Notes to Consolidated Financial Statements (Unaudited)
September 30, 2020
Note A –Background and Basis of Presentation
City Holding Company ("City Holding"), a West Virginia corporation headquartered in Charleston, West Virginia, is a registered financial holding company under the Bank Holding Company Act and conducts its principal activities through its wholly-owned subsidiary, City National Bank of West Virginia ("City National"). City National is a retail and consumer-oriented community bank with 94 banking offices in West Virginia (58), Kentucky (19), Virginia (13) and southeastern Ohio (4). City National provides credit, deposit, and trust and investment management services to its customers in a broad geographical area that includes many rural and small community markets in addition to larger cities including Charleston (WV), Huntington (WV), Martinsburg (WV), Ashland (KY), Lexington (KY), Winchester (VA) and Staunton (VA). In addition to its branch network, City National's delivery channels include automated-teller-machines ("ATMs"), interactive-teller machines ("ITMs"), mobile banking, debit cards, interactive voice response systems, and Internet technology. The Company’s business activities are currently limited to one reportable business segment, which is community banking.
On January 30, 2019, the Company announced that City National had signed a definitive agreement to sell its Virginia Beach, Virginia branch. The terms of the agreement provided for the acquirer to assume the majority of deposits and to acquire the equipment and other select assets associated with the branch, while City National retained the loans. The transaction closed during the second quarter of 2019. As a result of this transaction, the Company recognized a gain of $0.7 million and outstanding deposit balances decreased by $25.7 million.
The accompanying consolidated financial statements, which are unaudited, include all of the accounts of City Holding and its wholly-owned subsidiaries (collectively, the "Company"). All material intercompany transactions have been eliminated. The consolidated financial statements include all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations and financial condition for each of the periods presented. Such adjustments are of a normal recurring nature. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the results of operations that can be expected for the year ending December 31, 2020. The Company’s accounting and reporting policies conform with generally accepted accounting principles for interim financial information, with the instructions to Form 10-Q and Article 10 of Regulation S-X, and with Industry Guide 3, Statistical Disclosure by Bank Holding Companies. Such policies require management to make estimates and develop assumptions that affect the amounts reported in the consolidated financial statements and related footnotes. Actual results could differ from management’s estimates.
The consolidated balance sheet as of December 31, 2019 has been derived from audited financial statements included in the Company’s 2019 Annual Report to Shareholders. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in the 2019 Annual Report of the Company.
Certain amounts in the financial statements have been reclassified. Such reclassifications had no impact on shareholders’ equity or net income for any period.
Note B - Recent Accounting Pronouncements
Recently Adopted:
CECL
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This standard replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The new current expected credit losses model ("CECL") will apply to the allowance for credit losses, available-for-sale and held-to-maturity debt securities, purchased financial assets with credit deterioration and certain off-balance sheet credit exposures. In November 2018, the FASB issued ASU No. 2018-19, "Codification Improvements to Topic 326, Financial Instruments—Credit Losses." This amendment clarifies the scope of the guidance in ASU No. 2016-13. In December 2018, the federal bank regulators issued a final rule that would provide an optional three-year phase-in period for the day-one regulatory capital effects of the adoption of ASU No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, as amended, on January 1, 2020. In April 2020, federal bank regulators issued an interim final rule which provided banking organizations that implement CECL before the end of 2020 the option to delay for two more years an estimate of CECL's effect on regulatory capital, followed by the three-year transition period as previously issued. Management has elected to utilize the five-year interim final rule.
The Company adopted 2016-13 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet ("OBS") credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP.
The Company adopted 2016-13 using the prospective transition approach for financial assets purchased with credit deterioration ("PCD") that were previously classified as purchased-credit impaired ("PCI") and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether the PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2020, the amortized cost basis of the PCD assets was adjusted to reflect the addition of $2.7 million of the allowance for credit losses. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income over the remaining life of the asset.
The following table illustrates the impact of ASC 326 (in thousands):
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As Reported Under
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Pre-ASC 326
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Impact of ASC 326
|
|
ASC 326
|
Adoption
|
Adoption
|
|
|
|
|
Gross Loans
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$
|
3,618,825
|
|
$
|
3,616,099
|
|
$
|
2,726
|
|
Allowance for Credit Losses
|
(17,349)
|
|
(11,589)
|
|
(5,760)
|
|
Deferred Tax Assets, net
|
7,380
|
|
6,669
|
|
711
|
|
|
|
|
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Shareholders' Equity
|
655,648
|
|
657,983
|
|
(2,335)
|
|
As a result of the adoption of ASU 2016-13, the Company revised some of its existing accounting policies as noted below:
Allowance for Credit Losses - Available-for-Sale Securities: For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Purchased Credit Deteriorated ("PCD") Loans: The Company has purchased loans during its acquisitions, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan's purchase price and the allowance for credit losses becomes the initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is accreted or amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense.
Allowance for Credit Losses - Loans: The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods:
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Portfolio Segment
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Measurement Method
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Commercial and industrial
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Migration
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Commercial real estate:
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1-4 family
|
Migration
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Hotels
|
Migration
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Multi-family
|
Migration
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Non Residential Non-Owner Occupied
|
Migration
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Non Residential Owner Occupied
|
Migration
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Residential real estate
|
Vintage
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Home equity
|
Vintage
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Consumer
|
Vintage
|
Migration is an analysis that tracks a closed pool of loans for a configurable period of time and calculates a loss ratio on only those loans in the pool at the start date based on outstanding balance. Vintage is a predictive loss model that includes a reasonable approximation of probable and estimable future losses by tracking each loan's net losses over the life of the loan as compared to its original balance. For demand deposit overdrafts, the allowance for credit losses is measured using the historical loss rate. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. When management determines that foreclosure is probable, the expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
Expected credit losses are estimated over the contractual term of the loan, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled-debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
Troubled Debt Restructurings ("TDRs"): A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR. The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the allowance for credit loss is determined by discounting the expected future cash flows at the original interest rate of the loan.
Others
In January 2017, the FASB issued ASU No. 2017-04, "Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." This amendment simplifies the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. This ASU became effective for the Company on January 1, 2020. The adoption of ASU No. 2017-04 did not have a material impact on the Company's financial statements.
In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." This amendment expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This ASU became effective for the Company on January 1, 2019. The adoption of this ASU
did not have a material impact on the Company's financial statements. In April 2019, the FASB issued ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments." This amendment clarifies the guidance in ASU No. 2017-12. This amendment became effective for the Company on January 1, 2020. Effective January 1, 2020, the Company reclassified its held-to-maturity securities as available-for-sale utilizing the transition guidance under ASU 2019-04, and the unrealized gains/losses on these investments will be recorded through Other Comprehensive Income.
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement." This amendment removes, modifies, and clarifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. This ASU became effective for the Company on January 1, 2020. The adoption of ASU No. 2018-13 did not have a material impact on the Company's financial statements.
In August 2018, the FASB issued ASU No. 2018-15, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract." The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU became effective for the Company on January 1, 2020. The adoption of ASU No. 2018-15 did not have a material impact on the Company's financial statements.
In October 2018, the FASB issued ASU No. 2018-16, "Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes." This amendment permits the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the UST, the LIBOR swap rate, the OIS rate based on the Federal Funds Effective Rate, and the SIFMA Municipal Swap Rate. This ASU became effective for the Company on January 1, 2019 with anticipation the LIBOR index will be phased out by the end of 2021. In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This amendment provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and is effective as of March 12, 2020 through December 31, 2022. Management has reviewed the loan portfolio and taken the appropriate steps to prepare for the change from LIBOR to SOFR.
In October 2018, the FASB issued ASU No. 2018-17, "Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities." This amendment simplifies the analysis of fees paid to decision makers or service providers in determining variable interest entities. This ASU became effective for the Company on January 1, 2020. The adoption of ASU No. 2018-17 did not have a material impact on the Company's financial statements.
Pending Adoption:
In August 2018, the FASB issued ASU No. 2018-14, "Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans." This amendment removes, modifies, and clarifies certain disclosure requirements for defined benefit plans and other post-employment benefit plans. This ASU will become effective for the Company on January 1, 2021. The adoption of ASU No. 2018-14 is not expected to have a material impact on the Company's financial statements.
In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance. This ASU will become effective for the Company on January 1, 2021. The adoption of ASU No. 2019-12 is not expected to have a material impact on the Company's financial statements.
Note C – Investments
The aggregate carrying and approximate fair values of investment securities follow (in thousands). Fair values are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable financial instruments.
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|
|
September 30, 2020
|
December 31, 2019
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Fair Value
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Fair Value
|
Securities available-for-sale:
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|
|
|
|
|
|
|
|
U.S. Treasuries and U.S.
|
|
|
|
|
|
|
|
|
government agencies
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
500
|
|
$
|
2
|
|
$
|
—
|
|
$
|
502
|
|
Obligations of states and
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|
|
|
|
|
|
|
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political subdivisions
|
255,677
|
|
8,369
|
|
744
|
|
263,302
|
|
112,393
|
|
4,800
|
|
6
|
|
117,187
|
|
Mortgage-backed securities:
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|
|
|
|
|
|
|
|
U.S. government agencies
|
804,912
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|
38,459
|
|
138
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|
843,233
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|
631,637
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|
12,292
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|
1,825
|
|
642,104
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|
Private label
|
10,375
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|
1,002
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|
—
|
|
11,377
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|
10,896
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|
589
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|
—
|
|
11,485
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|
Trust preferred securities
|
4,554
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|
—
|
|
662
|
|
3,892
|
|
4,781
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|
27
|
|
347
|
|
4,461
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|
Corporate securities
|
31,515
|
|
1,859
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|
20
|
|
33,354
|
|
31,669
|
|
500
|
|
43
|
|
32,126
|
|
Total Debt Securities
|
1,107,033
|
|
49,689
|
|
1,564
|
|
1,155,158
|
|
791,876
|
|
18,210
|
|
2,221
|
|
807,865
|
|
Certificates of deposit held for investment
|
2,241
|
|
—
|
|
—
|
|
2,241
|
|
2,241
|
|
—
|
|
—
|
|
2,241
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|
Total Securities Available-for-Sale
|
$
|
1,109,274
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|
$
|
49,689
|
|
$
|
1,564
|
|
$
|
1,157,399
|
|
$
|
794,117
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|
$
|
18,210
|
|
$
|
2,221
|
|
$
|
810,106
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Securities held-to-maturity:
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|
|
Mortgage-backed securities:
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|
|
|
|
|
|
|
|
U.S. government agencies
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
49,036
|
|
$
|
1,562
|
|
$
|
—
|
|
$
|
50,598
|
|
Total Securities Held-to-Maturity
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
49,036
|
|
$
|
1,562
|
|
$
|
—
|
|
$
|
50,598
|
|
Effective January 1, 2020, the Company reclassified its held-to-maturity securities as available-for-sale utilizing the transition guidance under ASU 2019-04, and the unrealized gains/losses on these investments will be recorded through Other Comprehensive Income.
The Company's other investment securities include marketable and non-marketable equity securities. At September 30, 2020 and December 31, 2019, the Company held $10.9 million and $12.6 million, respectively, in marketable equity securities. Marketable equity securities mainly consist of investments made by the Company in equity positions of various community banks. Included within this portfolio are ownership positions in the following community bank holding companies: First National Corporation (FXNC) (4%) and Eagle Financial Services, Inc. (EFSI) (1.5%). Changes in the fair value of the marketable equity securities are recorded in "unrealized gains (losses) recognized on equity securities still held" in the consolidated statements of income. The Company's non-marketable securities consist of securities with limited marketability, such as stock in the Federal Reserve Bank ("FRB") or the Federal Home Loan Bank ("FHLB"). At September 30, 2020 and December 31, 2019, the Company held $15.6 million and $15.9 million, respectively, in non-marketable equity securities. These securities are carried at cost due to the restrictions placed on their transferability.
The Company's mortgage-backed U.S. government agency securities consist of both residential and commercial securities, all of which are guaranteed by Fannie Mae ("FNMA"), Freddie Mac ("FHLMC"), or Ginnie Mae ("GNMA"). At September 30, 2020 and December 31, 2019 there were no securities of any non-governmental issuer whose aggregate carrying value or estimated fair value exceeded 10% of shareholders' equity.
Certain investment securities owned by the Company were in an unrealized loss position (i.e., amortized cost basis exceeded the estimated fair value of the securities) as of September 30, 2020 and December 31, 2019. The following table shows the gross unrealized losses and fair value of the Company’s investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
Less Than Twelve Months
|
Twelve Months or Greater
|
Total
|
Estimated Fair Value
|
Unrealized Loss
|
Estimated Fair Value
|
Unrealized Loss
|
Estimated Fair Value
|
Unrealized Loss
|
Securities available-for-sale:
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
$
|
55,480
|
|
$
|
744
|
|
$
|
—
|
|
$
|
—
|
|
$
|
55,480
|
|
$
|
744
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
U.S. Government agencies
|
62,156
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|
138
|
|
36
|
|
—
|
|
62,192
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|
138
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|
Trust preferred securities
|
—
|
|
—
|
|
3,892
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|
662
|
|
3,892
|
|
662
|
|
Corporate securities
|
469
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|
20
|
|
—
|
|
—
|
|
469
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|
20
|
|
Total available-for-sale
|
$
|
118,105
|
|
$
|
902
|
|
$
|
3,928
|
|
$
|
662
|
|
$
|
122,033
|
|
$
|
1,564
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
Less Than Twelve Months
|
Twelve Months or Greater
|
Total
|
Estimated Fair Value
|
Unrealized Loss
|
Estimated Fair Value
|
Unrealized Loss
|
Estimated Fair Value
|
Unrealized Loss
|
Securities available-for-sale:
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
$
|
230
|
|
$
|
—
|
|
$
|
1,439
|
|
$
|
6
|
|
$
|
1,669
|
|
$
|
6
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
U.S. Government agencies
|
123,289
|
|
1,247
|
|
34,746
|
|
578
|
|
158,035
|
|
1,825
|
|
Trust preferred securities
|
4,200
|
|
347
|
|
—
|
|
—
|
|
4,200
|
|
347
|
|
Corporate securities
|
11,248
|
|
43
|
|
—
|
|
—
|
|
11,248
|
|
43
|
|
Total available-for-sale
|
$
|
138,967
|
|
$
|
1,637
|
|
$
|
36,185
|
|
$
|
584
|
|
$
|
175,152
|
|
$
|
2,221
|
|
There were no held-to-maturity securities in an unrealized loss position as of December 31, 2019.
The Company incurred no credit-related investment impairment losses in either the nine months ended September 30, 2020 or September 30, 2019.
Declines in the fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary would be reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost; (ii) the financial condition, capital strength, and near-term (within 12 months) prospects of the issuer, including any specific events which may influence the operations of the issuer, such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of the business that may affect the future earnings potential; (iii) the historical volatility in the market value of the investment and/or the liquidity or illiquidity of the investment; (iv) adverse conditions specifically related to the security, an industry, or a geographic area; and (v) the intent to sell the investment security and if it’s more likely than not that the Company will not have to sell the security before recovery of its cost basis.
As of September 30, 2020, management does not intend to sell any impaired security and it is not more than likely that it will be required to sell any impaired security before the recovery of its amortized cost basis. The unrealized losses on debt securities are primarily the result of interest rate changes, credit spread fluctuations on agency-issued mortgage-related securities, general financial market uncertainty and unprecedented market volatility. These conditions should not prohibit the Company from receiving its contractual principal and interest payments on its debt securities. The fair value is expected to recover as the securities approach their maturity date or repricing date. As of September 30, 2020, management believes the unrealized losses detailed in the table above are temporary and therefore no allowance for credit losses has been recognized on the Company’s securities.
The amortized cost and estimated fair value of debt securities at September 30, 2020, by contractual maturity, are shown in the following table (in thousands). Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties. Mortgage-backed securities have been allocated to their respective maturity groupings based on their contractual maturity.
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
Estimated Fair Value
|
Available-for-Sale Debt Securities
|
|
|
Due in one year or less
|
$
|
2,261
|
|
$
|
2,270
|
|
Due after one year through five years
|
16,269
|
|
16,817
|
|
Due after five years through ten years
|
288,225
|
|
305,691
|
|
Due after ten years
|
800,278
|
|
830,380
|
|
Total
|
$
|
1,107,033
|
|
$
|
1,155,158
|
|
Gross gains and gross losses recognized by the Company from investment security transactions are summarized in the table below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
|
2020
|
2019
|
2020
|
2019
|
Gross realized gains on securities sold
|
$
|
—
|
|
$
|
116
|
|
$
|
133
|
|
$
|
226
|
|
Gross realized losses on securities sold
|
—
|
|
(156)
|
|
(77)
|
|
(157)
|
|
Net investment security (losses) gains
|
$
|
—
|
|
$
|
(40)
|
|
$
|
56
|
|
$
|
69
|
|
|
|
|
|
|
Gross unrealized gains recognized on equity securities still held
|
$
|
461
|
|
$
|
14
|
|
$
|
170
|
|
$
|
255
|
|
Gross unrealized losses recognized on equity securities still held
|
—
|
|
(228)
|
|
(1,868)
|
|
(282)
|
|
Net unrealized gains (losses) recognized on equity securities still held
|
$
|
461
|
|
$
|
(214)
|
|
$
|
(1,698)
|
|
$
|
(27)
|
|
During January 2020, the Company sold the entirety of its Visa Inc. Class B common shares (86,605) in a cash transaction which resulted in a pre-tax gain of $17.8 million. The carrying value of the Visa Class B shares on the Company's balance sheet was $0, as the Company had no historical cost basis in the shares.
The carrying value of securities pledged to secure public deposits and for other purposes as required or permitted by law approximated $618 million and $519 million at September 30, 2020 and December 31, 2019, respectively.
Note D –Loans
The following summarizes the Company’s major classifications for loans (in thousands):
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
December 31, 2019
|
Commercial and industrial
|
383,980
|
|
308,015
|
|
|
|
|
1-4 Family
|
114,071
|
|
N/R
|
Hotels
|
295,989
|
|
N/R
|
Multi-family
|
214,394
|
|
N/R
|
Non Residential Non-Owner Occupied
|
628,814
|
|
N/R
|
Non Residential Owner Occupied
|
211,433
|
|
N/R
|
Commercial real estate
|
1,464,701
|
|
1,459,737
|
|
|
|
|
Residential real estate
|
1,621,265
|
|
1,640,396
|
|
Home equity
|
140,135
|
|
148,928
|
|
Consumer
|
50,541
|
|
54,263
|
|
DDA overdrafts
|
3,344
|
|
4,760
|
|
Gross loans
|
3,663,966
|
|
3,616,099
|
|
Allowance for credit losses
|
(24,867)
|
|
(11,589)
|
|
Net loans
|
$
|
3,639,099
|
|
$
|
3,604,510
|
|
|
|
|
Construction loans included in:
|
|
|
Residential real estate
|
$
|
28,947
|
|
$
|
29,033
|
|
Commercial real estate
|
42,449
|
|
64,049
|
|
N/R = Not reported. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP.
|
The Company’s commercial and residential real estate construction loans are primarily secured by real estate within the Company’s principal markets. These loans were originated under the Company’s loan policies, which are focused on the risk characteristics of the loan portfolio, including construction loans. In the judgment of the Company's management, adequate consideration has been given to these loans in establishing the Company's allowance for credit losses.
The Company originated loans to its customers under the Paycheck Protection Program (“PPP”) administered by the Small Business Administration (“SBA”) under the provisions of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). Loans covered by the PPP may be eligible for loan forgiveness. The remaining loan balances, if any, after the loan forgiveness, are fully guaranteed by the SBA. As of September 30, 2020, the Company has funded approximately $90 million of SBA-approved PPP loans to over 1,500 customers. Under the terms of the program, the SBA will pay the lender a processing fee tiered by the size of the loan (5% for loans less than $350,000; 3% for loans greater than $350,000 but less than $2.0 million; and 1% for loans greater than $2.0 million). The Company expects to recognize approximately $3.0 million in PPP loan related processing fees, net of associated expenses, over the term of these loans.
Note E – Allowance For Credit Losses
The following table summarizes the activity in the allowance for credit losses, by portfolio loan classification, for the three and nine months ended September 30, 2020 and 2019 (in thousands). The allocation of a portion of the allowance in one portfolio segment does not preclude its availability to absorb losses in other portfolio segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and
|
Commercial
|
Residential
|
|
|
DDA
|
|
|
Industrial
|
Real Estate
|
Real Estate
|
Home Equity
|
Consumer
|
Overdrafts
|
Total
|
Nine months ended September 30, 2020
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
2,059
|
|
$
|
2,606
|
|
$
|
3,448
|
|
$
|
1,187
|
|
$
|
975
|
|
$
|
1,314
|
|
$
|
11,589
|
|
Impact of adopting CECL
|
1,715
|
|
3,254
|
|
2,139
|
|
(598)
|
|
(810)
|
|
60
|
|
5,760
|
|
Charge-offs
|
(834)
|
|
(497)
|
|
(1,111)
|
|
(332)
|
|
(165)
|
|
(1,716)
|
|
(4,655)
|
|
Recoveries
|
17
|
|
375
|
|
127
|
|
89
|
|
183
|
|
1,134
|
|
1,925
|
|
Provision for credit losses
|
802
|
|
5,265
|
|
3,677
|
|
323
|
|
77
|
|
104
|
|
10,248
|
|
Ending balance
|
$
|
3,759
|
|
$
|
11,003
|
|
$
|
8,280
|
|
$
|
669
|
|
$
|
260
|
|
$
|
896
|
|
$
|
24,867
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2019
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
4,060
|
|
$
|
4,495
|
|
$
|
4,116
|
|
$
|
1,268
|
|
$
|
319
|
|
$
|
1,708
|
|
$
|
15,966
|
|
Charge-offs
|
(68)
|
|
(394)
|
|
(922)
|
|
(160)
|
|
(478)
|
|
(1,985)
|
|
(4,007)
|
|
Recoveries
|
183
|
614
|
282
|
—
|
|
211
|
1,112
|
|
2,402
|
|
(Recovery of) Provision
for credit losses
|
(1,471)
|
|
(1,619)
|
|
162
|
|
85
|
|
591
|
|
1,077
|
|
(1,175)
|
|
Ending balance
|
$
|
2,704
|
|
$
|
3,096
|
|
$
|
3,638
|
|
$
|
1,193
|
|
$
|
643
|
|
$
|
1,912
|
|
$
|
13,186
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2020
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
6,266
|
|
$
|
10,090
|
|
$
|
7,323
|
|
$
|
647
|
|
$
|
120
|
|
$
|
753
|
|
25,199
|
|
Charge-offs
|
(757)
|
|
(75)
|
|
(252)
|
|
(126)
|
|
(74)
|
|
(554)
|
|
(1,838)
|
|
Recoveries
|
3
|
|
44
|
|
24
|
|
33
|
|
42
|
|
334
|
|
480
|
|
(Recovery of) Provision for credit losses
|
(1,753)
|
|
944
|
|
1,185
|
|
115
|
|
172
|
|
363
|
|
1,026
|
|
Ending balance
|
$
|
3,759
|
|
$
|
11,003
|
|
$
|
8,280
|
|
$
|
669
|
|
$
|
260
|
|
$
|
896
|
|
$
|
24,867
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2019
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
2,796
|
|
$
|
3,469
|
|
$
|
3,959
|
|
$
|
1,211
|
|
$
|
509
|
|
$
|
1,851
|
|
$
|
13,795
|
|
Charge-offs
|
(17)
|
|
(216)
|
|
(291)
|
|
(43)
|
|
(182)
|
|
(772)
|
|
(1,521)
|
|
Recoveries
|
43
|
|
7
|
|
157
|
|
—
|
|
68
|
|
363
|
|
638
|
|
(Recovery of) Provision for credit losses
|
(118)
|
|
(164)
|
|
(187)
|
|
25
|
|
248
|
|
470
|
|
274
|
|
Ending balance
|
$
|
2,704
|
|
$
|
3,096
|
|
$
|
3,638
|
|
$
|
1,193
|
|
$
|
643
|
|
$
|
1,912
|
|
$
|
13,186
|
|
Management systematically monitors the loan portfolio and the appropriateness of the allowance for credit losses on a quarterly basis to provide for expected losses inherent in the portfolio. Management assesses the risk in each loan type based on historical trends, the general economic environment of its local markets, individual loan performance and other relevant factors. The provision for credit losses recorded during the nine months ended September 30, 2020 largely reflects the expected economic impact from the COVID-19 pandemic. The Company's estimate of future economic conditions utilized in its provision estimate is primarily dependent on expected unemployment ranges over a two-year period. Beyond two years, a straight line reversion to historical average loss rates is applied over the life of the loan pool in the migration methodology. The vintage methodology applies future average loss rates based on net losses in historical periods where the unemployment rate was within the forecasted range. As a result of COVID-19, expected unemployment ranges have significantly increased and resulted in an increase in the Company's provision for credit losses.
Individual credits in excess of $1 million are selected at least annually for detailed loan reviews, which are utilized by management to assess the risk in the portfolio and the appropriateness of the allowance. Due to the nature of commercial lending, evaluation of the appropriateness of the allowance as it relates to these types of loans is often based more upon specific
credit reviews, with consideration given to the potential impairment of certain credits and historical loss rates, adjusted for economic conditions and other inherent risk factors.
Non-Performing Loans
Interest income on loans is accrued and credited to operations based upon the principal amount outstanding, using methods that generally result in level rates of return. Loan origination fees, and certain direct costs, are deferred and amortized as an adjustment to the yield over the term of the loan. The accrual of interest generally is discontinued when a loan becomes 90 days past due as to principal or interest for all loan types. However, any loan may be placed on non-accrual status if the Company receives information that indicates a borrower is unable to meet the contractual terms of its respective loan agreement. Other indicators considered for placing a loan on non-accrual status include the borrower’s involvement in bankruptcies, foreclosures, repossessions, litigation and any other situation resulting in doubt as to whether full collection of contractual principal and interest is attainable. When interest accruals are discontinued, unpaid interest recognized in income in the current year is reversed, and interest accrued in prior years is charged to the allowance for credit losses. Management may elect to continue the accrual of interest when the net realizable value of collateral exceeds the principal balance and related accrued interest, and the loan is in the process of collection.
Generally for all loan classes, interest income during the period the loan is non-performing is recorded on a cash basis after recovery of principal is reasonably assured. Cash payments received on nonperforming loans are typically applied directly against the outstanding principal balance until the loan is fully repaid. Generally, loans are restored to accrual status when the obligation is brought current, the borrower has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.
The following tables present the amortized cost basis of loans on non-accrual status and loans past due over 90 days still accruing as of September 30, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accrual With No
|
Non-accrual With
|
Loans Past Due
|
|
Allowance for
|
Allowance for
|
Over 90 Days
|
|
Credit Losses
|
Credit Losses
|
Still Accruing
|
Commercial & Industrial
|
$
|
216
|
|
$
|
512
|
|
$
|
221
|
|
|
|
|
|
1-4 Family
|
—
|
|
2,242
|
|
—
|
|
Hotels
|
—
|
|
2,842
|
|
—
|
|
Multi-family
|
—
|
|
—
|
|
—
|
|
Non Residential Non-Owner Occupied
|
—
|
|
105
|
|
—
|
|
Non Residential Owner Occupied
|
2,540
|
|
750
|
|
—
|
|
Commercial Real Estate
|
2,540
|
|
5,939
|
|
—
|
|
|
|
|
|
Residential Real Estate
|
—
|
|
3,983
|
|
124
|
|
Home Equity
|
—
|
|
74
|
|
—
|
|
Consumer
|
—
|
|
—
|
|
—
|
|
Total
|
$
|
2,756
|
|
$
|
10,508
|
|
$
|
345
|
|
The following table presents the Company's loans on non-accrual status and loans past due over 90 days still accruing as of December 31, 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Loans Past Due
|
|
|
Over 90 Days
|
|
Non-accrual
|
Still Accruing
|
Commercial and industrial
|
$
|
1,182
|
|
$
|
184
|
|
Commercial real estate
|
6,384
|
|
—
|
|
Residential real estate
|
3,393
|
|
83
|
|
Home equity
|
531
|
|
—
|
|
Consumer
|
—
|
|
—
|
|
Total
|
$
|
11,490
|
|
$
|
267
|
|
The Company recognized less than $0.1 million of interest income on nonaccrual loans during each of the three months ended September 30, 2020 and 2019 and less than $0.1 million for each of the nine months ended September 30, 2020 and 2019, respectively.
The following table presents the amortized cost basis of individually evaluated impaired collateral-dependent loans as of September 30, 2020 (in thousands). Changes in the fair value of the collateral for collateral-dependent loans are reported as credit loss expense or a reversal of credit loss expense in the period of change.
|
|
|
|
|
|
|
|
|
|
Secured by
|
|
Real Estate
|
Equipment
|
Commercial and industrial
|
$
|
216
|
|
$
|
—
|
|
|
|
|
1-4 Family
|
—
|
|
—
|
|
Hotels
|
2,729
|
|
—
|
|
Multi-family
|
—
|
|
—
|
|
Non Residential Non-Owner Occupied
|
—
|
|
—
|
|
Non Residential Owner Occupied
|
2,540
|
|
—
|
|
Commercial real estate
|
5,269
|
|
—
|
|
Total
|
$
|
5,485
|
|
$
|
—
|
|
The following table presents the Company’s impaired loans, by class (in thousands) as of December 31, 2019. The difference between the unpaid principal balance and the recorded investment generally reflects amounts that have been previously charged-off. There were no significant individually evaluated impaired residential, home equity, or consumer loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
Recorded
|
Principal
|
Related
|
|
Investment
|
Balance
|
Allowance
|
With no related allowance recorded:
|
|
|
|
Commercial and industrial
|
$
|
501
|
|
$
|
501
|
|
$
|
—
|
|
Commercial real estate
|
3,546
|
|
3,572
|
|
—
|
|
Total
|
$
|
4,047
|
|
$
|
4,073
|
|
$
|
—
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
Commercial and industrial
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Commercial real estate
|
2,644
|
|
2,644
|
|
87
|
|
Total
|
$
|
2,644
|
|
$
|
2,644
|
|
$
|
87
|
|
The following table presents information related to the average recorded investment and interest income recognized on the Company’s impaired loans, by class (in thousands), for the three and nine months ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2019
|
Nine months ended September 30, 2019
|
|
Average
|
Interest
|
Average
|
Interest
|
|
Recorded
|
Income
|
Recorded
|
Income
|
|
Investment
|
Recognized
|
Investment
|
Recognized
|
With no related allowance recorded:
|
|
|
|
|
Commercial and industrial
|
$
|
503
|
|
—
|
|
$
|
570
|
|
$
|
—
|
|
Commercial real estate
|
3,540
|
|
3
|
|
4,558
|
|
41
|
|
Total
|
$
|
4,043
|
|
$
|
3
|
|
$
|
5,128
|
|
$
|
41
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
Commercial and industrial
|
$
|
100
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Commercial real estate
|
5,648
|
|
30
|
|
4,800
|
|
136
|
|
Total
|
$
|
5,748
|
|
$
|
30
|
|
$
|
4,800
|
|
$
|
136
|
|
The Company would have recognized less than $0.2 million of interest income during each of the three months ended September 30, 2020 and 2019 and less than $0.3 million during each of the nine months ended September 30, 2020 and 2019 if such loans had been current in accordance with their original terms.
Generally, all loan types are considered past due when the contractual terms of a loan are not met and the borrower is 30 days or more past due on a payment. Furthermore, residential and home equity loans are generally subject to charge-off when the loan becomes 120 days past due, depending on the estimated fair value of the collateral less cost to dispose, versus the outstanding loan balance. Commercial loans are generally charged off when the loan becomes 120 days past due. Open-end consumer loans are generally charged off when the loan becomes 180 days days past due.
The following table presents the aging of the amortized cost basis in past-due loans as of September 30, 2020 by class of loan (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
|
60-89
|
90+
|
Total
|
Current
|
Total
|
|
Past Due
|
Past Due
|
Past Due
|
Past Due
|
Loans
|
Loans
|
Commercial and industrial
|
$
|
451
|
|
$
|
20
|
|
$
|
221
|
|
$
|
692
|
|
$
|
383,288
|
|
$
|
383,980
|
|
|
|
|
|
|
|
|
1-4 Family
|
354
|
|
—
|
|
—
|
|
354
|
|
113,717
|
|
114,071
|
|
Hotels
|
—
|
|
—
|
|
—
|
|
—
|
|
295,989
|
|
295,989
|
|
Multi-family
|
—
|
|
—
|
|
—
|
|
—
|
|
214,394
|
|
214,394
|
|
Non Residential Non-Owner Occupied
|
—
|
|
148
|
|
—
|
|
148
|
|
628,666
|
|
628,814
|
|
Non Residential Owner Occupied
|
100
|
|
—
|
|
—
|
|
100
|
|
211,333
|
|
211,433
|
|
Commercial real estate
|
454
|
|
148
|
|
—
|
|
602
|
|
1,464,099
|
|
1,464,701
|
|
|
|
|
|
|
|
|
Residential real estate
|
4,370
|
|
658
|
|
124
|
|
5,152
|
|
1,616,113
|
|
1,621,265
|
|
Home Equity
|
451
|
|
24
|
|
—
|
|
475
|
|
139,660
|
|
140,135
|
|
Consumer
|
106
|
|
15
|
|
—
|
|
121
|
|
50,420
|
|
50,541
|
|
Overdrafts
|
375
|
|
4
|
|
—
|
|
379
|
|
2,965
|
|
3,344
|
|
Total
|
$
|
6,207
|
|
$
|
869
|
|
$
|
345
|
|
$
|
7,421
|
|
$
|
3,656,545
|
|
$
|
3,663,966
|
|
The following presents an aging analysis of the Company's past-due loans, by class, as of December 31, 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
|
60-89
|
90+
|
Total
|
Current
|
Total
|
|
Past Due
|
Past Due
|
Past Due
|
Past Due
|
Loans
|
Loans
|
Commercial and industrial
|
$
|
243
|
|
$
|
31
|
|
$
|
184
|
|
$
|
458
|
|
$
|
307,557
|
|
$
|
308,015
|
|
Commercial real estate
|
1,514
|
|
66
|
|
—
|
|
1,580
|
|
1,458,157
|
|
1,459,737
|
|
Residential real estate
|
5,758
|
|
1,643
|
|
83
|
|
7,484
|
|
1,632,912
|
|
1,640,396
|
|
Home equity
|
840
|
|
116
|
|
—
|
|
956
|
|
147,972
|
|
148,928
|
|
Consumer
|
156
|
|
32
|
|
—
|
|
188
|
|
54,075
|
|
54,263
|
|
Overdrafts
|
644
|
|
86
|
|
—
|
|
730
|
|
4,030
|
|
4,760
|
|
Total
|
$
|
9,155
|
|
$
|
1,974
|
|
$
|
267
|
|
$
|
11,396
|
|
$
|
3,604,703
|
|
$
|
3,616,099
|
|
Troubled Debt Restructurings ("TDRs")
The Company’s policy on loan modifications typically does not allow for modifications that would be considered a concession from the Company. However, when there is a modification, the Company evaluates each modification to determine if the modification constitutes a troubled debt restructuring (“TDR”) in accordance with ASU 2011-02, whereby a modification of a loan would be considered a TDR when both of the following conditions are met: (1) a borrower is experiencing financial difficulty and (2) the modification constitutes a concession. These modifications range from partial deferrals (interest only) to full deferrals (principal and interest). When determining whether the borrower is experiencing financial difficulties, the Company reviews whether the debtor is currently in payment default on any of its debt or whether it is probable that the debtor would be in payment default in the foreseeable future without the modification. Other indicators of financial difficulty include whether the debtor has declared or is in the process of declaring bankruptcy, the debtor’s ability to continue as a going concern, or the debtor’s projected cash flow to service its debt (including principal and interest) in accordance with the contractual terms for the foreseeable future, without a modification.
Regulatory guidance requires loans to be accounted for as collateral-dependent loans when borrowers have filed Chapter 7 bankruptcy, the debt has been discharged by the bankruptcy court and the borrower has not reaffirmed the debt. The filing of bankruptcy is deemed to be evidence that the borrower is in financial difficulty and the discharge of the debt by the bankruptcy court is deemed to be a concession granted to the borrower.
The following tables set forth the Company’s TDRs (in thousands). Substantially all of the Company's TDRs are accruing interest.
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
December 31, 2019
|
Commercial and industrial
|
$
|
—
|
|
$
|
—
|
|
|
|
|
1-4 Family
|
123
|
|
N/R
|
Hotels
|
2,634
|
|
N/R
|
Multi-family
|
1,903
|
|
N/R
|
Non Residential Non-Owner Occupied
|
—
|
|
N/R
|
Non Residential Owner Occupied
|
234
|
|
N/R
|
Commercial real estate
|
4,894
|
|
4,973
|
|
|
|
|
Residential real estate
|
20,398
|
|
21,029
|
|
Home equity
|
2,100
|
|
3,628
|
|
Consumer
|
260
|
|
—
|
|
Total
|
$
|
27,652
|
|
$
|
29,630
|
|
N/R = Not reported. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP.
|
The Company has allocated $1.6 million and $0.8 million of the allowance for credit losses for these loans as of September 30, 2020 and December 31, 2019, respectively. As of September 30, 2020, the Company has committed to lend an additional $0.4 million in relation to these loans.
The following table presents loans by class, modified as TDRs, that occurred during the nine months ended September 30, 2020 and 2019, respectively (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
September 30, 2019
|
|
|
Pre-
|
Post-
|
|
Pre-
|
Post-
|
|
|
Modification
|
Modification
|
|
Modification
|
Modification
|
|
|
Outstanding
|
Outstanding
|
|
Outstanding
|
Outstanding
|
|
Number of
|
Recorded
|
Recorded
|
Number of
|
Recorded
|
Recorded
|
|
Contracts
|
Investment
|
Investment
|
Contracts
|
Investment
|
Investment
|
Commercial and industrial
|
—
|
|
$
|
—
|
|
$
|
—
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
1-4 Family
|
—
|
|
—
|
|
—
|
|
N/R
|
N/R
|
N/R
|
Hotels
|
—
|
|
—
|
|
—
|
|
N/R
|
N/R
|
N/R
|
Multi-family
|
—
|
|
—
|
|
—
|
|
N/R
|
N/R
|
N/R
|
Non Owner Non-Owner Occupied
|
—
|
|
—
|
|
—
|
|
N/R
|
N/R
|
N/R
|
Non Owner Owner Occupied
|
—
|
|
—
|
|
—
|
|
N/R
|
N/R
|
N/R
|
Commercial real estate
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
Residential real estate
|
11
|
|
767
|
|
767
|
|
29
|
|
2,076
|
|
2,076
|
|
Home equity
|
—
|
|
—
|
|
—
|
|
8
|
|
213
|
|
213
|
|
Consumer
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Total
|
11
|
|
$
|
767
|
|
$
|
767
|
|
37
|
|
$
|
2,289
|
|
$
|
2,289
|
|
N/R = Not reported. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP.
|
The TDRs above increased the allowance for credit losses by less than $0.1 million in each of the nine months ended of September 30, 2020 and 2019 and resulted in charge-offs of less than $0.2 million during those same time periods.
The Company had one TDR that subsequently defaulted in 2019. The loan balance was approximately $3.0 million and the subsequent default resulted in a charge-off of $0.7 million and the remaining balance was transferred to OREO during 2019. The Company has had no TDRs that subsequently defaulted in 2020.
COVID-19 Pandemic
In March of 2020, in response to the COVID-19 pandemic, regulatory guidance was issued that clarified the accounting for loan modifications. Modifications of loan terms do not automatically result in a TDR. Short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extension of repayment terms, or other delays that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time the modification program was implemented. However, these deferrals do not absolve the company from performing its normal risk rating and therefore a loan could be current and have a less than satisfactory risk rating.
During the nine months ended September 30, 2020, the Company granted deferrals of approximately $135 million to its mortgage customers. These deferral arrangements ranged from 30 days to 90 days. As of September 30, 2020, approximately $15 million of these loans were still deferring, while approximately $120 million have resumed making their normal loan payment. As of September 30, 2020, approximately $4 million of these deferrals were previously and currently considered TDRs due to Chapter 7 bankruptcies.
During the nine months ended September 30, 2020, the Company granted deferrals of approximately $455 million to its commercial customers. These deferral arrangements ranged from one month to six months. As of September 30, 2020, approximately $180 million of these loans were still deferring (including $160 million for hotel and lodging related loans), while approximately $275 million have resumed making their normal loan payment.
Credit Quality Indicators
All commercial loans within the portfolio are subject to internal risk rating. All non-commercial loans are evaluated based on payment history. The Company’s internal risk ratings for commercial loans are: Exceptional, Good, Acceptable, Pass/Watch, Special Mention, Substandard and Doubtful. Each internal risk rating is defined in the loan policy using the following criteria: balance sheet yields; ratios and leverage; cash flow spread and coverage; prior history; capability of management; market position/industry; potential impact of changing economic, legal, regulatory or environmental conditions; purpose; structure; collateral support; and guarantor support. Risk grades are generally assigned by the primary lending officer and are periodically evaluated by the Company’s internal loan review process. Based on an individual loan’s risk grade, estimated loss percentages are applied to the outstanding balance of the loan to determine the amount of probable loss.
The Company categorizes loans into risk categories based on relevant information regarding the customer’s debt service ability, capacity and overall collateral position, along with other economic trends and historical payment performance. The risk rating for each credit is updated when the Company receives current financial information, the loan is reviewed by the Company’s internal loan review and credit administration departments, or the loan becomes delinquent or impaired. The risk grades are updated a minimum of annually for loans rated Exceptional, Good, Acceptable, or Pass/Watch. Loans rated Special Mention, Substandard or Doubtful are reviewed at least quarterly. The Company uses the following definitions for its risk ratings:
|
|
|
|
|
|
Risk Rating
|
Description
|
Pass ratings:
|
|
(a) Exceptional
|
Loans classified as exceptional are secured with liquid collateral conforming to the internal loan policy. Loans rated within this category pose minimal risk of loss to the bank.
|
(b) Good
|
Loans classified as good have similar characteristics that include a strong balance sheet, satisfactory debt service coverage ratios, strong management and/or guarantors, and little exposure to economic cycles. Loans in this category generally have a low chance of loss to the bank.
|
(c) Acceptable
|
Loans classified as acceptable have acceptable liquidity levels, adequate debt service coverage ratios, experienced management, and have average exposure to economic cycles. Loans within this category generally have a low risk of loss to the bank.
|
(d) Pass/Watch
|
Loans classified as pass/watch have erratic levels of leverage and/or liquidity, cash flow is volatile and the borrower is subject to moderate economic risk. A borrower in this category poses a low to moderate risk of loss to the bank.
|
Special Mention
|
Loans classified as special mention have a potential weakness(es) that deserves management’s close attention. The potential weakness could result in deterioration of the loan repayment or the bank’s credit position at some future date. A loan rated in this category poses a moderate loss risk to the bank.
|
Substandard
|
Loans classified as substandard reflect a customer with a well defined weakness that jeopardizes the liquidation of the debt. Loans in this category have the possibility that the bank will sustain some loss if the deficiencies are not corrected and the bank’s collateral value is weakened by the financial deterioration of the borrower.
|
Doubtful
|
Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristics that make collection of the full contract amount highly improbable. Loans rated in this category are most likely to cause the bank to have a loss due to a collateral shortfall or a negative capital position.
|
Based on the most recent analysis performed, the risk category of loans by class of loans at September 30, 2020 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving
|
|
|
Term Loans
|
Loans
|
|
|
Amortized Cost Basis by Origination Year and Risk Level
|
Amortized
|
|
|
2020
|
2019
|
2018
|
2017
|
2016
|
Prior
|
Cost Basis
|
Total
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
Pass
|
$
|
104,483
|
|
$
|
71,222
|
|
$
|
61,613
|
|
$
|
32,056
|
|
$
|
17,912
|
|
$
|
10,944
|
|
$
|
76,538
|
|
$
|
374,768
|
|
Special mention
|
83
|
|
43
|
|
14
|
|
60
|
|
—
|
|
437
|
|
414
|
|
1,051
|
|
Substandard
|
158
|
|
1,584
|
|
1,075
|
|
760
|
|
323
|
|
2,177
|
|
2,084
|
|
8,161
|
|
Total
|
$
|
104,724
|
|
$
|
72,849
|
|
$
|
62,702
|
|
$
|
32,876
|
|
$
|
18,235
|
|
$
|
13,558
|
|
$
|
79,036
|
|
$
|
383,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate -
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Pass
|
$
|
229,396
|
|
$
|
314,931
|
|
$
|
183,421
|
|
$
|
149,838
|
|
$
|
161,976
|
|
$
|
304,069
|
|
$
|
27,339
|
|
$
|
1,370,970
|
|
Special mention
|
396
|
|
5,287
|
|
1,209
|
|
156
|
|
185
|
|
3,643
|
|
—
|
|
10,876
|
|
Substandard
|
1,171
|
|
22,495
|
|
4,559
|
|
13,388
|
|
9,695
|
|
31,226
|
|
321
|
|
82,855
|
|
Total
|
$
|
230,963
|
|
$
|
342,713
|
|
$
|
189,189
|
|
$
|
163,382
|
|
$
|
171,856
|
|
$
|
338,938
|
|
$
|
27,660
|
|
$
|
1,464,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate -
|
|
|
|
|
|
|
|
|
1-4 Family
|
|
|
|
|
|
|
|
|
Pass
|
$
|
17,131
|
|
$
|
19,426
|
|
$
|
9,164
|
|
$
|
7,563
|
|
$
|
6,859
|
|
$
|
35,406
|
|
$
|
10,526
|
|
$
|
106,075
|
|
Special mention
|
171
|
|
—
|
|
—
|
|
24
|
|
162
|
|
957
|
|
—
|
|
1,314
|
|
Substandard
|
120
|
|
363
|
|
—
|
|
943
|
|
105
|
|
5,151
|
|
—
|
|
6,682
|
|
Total
|
$
|
17,422
|
|
$
|
19,789
|
|
$
|
9,164
|
|
$
|
8,530
|
|
$
|
7,126
|
|
$
|
41,514
|
|
$
|
10,526
|
|
$
|
114,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate -
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
|
|
|
|
|
|
Pass
|
$
|
23,983
|
|
$
|
95,401
|
|
$
|
26,376
|
|
$
|
39,848
|
|
$
|
21,521
|
|
$
|
44,727
|
|
$
|
—
|
|
$
|
251,856
|
|
Substandard
|
344
|
|
15,412
|
|
—
|
|
9,622
|
|
4,502
|
|
14,253
|
|
—
|
|
44,133
|
|
Total
|
$
|
24,327
|
|
$
|
110,813
|
|
$
|
26,376
|
|
$
|
49,470
|
|
$
|
26,023
|
|
$
|
58,980
|
|
$
|
—
|
|
$
|
295,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate -
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
|
|
|
|
|
|
Pass
|
$
|
69,894
|
|
$
|
56,692
|
|
$
|
2,815
|
|
$
|
21,086
|
|
$
|
32,657
|
|
$
|
27,559
|
|
$
|
1,153
|
|
$
|
211,856
|
|
Special mention
|
—
|
|
1,903
|
|
556
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,459
|
|
Substandard
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
79
|
|
—
|
|
79
|
|
Total
|
$
|
69,894
|
|
$
|
58,595
|
|
$
|
3,371
|
|
$
|
21,086
|
|
$
|
32,657
|
|
$
|
27,638
|
|
$
|
1,153
|
|
$
|
214,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate -
|
|
|
|
|
|
|
|
|
Non Residential Non-Owner Occupied
|
|
|
|
|
|
|
|
Pass
|
$
|
100,384
|
|
$
|
115,117
|
|
$
|
118,026
|
|
$
|
55,387
|
|
$
|
80,109
|
|
$
|
142,361
|
|
$
|
10,399
|
|
$
|
621,783
|
|
Special mention
|
17
|
|
511
|
|
597
|
|
43
|
|
—
|
|
149
|
|
—
|
|
1,317
|
|
Substandard
|
590
|
|
1,386
|
|
1,166
|
|
65
|
|
1,204
|
|
1,143
|
|
160
|
|
5,714
|
|
Total
|
$
|
100,991
|
|
$
|
117,014
|
|
$
|
119,789
|
|
$
|
55,495
|
|
$
|
81,313
|
|
$
|
143,653
|
|
$
|
10,559
|
|
$
|
628,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving
|
|
|
Term Loans
|
Loans
|
|
|
Amortized Cost Basis by Origination Year and Risk Level
|
Amortized
|
|
|
2020
|
2019
|
2018
|
2017
|
2016
|
Prior
|
Cost Basis
|
Total
|
Commercial real estate -
|
|
|
|
|
|
|
|
|
Non Residential Owner Occupied
|
|
|
|
|
|
|
|
Pass
|
$
|
18,004
|
|
$
|
28,295
|
|
$
|
27,040
|
|
$
|
25,954
|
|
$
|
20,830
|
|
$
|
54,016
|
|
$
|
5,261
|
|
$
|
179,400
|
|
Special mention
|
208
|
|
2,873
|
|
56
|
|
89
|
|
23
|
|
2,537
|
|
—
|
|
5,786
|
|
Substandard
|
117
|
|
5,334
|
|
3,393
|
|
2,758
|
|
3,884
|
|
10,600
|
|
161
|
|
26,247
|
|
Total
|
$
|
18,329
|
|
$
|
36,502
|
|
$
|
30,489
|
|
$
|
28,801
|
|
$
|
24,737
|
|
$
|
67,153
|
|
$
|
5,422
|
|
$
|
211,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
Performing
|
$
|
323,949
|
|
$
|
257,334
|
|
$
|
197,654
|
|
$
|
147,323
|
|
$
|
114,310
|
|
$
|
458,828
|
|
$
|
117,884
|
|
$
|
1,617,282
|
|
Non-performing
|
—
|
|
201
|
|
44
|
|
122
|
|
146
|
|
1,544
|
|
1,926
|
|
3,983
|
|
Total
|
$
|
323,949
|
|
$
|
257,535
|
|
$
|
197,698
|
|
$
|
147,445
|
|
$
|
114,456
|
|
$
|
460,372
|
|
$
|
119,810
|
|
$
|
1,621,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
|
|
|
|
|
|
|
|
Performing
|
$
|
7,765
|
|
$
|
6,757
|
|
$
|
6,363
|
|
$
|
2,373
|
|
$
|
1,828
|
|
$
|
11,233
|
|
$
|
103,742
|
|
$
|
140,061
|
|
Non-performing
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
74
|
|
74
|
|
Total
|
$
|
7,765
|
|
$
|
6,757
|
|
$
|
6,363
|
|
$
|
2,373
|
|
$
|
1,828
|
|
$
|
11,233
|
|
$
|
103,816
|
|
$
|
140,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
Performing
|
$
|
13,561
|
|
$
|
16,784
|
|
$
|
10,371
|
|
$
|
3,805
|
|
$
|
2,055
|
|
$
|
2,106
|
|
$
|
1,859
|
|
$
|
50,541
|
|
Non-performing
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Total
|
$
|
13,561
|
|
$
|
16,784
|
|
$
|
10,371
|
|
$
|
3,805
|
|
$
|
2,055
|
|
$
|
2,106
|
|
$
|
1,859
|
|
$
|
50,541
|
|
The following table presents the Company’s commercial loans by credit quality indicators, by portfolio loan classification (in thousands), as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial
|
Commercial Real Estate
|
Total
|
Pass
|
$
|
276,847
|
|
$
|
1,408,644
|
|
$
|
1,685,491
|
|
Special mention
|
2,472
|
|
13,838
|
|
16,310
|
|
Substandard
|
28,696
|
|
37,255
|
|
65,951
|
|
Total
|
$
|
308,015
|
|
$
|
1,459,737
|
|
$
|
1,767,752
|
|
The following table presents the Company's non-commercial loans by payment performance, by portfolio loan classification (in thousands), as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
Non-Performing
|
Total
|
Residential real estate
|
$
|
1,636,920
|
|
$
|
3,476
|
|
$
|
1,640,396
|
|
Home equity
|
148,397
|
|
531
|
|
148,928
|
|
Consumer
|
54,263
|
|
—
|
|
54,263
|
|
Total
|
$
|
1,839,580
|
|
$
|
4,007
|
|
$
|
1,843,587
|
|
Note F –Derivative Instruments
As of September 30, 2020 and December 31, 2019, the Company primarily utilizes non-hedging derivative financial instruments with commercial banking customers to facilitate their interest rate management strategies. For these instruments, the Company acts as an intermediary for its customers and has offsetting contracts with financial institution counterparties. Changes in the fair value of these underlying derivative contracts generally offset each other and do not significantly impact the Company's results of operations.
The following table summarizes the notional and fair value of these derivative instruments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
December 31, 2019
|
|
Notional Amount
|
Fair Value
|
Notional Amount
|
Fair Value
|
|
|
|
|
|
Non-hedging interest rate derivatives:
|
|
|
|
|
Customer counterparties:
|
|
|
|
|
Loan interest rate swap - assets
|
$
|
651,096
|
|
$
|
62,404
|
|
$
|
377,534
|
|
$
|
16,094
|
|
Loan interest rate swap - liabilities
|
4,272
|
|
283
|
|
189,803
|
|
3,214
|
|
|
|
|
|
|
Non-hedging interest rate derivatives:
|
|
|
|
|
Financial institution counterparties:
|
|
|
|
|
Loan interest rate swap - assets
|
4,272
|
|
283
|
|
189,803
|
|
3,214
|
|
Loan interest rate swap - liabilities
|
655,743
|
|
62,602
|
|
382,566
|
|
16,133
|
|
The following table summarizes the change in fair value of these derivative instruments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
2020
|
2019
|
2020
|
2019
|
Change in Fair Value Non-Hedging Interest Rate Derivatives:
|
|
|
|
|
Other (expense) income - derivative assets
|
$
|
(4,615)
|
|
$
|
6,824
|
|
$
|
37,103
|
|
$
|
9,073
|
|
Other expense (income) - derivative liabilities
|
4,615
|
|
(6,824)
|
|
(37,103)
|
|
(9,073)
|
|
Other (income) expense - derivative liabilities
|
(20)
|
|
38
|
|
163
|
|
192
|
|
Certain financial instruments, including derivatives, may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements. The Company's derivative transactions with financial institution counterparties are generally executed under International Swaps and Derivative Association ("ISDA") master agreements which include "right of setoff" provisions. In such cases there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts on a net basis. Nonetheless, the Company does not generally offset financial instruments for financial reporting purposes.
Pursuant to the Company's agreements with certain of its derivative financial institution counterparties, the Company may receive collateral or post collateral, which may be in the form of cash or securities, based upon mark-to-mark positions. The Company has posted collateral with a market value of $70.9 million as of September 30, 2020.
Loans associated with a customer counterparty loan interest rate swap agreement may be subject to a make whole penalty upon termination of the agreement. The dollar amount of the make whole penalty varies based on the remaining term of the agreement and market rates at that time. The make whole penalty is secured by equity in the specific collateral securing the loan. The Company estimates the make whole penalty when determining if there is sufficient collateral to pay off both the potential make whole penalty and the outstanding loan balance at the origination of the loan. In the event of a customer default, the make whole penalty is capitalized into the existing loan balance; however, no guarantees can be made that the collateral will be sufficient to cover both the make whole provision and the outstanding loan balance at the time of foreclosure.
Subsequent to quarter-end, the Company entered into a series of fair value hedge agreements to reduce the interest rate risk associated with the change in fair value of certain securities. The total notional amount of these agreements was $150 million.
Note G –Employee Benefit Plans
Stock Options
A summary of the Company’s stock option activity and related information is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
2020
|
2019
|
Options
|
Weighted-Average Exercise Price
|
Options
|
Weighted-Average Exercise Price
|
Outstanding at January 1
|
46,251
|
|
$
|
52.74
|
|
57,972
|
|
$
|
51.15
|
|
Exercised
|
(4,921)
|
|
45.17
|
|
(11,721)
|
|
44.87
|
|
Outstanding at September 30
|
41,330
|
|
$
|
53.64
|
|
46,251
|
|
$
|
52.74
|
|
|
|
|
|
|
Exerciseable at September 30
|
21,459
|
|
$
|
50.45
|
|
8,063
|
|
$
|
44.48
|
|
Information regarding stock option exercises and stock-based compensation expense associated with stock options is provided in the following table (in thousands):
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
2020
|
2019
|
Proceeds from stock option exercises
|
$
|
223
|
|
$
|
526
|
|
Intrinsic value of stock options exercised
|
93
|
|
368
|
|
|
|
|
Stock-based compensation expense associated with stock options
|
$
|
47
|
|
$
|
92
|
|
|
|
|
At period-end:
|
September 30, 2020
|
|
Unrecognized stock-based compensation expense associated with stock options
|
$
|
37
|
|
|
Weighted average period (in years) in which the above amount is expected to be
|
|
|
recognized
|
1.0
|
|
Shares issued in connection with stock option exercises are issued from available treasury shares. If no treasury shares are available, new shares would be issued from available authorized shares. During the nine months ended September 30, 2020 and 2019, all shares issued in connection with stock option exercises were issued from available treasury stock. For the stock options that have performance-based criteria, management has evaluated those criteria and has determined that, as of September 30, 2020, the criteria were probable of being met.
Restricted Shares, Restricted Stock Units, Performance Share Units
The Company records compensation expense with respect to restricted shares, restricted stock units and performance share units in an amount equal to the fair value of the common stock covered by each award on the date of grant. These awards become fully vested after various periods of continued employment from the respective dates of grant. The Company is entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted shares when the restrictions are released and the shares are issued. Compensation is being charged to expense over the respective vesting periods.
Restricted shares are forfeited if the awardee officer or employee terminates his employment with the Company prior to the lapsing of restrictions. The Company records forfeitures of restricted stock as treasury share repurchases and any compensation cost previously recognized is reversed in the period of forfeiture. Recipients of restricted shares do not pay any cash consideration to the Company for the shares, and, except for restricted stock units and performance share units, have the right to vote all shares subject to such grant and receive all dividends with respect to such shares, whether or not the shares have vested. For restricted shares and performance share units that have performance-based criteria, management has evaluated those criteria and has determined that, as of September 30, 2020, the criteria were probable of being met.
A summary of the Company’s restricted shares activity and related information is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
2020
|
2019
|
Restricted Awards
|
Average Market Price at Grant
|
Restricted Awards
|
Average Market Price at Grant
|
Outstanding at January 1
|
148,083
|
|
$
|
62.62
|
|
152,692
|
|
$
|
51.85
|
|
Granted
|
38,603
|
|
67.15
|
|
31,006
|
|
79.86
|
|
Vested
|
(29,775)
|
|
47.72
|
|
(45,007)
|
|
39.81
|
|
Outstanding at September 30
|
156,911
|
|
$
|
66.56
|
|
138,691
|
|
$
|
61.98
|
|
Information regarding stock-based compensation associated with restricted shares is provided in the following table (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30
|
Nine months ended September 30,
|
|
2020
|
2019
|
2020
|
2019
|
Stock-based compensation expense associated with restricted shares
|
$
|
708
|
|
$
|
499
|
|
$
|
2,018
|
|
$
|
1,434
|
|
|
|
|
|
|
At period-end:
|
|
|
September 30, 2020
|
|
Unrecognized stock-based compensation expense associated with restricted shares
|
|
|
$
|
5,592
|
|
|
Weighted average period (in years) in which the above amount is expected to be recognized
|
|
|
3.1
|
|
Shares issued in conjunction with restricted stock awards are issued from available treasury shares. If no treasury shares are available, new shares would be issued from available authorized shares. During the nine months ended September 30, 2020 and 2019, all shares issued in connection with restricted stock awards were issued from available treasury stock.
Benefit Plans
The Company provides retirement benefits to its employees through the City Holding Company 401(k) Plan and Trust (the “401(k) Plan”), which is intended to be compliant with Employee Retirement Income Security Act (ERISA) section 404(c). The Company also maintains a frozen defined benefit pension plan (the “Defined Benefit Plan”), which was inherited from the Company's acquisition of the plan sponsor (Horizon Bancorp, Inc.).
The following table presents the components of the Company's net periodic benefit cost, which is included in the line item "other expenses" in the consolidated statements of income, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
2020
|
2019
|
2020
|
2019
|
Components of net periodic cost:
|
|
|
|
|
Interest cost
|
$
|
112
|
|
$
|
242
|
|
$
|
336
|
|
$
|
522
|
|
Expected return on plan assets
|
(203)
|
|
(370)
|
|
(611)
|
|
(798)
|
|
Net amortization and deferral
|
272
|
|
396
|
|
817
|
|
855
|
|
Net Periodic Pension Cost
|
$
|
181
|
|
$
|
268
|
|
$
|
542
|
|
$
|
579
|
|
Note H –Commitments and Contingencies
COVID-19
The COVID-19 pandemic is creating extensive disruptions to the global economy and to the lives of individuals throughout the world. Governments, businesses, and the public are taking unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including quarantines, travel bans, shelter-in-place orders, closures of businesses and schools, fiscal stimulus, and legislation designed to deliver monetary aid and other relief. While the scope, duration, and full effects of COVID-19 are rapidly evolving and not fully known, the pandemic and related efforts to contain it have disrupted global economic activity, adversely affected the functioning of financial markets, impacted interest rates, increased economic and market uncertainty, and disrupted trade and supply chains. If these effects continue for a prolonged period or result in sustained economic stress or recession, the effects could have a material adverse impact on the Company in a number of ways related to credit, collateral, customer demand, funding, operations, interest rate risk, human capital and self-insurance, as well as financial statement related risk associated with critical accounting estimates such as the allowance for credit losses or valuation impairments on the Company's goodwill, intangible assets and deferred taxes.
Credit Related Financial Instruments
The Company is a party to certain financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. The Company has entered into agreements with certain customers to extend credit or provide a conditional commitment to provide payment on drafts presented in accordance with the terms of the underlying credit documents. The Company also provides overdraft protection to certain demand deposit customers that represent an unfunded commitment. Overdraft protection commitments, which are included with other commitments below, are uncollateralized and are paid at the Company’s discretion. Conditional commitments generally include standby and commercial letters of credit. Standby letters of credit represent an obligation of the Company to a designated third party contingent upon the failure of a customer of the Company to perform under the terms of the underlying contract between the customer and the third party. Commercial letters of credit are issued specifically to facilitate trade or commerce. Under the terms of a commercial letter of credit, drafts will be drawn when the underlying transaction is consummated, as intended, between the customer and a third party. The funded portion of these financial instruments is reflected in the Company’s balance sheet, while the unfunded portion of these commitments is not reflected in the balance sheet.
The table below presents a summary of the contractual obligations of the Company resulting from significant commitments (in thousands):
|
|
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|
|
|
|
|
|
|
September 30, 2020
|
December 31, 2019
|
Commitments to extend credit:
|
|
|
Home equity lines
|
$
|
216,420
|
|
$
|
214,715
|
|
Commercial real estate
|
53,911
|
|
56,941
|
|
Other commitments
|
252,200
|
|
213,904
|
|
Standby letters of credit
|
5,477
|
|
6,748
|
|
Commercial letters of credit
|
771
|
|
1,249
|
|
Loan commitments and standby and commercial letters of credit have credit risks essentially the same as those involved in extending loans to customers and are subject to the Company’s standard credit policies. Collateral is obtained based on management’s credit assessment of the customer. Management does not anticipate any material losses as a result of these commitments.
Litigation
In addition, the Company is engaged in various legal actions that it deems to be in the ordinary course of business. As these legal actions are resolved, the Company could realize positive and/or negative impact to its financial performance in the period in which these legal actions are ultimately resolved. There can be no assurance that current legal actions will have an immaterial impact on financial results, either positive or negative, or that no material legal actions may be presented in the future.
Note I –Accumulated Other Comprehensive Income
The activity in accumulated other comprehensive income is presented in the tables below (in thousands). All amounts are shown net of tax, which is calculated using a combined federal and state income tax rate approximating 23%.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
|
|
|
|
|
|
Defined
|
|
|
|
Defined
|
|
|
|
Benefit
|
Securities
|
|
|
Benefit
|
Securities
|
|
|
Pension
|
Available-
|
|
|
Pension
|
Available-
|
|
|
Plan
|
-for-Sale
|
Total
|
|
Plan
|
-for-Sale
|
Total
|
2020
|
|
|
|
|
|
|
|
Beginning Balance
|
$
|
(6,270)
|
|
$
|
37,299
|
|
$
|
31,029
|
|
|
$
|
(6,270)
|
|
$
|
12,110
|
|
$
|
5,840
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income before reclassifications
|
—
|
|
(539)
|
|
(539)
|
|
|
—
|
|
23,497
|
|
23,497
|
|
Amounts reclassified from other comprehensive income
|
—
|
|
—
|
|
—
|
|
|
—
|
|
(44)
|
|
(44)
|
|
Reclassification of unrealized gains on held-to-maturity
securities to available-for-sale
|
—
|
|
—
|
|
—
|
|
|
—
|
|
1,197
|
|
1,197
|
|
|
—
|
|
(539)
|
|
(539)
|
|
|
—
|
|
24,650
|
|
24,650
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
$
|
(6,270)
|
|
$
|
36,760
|
|
$
|
30,490
|
|
|
$
|
(6,270)
|
|
$
|
36,760
|
|
$
|
30,490
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
Beginning Balance
|
$
|
(5,871)
|
|
$
|
10,959
|
|
$
|
5,088
|
|
|
$
|
(5,871)
|
|
$
|
(8,611)
|
|
$
|
(14,482)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income before reclassifications
|
—
|
|
6,277
|
|
6,277
|
|
|
—
|
|
25,931
|
|
25,931
|
|
Amounts reclassified from other comprehensive income
|
—
|
|
30
|
|
30
|
|
|
—
|
|
(54)
|
|
(54)
|
|
|
—
|
|
6,307
|
|
6,307
|
|
|
—
|
|
25,877
|
|
25,877
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
$
|
(5,871)
|
|
$
|
17,266
|
|
$
|
11,395
|
|
|
$
|
(5,871)
|
|
$
|
17,266
|
|
$
|
11,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from Other Comprehensive Income
|
|
|
Three months ended
|
Nine months ended
|
Affected line item
|
|
September 30,
|
September 30,
|
in the Consolidated Statements
|
|
2020
|
2019
|
2020
|
2019
|
of Income
|
|
|
|
|
|
|
Securities available-for-sale:
|
|
|
|
|
|
Net securities (losses) gains reclassified into earnings
|
$
|
—
|
|
$
|
(40)
|
|
$
|
56
|
|
$
|
69
|
|
(Losses) gains on sale of investment securities, net
|
Related income tax expense (benefit)
|
—
|
|
10
|
|
(12)
|
|
(15)
|
|
Income tax expense
|
Net effect on accumulated other comprehensive income
|
$
|
—
|
|
$
|
(30)
|
|
$
|
44
|
|
$
|
54
|
|
|
Note J – Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share using the two class method (in thousands, except per share data):
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|
Three months ended September 30,
|
Nine months ended September 30,
|
2020
|
2019
|
2020
|
2019
|
Net income available to common shareholders
|
$
|
20,126
|
|
$
|
22,371
|
|
$
|
67,374
|
|
$
|
66,741
|
|
Less: earnings allocated to participating securities
|
(198)
|
|
(192)
|
|
(658)
|
|
(567)
|
|
Net earnings allocated to common shareholders
|
$
|
19,928
|
|
$
|
22,179
|
|
$
|
66,716
|
|
$
|
66,174
|
|
|
|
|
|
|
Distributed earnings allocated to common stock
|
$
|
8,944
|
|
$
|
9,213
|
|
$
|
26,832
|
|
$
|
26,346
|
|
Undistributed earnings allocated to common stock
|
10,984
|
|
12,966
|
|
39,884
|
|
39,828
|
|
Net earnings allocated to common shareholders
|
$
|
19,928
|
|
$
|
22,179
|
|
$
|
66,716
|
|
$
|
66,174
|
|
|
|
|
|
|
Average shares outstanding
|
15,950
|
|
16,271
|
|
16,065
|
|
16,350
|
|
Effect of dilutive securities:
|
|
|
|
|
Employee stock awards
|
20
|
|
18
|
|
19
|
|
18
|
|
Shares for diluted earnings per share
|
15,970
|
|
16,289
|
|
16,084
|
|
16,368
|
|
|
|
|
|
|
Basic earnings per share
|
$
|
1.25
|
|
$
|
1.36
|
|
$
|
4.15
|
|
$
|
4.05
|
|
Diluted earnings per share
|
$
|
1.25
|
|
$
|
1.36
|
|
$
|
4.15
|
|
$
|
4.04
|
|
Anti-dilutive options are not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares and therefore, the effect would have been anti-dilutive. Anti-dilutive options were not significant for any of the periods shown above.
Note K –Fair Value Measurements
Fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The Company bases fair value of assets and liabilities on quoted market prices, prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data. If such information is not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty creditworthiness, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amount presented herein. A more detailed description of the valuation methodologies used for assets and liabilities
measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
Financial Assets and Liabilities
The Company used the following methods and significant assumptions to estimate fair value for financial assets and liabilities measured on a recurring basis.
Securities Available for Sale. Securities available for sale are reported at fair value utilizing Level 1, Level 2, and Level 3 inputs. The fair value of securities available for sale is determined by utilizing a market approach by obtaining quoted prices on nationally recognized securities exchanges (other than forced or distressed transactions) that occur in sufficient volume or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. If such measurements are unavailable, the security is classified as Level 3. Significant judgment is required to make this determination.
The Company utilizes a third party pricing service provider to value its Level 1 and Level 2 investment securities. Annually, the Company obtains an independent auditor’s report from its third party pricing service provider regarding its controls over investment securities. On a quarterly basis, the Company reprices its debt securities with a third party that is independent of the primary pricing service provider to verify the reasonableness of the fair values.
Derivatives. Derivatives are reported at fair value utilizing Level 2 inputs. The Company utilizes a market approach by obtaining dealer quotations to value its customer interest rate swaps. The Company’s derivatives are included within "other assets" and "other liabilities" in the accompanying consolidated balance sheets. Derivative assets are typically secured through securities with financial counterparties or cross collateralization with a borrowing customer. Derivative liabilities are typically secured through the Company pledging securities to financial counterparties or, in the case of a borrowing customer, by the right of setoff. The Company considers factors such as the likelihood of default by itself and its counterparties, right of setoff, and remaining maturities in determining the appropriate fair value adjustments. All derivative counterparties approved by the Company's Asset and Liability Committee ("ALCO") are regularly reviewed, and appropriate business action is taken to adjust the exposure to certain counterparties, if necessary. Counterparty exposure is evaluated by netting positions that are subject to master netting agreements, as well as considering the amount of marketable collateral securing the position. This approach used to estimate impacted exposures to counterparties is also used by the Company to estimate its own credit risk in derivative liability positions. To date, no material losses have been incurred due to a counterparty's inability to pay any undercollateralized position. There was no significant change in the value of derivative assets and liabilities attributed to credit risk that would have resulted in a derivative credit risk valuation adjustment at September 30, 2020.
The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis. Financial assets measured at fair value on a nonrecurring basis include impaired loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on observable market data for both real estate collateral and non-real estate collateral. The following table presents assets and liabilities measured at fair value (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
Level 1
|
Level 2
|
Level 3
|
Total Gains (Losses)
|
September 30, 2020
|
|
|
|
|
|
Recurring fair value measurements
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
Obligations of states and political subdivisions
|
$
|
263,302
|
|
$
|
—
|
|
$
|
263,302
|
|
$
|
—
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
U.S. Government agencies
|
843,233
|
|
—
|
|
843,233
|
|
—
|
|
|
Private label
|
11,377
|
|
—
|
|
6,126
|
|
5,251
|
|
|
Trust preferred securities
|
3,892
|
|
—
|
|
3,892
|
|
—
|
|
|
Corporate securities
|
33,354
|
|
—
|
|
29,331
|
|
4,023
|
|
|
Marketable equity securities
|
10,936
|
|
5,955
|
|
4,981
|
|
—
|
|
|
Certificates of deposit held for investment
|
2,241
|
|
—
|
|
2,241
|
|
—
|
|
|
Derivative assets
|
62,687
|
|
—
|
|
62,687
|
|
—
|
|
|
Financial Liabilities
|
|
|
|
|
|
Derivative liabilities
|
63,020
|
|
—
|
|
63,020
|
|
—
|
|
|
|
|
|
|
|
|
Nonrecurring fair value measurements
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
Loans individually evaluated
|
$
|
10,612
|
|
$
|
—
|
|
$
|
—
|
|
$
|
10,612
|
|
$
|
(1,172)
|
|
Non-Financial Assets
|
|
|
|
|
|
Other real estate owned
|
2,080
|
|
—
|
|
—
|
|
2,080
|
|
(267)
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
Recurring fair value measurements
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
U.S. Government agencies
|
$
|
502
|
|
$
|
—
|
|
$
|
502
|
|
$
|
—
|
|
|
Obligations of states and political subdivisions
|
117,187
|
|
—
|
|
117,187
|
|
—
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
U.S. Government agencies
|
642,104
|
|
—
|
|
642,104
|
|
—
|
|
|
Private label
|
11,485
|
|
—
|
|
5,841
|
|
5,644
|
|
|
Trust preferred securities
|
4,461
|
|
—
|
|
4,461
|
|
—
|
|
|
Corporate securities
|
32,126
|
|
—
|
|
28,064
|
|
4,062
|
|
|
Marketable equity securities
|
12,634
|
|
7,787
|
|
4,847
|
|
—
|
|
|
Certificates of deposit held for investment
|
2,241
|
|
—
|
|
2,241
|
|
—
|
|
|
Derivative assets
|
19,310
|
|
—
|
|
19,310
|
|
—
|
|
|
Financial Liabilities
|
|
|
|
|
|
Derivative liabilities
|
19,380
|
|
—
|
|
19,380
|
|
—
|
|
|
|
|
|
|
|
|
Nonrecurring fair value measurements
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
Impaired loans
|
$
|
8,925
|
|
$
|
—
|
|
$
|
—
|
|
$
|
8,925
|
|
$
|
(87)
|
|
Non-Financial Assets
|
|
|
|
|
|
Other real estate owned
|
4,670
|
|
—
|
|
—
|
|
4,670
|
|
(470)
|
|
Other assets
|
100
|
|
—
|
|
—
|
|
100
|
|
(297)
|
|
The Company's financial assets and liabilities measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3) include impaired loans that were remeasured and reported at fair value through a specific valuation allowance allocation of the allowance for credit losses based upon the fair value of the underlying collateral (in thousands). The fair value of impaired loans is estimated using one of several methods, including collateral value, liquidation value and discounted cash flows. The significant unobservable inputs used in the fair value measurement of collateral for collateral-dependent impaired loans primarily relate to discounts applied to the customers’ reported amount of collateral. The amount of collateral discount depends upon the marketability of the underlying collateral. During the nine months ended September 30, 2020 and 2019, collateral discounts ranged from 15% to 30%. During the nine months ended September 30, 2020 and 2019, the Company had no Level 2 financial assets and liabilities that were measured on a nonrecurring basis.
Non-Financial Assets and Liabilities
The Company has no non-financial assets or liabilities measured at fair value on a recurring basis. Certain non-financial assets measured at fair value on a non-recurring basis include other real estate owned (“OREO”), which is measured at the lower of cost or fair value, and goodwill and other intangible assets, which are measured at fair value for impairment assessments.
Fair Value of Financial Instruments
ASC Topic 825 “Financial Instruments,” as amended, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including discount rates and estimate of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. ASC Topic 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.
The following table represents the estimates of fair value of financial instruments (in thousands). This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as noninterest-bearing demand, interest-bearing demand and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
September 30, 2020
|
|
|
|
|
|
Assets:
|
Cash and cash equivalents
|
$
|
252,718
|
|
$
|
252,718
|
|
$
|
252,718
|
|
$
|
—
|
|
$
|
—
|
|
Securities available-for-sale
|
1,157,399
|
|
1,157,399
|
|
—
|
|
1,148,125
|
|
9,274
|
|
Marketable equity securities
|
10,936
|
|
10,936
|
|
5,955
|
|
4,981
|
|
—
|
|
Net loans
|
3,639,099
|
|
3,626,632
|
|
—
|
|
—
|
|
3,626,632
|
|
Accrued interest receivable
|
16,627
|
|
16,627
|
|
16,627
|
|
—
|
|
—
|
|
Derivative assets
|
62,687
|
|
62,687
|
|
—
|
|
62,687
|
|
—
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Deposits
|
4,420,076
|
|
4,439,585
|
|
3,119,785
|
|
1,319,800
|
|
—
|
|
Short-term debt
|
279,866
|
|
279,866
|
|
—
|
|
279,866
|
|
—
|
|
Accrued interest payable
|
2,047
|
|
2,047
|
|
2,047
|
|
—
|
|
—
|
|
Derivative liabilities
|
63,020
|
|
63,020
|
|
—
|
|
63,020
|
|
—
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
140,144
|
|
$
|
140,144
|
|
$
|
140,144
|
|
$
|
—
|
|
$
|
—
|
|
Securities available-for-sale
|
810,106
|
|
810,106
|
|
—
|
|
800,400
|
|
9,706
|
|
Securities held-to-maturity
|
49,036
|
|
50,598
|
|
—
|
|
50,598
|
|
—
|
|
Marketable equity securities
|
12,634
|
|
12,634
|
|
7,787
|
|
4,847
|
|
—
|
|
Net loans
|
3,604,510
|
|
3,574,435
|
|
—
|
|
—
|
|
3,574,435
|
|
Accrued interest receivable
|
11,569
|
|
11,569
|
|
11,569
|
|
—
|
|
—
|
|
Derivative assets
|
19,310
|
|
19,310
|
|
—
|
|
19,310
|
|
—
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Deposits
|
4,075,894
|
|
4,094,493
|
|
2,711,323
|
|
1,383,170
|
|
—
|
|
Short-term debt
|
211,255
|
|
211,255
|
|
—
|
|
211,255
|
|
—
|
|
Long-term debt
|
4,056
|
|
4,124
|
|
—
|
|
4,124
|
|
—
|
|
Accrued interest payable
|
2,849
|
|
2,849
|
|
2,849
|
|
—
|
|
—
|
|
Derivative liabilities
|
19,380
|
|
19,380
|
|
—
|
|
19,380
|
|
—
|
|