EXHIBIT 99.2
INTEGRATED FINANCIAL HOLDINGS, INC.
RALEIGH, NORTH CAROLINA
SEPTEMBER 30, 2024
INTEGRATED FINANCIAL HOLDINGS, INC.
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2024
| |
|
Page
Number
|
|
Financial Statements
|
|
| |
Consolidated Balance Sheet
|
3
|
| |
Consolidated Statement of Income
|
4-5
|
| |
Consolidated Statement of Comprehensive Income
|
6
|
| |
Consolidated Statement of Changes in Shareholders’ Equity
|
7
|
| |
Consolidated Statement of Cash Flows
|
8-9
|
|
Notes to the Unaudited Consolidated Financial Statements
|
10-20
|
INTEGRATED FINANCIAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
|
(in thousands, except per share data)
|
|
September 30, 2024
|
|
|
Assets
|
|
|
|
|
Cash and due from banks
|
|
$
|
6,379
|
|
|
Interest-bearing deposits with other institutions
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
77,822
|
|
|
Securities available-for-sale, at fair value
|
|
|
1,019
|
|
|
Loans held for sale
|
|
|
41,723
|
|
|
Loans held for investment
|
|
|
382,755
|
|
|
Allowance for credit losses (“ACL”)
|
|
|
(7,660
|
)
|
|
Loans held for investment, net
|
|
|
375,095
|
|
|
Premises and equipment, net
|
|
|
3,638
|
|
|
Loan servicing assets
|
|
|
4,515
|
|
|
Bank owned life insurance
|
|
|
4,779
|
|
|
Accrued interest receivable
|
|
|
4,299
|
|
|
Goodwill
|
|
|
13,161
|
|
|
Intangible assets
|
|
|
4,520
|
|
|
Other assets
|
|
|
11,607
|
|
|
Total assets
|
|
$
|
542,178
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
85,609
|
|
|
Interest-bearing
|
|
|
364,274
|
|
|
Total deposits
|
|
|
449,883
|
|
|
Accrued interest payable
|
|
|
1,277
|
|
|
Other liabilities
|
|
|
8,388
|
|
|
Total liabilities
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
Common stock, voting $1 par value, 9,000,000 shares authorized, 2,338,764 shares issued and outstanding at September 30, 2024
|
|
|
2,339
|
|
|
Common stock, non-voting, $1 par value, 1,000,000 shares authorized, 21,740 shares issued and outstanding at September 30, 2024
|
|
|
22
|
|
|
Additional paid-in capital
|
|
|
28,370
|
|
|
Retained earnings
|
|
|
52,044
|
|
|
Accumulated other comprehensive loss
|
|
|
(145
|
)
|
|
Total shareholders’ equity
|
|
|
82,630
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
|
|
INTEGRATED FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
|
(in thousands, except share and per share data)
|
|
Nine Months Ended
September 30, 2024
|
|
|
Interest income
|
|
|
|
|
Interest and fees on loans
|
|
$
|
27,356
|
|
|
Investment securities & deposits
|
|
|
1,698
|
|
|
Total interest income
|
|
|
29,054
|
|
|
Interest expense
|
|
|
|
|
|
Interest on deposits
|
|
|
11,083
|
|
|
Interest on borrowed funds
|
|
|
474
|
|
|
Total interest expense
|
|
|
11,557
|
|
|
Net interest income
|
|
|
17,497
|
|
|
Provision for credit losses
|
|
|
1,850
|
|
|
Net interest income after provision for credit losses
|
|
|
15,647
|
|
|
Noninterest income
|
|
|
|
|
|
Government loan servicing and packaging revenue
|
|
|
10,952
|
|
|
Government lending revenue
|
|
|
4,693
|
|
|
Loan servicing rights
|
|
|
549
|
|
|
Bank-owned life insurance income
|
|
|
91
|
|
|
Change in fair value of marketable equity securities
|
|
|
(8,631
|
)
|
|
Other noninterest income
|
|
|
(1,879
|
)
|
|
Total noninterest income
|
|
|
5,775
|
|
|
Noninterest expense
|
|
|
|
|
|
Compensation
|
|
|
16,184
|
|
|
Occupancy and equipment
|
|
|
862
|
|
|
Loan related expenses
|
|
|
1,788
|
|
|
Data processing expense
|
|
|
765
|
|
|
Advertising expense
|
|
|
350
|
|
|
Insurance expense
|
|
|
668
|
|
|
Professional fees
|
|
|
1,317
|
|
|
Software
|
|
|
1,523
|
|
|
Communications
|
|
|
191
|
|
|
Directors fees
|
|
|
576
|
|
|
Intangible amortization expense
|
|
|
498
|
|
|
Merger related expenses
|
|
|
5,133
|
|
|
Other noninterest expense
|
|
|
1,272
|
|
|
Total noninterest expense
|
|
|
31,127
|
|
|
Loss before income taxes
|
|
|
(9,705
|
)
|
|
Income tax benefit
|
|
|
1,719
|
|
|
Net loss
|
|
$
|
(7,986
|
)
|
| |
|
|
|
|
|
Basic loss per common share
|
|
$
|
(3.37
|
)
|
|
Diluted loss per common share
|
|
$
|
(3.32
|
)
|
|
Weighted average common shares outstanding
|
|
|
2,369,645
|
|
|
Diluted average common shares outstanding
|
|
|
2,402,438
|
|
INTEGRATED FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
|
(in thousands)
|
|
Nine Months Ended
September 30, 2024
|
|
|
Net loss
|
|
$
|
(7,986
|
)
|
|
Other comprehensive loss:
|
|
|
|
|
Unrealized gain during the period on available-for-sale securities
|
|
|
2,500 |
|
Income tax expense relating to the items above
|
|
|
(525
|
)
|
| Other comprehensive income |
|
|
1,975
|
|
| Comprehensive loss |
|
$
|
(6,011
|
)
|
INTEGRATED FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)
| |
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
| |
|
Common Stock
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
| |
|
$1.00 par
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Shareholders’
|
|
|
(in thousands)
|
|
Voting
|
|
|
Non-voting
|
|
|
Capital
|
|
|
Loss
|
|
|
Earnings
|
|
|
Equity
|
|
|
Balance at December 31, 2023
|
|
$
|
2,273
|
|
|
$
|
22
|
|
|
$
|
25,811
|
|
|
$
|
(2,120
|
)
|
|
$
|
74,346
|
|
|
$
|
100,332
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,986
|
)
|
|
|
(7,986
|
)
|
|
Other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,975
|
|
|
|
-
|
|
|
|
1,975
|
|
|
Distribution of shareholder dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(14,316
|
)
|
|
|
(14,316
|
)
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
330
|
|
|
|
-
|
|
|
|
-
|
|
|
|
330
|
|
|
Exercise of stock options
|
|
|
30
|
|
|
|
-
|
|
|
|
213
|
|
|
|
-
|
|
|
|
-
|
|
|
|
243
|
|
|
Restricted stock issuance
|
|
|
37
|
|
|
|
-
|
|
|
|
2,016
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,053
|
|
|
Share cancellations
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
Balance at September 30, 2024
|
|
$
|
2,339
|
|
|
$
|
22
|
|
|
$
|
28,370
|
|
|
$
|
(145
|
)
|
|
$
|
52,044
|
|
|
$
|
82,630
|
|
INTEGRATED FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
| |
|
Nine Months Ended
|
|
|
(in thousands)
|
|
September 30, 2024
|
|
|
Cash flows from operating activities
|
|
|
|
|
Net income
|
|
|
(7,986
|
)
|
|
Adjustments to reconcile net income to net cash from operating activities:
|
|
|
|
|
|
Depreciation expense
|
|
|
134
|
|
|
Provision for loan losses
|
|
|
1,850
|
|
|
Amortization of premium on securities, net of accretion
|
|
|
19
|
|
|
Amortization of intangible assets
|
|
|
498
|
|
|
Accretion of discounts on loans
|
|
|
(1,518
|
)
|
|
Originations of loans held for sale
|
|
|
(72,254
|
)
|
|
Proceeds from sales of loans held for sale
|
|
|
75,647
|
|
|
Net gains on sale of loans held for sale
|
|
|
(4,693
|
)
|
|
Net gain on sale of foreclosed assets
|
|
|
(19
|
)
|
|
Stock-based compensation expense
|
|
|
2,346
|
|
|
Earnings on bank-owned life insurance
|
|
|
(91
|
)
|
|
Revaluation of loan servicing rights
|
|
|
(549
|
)
|
|
Net loss on the sale of investments
|
|
|
9,460
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
Increase in other assets
|
|
|
1,173
|
|
Decrease in other liabilities
|
|
|
(1,887
|
)
|
Net cash provided by operating activities
|
|
$
|
2,131
|
|
| |
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
Proceeds from maturities and principal paydowns of securities available-for-sale
|
|
$
|
521
|
|
|
Proceeds from the sale of investments
|
|
|
33,746
|
|
|
Increase in loans, net
|
|
|
(22,633
|
)
|
|
Increase in FHLB stock, net
|
|
|
80
|
|
|
Proceeds from sale of foreclosed assets
|
|
|
120
|
|
|
Purchases of premises and equipment, net
|
|
|
(16
|
)
|
Net cash provided by investing activities
|
|
$
|
11,819
|
|
| |
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
Increase in deposits, net
|
|
$
|
14,204
|
|
|
Stock option exercises and restricted stock vested
|
|
|
279
|
|
|
Distribution of dividend to shareholders
|
|
|
(14,316
|
)
|
Net cash provided by financing activities
|
|
$
|
167
|
|
| |
|
|
|
|
|
Net change in cash and cash equivalents
|
|
$
|
14,116
|
|
|
Cash and cash equivalents, beginning
|
|
|
63,706
|
|
|
Cash and cash equivalents, ending
|
|
$
|
77,822
|
|
| |
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
11,626
|
|
Cash paid during the period for taxes
|
|
$
|
949
|
|
|
Supplemental Disclosure of Non-Cash Transactions
|
|
|
|
|
|
Change in unrealized loss on securities AFS
|
|
$
|
2,500
|
|
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Nature of Business and Basis of Presentation
Summary of Significant Accounting Policies
A summary of significant accounting principles is included in the Integrated Financial Holdings, Inc. (the “Company”) consolidated financial statements (unaudited),
which are included elsewhere herein.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, West Town Bank & Trust (the “Bank”) and Windsor
Advantage, LLC (“Windsor”) after elimination of all significant intercompany balances and transactions.
Management Opinion
The accompanying unaudited consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) and are
unaudited. They do not contain all of the disclosures required for annual audited financial statements. In the opinion of management, all adjustments necessary to present a fair statement of the results for the interim period have been made. Such
adjustments are of a normal and recurring nature. The results of operations for any interim period are not necessarily indicative of the results to be expected for an entire year. These interim consolidated financial statements should be read in
conjunction with the annual consolidated financial statements and notes thereto contained in the Company’s consolidated financial statements.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management 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 from those estimates. On an ongoing basis, the Company evaluates its estimates, including those relating to the allowance for credit losses, determination of fair value of acquired assets and assumed liabilities, servicing
assets, and valuation of goodwill and intangible assets.
Risks and Uncertainties
In the normal course of its business, the Company encounters two significant types of risks: economic and regulatory. There are three main components of economic risk:
interest rate risk, credit risk, and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different times, or on different bases, than its interest-earning assets. Credit
risk is the risk of default on the Company’s loan and investment securities portfolios that results from a borrower’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of collateral
underlying loans receivable and the valuation of real estate held by the Company.
The Company is subject to the regulations of various governmental agencies. These regulations can and do change significantly from period to period. The Company also
undergoes periodic examinations by the regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required loss allowances and operating restrictions from the regulators’ judgments based on information
available to them at the time of their examination.
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of loans receivable, investment securities, federal
funds sold and amounts due from banks.
The Company makes loans to individuals and small businesses for various personal and commercial purposes throughout the United States. The Company’s loan portfolio is
not concentrated in loans to any single borrower or a relatively small number of borrowers. Additionally, management is not aware of any concentrations of loans to classes of borrowers or industries that would be similarly affected by economic
conditions. However, the Company does have a large portfolio of loans in the solar electric generation power industry but not so much as to be deemed a concern by management.
In addition to monitoring potential concentrations of loans to particular borrowers or groups of borrowers, industries and geographic regions, management monitors
exposure to credit risk from concentrations of lending products and practices such as loans that subject borrowers to substantial payment increases (e.g., principal deferral periods, loans with initial interest-only periods, etc.), and loans with
high loan-to-value ratios. Management has determined that there is no concentration of credit risk associated with its lending policies or practices. Additionally, there are industry practices that could subject the Company to increased credit risk
should economic conditions change over the course of a loan’s life. For example, the Company makes variable rate loans and fixed rate principal-amortizing loans with maturities prior to the loan being fully paid (i.e., balloon payment loans). These
loans are underwritten and monitored to manage the associated risks. Therefore, management believes that these particular practices do not subject the Company to unusual credit risk.
The Company’s investment portfolio consists principally of obligations of the United States, its agencies or its corporations and general obligation municipal
securities. In the opinion of management, there is no concentration of credit risk in its investment portfolio. The Company places its deposits and correspondent accounts with and sells its federal funds to high quality institutions.
Management believes credit risk associated with correspondent accounts is not significant.
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 2. Earnings per Share
Basic earnings per common share is computed using the weighted average number of common shares and participating securities outstanding during the reporting period.
Diluted earnings per common share is the amount of earnings available to each share of common stock during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include
incremental shares issued for stock options and warrants. Potentially dilutive common shares are excluded from the computation of dilutive earnings per share in the periods in which the effect would be anti-dilutive.
The Company’s basic and diluted earnings per share calculations are presented in the following table:
| |
|
Nine Months Ended
|
|
|
(in thousands, except share and per share data)
|
|
September 30, 2024
|
|
|
Net loss
|
|
$
|
(7,986
|
)
|
|
Weighted average common shares - basic
|
|
|
2,369,645
|
|
|
Add: effect of dilutive stock options and restricted stock awards
|
|
|
32,793
|
|
|
Weighted average common shares - dilutive
|
|
|
2,402,438
|
|
|
Basic earnings per common share
|
|
$
|
(3.37
|
)
|
|
Diluted earnings per common share
|
|
$
|
(3.32
|
)
|
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 3. Investment Securities
The amortized cost, unrealized gains, unrealized losses, and fair values of available-for-sale investment securities at September 30, 2024 are as follows:
| |
|
September 30, 2024
|
|
| |
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
| |
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
(in thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Government sponsored enterprises collateralized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage obligations
|
|
$
|
1,202
|
|
|
$
|
-
|
|
|
$
|
(183
|
)
|
|
$
|
1,019
|
|
|
Total investment securities available-for-sale
|
|
$
|
1,202
|
|
|
$
|
-
|
|
|
$
|
(183
|
)
|
|
$
|
1,019
|
|
The following table summarized securities with unrealized losses at September 30, 2024, aggregated by major security type and length of time in a continuous unrealized
loss position:
| |
|
September 30, 2024
|
|
| |
|
Less than twelve months
|
|
|
Twelve months or more
|
|
|
Total
|
|
| |
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
(in thousands)
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Government sponsored enterprises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
collateralized mortgage obligations
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,019
|
|
|
$
|
(183
|
)
|
|
$
|
1,019
|
|
|
$
|
(183
|
)
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,019
|
|
|
$
|
(183
|
)
|
|
$
|
1,019
|
|
|
$
|
(183
|
)
|
The fair values of investment securities available-for-sale at September 30, 2024 by contractual maturity are shown below. Actual expected maturities may differ from
contractual maturities because issuers may have the right to call or prepay obligations.
| |
|
|
|
|
After One
|
|
|
After Five
|
|
|
|
|
|
|
|
| |
|
Within
|
|
|
Within
|
|
|
Within
|
|
|
After
|
|
|
|
|
|
(in thousands)
|
|
1 Year
|
|
|
Five Years
|
|
|
Ten Years
|
|
|
Ten Years
|
|
|
Total
|
|
|
Government sponsored enterprises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
collateralized mortgage obligations
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,019
|
|
|
$
|
1,019
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,019
|
|
|
$
|
1,019
|
|
Management considers the nature of the investment, the underlying causes of the decline in the market value and the severity in determining impairment. Consideration
is given to (1) the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time
sufficient to allow for any anticipated recovery in fair value.
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 3. Investment Securities, Continued
Securities classified as available-for-sale are recorded at fair market value. At September 30, 2024, there were two securities classified as available-for-sale in an
unrealized loss position for twelve months or more. No impairment loss has been realized in the Company’s consolidated income statement.
As of September 30, 2024, investments with amortized costs and fair values of $1.2 million and $1.0 million, respectively, were pledged as collateral for public
deposits.
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 4. Loans Held for Investment
Loans held for investment at September 30, 2024 were as follows:
|
(in thousands)
|
|
September 30, 2024
|
|
|
Commercial
|
|
$
|
253,394
|
|
|
Real Estate:
|
|
|
|
|
|
Commercial real estate
|
|
|
77,971
|
|
|
Residential real estate
|
|
|
50,035
|
|
|
Consumer
|
|
|
29
|
|
|
Subtotal
|
|
|
381,429
|
|
|
Net deferred loan costs
|
|
|
1,326
|
|
|
Allowance for credit losses
|
|
|
(7,660
|
)
|
|
Loans held for investment, net
|
|
$
|
375,095
|
|
Included above, the Company has SBA loans totaling $41.9 million and USDA loans totaling $266.5 million at September 30, 2024.
The following tables present the activity in the allowance for credit losses by class of loans for the nine months ended September 30, 2024.
| |
|
|
|
|
Commercial
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Commercial
|
|
|
Real Estate
|
|
|
Real Estate
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
as of December 31, 2023
|
|
$
|
5,138
|
|
|
$
|
1,044
|
|
|
$
|
669
|
|
|
$
|
1
|
|
|
$
|
84
|
|
|
$
|
6,936
|
|
|
Provision for credit losses
|
|
|
1,570
|
|
|
|
(428
|
)
|
|
|
582
|
|
|
|
|
|
|
|
126
|
|
|
|
1,850
|
|
|
Charge-offs
|
|
|
(784
|
)
|
|
|
(451
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,235
|
)
|
|
Recoveries
|
|
|
50
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110
|
|
|
Ending Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
as of September 30, 2024
|
|
$
|
5,974
|
|
|
$
|
225
|
|
|
$
|
1,251
|
|
|
$
|
1
|
|
|
$
|
209
|
|
|
$
|
7,660
|
|
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 4. Loans Held for Investment, continued
The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The
underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:
| |
|
Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner
occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate
loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.
|
| |
|
Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage.
|
| |
|
Home equity lines of credit are generally secured by second mortgages on residential real estate property.
|
| |
|
Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no
underlying collateral.
|
The following table details the amortized cost of collateral dependent loans as of September 30, 2024:
|
(in thousands)
|
|
September 30, 2024
|
|
|
Commercial
|
|
$
|
4,124 |
|
|
Real Estate:
|
|
|
|
|
|
Commercial real estate
|
|
|
12,235
|
|
|
Residential real estate
|
|
|
4,688
|
|
|
Total loans
|
|
$
|
21,047
|
|
Nonaccrual loans and collateral dependent loans are defined differently. Some loans may be included in both categories, and some may only be included in one category.
The following table presents the recorded investment in non-accrual and loans past due over 90 days still on accrual by class of loans as of September 30, 2024:
| |
|
September 30, 2024
|
|
| |
|
Nonaccrual Loans
|
|
|
Nonaccrual Loans
|
|
|
Total
|
|
|
(in thousands)
|
|
with No Allowance
|
|
|
with an Allowance
|
|
|
Nonaccrual Loans
|
|
|
Commercial
|
|
$
|
2,067
|
|
|
$
|
178
|
|
|
$
|
2,245
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
8,877
|
|
|
|
1,948
|
|
|
|
10,826
|
|
|
Residential real estate
|
|
|
2,294
|
|
|
|
2,444
|
|
|
|
4,738
|
|
|
Total loans
|
|
$
|
13,238
|
|
|
$
|
4,570
|
|
|
$
|
17,808
|
|
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 4. Loans Held for Investment, continued
Non-accrual loans and loans past due over 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated and individually
classified collateral dependent loans. Loans from which principal or interest is in default for 90 days or more are classified as a non-accrual unless they are well secured and in process of collection. Loans past due over 90 days still accruing
were matured loans that were well secured and in process of collection. Borrowers have continued to make payments on these loans while administrative and legal due processes are proceeding which will enable the Bank to extend or modify maturity
dates.
The following tables display all non-accrual loans and loans 90 or more days past due and still on accrual for the periods ended September 30, 2024.
|
(in thousands)
|
|
Amount
|
|
|
Number
|
|
|
September 30, 2024
|
|
|
|
|
|
|
|
Loans past due over 90 days and still on accrual
|
|
$
|
-
|
|
|
|
-
|
|
|
Non-accrual loans past due
|
|
|
|
|
|
|
|
|
|
Less than 30 days
|
|
|
-
|
|
|
|
-
|
|
|
30-59 days
|
|
|
-
|
|
|
|
-
|
|
|
60-89 days
|
|
|
-
|
|
|
|
-
|
|
|
90+ days
|
|
|
4,570 |
|
|
|
18 |
|
|
Non-accrual loans past due
|
|
$
|
4,570
|
|
|
|
18
|
|
The following tables present the aging of the recorded investment in past due loans by class of loans as of September 30, 2024:
| |
|
|
|
|
|
|
|
Greater than
|
|
|
|
|
|
|
|
|
|
|
| |
|
30 - 59 Days
|
|
|
60 - 89 Days
|
|
|
90 Days
|
|
|
Total
|
|
|
|
|
|
|
|
| |
|
Past
|
|
|
Past
|
|
|
Past
|
|
|
Past
|
|
|
|
|
|
Total
|
|
|
(in thousands)
|
|
Due
|
|
|
Due
|
|
|
Due
|
|
|
Due
|
|
|
Current
|
|
|
Loans
|
|
|
September 30, 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
250
|
|
|
$
|
335
|
|
|
$
|
257
|
|
|
$
|
843
|
|
|
$
|
|
|
|
$
|
253,394
|
|
|
Commercial real estate
|
|
|
|
|
|
|
465
|
|
|
|
10,829
|
|
|
|
11,294
|
|
|
|
66,677
|
|
|
|
77,971
|
|
|
Residential real estate
|
|
|
2,344
|
|
|
|
663
|
|
|
|
1,772
|
|
|
|
4,779
|
|
|
|
45,256
|
|
|
|
50,035
|
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
29
|
|
|
|
29
|
|
|
Total
|
|
$
|
2,594
|
|
|
$
|
1,463
|
|
|
$
|
12,858
|
|
|
$
|
16,916
|
|
|
$
|
364,513
|
|
|
$
|
381,429
|
|
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 4. Loans Held for Investment, continued
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its
modification efforts.
During the nine months ended September 30, 2024, there were seven loans totaling $1,460,000 for commercial borrowers experiencing financial difficulty. All
modifications provided for three months of full payment deferral.
Credit Quality Indicators
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial
information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes
non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The risk category of homogeneous loans is evaluated at origination and when a loan becomes delinquent. The Company uses the
following definitions for risk ratings:
Pass
loans are loans that are performing and are deemed adequately protected by the net worth of the borrower or the underlying collateral value. These loans are considered the least risky in terms of determining the allowance for loan losses.
Special Mention loans are loans with underwriting guideline tolerances and/or exceptions and with no mitigating factors. These are loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the
asset or inadequately protect the Bank’s position at some future date.
Substandard loans typically have an identified weakness or weaknesses and are inadequately protected by the net worth of the borrower or collateral value.
Doubtful
loans have the same characteristics of a substandard loan with an additional weakness that makes collection or liquidation of the asset highly questionable, and there is a high probability of loss based on currently existing facts, conditions or
values.
Loss loans
are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value but rather that it is not practical or
desirable to defer writing off the worthless loan even though partial recovery may be collected in the future. Probable loss portions of doubtful assets should be charged against the Allowance for Credit Losses. Loans may reside in this
classification for administrative purposes for a period not to exceed the earlier of thirty days or calendar quarter-end. There were no loans rated as loss as of September 30, 2024.
Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans.
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 4. Loans Held for Investment, continued
The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination or renewal as of September 30, 2024:
| |
|
September 30, 2024
|
|
| |
|
Term Loans by Year of Origination
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2024
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
2020
|
|
|
Prior
|
|
|
Revolving
|
|
|
Total
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
45,410
|
|
|
$
|
64,072
|
|
|
$
|
45,289
|
|
|
$
|
20,013
|
|
|
$
|
8,041
|
|
|
$
|
50,113
|
|
|
$
|
15,368
|
|
|
$
|
248,306
|
|
|
Special mention
|
|
|
69
|
|
|
|
163
|
|
|
|
-
|
|
|
|
20
|
|
|
|
181
|
|
|
|
251
|
|
|
|
-
|
|
|
|
684
|
|
|
Substandard
|
|
|
1,413
|
|
|
|
1,084
|
|
|
|
876
|
|
|
|
145
|
|
|
|
178
|
|
|
|
708
|
|
|
|
-
|
|
|
|
4,404
|
|
| |
|
|
46,892
|
|
|
|
65,319
|
|
|
|
46,165
|
|
|
|
20,178
|
|
|
|
8,400
|
|
|
|
51,072
|
|
|
|
15,368
|
|
|
|
253,394
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
|
14,484
|
|
|
|
13,197
|
|
|
|
12,790
|
|
|
|
7,870
|
|
|
|
4,311
|
|
|
|
14,699
|
|
|
|
260
|
|
|
|
67,611
|
|
|
Substandard
|
|
|
227
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,629
|
|
|
|
2,504
|
|
|
|
-
|
|
|
|
10,360
|
|
| |
|
|
14,711
|
|
|
|
13,197
|
|
|
|
12,790
|
|
|
|
7,870
|
|
|
|
11,940
|
|
|
|
17,203
|
|
|
|
260
|
|
|
|
77,971
|
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
|
11,589
|
|
|
|
11,966
|
|
|
|
1,816
|
|
|
|
7,197
|
|
|
|
4,394
|
|
|
|
7,602
|
|
|
|
733
|
|
|
|
45,297
|
|
|
Special mention
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
191
|
|
|
|
-
|
|
|
|
191
|
|
|
Substandard
|
|
|
355
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,257
|
|
|
|
424
|
|
|
|
511
|
|
|
|
-
|
|
|
|
4,547
|
|
| |
|
|
11,944
|
|
|
|
11,966
|
|
|
|
1,816
|
|
|
|
10,454
|
|
|
|
4,818
|
|
|
|
8,304
|
|
|
|
733
|
|
|
|
50,035
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
|
19
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8
|
|
|
|
2
|
|
|
|
-
|
|
|
|
29
|
|
| |
|
|
19
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8
|
|
|
|
2
|
|
|
|
-
|
|
|
|
29
|
|
|
Total
|
|
$
|
73,566
|
|
|
$
|
90,482
|
|
|
$
|
60,771
|
|
|
$
|
38,502
|
|
|
$
|
25,166
|
|
|
$
|
76,581
|
|
|
$
|
16,361
|
|
|
$
|
381,429
|
|
The following table presents the Company’s gross charge-offs by year of origination or renewal as of September 30, 2024:
| |
|
September 30, 2024
|
|
| |
|
Term Loans by Year of Origination
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2024
|
|
|
2023
|
|
|
2022
|
|
|
2021
|
|
|
2020
|
|
|
Prior
|
|
|
Revolving
|
|
|
Total
|
|
|
Commercial
|
|
$
|
-
|
|
|
$
|
22
|
|
|
$
|
175
|
|
|
$
|
-
|
|
|
$
|
583
|
|
|
$
|
4
|
|
|
$
|
-
|
|
|
$
|
784
|
|
|
Commercial real estate
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
24
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
427
|
|
|
$
|
-
|
|
|
$
|
451
|
|
| |
|
$
|
-
|
|
|
$
|
22
|
|
|
$
|
199
|
|
|
$
|
-
|
|
|
$
|
583
|
|
|
$
|
431
|
|
|
$
|
-
|
|
|
$
|
1,235
|
|
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 5. Deposits
Time deposits that meet or exceed the FDIC insurance limit of $250,000 as of September 30, 2024 were $57.3 million.
At September 30, 2024, scheduled maturities of time deposits were as follows:
|
(in thousands)
|
|
|
|
|
2024
|
|
$
|
50,585
|
|
|
2025
|
|
|
132,913
|
|
|
2026
|
|
|
62,623
|
|
|
2027
|
|
|
44,977
|
|
|
2028
|
|
|
28,546
|
|
|
2029
|
|
|
286
|
|
|
Total
|
|
$
|
319,930
|
|
At September 30, 2024, brokered deposits totaled $158.2 million.
INTEGRATED FINANCIAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6. Business Combinations
On March 28, 2024, the Company and Capital Bancorp, Inc (“CBNK” or “Capital”) jointly announced signing of a definitive merger agreement under which Capital has agreed
to acquire the Company.
Effective October 1, 2024, the merger was completed. Under the terms of the Agreement and Plan of Merger, Integrated Financial Holdings, Inc. merged with and into
Capital, with Capital remaining as the surviving entity.
19
