QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading symbols(s) |
Name of each exchange on which registered |
||
None |
Not Applicable |
Not Applicable |
Securities registered pursuant to Section 12(g) of the Act: |
No |
No ☐ |
Large accelerated filer ☐ |
Accelerated filer ☐ |
Smaller reporting company |
|
Emerging growth company |
Yes |
No ☒ |
Page |
|
PART I – Financial Information |
|
3 |
|
3 |
|
4 |
|
5 |
|
6 |
|
7 |
|
8 |
|
31 |
|
47 |
|
47 |
|
47 |
|
47 |
|
47 |
|
49 |
|
49 |
|
49 |
|
49 |
|
49 |
|
50 |
(in thousands, except share amounts) |
March 31, 2021 |
December 31, 2020 |
||||||
Assets |
||||||||
Cash and cash equivalents |
$ |
$ |
||||||
Certificates of deposit |
||||||||
Investment securities – available-for-sale |
||||||||
Loans, net of allowance for loan losses of $ |
||||||||
Loans held-for-sale |
||||||||
Stock in Federal Home Loan Bank and other equity securities, at cost |
||||||||
Premises and equipment, net |
||||||||
Interest receivable and other assets |
||||||||
Total Assets |
$ |
$ |
||||||
Liabilities and Stockholders’ Equity |
||||||||
Liabilities: |
||||||||
Demand deposits |
$ |
$ |
||||||
Interest-bearing transaction deposits |
||||||||
Savings and MMDA’s |
||||||||
Time, $250,000 or less |
||||||||
Time, over $250,000 |
||||||||
Total deposits |
||||||||
Federal Home Loan Bank advances |
||||||||
Interest payable and other liabilities |
||||||||
Total Liabilities |
||||||||
Commitments and contingencies (Note 7) |
||||||||
Stockholders’ Equity: |
||||||||
Common stock, |
||||||||
Additional paid-in capital |
||||||||
Retained earnings |
||||||||
Accumulated other comprehensive income, net |
||||||||
Total Stockholders’ Equity |
||||||||
Total Liabilities and Stockholders’ Equity |
$ |
$ |
(in thousands, except per share amounts) |
Three months ended March 31, 2021 |
Three months ended March 31, 2020 |
||||||
Interest and dividend income: |
||||||||
Loans |
$ |
$ |
||||||
Due from banks interest bearing accounts |
||||||||
Investment securities |
||||||||
Taxable |
||||||||
Non-taxable |
||||||||
Other earning assets |
||||||||
Total interest and dividend income |
||||||||
Interest expense: |
||||||||
Deposits |
||||||||
Total interest expense |
||||||||
Net interest income |
||||||||
Provision for loan losses |
||||||||
Net interest income after provision for loan losses |
||||||||
Non-interest income: |
||||||||
Service charges on deposit accounts |
||||||||
Gains on sales of loans held-for-sale |
||||||||
Investment and brokerage services income |
||||||||
Mortgage brokerage income |
||||||||
Loan servicing income |
||||||||
Debit card income |
||||||||
(Losses) gains on sales/calls of available-for-sale securities |
( |
) |
||||||
Other income |
||||||||
Total non-interest income |
||||||||
Non-interest expenses: |
||||||||
Salaries and employee benefits |
||||||||
Occupancy and equipment |
||||||||
Data processing |
||||||||
Stationery and supplies |
||||||||
Advertising |
||||||||
Directors’ fees |
||||||||
Other expense |
||||||||
Total non-interest expenses |
||||||||
Income before provision for income taxes |
||||||||
Provision for income taxes |
||||||||
Net income |
$ |
$ |
||||||
Basic earnings per common share |
$ |
$ |
||||||
Diluted earnings per common share |
$ |
$ |
(in thousands) |
Three months ended March 31, 2021 |
Three months ended March 31, 2020 |
||||||
Net income |
$ |
$ |
||||||
Other comprehensive (loss) income, net of tax: |
||||||||
Unrealized holding(losses) gains on securities: |
||||||||
Unrealized holding (losses) gains arising during the period, net of tax effect of $( |
( |
) |
||||||
Less: reclassification adjustment due to losses (gains) realized on sales of securities, net of tax effect of $ |
( |
) |
||||||
Other comprehensive (loss) income |
$ |
( |
) |
$ |
||||
Comprehensive (loss) income |
$ |
( |
) |
$ |
Common Stock |
Additional Paid-in |
Retained |
Accumulated Other Comprehensive |
|||||||||||||||||||||
Shares |
Amounts |
Capital |
Earnings |
Income (Loss) |
Total |
|||||||||||||||||||
Balance at December 31, 2019 |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||
Net income |
||||||||||||||||||||||||
Other comprehensive income, net of tax |
||||||||||||||||||||||||
Stock dividend adjustment |
( |
) |
||||||||||||||||||||||
Cash in lieu of fractional shares |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
Stock-based compensation |
||||||||||||||||||||||||
Common shares issued related to restricted stock grants, net of reversals |
||||||||||||||||||||||||
Stock options exercised, net |
||||||||||||||||||||||||
Balance at March 31, 2020 |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||
Balance at December 31, 2020 |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||
Net income |
||||||||||||||||||||||||
Other comprehensive loss, net of tax |
( |
) |
( |
) |
||||||||||||||||||||
Stock dividend adjustment |
( |
) |
||||||||||||||||||||||
Cash in lieu of fractional shares |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
Stock-based compensation |
||||||||||||||||||||||||
Common shares issued related to restricted stock grants |
||||||||||||||||||||||||
Stock options exercised, net |
||||||||||||||||||||||||
Balance at March 31, 2021 |
$ |
$ |
$ |
$ |
$ |
(in thousands) |
||||||||
Three months ended March 31, 2021 |
Three months ended March 31, 2020 |
|||||||
Cash Flows From Operating Activities |
||||||||
Net income |
$ |
$ |
||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation |
||||||||
Accretion and amortization of investment securities premiums and discounts, net |
||||||||
Valuation adjustment on mortgage servicing rights |
( |
) |
||||||
Increase in deferred loan origination fees and costs, net |
||||||||
Provision for loan losses |
||||||||
Stock-based compensation |
||||||||
Losses (gains) on sales/calls of available-for-sale securities |
( |
) |
||||||
Amortization of operating lease right-of-use asset |
||||||||
Gain on sales of loans held-for-sale |
( |
) |
( |
) |
||||
Proceeds from sales of loans held-for-sale |
||||||||
Originations of loans held-for-sale |
( |
) |
( |
) |
||||
Changes in assets and liabilities: |
||||||||
Increase in interest receivable and other assets |
( |
) |
( |
) |
||||
Net decrease in interest payable and other liabilities |
( |
) |
( |
) |
||||
Net cash used in operating activities |
( |
) |
||||||
Cash Flows From Investing Activities |
||||||||
Proceeds from calls or maturities of available-for-sale securities |
||||||||
Proceeds from sales of available-for-sale securities |
||||||||
Principal repayments on available-for-sale securities |
||||||||
Purchase of available-for-sale securities |
( |
) |
( |
) |
||||
Net decrease (increase) in certificates of deposit |
( |
) |
||||||
Net (increase) decrease in loans |
( |
) |
||||||
Purchases of premises and equipment |
( |
) |
( |
) |
||||
Net cash used in investing activities |
( |
) |
( |
) |
||||
Cash Flows From Financing Activities |
||||||||
Net increase in deposits |
||||||||
Cash dividends paid in lieu of fractional shares |
( |
) |
( |
) |
||||
Stock options exercised |
||||||||
Net cash provided by financing activities |
||||||||
Net increase in Cash and Cash Equivalents |
||||||||
Cash and Cash Equivalents, beginning of period |
||||||||
Cash and Cash Equivalents, end of period |
$ |
$ |
||||||
Supplemental Disclosures of Cash Flow Information: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ |
$ |
||||||
Supplemental disclosures of non-cash investing and financing activities: |
||||||||
Stock dividend distributed |
$ |
$ |
||||||
Unrealized holding (losses) gains on available for sale securities, net of taxes |
$ |
( |
) |
$ |
||||
Transfer of loans held-for-sale to loans held-for-investment |
$ |
1. | BASIS OF PRESENTATION |
2. | ACCOUNTING POLICIES |
3. | INVESTMENT SECURITIES |
(in thousands) |
Amortized cost |
Unrealized gains |
Unrealized losses |
Estimated fair value |
||||||||||||
Investment securities available-for-sale: |
||||||||||||||||
U.S. Treasury Securities |
$ |
$ |
$ |
( |
) |
$ |
||||||||||
Securities of U.S. government agencies and corporations |
( |
) |
||||||||||||||
Obligations of states and political subdivisions |
( |
) |
||||||||||||||
Collateralized mortgage obligations |
( |
) |
||||||||||||||
Mortgage-backed securities |
( |
) |
||||||||||||||
Total debt securities |
$ |
$ |
$ |
( |
) |
$ |
(in thousands) |
Amortized cost |
Unrealized gains |
Unrealized losses |
Estimated fair value |
||||||||||||
Investment securities available-for-sale: |
||||||||||||||||
U.S. Treasury Securities |
$ |
$ |
$ |
( |
) |
$ |
||||||||||
Securities of U.S. government agencies and corporations |
( |
) |
||||||||||||||
Obligations of states and political subdivisions |
( |
) |
||||||||||||||
Collateralized mortgage obligations |
( |
) |
||||||||||||||
Mortgage-backed securities |
( |
) |
||||||||||||||
Total debt securities |
$ |
$ |
$ |
( |
) |
$ |
(in thousands) |
Amortized cost |
Estimated fair value |
||||||
Maturity in years: |
||||||||
Due in one year or less |
$ |
$ |
||||||
Due after one year through five years |
||||||||
Due after five years through ten years |
||||||||
Due after ten years |
||||||||
Subtotal |
||||||||
MBS & CMO |
||||||||
Total |
$ |
$ |
Less than 12 months |
12 months or more |
Total |
||||||||||||||||||||||
(in thousands) |
Fair Value |
Unrealized losses |
Fair Value |
Unrealized losses |
Fair Value |
Unrealized losses |
||||||||||||||||||
U.S. Treasury Securities |
( |
) |
( |
) |
||||||||||||||||||||
Securities of U.S. government agencies and corporations |
$ |
$ |
( |
) |
$ |
$ |
$ |
$ |
( |
) |
||||||||||||||
Obligations of states and political subdivisions |
( |
) |
( |
) |
||||||||||||||||||||
Collateralized Mortgage obligations |
( |
) |
( |
) |
||||||||||||||||||||
Mortgage-backed securities |
( |
) |
( |
) |
||||||||||||||||||||
Total |
$ |
$ |
( |
) |
$ |
$ |
$ |
$ |
( |
) |
Less than 12 months |
12 months or more |
Total |
||||||||||||||||||||||
(in thousands) |
Fair Value |
Unrealized losses |
Fair Value |
Unrealized losses |
Fair Value |
Unrealized losses |
||||||||||||||||||
U.S. Treasury Securities |
$ |
$ |
( |
) |
$ |
$ |
$ |
$ |
( |
) |
||||||||||||||
Securities of U.S. government agencies and corporations |
( |
) |
( |
) |
||||||||||||||||||||
Obligations of states and political subdivisions |
( |
) |
( |
) |
||||||||||||||||||||
Collateralized Mortgage obligations |
( |
) |
( |
) |
||||||||||||||||||||
Mortgage-backed securities |
( |
) |
( |
) |
||||||||||||||||||||
Total |
$ |
$ |
( |
) |
$ |
$ |
$ |
$ |
( |
) |
4. | LOANS |
($ in thousands) |
March 31, 2021 |
December 31, 2020 |
||||||
Commercial |
$ |
$ |
||||||
Commercial Real Estate |
||||||||
Agriculture |
||||||||
Residential Mortgage |
||||||||
Residential Construction |
||||||||
Consumer |
||||||||
Allowance for loan losses |
( |
) |
( |
) |
||||
Net deferred origination fees and costs |
( |
) |
( |
) |
||||
Loans, net |
$ |
$ |
($ in thousands) |
Current & Accruing |
30-59 Days Past Due & Accruing |
60-89 Days Past Due & Accruing |
90 Days or more Past Due & Accruing |
Nonaccrual |
Total Loans |
||||||||||||||||||
March 31, 2021 |
||||||||||||||||||||||||
Commercial |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Commercial Real Estate |
||||||||||||||||||||||||
Agriculture |
||||||||||||||||||||||||
Residential Mortgage |
||||||||||||||||||||||||
Residential Construction |
||||||||||||||||||||||||
Consumer |
||||||||||||||||||||||||
Total |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
December 31, 2020 |
||||||||||||||||||||||||
Commercial |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Commercial Real Estate |
||||||||||||||||||||||||
Agriculture |
||||||||||||||||||||||||
Residential Mortgage |
||||||||||||||||||||||||
Residential Construction |
||||||||||||||||||||||||
Consumer |
||||||||||||||||||||||||
Total |
$ |
$ |
$ |
$ |
$ |
$ |
($ in thousands) |
Unpaid Contractual Principal Balance |
Recorded Investment with no Allowance |
Recorded Investment with Allowance |
Total Recorded Investment |
Related Allowance |
|||||||||||||||
March 31, 2021 |
||||||||||||||||||||
Commercial |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
Commercial Real Estate |
||||||||||||||||||||
Agriculture |
||||||||||||||||||||
Residential Mortgage |
||||||||||||||||||||
Residential Construction |
||||||||||||||||||||
Consumer |
||||||||||||||||||||
Total |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
December 31, 2020 |
||||||||||||||||||||
Commercial |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
Commercial Real Estate |
||||||||||||||||||||
Agriculture |
||||||||||||||||||||
Residential Mortgage |
||||||||||||||||||||
Residential Construction |
||||||||||||||||||||
Consumer |
||||||||||||||||||||
Total |
$ |
$ |
$ |
$ |
$ |
($ in thousands) |
Three Months Ended March 31, 2021 |
Three Months Ended March 31, 2020 |
||||||||||||||
Average Recorded Investment |
Interest Income Recognized |
Average Recorded Investment |
Interest Income Recognized |
|||||||||||||
Commercial |
$ |
$ |
$ |
$ |
||||||||||||
Commercial Real Estate |
||||||||||||||||
Agriculture |
||||||||||||||||
Residential Mortgage |
||||||||||||||||
Residential Construction |
||||||||||||||||
Consumer |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
($ in thousands) |
Pass |
Special Mention |
Substandard |
Doubtful |
Loss |
Total |
||||||||||||||||||
March 31, 2021 |
||||||||||||||||||||||||
Commercial |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Commercial Real Estate |
||||||||||||||||||||||||
Agriculture |
||||||||||||||||||||||||
Residential Mortgage |
||||||||||||||||||||||||
Residential Construction |
||||||||||||||||||||||||
Consumer |
||||||||||||||||||||||||
Total |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
December 31, 2020 |
||||||||||||||||||||||||
Commercial |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Commercial Real Estate |
||||||||||||||||||||||||
Agriculture |
||||||||||||||||||||||||
Residential Mortgage |
||||||||||||||||||||||||
Residential Construction |
||||||||||||||||||||||||
Consumer |
||||||||||||||||||||||||
Total |
$ |
$ |
$ |
$ |
$ |
$ |
Three months ended March 31, 2021 |
||||||||||||||||||||||||||||||||
($ in thousands) |
Commercial |
Commercial Real Estate |
Agriculture |
Residential Mortgage |
Residential Construction |
Consumer |
Unallocated |
Total |
||||||||||||||||||||||||
Balance as of December 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
Provision for (reversal of) loan losses |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||
Charge-offs |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||
Recoveries |
||||||||||||||||||||||||||||||||
Net charge-offs |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Balance as of March 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
Period-end amount allocated to: |
||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment |
||||||||||||||||||||||||||||||||
Loans collectively evaluated for impairment |
||||||||||||||||||||||||||||||||
Balance as of March 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
Three months ended March 31, 2020 |
||||||||||||||||||||||||||||||||
($ in thousands) |
Commercial |
Commercial Real Estate |
Agriculture |
Residential Mortgage |
Residential Construction |
Consumer |
Unallocated |
Total |
||||||||||||||||||||||||
Balance as of December 31, 2019 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
Provision for (reversal of) loan losses |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Charge-offs |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||
Recoveries |
||||||||||||||||||||||||||||||||
Net charge-offs |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||
Balance as of March 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
Period-end amount allocated to: |
||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment |
||||||||||||||||||||||||||||||||
Loans collectively evaluated for impairment |
||||||||||||||||||||||||||||||||
Balance as of March 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
Year ended December 31, 2020 |
||||||||||||||||||||||||||||||||
($ in thousands) |
Commercial |
Commercial Real Estate |
Agriculture |
Residential Mortgage |
Residential Construction |
Consumer |
Unallocated |
Total |
||||||||||||||||||||||||
Balance as of December 31, 2019 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
Provision for (reversal of) loan losses |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||
Charge-offs |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||
Recoveries |
||||||||||||||||||||||||||||||||
Net recoveries |
( |
) |
||||||||||||||||||||||||||||||
Ending Balance |
||||||||||||||||||||||||||||||||
Period-end amount allocated to: |
||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment |
||||||||||||||||||||||||||||||||
Loans collectively evaluated for impairment |
||||||||||||||||||||||||||||||||
Balance as of December 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
($ in thousands) |
Commercial |
Commercial Real Estate |
Agriculture |
Residential Mortgage |
Residential Construction |
Consumer |
Total |
|||||||||||||||||||||
March 31, 2021 |
||||||||||||||||||||||||||||
Loans individually evaluated for impairment |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Loans collectively evaluated for impairment |
||||||||||||||||||||||||||||
Ending Balance |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
March 31, 2020 |
||||||||||||||||||||||||||||
Loans individually evaluated for impairment |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Loans collectively evaluated for impairment |
||||||||||||||||||||||||||||
Ending Balance |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
December 31, 2020 |
||||||||||||||||||||||||||||
Loans individually evaluated for impairment |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Loans collectively evaluated for impairment |
||||||||||||||||||||||||||||
Ending Balance |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
5. | MORTGAGE OPERATIONS |
March 31, 2021 |
December 31, 2020 |
|||||||
Constant prepayment rate |
% |
% |
||||||
Discount rate |
% |
% |
||||||
Weighted average life (years) |
(in thousands) |
||||||||||||||||
December 31, 2020 |
Additions |
Reductions |
March 31, 2021 |
|||||||||||||
Mortgage servicing rights |
$ |
$ |
$ |
( |
) |
$ |
||||||||||
Valuation allowance |
( |
) |
( |
) |
||||||||||||
Mortgage servicing rights, net of valuation allowance |
$ |
$ |
$ |
$ |
6. | FAIR VALUE MEASUREMENTS |
(in thousands) |
||||||||||||||||
March 31, 2021 |
Fair Value |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
U.S. Treasury securities |
$ |
$ |
$ |
$ |
||||||||||||
Securities of U.S. government agencies and corporations |
||||||||||||||||
Obligations of states and political subdivisions |
||||||||||||||||
Collateralized mortgage obligations |
||||||||||||||||
Mortgage-backed securities |
||||||||||||||||
Total investments at fair value |
$ |
$ |
$ |
$ |
(in thousands) |
||||||||||||||||
December 31, 2020 |
Fair Value |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
U.S. Treasury securities |
$ |
$ |
$ |
$ |
||||||||||||
Securities of U.S. government agencies and corporations |
||||||||||||||||
Obligations of states and political subdivisions |
||||||||||||||||
Collateralized mortgage obligations |
||||||||||||||||
Mortgage-backed securities |
||||||||||||||||
Total investments at fair value |
$ |
$ |
$ |
$ |
(in thousands) |
||||||||||||||||
March 31, 2021 |
Carrying Value |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
Impaired loans |
$ |
$ |
$ |
$ |
||||||||||||
Mortgage servicing rights |
||||||||||||||||
Total assets at fair value |
$ |
$ |
$ |
$ |
(in thousands) |
||||||||||||||||
December 31, 2020 |
Carrying Value |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
Impaired loans |
$ |
$ |
$ |
$ |
||||||||||||
Mortgage servicing rights |
||||||||||||||||
Total assets at fair value |
$ |
$ |
$ |
$ |
Method |
Assumption Inputs |
|
Impaired loans |
Collateral, market, income, enterprise, and liquidation |
External appraised values, management assumptions regarding market trends or other relevant factors, and selling costs generally ranging from |
Mortgage servicing rights |
Discounted cash flows |
Present value of expected future cash flows was estimated using a discount rate factor of |
March 31, 2021 |
December 31, 2020 |
|||||||||||||||||||
Level |
Carrying amount |
Fair value |
Carrying amount |
Fair value |
||||||||||||||||
Financial assets: |
||||||||||||||||||||
Cash and cash equivalents |
1 |
$ |
$ |
$ |
$ |
|||||||||||||||
Certificates of deposit |
2 |
|||||||||||||||||||
Stock in Federal Home Loan Bank and other equity securities |
3 |
|||||||||||||||||||
Loans receivable: |
||||||||||||||||||||
Net loans |
3 |
|||||||||||||||||||
Loans held-for-sale |
2 |
|||||||||||||||||||
Interest receivable |
2 |
|||||||||||||||||||
Mortgage servicing rights |
3 |
|||||||||||||||||||
Financial liabilities: |
||||||||||||||||||||
Deposits |
3 |
|||||||||||||||||||
Federal Home Loan Bank advances |
2 |
|||||||||||||||||||
Interest payable |
2 |
7. | FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK |
(in thousands) |
March 31, 2021 |
December 31, 2020 |
||||||
Undisbursed loan commitments |
$ |
$ |
||||||
Standby letters of credit |
||||||||
Commitments to sell loans |
||||||||
$ |
$ |
8. | STOCK PLANS |
Number of Shares |
Weighted Average Exercise Price |
Aggregate Intrinsic Value |
Weighted Average Remaining Contractual Term (in years) |
|||||||||||||
Options outstanding at Beginning of Period |
$ |
|||||||||||||||
Granted |
||||||||||||||||
Expired |
||||||||||||||||
Cancelled / Forfeited |
||||||||||||||||
Exercised |
( |
) |
||||||||||||||
Options outstanding at End of Period |
$ |
|||||||||||||||
Exercisable (vested) at End of Period |
$ |
$ |
Number of Shares |
Weighted Average Grant-Date Fair Value |
Aggregate Intrinsic Value |
Weighted Average Remaining Contractual Term (in years) |
||||||||
Non-vested Restricted stock outstanding at Beginning of Period |
$ |
||||||||||
Granted |
|||||||||||
Cancelled/Forfeited |
|||||||||||
Exercised/Released/Vested |
( |
||||||||||
Non-vested restricted stock outstanding at End of Period |
$ |
$ |
Three Months Ended March 31, 2021 |
||||
Risk Free Interest Rate |
% |
|||
Expected Dividend Yield |
% |
|||
Expected Life in Years |
||||
Expected Price Volatility |
% |
9. | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
($ in thousands) |
Unrealized Gains (losses) on Securities |
Officers’ retirement plan |
Directors’ retirement plan |
Accumulated Other Comprehensive Income (loss) |
||||||||||||
Balance as of December 31, 2020 |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||
Current period other comprehensive loss |
( |
) |
( |
) |
||||||||||||
Balance as of March 31, 2021 |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
($ in thousands) |
Unrealized Gains (losses) on Securities |
Officers’ retirement plan |
Directors’ retirement plan |
Accumulated Other Comprehensive Income (loss) |
||||||||||||
Balance as of December 31, 2019 |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||
Current period other comprehensive income |
||||||||||||||||
Balance as of March 31, 2020 |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
10. | OUTSTANDING SHARES AND EARNINGS PER SHARE |
Three months ended March 31, |
||||||||
2021 |
2020 |
|||||||
Basic earnings per share: |
||||||||
Net income |
$ |
$ |
||||||
Weighted average common shares outstanding |
||||||||
Basic EPS |
$ |
$ |
||||||
Diluted earnings per share: |
||||||||
Net income |
$ |
$ |
||||||
Weighted average common shares outstanding |
||||||||
Effect of dilutive shares |
||||||||
Adjusted weighted average common shares outstanding |
||||||||
Diluted EPS |
$ |
$ |
11. | LEASES |
(in thousands) |
March 31, 2021 |
|||
2021 |
$ |
|||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
2026 and thereafter |
||||
Total lease payments |
||||
Less: interest |
( |
) |
||
Present value of lease liabilities |
$ |
(in thousands) |
Three Months Ended March 31, 2021 |
Three Months Ended March 31, 2020 |
||||||
Cash paid for amounts included in the measurement of lease liabilities |
||||||||
Operating cash flows from operating leases |
$ |
$ |
||||||
Right-of-use assets obtained in exchange for new operating lease liabilities |
$ |
$ |
(in thousands) |
March 31, 2021 |
December 31, 2020 |
||||||
Weighted-average remaining lease term – operating leases, in years |
$ |
$ |
||||||
Weighted-average discount rate – operating leases |
$ |
% |
$ |
% |
12. | SHORT-TERM BORROWINGS |
● | Our business objectives, strategies and initiatives, our organizational structure, the growth of our business and our competitive position and prospects, and the effect of competition on our business and strategies |
● | Our assessment of significant factors and developments that have affected or may affect our results |
● | Legal and regulatory actions, and future legislative and regulatory developments, including the effects of the Dodd-Frank Wall Street Reform and Protection Act (the “Dodd-Frank Act”), the Economic Growth, Regulatory Relief and Consumer Protection Act (the “EGRRCPA”), and other legislation and governmental measures introduced in response to the financial crisis which began in 2008 and the ensuing recession affecting the banking system, financial markets and the U.S. economy, as well as the effect of the federal Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), enacted in March 2020, in an effort to mitigate the consequences of the coronavirus pandemic and the governmental actions in response to the pandemic |
● | Regulatory and compliance controls, processes and requirements and their impact on our business |
● | The costs and effects of legal or regulatory actions |
● | Expectations regarding draws on performance letters of credit and liabilities that may result from recourse provisions in standby letters of credit |
● | Our intent to sell or hold, and the likelihood that we would be required to sell, various investment securities |
● | Our regulatory capital requirements, including the capital rules established after the 2008 financial crisis by the U.S. federal banking agencies and our current intention not to elect to use the community bank leverage framework |
● | Expectations regarding our non-payment of a cash dividend on our common stock in the foreseeable future |
● | Credit quality and provision for credit losses and management of asset quality and credit risk, expectations regarding collections and expectations regarding the forgiveness and SBA reimbursement and guarantee of loans made under the Paycheck Protection Program (“PPP”) and the timing thereof |
● | Our allowances for credit losses, including the conditions we consider in determining the unallocated allowance and our portfolio credit quality, the adequacy of the allowance for loan losses, underwriting standards, and risk grading |
● | Our assessment of economic conditions and trends and credit cycles and their impact on our business |
● | The seasonal nature of our business |
● | The impact of changes in interest rates and our strategy to manage our interest rate risk profile and the possible effect of changes in residential mortgage interest rates on new originations and refinancing of existing residential mortgage loans |
● | Loan portfolio composition and risk grade trends, expected charge-offs, portfolio credit quality, our strategy regarding troubled debt restructurings (“TDRs”), delinquency rates and our underwriting standards and our expectations regarding our recognition of interest income on loans that were provided payment deferrals upon completion of the payment forbearance period |
● | Our deposit base including renewal of time deposits |
● | The impact on our net interest income and net interest margin from the current low interest rate environment |
● | Possible changes in the initiatives and policies of the federal bank regulatory agencies |
● | Tax rates and the impact of changes in the U.S. tax laws, including the Tax Cuts and Jobs Act |
● | Our pension and retirement plan costs |
● | Our liquidity strategies and beliefs concerning the adequacy of our liquidity position |
● | Critical accounting policies and estimates, the impact or anticipated impact of recent accounting pronouncements or changes in accounting principles |
● | Expected rates of return, maturities, loss exposure, growth rates, yields, and projected results |
● | The possible impact of weather-related conditions, including drought, fire or flooding, seismic events, and related governmental responses, including related electrical power outages, on economic conditions, especially in the agricultural sector |
● | Maintenance of insurance coverages appropriate for our operations |
● | Threats to the banking sector and our business due to cybersecurity issues and attacks and regulatory expectations related to cybersecurity |
● | Our expectations regarding the adoption of the expected loss model for determining the allowance for loan losses |
● | The effects of the coronavirus pandemic on the U.S., California and global economies and the actions of governments to reduce the spread of the virus and to mitigate the resulting economic consequences |
● | Descriptions of assumptions underlying or relating to any of the foregoing |
• | Net income of $3.2 million for the three months ended March 31, 2021, up 18.6% from $2.7 million earned for the same period last year. |
• | Diluted earnings per share of $0.23 for the three months ended March 31, 2021, up 15.0% from diluted earnings per share of $0.20 in the same period last year. |
• | Net interest income of $10.9 million for the three months ended March 31, 2021, down 3.2% from $11.2 million in the same period last year. |
• | Net interest margin of 2.67% for the three months ended March 31, 2021, down 26.4% from 3.63% for the same period last year. |
• | Provision for loan losses of $0.3 million for the three months ended March 31, 2021, down 53.9% from $0.7 million in the same period last year. |
• | Total assets of $1.78 billion as of March 31, 2021, up 7.5% from $1.66 billion as of December 31, 2020. |
• | Total net loans (including loans held-for-sale) of $950.8 million as of March 31, 2021, up 7.4% from $885.0 million as of December 31, 2020. |
• | Total investment securities of $466.0 million as of March 31, 2021, up 7.1% from $435.1 million as of December 31, 2020. |
• | Total deposits of $1.61 billion as of March 31, 2021, up 8.7% from $1.48 billion as of December 31, 2020. |
Three months ended March 31, 2021 |
Three months ended March 31, 2020 |
|||||||
(in thousands except for per share amounts and ratios) |
||||||||
For the Period: |
||||||||
Net Income |
$ |
3,178 |
$ |
2,679 |
||||
Basic Earnings Per Common Share |
$ |
0.24 |
$ |
0.20 |
||||
Diluted Earnings Per Common Share |
$ |
0.23 |
$ |
0.20 |
||||
Net Income to Average Assets (annualized) |
0.75 |
% |
0.82 |
% |
||||
Net Income to Average Equity (annualized) |
8.47 |
% |
7.91 |
% |
||||
Average Equity to Average Assets |
8.80 |
% |
10.32 |
% |
March 31, 2021 |
December 31, 2020 |
|||||||
(in thousands except for ratios) |
||||||||
At Period End: |
||||||||
Total Assets |
$ |
1,779,981 |
$ |
1,655,376 |
||||
Total Investment Securities |
$ |
466,046 |
$ |
435,080 |
||||
Total Loans, Net (including loans held-for-sale) |
$ |
950,810 |
$ |
885,020 |
||||
Total Deposits |
$ |
1,607,037 |
$ |
1,478,162 |
||||
Loan-To-Deposit Ratio |
59.2 |
% |
59.9 |
% |
Three months ended March 31, 2021 |
Three months ended March 31, 2020 |
|||||||||||||||||||||||
Average Balance |
Interest |
Yield/ Rate (4) |
Average Balance |
Interest |
Yield/ Rate (4) |
|||||||||||||||||||
Assets |
||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans (1) |
$ |
908,301 |
$ |
9,237 |
4.12 |
% |
$ |
754,296 |
$ |
9,235 |
4.91 |
% |
||||||||||||
Certificates of deposit |
16,065 |
85 |
2.15 |
% |
18,159 |
114 |
2.52 |
% |
||||||||||||||||
Interest bearing due from banks |
269,813 |
63 |
0.09 |
% |
115,507 |
419 |
1.45 |
% |
||||||||||||||||
Investment securities, taxable |
424,086 |
1,486 |
1.42 |
% |
329,293 |
1,757 |
2.14 |
% |
||||||||||||||||
Investment securities, non-taxable (2) |
26,915 |
143 |
2.15 |
% |
16,287 |
100 |
2.46 |
% |
||||||||||||||||
Other interest earning assets |
6,480 |
82 |
5.13 |
% |
6,574 |
124 |
7.57 |
% |
||||||||||||||||
Total average interest-earning assets |
1,651,660 |
11,096 |
2.72 |
% |
1,240,116 |
11,749 |
3.80 |
% |
||||||||||||||||
Non-interest-earning assets: |
||||||||||||||||||||||||
Cash and due from banks |
35,225 |
33,271 |
||||||||||||||||||||||
Premises and equipment, net |
6,471 |
6,529 |
||||||||||||||||||||||
Interest receivable and other assets |
35,258 |
36,089 |
||||||||||||||||||||||
Total average assets |
1,728,614 |
1,316,005 |
||||||||||||||||||||||
Liabilities and Stockholders’ Equity: |
||||||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Interest-bearing transaction deposits |
400,485 |
55 |
0.06 |
% |
331,663 |
158 |
0.19 |
% |
||||||||||||||||
Savings and MMDA’s |
409,068 |
105 |
0.10 |
% |
345,082 |
268 |
0.31 |
% |
||||||||||||||||
Time, $250,000 and under |
43,357 |
40 |
0.37 |
% |
38,418 |
56 |
0.58 |
% |
||||||||||||||||
Time, over $250,000 |
14,838 |
24 |
0.66 |
% |
14,097 |
36 |
1.02 |
% |
||||||||||||||||
Total average interest-bearing liabilities |
867,748 |
224 |
0.10 |
% |
729,260 |
518 |
0.28 |
% |
||||||||||||||||
Non-interest-bearing liabilities: |
||||||||||||||||||||||||
Federal Home Loan Bank advances |
5,000 |
— |
||||||||||||||||||||||
Non-interest-bearing demand deposits |
684,279 |
431,675 |
||||||||||||||||||||||
Interest payable and other liabilities |
19,390 |
19,236 |
||||||||||||||||||||||
Total liabilities |
1,576,417 |
1,180,171 |
||||||||||||||||||||||
Total average stockholders’ equity |
152,197 |
135,834 |
||||||||||||||||||||||
Total average liabilities and stockholders’ equity |
$ |
1,728,614 |
$ |
1,316,005 |
||||||||||||||||||||
Net interest income and net interest margin (3) |
$ |
10,872 |
2.67 |
% |
$ |
11,231 |
3.63 |
% |
(1) | Average balances for loans include loans held-for-sale and non-accrual loans and are net of the allowance for loan losses, but non-accrued interest is excluded. Loan interest income includes loan fees of approximately $864 and $(2) for the three months ended March 31, 2021 and 2020, respectively. Loan fees for the three months ended March 31, 2021 include $760 in PPP loan fees recognized. |
(2) | Interest income and yields on tax-exempt securities are not presented on a taxable equivalent basis. |
(3) | Net interest margin is computed by dividing net interest income by total average interest-earning assets. |
(4) | For disclosure purposes, yield/rates are annualized by dividing the number of days in the reported period by 365. |
Three months ended March 31, 2021 |
Three months ended December 31, 2020 |
|||||||||||||||||||||||
Average Balance |
Interest |
Yield/ Rate (4) |
Average Balance |
Interest |
Yield/ Rate (4) |
|||||||||||||||||||
Assets |
||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans (1) |
$ |
908,301 |
$ |
9,237 |
4.12 |
% |
$ |
924,244 |
$ |
10,817 |
4.64 |
% |
||||||||||||
Certificates of deposit |
16,065 |
85 |
2.15 |
% |
17,225 |
95 |
2.19 |
% |
||||||||||||||||
Interest bearing due from banks |
269,813 |
63 |
0.09 |
% |
267,079 |
73 |
0.11 |
% |
||||||||||||||||
Investment securities, taxable |
424,086 |
1,486 |
1.42 |
% |
373,811 |
1,482 |
1.57 |
% |
||||||||||||||||
Investment securities, non-taxable (2) |
26,915 |
143 |
2.15 |
% |
26,766 |
143 |
2.12 |
% |
||||||||||||||||
Other interest earning assets |
6,480 |
82 |
5.13 |
% |
6,480 |
82 |
5.02 |
% |
||||||||||||||||
Total average interest-earning assets |
1,651,660 |
11,096 |
2.72 |
% |
1,615,605 |
12,692 |
3.12 |
% |
||||||||||||||||
Non-interest-earning assets: |
||||||||||||||||||||||||
Cash and due from banks |
35,225 |
31,396 |
||||||||||||||||||||||
Premises and equipment, net |
6,471 |
6,633 |
||||||||||||||||||||||
Interest receivable and other assets |
35,258 |
36,771 |
||||||||||||||||||||||
Total average assets |
1,728,614 |
1,690,405 |
||||||||||||||||||||||
Liabilities and Stockholders’ Equity: |
||||||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Interest-bearing transaction deposits |
400,485 |
55 |
0.06 |
% |
378,804 |
55 |
0.06 |
% |
||||||||||||||||
Savings and MMDA’s |
409,068 |
105 |
0.10 |
% |
411,474 |
134 |
0.13 |
% |
||||||||||||||||
Time, $250,000 and under |
43,357 |
40 |
0.37 |
% |
43,089 |
50 |
0.46 |
% |
||||||||||||||||
Time, over $250,000 |
14,838 |
24 |
0.66 |
% |
15,041 |
28 |
0.74 |
% |
||||||||||||||||
Total average interest-bearing liabilities |
867,748 |
224 |
0.10 |
% |
848,408 |
267 |
0.12 |
% |
||||||||||||||||
Non-interest-bearing liabilities: |
||||||||||||||||||||||||
Federal Home Loan Bank advances |
5,000 |
7,285 |
||||||||||||||||||||||
Non-interest-bearing demand deposits |
684,279 |
663,103 |
||||||||||||||||||||||
Interest payable and other liabilities |
19,390 |
21,268 |
||||||||||||||||||||||
Total liabilities |
1,576,417 |
1,540,064 |
||||||||||||||||||||||
Total average stockholders’ equity |
152,197 |
150,341 |
||||||||||||||||||||||
Total average liabilities and stockholders’ equity |
$ |
1,728,614 |
$ |
1,690,405 |
||||||||||||||||||||
Net interest income and net interest margin (3) |
$ |
10,872 |
2.67 |
% |
$ |
12,425 |
3.05 |
% |
(1) | Average balances for loans include loans held-for-sale and non-accrual loans and are net of the allowance for loan losses, but non-accrued interest is excluded. Loan interest income includes loan fees of approximately $864 and $2,102 for the three months ended March 31, 2021 and December 31, 2020, respectively. Loan fees for the three months ended March 31, 2021 and December 31, 2020 include $760 and $1,789 in PPP loan fees recognized, respectively. |
(2) | Interest income and yields on tax-exempt securities are not presented on a taxable equivalent basis. |
(3) | Net interest margin is computed by dividing net interest income by total average interest-earning assets. |
(4) | For disclosure purposes, yield/rates are annualized by dividing the number of days in the reported period by 365. |
Three Months Ended March 31, 2021 Over Three Months Ended March 31, 2020 |
Three Months Ended March 31, 2021 Over Three Months Ended December 31, 2020 |
|||||||||||||||||||||||
Volume |
Interest Rate |
Change |
Volume |
Interest Rate |
Change |
|||||||||||||||||||
Increase (Decrease) in Interest Income: |
||||||||||||||||||||||||
Loans |
$ |
1,668 |
$ |
(1,666 |
) |
$ |
2 |
$ |
(210 |
) |
$ |
(1,370 |
) |
$ |
(1,580 |
) |
||||||||
Certificates of Deposit |
(13 |
) |
(16 |
) |
(29 |
) |
(8 |
) |
(2 |
) |
(10 |
) |
||||||||||||
Due From Banks |
253 |
(609 |
) |
(356 |
) |
1 |
(11 |
) |
(10 |
) |
||||||||||||||
Investment Securities - Taxable |
422 |
(693 |
) |
(271 |
) |
166 |
(162 |
) |
4 |
|||||||||||||||
Investment Securities - Non-taxable |
58 |
(15 |
) |
43 |
— |
— |
— |
|||||||||||||||||
Other Assets |
(2 |
) |
(40 |
) |
(42 |
) |
— |
— |
— |
|||||||||||||||
$ |
2,386 |
$ |
(3,039 |
) |
$ |
(653 |
) |
$ |
(51 |
) |
$ |
(1,545 |
) |
$ |
(1,596 |
) |
||||||||
Increase (Decrease) in Interest Expense: |
||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||
Interest-Bearing Transaction Deposits |
$ |
26 |
$ |
(129 |
) |
$ |
(103 |
) |
$ |
— |
$ |
— |
$ |
— |
||||||||||
Savings & MMDAs |
43 |
(206 |
) |
(163 |
) |
— |
(29 |
) |
(29 |
) |
||||||||||||||
Time Certificates |
29 |
(57 |
) |
(28 |
) |
1 |
(15 |
) |
(14 |
) |
||||||||||||||
$ |
98 |
$ |
(392 |
) |
$ |
(294 |
) |
$ |
1 |
$ |
(44 |
) |
$ |
(43 |
) |
|||||||||
Decrease in Net Interest Income: |
$ |
2,288 |
$ |
(2,647 |
) |
$ |
(359 |
) |
$ |
(52 |
) |
$ |
(1,501 |
) |
$ |
(1,553 |
) |
(in thousands) |
||||||||
Three months ended March 31, 2021 |
Three months ended March 31, 2020 |
|||||||
Other non-interest expenses |
||||||||
(Reversal of) provision for unfunded commitments expense |
$ |
(200 |
) |
$ |
100 |
|||
FDIC assessments |
135 |
— |
||||||
Contributions |
45 |
49 |
||||||
Legal fees |
49 |
84 |
||||||
Accounting and audit fees |
115 |
114 |
||||||
Consulting fees |
50 |
74 |
||||||
Postage expense |
39 |
22 |
||||||
Telephone expense |
30 |
28 |
||||||
Public relations |
26 |
62 |
||||||
Training expense |
12 |
26 |
||||||
Loan origination expense |
26 |
44 |
||||||
Computer software depreciation |
16 |
17 |
||||||
Operational losses |
54 |
64 |
||||||
Loan collection expense |
230 |
34 |
||||||
Minibank interchange fees |
128 |
135 |
||||||
Other non-interest expense |
328 |
262 |
||||||
Total other non-interest expenses |
$ |
1,083 |
$ |
1,115 |
(in thousands) |
||||||||
March 31, 2021 |
December 31, 2020 |
|||||||
Undisbursed loan commitments |
$ |
207,589 |
$ |
189,097 |
||||
Standby letters of credit |
2,878 |
1,731 |
||||||
Commitments to sell loans |
3,430 |
1,052 |
||||||
$ |
213,897 |
$ |
191,880 |
• | Substandard Assets – A substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. |
• | Doubtful Assets – An asset classified doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable or improbable. |
At March 31, 2021 |
At December 31, 2020 |
|||||||||||||||||||||||
Gross |
Guaranteed |
Net |
Gross |
Guaranteed |
Net |
|||||||||||||||||||
(dollars in thousands) |
||||||||||||||||||||||||
Commercial |
$ |
284 |
$ |
63 |
$ |
221 |
$ |
363 |
$ |
63 |
$ |
300 |
||||||||||||
Commercial real estate |
6,803 |
32 |
6,771 |
4,875 |
34 |
4,841 |
||||||||||||||||||
Agriculture |
9,130 |
— |
9,130 |
9,130 |
— |
9,130 |
||||||||||||||||||
Residential mortgage |
148 |
— |
148 |
153 |
— |
153 |
||||||||||||||||||
Residential construction |
— |
— |
— |
— |
— |
— |
||||||||||||||||||
Consumer |
687 |
— |
687 |
690 |
— |
690 |
||||||||||||||||||
Total non-accrual loans |
$ |
17,052 |
$ |
95 |
$ |
16,957 |
$ |
15,211 |
$ |
97 |
$ |
15,114 |
At March 31, 2021 |
At December 31, 2020 |
|||||||||||||||||||||||
Gross |
Guaranteed |
Net |
Gross |
Guaranteed |
Net |
|||||||||||||||||||
(dollars in thousands) |
||||||||||||||||||||||||
Non-accrual loans |
$ |
17,052 |
$ |
95 |
$ |
16,957 |
$ |
15,211 |
$ |
97 |
$ |
15,114 |
||||||||||||
Loans 90 days past due and still accruing |
— |
— |
— |
— |
— |
— |
||||||||||||||||||
Total non-performing loans |
17,052 |
95 |
16,957 |
15,211 |
97 |
15,114 |
||||||||||||||||||
Other real estate owned |
— |
— |
— |
— |
— |
— |
||||||||||||||||||
Total non-performing assets |
17,052 |
95 |
16,957 |
15,211 |
97 |
15,114 |
||||||||||||||||||
Non-performing loans (net of guarantees) to total loans |
1.8 |
% |
1.7 |
% |
||||||||||||||||||||
Non-performing assets (net of guarantees) to total assets |
1.0 |
% |
0.9 |
% |
||||||||||||||||||||
Allowance for loan and lease losses to non-performing loans (net of guarantees) |
92.7 |
% |
102.0 |
% |
Three months ended March 31, |
Year ended December 31, |
|||||||||||
2021 |
2020 |
2020 |
||||||||||
Balance at beginning of period |
$ |
15,416 |
$ |
12,356 |
$ |
12,356 |
||||||
Provision for loan losses |
300 |
650 |
3,050 |
|||||||||
Loans charged-off: |
||||||||||||
Commercial |
(13 |
) |
(145 |
) |
(212 |
) |
||||||
Commercial Real Estate |
— |
— |
— |
|||||||||
Agriculture |
— |
— |
— |
|||||||||
Residential Mortgage |
— |
— |
— |
|||||||||
Residential Construction |
— |
— |
— |
|||||||||
Consumer |
(3 |
) |
(9 |
) |
(15 |
) |
||||||
Total charged-off |
(16 |
) |
(154 |
) |
(227 |
) |
||||||
Recoveries: |
||||||||||||
Commercial |
8 |
11 |
201 |
|||||||||
Commercial Real Estate |
— |
— |
— |
|||||||||
Agriculture |
— |
— |
— |
|||||||||
Residential Mortgage |
— |
— |
— |
|||||||||
Residential Construction |
— |
— |
— |
|||||||||
Consumer |
5 |
6 |
36 |
|||||||||
Total recoveries |
13 |
17 |
237 |
|||||||||
Net (charge-offs) recoveries |
(3 |
) |
(137 |
) |
10 |
|||||||
Balance at end of period |
$ |
15,713 |
$ |
12,869 |
$ |
15,416 |
||||||
Ratio of net charge-offs to average loans outstanding during the period (annualized) |
0.00 |
% |
(0.07 |
%) |
0.00 |
% |
||||||
Allowance for loan losses |
||||||||||||
To total loans at the end of the period |
1.63 |
% |
1.67 |
% |
1.73 |
% |
||||||
To non-performing loans, net of guarantees at the end of the period |
92.7 |
% |
1,152.1 |
% |
102.0 |
% |
(in thousands) |
||||||||
March 31, 2021 |
December 31, 2020 |
|||||||
Three months or less |
$ |
1,743 |
$ |
5,110 |
||||
Over three to twelve months |
6,540 |
5,877 |
||||||
Over twelve months |
6,636 |
3,656 |
||||||
Total |
$ |
14,919 |
$ |
14,643 |
(amounts in thousands except percentage amounts) |
||||||||||||
Actual |
Well Capitalized Ratio Requirement |
|||||||||||
Capital |
Ratio |
|||||||||||
Leverage |
$ |
144,788 |
8.40 |
% |
5.0 |
% |
||||||
Common Equity Tier 1 |
$ |
144,788 |
15.94 |
% |
6.5 |
% |
||||||
Tier 1 Risk-Based |
$ |
144,788 |
15.94 |
% |
8.0 |
% |
||||||
Total Risk-Based |
$ |
156,205 |
17.20 |
% |
10.0 |
% |
Exhibit Number |
Description of Document |
|
Rule 13a — 14(a) Certification of Chief Executive Officer |
||
Rule 13a — 14(a) Certification of Chief Financial Officer |
||
Statement of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) |
||
Statement of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) |
||
101.INS |
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
|
101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
FIRST NORTHERN COMMUNITY BANCORP |
||||
Date: |
May 6, 2021 |
By: |
/s/ Kevin Spink |
|
Kevin Spink, Executive Vice President / Chief Financial Officer |
||||
(Principal Financial Officer and Duly Authorized Officer) |
Date: May 6, 2021
|
|
/s/ Louise A. Walker
|
|
Louise A. Walker, President and Chief Executive Officer
|
/s/ Kevin Spink
|
|
Kevin Spink, Executive Vice President / Chief Financial Officer
|
Date:
|
May 6, 2021
|
/s/ Louise A. Walker
|
|
Louise A. Walker, President and Chief Executive Officer
|
Date:
|
May 6, 2021
|
/s/ Kevin Spink
|
|
Kevin Spink, Executive Vice President / Chief Financial Officer
|
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Assets | ||
Loans, allowance for loan losses | $ 15,713 | $ 15,416 |
Stockholder's Equity: | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized (in shares) | 16,000,000 | 16,000,000 |
Common stock, shares issued (in shares) | 13,680,085 | 13,634,463 |
Common stock, shares outstanding (in shares) | 13,680,085 | 13,634,463 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) [Abstract] | ||
Net income | $ 3,178 | $ 2,679 |
Unrealized holding (losses) gains on securities: | ||
Unrealized holding (losses) gains arising during the period, net of tax effect of $(1,687) and $2,055 for the three-month periods ended March 31, 2021 and March 31, 2020, respectively | (4,179) | 5,096 |
Less: reclassification adjustment due to losses (gains) realized on sales of securities, net of tax effect of $3 and $(11) for the three-month periods ended March 31, 2021 and March 31, 2020, respectively | 7 | (27) |
Other comprehensive (loss) income | (4,172) | 5,069 |
Comprehensive (loss) income | $ (994) | $ 7,748 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Unrealized holding (losses) gains on securities: | ||
Unrealized holding (losses) gains on securities arising during the current period, tax | $ (1,687) | $ 2,055 |
Reclassification adjustment due to losses (gains) realized on sales of securities, tax | $ 3 | $ (11) |
BASIS OF PRESENTATION |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 | |||
BASIS OF PRESENTATION [Abstract] | |||
BASIS OF PRESENTATION |
The accompanying unaudited condensed consolidated financial statements of First Northern Community Bancorp (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Articles 9 and 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of results expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. All material intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to the December 31, 2020 footnotes to conform to the classifications used in March 31, 2021. There was no impact to net income, earnings per share, or stockholders’ equity as a result of the reclassifications.
|
ACCOUNTING POLICIES |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 | |||
ACCOUNTING POLICIES [Abstract] | |||
ACCOUNTING POLICIES |
The most significant accounting policies followed by the Company are presented in Note 1 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, Management has identified the allowance for loan losses accounting to be the accounting area requiring the most subjective or complex judgments, and as such the accounting area that could be most subject to revision as new information becomes available. A discussion of the factors affecting accounting for the allowance for loan losses is included in the “Asset Quality” and “Allowance for Loan Losses” discussions below. Certain amounts in prior periods have been reclassified to conform to the current presentation.
Application of these principles requires the Company to make certain estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment writedown or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available.
Recently Issued Accounting Pronouncements:
The Coronavirus Aid, Relief and Economic Security (‘CARES’) Act was passed by Congress and signed into law on March 27, 2020. Section 4013 of the CARES Act provides that a financial institution may elect to not apply GAAP requirements to loan modifications related to the COVID-19 pandemic that would otherwise be categorized as a TDR, and suspends the determination of loan modifications related to the COVID-19 pandemic from being treated as TDR’s. The relief from TDR guidance applies to modifications of loans that were not more than 30 days past due as of December 31, 2019, and modifications that occur beginning on March 1, 2020 until the earlier of: sixty days after the date on which the national emergency related to the COVID-19 outbreak is terminated or December 31, 2020. The suspension of TDR accounting and reporting guidance may not be applied to any adverse impact on the credit of a borrower that is not related to the COVID-19 pandemic. In December 2020, the Consolidated Appropriations Act, 2021 was signed into law. Section 541 of this legislation, “Extension of Temporary Relief From Troubled Debt Restructurings and Insurer Clarification,” extends Section 4013 of the CARES Act to the earlier of January 1, 2022 or 60 days after the termination of the national emergency declared relating to COVID-19. Future TDRs are indeterminable and will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.
On April 3, 2020, the SEC Office of the Chief Accountant issued a public statement communicating that for eligible entities that elect to apply Section 4013 of the CARES Act, the SEC staff would not object that this is in accordance with GAAP for the periods for which such elections are available. In June 2020, the American Institute of Certified Public Accountants published Q&A Section 2130.41 regarding a technical question regarding the recognition of interest income on Section 4013 loans which provided multiple permitted policy elections regarding the recognition of interest on Section 4013 restructured loans.
The Bank has continued to actively assist its communities by providing temporary loan relief under Section 4013 of the CARES Act. This relief included loan modifications which include forbearance programs (both full payment deferrals and interest only payments) to customers who have been negatively impacted by the pandemic. For loans that have been provided temporary full payment deferrals, the Bank has made a policy election to cease recognition of interest income during the term of the payment deferrals (generally
to six months). Upon completion of the forbearance period, the foregone interest over the deferral period is capitalized as deferred interest and recognized as an adjustment to the effective interest rate over the life of the loan using the effective yield method. Loans that were provided interest only payment relief will continue to accrue interest over the interest only period provided that the loans continue to perform as agreed. This policy election does not impact the Bank’s existing policies regarding non-accrual determinations if reasonable doubt exists as to the full and timely collection of interest or principal or when a loan becomes contractually past due by ninety days or more with respect to interest or principal regardless of whether a loan was modified under Section 4013 of the CARES Act. On March 22, 2020, the federal bank regulatory agencies issued joint guidance advising that the agencies have confirmed with the staff of the Financial Accounting Standards Board that short-term modifications due to COVID-19, made on a good faith basis to borrowers who were current prior to relief, are not TDRs. The CARES Act also provided relief from TDR classification for certain COVID-19 loan modifications. The Bank elected not to classify modifications that meet the criteria under either the CARES Act or the criteria specified by the regulatory agencies as TDRs.In March 2020, the FASB issued ASU 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842). This ASU adds an SEC paragraph pursuant to the issuance of SEC Staff Accounting Bulletin No. 119 on loan losses to the FASB Codification Topic 326. This ASU also updates the SEC section of the Codification for the change in the effective date of Topic 842. This ASU is effective upon addition to the FASB Codification. The Company adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019. ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) is effective on January 1, 2023 for smaller reporting companies with less than $250 million in public float as defined in the SEC’s rules (such as the Company). While the Company is currently unable to reasonably estimate the impact of adopting ASU 2016-13, it expects that the impact of adoption will be significantly influenced by the composition, characteristics and quality of the Company’s loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.
In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. The amendments in ASU 2020-03 make narrow-scope improvements to various aspects of the financial instruments guidance, including the current expected credit losses (CECL) standard issued in 2016. The ASU is part of the FASB’s ongoing Codification improvement project aimed at clarifying specific areas of accounting guidance to help avoid unintended application. The items addressed in that project generally are not expected to have a significant effect on current accounting practice or create a significant administrative cost for most entities. Effective dates for each amendment vary. The Company does not expect the adoption of this update to have a significant impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. This ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is in the process of evaluating the provisions of this ASU, but does not expect it to have a material impact on the Company’s consolidated financial statements.
In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply ASU 2021-01 on contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued. An entity may elect to apply ASU 2021-01 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020, and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The Company is in the process of evaluating the provisions of this ASU, but does not expect it to have a material impact on the Company’s consolidated financial statements.
|
INVESTMENT SECURITIES |
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INVESTMENT SECURITIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENT SECURITIES |
The amortized cost, unrealized gains and losses and estimated fair values of investments in debt and other securities at March 31, 2021 are summarized as follows:
The amortized cost, unrealized gains and losses and estimated fair values of investments in debt and other securities at December 31, 2020 are summarized as follows:
The Company had $9,393,000 and $20,044,000 proceeds from sales, calls and maturities of available-for-sale securities for the three months ended March 31, 2021 and March 31, 2020, respectively. Gross realized gains on sales/calls of available-for-sale securities were $25,000 and $84,000 for the three months ended March 31, 2021 and March 31, 2020, respectively. Gross realized losses on sales of available-for-sale securities were $35,000 and $46,000 for the three months ended March 31, 2021 and March 31, 2020, respectively.
The amortized cost and estimated fair value of debt and other securities at March 31, 2021, by contractual maturity, are shown in the following table:
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. In addition, factors such as prepayments and interest rates may affect the yield on the carrying value of mortgage-related securities.
An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of March 31, 2021, follows:
No decline in value was considered “other-than-temporary” during the first three months of 2021. Ninety-three securities, all considered investment grade, which had an aggregate fair value of $203,669,000 and a total unrealized loss of $4,200,000 have been in an unrealized loss position for less than twelve months as of March 31, 2021. No securities have been in an unrealized loss position for more than twelve months as of March 31, 2021. The unrealized losses on the Company’s investment securities were caused by market conditions for these types of investments, particularly changes in risk-free interest rates. The Company does not intend to sell the securities and has concluded it is not more likely than not that the Company will be required to sell these securities prior to recovery of their anticipated cost basis. Therefore, the Company does not consider these investments to be other than temporarily impaired as of March 31, 2021.
The fair value of investment securities could decline in the future if the general economy deteriorates, inflation increases, credit ratings decline, the issuer’s financial condition deteriorates, or the liquidity for securities declines. As a result, other than temporary impairments may occur in the future. The coronavirus pandemic and the impact of governmental health measures in response thereto may increase the likelihood of such other than temporary impairments.
An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of December 31, 2020, follows:
Investment securities carried at $40,372,000 and $41,916,000 at March 31, 2021 and December 31, 2020, respectively, were pledged to secure public deposits or for other purposes as required or permitted by law.
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LOANS |
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LOANS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LOANS |
The composition of the Company’s loan portfolio, by loan class, as of March 31, 2021 and December 31, 2020 was as follows:
The Company manages asset quality and credit risk by maintaining diversification in its loan portfolio and through review processes that include analysis of credit requests and ongoing examination of outstanding loans and delinquencies, with particular attention to portfolio dynamics and loan mix. The Company strives to identify loans experiencing difficulty early enough to correct the problems, to record charge-offs promptly based on realistic assessments of collectability and current collateral values and to maintain an adequate allowance for loan losses at all times. Asset quality reviews of loans and other non-performing assets are administered using credit risk rating standards and criteria similar to those employed by state and federal banking regulatory agencies.
Commercial loans, whether secured or unsecured, generally are made to support the short-term operations and other needs of small businesses. These loans are generally secured by the receivables, equipment, and other real property of the business and are susceptible to the related risks described above. Problem commercial loans are generally identified by periodic review of financial information that may include financial statements, tax returns, and payment history of the borrower. Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors. Notwithstanding, when repayment becomes unlikely based on the borrower’s income and cash flow, repossession or foreclosure of the underlying collateral may become necessary. Collateral values may be determined by appraisals obtained through Bank-approved, licensed appraisers, qualified independent third parties, purchase invoices, or other appropriate documentation.
Commercial real estate loans generally fall into two categories, owner-occupied and non-owner occupied. Loans secured by owner-occupied real estate are primarily susceptible to changes in the market conditions of the related business. This may be driven by, among other things, industry changes, geographic business changes, changes in the individual financial capacity of the business owner, general economic conditions, and changes in business cycles. These same risks apply to Commercial loans whether secured by equipment, receivables or other personal property or unsecured. Problem commercial real estate loans are generally identified by periodic review of financial information that may include financial statements, tax returns, payment history of the borrower, and site inspections. Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors. Notwithstanding, when repayment becomes unlikely based on the borrower’s income and cash flow, repossession or foreclosure of the underlying collateral may become necessary. Losses on loans secured by owner occupied real estate, equipment, or other personal property generally are dictated by the value of underlying collateral at the time of default and liquidation of the collateral. When default is driven by issues related specifically to the business owner, collateral values tend to provide better repayment support and may result in little or no loss. Alternatively, when default is driven by more general economic conditions, underlying collateral generally has devalued more and results in larger losses due to default. Loans secured by non-owner occupied real estate are primarily susceptible to risks associated with swings in occupancy or vacancy and related shifts in lease rates, rental rates or room rates. Most often, these shifts are a result of changes in general economic or market conditions or overbuilding and resulting over-supply of space. Losses are dependent on the value of underlying collateral at the time of default. Values are generally driven by these same factors and influenced by interest rates and required rates of return as well as changes in occupancy costs. Collateral values may be determined by appraisals obtained through Bank-approved, licensed appraisers, qualified independent third parties, sales invoices, or other appropriate means.
Agricultural loans, whether secured or unsecured, generally are made to producers and processors of crops and livestock. Repayment is primarily from the sale of an agricultural product or service. Agricultural loans are generally secured by inventory, receivables, equipment, and other real property. Agricultural loans primarily are susceptible to changes in market demand for specific commodities. This may be exacerbated by, among other things, industry changes, changes in the individual financial capacity of the business owner, general economic conditions and changes in business cycles, as well as adverse weather conditions such as drought or floods. Problem agricultural loans are generally identified by periodic review of financial information that may include financial statements, tax returns, crop budgets, payment history, and crop inspections. Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors. Notwithstanding, when repayment becomes unlikely based on the borrower’s income and cash flow, repossession or foreclosure of the underlying collateral may become necessary.
Residential mortgage loans, which are secured by real estate, are primarily susceptible to four risks; non-payment due to diminished or lost income, over-extension of credit, a lack of borrower’s cash flow to sustain payments, and shortfalls in collateral value. In general, non-payment is usually due to loss of employment and follows general economic trends in the economy, particularly the upward movement in the unemployment rate, loss of collateral value, and demand shifts.
Construction loans, whether owner-occupied or non-owner occupied residential development loans, are not only susceptible to the related risks described above but the added risks of construction, including cost over-runs, mismanagement of the project, or lack of demand and market changes experienced at time of completion. Losses are primarily related to underlying collateral value and changes therein as described above. Problem construction loans are generally identified by periodic review of financial information that may include financial statements, tax returns and payment history of the borrower. Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors, or repossession or foreclosure of the underlying collateral. Collateral values may be determined by appraisals obtained through Bank-approved, licensed appraisers, qualified independent third parties, purchase invoices, or other appropriate documentation.
Consumer loans, whether unsecured or secured, are primarily susceptible to four risks: non-payment due to diminished or lost income, over-extension of credit, a lack of borrower’s cash flow to sustain payments, and shortfall in collateral value. In general, non-payment is usually due to loss of employment and will follow general economic trends in the economy, particularly the upward movements in the unemployment rate, loss of collateral value, and demand shifts.
Collateral values may be determined by appraisals obtained through Bank-approved, licensed appraisers, qualified independent third parties, purchase invoices, or other appropriate documentation. Collateral valuations are obtained at origination of the credit. Once repayment is questionable, and the loan has been deemed classified, collateral valuations are obtained periodically (generally annually but may be more frequent depending on the collateral type).
As of March 31, 2021, approximately 30% in principal amount of the Company’s loans were for general commercial uses, including professional, retail and small businesses. Approximately 52% in principal amount of the Company’s loans were secured by commercial real estate, consisting primarily of loans secured by commercial properties and construction and land development loans. Approximately 8% in principal amount of the Company’s loans were for agriculture, approximately 7% in principal amount of the Company’s loans were residential mortgage loans, approximately 1% in principal amount of the Company’s loans were residential construction loans and approximately 2% in principal amount of the Company’s loans were consumer loans.
Once a loan becomes delinquent or repayment becomes questionable, a Company collection officer will address collateral shortfalls with the borrower and attempt to obtain additional collateral or a principal payment. If this is not forthcoming and payment of principal and interest in accordance with the contractual terms of the loan agreement becomes unlikely, the Company will consider the loan to be impaired and will estimate its probable loss, using the present value of future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. For collateral dependent loans, the Company will utilize a recent valuation of the underlying collateral less estimated costs of sale, and charge-off the loan down to the estimated net realizable amount. Depending on the length of time until final collection, the Company may periodically revalue the estimated loss and take additional charge-offs or specific reserves as warranted. Revaluations may occur as often as every 3-12 months depending on the underlying collateral and volatility of values. Final charge-offs or recoveries are taken when the collateral is liquidated and the actual loss is confirmed. Unpaid balances on loans after or during collection and liquidation may also be pursued through legal action and attachment of wages or judgment liens on the borrower’s other assets.
At March 31, 2021 and December 31, 2020, all loans were pledged under a blanket collateral lien to secure actual and potential borrowings from the Federal Home Loan Bank (“FHLB”).
Non-accrual and Past Due Loans
The Company’s loans by delinquency and non-accrual status, as of March 31, 2021 and December 31, 2020, were as follows:
Non-accrual loans amounted to $17,052,000 at March 31, 2021 and were comprised of three commercial loans totaling $284,000, four commercial real estate loans totaling $6,803,000, three agriculture loans totaling $9,130,000, one residential mortgage loan totaling $148,000 and four consumer loans totaling $687,000. Non-accrual loans amounted to $15,211,000 at December 31, 2020 and were comprised of four commercial loans totaling $363,000, three commercial real estate loans totaling $4,875,000, three agriculture loans totaling $9,130,000, one residential mortgage loan totaling $153,000 and five consumer loans totaling $690,000. All non-accrual loans are measured for impairment based upon the present value of future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of collateral, if the loan is collateral dependent. If the measurement of the non-accrual loan is less than the recorded investment in the loan, an impairment is recognized through the establishment of a specific reserve sufficient to cover expected losses and/or a charge-off against the allowance for loan losses. If the loan is considered to be collateral dependent, it is generally the Company’s policy to charge-off the portion of any non-accrual loan that the Company does not expect to collect by writing the loan down to the estimated net realizable value of the underlying collateral. There were no commitments to lend additional funds to borrowers whose loans were on non-accrual status at March 31, 2021. Loans with deferrals granted under Section 4013 of the CARES Act are not considered past due and/or reported as nonaccrual if deemed collectible during the deferral period. See Note 2 for discussion on policy election on loan modifications under Section 4013 of the CARES Act.
Impaired Loans
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. Loans to be considered for impairment include non-accrual loans, troubled debt restructurings and loans with a risk rating of 5 (special mention) or worse and an aggregate exposure of $500,000 or more. Once identified, impaired loans are measured individually for impairment using one of three methods: present value of expected cash flows discounted at the loan’s effective interest rate; the loan’s observable market price; or fair value of collateral if the loan is collateral dependent. In general, any portion of the recorded investment in a collateral dependent loan in excess of the fair value of the collateral that can be identified as uncollectible, and is, therefore, deemed a confirmed loss, is promptly charged-off against the allowance for loan losses.
Impaired loans, segregated by loan class, as of March 31, 2021 and December 31, 2020 were as follows:
The average recorded investment in impaired loans and the amount of interest income recognized on impaired loans during the three months ended March 31, 2021 and March 31, 2020 was as follows:
Troubled Debt Restructurings
The Company’s loan portfolio includes certain loans that have been modified in a Troubled Debt Restructuring (“TDR”), which are loans on which concessions in terms have been granted because of the borrowers’ financial difficulties and, as a result, the Company receives less than the current market-based compensation for the loan. These concessions may include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are placed on non-accrual status at the time of restructure and may be returned to accruing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.
When a loan is modified, it is measured based upon the present value of future cash flows discounted at the contractual interest rate of the original loan agreement, or the fair value of collateral less selling costs if the loan is collateral dependent. If the value of the modified loan is less than the recorded investment in the loan, impairment is recognized through a specific allowance or a charge-off of the loan.
The Company had $1,195,000 and $2,325,000 in TDR loans as of March 31, 2021 and December 31, 2020, respectively. Specific reserves for TDR loans totaled $160,000 and $253,000 as of March 31, 2021 and December 31, 2020, respectively. TDR loans performing in compliance with modified terms totaled $1,195,000 and $2,260,000 as of March 31, 2021 and December 31, 2020, respectively. There were no commitments to advance additional funds on existing TDR loans as of March 31, 2021.
On March 22, 2020, the Federal bank regulatory agencies issued joint guidance advising that the agencies have confirmed with the staff of the Financial Accounting Standards Board that short-term modifications due to COVID-19, made on a good faith basis to borrowers who were current prior to relief, are not TDRs. The CARES Act also provided relief from TDR classification for certain COVID-19 loan modifications. The Bank elected not to classify modifications that meet the criteria under either the CARES Act or the criteria specified by the regulatory agencies as TDRs.
There were no loans modified as TDRs during the three-month periods ended March 31, 2021 and 2020.
Loan modifications generally involve reductions in the interest rate, payment extensions, forgiveness of principal, or forbearance. There were no loans modified as a TDR within the previous twelve months and for which there was a payment default during the three months ended March 31, 2021 and March 31, 2020.
Credit Quality Indicators
All loans are rated using the credit risk ratings and criteria adopted by the Company. Risk ratings are adjusted as future circumstances warrant. All credits risk rated 1, 2, 3 or 4 equate to a Pass as indicated by Federal and State bank regulatory agencies; a 5 equates to a Special Mention; a 6 equates to Substandard; a 7 equates to Doubtful; and an 8 equates to a Loss. For the definitions of each risk rating, see Note 4 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.
The following table presents the risk ratings by loan class as of March 31, 2021 and December 31, 2020:
Allowance for Loan Losses
The following tables detail activity in the allowance for loan losses and the amount allocated to loans individually and collectively evaluated for impairment by loan class for the three months ended March 31, 2021 and March 31, 2020:
The following table details activity in the allowance for loan losses and the amount allocated to loans individually and collectively evaluated for impairment by loan class as of and for the period ended December 31, 2020.
The Company’s investment in loans as of March 31, 2021, March 31, 2020, and December 31, 2020 related to each balance in the allowance for loan losses by loan class and disaggregated on the basis of the Company’s impairment methodology was as follows:
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MORTGAGE OPERATIONS |
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MORTGAGE OPERATIONS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MORTGAGE OPERATIONS |
Transfers and servicing of financial assets and extinguishments of liabilities are accounted for and reported based on consistent application of a financial-components approach that focuses on control. Transfers of financial assets that are sales are distinguished from transfers that are secured borrowings. Retained servicing rights on loans sold are measured by allocating the previous carrying amount of the transferred assets between the loans sold and retained interest, if any, based on their relative fair value at the date of transfer. Fair values are estimated using discounted cash flows based on a current market interest rate.
The Company recognizes a gain and a related asset for the fair value of the rights to service loans for others when loans are sold. The Company sold a substantial portion of its portfolio of conforming long-term residential mortgage loans originated during the three months ended March 31, 2021 for cash proceeds equal to the fair value of the loans. At March 31, 2021, and December 31, 2020, the Company serviced real estate mortgage loans for others totaling $207,204,000 and $206,208,000, respectively.
The recorded value of mortgage servicing rights is amortized in proportion to, and over the period of, estimated net servicing revenues. The Company assesses capitalized mortgage servicing rights for impairment based upon the fair value of those rights at each reporting date. For purposes of measuring impairment, the rights are stratified based upon the product type, term and interest rates. Fair value is determined by discounting estimated net future cash flows from mortgage servicing activities using discount rates that approximate current market rates and estimated prepayment rates, among other assumptions. The amount of impairment recognized, if any, is the amount by which the capitalized mortgage servicing rights for a stratum exceeds their fair value. Impairment, if any, is recognized through a valuation allowance for each individual stratum. Changes in the carrying amount of mortgage servicing rights are reported in earnings under other operating income on the condensed consolidated statements of income.
Key assumptions used in measuring the fair value of mortgage servicing rights as of March 31, 2021 and December 31, 2020 were as follows:
The following table summarizes the Company’s mortgage servicing rights assets as of March 31, 2021 and December 31, 2020. Mortgage servicing rights are included in Interest Receivable and Other Assets on the condensed consolidated balance sheets:
At March 31, 2021 and December 31, 2020, the estimated fair market value of the Company’s mortgage servicing rights asset was $1,463,000 and $1,242,000, respectively. The changes in fair value of mortgage servicing rights during 2021 was primarily due to changes in prepayment speeds.
The Company received contractually specified servicing fees of $134,000 and $131,000 for the three months ended March 31, 2021 and March 31, 2020, respectively. Contractually specified servicing fees are included in loan servicing income on the condensed consolidated statements of income, net of the amortization of the mortgage servicing rights asset.
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FAIR VALUE MEASUREMENTS |
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FAIR VALUE MEASUREMENTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS |
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale and trading securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a non-recurring basis, such as loans held-for-sale, loans held-for-investment and certain other assets. These non-recurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally corresponds with the Company’s quarterly valuation process.
Assets Recorded at Fair Value on a Recurring Basis
The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of March 31, 2021:
There were no transfers of assets measured at fair value on a recurring basis between level 1 and level 2 of the fair value hierarchy.
The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of December 31, 2020:
Assets Recorded at Fair Value on a Non-Recurring Basis
Assets measured at fair value on a non-recurring basis are included in the table below by level within the fair value hierarchy as of March 31, 2021 and December 31, 2020:
There were no liabilities measured at fair value on a recurring or non-recurring basis as of March 31, 2021 and December 31, 2020.
Key methods and assumptions used in measuring the fair value of impaired loans as of March 31, 2021 and December 31, 2020 were as follows:
The following section describes the valuation methodologies used for assets and liabilities recorded at fair value.
Investment Securities Available-for-Sale
Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, if available. If quoted market prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions, and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets where valuations include significant unobservable assumptions.
Impaired Loans
The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, the Company measures impairment. The fair value of impaired loans is estimated using one of several methods, including the present value of expected cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. Those impaired loans not requiring charge-off or specific allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.
At March 31, 2021, certain impaired loans were considered collateral dependent and were evaluated based on the fair value of the underlying collateral securing the loan. Impaired loans where a charge-off is recorded based on the fair value of collateral require classification in the fair value hierarchy. When a loan is evaluated based on the fair value of the underlying collateral securing the loan, the Company records the impaired loan as non-recurring Level 3 given the valuation includes significant unobservable assumptions.
Mortgage Servicing Rights
Mortgage servicing rights (MSRs) are subject to impairment testing. All mortgage servicing rights are initially measured and recorded at fair value at the time loans are sold. The fair value of MSRs is determined based on the price that would be received to sell the MSRs in an orderly transaction between market participants at the measurement date. Subsequent fair value measurements are determined using a discounted cash flow model. In order to determine the fair value of the mortgage servicing rights, the present value of expected future cash flows is estimated. Assumptions used include market discount rates, anticipated prepayment speeds, delinquency and foreclosure rates, and ancillary fee income. At March 31, 2021, the discount rate and constant prepayment rate used in measuring the fair value of the Company’s mortgage servicing rights was 10.00% and 16.33%, respectively.
The model used to calculate the fair value of the Company’s mortgage servicing rights is periodically validated. The model assumptions and the mortgage servicing rights fair value estimates are also compared to observable trades of similar portfolios as well as to mortgage servicing rights broker valuations and industry surveys, as available. If the valuation model reflects a value less than the carrying value, mortgage servicing rights are adjusted to fair value through a valuation allowance as determined by the model. As such, the Company classifies mortgage servicing rights subjected to non-recurring fair value adjustments as Level 3.
Disclosures about Fair Value of Financial Instruments
The estimated fair values of the Company’s financial instruments for the periods ended March 31, 2021 and December 31, 2020 were approximately as follows:
Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument and expected exit prices. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets or liabilities include deferred tax liabilities and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates.
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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK |
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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK |
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Bank’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
Financial instruments, whose contract amounts represent credit risk at the indicated periods, were as follows:
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank issues both financial and performance standby letters of credit. The financial standby letters of credit are primarily to guarantee payment to third parties. At March 31, 2021 and December 31, 2020, there were no financial standby letters of credit outstanding. The performance standby letters of credit are typically issued to municipalities as specific performance bonds. Performance standby letters of credit totaled $2,878,000 and $1,731,000 at March 31, 2021 and December 31, 2020, respectively. The Bank has experienced no draws on outstanding letters of credit, resulting in no related liability included on its balance sheet; however, should a triggering event occur, the Bank either has collateral in excess of the letter of credit or imbedded agreements of recourse from the customer. The Bank has set aside a reserve for unfunded commitments in the amount of $750,000 and $950,000 at March 31, 2021 and December 31, 2020, respectively, which is recorded in “interest payable and other liabilities” on the Condensed Consolidated Balance Sheets.
Commitments to extend credit and standby letters of credit bear similar credit risk characteristics as outstanding loans. As of March 31, 2021 and December 31, 2020, the Company had no off-balance sheet derivatives requiring additional disclosure.
Mortgage loans sold to investors may be sold with servicing rights retained, for which the Company makes only standard legal representations and warranties as to meeting certain underwriting and collateral documentation standards. In the past two years, the Company has not had to repurchase any loans due to deficiencies in underwriting or loan documentation. Management believes that any liabilities that may result from such recourse provisions are not significant.
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STOCK PLANS |
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STOCK PLANS |
On January 27, 2021, the Board of Directors of the Company declared a 5% stock dividend paid on March 25, 2021 to shareholders of record as of February 26, 2021. All stock options and restricted stock outstanding have been adjusted to give retroactive effect to stock dividends.
The following table presents the activity related to stock options for the three months ended March 31, 2021:
The intrinsic value of options exercised was $63,000 and $96,000 during the three months ended March 31, 2021 and March 31, 2020, respectively. The fair value of awards vested was $182,000 and $149,000 during the three months ended March 31, 2021 and March 31, 2020, respectively.
As of March 31, 2021, there was $280,000 of total unrecognized compensation cost related to non-vested stock options. This cost is expected to be recognized over a weighted average period of approximately 2.26 years.
There was $40,000 of recognized compensation cost related to stock options granted for the three months ended March 31, 2021.
The following table presents the activity related to non-vested restricted stock for the three months ended March 31, 2021:
The weighted average fair value of restricted stock granted during the three months ended March 31, 2021 was $10.43 per share.
As of March 31, 2021, there was $1,033,000 of total unrecognized compensation cost related to non-vested restricted stock. This cost is expected to be recognized over a weighted average period of approximately 2.94 years.
There was $96,000 of recognized compensation cost related to restricted stock awards for the three months ended March 31, 2021.
The Company has an Employee Stock Purchase Plan (“ESPP”). There are 325,543 shares authorized under the ESPP. The total number of shares authorized has been adjusted to give retroactive effect to stock dividends and stock splits, including the 5% stock dividend declared on January 27, 2021, payable March 25, 2021 to shareholders of record as of February 26, 2021. The ESPP will expire on March 16, 2026.
The ESPP is implemented by participation periods of not more than twenty-seven months each. The Board of Directors determines the commencement date and duration of each participation period. The Board of Directors approved the current participation period of November 24, 2020 to November 23, 2021. An eligible employee is one who has been continually employed for at least 90 days prior to commencement of a participation period. Under the terms of the ESPP, employees can choose to have up to 10 percent of their compensation withheld to purchase the Company’s common stock each participation period. The purchase price of the stock is 85 percent of the lower of the fair value on the last trading day before the date of participation or the fair value on the last trading day during the participation period.
As of March 31, 2021, there was $24,000 of unrecognized compensation cost related to ESPP issuances. This cost is expected to be recognized over a weighted average period of approximately 0.75 years.
There was $8,000 of recognized compensation cost related to ESPP issuances for the three months ended March 31, 2021.
The weighted average fair value at issuance date during the three months ended March 31, 2021 was $2.38.
A summary of the weighted average assumptions used in valuing ESPP issuances during the three months ended March 31, 2021 is presented below:
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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
The following table details activity in accumulated other comprehensive income (loss) for the three months ended March 31, 2021:
The following table details activity in accumulated other comprehensive income (loss) for the three months ended March 31, 2020:
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OUTSTANDING SHARES AND EARNINGS PER SHARE |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OUTSTANDING SHARES AND EARNINGS PER SHARE [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OUTSTANDING SHARES AND EARNINGS PER SHARE |
On January 27, 2021, the Board of Directors of the Company declared a 5% stock dividend payable on March 25, 2021 to shareholders of record as of February 26, 2021. All income per share amounts have been adjusted to give retroactive effect to stock dividends.
Earnings Per Share (EPS)
Basic EPS includes no dilution and is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the respective period. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding plus dilutive shares for the quarter. Diluted shares include all common stock equivalents (“in-the-money” stock options, unvested restricted stock, stock units, warrants and rights, convertible bonds and preferred stock), which reflects the potential dilution of securities that could share in the earnings of the Company.
The following table presents a reconciliation of basic and diluted EPS for the three months ended March 31, 2021 and 2020 (dollars in thousands except per share amounts):
Stock options which were not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect amounted to 344,205 shares and 424,475 shares for the three months ended March 31, 2021 and March 31, 2020, respectively. Restricted stock which were not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect amounted to 40,320 and 43,034 for the three months ended March 31, 2021 and March 31, 2020, respectively.
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LEASES |
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES |
The Company leases ten branch and administrative locations under operating leases expiring on various dates through 2030. Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense is recognized on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company combines lease and nonlease components. The Company had no financing leases as of March 31, 2021.
Most leases include options to renew, with renewal terms that can extend the lease term from 3 to 10 years. The exercise of lease renewal options is at the Company’s sole discretion. Most leases are currently in the extension period. For the remaining leases with options to renew, the Company has not included the extended lease terms in the calculation of lease liabilities as the options are not reasonably certain of being exercised. Certain lease agreements include rental payments that are adjusted periodically for inflation. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.
The Company uses its FHLB advance fixed rates, which are its incremental borrowing rates for secured borrowings, as the discount rates to calculate lease liabilities.
The Company had right-of-use assets totaling $5,662,000 and $5,913,000 as of March 31, 2021 and December 31, 2020, respectively. The Company had lease liabilities totaling $6,202,000 and $6,453,000 as of March 31, 2021 and December 31, 2020, respectively. The Company recognized lease expenses totaling $293,000 and $309,000 for the three months ended March 31, 2021 and March 31, 2020, respectively. Lease expenses include expenses related to short-term leases. Lease expense is included in Occupancy and equipment expense on the Income Statement.
The table below summarizes the maturity of remaining lease liabilities:
The following table presents supplemental cash flow information related to leases for the three months ended March 31, 2021 and March 31, 2020:
The following table presents the weighted average operating lease term and discount rate as of March 31, 2021 and December 31, 2020:
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SHORT-TERM BORROWINGS |
3 Months Ended | ||
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Mar. 31, 2021 | |||
SHORT-TERM BORROWINGS [Abstract] | |||
SHORT-TERM BORROWINGS |
Short-term borrowings totaling $5,000,000 as of March 31, 2021 and December 31, 2020 consisted of an advance with the FHLB through its COVID-19 Relief and Recovery Advances Program. The advance matures in the second quarter of 2021 and has a 0% interest rate. The advance is secured under terms of a blanket collateral agreement by a pledge of FHLB stock and certain other qualifying collateral such as commercial and mortgage loans. As of March 31, 2021 the Company had a remaining collateral borrowing capacity with the FHLB of $292,864,000 and, at such date, also had unsecured formal lines of credit totaling $122,000,000 with correspondent banks.
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BASIS OF PRESENTATION (Policies) |
3 Months Ended |
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Mar. 31, 2021 | |
BASIS OF PRESENTATION [Abstract] | |
Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements of First Northern Community Bancorp (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Articles 9 and 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of results expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. All material intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to the December 31, 2020 footnotes to conform to the classifications used in March 31, 2021. There was no impact to net income, earnings per share, or stockholders’ equity as a result of the reclassifications.
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ACCOUNTING POLICIES (Policies) |
3 Months Ended |
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Mar. 31, 2021 | |
ACCOUNTING POLICIES [Abstract] | |
Recently Issued Accounting Pronouncements |
Recently Issued Accounting Pronouncements:
The Coronavirus Aid, Relief and Economic Security (‘CARES’) Act was passed by Congress and signed into law on March 27, 2020. Section 4013 of the CARES Act provides that a financial institution may elect to not apply GAAP requirements to loan modifications related to the COVID-19 pandemic that would otherwise be categorized as a TDR, and suspends the determination of loan modifications related to the COVID-19 pandemic from being treated as TDR’s. The relief from TDR guidance applies to modifications of loans that were not more than 30 days past due as of December 31, 2019, and modifications that occur beginning on March 1, 2020 until the earlier of: sixty days after the date on which the national emergency related to the COVID-19 outbreak is terminated or December 31, 2020. The suspension of TDR accounting and reporting guidance may not be applied to any adverse impact on the credit of a borrower that is not related to the COVID-19 pandemic. In December 2020, the Consolidated Appropriations Act, 2021 was signed into law. Section 541 of this legislation, “Extension of Temporary Relief From Troubled Debt Restructurings and Insurer Clarification,” extends Section 4013 of the CARES Act to the earlier of January 1, 2022 or 60 days after the termination of the national emergency declared relating to COVID-19. Future TDRs are indeterminable and will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.
On April 3, 2020, the SEC Office of the Chief Accountant issued a public statement communicating that for eligible entities that elect to apply Section 4013 of the CARES Act, the SEC staff would not object that this is in accordance with GAAP for the periods for which such elections are available. In June 2020, the American Institute of Certified Public Accountants published Q&A Section 2130.41 regarding a technical question regarding the recognition of interest income on Section 4013 loans which provided multiple permitted policy elections regarding the recognition of interest on Section 4013 restructured loans.
The Bank has continued to actively assist its communities by providing temporary loan relief under Section 4013 of the CARES Act. This relief included loan modifications which include forbearance programs (both full payment deferrals and interest only payments) to customers who have been negatively impacted by the pandemic. For loans that have been provided temporary full payment deferrals, the Bank has made a policy election to cease recognition of interest income during the term of the payment deferrals (generally
to six months). Upon completion of the forbearance period, the foregone interest over the deferral period is capitalized as deferred interest and recognized as an adjustment to the effective interest rate over the life of the loan using the effective yield method. Loans that were provided interest only payment relief will continue to accrue interest over the interest only period provided that the loans continue to perform as agreed. This policy election does not impact the Bank’s existing policies regarding non-accrual determinations if reasonable doubt exists as to the full and timely collection of interest or principal or when a loan becomes contractually past due by ninety days or more with respect to interest or principal regardless of whether a loan was modified under Section 4013 of the CARES Act. On March 22, 2020, the federal bank regulatory agencies issued joint guidance advising that the agencies have confirmed with the staff of the Financial Accounting Standards Board that short-term modifications due to COVID-19, made on a good faith basis to borrowers who were current prior to relief, are not TDRs. The CARES Act also provided relief from TDR classification for certain COVID-19 loan modifications. The Bank elected not to classify modifications that meet the criteria under either the CARES Act or the criteria specified by the regulatory agencies as TDRs.In March 2020, the FASB issued ASU 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842). This ASU adds an SEC paragraph pursuant to the issuance of SEC Staff Accounting Bulletin No. 119 on loan losses to the FASB Codification Topic 326. This ASU also updates the SEC section of the Codification for the change in the effective date of Topic 842. This ASU is effective upon addition to the FASB Codification. The Company adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019. ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) is effective on January 1, 2023 for smaller reporting companies with less than $250 million in public float as defined in the SEC’s rules (such as the Company). While the Company is currently unable to reasonably estimate the impact of adopting ASU 2016-13, it expects that the impact of adoption will be significantly influenced by the composition, characteristics and quality of the Company’s loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.
In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. The amendments in ASU 2020-03 make narrow-scope improvements to various aspects of the financial instruments guidance, including the current expected credit losses (CECL) standard issued in 2016. The ASU is part of the FASB’s ongoing Codification improvement project aimed at clarifying specific areas of accounting guidance to help avoid unintended application. The items addressed in that project generally are not expected to have a significant effect on current accounting practice or create a significant administrative cost for most entities. Effective dates for each amendment vary. The Company does not expect the adoption of this update to have a significant impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. This ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is in the process of evaluating the provisions of this ASU, but does not expect it to have a material impact on the Company’s consolidated financial statements.
In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply ASU 2021-01 on contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued. An entity may elect to apply ASU 2021-01 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020, and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The Company is in the process of evaluating the provisions of this ASU, but does not expect it to have a material impact on the Company’s consolidated financial statements.
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INVESTMENT SECURITIES (Tables) |
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INVESTMENT SECURITIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost, Unrealized Gains and Losses and Estimated Fair Values of Investments in Debt and Other Securities |
The amortized cost, unrealized gains and losses and estimated fair values of investments in debt and other securities at March 31, 2021 are summarized as follows:
The amortized cost, unrealized gains and losses and estimated fair values of investments in debt and other securities at December 31, 2020 are summarized as follows:
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Amortized Cost and Estimated Fair Value of Debt and Other Securities by Contractual or Expected Maturity |
The amortized cost and estimated fair value of debt and other securities at March 31, 2021, by contractual maturity, are shown in the following table:
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Analysis of Gross Unrealized Losses of the Available-for-sale Investment Securities Portfolio |
An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of March 31, 2021, follows:
An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of December 31, 2020, follows:
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LOANS (Tables) |
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LOANS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loan Portfolio, by Loan Class |
The composition of the Company’s loan portfolio, by loan class, as of March 31, 2021 and December 31, 2020 was as follows:
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Loans by Delinquency and Non-Accrual Status |
The Company’s loans by delinquency and non-accrual status, as of March 31, 2021 and December 31, 2020, were as follows:
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Impaired Loans, Segregated by Loan Class |
Impaired loans, segregated by loan class, as of March 31, 2021 and December 31, 2020 were as follows:
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Average Recorded Investment and Interest Income in Impaired Loans Recognized Using Accrual Basis Method of Accounting |
The average recorded investment in impaired loans and the amount of interest income recognized on impaired loans during the three months ended March 31, 2021 and March 31, 2020 was as follows:
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Risk Ratings by Loan Class |
The following table presents the risk ratings by loan class as of March 31, 2021 and December 31, 2020:
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Allowance for Loan Losses |
The following tables detail activity in the allowance for loan losses and the amount allocated to loans individually and collectively evaluated for impairment by loan class for the three months ended March 31, 2021 and March 31, 2020:
The following table details activity in the allowance for loan losses and the amount allocated to loans individually and collectively evaluated for impairment by loan class as of and for the period ended December 31, 2020.
The Company’s investment in loans as of March 31, 2021, March 31, 2020, and December 31, 2020 related to each balance in the allowance for loan losses by loan class and disaggregated on the basis of the Company’s impairment methodology was as follows:
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MORTGAGE OPERATIONS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MORTGAGE OPERATIONS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Key Assumptions Used in Measuring the Fair Value of Mortgage Servicing Rights |
Key assumptions used in measuring the fair value of mortgage servicing rights as of March 31, 2021 and December 31, 2020 were as follows:
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Mortgage Servicing Rights Assets |
The following table summarizes the Company’s mortgage servicing rights assets as of March 31, 2021 and December 31, 2020. Mortgage servicing rights are included in Interest Receivable and Other Assets on the condensed consolidated balance sheets:
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FAIR VALUE MEASUREMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities Measured at Fair Value on a Recurring Basis |
The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of March 31, 2021:
There were no transfers of assets measured at fair value on a recurring basis between level 1 and level 2 of the fair value hierarchy.
The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of December 31, 2020:
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Assets Measured at Fair Value on a Non-recurring Basis |
Assets measured at fair value on a non-recurring basis are included in the table below by level within the fair value hierarchy as of March 31, 2021 and December 31, 2020:
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Key Methods and Assumptions Used in Measuring Fair Value |
Key methods and assumptions used in measuring the fair value of impaired loans as of March 31, 2021 and December 31, 2020 were as follows:
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Estimated Fair Value of Financial Instruments |
The estimated fair values of the Company’s financial instruments for the periods ended March 31, 2021 and December 31, 2020 were approximately as follows:
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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments Whose Contract Amount Represent Credit Risk |
Financial instruments, whose contract amounts represent credit risk at the indicated periods, were as follows:
|
STOCK PLANS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK PLANS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Option Activity |
The following table presents the activity related to stock options for the three months ended March 31, 2021:
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Activity Related to Restricted Stock |
The following table presents the activity related to non-vested restricted stock for the three months ended March 31, 2021:
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Weighted Average Assumptions Used in Valuing ESPP |
A summary of the weighted average assumptions used in valuing ESPP issuances during the three months ended March 31, 2021 is presented below:
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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity in Accumulated Other Comprehensive Income (Loss) |
The following table details activity in accumulated other comprehensive income (loss) for the three months ended March 31, 2021:
The following table details activity in accumulated other comprehensive income (loss) for the three months ended March 31, 2020:
|
OUTSTANDING SHARES AND EARNINGS PER SHARE (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OUTSTANDING SHARES AND EARNINGS PER SHARE [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Basic and Diluted EPS |
The following table presents a reconciliation of basic and diluted EPS for the three months ended March 31, 2021 and 2020 (dollars in thousands except per share amounts):
|
LEASES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Maturities of Remaining Lease Liabilities |
The table below summarizes the maturity of remaining lease liabilities:
|
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Supplemental Cash Flow Information Related to Leases |
The following table presents supplemental cash flow information related to leases for the three months ended March 31, 2021 and March 31, 2020:
|
||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted Average Operating Lease Term and Discount Rate |
The following table presents the weighted average operating lease term and discount rate as of March 31, 2021 and December 31, 2020:
|
ACCOUNTING POLICIES (Details) - CARES Act [Member] |
3 Months Ended |
---|---|
Mar. 31, 2021 | |
Minimum [Member] | |
Recently Issued Accounting Pronouncements [Abstract] | |
Term of payment deferrals | 3 months |
Maximum [Member] | |
Recently Issued Accounting Pronouncements [Abstract] | |
Term of payment deferrals | 6 months |
INVESTMENT SECURITIES, Contractual or Expected Maturity (Details) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Maturity in years [Abstract] | ||
Due in one year or less | $ 17,585 | |
Due after one year through five years | 82,350 | |
Due after five years through ten years | 65,385 | |
Due after ten years | 18,262 | |
Subtotal | 183,582 | |
MBS & CMO | 278,221 | |
Amortized cost | 461,803 | $ 424,981 |
Maturity in years [Abstract] | ||
Due in one year or less | 17,746 | |
Due after one year through five years | 83,346 | |
Due after five years through ten years | 64,322 | |
Due after ten years | 18,838 | |
Subtotal | 184,252 | |
MBS & CMO | 281,794 | |
Estimated fair value | $ 466,046 | $ 435,080 |
LOANS, Troubled Debt Restructurings (Details) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021
USD ($)
Loan
|
Mar. 31, 2020
Loan
|
Dec. 31, 2020
USD ($)
|
|
Troubled Debt Restructurings [Abstract] | |||
Period of continuous payment for reclassification of nonaccrual loans to accruing status | 6 months | ||
TDR loans | $ 1,195,000 | $ 2,325,000 | |
Specific reserves for TDR loans | 160,000 | 253,000 | |
TDR loans performing in compliance with modified terms | 1,195,000 | $ 2,260,000 | |
Commitments to advance existing TDR loans | $ 0 | ||
Loans Modified as TDR's [Abstract] | |||
Number of contracts | Loan | 0 | 0 | |
Number of TDR loans defaulted within 12 months of modification date | Loan | 0 | 0 |
MORTGAGE OPERATIONS (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
|
MORTGAGE OPERATIONS [Abstract] | |||
Real estate mortgage loans serviced | $ 207,204,000 | $ 206,208,000 | |
Key assumptions used in measuring the fair value of mortgage servicing rights [Abstract] | |||
Constant prepayment rate | 16.33% | 20.22% | |
Discount rate | 10.00% | 10.00% | |
Weighted average life | 4 years 9 months 14 days | 3 years 11 months 15 days | |
Mortgage servicing rights [Roll Forward] | |||
Beginning balance | $ 1,628,000 | ||
Additions | 206,000 | ||
Reductions | (108,000) | ||
Ending balance | 1,726,000 | $ 1,628,000 | |
Valuation allowance [Roll Forward] | |||
Beginning balance | (386,000) | ||
Additions | 0 | ||
Reductions | 123,000 | ||
Ending balance | (263,000) | (386,000) | |
Mortgage servicing rights, net of valuation allowance [Roll Forward] | |||
Beginning balance | 1,242,000 | ||
Additions | 206,000 | ||
Reductions | 15,000 | ||
Ending balance | 1,463,000 | ||
Fair value of mortgage servicing rights asset | 1,463,000 | $ 1,242,000 | |
Contractually specified servicing fees | $ 134,000 | $ 131,000 |
STOCK PLANS (Details) |
3 Months Ended | |
---|---|---|
Jan. 27, 2021 |
Mar. 31, 2021 |
|
Dividends [Abstract] | ||
Stock dividend percentage | 5.00% | |
Dividends, date declared | Jan. 27, 2021 | |
Dividends, date to be paid | Mar. 25, 2021 | |
Dividends, date of record | Feb. 26, 2021 |
SHORT-TERM BORROWINGS (Details) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Short-Term Borrowings [Abstract] | ||
Short-term borrowings | $ 5,000,000 | $ 5,000,000 |
Federal Home Loan Bank Advances [Member] | COVID-19 Relief and Recovery Advances Program [Member] | ||
Short-Term Borrowings [Abstract] | ||
Short-term borrowings | $ 5,000,000 | $ 5,000,000 |
Interest rate | 0.00% | 0.00% |
Remaining collateral borrowing capacity with FHLB | $ 292,864,000 | |
Line of Credit [Member] | ||
Short-Term Borrowings [Abstract] | ||
Unsecured lines of credit with correspondent banks | $ 122,000,000 |
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