NOTE 1. BASIS OF PRESENTATION
We, Summit Financial Group, Inc. and subsidiaries, prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual year end financial statements. In our opinion, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature.
The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates.
The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year. The consolidated financial statements and notes included herein should be read in conjunction with our 2018 audited financial statements and Annual Report on Form 10-K.
NOTE 2. SIGNIFICANT NEW AUTHORITATIVE ACCOUNTING GUIDANCE
Recently Adopted
We adopted ASU No. 2016-02, Leases (Topic 842) and its related amendments on its required effective date of January 1, 2019 utilizing the modified retrospective approach. Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary. The impact was insignificant to our consolidated financial position. Our current minimum commitments under long-term operating leases are disclosed in Note 12, Commitments and Contingencies.
We adopted ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities on its required effective date of January 1, 2019. This guidance shortens the amortization period for premiums on certain callable debt securities to the earliest call date (with an explicit, noncontingent call feature that is callable at a fixed price and on a preset date), rather than contractual maturity date as currently required under GAAP. The ASU does not impact instruments without preset call dates such as mortgage-backed securities. The adoption of the new pronouncement did not have a significant impact on our consolidated financial statements.
Pending Adoption
During June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments. This ASU, as amended, among other things, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. This ASU, as amended, is effective for SEC filers which are not Smaller Reporting Companies for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. We will adopt the guidance in the first quarter of 2020 with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. In this regard, we have a cross-functional implementation team comprised of personnel from risk management, operations and information technology, loan administration and finance and engaged a third-party vendor to assist us. The team is working through the late stages of its implementation plan, including refining and validating the third-party vendor’s model solution as well as analyzing qualitative factors which may modify the model’s quantitative outputs. While we are currently unable to estimate the approximate impact of the adoption of this ASU, as amended, it is expected to materially increase our allowance for loan losses. The ultimate impact of adoption will be significantly influenced by the loan portfolio's composition and credit quality, as well as the prevailing economic conditions and forecasts as of the adoption date.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendments modify the disclosure requirements in Topic 820 to add disclosures regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty. Certain disclosure
requirements in Topic 820 are also removed or modified. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain of the amendments are to be applied prospectively while others are to be applied retrospectively. Early adoption is permitted. We do not expect the adoption of ASU 2018-13 to have a material impact on our consolidated financial statements.
NOTE 3. FAIR VALUE MEASUREMENTS
The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
Fair Value Measurements Using:
|
Dollars in thousands
|
September 30, 2019
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Securities available for sale
|
|
|
|
|
|
|
|
U.S. Government sponsored agencies
|
$
|
22,067
|
|
|
$
|
—
|
|
|
$
|
22,067
|
|
|
$
|
—
|
|
Mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
Government sponsored agencies
|
71,887
|
|
|
—
|
|
|
71,887
|
|
|
—
|
|
Nongovernment sponsored entities
|
8,038
|
|
|
—
|
|
|
8,038
|
|
|
—
|
|
State and political subdivisions
|
33,664
|
|
|
—
|
|
|
33,664
|
|
|
—
|
|
Corporate debt securities
|
16,439
|
|
|
—
|
|
|
16,439
|
|
|
—
|
|
Asset-backed securities
|
33,419
|
|
|
—
|
|
|
33,419
|
|
|
—
|
|
Tax-exempt state and political subdivisions
|
79,833
|
|
|
—
|
|
|
79,833
|
|
|
—
|
|
Total securities available for sale
|
$
|
265,347
|
|
|
$
|
—
|
|
|
$
|
265,347
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Derivative financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
1,444
|
|
|
$
|
—
|
|
|
$
|
1,444
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
Fair Value Measurements Using:
|
Dollars in thousands
|
December 31, 2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Securities available for sale
|
|
|
|
|
|
|
|
U.S. Government sponsored agencies
|
$
|
26,140
|
|
|
$
|
—
|
|
|
$
|
26,140
|
|
|
$
|
—
|
|
Mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
Government sponsored agencies
|
80,309
|
|
|
—
|
|
|
80,309
|
|
|
—
|
|
Nongovernment sponsored entities
|
614
|
|
|
—
|
|
|
614
|
|
|
—
|
|
State and political subdivisions
|
19,243
|
|
|
—
|
|
|
19,243
|
|
|
—
|
|
Corporate debt securities
|
14,512
|
|
|
—
|
|
|
14,512
|
|
|
—
|
|
Asset-backed securities
|
25,175
|
|
|
—
|
|
|
25,175
|
|
|
—
|
|
Tax-exempt state and political subdivisions
|
127,154
|
|
|
—
|
|
|
127,154
|
|
|
—
|
|
Total securities available for sale
|
$
|
293,147
|
|
|
$
|
—
|
|
|
$
|
293,147
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Derivative financial assets
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
555
|
|
|
$
|
—
|
|
|
$
|
555
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Derivative financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
411
|
|
|
$
|
—
|
|
|
$
|
411
|
|
|
$
|
—
|
|
We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
Fair Value Measurements Using:
|
Dollars in thousands
|
September 30, 2019
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Residential mortgage loans held for sale
|
$
|
1,087
|
|
|
$
|
—
|
|
|
$
|
1,087
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Collateral-dependent impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
104
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
96
|
|
Commercial real estate
|
1,436
|
|
|
$
|
—
|
|
|
1,436
|
|
|
—
|
|
Construction and development
|
430
|
|
|
$
|
—
|
|
|
430
|
|
|
—
|
|
Residential real estate
|
657
|
|
|
—
|
|
|
657
|
|
|
—
|
|
Total collateral-dependent impaired loans
|
$
|
2,627
|
|
|
$
|
—
|
|
|
$
|
2,531
|
|
|
$
|
96
|
|
|
|
|
|
|
|
|
|
Property held for sale
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
$
|
1,384
|
|
|
$
|
—
|
|
|
$
|
1,304
|
|
|
$
|
80
|
|
Construction and development
|
14,168
|
|
|
—
|
|
|
14,168
|
|
|
—
|
|
Residential real estate
|
730
|
|
|
—
|
|
|
730
|
|
|
—
|
|
Total property held for sale
|
$
|
16,282
|
|
|
$
|
—
|
|
|
$
|
16,202
|
|
|
$
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
Fair Value Measurements Using:
|
Dollars in thousands
|
December 31, 2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Residential mortgage loans held for sale
|
$
|
400
|
|
|
$
|
—
|
|
|
$
|
400
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Collateral-dependent impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
2,660
|
|
|
$
|
—
|
|
|
$
|
2,611
|
|
|
$
|
49
|
|
Commercial real estate
|
420
|
|
|
—
|
|
|
420
|
|
|
—
|
|
Construction and development
|
759
|
|
|
—
|
|
|
759
|
|
|
—
|
|
Residential real estate
|
763
|
|
|
—
|
|
|
763
|
|
|
—
|
|
Total collateral-dependent impaired loans
|
$
|
4,602
|
|
|
$
|
—
|
|
|
$
|
4,553
|
|
|
$
|
49
|
|
|
|
|
|
|
|
|
|
Property held for sale
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
$
|
1,677
|
|
|
$
|
—
|
|
|
$
|
1,677
|
|
|
$
|
—
|
|
Construction and development
|
16,363
|
|
|
—
|
|
|
16,363
|
|
|
—
|
|
Residential real estate
|
403
|
|
|
—
|
|
|
403
|
|
|
—
|
|
Total property held for sale
|
$
|
18,443
|
|
|
$
|
—
|
|
|
$
|
18,443
|
|
|
$
|
—
|
|
The carrying values and estimated fair values of our financial instruments are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
Fair Value Measurements Using:
|
Dollars in thousands
|
|
Carrying
Value
|
|
Estimated
Fair
Value
|
|
Level 1
|
Level 2
|
Level 3
|
Financial assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
52,670
|
|
|
$
|
52,670
|
|
|
$
|
—
|
|
$
|
52,670
|
|
$
|
—
|
|
Securities available for sale
|
|
265,347
|
|
|
265,347
|
|
|
—
|
|
265,347
|
|
—
|
|
Other investments
|
|
14,022
|
|
|
14,022
|
|
|
—
|
|
14,022
|
|
—
|
|
Loans held for sale, net
|
|
1,087
|
|
|
1,087
|
|
|
—
|
|
1,087
|
|
—
|
|
Loans, net
|
|
1,838,891
|
|
|
1,837,454
|
|
|
—
|
|
2,531
|
|
1,834,923
|
|
Accrued interest receivable
|
|
8,704
|
|
|
8,704
|
|
|
—
|
|
8,704
|
|
—
|
|
Derivative financial assets
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
|
$
|
2,180,721
|
|
|
$
|
2,179,284
|
|
|
$
|
—
|
|
$
|
344,361
|
|
$
|
1,834,923
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,832,285
|
|
|
$
|
1,837,024
|
|
|
$
|
—
|
|
$
|
1,837,024
|
|
$
|
—
|
|
Short-term borrowings
|
|
206,694
|
|
|
206,694
|
|
|
—
|
|
206,694
|
|
—
|
|
Long-term borrowings
|
|
722
|
|
|
868
|
|
|
—
|
|
868
|
|
—
|
|
Subordinated debentures owed to unconsolidated subsidiary trusts
|
|
19,589
|
|
|
19,589
|
|
|
—
|
|
19,589
|
|
—
|
|
Accrued interest payable
|
|
1,297
|
|
|
1,297
|
|
|
—
|
|
1,297
|
|
—
|
|
Derivative financial liabilities
|
|
1,444
|
|
|
1,444
|
|
|
—
|
|
1,444
|
|
—
|
|
|
|
$
|
2,062,031
|
|
|
$
|
2,066,916
|
|
|
$
|
—
|
|
$
|
2,066,916
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Fair Value Measurements Using:
|
Dollars in thousands
|
|
Carrying
Value
|
|
Estimated
Fair
Value
|
|
Level 1
|
Level 2
|
Level 3
|
Financial assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
59,540
|
|
|
$
|
59,540
|
|
|
$
|
—
|
|
$
|
59,540
|
|
$
|
—
|
|
Securities available for sale
|
|
293,147
|
|
|
293,147
|
|
|
—
|
|
293,147
|
|
—
|
|
Other investments
|
|
16,635
|
|
|
16,635
|
|
|
—
|
|
16,635
|
|
—
|
|
Loans held for sale, net
|
|
400
|
|
|
400
|
|
|
—
|
|
400
|
|
—
|
|
Loans, net
|
|
1,682,005
|
|
|
1,666,834
|
|
|
—
|
|
4,553
|
|
1,662,281
|
|
Accrued interest receivable
|
|
8,708
|
|
|
8,708
|
|
|
—
|
|
8,708
|
|
—
|
|
Derivative financial assets
|
|
555
|
|
|
555
|
|
|
—
|
|
555
|
|
—
|
|
|
|
$
|
2,060,990
|
|
|
$
|
2,045,819
|
|
|
$
|
—
|
|
$
|
383,538
|
|
$
|
1,662,281
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,634,826
|
|
|
$
|
1,631,456
|
|
|
$
|
—
|
|
$
|
1,631,456
|
|
$
|
—
|
|
Short-term borrowings
|
|
309,084
|
|
|
309,084
|
|
|
—
|
|
309,084
|
|
—
|
|
Long-term borrowings
|
|
735
|
|
|
843
|
|
|
—
|
|
843
|
|
—
|
|
Subordinated debentures owed to unconsolidated subsidiary trusts
|
|
19,589
|
|
|
19,589
|
|
|
—
|
|
19,589
|
|
—
|
|
Accrued interest payable
|
|
1,102
|
|
|
1,102
|
|
|
—
|
|
1,102
|
|
—
|
|
Derivative financial liabilities
|
|
411
|
|
|
411
|
|
|
—
|
|
411
|
|
—
|
|
|
|
$
|
1,965,747
|
|
|
$
|
1,962,485
|
|
|
$
|
—
|
|
$
|
1,962,485
|
|
$
|
—
|
|
NOTE 4. EARNINGS PER SHARE
The computations of basic and diluted earnings per share follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
|
2019
|
|
2018
|
Dollars in thousands,except per share amounts
|
|
Net Income
(Numerator)
|
|
Common
Shares
(Denominator)
|
|
Per
Share
|
|
Net Income
(Numerator)
|
|
Common
Shares
(Denominator)
|
|
Per
Share
|
Net income
|
|
$
|
8,061
|
|
|
|
|
|
|
$
|
6,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
8,061
|
|
|
12,412,982
|
|
|
$
|
0.65
|
|
|
$
|
6,899
|
|
|
12,374,350
|
|
|
$
|
0.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
4,654
|
|
|
|
|
|
|
|
7,349
|
|
|
|
|
Stock appreciation rights (SARs)
|
|
|
|
50,142
|
|
|
|
|
|
|
57,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
8,061
|
|
|
12,467,777
|
|
|
$
|
0.65
|
|
|
$
|
6,899
|
|
|
12,439,051
|
|
|
$
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
Dollars in thousands,except per share amounts
|
|
Income
(Numerator)
|
|
Common
Shares
(Denominator)
|
|
Per
Share
|
|
Income
(Numerator)
|
|
Common
Shares
(Denominator)
|
|
Per
Share
|
Net income
|
|
$
|
23,718
|
|
|
|
|
|
|
$
|
20,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
23,718
|
|
|
12,555,411
|
|
|
$
|
1.89
|
|
|
$
|
20,622
|
|
|
12,366,612
|
|
|
$
|
1.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
5,006
|
|
|
|
|
|
|
|
7,561
|
|
|
|
|
Stock appreciation rights (SARs)
|
|
|
|
53,965
|
|
|
|
|
|
|
56,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
23,718
|
|
|
12,614,382
|
|
|
$
|
1.88
|
|
|
$
|
20,622
|
|
|
12,430,227
|
|
|
$
|
1.66
|
|
Stock option and stock appreciation right (SAR) grants are disregarded in this computation if they are determined to be anti-dilutive. Our anti-dilutive stock options for the three and nine months ended September 30, 2019 were 7,700 shares and for the three and nine months ended September 30, 2018 were 15,600 shares. Our anti-dilutive SARs for the three and nine months ended September 30, 2019 and September 30, 2018 were 84,615 and 87,615, respectively .
NOTE 5. DEBT SECURITIES
The amortized cost, unrealized gains, unrealized losses and estimated fair values of securities at September 30, 2019 and December 31, 2018 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
Amortized
|
|
Unrealized
|
|
Estimated
|
Dollars in thousands
|
Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
Available for Sale
|
|
|
|
|
|
|
|
Taxable debt securities
|
|
|
|
|
|
|
|
U.S. Government and agencies and corporations
|
$
|
22,186
|
|
|
$
|
248
|
|
|
$
|
367
|
|
|
$
|
22,067
|
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored agencies
|
71,119
|
|
|
1,245
|
|
|
477
|
|
|
71,887
|
|
Nongovernment-sponsored entities
|
8,057
|
|
|
19
|
|
|
38
|
|
|
8,038
|
|
State and political subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
6,716
|
|
|
143
|
|
|
—
|
|
|
6,859
|
|
Water and sewer revenues
|
4,752
|
|
|
115
|
|
|
9
|
|
|
4,858
|
|
University/college revenues
|
4,598
|
|
|
244
|
|
|
—
|
|
|
4,842
|
|
Other revenues
|
16,590
|
|
|
515
|
|
|
—
|
|
|
17,105
|
|
Corporate debt securities
|
16,553
|
|
|
50
|
|
|
164
|
|
|
16,439
|
|
Asset-backed securities
|
33,957
|
|
|
—
|
|
|
538
|
|
|
33,419
|
|
Total taxable debt securities
|
184,528
|
|
|
2,579
|
|
|
1,593
|
|
|
185,514
|
|
Tax-exempt debt securities
|
|
|
|
|
|
|
|
|
|
|
|
State and political subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
41,473
|
|
|
3,095
|
|
|
—
|
|
|
44,568
|
|
Water and sewer revenues
|
9,592
|
|
|
672
|
|
|
—
|
|
|
10,264
|
|
Lease revenues
|
8,542
|
|
|
650
|
|
|
—
|
|
|
9,192
|
|
Other revenues
|
15,001
|
|
|
811
|
|
|
3
|
|
|
15,809
|
|
Total tax-exempt debt securities
|
74,608
|
|
|
5,228
|
|
|
3
|
|
|
79,833
|
|
Total securities available for sale
|
$
|
259,136
|
|
|
$
|
7,807
|
|
|
$
|
1,596
|
|
|
$
|
265,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Amortized
|
|
Unrealized
|
|
Estimated
|
Dollars in thousands
|
Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
Available for Sale
|
|
|
|
|
|
|
|
Taxable debt securities
|
|
|
|
|
|
|
|
U.S. Government and agencies and corporations
|
$
|
26,303
|
|
|
$
|
203
|
|
|
$
|
366
|
|
|
$
|
26,140
|
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored agencies
|
80,883
|
|
|
603
|
|
|
1,177
|
|
|
80,309
|
|
Nongovernment-sponsored entities
|
611
|
|
|
4
|
|
|
1
|
|
|
614
|
|
State and political subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
6,081
|
|
|
—
|
|
|
126
|
|
|
5,955
|
|
Other revenues
|
13,457
|
|
|
17
|
|
|
186
|
|
|
13,288
|
|
Corporate debt securities
|
14,807
|
|
|
9
|
|
|
304
|
|
|
14,512
|
|
Asset-backed securities
|
25,288
|
|
|
10
|
|
|
123
|
|
|
25,175
|
|
Total taxable debt securities
|
167,430
|
|
|
846
|
|
|
2,283
|
|
|
165,993
|
|
Tax-exempt debt securities
|
|
|
|
|
|
|
|
|
|
|
|
State and political subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
65,626
|
|
|
624
|
|
|
344
|
|
|
65,906
|
|
Water and sewer revenues
|
20,018
|
|
|
225
|
|
|
98
|
|
|
20,145
|
|
Lease revenues
|
10,980
|
|
|
135
|
|
|
7
|
|
|
11,108
|
|
Other revenues
|
30,197
|
|
|
77
|
|
|
279
|
|
|
29,995
|
|
Total tax-exempt debt securities
|
126,821
|
|
|
1,061
|
|
|
728
|
|
|
127,154
|
|
Total securities available for sale
|
$
|
294,251
|
|
|
$
|
1,907
|
|
|
$
|
3,011
|
|
|
$
|
293,147
|
|
The below information is relative to the five states where issuers with the highest volume of state and political subdivision securities held in our portfolio are located. We own no such securities of any single issuer which we deem to be a concentration.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
Amortized
|
|
Unrealized
|
|
Estimated
|
Dollars in thousands
|
Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California
|
$
|
17,649
|
|
|
$
|
1,573
|
|
|
$
|
—
|
|
|
$
|
19,222
|
|
Illinois
|
13,180
|
|
|
613
|
|
|
—
|
|
|
13,793
|
|
Michigan
|
10,902
|
|
|
655
|
|
|
—
|
|
|
11,557
|
|
New York
|
8,546
|
|
|
476
|
|
|
—
|
|
|
9,022
|
|
West Virginia
|
8,406
|
|
|
228
|
|
|
3
|
|
|
8,631
|
|
Management performs pre-purchase and ongoing analysis to confirm that all investment securities meet applicable credit quality standards.
The maturities, amortized cost and estimated fair values of securities at September 30, 2019, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
Due in one year or less
|
|
$
|
30,056
|
|
|
$
|
30,214
|
|
Due from one to five years
|
|
77,571
|
|
|
78,032
|
|
Due from five to ten years
|
|
60,653
|
|
|
61,130
|
|
Due after ten years
|
|
90,856
|
|
|
95,971
|
|
|
|
$
|
259,136
|
|
|
$
|
265,347
|
|
The proceeds from sales, calls and maturities of securities available for sale, including principal payments received on mortgage-backed obligations, and the related gross gains and losses realized, for the nine months ended September 30, 2019 and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
|
|
Gross realized
|
Dollars in thousands
|
Sales
|
|
Calls and
Maturities
|
|
Principal
Payments
|
|
Gains
|
|
Losses
|
For the Nine Months Ended
September 30,
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
$
|
133,174
|
|
|
$
|
1,766
|
|
|
$
|
18,501
|
|
|
$
|
1,867
|
|
|
$
|
332
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
$
|
92,048
|
|
|
$
|
1,050
|
|
|
$
|
19,770
|
|
|
$
|
1,754
|
|
|
$
|
926
|
|
We held 61 available for sale securities having an unrealized loss at September 30, 2019. We do not intend to sell these securities, and it is more likely than not that we will not be required to sell these securities before recovery of their amortized cost bases. We believe that this decline in value is primarily attributable to the lack of market liquidity and to changes in market interest rates and is not due to credit quality. Accordingly, no other-than-temporary impairment charge to earnings is warranted at this time.
Provided below is a summary of securities available for sale which were in an unrealized loss position at September 30, 2019 and December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
Dollars in thousands
|
# of securities in loss position
|
|
Estimated
Fair Value
|
|
Unrealized
Loss
|
|
Estimated
Fair Value
|
|
Unrealized
Loss
|
|
Estimated
Fair Value
|
|
Unrealized
Loss
|
Taxable debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies and corporations
|
15
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,730
|
|
|
$
|
367
|
|
|
$
|
15,730
|
|
|
$
|
367
|
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored agencies
|
21
|
|
19,162
|
|
|
324
|
|
|
8,750
|
|
|
153
|
|
|
27,912
|
|
|
477
|
|
Nongovernment-sponsored entities
|
3
|
|
5,998
|
|
|
38
|
|
|
—
|
|
|
—
|
|
|
5,998
|
|
|
38
|
|
State and political subdivisions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water and sewer revenues
|
1
|
|
997
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
997
|
|
|
9
|
|
Corporate debt securities
|
5
|
|
3,358
|
|
|
23
|
|
|
1,859
|
|
|
141
|
|
|
5,217
|
|
|
164
|
|
Asset-backed securities
|
15
|
|
17,420
|
|
|
240
|
|
|
15,999
|
|
|
298
|
|
|
33,419
|
|
|
538
|
|
Tax-exempt debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and political subdivisions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues
|
1
|
|
1,031
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
1,031
|
|
|
3
|
|
Total
|
61
|
|
$
|
47,966
|
|
|
$
|
637
|
|
|
$
|
42,338
|
|
|
$
|
959
|
|
|
$
|
90,304
|
|
|
$
|
1,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
Dollars in thousands
|
# of securities in loss position
|
|
Estimated
Fair Value
|
|
Unrealized
Loss
|
|
Estimated
Fair Value
|
|
Unrealized
Loss
|
|
Estimated
Fair Value
|
|
Unrealized
Loss
|
Taxable debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies and
corporations
|
15
|
|
$
|
12,185
|
|
|
$
|
184
|
|
|
$
|
7,464
|
|
|
$
|
182
|
|
|
$
|
19,649
|
|
|
$
|
366
|
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored agencies
|
37
|
|
23,277
|
|
|
241
|
|
|
24,472
|
|
|
936
|
|
|
47,749
|
|
|
1,177
|
|
Nongovernment-sponsored entities
|
1
|
|
—
|
|
|
—
|
|
|
436
|
|
|
1
|
|
|
436
|
|
|
1
|
|
State and political subdivisions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
8
|
|
—
|
|
|
—
|
|
|
5,222
|
|
|
126
|
|
|
5,222
|
|
|
126
|
|
Other revenues
|
11
|
|
968
|
|
|
16
|
|
|
9,450
|
|
|
170
|
|
|
10,418
|
|
|
186
|
|
Corporate debt securities
|
7
|
|
2,759
|
|
|
109
|
|
|
4,587
|
|
|
195
|
|
|
7,346
|
|
|
304
|
|
Asset-backed securities
|
9
|
|
20,129
|
|
|
123
|
|
|
—
|
|
|
—
|
|
|
20,129
|
|
|
123
|
|
Tax-exempt debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and political subdivisions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
25
|
|
7,273
|
|
|
50
|
|
|
16,830
|
|
|
294
|
|
|
24,103
|
|
|
344
|
|
Water and sewer revenues
|
7
|
|
989
|
|
|
6
|
|
|
4,311
|
|
|
92
|
|
|
5,300
|
|
|
98
|
|
Lease revenues
|
2
|
|
553
|
|
|
—
|
|
|
557
|
|
|
7
|
|
|
1,110
|
|
|
7
|
|
Other revenues
|
12
|
|
7,309
|
|
|
62
|
|
|
11,531
|
|
|
217
|
|
|
18,840
|
|
|
279
|
|
Total
|
134
|
|
$
|
75,442
|
|
|
$
|
791
|
|
|
$
|
84,860
|
|
|
$
|
2,220
|
|
|
$
|
160,302
|
|
|
$
|
3,011
|
|
NOTE 6. LOANS
Loans are summarized as follows:
|
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
September 30,
2019
|
|
December 31,
2018
|
Commercial
|
|
$
|
199,391
|
|
|
$
|
194,315
|
|
Commercial real estate
|
|
|
|
|
|
|
Owner-occupied
|
|
255,828
|
|
|
257,256
|
|
Non-owner occupied
|
|
567,670
|
|
|
573,932
|
|
Construction and development
|
|
|
|
|
|
|
Land and land development
|
|
69,589
|
|
|
68,833
|
|
Construction
|
|
56,255
|
|
|
24,731
|
|
Residential real estate
|
|
|
|
|
|
|
Non-jumbo
|
|
359,399
|
|
|
336,977
|
|
Jumbo
|
|
69,815
|
|
|
73,599
|
|
Home equity
|
|
78,493
|
|
|
80,910
|
|
Mortgage warehouse lines
|
|
145,039
|
|
|
39,140
|
|
Consumer
|
|
36,982
|
|
|
32,460
|
|
Other
|
|
13,371
|
|
|
12,899
|
|
Total loans, net of unearned fees
|
|
1,851,832
|
|
|
1,695,052
|
|
Less allowance for loan losses
|
|
12,941
|
|
|
13,047
|
|
Loans, net
|
|
$
|
1,838,891
|
|
|
$
|
1,682,005
|
|
The outstanding balance and the recorded investment of acquired loans included in the consolidated balance sheet at September 30, 2019 and December 31, 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Loans
|
|
|
September 30, 2019
|
|
December 31, 2018
|
Dollars in thousands
|
|
Purchased Credit Impaired
|
|
Purchased Performing
|
|
Total
|
|
Purchased Credit Impaired
|
|
Purchased Performing
|
|
Total
|
Outstanding balance
|
|
$
|
4,160
|
|
|
$
|
143,441
|
|
|
$
|
147,601
|
|
|
$
|
4,275
|
|
|
$
|
138,167
|
|
|
$
|
142,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
3,688
|
|
|
$
|
3,688
|
|
|
$
|
—
|
|
|
$
|
3,934
|
|
|
$
|
3,934
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
—
|
|
|
18,221
|
|
|
18,221
|
|
|
—
|
|
|
16,133
|
|
|
16,133
|
|
Non-owner occupied
|
|
1,194
|
|
|
16,285
|
|
|
17,479
|
|
|
1,162
|
|
|
23,431
|
|
|
24,593
|
|
Construction and development
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and land development
|
|
—
|
|
|
3,369
|
|
|
3,369
|
|
|
—
|
|
|
5,161
|
|
|
5,161
|
|
Construction
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
|
1,265
|
|
|
89,697
|
|
|
90,962
|
|
|
1,374
|
|
|
77,894
|
|
|
79,268
|
|
Jumbo
|
|
953
|
|
|
3,098
|
|
|
4,051
|
|
|
975
|
|
|
2,577
|
|
|
3,552
|
|
Home equity
|
|
—
|
|
|
2,312
|
|
|
2,312
|
|
|
—
|
|
|
2,805
|
|
|
2,805
|
|
Consumer
|
|
—
|
|
|
4,883
|
|
|
4,883
|
|
|
—
|
|
|
4,630
|
|
|
4,630
|
|
Other
|
|
—
|
|
|
13
|
|
|
13
|
|
|
—
|
|
|
122
|
|
|
122
|
|
Total recorded investment
|
|
$
|
3,412
|
|
|
$
|
141,566
|
|
|
$
|
144,978
|
|
|
$
|
3,511
|
|
|
$
|
136,687
|
|
|
$
|
140,198
|
|
The following table presents a summary of the change in the accretable yield of the purchased credit impaired ("PCI") loan portfolio for the three and nine months ended September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
Dollars in thousands
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Accretable yield
|
|
$
|
597
|
|
|
$
|
676
|
|
|
$
|
632
|
|
|
$
|
745
|
|
Accretion
|
|
(12
|
)
|
|
(12
|
)
|
|
(46
|
)
|
|
(81
|
)
|
Reclassification of nonaccretable difference due to improvement
in expected cash flows
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other changes, net
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
Accretable yield, September 30
|
|
$
|
585
|
|
|
$
|
664
|
|
|
$
|
585
|
|
|
$
|
664
|
|
The following table presents the contractual aging of the recorded investment in past due loans by class as of September 30, 2019 and December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2019
|
|
Past Due
|
|
|
|
> 90 days and Accruing
|
Dollars in thousands
|
30-59 days
|
|
60-89 days
|
|
> 90 days
|
|
Total
|
|
Current
|
|
Commercial
|
$
|
405
|
|
|
$
|
50
|
|
|
$
|
483
|
|
|
$
|
938
|
|
|
$
|
198,453
|
|
|
$
|
—
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
137
|
|
|
175
|
|
|
3,859
|
|
|
4,171
|
|
|
251,657
|
|
|
—
|
|
Non-owner occupied
|
259
|
|
|
—
|
|
|
1,784
|
|
|
2,043
|
|
|
565,627
|
|
|
—
|
|
Construction and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and land development
|
67
|
|
|
21
|
|
|
168
|
|
|
256
|
|
|
69,333
|
|
|
—
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56,255
|
|
|
—
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
3,390
|
|
|
1,516
|
|
|
2,182
|
|
|
7,088
|
|
|
352,311
|
|
|
—
|
|
Jumbo
|
952
|
|
|
—
|
|
|
—
|
|
|
952
|
|
|
68,863
|
|
|
—
|
|
Home equity
|
74
|
|
|
218
|
|
|
56
|
|
|
348
|
|
|
78,145
|
|
|
—
|
|
Mortgage warehouse lines
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
145,039
|
|
|
—
|
|
Consumer
|
344
|
|
|
108
|
|
|
79
|
|
|
531
|
|
|
36,451
|
|
|
39
|
|
Other
|
—
|
|
|
—
|
|
|
100
|
|
|
100
|
|
|
13,271
|
|
|
—
|
|
Total
|
$
|
5,628
|
|
|
$
|
2,088
|
|
|
$
|
8,711
|
|
|
$
|
16,427
|
|
|
$
|
1,835,405
|
|
|
$
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2018
|
|
Past Due
|
|
|
|
> 90 days and Accruing
|
Dollars in thousands
|
30-59 days
|
|
60-89 days
|
|
> 90 days
|
|
Total
|
|
Current
|
|
Commercial
|
$
|
254
|
|
|
$
|
51
|
|
|
$
|
483
|
|
|
$
|
788
|
|
|
$
|
193,527
|
|
|
$
|
—
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
—
|
|
|
—
|
|
|
612
|
|
|
612
|
|
|
256,644
|
|
|
—
|
|
Non-owner occupied
|
156
|
|
|
255
|
|
|
1,756
|
|
|
2,167
|
|
|
571,765
|
|
|
—
|
|
Construction and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and land development
|
190
|
|
|
4
|
|
|
3,174
|
|
|
3,368
|
|
|
65,465
|
|
|
—
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,731
|
|
|
—
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
4,120
|
|
|
2,235
|
|
|
3,753
|
|
|
10,108
|
|
|
326,869
|
|
|
—
|
|
Jumbo
|
—
|
|
|
—
|
|
|
675
|
|
|
675
|
|
|
72,924
|
|
|
—
|
|
Home equity
|
754
|
|
|
261
|
|
|
181
|
|
|
1,196
|
|
|
79,714
|
|
|
—
|
|
Mortgage warehouse lines
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,140
|
|
|
—
|
|
Consumer
|
502
|
|
|
121
|
|
|
125
|
|
|
748
|
|
|
31,712
|
|
|
36
|
|
Other
|
31
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
12,868
|
|
|
—
|
|
Total
|
$
|
6,007
|
|
|
$
|
2,927
|
|
|
$
|
10,759
|
|
|
$
|
19,693
|
|
|
$
|
1,675,359
|
|
|
$
|
36
|
|
Nonaccrual loans: The following table presents the nonaccrual loans included in the net balance of loans at September 30, 2019 and December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
Dollars in thousands
|
|
2019
|
|
2018
|
Commercial
|
|
$
|
835
|
|
|
$
|
935
|
|
Commercial real estate
|
|
|
|
|
|
|
Owner-occupied
|
|
4,024
|
|
|
1,028
|
|
Non-owner occupied
|
|
3,013
|
|
|
2,210
|
|
Construction and development
|
|
|
|
|
|
|
Land & land development
|
|
191
|
|
|
3,198
|
|
Construction
|
|
—
|
|
|
—
|
|
Residential mortgage
|
|
|
|
|
|
|
Non-jumbo
|
|
4,299
|
|
|
6,532
|
|
Jumbo
|
|
—
|
|
|
675
|
|
Home equity
|
|
162
|
|
|
299
|
|
Mortgage warehouse lines
|
|
—
|
|
|
—
|
|
Consumer
|
|
76
|
|
|
112
|
|
Other
|
|
100
|
|
|
—
|
|
Total
|
|
$
|
12,700
|
|
|
$
|
14,989
|
|
Impaired loans: Impaired loans include the following:
|
|
▪
|
Loans which we risk-rate (loan relationships having aggregate balances in excess of $2.5 million, or loans exceeding $500,000 and exhibiting credit weakness) through our normal loan review procedures and which, based on current information and events, it is probable that we will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement. Risk-rated loans with insignificant delays or insignificant short falls in the amount of payments expected to be collected are not considered to be impaired.
|
|
|
▪
|
Loans that have been modified in a troubled debt restructuring.
|
Both commercial and consumer loans are deemed impaired upon being contractually modified in a troubled debt restructuring. Troubled debt restructurings typically result from our loss mitigation activities and occur when we grant a concession to a borrower who is experiencing financial difficulty in order to minimize our economic loss and to avoid foreclosure or repossession of collateral. Once restructured, a loan is generally considered impaired until its maturity, regardless of whether the borrower performs under the modified terms. Although such a loan may be returned to accrual status if the criteria set forth in accounting principles generally accepted in the United States are met, the loan would continue to be evaluated for an asset-specific allowance for loan losses and we would continue to report the loan in the impaired loan table below.
The following tables present loans individually evaluated for impairment at September 30, 2019 and December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
Dollars in thousands
|
Recorded
Investment
|
|
Unpaid
Principal Balance
|
|
Related
Allowance
|
|
Average
Impaired
Balance
|
|
Interest Income
Recognized
while impaired
|
|
|
|
|
|
|
|
|
|
|
Without a related allowance
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
4,813
|
|
|
$
|
4,813
|
|
|
$
|
—
|
|
|
$
|
5,193
|
|
|
$
|
304
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
7,245
|
|
|
7,246
|
|
|
—
|
|
|
7,637
|
|
|
229
|
|
Non-owner occupied
|
10,683
|
|
|
10,690
|
|
|
—
|
|
|
10,127
|
|
|
502
|
|
Construction and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land & land development
|
954
|
|
|
954
|
|
|
—
|
|
|
1,209
|
|
|
70
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
3,472
|
|
|
3,478
|
|
|
—
|
|
|
3,966
|
|
|
217
|
|
Jumbo
|
4,000
|
|
|
3,999
|
|
|
—
|
|
|
4,029
|
|
|
221
|
|
Home equity
|
523
|
|
|
523
|
|
|
—
|
|
|
523
|
|
|
29
|
|
Mortgage warehouse lines
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Consumer
|
14
|
|
|
14
|
|
|
—
|
|
|
14
|
|
|
1
|
|
Total without a related allowance
|
$
|
31,704
|
|
|
$
|
31,717
|
|
|
$
|
—
|
|
|
$
|
32,698
|
|
|
$
|
1,573
|
|
|
|
|
|
|
|
|
|
|
|
With a related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
116
|
|
|
$
|
116
|
|
|
$
|
12
|
|
|
$
|
54
|
|
|
$
|
2
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
3,884
|
|
|
3,888
|
|
|
414
|
|
|
3,903
|
|
|
113
|
|
Non-owner occupied
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Construction and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land & land development
|
1,025
|
|
|
1,026
|
|
|
595
|
|
|
1,036
|
|
|
52
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
1,831
|
|
|
1,829
|
|
|
201
|
|
|
2,145
|
|
|
72
|
|
Jumbo
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Home equity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Mortgage warehouse lines
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Consumer
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total with a related allowance
|
$
|
6,856
|
|
|
$
|
6,859
|
|
|
$
|
1,222
|
|
|
$
|
7,138
|
|
|
$
|
239
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
28,720
|
|
|
$
|
28,733
|
|
|
$
|
1,021
|
|
|
$
|
29,159
|
|
|
$
|
1,272
|
|
Residential real estate
|
9,826
|
|
|
9,829
|
|
|
201
|
|
|
10,663
|
|
|
539
|
|
Consumer
|
14
|
|
|
14
|
|
|
—
|
|
|
14
|
|
|
1
|
|
Total
|
$
|
38,560
|
|
|
$
|
38,576
|
|
|
$
|
1,222
|
|
|
$
|
39,836
|
|
|
$
|
1,812
|
|
The table above does not include PCI loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
Dollars in thousands
|
Recorded
Investment
|
|
Unpaid
Principal Balance
|
|
Related
Allowance
|
|
Average
Impaired
Balance
|
|
Interest Income
Recognized
while impaired
|
|
|
|
|
|
|
|
|
|
|
Without a related allowance
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
1,019
|
|
|
$
|
1,253
|
|
|
$
|
—
|
|
|
$
|
321
|
|
|
$
|
16
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
8,600
|
|
|
8,605
|
|
|
—
|
|
|
7,730
|
|
|
318
|
|
Non-owner occupied
|
9,666
|
|
|
9,673
|
|
|
—
|
|
|
9,753
|
|
|
493
|
|
Construction and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land & land development
|
4,767
|
|
|
4,767
|
|
|
—
|
|
|
4,947
|
|
|
102
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
3,279
|
|
|
3,284
|
|
|
—
|
|
|
3,401
|
|
|
180
|
|
Jumbo
|
4,132
|
|
|
4,130
|
|
|
—
|
|
|
3,517
|
|
|
166
|
|
Home equity
|
523
|
|
|
523
|
|
|
—
|
|
|
523
|
|
|
30
|
|
Mortgage warehouse lines
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Consumer
|
9
|
|
|
10
|
|
|
—
|
|
|
13
|
|
|
1
|
|
Total without a related allowance
|
$
|
31,995
|
|
|
$
|
32,245
|
|
|
$
|
—
|
|
|
$
|
30,205
|
|
|
$
|
1,306
|
|
|
|
|
|
|
|
|
|
|
|
With a related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
3,343
|
|
|
$
|
3,342
|
|
|
$
|
682
|
|
|
$
|
705
|
|
|
$
|
39
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
2,969
|
|
|
2,969
|
|
|
462
|
|
|
2,397
|
|
|
117
|
|
Non-owner occupied
|
189
|
|
|
191
|
|
|
9
|
|
|
226
|
|
|
16
|
|
Construction and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land & land development
|
1,057
|
|
|
1,057
|
|
|
298
|
|
|
1,073
|
|
|
56
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
2,982
|
|
|
2,981
|
|
|
585
|
|
|
2,539
|
|
|
98
|
|
Jumbo
|
821
|
|
|
822
|
|
|
106
|
|
|
827
|
|
|
48
|
|
Home equity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Mortgage warehouse lines
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Consumer
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total with a related allowance
|
$
|
11,361
|
|
|
$
|
11,362
|
|
|
$
|
2,142
|
|
|
$
|
7,767
|
|
|
$
|
374
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
31,610
|
|
|
$
|
31,857
|
|
|
$
|
1,451
|
|
|
$
|
27,152
|
|
|
$
|
1,157
|
|
Residential real estate
|
11,737
|
|
|
11,740
|
|
|
691
|
|
|
10,807
|
|
|
522
|
|
Consumer
|
9
|
|
|
10
|
|
|
—
|
|
|
13
|
|
|
1
|
|
Total
|
$
|
43,356
|
|
|
$
|
43,607
|
|
|
$
|
2,142
|
|
|
$
|
37,972
|
|
|
$
|
1,680
|
|
The table above does not include PCI loans.
Included in impaired loans are TDRs of $25.9 million, of which $23.1 million were current with respect to restructured contractual payments at September 30, 2019, and $27 million, of which $26.6 million were current with respect to restructured contractual payments at December 31, 2018. There were no commitments to lend additional funds under these restructurings at either balance sheet date.
The following tables present by class the TDRs that were restructured during the three and nine months ended September 30, 2019 and September 30, 2018 . Generally, the modifications were extensions of term, modifying the payment terms from principal and interest to interest only for an extended period, or reduction in interest rate. All TDRs are evaluated individually for allowance for loan loss purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
September 30, 2019
|
|
For the Three Months Ended
September 30, 2018
|
Dollars in thousands
|
Number of
Modifications
|
|
Pre-modification
Recorded
Investment
|
|
Post-modification
Recorded
Investment
|
|
Number of
Modifications
|
|
Pre-modification
Recorded
Investment
|
|
Post-modification
Recorded
Investment
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2
|
|
|
$
|
94
|
|
|
$
|
94
|
|
Total
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2
|
|
|
$
|
94
|
|
|
$
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
September 30, 2019
|
|
For the Nine Months Ended
September 30, 2018
|
Dollars in thousands
|
Number of
Modifications
|
|
Pre-modification
Recorded
Investment
|
|
Post-modification
Recorded
Investment
|
|
Number of
Modifications
|
|
Pre-modification
Recorded
Investment
|
|
Post-modification
Recorded
Investment
|
Commercial
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2
|
|
|
$
|
157
|
|
|
$
|
157
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
1
|
|
|
325
|
|
|
325
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-owner occupied
|
4
|
|
|
324
|
|
|
324
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
7
|
|
|
410
|
|
|
410
|
|
|
8
|
|
|
899
|
|
|
899
|
|
Consumer
|
1
|
|
|
16
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
13
|
|
|
$
|
1,075
|
|
|
$
|
1,075
|
|
|
10
|
|
|
$
|
1,056
|
|
|
$
|
1,056
|
|
The following tables present defaults during the stated period of TDRs that were restructured during the past twelve months. For purposes of these tables, a default is considered as either the loan was past due 30 days or more at any time during the period, or the loan was fully or partially charged off during the period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
September 30, 2019
|
|
For the Three Months Ended
September 30, 2018
|
Dollars in thousands
|
Number
of
Defaults
|
|
Recorded
Investment
at Default Date
|
|
Number
of
Defaults
|
|
Recorded
Investment
at Default Date
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
Non-owner occupied
|
1
|
|
|
$
|
126
|
|
|
—
|
|
|
$
|
—
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
3
|
|
|
174
|
|
|
—
|
|
|
—
|
|
Total
|
4
|
|
|
$
|
300
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
September 30, 2019
|
|
For the Nine Months Ended
September 30, 2018
|
Dollars in thousands
|
Number
of
Defaults
|
|
Recorded
Investment
at Default Date
|
|
Number
of
Defaults
|
|
Recorded
Investment
at Default Date
|
Commercial
|
—
|
|
|
$
|
—
|
|
|
2
|
|
|
$
|
157
|
|
Commercial real estate
|
|
|
|
|
|
|
|
Non-owner occupied
|
1
|
|
|
126
|
|
|
1
|
|
|
341
|
|
Residential real estate
|
|
|
|
|
|
|
|
Non-jumbo
|
3
|
|
|
174
|
|
|
3
|
|
|
628
|
|
Total
|
4
|
|
|
$
|
300
|
|
|
6
|
|
|
$
|
1,126
|
|
The following tables detail the activity regarding TDRs by loan type, net of fees, for the three and nine months ended September 30, 2019, and the related allowance on TDRs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2019
|
|
Construction & Land Development
|
|
|
|
Commercial Real Estate
|
|
Residential Real Estate
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
Land &
Land
Develop-
ment
|
|
Construc-
tion
|
|
Commer-
cial
|
|
Owner
Occupied
|
|
Non-
Owner
Occupied
|
|
Non-
jumbo
|
|
Jumbo
|
|
Home
Equity
|
|
Mortgage Warehouse Lines
|
|
Con-
sumer
|
|
Other
|
|
Total
|
Troubled debt restructurings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance July 1, 2019
|
$
|
2,123
|
|
|
$
|
—
|
|
|
$
|
233
|
|
|
$
|
9,588
|
|
|
$
|
5,624
|
|
|
$
|
4,695
|
|
|
$
|
3,380
|
|
|
$
|
523
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
26,181
|
|
Additions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Charge-offs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net (paydowns) advances
|
(144
|
)
|
|
—
|
|
|
(21
|
)
|
|
(58
|
)
|
|
(49
|
)
|
|
(33
|
)
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(318
|
)
|
Transfer into foreclosed properties
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Refinance out of TDR status
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance, September 30, 2019
|
$
|
1,979
|
|
|
$
|
—
|
|
|
$
|
212
|
|
|
$
|
9,530
|
|
|
$
|
5,575
|
|
|
$
|
4,662
|
|
|
$
|
3,368
|
|
|
$
|
523
|
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
25,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance related to troubled debt restructurings
|
$
|
595
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
251
|
|
|
$
|
—
|
|
|
$
|
199
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2019
|
|
Construction & Land Development
|
|
|
|
Commercial Real Estate
|
|
Residential Real Estate
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
Land &
Land
Develop-
ment
|
|
Construc-
tion
|
|
Commer-
cial
|
|
Owner
Occupied
|
|
Non-
Owner
Occupied
|
|
Non-
jumbo
|
|
Jumbo
|
|
Home
Equity
|
|
Mortgage Warehouse Lines
|
|
Con-
sumer
|
|
Other
|
|
Total
|
Troubled debt restructurings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2019
|
$
|
2,654
|
|
|
$
|
—
|
|
|
$
|
273
|
|
|
$
|
9,365
|
|
|
$
|
5,404
|
|
|
$
|
4,490
|
|
|
$
|
4,278
|
|
|
$
|
523
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
26,997
|
|
Additions
|
—
|
|
|
—
|
|
|
—
|
|
|
325
|
|
|
324
|
|
|
410
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
1,075
|
|
Charge-offs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net (paydowns) advances
|
(675
|
)
|
|
—
|
|
|
(61
|
)
|
|
(160
|
)
|
|
(153
|
)
|
|
(238
|
)
|
|
(910
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
(2,209
|
)
|
Transfer into foreclosed properties
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Refinance out of TDR status
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance, September 30, 2019
|
$
|
1,979
|
|
|
$
|
—
|
|
|
$
|
212
|
|
|
$
|
9,530
|
|
|
$
|
5,575
|
|
|
$
|
4,662
|
|
|
$
|
3,368
|
|
|
$
|
523
|
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
25,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance related to troubled debt restructurings
|
$
|
595
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
251
|
|
|
$
|
—
|
|
|
$
|
199
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,049
|
|
The following table presents the recorded investment in construction and development, commercial, and commercial real estate loans which are generally evaluated based upon our internal risk ratings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Risk Profile by Internal Risk Rating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Development
|
|
|
|
|
|
Commercial Real Estate
|
|
|
|
|
Land and Land Development
|
|
Construction
|
|
Commercial
|
|
Owner Occupied
|
|
Non-Owner Occupied
|
|
Mortgage Warehouse Lines
|
Dollars in thousands
|
9/30/2019
|
|
12/31/2018
|
|
9/30/2019
|
|
12/31/2018
|
|
9/30/2019
|
|
12/31/2018
|
|
9/30/2019
|
|
12/31/2018
|
|
9/30/2019
|
|
12/31/2018
|
|
9/30/2019
|
12/31/2018
|
Pass
|
$
|
67,740
|
|
|
$
|
63,743
|
|
|
$
|
56,115
|
|
|
$
|
24,589
|
|
|
$
|
192,576
|
|
|
$
|
182,651
|
|
|
$
|
248,890
|
|
|
$
|
250,254
|
|
|
$
|
558,634
|
|
|
$
|
565,715
|
|
|
$
|
145,039
|
|
$
|
39,140
|
|
OLEM (Special Mention)
|
454
|
|
|
472
|
|
|
140
|
|
|
142
|
|
|
1,333
|
|
|
6,748
|
|
|
2,602
|
|
|
1,864
|
|
|
1,643
|
|
|
1,554
|
|
|
—
|
|
—
|
|
Substandard
|
1,395
|
|
|
4,618
|
|
|
—
|
|
|
—
|
|
|
5,482
|
|
|
4,916
|
|
|
4,336
|
|
|
5,138
|
|
|
7,393
|
|
|
6,663
|
|
|
—
|
|
—
|
|
Doubtful
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
Loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
Total
|
$
|
69,589
|
|
|
$
|
68,833
|
|
|
$
|
56,255
|
|
|
$
|
24,731
|
|
|
$
|
199,391
|
|
|
$
|
194,315
|
|
|
$
|
255,828
|
|
|
$
|
257,256
|
|
|
$
|
567,670
|
|
|
$
|
573,932
|
|
|
$
|
145,039
|
|
$
|
39,140
|
|
The following table presents the recorded investment and payment activity in consumer, residential real estate, and home equity loans, which are generally evaluated based on the aging status of the loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
|
Nonperforming
|
Dollars in thousands
|
9/30/2019
|
|
12/31/2018
|
|
9/30/2019
|
|
12/31/2018
|
Residential real estate
|
|
|
|
|
|
|
|
Non-jumbo
|
$
|
355,100
|
|
|
$
|
330,445
|
|
|
$
|
4,299
|
|
|
$
|
6,532
|
|
Jumbo
|
69,815
|
|
|
72,924
|
|
|
—
|
|
|
675
|
|
Home Equity
|
78,331
|
|
|
80,611
|
|
|
162
|
|
|
299
|
|
Consumer
|
36,868
|
|
|
32,312
|
|
|
114
|
|
|
148
|
|
Other
|
13,271
|
|
|
12,899
|
|
|
100
|
|
|
—
|
|
Total
|
$
|
553,385
|
|
|
$
|
529,191
|
|
|
$
|
4,675
|
|
|
$
|
7,654
|
|
NOTE 7. ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses for the nine month period ended September 30, 2019 and for the year ended December 31, 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
Dollars in thousands
|
|
2019
|
|
2018
|
Balance, beginning of year
|
|
$
|
13,047
|
|
|
$
|
12,565
|
|
Charge-offs:
|
|
|
|
|
Commercial
|
|
200
|
|
|
248
|
|
Commercial real estate
|
|
|
|
|
Owner occupied
|
|
2
|
|
|
38
|
|
Non-owner occupied
|
|
94
|
|
|
619
|
|
Construction and development
|
|
|
|
|
Land and land development
|
|
—
|
|
|
259
|
|
Construction
|
|
—
|
|
|
—
|
|
Residential real estate
|
|
|
|
|
Non-jumbo
|
|
826
|
|
|
887
|
|
Jumbo
|
|
—
|
|
|
—
|
|
Home equity
|
|
—
|
|
|
26
|
|
Mortgage warehouse lines
|
|
—
|
|
|
—
|
|
Consumer
|
|
253
|
|
|
244
|
|
Other
|
|
273
|
|
|
282
|
|
Total
|
|
1,648
|
|
|
2,603
|
|
Recoveries:
|
|
|
|
|
|
|
Commercial
|
|
11
|
|
|
16
|
|
Commercial real estate
|
|
|
|
|
Owner occupied
|
|
17
|
|
|
23
|
|
Non-owner occupied
|
|
—
|
|
|
—
|
|
Construction and development
|
|
|
|
|
Land and land development
|
|
106
|
|
|
270
|
|
Construction
|
|
—
|
|
|
—
|
|
Residential real estate
|
|
|
|
|
Non-jumbo
|
|
106
|
|
|
228
|
|
Jumbo
|
|
—
|
|
|
25
|
|
Home equity
|
|
17
|
|
|
10
|
|
Mortgage warehouse lines
|
|
—
|
|
|
—
|
|
Consumer
|
|
136
|
|
|
141
|
|
Other
|
|
99
|
|
|
122
|
|
Total
|
|
492
|
|
|
835
|
|
Net charge-offs
|
|
1,156
|
|
|
1,768
|
|
Provision for loan losses
|
|
1,050
|
|
|
2,250
|
|
Balance, end of period
|
|
$
|
12,941
|
|
|
$
|
13,047
|
|
The following table presents the activity in the allowance for loan losses, balance in the allowance for loan losses and recorded investment in loans by portfolio segment and based on impairment during the first nine months of 2019 and for the year ended 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2019
|
|
At September 30, 2019
|
|
At September 30, 2019
|
|
Allowance for loan losses
|
|
Allowance related to:
|
|
Loans
|
Dollars in thousands
|
Beginning
Balance
|
Charge-
offs
|
Recoveries
|
Provision
|
Ending
Balance
|
|
Loans
individua-
lly
evaluated
for
impairm-
ent
|
Loans
collective-
ly
evaluated
for
impairm-
ent
|
Loans
acquired
with
deteriora-
ted credit
quality (PCI)
|
Total
|
|
Loans
individua-
lly
evaluated
for
impairm-
ent
|
Loans
collective-
ly
evaluated
for
impairm-
ent
|
Loans
acquired
with
deteriora-
ted credit
quality (PCI)
|
Total
|
Commercial
|
$
|
1,705
|
|
$
|
(200
|
)
|
$
|
11
|
|
$
|
(991
|
)
|
$
|
525
|
|
|
$
|
12
|
|
$
|
513
|
|
$
|
—
|
|
$
|
525
|
|
|
$
|
4,929
|
|
$
|
194,462
|
|
$
|
—
|
|
$
|
199,391
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
2,214
|
|
(2
|
)
|
17
|
|
508
|
|
2,737
|
|
|
414
|
|
2,323
|
|
—
|
|
2,737
|
|
|
11,129
|
|
244,699
|
|
—
|
|
255,828
|
|
Non-owner occupied
|
5,742
|
|
(94
|
)
|
—
|
|
194
|
|
5,842
|
|
|
—
|
|
5,750
|
|
92
|
|
5,842
|
|
|
10,683
|
|
555,793
|
|
1,194
|
|
567,670
|
|
Construction and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and land development
|
339
|
|
—
|
|
106
|
|
160
|
|
605
|
|
|
595
|
|
10
|
|
—
|
|
605
|
|
|
1,979
|
|
67,610
|
|
—
|
|
69,589
|
|
Construction
|
64
|
|
—
|
|
—
|
|
296
|
|
360
|
|
|
—
|
|
360
|
|
—
|
|
360
|
|
|
—
|
|
56,255
|
|
—
|
|
56,255
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
2,090
|
|
(826
|
)
|
106
|
|
577
|
|
1,947
|
|
|
201
|
|
1,736
|
|
10
|
|
1,947
|
|
|
5,303
|
|
352,831
|
|
1,265
|
|
359,399
|
|
Jumbo
|
379
|
|
—
|
|
—
|
|
(50
|
)
|
329
|
|
|
—
|
|
323
|
|
6
|
|
329
|
|
|
4,000
|
|
64,862
|
|
953
|
|
69,815
|
|
Home equity
|
167
|
|
—
|
|
17
|
|
(101
|
)
|
83
|
|
|
—
|
|
83
|
|
—
|
|
83
|
|
|
523
|
|
77,970
|
|
—
|
|
78,493
|
|
Mortgage warehouse lines
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
145,039
|
|
—
|
|
145,039
|
|
Consumer
|
79
|
|
(253
|
)
|
136
|
|
211
|
|
173
|
|
|
—
|
|
173
|
|
—
|
|
173
|
|
|
14
|
|
36,968
|
|
—
|
|
36,982
|
|
Other
|
268
|
|
(273
|
)
|
99
|
|
246
|
|
340
|
|
|
—
|
|
340
|
|
—
|
|
340
|
|
|
—
|
|
13,371
|
|
—
|
|
13,371
|
|
Total
|
$
|
13,047
|
|
$
|
(1,648
|
)
|
$
|
492
|
|
$
|
1,050
|
|
$
|
12,941
|
|
|
$
|
1,222
|
|
$
|
11,611
|
|
$
|
108
|
|
$
|
12,941
|
|
|
$
|
38,560
|
|
$
|
1,809,860
|
|
$
|
3,412
|
|
$
|
1,851,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2018
|
|
At December 31, 2018
|
|
At December 31, 2018
|
|
Allowance for loan losses
|
|
Allowance related to:
|
|
Loans
|
Dollars in thousands
|
Beginning
Balance
|
Charge-
offs
|
Recoveries
|
Provision
|
Ending
Balance
|
|
Loans
individua-
lly
evaluated
for
impairm-
ent
|
Loans
collective-
ly
evaluated
for
impairm-
ent
|
Loans
acquired
with
deteriora-
ted credit
quality (PCI)
|
Total
|
|
Loans
individua-
lly
evaluated
for
impairm-
ent
|
Loans
collective-
ly
evaluated
for
impairm-
ent
|
Loans
acquired
with
deteriora-
ted credit
quality (PCI)
|
Total
|
Commercial
|
$
|
1,303
|
|
$
|
(248
|
)
|
$
|
16
|
|
$
|
634
|
|
$
|
1,705
|
|
|
$
|
682
|
|
$
|
1,023
|
|
$
|
—
|
|
$
|
1,705
|
|
|
$
|
4,362
|
|
$
|
189,953
|
|
$
|
—
|
|
$
|
194,315
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
2,424
|
|
(38
|
)
|
23
|
|
(195
|
)
|
2,214
|
|
|
462
|
|
1,752
|
|
—
|
|
2,214
|
|
|
11,569
|
|
245,687
|
|
—
|
|
257,256
|
|
Non-owner occupied
|
4,950
|
|
(619
|
)
|
—
|
|
1,411
|
|
5,742
|
|
|
9
|
|
5,729
|
|
4
|
|
5,742
|
|
|
9,855
|
|
562,915
|
|
1,162
|
|
573,932
|
|
Construction and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and land development
|
641
|
|
(259
|
)
|
270
|
|
(313
|
)
|
339
|
|
|
298
|
|
41
|
|
—
|
|
339
|
|
|
5,824
|
|
63,009
|
|
—
|
|
68,833
|
|
Construction
|
153
|
|
—
|
|
—
|
|
(89
|
)
|
64
|
|
|
—
|
|
64
|
|
—
|
|
64
|
|
|
—
|
|
24,731
|
|
—
|
|
24,731
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-jumbo
|
1,911
|
|
(887
|
)
|
228
|
|
838
|
|
2,090
|
|
|
585
|
|
1,495
|
|
10
|
|
2,090
|
|
|
6,261
|
|
329,342
|
|
1,374
|
|
336,977
|
|
Jumbo
|
72
|
|
—
|
|
25
|
|
282
|
|
379
|
|
|
106
|
|
273
|
|
—
|
|
379
|
|
|
4,953
|
|
67,671
|
|
975
|
|
73,599
|
|
Home equity
|
638
|
|
(26
|
)
|
10
|
|
(455
|
)
|
167
|
|
|
—
|
|
167
|
|
—
|
|
167
|
|
|
523
|
|
80,387
|
|
—
|
|
80,910
|
|
Mortgage warehouse lines
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
39,140
|
|
—
|
|
39,140
|
|
Consumer
|
210
|
|
(244
|
)
|
141
|
|
(28
|
)
|
79
|
|
|
—
|
|
79
|
|
—
|
|
79
|
|
|
9
|
|
32,451
|
|
—
|
|
32,460
|
|
Other
|
263
|
|
(282
|
)
|
122
|
|
165
|
|
268
|
|
|
—
|
|
268
|
|
—
|
|
268
|
|
|
—
|
|
12,899
|
|
—
|
|
12,899
|
|
Total
|
$
|
12,565
|
|
$
|
(2,603
|
)
|
$
|
835
|
|
$
|
2,250
|
|
$
|
13,047
|
|
|
$
|
2,142
|
|
$
|
10,891
|
|
$
|
14
|
|
$
|
13,047
|
|
|
$
|
43,356
|
|
$
|
1,648,185
|
|
$
|
3,511
|
|
$
|
1,695,052
|
|
NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
In accordance with ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, during third quarter 2019, we performed the qualitative assessment of goodwill and determined that the fair value was more likely than not greater than its carrying value. In performing the qualitative assessment, we considered certain events and circumstances such as macroeconomic conditions, industry and market considerations, overall financial performance and cost factors when
evaluating whether it is more likely than not that the fair value is less than the carrying value. No indicators of impairment were noted as of September 30, 2019.
The following tables present our goodwill by reporting unit at September 30, 2019 and other intangible assets by reporting unit at September 30, 2019 and December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill Activity
|
Dollars in thousands
|
|
Community Banking
|
|
Insurance Services
|
|
Total
|
Balance, January 1, 2019
|
|
$
|
10,562
|
|
|
$
|
4,710
|
|
|
$
|
15,272
|
|
Reclassifications to goodwill
|
|
—
|
|
|
—
|
|
|
—
|
|
Acquired goodwill, net
|
|
1,855
|
|
|
—
|
|
|
1,855
|
|
Goodwill reduction in conjunction with sale of Summit Insurance Services, LLC
|
|
—
|
|
|
(4,710
|
)
|
|
(4,710
|
)
|
Balance, September 30, 2019
|
|
$
|
12,417
|
|
|
$
|
—
|
|
|
$
|
12,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Intangible Assets
|
|
|
September 30, 2019
|
|
December 31, 2018
|
Dollars in thousands
|
|
Community
Banking
|
|
Insurance
Services
|
|
Total
|
|
Community
Banking
|
|
Insurances
Services
|
|
Total
|
Identifiable intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
|
$
|
14,727
|
|
|
$
|
3,000
|
|
|
$
|
17,727
|
|
|
$
|
12,598
|
|
|
$
|
3,000
|
|
|
$
|
15,598
|
|
Less: accumulated amortization
|
|
3,962
|
|
|
2,367
|
|
|
6,329
|
|
|
2,728
|
|
|
2,300
|
|
|
5,028
|
|
Less: customer intangible reduction in conjunction with sale of Summit Insurance Services, LLC
|
|
—
|
|
|
633
|
|
|
633
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net carrying amount
|
|
$
|
10,765
|
|
|
$
|
—
|
|
|
$
|
10,765
|
|
|
$
|
9,870
|
|
|
$
|
700
|
|
|
$
|
10,570
|
|
We recorded amortization expense of $1,300,000 and $1,261,000 for the nine months ended September 30, 2019 and 2018, respectively, relative to our identifiable intangible assets.
Amortization relative to our identifiable intangible assets is expected to approximate the following during the next five years:
|
|
|
|
|
|
|
|
Core Deposit
|
Dollars in thousands
|
|
Intangible
|
2019
|
|
$
|
1,634
|
|
2020
|
|
1,513
|
|
2021
|
|
1,393
|
|
2022
|
|
1,273
|
|
2023
|
|
1,152
|
|
NOTE 9. DEPOSITS
The following is a summary of interest bearing deposits by type as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
September 30,
2019
|
|
December 31,
2018
|
Demand deposits, interest bearing
|
|
$
|
602,059
|
|
|
$
|
523,257
|
|
Savings deposits
|
|
305,891
|
|
|
284,173
|
|
Time deposits
|
|
682,336
|
|
|
605,276
|
|
Total
|
|
$
|
1,590,286
|
|
|
$
|
1,412,706
|
|
Included in time deposits are deposits acquired through a third party (“brokered deposits”) totaling $227.4 million and $220.5 million at September 30, 2019 and December 31, 2018, respectively.
A summary of the scheduled maturities for all time deposits as of September 30, 2019 is as follows:
|
|
|
|
|
Dollars in thousands
|
|
Three month period ending December 31, 2019
|
$
|
112,664
|
|
Year ending December 31, 2020
|
313,174
|
|
Year ending December 31, 2021
|
157,375
|
|
Year ending December 31, 2022
|
43,975
|
|
Year ending December 31, 2023
|
17,776
|
|
Thereafter
|
37,372
|
|
Total
|
$
|
682,336
|
|
The aggregate amount of time deposits in denominations that meet or exceed the FDIC insurance limit of $250,000 totaled $274.8 million at September 30, 2019 and $255.8 million at December 31, 2018.
NOTE 10. BORROWED FUNDS
Short-term borrowings: A summary of short-term borrowings is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2019
|
|
2018
|
Dollars in thousands
|
Short-term
FHLB
Advances
|
|
Federal Funds
Purchased
and Lines
of Credit
|
|
Short-term
FHLB
Advances
|
|
Federal Funds
Purchased
and Lines
of Credit
|
Balance at September 30
|
$
|
206,550
|
|
|
$
|
144
|
|
|
$
|
233,300
|
|
|
$
|
5,103
|
|
Average balance outstanding for the period
|
196,058
|
|
|
564
|
|
|
209,877
|
|
|
4,128
|
|
Maximum balance outstanding at any month end during period
|
225,200
|
|
|
144
|
|
|
262,000
|
|
|
7,534
|
|
Weighted average interest rate for the period
|
2.63
|
%
|
|
2.48
|
%
|
|
2.01
|
%
|
|
1.80
|
%
|
Weighted average interest rate for balances
|
|
|
|
|
|
|
|
|
|
|
|
outstanding at September 30
|
2.15
|
%
|
|
2.00
|
%
|
|
2.41
|
%
|
|
2.25
|
%
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
Dollars in thousands
|
Short-term
FHLB
Advances
|
|
Federal Funds
Purchased
and Lines
of Credit
|
Balance at December 31
|
$
|
303,950
|
|
|
5,134
|
|
Average balance outstanding for the period
|
223,764
|
|
|
4,378
|
|
Maximum balance outstanding at any month end
during period
|
303,950
|
|
|
7,534
|
|
Weighted average interest rate for the period
|
2.18
|
%
|
|
1.95
|
%
|
Weighted average interest rate for balances
|
|
|
|
outstanding at December 31
|
2.71
|
%
|
|
2.50
|
%
|
Long-term borrowings: Our long-term borrowings of $722,000 and $735,000 at September 30, 2019 and December 31, 2018, respectively, consisted of advances from the Federal Home Loan Bank (“FHLB”). These FHLB advances are collateralized primarily by similar amounts of residential mortgage loans, certain commercial loans, mortgage backed securities and securities of U. S. Government agencies and corporations.
Our long term FHLB borrowings bear both fixed and variable rates and mature in varying amounts through the year 2026.
The average interest rate paid on long-term borrowings for the nine month period ended September 30, 2019 was 5.34% compared to 4.24% for the first nine months of 2018.
Subordinated debentures owed to unconsolidated subsidiary trusts: We have three statutory business trusts that were formed for the purpose of issuing mandatorily redeemable securities (the “capital securities”) for which we are obligated to third party investors and investing the proceeds from the sale of the capital securities in our junior subordinated debentures (the “debentures”). The debentures held by the trusts are their sole assets. Our subordinated debentures totaled $19.6 million at September 30, 2019 and December 31, 2018.
The capital securities held by SFG Capital Trust I, SFG Capital Trust II, and SFG Capital Trust III qualify as Tier 1 capital under Federal Reserve Board guidelines. In accordance with these Guidelines, trust preferred securities generally are limited to 25% of Tier 1 capital elements, net of goodwill. The amount of trust preferred securities and certain other elements in excess of the limit can be included in Tier 2 capital.
A summary of the maturities of all long-term borrowings and subordinated debentures for the next five years and thereafter is as follows:
|
|
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Long-term
borrowings
|
|
Subordinated
debentures owed
to unconsolidated
subsidiary trusts
|
Year Ending December 31,
|
2019
|
|
$
|
5
|
|
|
$
|
—
|
|
|
2020
|
|
18
|
|
|
—
|
|
|
2021
|
|
20
|
|
|
—
|
|
|
2022
|
|
21
|
|
|
—
|
|
|
2023
|
|
22
|
|
|
—
|
|
|
Thereafter
|
|
636
|
|
|
19,589
|
|
|
|
|
$
|
722
|
|
|
$
|
19,589
|
|
NOTE 11. SHARE-BASED COMPENSATION
Under the 2014 Long-Term Incentive Plan (“2014 LTIP”), SARs have generally been granted with an exercise price equal to the fair value of Summit's common stock on the grant date. We periodically grant employee stock options to individual employees. During first quarter 2019, we granted 109,819 SARs that become exercisable ratably over five years (20% per year) and expire ten years after the grant date and granted 28,306 SARS that become exercisable ratably over seven years (14.29% per year) and expire ten years after the grant date.
The fair value of our employee stock options and SARs granted under the Plans is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options and SARs granted but are not considered by the model. Because our employee stock options and SARs have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options and SARs at the time of grant. The assumptions used to value SARs granted during 2019 were as follows:
|
|
|
|
|
|
|
5-year vesting SARs
|
7-year vesting SARs
|
Risk-free interest rate
|
2.43
|
%
|
2.51
|
%
|
Expected dividend yield
|
2.30
|
%
|
2.30
|
%
|
Expected common stock volatility
|
35.71
|
%
|
40.84
|
%
|
Expected life
|
6.5 years
|
|
7.0 years
|
|
We recognize compensation expense based on the estimated number of stock awards expected to actually vest, exclusive of the awards expected to be forfeited. During the first nine months of 2019 and 2018, our share-based compensation expense was $430,000 and $292,000 and the related deferred tax benefits were approximately $103,000 and $70,000.
A summary of activity in our Plans during the first nine months of 2019 and 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
2019
|
|
Options/SARs
|
|
Aggregate
Intrinsic
Value (in thousands)
|
|
Remaining
Contractual
Term (Yrs.)
|
|
Weighted-Average
Exercise Price
|
Outstanding, January 1
|
232,091
|
|
|
|
|
|
|
$
|
17.36
|
|
Granted
|
138,125
|
|
|
|
|
|
|
23.94
|
|
Exercised
|
(31,413
|
)
|
|
|
|
|
|
11.83
|
|
Forfeited
|
—
|
|
|
|
|
|
|
—
|
|
Expired
|
—
|
|
|
|
|
|
|
—
|
|
Outstanding, September 30
|
338,803
|
|
|
$
|
1,745
|
|
|
7.41
|
|
$
|
20.56
|
|
|
|
|
|
|
|
|
|
Exercisable, September 30
|
112,989
|
|
|
$
|
1,063
|
|
|
5.59
|
|
$
|
16.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
2018
|
|
Options/SARs
|
|
Aggregate
Intrinsic
Value (in thousands)
|
|
Remaining
Contractual
Term (Yrs.)
|
|
Weighted-Average
Exercise Price
|
Outstanding, January 1
|
250,291
|
|
|
|
|
|
|
$
|
17.75
|
|
Granted
|
—
|
|
|
|
|
|
|
—
|
|
Exercised
|
(1,600
|
)
|
|
|
|
|
|
17.79
|
|
Forfeited
|
(3,200
|
)
|
|
|
|
|
|
25.5
|
|
Expired
|
—
|
|
|
|
|
|
|
—
|
|
Outstanding, September 30
|
245,491
|
|
|
$
|
1,645
|
|
|
6.62
|
|
$
|
17.65
|
|
|
|
|
|
|
|
|
|
Exercisable, September 30
|
109,324
|
|
|
$
|
898
|
|
|
5.55
|
|
$
|
15.77
|
|
NOTE 12. COMMITMENTS AND CONTINGENCIES
Off-Balance Sheet Arrangements
We are a party to certain financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position. The contract amounts of these instruments reflect the extent of involvement that we have in this class of financial instruments.
Many of our lending relationships contain both funded and unfunded elements. The funded portion is reflected on our balance sheet. The unfunded portion of these commitments is not recorded on our balance sheet until a draw is made under the loan facility. Since many of the commitments to extend credit may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements.
A summary of the total unfunded, or off-balance sheet, credit extension commitments follows:
|
|
|
|
|
|
Dollars in thousands
|
|
September 30,
2019
|
Commitments to extend credit:
|
|
|
Revolving home equity and credit card lines
|
|
$
|
68,033
|
|
Construction loans
|
|
118,245
|
|
Other loans
|
|
199,696
|
|
Standby letters of credit
|
|
7,338
|
|
Total
|
|
$
|
393,312
|
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. We evaluate each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if we deem necessary upon extension of credit, is based on our credit evaluation. Collateral held varies but may include accounts receivable, inventory, equipment or real estate.
Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.
Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments.
Operating leases
We occupy certain facilities under long-term operating leases. The aggregate minimum annual rental commitments under those leases total approximately $62,000 in 2019 and $124,000 in 2020. Total net rent expense included in the accompanying consolidated financial statements was $106,000 for the nine months ended September 30, 2019 and $222,000 for the nine months ended September 30, 2018.
Litigation
We are not a party to litigation except for matters that arise in the normal course of business. While it is impossible to ascertain the ultimate resolution or range of financial liability if any, with respect to these contingent matters, in the opinion of management, the outcome of these matters will not have a significant adverse effect on the consolidated financial statements.
NOTE 13. REGULATORY MATTERS
Our bank subsidiary, Summit Community Bank, Inc. (“Summit Community”), is subject to various regulatory capital requirements administered by the banking regulatory agencies. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, Summit Community must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Our bank subsidiary’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require Summit Community to maintain minimum amounts and ratios of Common Equity Tier 1("CET1"), Total capital and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). We believe, as of September 30, 2019, that our bank subsidiary met all capital adequacy requirements to which they were subject.
The most recent notifications from the banking regulatory agencies categorized Summit Community as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, Summit Community must maintain minimum CET1, Total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below.
In December 2018, the federal bank regulatory agencies approved a final rule modifying their regulatory capital rules to provide an option to phase-in over a period of three years the day-one regulatory capital effects of the implementation of ASU
No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments. We intend to elect to this optional phase-in period upon adoption of the ASU effective January 1, 2020.
The following tables present Summit's, as well as Summit Community's, actual and required minimum regulatory capital amounts and ratios as of September 30, 2019 and December 31, 2018. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
Minimum Required Capital - Basel III
|
|
Minimum Required To Be Well Capitalized
|
Dollars in thousands
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
As of September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
CET1 (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit
|
|
$
|
217,934
|
|
|
11.2
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Summit Community
|
|
236,937
|
|
|
12.2
|
%
|
|
135,947
|
|
|
7.0
|
%
|
|
126,237
|
|
|
6.5
|
%
|
Tier I Capital (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit
|
|
236,934
|
|
|
12.2
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Summit Community
|
|
236,937
|
|
|
12.2
|
%
|
|
165,079
|
|
|
8.5
|
%
|
|
155,369
|
|
|
8.0
|
%
|
Total Capital (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
|
Summit
|
|
249,874
|
|
|
12.8
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Summit Community
|
|
249,878
|
|
|
12.9
|
%
|
|
203,389
|
|
|
10.5
|
%
|
|
193,704
|
|
|
10.0
|
%
|
Tier I Capital (to average assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit
|
|
236,934
|
|
|
10.4
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Summit Community
|
|
236,937
|
|
|
10.4
|
%
|
|
91,130
|
|
|
4.0
|
%
|
|
113,912
|
|
|
5.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
Minimum Required Capital - Basel III Fully Phased-in
|
|
Minimum Required To Be Well Capitalized
|
Dollars in thousands
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
As of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
CET1 (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit
|
|
197,551
|
|
|
11.1
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Summit Community
|
|
213,930
|
|
|
12.0
|
%
|
|
124,793
|
|
|
7.0
|
%
|
|
115,879
|
|
|
6.5
|
%
|
Tier I Capital (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit
|
|
216,551
|
|
|
12.2
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Summit Community
|
|
213,930
|
|
|
12.0
|
%
|
|
151,534
|
|
|
8.5
|
%
|
|
142,620
|
|
|
8.0
|
%
|
Total Capital (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit
|
|
229,598
|
|
|
12.9
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Summit Community
|
|
226,977
|
|
|
12.8
|
%
|
|
186,192
|
|
|
10.5
|
%
|
|
177,326
|
|
|
10.0
|
%
|
Tier I Capital (to average assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit
|
|
216,551
|
|
|
10.1
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Summit Community
|
|
213,930
|
|
|
10.0
|
%
|
|
85,572
|
|
|
4.0
|
%
|
|
106,965
|
|
|
5.0
|
%
|
NOTE 14. DERIVATIVE FINANCIAL INSTRUMENTS
We have entered into three forward-starting, pay-fixed/receive LIBOR interest rate swaps as follows:
|
|
•
|
A $30 million notional interest rate swap expiring on October 18, 2020, was designated as a cash flow hedge of $30 million of variable rate Federal Home Loan Bank advances. Under the terms of this swap we will pay a fixed rate of 2.89% and receive a variable rate equal to one month LIBOR.
|
|
|
•
|
A $40 million notional interest rate swap expiring October 18, 2019, was designated as a cash flow hedge of $40 million of variable rate Federal Home Loan Bank advances. Under the terms of the swap we will pay a fixed rate of 2.84% and receive a variable rate equal to one month LIBOR.
|
|
|
•
|
A $40 million notional interest rate swap with an effective date of October 18, 2019 and expiring on October 18, 2021, was designated as a cash flow hedge of $40 million of forecasted variable rate Federal Home Loan Bank advances. Under the terms of this swap we will pay a fixed rate of 2.19% and receive a variable rate equal to one month LIBOR.
|
We have entered into two pay fixed/receive variable interest rate swaps to hedge fair value variability of two commercial fixed rate loans with the same principal, amortization, and maturity terms of the underlying loans, which are designated as fair value hedges as follows:
|
|
•
|
Under the terms of a $9.95 million original notional interest rate swap expiring January 15, 2025, we will pay a fixed rate of 4.33% and receive a variable rate equal to one month LIBOR plus 2.4000 percent.
|
|
|
•
|
Under the terms of a $11.3 million original notional interest rate swap expiring January 15, 2026, we will pay a fixed rate of 4.30% and receive a variable rate equal to one month LIBOR plus 2.18000 percent.
|
A summary of our derivative financial instruments as of September 30, 2019 and December 31, 2018 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
Notional
Amount
|
|
Derivative Fair Value
|
|
Net Ineffective
|
Dollars in thousands
|
|
Asset
|
|
Liability
|
|
Hedge Gains/(Losses)
|
CASH FLOW HEDGES
|
|
|
|
|
|
|
|
Pay-fixed/receive-variable interest rate swaps
|
|
|
|
|
|
|
|
Short term borrowings
|
$
|
110,000
|
|
|
$
|
—
|
|
|
$
|
898
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
FAIR VALUE HEDGES
|
|
|
|
|
|
|
|
Pay-fixed/receive-variable interest rate swaps
|
|
|
|
|
|
|
|
Commercial real estate loans
|
$
|
18,959
|
|
|
$
|
—
|
|
|
$
|
546
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Notional
Amount
|
|
Derivative Fair Value
|
|
Net Ineffective
|
Dollars in thousands
|
|
Asset
|
|
Liability
|
|
Hedge Gains/(Losses)
|
CASH FLOW HEDGES
|
|
|
|
|
|
|
|
Pay-fixed/receive-variable interest rate swaps
|
|
|
|
|
|
|
Short term borrowings
|
$
|
110,000
|
|
|
$
|
—
|
|
|
$
|
411
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
FAIR VALUE HEDGES
|
|
|
|
|
|
|
|
Pay-fixed/receive-variable interest rate swaps
|
|
|
|
|
|
|
|
Commercial real estate loans
|
$
|
19,399
|
|
|
$
|
555
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Loan commitments: ASC Topic 815, Derivatives and Hedging, requires that commitments to make mortgage loans should be accounted for as derivatives if the loans are to be held for sale, because the commitment represents a written option and accordingly is recorded at the fair value of the option liability.
NOTE 15. ACQUISITIONS
Peoples Bankshares, Inc. Acquisition
On January 1, 2019, Summit Community Bank, Inc. ("SCB"), a wholly-owned subsidiary of Summit, acquired 100% of the ownership of Peoples Bankshares, Inc. ("PBI") and its subsidiary First Peoples Bank, headquartered in Mullens, West Virginia.
With this transaction, Summit further expands its footprint in Wyoming and Raleigh Counties of West Virginia. Pursuant to the Agreement and Plan of Merger dated July 24, 2018, PBI's shareholders received cash in the amount of $47.00 per share or 1.7193 shares of Summit common stock, or a combination of cash and Summit stock, subject to proration to result in approximately 50% cash and 50% stock consideration in the aggregate. Total stock consideration was $9.0 million or 465,931 shares of Summit common stock and cash consideration was $12.7 million. PBI's assets and liabilities approximated $133 million and $113 million, respectively, at December 31, 2018.
We accounted for the acquisition using the acquisition method of accounting in accordance with ASC 805, Business Combinations and accordingly, the assets and liabilities of PBI were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities, particularly related to the loan portfolio, is a complicated process involving significant judgment regarding methods and assumptions used to calculate the estimated fair values. The fair values are preliminary and subject to refinement for up to one year after the acquisition date as additional information relative to the acquisition date fair values becomes available. We recognized goodwill of $1.85 million in connection with the acquisition (not deductible for income tax purposes), which is not amortized for financial reporting purposes, but is subject to annual impairment testing. The core deposit intangible represents the value of long-term deposit relationships acquired in this transaction and will be amortized over an estimated weighted average life of 15 years using an accelerated method which approximates the estimated run-off of the acquired deposits. The following table details the total consideration paid on January 1, 2019 in connection with the acquisition of PBI, the fair values of the assets acquired and liabilities assumed and the resulting preliminary goodwill.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
As Recorded by PBI
|
|
Estimated Fair Value Adjustments
|
|
Estimated Fair Values as Recorded by Summit
|
Cash consideration
|
|
|
|
|
|
$
|
12,740
|
|
Stock consideration
|
|
|
|
|
|
8,997
|
|
Total consideration
|
|
|
|
|
|
21,737
|
|
|
|
|
|
|
|
|
Identifiable assets acquired:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
33,422
|
|
|
$
|
(93
|
)
|
|
$
|
33,329
|
|
Securities available for sale, at fair value
|
|
55,206
|
|
|
(93
|
)
|
|
55,113
|
|
Loans
|
|
|
|
|
|
|
|
Purchased performing
|
|
42,376
|
|
|
(977
|
)
|
|
41,399
|
|
Purchased credit impaired
|
|
—
|
|
|
—
|
|
|
—
|
|
Allowance for loan losses
|
|
(410
|
)
|
|
410
|
|
|
—
|
|
Premises and equipment
|
|
1,382
|
|
|
(567
|
)
|
|
815
|
|
Property held for sale
|
|
—
|
|
|
—
|
|
|
—
|
|
Core deposit intangibles
|
|
—
|
|
|
2,129
|
|
|
2,129
|
|
Other assets
|
|
1,110
|
|
|
(100
|
)
|
|
1,010
|
|
Total identifiable assets acquired
|
|
$
|
133,086
|
|
|
$
|
709
|
|
|
$
|
133,795
|
|
|
|
|
|
|
|
|
Identifiable liabilities assumed:
|
|
|
|
|
|
|
Deposits
|
|
112,064
|
|
|
315
|
|
|
112,379
|
|
Other liabilities
|
|
1,422
|
|
|
111
|
|
|
1,533
|
|
Total identifiable liabilities assumed
|
|
$
|
113,486
|
|
|
$
|
426
|
|
|
$
|
113,912
|
|
|
|
|
|
|
|
|
Net identifiable assets acquired
|
|
$
|
19,600
|
|
|
$
|
283
|
|
|
$
|
19,883
|
|
|
|
|
|
|
|
|
Goodwill resulting from acquisition
|
|
|
|
|
|
$
|
1,854
|
|
The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above.
Cash and cash equivalents: The carrying amount of these assets approximates their fair value based on the short-term nature of these assets, with the exception of certificates of deposits held at other banks, which were adjusted to fair value based upon current interest rates.
Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair value estimates are based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market.
Loans: Fair values for loans are based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, collectibility, fixed or variable interest rate, term of loan, amortization status and current market rates. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns, if any.
Premises and equipment: The fair value of PBI's real property was determined based upon appraisals by licensed appraisers. The fair value of tangible personal property, which is not material, was assumed to equal the carrying value by PBI.
Core deposit intangible: This intangible asset represents the value of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, reserve requirements and the net maintenance cost attributable to customer deposits.
Deposits: The fair values of the demand and savings deposits by definition equal the amount payable on demand at the acquisition date. The fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.
Loans acquired in a business combination are recorded at estimated fair value on the date of acquisition without the carryover of the related allowance for loan losses. Purchased credit-impaired (PCI) loans are those for which there is evidence of credit deterioration since origination and for which it is probable at the date of acquisition that we will not collect all contractually required principal and interest payments. When determining fair value, PCI loans are identified as of the date of acquisition based upon evidence of credit quality such as internal risk grades and past due and nonaccrual status. The difference between contractually required payments of principal and interest at acquisition and the cash flows expected to be collected at acquisition is accounted for as a"nonaccretable difference," and is available to absorb future credit losses on those loans. For purposes of determining the nonaccretable difference, no prepayments are generally assumed in determining contractually required payments of principal and interest or cash flows expected to be collected. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent significant increases in cash flows may result in a reversal of the provision for loan losses to the extent of prior charges, or a transfer from nonaccretable difference to accretable yield. Further, any excess of cash flows expected at acquisition over the estimated fair value is accounted for as accretable yield and is recognized as interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. No acquired PBI loans were designated as PCI loans.
Loans not designated PCI loans as of the acquisition date are designated purchased performing loans. We account for purchased performing loans using the contractual cash flows method of recognizing discount accretion based on the acquired loans’ contractual cash flows. Purchased performing loans are recorded at fair value, including a credit discount. The fair value discount is accreted as an adjustment to yield over the estimated lives of the loans. There is no allowance for loan losses established at the acquisition date for purchased performing loans. A provision for loan losses is recorded for any deterioration in these loans subsequent to the acquisition.
The following presents the financial effects of adjustments recognized in the statements of income for the three and nine months ended September 30, 2019 and 2018 related to business combinations that occurred during 2016, 2017 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income increase (decrease)
|
Dollars in thousands
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2019
|
|
2018
|
|
2019
|
2018
|
Interest and fees on loans
|
$
|
137
|
|
|
$
|
38
|
|
|
$
|
604
|
|
$
|
239
|
|
Interest expense on deposits
|
77
|
|
|
48
|
|
|
247
|
|
162
|
|
Amortization of intangibles
|
(404
|
)
|
|
(363
|
)
|
|
(1,234
|
)
|
(1,111
|
)
|
Income before income tax expense
|
$
|
(190
|
)
|
|
$
|
(277
|
)
|
|
$
|
(383
|
)
|
$
|
(710
|
)
|
Pending Cornerstone Acquisition
On September 17, 2019, we entered into a Definitive Merger Agreement with Cornerstone Financial Services, Inc. ("Cornerstone"). Pursuant to the terms of the merger agreement, Summit will acquire all of the outstanding shares of common stock of Cornerstone in exchange for cash in the amount of $5,700 per share or 228 shares of Summit common stock. Cornerstone shareholders will have a right to receive cash, Summit’s common stock or a combination of cash and Summit common stock, subject to proration to result in approximately 50% cash and 50% stock consideration in the aggregate. Total merger consideration received by Cornerstone shareholders is subject to an adjustment if Cornerstone's adjusted shareholders’ equity as of the effective date of the merger deviates from the range mutually determined by the parties. Cornerstone's assets approximated $192 million at September 30, 2019.
We anticipate the acquisition will close in the first quarter of 2020, subject to customary closing conditions, including regulatory approval and approval of Cornerstone's shareholders. Following the consummation of the merger, Cornerstone's wholly-owned subsidiary Cornerstone Bank, Inc. will be consolidated with Summit's subsidiary, Summit Community Bank, Inc.
NOTE 16. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following is changes in accumulated other comprehensive income (loss) by component, net of tax, for the three and nine months ending September 30, 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2019
|
Dollars in thousands
|
|
Gains and Losses on Pension Plan
|
|
Gains and Losses on Other Post-Retirement Benefits
|
|
Gains and Losses on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
Total
|
Beginning balance
|
|
$
|
(328
|
)
|
|
$
|
139
|
|
|
$
|
(737
|
)
|
|
$
|
3,147
|
|
|
$
|
2,221
|
|
Other comprehensive income (loss) before reclassification
|
|
—
|
|
|
—
|
|
|
53
|
|
|
1,916
|
|
|
1,969
|
|
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(344
|
)
|
|
(344
|
)
|
Net current period other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
53
|
|
|
1,572
|
|
|
1,625
|
|
Ending balance
|
|
$
|
(328
|
)
|
|
$
|
139
|
|
|
$
|
(684
|
)
|
|
$
|
4,719
|
|
|
$
|
3,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2018
|
Dollars in thousands
|
|
Gains and Losses on Other Post-Retirement Benefits
|
|
Gains and Losses on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
Total
|
Beginning balance
|
|
$
|
398
|
|
|
$
|
(472
|
)
|
|
$
|
(912
|
)
|
|
$
|
(986
|
)
|
Other comprehensive (loss) income before reclassification
|
|
—
|
|
|
255
|
|
|
(2,168
|
)
|
|
(1,913
|
)
|
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(6
|
)
|
Net current period other comprehensive (loss) income
|
|
—
|
|
|
255
|
|
|
(2,174
|
)
|
|
(1,919
|
)
|
Ending balance
|
|
$
|
398
|
|
|
$
|
(217
|
)
|
|
$
|
(3,086
|
)
|
|
$
|
(2,905
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2019
|
Dollars in thousands
|
|
Gains and Losses on Pension Plan
|
|
Gains and Losses on Other Post-Retirement Benefits
|
|
Gains and Losses on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
Total
|
Beginning balance
|
|
$
|
—
|
|
|
$
|
139
|
|
|
$
|
(314
|
)
|
|
$
|
(841
|
)
|
|
$
|
(1,016
|
)
|
Other comprehensive income (loss) before reclassification
|
|
(328
|
)
|
|
—
|
|
|
(370
|
)
|
|
6,727
|
|
|
6,029
|
|
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,167
|
)
|
|
(1,167
|
)
|
Net current period other comprehensive income (loss)
|
|
(328
|
)
|
|
—
|
|
|
(370
|
)
|
|
5,560
|
|
|
4,862
|
|
Ending balance
|
|
$
|
(328
|
)
|
|
$
|
139
|
|
|
$
|
(684
|
)
|
|
$
|
4,719
|
|
|
$
|
3,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2018
|
Dollars in thousands
|
|
Gains and Losses on Other Post-Retirement Benefits
|
|
Gains and Losses on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
Total
|
Beginning balance
|
|
$
|
398
|
|
|
$
|
(1,564
|
)
|
|
$
|
2,898
|
|
|
$
|
1,732
|
|
Other comprehensive (loss) income before reclassification
|
|
—
|
|
|
1,347
|
|
|
(5,355
|
)
|
|
(4,008
|
)
|
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
—
|
|
|
(629
|
)
|
|
(629
|
)
|
Net current period other comprehensive (loss) income
|
|
—
|
|
|
1,347
|
|
|
(5,984
|
)
|
|
(4,637
|
)
|
Ending balance
|
|
$
|
398
|
|
|
$
|
(217
|
)
|
|
$
|
(3,086
|
)
|
|
$
|
(2,905
|
)
|
NOTE 17. INCOME TAXES
Our income tax expense for the three months ended September 30, 2019 and September 30, 2018 totaled $1.8 million and $1.7 million, respectively. For the nine months ended September 30, 2019 and September 30, 2018 our income tax expense totaled $5.3 million and $5.2 million, respectively. Our effective tax rate (income tax expense as a percentage of income before taxes) for the quarters ended September 30, 2019 and 2018 was 18.5% and 19.5%, respectively, and for the nine months ended September 30, 2019 and 2018 were 18.2% and 20.1%, respectively. A reconciliation between the statutory income tax rate and our effective income tax rate for the three and nine months ended September 30, 2019 and 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Dollars in thousands
|
Percent
|
|
Percent
|
|
Percent
|
|
Percent
|
Applicable statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
Increase (decrease) in rate resulting from:
|
|
|
|
|
|
|
|
Tax-exempt interest and dividends, net
|
(1.6
|
)%
|
|
(3.1
|
)%
|
|
(2.0
|
)%
|
|
(3.0
|
)%
|
State income taxes, net of Federal income tax benefit
|
1.9
|
%
|
|
2.1
|
%
|
|
1.8
|
%
|
|
2.2
|
%
|
Low-income housing and rehabilitation tax credits
|
(0.4
|
)%
|
|
(0.9
|
)%
|
|
(0.6
|
)%
|
|
(1.1
|
)%
|
Other, net
|
(2.4
|
)%
|
|
0.4
|
%
|
|
(2.0
|
)%
|
|
1.0
|
%
|
Effective income tax rate
|
18.5
|
%
|
|
19.5
|
%
|
|
18.2
|
%
|
|
20.1
|
%
|
The components of applicable income tax expense for the three and nine months ended September 30, 2019 and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
Dollars in thousands
|
2019
|
2018
|
|
2019
|
2018
|
Current
|
|
|
|
|
|
Federal
|
$
|
1,666
|
|
$
|
1,410
|
|
|
$
|
4,913
|
|
$
|
4,628
|
|
State
|
246
|
|
228
|
|
|
716
|
|
737
|
|
|
1,912
|
|
1,638
|
|
|
5,629
|
|
5,365
|
|
Deferred
|
|
|
|
|
|
|
|
|
Federal
|
(88
|
)
|
25
|
|
|
(294
|
)
|
(142
|
)
|
State
|
(12
|
)
|
4
|
|
|
(42
|
)
|
(22
|
)
|
|
(100
|
)
|
29
|
|
|
(336
|
)
|
(164
|
)
|
Total
|
$
|
1,812
|
|
$
|
1,667
|
|
|
$
|
5,293
|
|
$
|
5,201
|
|
NOTE 18. REVENUE FROM CONTRACTS WITH CUSTOMERS
Interest income, loan fees, realized securities gains and losses, bank owned life insurance income and mortgage banking revenue are not in the scope of ASC Topic 606, Revenue from Contracts with Customers. With the exception of gains or losses on sales of foreclosed properties, all of our revenue from contracts with customers in the scope of ASC 606 is recognized
within Noninterest Income in the Consolidated Statements of Income. Incremental costs of obtaining a contract are expensed when incurred when the amortization period is one year or less.
The following table illustrates our total non-interest income segregated by revenues within the scope of ASC Topic 606 and those which are within the scope of other ASC Topics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
Dollars in thousands
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Service fees on deposit accounts
|
|
$
|
1,312
|
|
|
$
|
1,215
|
|
|
$
|
3,716
|
|
|
$
|
3,421
|
|
Bank card revenue
|
|
924
|
|
|
793
|
|
|
2,631
|
|
|
2,343
|
|
Trust and wealth management fees
|
|
632
|
|
|
687
|
|
|
1,830
|
|
|
2,026
|
|
Insurance commissions
|
|
40
|
|
|
1,062
|
|
|
1,821
|
|
|
3,188
|
|
Other
|
|
66
|
|
|
53
|
|
|
224
|
|
|
189
|
|
Net revenue from contracts with customers
|
|
2,974
|
|
|
3,810
|
|
|
10,222
|
|
|
11,167
|
|
Non-interest income within the scope of other ASC topics
|
|
785
|
|
|
401
|
|
|
4,577
|
|
|
2,068
|
|
Total noninterest income
|
|
$
|
3,759
|
|
|
$
|
4,211
|
|
|
$
|
14,799
|
|
|
$
|
13,235
|
|