,754 | 3.29 | % | 8,731 | 3.27 | % | ||||||||||||||||||
Tax-equivalent adjustment | (6 | ) | (10 | ) | ||||||||||||||||||||
Net Interest Income | $ | 8,748 | $ | 8,721 |
…NON-INTEREST EXPENSE… Non-interest expense for the firstthird quarter of 2018 totaled $10.1 million and increased by $35,000, or only 0.4%, fromremained consistent with the prior year’s firstthird quarter. Factors contributing to the lower non-interest expense in the quarter included:
Also, the enactment of this new tax law provided corporations that have a defined benefit pension plan with an opportunity to contribute additional funds to their pension plan in 2018 that could be allocated back to the 2017 tax year in order to achieve a greater income tax benefit. The Company took advantage of this opportunity and made an additional $2.5 million contribution to our defined benefit pension plan in the third quarter of which resulted in lower employee expense due to the closure of one branch office and reduced health care and pension costs. The branch office that closed along with our efforts to reduce and control expenses resulted in occupancy & equipment costs and miscellaneous expenses declining between periods. The Retail banking segment also benefitted from the recognition of a lower loan loss provision in 2018 and the lower corporate income tax rate that resulted from the enactment of the “Tax Cuts and Jobs Act” which caused a reduction in income tax expense. Slightly offsetting these favorable items nine-month time period only, BOLI income. 2018 but lower on a quarterly basis when compared to 2017. compensation. Jobs Act”. 0.9%, during the period. 44. of 2017. The Company recorded a to remain near 92% through the remainder of 2018. initially and 7.00% at January 1, 2019; a tier 1 capital ratio of 6.00% and 8.50%; a total capital ratio of 8.00% and 10.50%; and a tier 1 leverage ratio of 5.00% and 5.00%. Under the new rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer above its minimum risk-based capital requirements, which increases over the transition period, from 0.625% of total risk weighted assets in 2016 to 2.50% in 2019. The Company continues to be committed to maintaining strong capital levels that exceed regulatory requirements while also supporting balance sheet growth and providing a return to our shareholders. The Company believes that its overall interest rate risk position is well controlled. The variability of net interest income is positive in the upward rate shocks due to the Company’s short duration investment securities portfolio, the scheduled repricing of loans tied to LIBOR or prime, and the extension of a portion of borrowed funds. Also, the Company expects that it will not have to reprice its core deposit accounts up as quickly as interest rates rise. The variability of net interest income is negative in the 100 basis point downward rate scenario as the Company has more exposure to assets repricing downward to a greater extent than liabilities due to the absolute low level of interest rates with the fed funds rate currently at approximately The allowance for loan losses is calculated with the objective of maintaining reserve levels believed by management to be sufficient to absorb estimated probable credit losses. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the credit portfolio and other relevant factors. However, this quarterly evaluation is inherently subjective as it requires material estimates, including, among others, likelihood of customer default, loss given default, exposure at default, the amounts and timing of expected future cash flows on impaired loans, value of collateral, estimated losses on consumer loans and residential mortgages, and general amounts for historical loss experience. This process also considers economic conditions, uncertainties in estimating losses and inherent risks in the various credit portfolios. All of these factors may be susceptible to significant change. Also, the allocation of the allowance for credit losses to specific loan pools is based on historical loss trends and management’s judgment concerning those trends. ACCOUNT — Income Taxes serving our communities through employee involvement and a philanthropic spirit. We will strive to provide our shareholders with consistently improved financial performance; the products, services and know-how needed to forge lasting banking for life customer relationships; a work environment that challenges and rewards staff; and the manpower and financial resources needed to make a difference in the communities we serve. Our strategic initiatives will focus on these four key constituencies: provides the following cautionary statement identifying important factors (some of which are beyond the Company’s control) which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions.$446,000,$252,000, or an effective tax rate of 20.1%9.8%, in the firstthird quarter of 2018. This compares to an income tax expense of $625,000,$701,000, or an effective tax rate of 31.7%31.1%, for the firstthird quarter of 2017. The lower effective tax rate and income tax expense in the firstthird quarter of 2018 reflects the benefits of corporate tax reform as a result of the enactment of the “Tax Cuts and Jobs Act” late in the fourth quarter of 2017. Nine months ended
September 30, 2018 Nine months ended
September 30, 2017 Net income $ 5,840 $ 4,288 Diluted earnings per share 0.32 0.23 Return on average assets (annualized) 0.67% 0.49% Return on average equity (annualized) 8.14% 5.98% Nine months ended
September 30, 2018 Nine months ended
September 30, 2017 $ Change % Change Interest income $ 34,969 $ 32,986 $ 1,983 6.0% Interest expense 8,254 6,429 1,825 28.4 Net interest income $ 26,715 $ 26,557 $ 158 0.6 Net interest margin 3.29% 3.27% 0.02 N/M 2018 2017 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 $ 884,620 $ 30,566 4.57% $ 894,088 $ 29,219 4.33% Interest bearing deposits 1,024 14 1.77 1,029 8 1.03 Short-term investment in money market funds 6,804 150 2.91 8,049 93 1.52 Investment securities – AFS 142,366 3,274 3.07 135,131 2,819 2.78 Investment securities – HTM 39,262 981 3.33 36,854 877 3.17 Total investment securities 181,628 4,255 3.12 171,985 3,696 2.87 Total interest earning assets/interest income 1,074,076 34,985 4.32 1,075,151 33,016 4.08 Non-interest earning assets: Cash and due from banks 22,598 22,214 Premises and equipment 12,417 12,095 Other assets 62,215 67,552 Allowance for loan losses (9,974) (10,290) TOTAL ASSETS $ 1,161,332 $ 1,166,722 Interest bearing liabilities: Interest bearing deposits: Interest bearing demand $ 131,062 $ 770 0.79% $ 129,923 $ 450 0.46% Savings 98,445 122 0.17 97,852 122 0.17 Money markets 251,215 1,570 0.84 276,958 1,047 0.51 Time deposits 296,717 3,456 1.56 290,598 2,939 1.35 Total interest bearing deposits 777,439 5,918 1.02 795,331 4,558 0.77 Short-term borrowings 34,297 529 2.03 15,390 130 1.13 Advances from Federal Home Loan Bank 44,884 577 1.72 45,785 511 1.49 Guaranteed junior subordinated deferrable interest
debentures 13,085 840 8.57 13,085 840 8.57 Subordinated debt 7,650 390 6.80 7,650 390 6.80 Total interest bearing liabilities/interest expense 877,355 8,254 1.26 877,241 6,429 0.98 Non-interest bearing liabilities: Demand deposits 180,056 181,924 Other liabilities 8,033 11,630 Shareholders’ equity 95,888 95,927 TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY $ 1,161,332 $ 1,166,722 Interest rate spread 3.07 3.10 Net interest income/ Net interest margin 26,731 3.29% 26,587 3.27% Tax-equivalent adjustment (16) (30) Net Interest Income $ 26,715 $ 26,557 $706,000$1,145,000 in the third quarter of 2018 and $2,605,000 for the first quarternine months of 2018 which was up by $89,000$351,000 from the third quarter of last year and by $446,000 from the net income contribution for the same 2017 period.first nine months of 2017. This increase reflects a reduced level of non-interest expense and a lower level of interest bearing deposits between years. Also, management prices deposits in a controlled but competitive manner which helps to offset the immediate upward repricing of money market deposit accounts because of the increases to the federal funds rate. Net interest income was negatively impacted by a lower level of residential mortgage production and refinancing activity. The lower level of non-interest expense was due to the Company’s focus on reducing and controlling costswas a decrease in net interest income due toboth time periods was a lower level of non-interest income due to reduced residential real estatemortgage loan origninations in 2018 combined withsale gain income, mortgage related fees, fee income from deposit service charges and, for the immediate upward repricing of money market deposit accounts because of the increases to the Federal Funds Rate.$1.56 million$1,876,000 in the third quarter and $5,076,000 in the first quarternine-months of 2018 which was $88,000 higher by $464,000 and $781,000 when compared to the same 2017 results.periods. The higher level of net income for the first quarterboth time periods of 2018 was due to a greater level of loan interest income, the lower provision for loan losses and reduced income tax expense. Total loan interest income increased and reflects new loans originating at higher yields as well as the upward repricing of certain loans tied to LIBOR or the prime rate as both of these indices have moved up with the Federal Reserve’s decision to increase the target federal funds interest rate. The higher loan interest income more than offsets the unfavorable impact of a reduced volume of commercial and commercial real estate loans this year as early loan prepayment activity has more than offset loan production this year. The lower loan loss provision in 2018 reflects our overall strong asset quality, the successful workout of several criticized loans, and reduced loan portfolio balances. Also, total employee costs are lower due to reduced pension expense and three fewer commercial relationship managers in 2018. Partially offsetting these favorable items was lower loan interest income due to a reduced volume of commercial and commercial real estate loans this year due to loan originations occurring at a slower pace so far this year and early loan prepayment activity being higher in 2018. Also,Finally, miscellaneous expenses are higher for the first nine-month time period in 2018.trustwealth management segment reported net income of $508,000$483,000 in the third quarter and $1,423,000 in the first quarternine-months of 2018 which was $141,000$148,000 and $432,000 higher than the 2017 first quarter.same periods for 2017. The increase is due to Trust and investment advisorywealth management fees increasing as this segment has benefitted from increased market values for assets under management. Wealth management continues to be an important strategic focus of the Company. Also contributing to the higher level of net income from this segment was a lower level of professional fees. Slightly offsetting these favorable items was higher employee costs due to higher salaries because of additional investment in talent, and a greater level of incentive compensaton.$1.0 million$1,175,000 in the third quarter of 2018 and a $3,264,000 net loss in the first quarternine-months of 2018,this year, which is lower thanhigher by $185,000 for the quarter and by $107,000 for the nine-month period. The increased loss reported last year by $101,000. The decreasedfor both time periods was the result of a higher usage of overnight borrowed funds which have a higher cost due to the increasing national interest rates and the immediate impact that the rising interest rate environment has on overnight borrowed funds. Also contributing to the increased loss between yearsboth time periods is reflectivea reduction to the income tax credit which is not as favorable in 2018 due to the enactment of the higher level of investment securities on the Company’s balance sheet resulting from the Company’s strategic decision diversify the portfolio“Tax Cuts and purchase more high quality corporate and taxable municipal securities. Even with this improvement, this segment continues to feel the most earnings pressure from the continued low interest rate environment.$1.151$1.17 billion at March 31,September 30, 2018, which decreasedincreased by $16.5$1.2 million, or 1.4%0.1%, from the December 31, 2017 asset level. The decreaseincrease was driven by a reduction in thean increased level of total loan portfolio.earning assets. Specifically, total loans declinedinvestment securities grew by $17.1$9.5 million, or 1.9%, during the period5.7% and more than offset growth in investment securitiestotal loans decreasing by $3.2$8.4 million, or 1.9%.threenine months of 2018. As of September 30, 2018, the 25 largest depositors represented 21.8% of total deposits, which is a slight decrease from the third quarter 2017 when it was 22.4%. Total FHLB borrowings have decreasedincreased by $12.4$8.5 million since year-end 2017. Theremained relatively stable, declining slightlydecreased by $260,000$3.7 million and total $46totaled $43 million asdue to timing differences related to the replacement of matured advances. The Company has utilized these term advances to help manage interest rate risk and favorably position our balance sheet for a rising rate environment. The Company’s total shareholders’ equity increased by $708,000$2.1 million over the first threenine months of 2018 due to the retention of earnings more than offsetting our common stock dividend payment to shareholders and the impact of our common stock buyback program, which is addressed on page 40.13.45%13.13%, and a common equity tier 1 capital ratio of 10.26%10.10% at March 31,September 30, 2018. (See the discussion of the Basel III capital requirements under the “Capital Resources” section.) TheAs of September 30, 2018, the Company’s book value per common share was $5.31,$5.47 and its tangible book value per common share was $4.65,$4.80. Both of these ratios improved by $0.22 per common share and its$0.21 per common share, respectively, when compared to December 31, 2017. The tangible common equity to tangible assets ratio was 7.36%7.37% at MarchSeptember 30, 2018 and improved by 17 basis points when compared to December 31, 2018.2017.
The tangible common equity ratio is calculated by dividing tangible equity by tangible assets. The following table sets forth the calculation of the Company’s tangible common equity ratio at September 30, 2018 and December 31, 2017 (in thousands, except ratio): September 30,
2018 December 31,
2017 Total shareholders’ equity $ 97,179 $ 95,102 Less: Goodwill 11,944 11,944 Tangible equity 85,235 83,158 Total assets 1,168,806 1,167,655 Less: Goodwill 11,944 11,944 Tangible assets 1,156,862 1,155,711 Tangible common equity ratio 7.37% 7.20% …LOAN QUALITY….....LOAN QUALITY.....The following table sets forth information concerning the Company’s loan delinquency, non-performing assets, and classified assets (in thousands, except percentages): September 30,
2018 December 31,
2017 September 30,
2017 Total accruing loan delinquency (past due 30 to 89 days) $ 9,365 $ 8,178 $ 9,052 Total non-accrual loans 904 3,016 4,654 Total non-performing assets including TDR* 1,067 3,034 5,372 Accruing loan delinquency, as a percentage of total loans, net of unearned income 1.06% 0.92% 1.01% Non-accrual loans, as a percentage of total loans, net of unearned
income 0.10 0.34 0.52 Non-performing assets, as a percentage of total loans, net of unearned income, and other real estate owned 0.12 0.34 0.60 Non-performing assets as a percentage of total assets 0.09 0.26 0.46 As a percent of average loans, net of unearned income: Annualized net charge-offs 0.13 0.06 0.05 Annualized provision for loan losses 0.02 0.09 0.11 Total classified loans (loans rated substandard or doubtful) $ 4,051 $ 5,433 $ 8,140 March 31,
2018 December 31,
2017 March 31,
2017Total accruing loan delinquency (past due 30 to 89 days) $ 8,155 $ 8,178 $ 7,715 Total non-accrual loans 1,989 3,016 1,463 Total non-performing assets including TDR* 2,157 3,034 1,488 Accruing loan delinquency, as a percentage of total loans, net of unearned income 0.93 % 0.92 % 0.86 % Non-accrual loans, as a percentage of total loans, net of unearned income 0.23 0.34 0.16 Non-performing assets, as a percentage of total loans, net of unearned income, and other real estate owned 0.25 0.34 0.17 Non-performing assets as a percentage of total assets 0.19 0.26 0.13 As a percent of average loans, net of unearned income: Annualized net charge-offs 0.15 0.06 0.04 Annualized provision for loan losses 0.02 0.09 0.10 Total classified loans (loans rated substandard or doubtful) $ 4,355 $ 5,433 $ 3,878 *Non-performing assets are comprised of (i) loans that are on a non-accrual basis, (ii) loans that are contractually past due 90 days or more as to interest and principal payments, (iii) performing loans classified as a troubled debt restructuring and (iv) other real estate owned.quarternine months of 2018 as evidenced by low levels of non-accrual loans, non-performing assets, classified loans, and loan delinquency levels that continue to be belownear 1% of total loans. 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 March 31,September 30, 2018, the 25 largest credits represented 26.4%27.2% of total loans outstanding, which represents a slight decrease fromis consistent with the firstthird quarter 2017 when it was 27.3%. September 30,
2018 December 31,
2017 September 30,
2017 Allowance for loan losses $ 9,439 $ 10,214 $ 10,346 Allowance for loan losses as a percentage of each of the following: total loans, net of unearned income 1.07% 1.15% 1.15% total accruing delinquent loans (past due 30 to 89 days) 100.79 124.90 114.30 total non-accrual loans 1,044.14 338.66 222.30 total non-performing assets 884.63 336.65 192.59 March 31,
2018 December 31,
2017 March 31,
2017Allowance for loan losses $ 9,932 $ 10,214 $ 10,080 Allowance for loan losses as a percentage of each of the following total loans, net of unearned income 1.14 % 1.15 % 1.12 % total accruing delinquent loans (past due 30 to 89 days) 121.79 124.90 130.65 total non-accrual loans 499.35 338.66 689.00 total non-performing assets 460.45 336.65 677.42 $50,000$100,000 provision for loan losses in the first threenine months of 2018 compared to a $225,000$750,000 provision for loan losses in the first threenine months of 2017 or a decrease of $175,000 million$650,000 between periods. The lower loan loss provision in 2018 reflects our overall strong asset quality, the successful workout of several criticized loans, and reduced loan portfolio balances.threenine months of 2018, the Company’s loan to deposit ratio has averaged91.8% 92.39%. We are optimistic that we can increase theexpect our loan to deposit ratio in 2018 given commercial loan pipelines, continued growth from our loan production offices and our focus on small business lending.$3.6$3.0 million from December 31, 2017 to March 31,September 30, 2018, due to $16.9$8.8 million of net cash used in financinginvesting activities partially offset by $9.7more than offsetting $3.8 million of net cash provided by investingoperating activities and $3.6$2.1 million of net cash provided by operatingfinancing activities. Within financing activities, short term borrowed funds decreasedincreased by $12.2 million while total deposit balances decreased by $3.7 million. Within investing activities, cash advanced for new loan fundings and purchases (excluding residential mortgages sold in the secondary market) totaled $30.7$136 million and was $14.3$5.4 million lower than the $45.0$141.3 million of cash received from loan principal payments and participations sold. Also, cash utilized for new investment security purchases totaled $14.0$33.8 million which more than exceeded cash provided from investment security maturities and sales of $9.1$20.6 million. Within operating activities, sales of residential mortgage loans of $6.4$25.8 million more than offset new residential mortgage loan originations of $4.1$23.4 million. At March 31,September 30, 2018, the Company had immediately available $376$351 million of overnight borrowing capacity at the FHLB and $35 million of unsecured federal funds lines with correspondent banks.$9.5$8.7 million of cash, short-term investments, and investment securities at March 31,September 30, 2018. Additionally, dividend payments from our subsidiaries also provide ongoing cash to the holding company. At March 31, 2017,September 30, 2018, our subsidiary Bank had $3.8$6.5 million of cash available for immediate dividends to the holding company under applicable regulatory formulas. Management follows a policy that limits dividend payments from the Trust Company to 75% of annual net income. Overall, we 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 dividend, and support anythe common stock repurchase program.10.26%10.10%, the tier 1 capital ratio was 11.52%11.31%, and the total capital ratio was 13.45%13.13% at March 31,September 30, 2018.9.54%9.57% at March 31,September 30, 2018. We anticipate that we will maintain our strong capital ratios throughout the remainder of 2018. Capital generated from earnings will be utilized to pay the common stock cash dividend, fund the stock repurchase program, and will also support controlled balance sheet growth. There is a particular emphasis on ensuring that the subsidiary bank has appropriate levels of capital to support its non-owner occupied commercial real estate loan concentration which stood at 337%335% of regulatory capital at March 31,September 30, 2018.On January 24, 2017, the Company’s Board of Directors approved a new common stock repurchase program which called 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. The shares were purchased from time to time in open market, privately negotiated, or block transactions. This common stock repurchase program did not obligate the Company to acquire any specific number of shares and could have been modified, suspended or discontinued at any time. During the first three months of 2018, the Company was able to repurchase 105,663 shares of its common stock and return $445,000 million of capital to its shareholders through this program. This represented the completion of the most recently authorized buyback program as all 945,000 common stock shares have been repurchased and a total of $3.8 million was returned to our shareholders over the past 14 months. As of March 31, 2018, the Company had approximately 18.0 million shares of its common stock outstanding.reviserevised the prompt corrective action requirements under banking regulations. The revisions from the previous standards include a revised definition of capital, the introduction of a minimum Common Equity Tier 1 capital ratio and changed risk weightings for certain assets. The implementation of the new rules will be phased in over this four-year period ending January 1, 2019 with minimum capital requirements becoming increasingly more strict each year of the transition. The new minimum capital requirements for each ratio, both, initially on January 1, 2015 and at the end of the transition on January 1, 2019, are as follows: A common equity tier 1 capital ratio of 4.50%Interest Rate Scenario Variability of Net
Interest Income Change in Market Value
of Portfolio Equity 200bp increase 0.2% 16.2% 100bp increase 0.5 9.2 100bp decrease (1.4) (12.5) Interest Rate Scenario Variability of Net
Interest Income Change in Market Value
of Portfolio Equity200bp increase 2.1 % 19.5 % 100bp increase 1.3 11.1 100bp decrease (1.4 ) (15.4 ) 1.25%2.25%. The market value of portfolio equity increases in the upward rate shocks due to the improved value of the Company’s core deposit base. Negative variability of market value of portfolio equity occurs in the downward rate shock due to a reduced value for core deposits.$180.0$207.9 million and standby letters of credit of $10.0$9.7 million as of March 31,September 30, 2018. The Company’s exposure to credit loss in the event of nonperformance by the other party to these commitments to extend credit and standby letters of credit is represented by their contractual amounts. The Company uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending.
BALANCE SHEET REFERENCE — Allowance for loan losses
INCOME STATEMENT REFERENCE — Provision for loan losses
DESCRIPTION$7.5$7.1 million, or 76%, of the total allowance for loan losses at March 31,September 30, 2018 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 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.
BALANCE SHEET REFERENCE — Goodwill
INCOME STATEMENT REFERENCE — Goodwill impairment
DESCRIPTION
BALANCE SHEET REFERENCE — Net deferred tax asset
INCOME STATEMENT REFERENCE — Provision for income tax expense
DESCRIPTIONMarch 31,September 30, 2018, 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.
BALANCE SHEET REFERENCE — Investment securities
INCOME STATEMENT REFERENCE — Net realized gains (losses) on investment securities
DESCRIPTIONMarch 31,September 30, 2018, the unrealized losses in the available-for-sale security portfolio were comprised of securities issued by government agencies or government sponsored agencies and certain high quality corporate and taxable municipal securities. The Company believes the unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value.opportunistically explore expansion avenues located beyond the AmeriServ footprint while maintaining a well-capitalized position. We will also explore branch consolidation opportunities and further leverage union affiliated revenue streams, prudently manage the Company’s risk profile to improve asset yields and increase profitability and continue to identify and implement technological opportunities and advancements to drive efficiency for the holding company and its affiliates.theThe Company is committed to providing exceptional customer service;service, identifying opportunities to enhance the Banking for Life philosophy by providing products and services to meet the financial needs in every step through a customer’s life cycle;cycle, and further defining the role technology plays in anticipating and satisfying customer needs. We will provide leading banking systems and solutions to improve and enhance customers’ Banking for Life experience. We will provide customers with a comprehensive offering of financial solutions including retail and business banking, home mortgages and wealth management at one location. We arehave redesigned and continue to be committed to redesignredesigning select branches to be more inviting and technologically savvy to meet the needs of the next generation of AmeriServ customers without abandoning the needs of our existing demographic.3.…3…QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET 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.4.…4…CONTROLS AND PROCEDURES…(a) Evaluation of Disclosure Controls and Procedures. The Company’s management carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and the operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31,September 30, 2018, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer along with the Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of March 31,September 30, 2018, are effective.firstthird quarter of 2018. All shares are repurchased under Board of Directors authorization.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, 2018 43,800 $ 4.37 43,800 496,200 August 1 – 31, 2018 167,479 4.54 167,479 328,721 September 1 – 30, 2018 68,400 4.54 68,400 260,321 Total 279,679 279,679 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 planJanuary 1 – 31, 2018 20,700 $ 4.23 20,700 84,963 February 1 – 28, 2018 84,963 4.21 84,963 — March 1 – 31, 2018 — — — — Total 105,663 $ 4.21 105,663 — Item 3. Defaults Upon Senior Securities
None
NoneAmeriServ Financial, Inc.Registrant AmeriServ Financial, Inc.
Registrant Date: May 11,November 9, 2018
President and Chief Executive Officer Date: May 11,November 9, 2018
Senior Vice President and Chief Financial Officer 44