QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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The
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Large accelerated filer
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☐
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☒
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Non-accelerated filer
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☐
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Smaller reporting company
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Emerging growth company
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Page
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PART I.
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3
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Item 1.
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3
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3
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4
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6
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7
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8
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||
Item 2.
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30
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Item 3.
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52
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Item 4.
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52
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PART II.
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53
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Item 1.
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53
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Item 1A.
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53
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Item 2.
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53
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Item 3.
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53
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Item 4.
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53
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Item 5.
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53
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Item 6.
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54
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55
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Item 1. |
Consolidated
Financial Statements
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September 30,
2022
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December 31,
2021
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|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Cash and due from banks
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$
|
|
$
|
|
||||
Interest-bearing deposits in banks
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||||||
Cash and cash equivalents
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||||||
Securities available for sale
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||||||
Loans held for sale
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||||||
Loans held for investment
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||||||
Allowance for loan losses
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(
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)
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(
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)
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||||
Loans held for investment, net
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||||||||
Accrued interest receivable
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||||||
Premises and equipment, net
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||||||
Bank-owned life insurance
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||||||
Goodwill
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||||||
Intangible assets, net
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||||||
Mortgage servicing rights
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||||||
Deferred tax asset, net
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||||||
Other assets
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||||||
Total assets
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$
|
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$
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Deposits:
|
||||||||
Noninterest-bearing
|
$
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|
$
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|
||||
Interest-bearing
|
|
|
||||||
Total deposits
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|
||||||
Accrued expenses and other liabilities
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|
|
||||||
Subordinated debt securities
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||||||
Junior subordinated deferrable interest debentures
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|
||||||
Total liabilities
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|
||||||
Stockholders’ equity:
|
||||||||
Common stock, $
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|
||||||
Additional paid-in capital
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|
||||||
Retained earnings
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|
||||||
Accumulated other comprehensive income (loss)
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(
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)
|
|
|||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
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$
|
|
$
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Interest income:
|
||||||||||||||||
Loans, including fees
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Securities:
|
||||||||||||||||
Taxable
|
|
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||||||||||||
Non-taxable
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||||||||||||
Federal funds sold and interest-bearing deposits in banks
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|
||||||||||||
Total interest income
|
|
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|
||||||||||||
Interest expense:
|
||||||||||||||||
Deposits
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|
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|
||||||||||||
Notes payable & other borrowings
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|
|
|
|
||||||||||||
Subordinated debt securities
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|
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|
||||||||||||
Junior subordinated deferrable interest debentures
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|
||||||||||||
Total interest expense
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|
||||||||||||
Net interest income
|
|
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|
||||||||||||
Provision for loan losses
|
(
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)
|
|
(
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)
|
(
|
)
|
|||||||||
Net interest income, after provision for loan losses
|
|
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|
||||||||||||
Noninterest income:
|
||||||||||||||||
Service charges on deposit accounts
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|
||||||||||||
Income from insurance activities
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||||||||||||
Net gain on sales of loans
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||||||||||||
Bank card services and interchange fees
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||||||||||||
Other mortgage banking income
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||||||||||||||
Investment commissions
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||||||||||||
Fiduciary fees
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||||||||||||
Other
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||||||||||||
Total noninterest income
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|
||||||||||||
Noninterest expense:
|
||||||||||||||||
Salaries and employee benefits
|
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|
||||||||||||
Occupancy and equipment, net
|
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|
||||||||||||
Professional services
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||||||||||||
Marketing and development
|
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||||||||||||
IT and data services
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||||||||||||
Bank card expenses
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||||||||||||
Appraisal expenses
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|
||||||||||||
Other
|
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|
||||||||||||
Total noninterest expense
|
|
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|
||||||||||||
Income before income taxes
|
|
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|
||||||||||||
Income tax expense
|
|
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|
||||||||||||
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Earnings per share:
|
||||||||||||||||
Basic
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Diluted
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other comprehensive income (loss): | ||||||||||||||||
Unrealized gain (loss) on securities available for sale |
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Less: Change in fair value on
hedged state and municipal securities
|
|
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|
|
||||||||||||
Tax effect
|
|
|
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|
||||||||||||
Other comprehensive income (loss)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Comprehensive income (loss)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
Common Stock
|
Additional
Paid-in
|
Retained
|
Accumulated
Other
Comprehensive
|
|||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Income (Loss)
|
Total
|
|||||||||||||||||||
Nine
Months Ended September 30,
|
||||||||||||||||||||||||
Balance at December 31, 2020
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||||||
Net income
|
—
|
|
|
|
|
|
||||||||||||||||||
Cash dividends declared - $
|
—
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
Other comprehensive loss
|
—
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Exercise of employee stock options and vesting of restricted stock units, net of
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
Repurchases of common stock
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||
Stock-based compensation
|
—
|
|
|
|
|
|
||||||||||||||||||
Balance at September 30, 2021
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||||||
Balance at December 31, 2021
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||||||
Net income
|
—
|
|
|
|
|
|
||||||||||||||||||
Cash dividends declared - $
|
—
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
Other comprehensive loss
|
—
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Impact of adoption of Topic 842 related to leases |
— | ( |
) | ( |
) | |||||||||||||||||||
Exercise of employee stock options and vesting of restricted stock units, net of
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
Repurchases of common stock
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||
Stock-based compensation
|
—
|
|
|
|
|
|
||||||||||||||||||
Balance at September 30, 2022
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||
Three Months Ended September 30,
|
||||||||||||||||||||||||
Balance at June 30,
2021
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||||||
Net income
|
—
|
|
|
|
|
|
||||||||||||||||||
Cash dividends declared - $
|
—
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
Other comprehensive loss
|
—
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Repurchases of common stock
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||
Stock-based compensation
|
—
|
|
|
|
|
|
||||||||||||||||||
Balance at September 30, 2021
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||||||
Balance at June 30, 2022
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||
Net income
|
—
|
|
|
|
|
|
||||||||||||||||||
Cash dividends declared - $
|
—
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
Other comprehensive loss
|
—
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Exercise of employee stock options and vesting of restricted stock units, net of |
( |
) | ( |
) | ||||||||||||||||||||
Repurchases of common stock
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||
Stock-based compensation
|
—
|
|
|
|
|
|
||||||||||||||||||
Balance at September 30, 2022
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
Nine Months Ended
September 30,
|
||||||||
2022
|
2021
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
|
$
|
|
||||
Adjustments to reconcile net income to net cash from operating activities:
|
||||||||
Provision for loan losses
|
(
|
)
|
(
|
)
|
||||
Depreciation and amortization
|
|
|
||||||
Accretion and amortization
|
|
|
||||||
Other gains, net
|
(
|
)
|
(
|
)
|
||||
Net gain on sales of loans
|
(
|
)
|
(
|
)
|
||||
Proceeds from sales of loans held for sale
|
|
|
||||||
Loans originated for sale
|
(
|
)
|
(
|
)
|
||||
Deferred income tax expense
|
||||||||
Earnings on bank-owned life insurance
|
(
|
)
|
(
|
)
|
||||
Stock-based compensation
|
|
|
||||||
Change in valuation of mortgage servicing rights
|
(
|
)
|
(
|
)
|
||||
Net change in:
|
||||||||
Accrued interest receivable and other assets
|
(
|
)
|
|
|||||
Accrued expenses and other liabilities
|
|
|
||||||
Net cash provided by operating activities
|
|
|
||||||
Cash flows from investing activities:
|
||||||||
Activity in securities available for sale:
|
||||||||
Purchases
|
(
|
)
|
(
|
)
|
||||
Maturities, prepayments, and calls
|
|
|
||||||
Loan originations and principal collections, net
|
(
|
)
|
(
|
)
|
||||
Purchases of premises and equipment
|
(
|
)
|
(
|
)
|
||||
Proceeds from sales of premises and equipment
|
|
|
||||||
Proceeds from sales of foreclosed assets
|
|
|
||||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Net change in deposits
|
|
|
||||||
Net change in short-term borrowings
|
|
(
|
)
|
|||||
Payments to tax authorities for stock-based compensation
|
(
|
)
|
(
|
)
|
||||
Payments made on notes payable and other borrowings
|
|
(
|
)
|
|||||
Cash dividends on common stock
|
(
|
)
|
(
|
)
|
||||
Payments to repurchase common stock
|
(
|
)
|
(
|
)
|
||||
Net cash provided by financing activities
|
|
|
||||||
Net change in cash and cash equivalents
|
(
|
)
|
|
|||||
Beginning cash and cash equivalents
|
|
|
||||||
Ending cash and cash equivalents
|
$
|
|
$
|
|
||||
Supplemental disclosures of cash flow information:
|
||||||||
Interest paid on deposits and borrowed funds
|
$
|
|
$
|
|
||||
Income taxes paid
|
||||||||
Supplemental schedule of noncash activities:
|
||||||||
Loans transferred to foreclosed assets
|
$
|
|
$
|
|
||||
Additions to mortgage servicing rights
|
|
|
Wholly-Owned, Consolidated Subsidiaries:
|
|
|
Bank subsidiary
|
|
Non-bank subsidiary
|
|
Non-bank subsidiary
|
|
Non-bank subsidiary
|
|
Non-bank subsidiary
|
|
Non-bank subsidiary
|
Wholly-Owned, Equity Method Subsidiaries:
|
|
|
Non-bank subsidiaries
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
September 30, 2022
|
||||||||||||||||
Available for sale:
|
||||||||||||||||
State and municipal
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
Mortgage-backed securities
|
|
|
(
|
)
|
|
|||||||||||
Collateralized mortgage obligations
|
|
|
(
|
)
|
|
|||||||||||
Asset-backed and other amortizing securities
|
|
|
(
|
)
|
|
|||||||||||
Other securities
|
|
|
(
|
)
|
|
|||||||||||
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
December 31, 2021
|
||||||||||||||||
Available for sale:
|
||||||||||||||||
State and municipal
|
$ |
|
$ |
|
$ |
(
|
)
|
$ |
|
|||||||
Mortgage-backed securities
|
|
|
(
|
)
|
|
|||||||||||
Collateralized mortgage obligations
|
|
|
(
|
)
|
|
|||||||||||
Asset-backed and other amortizing securities
|
|
|
(
|
)
|
|
|||||||||||
Other securities
|
|
|
|
|
||||||||||||
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
Available for Sale
|
||||||||
Amortized
Cost
|
Fair
Value
|
|||||||
Within 1 year
|
$
|
|
$
|
|
||||
After 1 year through 5 years
|
|
|
||||||
After 5 years through 10 years
|
|
|
||||||
After 10 years
|
|
|
||||||
Other
|
|
|
||||||
$
|
|
$
|
|
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
|||||||||||||||||||
September 30, 2022
|
||||||||||||||||||||||||
State and municipal
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||
Mortgage-backed securities
|
|
|
|
|
|
|
||||||||||||||||||
Collateralized mortgage obligations
|
|
|
|
|
|
|
||||||||||||||||||
Asset-backed and other amortizing securities
|
|
|
|
|
|
|
||||||||||||||||||
Other securities
|
|
|
|
|
|
|
||||||||||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||||||
December 31, 2021
|
||||||||||||||||||||||||
State and municipal
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||
Mortgage-backed securities
|
|
|
|
|
|
|
||||||||||||||||||
Collateralized mortgage obligations
|
|
|
|
|
|
|
||||||||||||||||||
Asset-backed and other amortizing securities
|
|
|
|
|
|
|
||||||||||||||||||
Other securities
|
|
|
|
|
|
|
||||||||||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
September 30,
2022
|
December 31,
2021
|
|||||||
Commercial real estate
|
$
|
|
$
|
|
||||
Commercial - specialized
|
|
|
||||||
Commercial - general
|
|
|
||||||
Consumer:
|
||||||||
1-4 family residential
|
|
|
||||||
Auto loans
|
|
|
||||||
Other consumer
|
|
|
||||||
Construction
|
|
|
||||||
|
|
|||||||
Allowance for loan losses
|
(
|
)
|
(
|
)
|
||||
Loans, net
|
$
|
|
$
|
|
Beginning
Balance
|
Provision for
Loan Losses
|
Charge-offs
|
Recoveries
|
Ending
Balance
|
||||||||||||||||
For the three months ended September 30, 2022
|
||||||||||||||||||||
Commercial real estate
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||
Commercial - specialized
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
Commercial - general
|
|
|
|
|
|
|||||||||||||||
Consumer:
|
||||||||||||||||||||
1-4 family residential
|
|
|
(
|
)
|
|
|
||||||||||||||
Auto loans
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
Other consumer
|
|
|
(
|
)
|
|
|
||||||||||||||
Construction
|
|
|
|
|
|
|||||||||||||||
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||
For the three months ended September 30, 2021
|
||||||||||||||||||||
Commercial real estate
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Commercial - specialized
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
Commercial - general
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
Consumer:
|
||||||||||||||||||||
1-4 family residential
|
|
|
|
|
|
|||||||||||||||
Auto loans
|
|
|
(
|
)
|
|
|
||||||||||||||
Other consumer
|
|
|
(
|
)
|
|
|
||||||||||||||
Construction
|
|
|
|
|
|
|||||||||||||||
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
Beginning
Balance
|
Provision for
Loan Losses
|
Charge-offs
|
Recoveries
|
Ending
Balance
|
||||||||||||||||
For the nine months ended September 30, 2022
|
||||||||||||||||||||
Commercial real estate
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||
Commercial - specialized
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
Commercial - general
|
|
|
(
|
)
|
|
|
||||||||||||||
Consumer:
|
||||||||||||||||||||
1-4 family residential
|
|
|
(
|
)
|
|
|
||||||||||||||
Auto loans
|
|
|
(
|
)
|
|
|
||||||||||||||
Other consumer
|
|
|
(
|
)
|
|
|
||||||||||||||
Construction
|
|
|
(
|
)
|
|
|
||||||||||||||
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||
For the nine months ended September 30, 2021
|
||||||||||||||||||||
Commercial real estate
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||
Commercial - specialized
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
Commercial - general
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
Consumer:
|
||||||||||||||||||||
1-4 family residential
|
|
|
(
|
)
|
|
|
||||||||||||||
Auto loans
|
|
(
|
)
|
(
|
)
|
|
|
|||||||||||||
Other consumer
|
|
|
(
|
)
|
|
|
||||||||||||||
Construction
|
|
|
|
|
|
|||||||||||||||
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
Recorded Investment
|
Allowance for Loan Losses
|
|||||||||||||||
Individually
Evaluated
|
Collectively
Evaluated
|
Individually
Evaluated
|
Collectively
Evaluated
|
|||||||||||||
September 30, 2022
|
||||||||||||||||
Commercial real estate
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Commercial - specialized
|
|
|
|
|
||||||||||||
Commercial - general
|
|
|
|
|
||||||||||||
Consumer:
|
||||||||||||||||
1-4 family residential
|
|
|
|
|
||||||||||||
Auto loans
|
|
|
|
|
||||||||||||
Other consumer
|
|
|
|
|
||||||||||||
Construction
|
|
|
|
|
||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
December 31, 2021
|
||||||||||||||||
Commercial real estate
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Commercial - specialized
|
|
|
|
|
||||||||||||
Commercial - general
|
|
|
|
|
||||||||||||
Consumer:
|
||||||||||||||||
1-4 family residential
|
|
|
|
|
||||||||||||
Auto loans
|
|
|
|
|
||||||||||||
Other consumer
|
|
|
|
|
||||||||||||
Construction
|
|
|
|
|
||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
Unpaid
Contractual
Principal
Balance
|
Recorded
Investment
With No
Allowance
|
Recorded
Investment
With
Allowance
|
Total
Recorded
Investment
|
Related
Allowance
|
Average
Recorded
Investment
|
|||||||||||||||||||
September 30, 2022
|
||||||||||||||||||||||||
Commercial real estate
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Commercial - specialized
|
|
|
|
|
|
|
||||||||||||||||||
Commercial - general
|
|
|
|
|
|
|
||||||||||||||||||
Consumer:
|
||||||||||||||||||||||||
1-4 family residential
|
|
|
|
|
|
|
||||||||||||||||||
Auto loans
|
|
|
|
|
|
|
||||||||||||||||||
Other consumer
|
|
|
|
|
|
|
||||||||||||||||||
Construction
|
|
|
|
|
|
|
||||||||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
December 31, 2021
|
||||||||||||||||||||||||
Commercial real estate
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Commercial - specialized
|
|
|
|
|
|
|
||||||||||||||||||
Commercial - general
|
|
|
|
|
|
|
||||||||||||||||||
Consumer:
|
||||||||||||||||||||||||
1-4 family residential
|
|
|
|
|
|
|
||||||||||||||||||
Auto loans
|
|
|
|
|
|
|
||||||||||||||||||
Other consumer
|
|
|
|
|
|
|
||||||||||||||||||
Construction
|
|
|
|
|
|
|
||||||||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
30-89 Days
Past Due
|
90 Days or
More Past Due
|
Nonaccrual
|
||||||||||
September 30, 2022
|
||||||||||||
Commercial real estate
|
$
|
|
$
|
|
$
|
|
||||||
Commercial - specialized
|
|
|
|
|||||||||
Commercial - general
|
|
|
|
|||||||||
Consumer:
|
||||||||||||
1-4 family residential
|
|
|
|
|||||||||
Auto loans
|
|
|
|
|||||||||
Other consumer
|
|
|
|
|||||||||
Construction
|
|
|
|
|||||||||
|
$
|
|
$
|
|
$
|
|
||||||
December 31, 2021
|
||||||||||||
Commercial real estate
|
$
|
|
$
|
|
$
|
|
||||||
Commercial - specialized
|
|
|
|
|||||||||
Commercial - general
|
|
|
|
|||||||||
Consumer:
|
||||||||||||
1-4 family residential
|
|
|
|
|||||||||
Auto loans
|
|
|
|
|||||||||
Other consumer
|
|
|
|
|||||||||
Construction
|
|
|
|
|||||||||
|
$
|
|
$
|
|
$
|
|
Pass
|
Special
Mention
|
Substandard
|
Doubtful
|
Total
|
||||||||||||||||
September 30, 2022
|
||||||||||||||||||||
Commercial real estate
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Commercial - specialized
|
|
|
|
|
|
|||||||||||||||
Commercial - general
|
|
|
|
|
|
|||||||||||||||
Consumer:
|
||||||||||||||||||||
1-4 family residential
|
|
|
|
|
|
|||||||||||||||
Auto loans
|
|
|
|
|
|
|||||||||||||||
Other consumer
|
|
|
|
|
|
|||||||||||||||
Construction
|
|
|
|
|
|
|||||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
December 31, 2021
|
||||||||||||||||||||
Commercial real estate
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Commercial - specialized
|
|
|
|
|
|
|||||||||||||||
Commercial - general
|
|
|
|
|
|
|||||||||||||||
Consumer:
|
||||||||||||||||||||
1-4 family residential
|
|
|
|
|
|
|||||||||||||||
Auto loans
|
|
|
|
|
|
|||||||||||||||
Other consumer
|
|
|
|
|
|
|||||||||||||||
Construction
|
|
|
|
|
|
|||||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
September 30,
2022
|
December 31,
2021
|
|||||||
Amortized intangible assets
|
||||||||
Core deposit intangible
|
$
|
|
$
|
|
||||
Less: Accumulated amortization
|
(
|
)
|
(
|
)
|
||||
|
|
|||||||
Other intangibles
|
|
|
||||||
Less: Accumulated amortization
|
(
|
)
|
(
|
)
|
||||
|
|
|||||||
Other intangible assets, net
|
$
|
|
$
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Beginning balance
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Additions
|
|
|
|
|
||||||||||||
Valuation adjustment
|
|
|
|
|
||||||||||||
Ending balance
|
$
|
|
$
|
|
$
|
|
$
|
|
September 30,
|
December 31,
|
|||||||
2022
|
2021
|
|||||||
Mortgage loans serviced for others
|
$
|
|
$
|
|
||||
Mortgage servicing rights assets as a percentage of serviced mortgage loans
|
|
%
|
|
%
|
September 30,
|
December 31,
|
|||||||
2022
|
2021
|
|||||||
Weighted average constant prepayment rate
|
|
%
|
|
%
|
||||
Weighted average discount rate
|
|
%
|
|
%
|
||||
Weighted average life in years
|
|
|
Number
of Shares
|
Weighted-Average
Exercise Price
|
Weighted-Average
Remaining Contractual
Life in Years
|
Aggregate
Intrinsic Value
|
|||||||||||||
Nine Months Ended September 30, 2022
|
||||||||||||||||
Outstanding at beginning of year:
|
|
$
|
|
$
|
|
|||||||||||
Granted
|
|
|
|
|||||||||||||
Exercised
|
(
|
)
|
|
(
|
)
|
|||||||||||
Forfeited
|
(
|
)
|
|
(
|
)
|
|||||||||||
Expired
|
(
|
)
|
|
(
|
)
|
|||||||||||
Balance, September 30, 2022
|
|
$
|
|
|
$
|
|
||||||||||
Exercisable at end of period
|
|
$
|
|
|
$
|
|
||||||||||
Vested at end of period
|
|
$
|
|
|
$
|
|
Nine Months Ended
September 30,
|
||||||||
2022
|
2021
|
|||||||
Expected volatility
|
|
|
||||||
Expected dividend yield
|
|
|
|
|
||||
Expected term (years)
|
|
|
||||||
Risk-free interest rate
|
|
|
||||||
Weighted average grant date fair value
|
$
|
|
$
|
|
Number
of Shares
|
Weighted-Average
Grant Date
Fair Value
|
|||||||
Nine Months Ended September 30, 2022
|
||||||||
Outstanding at beginning of year:
|
|
$
|
|
|||||
Granted
|
|
|
||||||
Vested
|
(
|
)
|
|
|||||
Forfeited
|
(
|
)
|
|
|||||
Balance, September 30, 2022
|
|
$
|
|
September 30,
2022
|
December 31,
2021
|
|||||||
Commitments to grant loans and unfunded commitments under lines of credit
|
$
|
|
$
|
|
||||
Standby letters of credit
|
|
|
September 30,
2022
|
||||
Operating lease right of use assets (included in )
|
$
|
|
||
Operating lease liabilities (included in )
|
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
||||||
|
2022
|
2022
|
||||||
Cash paid for amounts included in the measurement of lease liabilities:
|
||||||||
Operating cash flows used in operating leases
|
$
|
|
$
|
|
||||
Right-of-use assets obtained in exchange for new lease obligations:
|
||||||||
Operating leases
|
$
|
|
$
|
|
2022
|
$
|
|
||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
Thereafter
|
|
|||
Total minimum lease payments
|
|
|||
Less: Amount representing interest
|
(
|
)
|
||
Lease liabilities
|
$
|
|
Actual
|
Minimum Required
Under BASEL III
Fully Phased-In
|
To Be Well Capitalized
Under Prompt Corrective
Action Provisions
|
||||||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||||||
September 30, 2022
|
||||||||||||||||||||||||
Total Capital to Risk Weighted Assets:
|
||||||||||||||||||||||||
Consolidated
|
$
|
|
|
%
|
$
|
|
|
%
|
N/A
|
N/A
|
||||||||||||||
City Bank
|
|
|
%
|
|
|
%
|
$
|
|
|
%
|
||||||||||||||
Tier I Capital to Risk Weighted Assets:
|
||||||||||||||||||||||||
Consolidated
|
|
|
%
|
|
|
%
|
N/A
|
N/A
|
||||||||||||||||
City Bank
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
Common Equity Tier 1 to Risk Weighted Assets:
|
||||||||||||||||||||||||
Consolidated
|
|
|
%
|
|
|
%
|
N/A
|
N/A
|
||||||||||||||||
City Bank
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
Tier I Capital to Average Assets:
|
||||||||||||||||||||||||
Consolidated
|
|
|
%
|
|
|
%
|
N/A
|
N/A
|
||||||||||||||||
City Bank
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
December 31, 2021
|
||||||||||||||||||||||||
Total Capital to Risk Weighted Assets:
|
||||||||||||||||||||||||
Consolidated
|
$
|
|
|
%
|
$
|
|
|
%
|
N/A
|
N/A
|
||||||||||||||
City Bank
|
|
|
%
|
|
|
%
|
$
|
|
|
%
|
||||||||||||||
Tier I Capital to Risk Weighted Assets:
|
||||||||||||||||||||||||
Consolidated
|
|
|
%
|
|
|
%
|
N/A
|
N/A
|
||||||||||||||||
City Bank
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
Common Equity Tier 1 to Risk Weighted Assets:
|
||||||||||||||||||||||||
Consolidated
|
|
|
%
|
|
|
%
|
N/A
|
N/A
|
||||||||||||||||
City Bank
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
Tier I Capital to Average Assets:
|
||||||||||||||||||||||||
Consolidated
|
|
|
%
|
|
|
%
|
N/A
|
N/A
|
||||||||||||||||
City Bank
|
|
|
%
|
|
|
%
|
|
|
%
|
Three Months Ended
|
||||||||||
September 30,
|
||||||||||
Interest Rate Contracts
|
Location
|
2022
|
2021
|
|||||||
Interest rate swaps - fair value hedges
|
Interest income
|
$
|
|
$
|
(
|
)
|
||||
Fair value hedge ineffectiveness
|
Other noninterest expense
|
$
|
|
$
|
|
Nine Months Ended
|
||||||||||
September 30,
|
||||||||||
Interest Rate Contracts
|
Location
|
2022
|
2021
|
|||||||
Interest rate swaps - fair value hedges
|
Interest income
|
$
|
|
$
|
(
|
)
|
||||
Fair value hedge ineffectiveness
|
Other noninterest expense
|
$
|
|
$
|
|
September 30, 2022
|
December 31, 2021
|
|||||||||||||||
Notional
Amount
|
Fair
Value
|
Notional
Amount
|
Fair
Value
|
|||||||||||||
Included in other liabilities:
|
||||||||||||||||
Interest rate swaps related to fixed rate loans
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Interest rate swaps related to state and municipal securities
|
|
|
|
|
||||||||||||
Included in other assets:
|
||||||||||||||||
Interest rate swaps related to fixed rate loans
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Interest rate swaps related to state and municipal securities
|
|
|
|
|
Three Months Ended
|
|||||||||
|
|
September 30,
|
|||||||
|
Location |
2022
|
2021
|
||||||
Forward contracts related to mortgage loans held for sale
|
Net gain (loss) on sales of loans
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Interest rate lock commitments
|
Net gain (loss) on sales of loans
|
$
|
|
$
|
|
Nine Months Ended
|
|||||||||
September 30,
|
|||||||||
|
Location |
2022
|
2021
|
||||||
Forward contracts related to mortgage loans held for sale
|
Net gain (loss) on sales of loans
|
$
|
(
|
)
|
$
|
|
|||
Interest rate lock commitments
|
Net gain (loss) on sales of loans
|
$
|
|
$
|
(
|
)
|
September 30, 2022
|
December 31, 2021
|
|||||||||||||||
Notional
Amount
|
Fair
Value
|
Notional
Amount
|
Fair
Value
|
|||||||||||||
Included in other assets:
|
||||||||||||||||
Forward contracts related to mortgage loans held for sale
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Interest rate lock commitments
|
|
|
|
|
||||||||||||
Total included in other assets
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Included in other liabilities:
|
||||||||||||||||
Forward contracts related to mortgage loans held for sale
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Interest rate lock commitments
|
|
|
|
|
||||||||||||
|
||||||||||||||||
Total included in other liabilities
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Weighted average common shares outstanding - basic
|
|
|
|
|
||||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Stock-based compensation awards
|
|
|
|
|
||||||||||||
Weighted average common shares outstanding - diluted
|
|
|
|
|
||||||||||||
Basic earnings per share
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Diluted earnings per share
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended September 30, 2022
|
Banking
|
Insurance
|
Consolidated
|
|||||||||
Net interest income
|
$
|
|
$
|
|
$
|
|
||||||
Provision for loan losses
|
|
|
|
|||||||||
Noninterest income
|
|
|
|
|||||||||
Noninterest expense
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Income before income taxes
|
|
|
|
|||||||||
Income tax (expense) benefit
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Net income
|
$
|
|
$
|
|
$
|
|
Three Months Ended September 30, 2021
|
Banking
|
Insurance
|
Consolidated
|
|||||||||
Net interest income
|
$
|
|
$
|
|
$
|
|
||||||
Provision for loan losses
|
|
|
|
|||||||||
Noninterest income
|
|
|
|
|||||||||
Noninterest expense
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Income before income taxes
|
|
|
|
|||||||||
Income tax (expense) benefit
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Net income
|
$
|
|
$
|
|
$
|
|
Nine Months Ended September 30, 2022
|
Banking
|
Insurance
|
Consolidated
|
|||||||||
Net interest income
|
$
|
|
$
|
|
$
|
|
||||||
Provision for loan losses
|
|
|
|
|||||||||
Noninterest income
|
|
|
|
|||||||||
Noninterest expense
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Income before income taxes
|
|
|
|
|||||||||
Income tax (expense) benefit
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Net income
|
$
|
|
$
|
|
$
|
|
Nine Months Ended September 30, 2021
|
Banking
|
Insurance
|
Consolidated
|
|||||||||
Net interest income
|
$
|
|
$
|
|
$
|
|
||||||
Provision for loan losses
|
|
|
|
|||||||||
Noninterest income
|
|
|
|
|||||||||
Noninterest expense
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Income before income taxes
|
|
|
|
|||||||||
Income tax (expense) benefit
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Net income
|
$
|
|
$
|
|
$
|
|
● |
Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the measurement date.
|
● |
Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or
other means.
|
● |
Level 3 Inputs - Significant unobservable inputs for determining the fair values of assets
or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
September 30, 2022
|
||||||||||||||||
Assets (liabilities) measured at fair value on a recurring basis:
|
||||||||||||||||
Securities available for sale:
|
||||||||||||||||
State and municipal
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Mortgage-backed securities
|
|
|
|
|
||||||||||||
Collateralized mortgage obligations
|
|
|
|
|
||||||||||||
Asset-backed and other amortizing securities
|
|
|
|
|
||||||||||||
Other securities
|
|
|
|
|
||||||||||||
Loans held for sale (mandatory)
|
|
|
|
|
||||||||||||
Mortgage servicing rights
|
|
|
|
|
||||||||||||
Asset derivatives
|
|
|
|
|
||||||||||||
Liability derivatives
|
|
(
|
)
|
|
(
|
)
|
||||||||||
Assets measured at fair value on a non-recurring basis:
|
||||||||||||||||
Impaired loans
|
|
|
|
|
||||||||||||
December 31, 2021
|
||||||||||||||||
Assets (liabilities) measured at fair value on a recurring basis:
|
||||||||||||||||
Securities available for sale:
|
||||||||||||||||
State and municipal
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Mortgage-backed securities
|
|
|
|
|
||||||||||||
Collateralized mortgage obligations
|
|
|
|
|
||||||||||||
Asset-backed and other amortizing securities
|
|
|
|
|
||||||||||||
Other securities
|
|
|
|
|
||||||||||||
Loans held for sale (mandatory)
|
|
|
|
|
||||||||||||
Mortgage servicing rights
|
|
|
|
|
||||||||||||
Asset derivatives
|
|
|
|
|
||||||||||||
Liability derivatives
|
|
(
|
)
|
|
(
|
)
|
||||||||||
Assets measured at fair value on a non-recurring basis:
|
||||||||||||||||
Impaired loans
|
|
|
|
|
Fair
Value
|
Valuation
Techniques
|
Unobservable
Inputs
|
Range of
Discounts
|
||||||||
September 30, 2022
|
|||||||||||
Non-recurring: |
|||||||||||
Impaired loans
|
$
|
|
Third party appraisals or inspections
|
Collateral discounts and selling costs
|
|
%
|
|||||
Recurring: |
|||||||||||
Mortgage servicing rights
|
|
Discounted cash flows
|
Conditional prepayment rate
|
|
%
|
||||||
Discount rate
|
|
%
|
|||||||||
December 31, 2021
|
|||||||||||
Non-recurring: |
|||||||||||
Impaired loans
|
$
|
|
Third party appraisals or inspections
|
Collateral discounts and selling costs
|
|
%
|
|||||
Recurring: |
|||||||||||
Mortgage servicing rights
|
|
Discounted cash flows
|
Conditional prepayment rate
|
|
%
|
||||||
Discount rate
|
|
%
|
Carrying
Amount
|
Level 1
|
Level 2
|
Level 3
|
Total
Fair Value
|
||||||||||||||||
September 30, 2022
|
||||||||||||||||||||
Financial assets:
|
||||||||||||||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Loans held for investment, net
|
|
|
|
|
|
|||||||||||||||
Loans held for sale (best efforts) |
||||||||||||||||||||
Accrued interest receivable
|
|
|
|
|
|
|||||||||||||||
Financial liabilities:
|
||||||||||||||||||||
Deposits
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Accrued interest payable
|
|
|
|
|
|
|||||||||||||||
Junior subordinated deferrable interest debentures
|
|
|
|
|
|
|||||||||||||||
Subordinated debt securities
|
|
|
|
|
|
Carrying
Amount
|
Level 1
|
Level 2
|
Level 3
|
Total
Fair Value
|
||||||||||||||||
December 31, 2021
|
||||||||||||||||||||
Financial assets:
|
||||||||||||||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Loans held for investment, net
|
|
|
|
|
|
|||||||||||||||
Loans held for sale (best efforts) |
||||||||||||||||||||
Accrued interest receivable
|
|
|
|
|
|
|||||||||||||||
Financial liabilities:
|
||||||||||||||||||||
Deposits
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Accrued interest payable
|
|
|
|
|
|
|||||||||||||||
Junior subordinated deferrable interest debentures
|
|
|
|
|
|
|||||||||||||||
Subordinated debt securities
|
|
|
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
● |
our ability to effectively execute our expansion strategy and manage our growth, including identifying and consummating suitable acquisitions;
|
● |
business and economic conditions, particularly those affecting our market areas, as well as the concentration of our business in such market areas;
|
● |
the impact, duration and severity of the ongoing COVID-19 pandemic, or any current or future variants thereof, and the response of governmental authorities to the COVID-19 pandemic and our participation in
COVID-19-related government programs such as the Paycheck Protection Program (the “PPP”) administered by the Small Business Administration (the “SBA”) and created under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES
Act”);
|
● |
the uncertain inflationary outlook in the United States and our market areas, and its impact on market interest rates, the economy and credit quality;
|
● |
high concentrations of loans secured by real estate located in our market areas;
|
● |
risks associated with our commercial loan portfolio, including the uncertain economic consequences of the ongoing COVID-19 pandemic, or any current or future variants thereof, or any deterioration in value of
the general business assets that secure such loans;
|
● |
potential changes in the prices, values and sales volumes of commercial and residential real estate securing our real estate loans;
|
● |
risks associated with our agricultural loan portfolio, including the heightened sensitivity to weather conditions, commodity prices, and other factors generally outside the borrowers and our control;
|
● |
risks associated with the sale of crop insurance products, including termination of or substantial changes to the federal crop insurance program;
|
● |
risks related to the significant amount of credit that we have extended to a limited number of borrowers and in a limited geographic area;
|
● |
public funds deposits comprising a relatively high percentage of our deposits;
|
● |
potential impairment on the goodwill we have recorded or may record in connection with business acquisitions;
|
● |
our ability to maintain our reputation;
|
● |
our ability to successfully manage our credit risk and the sufficiency of our allowance for loan losses;
|
● |
our ability to attract, hire and retain qualified management personnel;
|
● |
our dependence on our management team, including our ability to retain executive officers and key employees and their customer and community relationships;
|
● |
market interest rate fluctuations, which could have an adverse effect on our profitability;
|
● |
increases in market interest rates, which could negatively impact bond market values and result in a lower net book value;
|
● |
our ability to successfully manage the current rising market interest rate environment, our credit risk and the level of future non-performing assets and charge-offs;
|
● |
competition from banks, credit unions and other financial services providers;
|
● |
our ability to keep pace with technological change or difficulties we may experience when implementing new technologies;
|
● |
system failures, service denials, cyber-attacks and security breaches;
|
● |
our ability to maintain effective internal control over financial reporting;
|
● |
employee error, fraudulent activity by employees or customers and inaccurate or incomplete information about our customers and counterparties;
|
● |
increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;
|
● |
our ability to maintain adequate liquidity and to raise necessary capital to fund our acquisition strategy and operations or to meet increased minimum regulatory capital levels;
|
● |
costs and effects of litigation, investigations or similar matters to which we may be subject, including any effect on our reputation;
|
● |
natural disasters, severe weather, acts of god, acts of war or terrorism, outbreaks of hostilities, public health outbreaks (such as the ongoing COVID-19 pandemic), other international or domestic calamities,
and other matters beyond our control;
|
● |
tariffs and trade barriers;
|
● |
compliance with governmental and regulatory requirements, including the Dodd-Frank Act Wall Street Reform and Consumer Protection Act, the Economic Growth, Regulatory Relief, and Consumer Protection Act
(“EGRRCPA”), and others relating to banking, consumer protection, securities and tax matters; and
|
● |
changes in the laws, rules, regulations, interpretations or policies relating to financial institutions, accounting, tax, trade, monetary and fiscal matters, including our ability to navigate the uncertain
impacts of quantitative tightening and current and future governmental monetary and fiscal policies, including the policies of the Board of Governors of the Federal Reserve System (“Federal Reserve”) and as a result of initiatives of the
Biden administration.
|
Three Months Ended September 30,
|
||||||||||||||||||||||||
2022
|
2021
|
|||||||||||||||||||||||
Average
Balance
|
Interest
|
Yield/
Rate
|
Average
Balance
|
Interest
|
Yield/
Rate
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Loans, excluding PPP(1)
|
$
|
2,666,429
|
$
|
34,176
|
5.09
|
%
|
$
|
2,365,010
|
$
|
28,947
|
4.86
|
%
|
||||||||||||
Loans - PPP
|
4,754
|
288
|
24.03
|
86,645
|
1,872
|
8.57
|
||||||||||||||||||
Investment securities – taxable
|
617,722
|
4,166
|
2.68
|
531,620
|
2,309
|
1.72
|
||||||||||||||||||
Investment securities – non-taxable
|
215,508
|
1,428
|
2.63
|
221,026
|
1,468
|
2.64
|
||||||||||||||||||
Other interest-earning assets(2)
|
293,636
|
1,351
|
1.83
|
284,369
|
151
|
0.21
|
||||||||||||||||||
Total interest-earning assets
|
3,798,049
|
41,409
|
4.33
|
3,488,670
|
34,747
|
3.95
|
||||||||||||||||||
Noninterest-earning assets
|
208,135
|
259,641
|
||||||||||||||||||||||
Total assets
|
$
|
4,006,184
|
$
|
3,748,311
|
||||||||||||||||||||
Liabilities and Stockholders’ Equity:
|
||||||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
NOW, savings and money market deposits
|
$
|
1,873,786
|
$
|
3,514
|
0.74
|
%
|
$
|
1,820,677
|
$
|
1,005
|
0.22
|
%
|
||||||||||||
Time deposits
|
330,133
|
1,023
|
1.23
|
330,161
|
1,025
|
1.23
|
||||||||||||||||||
Short-term borrowings
|
4
|
—
|
0.00
|
725
|
—
|
0.00
|
||||||||||||||||||
Notes payable & other longer-term borrowings
|
—
|
—
|
0.00
|
—
|
—
|
0.00
|
||||||||||||||||||
Subordinated debt securities
|
75,914
|
1,012
|
5.29
|
75,728
|
1,013
|
5.31
|
||||||||||||||||||
Junior subordinated deferrable interest debentures
|
46,393
|
457
|
3.91
|
46,393
|
217
|
1.86
|
||||||||||||||||||
Total interest-bearing liabilities
|
$
|
2,326,230
|
$
|
6,006
|
1.02
|
%
|
$
|
2,273,684
|
$
|
3,260
|
0.57
|
%
|
||||||||||||
Noninterest-bearing liabilities:
|
||||||||||||||||||||||||
Noninterest-bearing deposits
|
$
|
1,248,804
|
$
|
1,035,910
|
||||||||||||||||||||
Other liabilities
|
78,139
|
43,171
|
||||||||||||||||||||||
Total noninterest-bearing liabilities
|
1,326,943
|
1,079,081
|
||||||||||||||||||||||
Stockholders’ equity
|
353,011
|
395,546
|
||||||||||||||||||||||
Total liabilities and stockholders’ equity
|
$
|
4,006,184
|
$
|
3,748,311
|
||||||||||||||||||||
Net interest income
|
$
|
35,403
|
$
|
31,487
|
||||||||||||||||||||
Net interest spread
|
3.30
|
%
|
3.38
|
%
|
||||||||||||||||||||
Net interest margin(3)
|
3.70
|
%
|
3.58
|
%
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||
2022
|
2021
|
|||||||||||||||||||||||
Average
Balance
|
Interest
|
Yield/
Rate
|
Average
Balance
|
Interest
|
Yield/
Rate
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Loans, excluding PPP(1)
|
$
|
2,548,174
|
$
|
97,321
|
5.11
|
%
|
$
|
2,246,650
|
$
|
82,314
|
4.90
|
%
|
||||||||||||
Loans - PPP
|
19,509
|
1,941
|
13.30
|
141,040
|
7,147
|
6.78
|
||||||||||||||||||
Investment securities – taxable
|
592,069
|
10,058
|
2.27
|
540,380
|
7,118
|
1.76
|
||||||||||||||||||
Investment securities – non-taxable
|
216,951
|
4,315
|
2.66
|
219,242
|
4,414
|
2.69
|
||||||||||||||||||
Other interest-earning assets(2)
|
363,659
|
2,213
|
0.81
|
328,412
|
373
|
0.15
|
||||||||||||||||||
Total interest-earning assets
|
3,740,362
|
115,848
|
4.14
|
3,475,724
|
101,366
|
3.90
|
||||||||||||||||||
Noninterest-earning assets
|
236,296
|
261,449
|
||||||||||||||||||||||
Total assets
|
$
|
3,976,658
|
$
|
3,737,173
|
||||||||||||||||||||
Liabilities and Shareholders’ Equity:
|
||||||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
NOW, savings and money market deposits
|
$
|
1,905,000
|
$
|
5,782
|
0.41
|
%
|
$
|
1,834,113
|
$
|
3,259
|
0.24
|
%
|
||||||||||||
Time deposits
|
334,686
|
2,962
|
1.18
|
326,862
|
3,114
|
1.27
|
||||||||||||||||||
Short-term borrowings
|
4
|
—
|
0.00
|
10,725
|
5
|
0.06
|
||||||||||||||||||
Notes payable & other longer-term borrowings
|
—
|
—
|
0.00
|
26,188
|
38
|
0.19
|
||||||||||||||||||
Subordinated debt securities
|
75,852
|
3,037
|
5.35
|
75,682
|
3,044
|
5.38
|
||||||||||||||||||
Junior subordinated deferrable interest debentures
|
46,393
|
1,005
|
2.90
|
46,393
|
661
|
1.90
|
||||||||||||||||||
Total interest-bearing liabilities
|
$
|
2,361,935
|
$
|
12,786
|
0.72
|
%
|
$
|
2,319,963
|
$
|
10,121
|
0.58
|
%
|
||||||||||||
Noninterest-bearing liabilities:
|
||||||||||||||||||||||||
Noninterest-bearing deposits
|
$
|
1,174,783
|
$
|
991,331
|
||||||||||||||||||||
Other liabilities
|
64,639
|
41,996
|
||||||||||||||||||||||
Total noninterest-bearing liabilities
|
1,239,422
|
1,033,327
|
||||||||||||||||||||||
Shareholders’ equity
|
375,301
|
383,883
|
||||||||||||||||||||||
Total liabilities and shareholders’ equity
|
$
|
3,976,658
|
$
|
3,737,173
|
||||||||||||||||||||
Net interest income
|
$
|
103,062
|
$
|
91,245
|
||||||||||||||||||||
Net interest spread
|
3.42
|
%
|
3.32
|
%
|
||||||||||||||||||||
Net interest margin(3)
|
3.68
|
%
|
3.51
|
%
|
(1) |
Average loan balances include nonaccrual loans and loans held for sale.
|
(2) |
Includes income and average balances for interest-earning deposits at other banks, nonmarketable securities, federal funds sold and other miscellaneous interest-earning assets.
|
(3) |
Net interest margin is calculated as the annualized net interest income, on a fully tax-equivalent basis, divided by average interest-earning assets.
|
Three Months Ended September 30,
|
||||||||||||
2022 over 2021
|
||||||||||||
Change due to:
|
Total
Variance
|
|||||||||||
Volume
|
Rate
|
|||||||||||
(Dollars in thousands)
|
||||||||||||
Interest-earning assets:
|
||||||||||||
Loans, excluding PPP
|
$
|
3,689
|
$
|
1,540
|
$
|
5,229
|
||||||
Loans - PPP
|
(1,769
|
)
|
185
|
(1,584
|
)
|
|||||||
Investment securities – taxable
|
374
|
1,483
|
1,857
|
|||||||||
Investment securities – non-taxable
|
(37
|
)
|
(3
|
)
|
(40
|
)
|
||||||
Other interest-earning assets
|
5
|
1,195
|
1,200
|
|||||||||
Total increase (decrease) in interest income
|
2,262
|
4,400
|
6,662
|
|||||||||
Interest-bearing liabilities:
|
||||||||||||
NOW, Savings, MMDAs
|
29
|
2,480
|
2,509
|
|||||||||
Time deposits
|
—
|
(2
|
)
|
(2
|
)
|
|||||||
Short-term borrowings
|
—
|
—
|
—
|
|||||||||
Notes payable & other borrowings
|
—
|
—
|
—
|
|||||||||
Subordinated debt securities
|
2
|
(3
|
)
|
(1
|
)
|
|||||||
Junior subordinated deferrable interest debentures
|
—
|
240
|
240
|
|||||||||
Total increase (decrease) interest expense:
|
31
|
2,715
|
2,746
|
|||||||||
Increase (decrease) in net interest income
|
$
|
2,231
|
$
|
1,685
|
$
|
3,916
|
Nine Months Ended September 30,
|
||||||||||||
2022 over 2021
|
||||||||||||
Change due to:
|
Total
Variance
|
|||||||||||
Volume
|
Rate
|
|||||||||||
(Dollars in thousands)
|
||||||||||||
Interest-earning assets:
|
||||||||||||
Loans, excluding PPP
|
$
|
11,047
|
$
|
3,960
|
$
|
15,007
|
||||||
Loans - PPP
|
(6,158
|
)
|
952
|
(5,206
|
)
|
|||||||
Investment securities – taxable
|
681
|
2,259
|
2,940
|
|||||||||
Investment securities – non-taxable
|
(46
|
)
|
(53
|
)
|
(99
|
)
|
||||||
Other interest-earning assets
|
40
|
1,800
|
1,840
|
|||||||||
Total increase (decrease) in interest income
|
5,564
|
8,918
|
14,482
|
|||||||||
Interest-bearing liabilities:
|
||||||||||||
NOW, Savings, MMDAs
|
126
|
2,397
|
2,523
|
|||||||||
Time deposits
|
75
|
(227
|
)
|
(152
|
)
|
|||||||
Short-term borrowings
|
(5
|
)
|
—
|
(5
|
)
|
|||||||
Notes payable & other borrowings
|
(38
|
)
|
—
|
(38
|
)
|
|||||||
Subordinated debt securities
|
7
|
(14
|
)
|
(7
|
)
|
|||||||
Junior subordinated deferrable interest debentures
|
—
|
344
|
344
|
|||||||||
Total increase (decrease) interest expense:
|
165
|
2,500
|
2,665
|
|||||||||
Increase (decrease) in net interest income
|
$
|
5,399
|
$
|
6,418
|
$
|
11,817
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||||||||||
2022
|
2021
|
Increase
(Decrease)
|
2022
|
2021
|
Increase
(Decrease)
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Noninterest income:
|
||||||||||||||||||||||||
Service charges on deposit accounts
|
$
|
1,764
|
$
|
1,851
|
$
|
(87
|
)
|
$
|
5,149
|
$
|
5,023
|
$
|
126
|
|||||||||||
Income from insurance activities
|
4,856
|
3,794
|
1,062
|
8,003
|
6,146
|
1,857
|
||||||||||||||||||
Bank card services and interchange fees
|
3,156
|
3,045
|
111
|
9,856
|
8,760
|
1,096
|
||||||||||||||||||
Mortgage banking activities
|
6,288
|
14,802
|
(8,514
|
)
|
28,594
|
47,329
|
(18,735
|
)
|
||||||||||||||||
Investment commissions
|
391
|
430
|
(39
|
)
|
1,403
|
1,390
|
13
|
|||||||||||||||||
Fiduciary income
|
568
|
556
|
12
|
1,815
|
2,234
|
(419
|
)
|
|||||||||||||||||
Other income and fees(1)
|
3,914
|
1,313
|
2,601
|
8,649
|
3,659
|
4,990
|
||||||||||||||||||
Total noninterest income
|
$
|
20,937
|
$
|
25,791
|
$
|
(4,854
|
)
|
$
|
63,469
|
$
|
74,541
|
$
|
(11,072
|
)
|
(1) |
Other income and fees includes the increase in the cash surrender value of life insurance, safe deposit box rental, check printing, collections, legal settlements, wire transfer and other miscellaneous
services.
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||||||||||
2022
|
2021
|
Increase
(Decrease)
|
2022
|
2021
|
Increase
(Decrease)
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Noninterest expense:
|
||||||||||||||||||||||||
Salaries and employee benefits
|
$
|
22,927
|
$
|
24,116
|
$
|
(1,189
|
)
|
$
|
67,620
|
$
|
71,811
|
$
|
(4,191
|
)
|
||||||||||
Occupancy expense, net
|
4,132
|
3,896
|
236
|
11,902
|
10,960
|
942
|
||||||||||||||||||
Professional services
|
2,523
|
1,388
|
1,135
|
7,795
|
4,483
|
3,312
|
||||||||||||||||||
Marketing and development
|
913
|
777
|
136
|
2,391
|
2,157
|
234
|
||||||||||||||||||
IT and data services
|
908
|
1,068
|
(160
|
)
|
2,902
|
3,029
|
(127
|
)
|
||||||||||||||||
Bankcard expenses
|
1,399
|
1,339
|
60
|
4,050
|
3,640
|
410
|
||||||||||||||||||
Appraisal expenses
|
359
|
790
|
(431
|
)
|
1,432
|
2,350
|
(918
|
)
|
||||||||||||||||
Other expenses(1)
|
4,240
|
4,689
|
(449
|
)
|
13,289
|
13,468
|
(179
|
)
|
||||||||||||||||
Total noninterest expense
|
$
|
37,401
|
$
|
38,063
|
$
|
(662
|
)
|
$
|
111,381
|
$
|
111,898
|
$
|
(517
|
)
|
(1) |
Other expenses include items such as telephone expenses, postage, courier fees, directors’ fees, and insurance.
|
Due in
One Year or Less
|
Due after One Year
Through Five Years
|
Due after Five Years
Through Fifteen Years
|
Due after
Fifteen Years
|
Total
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
Commercial real estate
|
$
|
116,194
|
$
|
426,898
|
$
|
244,483
|
$
|
81,656
|
$
|
869,231
|
||||||||||
Commercial - specialized
|
98,706
|
159,969
|
63,261
|
46,268
|
368,204
|
|||||||||||||||
Commercial - general
|
61,356
|
155,582
|
136,366
|
123,905
|
477,209
|
|||||||||||||||
Consumer:
|
||||||||||||||||||||
1-4 family residential
|
31,870
|
74,860
|
74,777
|
243,295
|
424,802
|
|||||||||||||||
Auto loans
|
3,064
|
161,110
|
144,937
|
—
|
309,111
|
|||||||||||||||
Other consumer
|
4,887
|
47,487
|
28,150
|
—
|
80,524
|
|||||||||||||||
Construction
|
139,837
|
2,661
|
938
|
17,849
|
161,285
|
|||||||||||||||
Total loans
|
$
|
455,914
|
$
|
1,028,567
|
$
|
692,912
|
$
|
512,973
|
$
|
2,690,366
|
Fixed
Rate
|
Adjustable
Rate
|
|||||||
(Dollars in thousands)
|
||||||||
Commercial real estate
|
$
|
326,890
|
$
|
426,148
|
||||
Commercial - specialized
|
69,927
|
199,571
|
||||||
Commercial - general
|
150,518
|
265,334
|
||||||
Consumer:
|
||||||||
1-4 family residential
|
231,728
|
161,204
|
||||||
Auto loans
|
306,047
|
—
|
||||||
Other consumer
|
75,271
|
365
|
||||||
Construction
|
1,617
|
19,832
|
||||||
Total loans
|
$
|
1,161,998
|
$
|
1,072,454
|
September 30,
2022
|
December 31,
2021
|
|||||||
(Dollars in thousands)
|
||||||||
Commitments to grant loans and unfunded commitments under lines of credit
|
$
|
741,347
|
$
|
542,338
|
||||
Standby letters of credit
|
12,563
|
12,418
|
||||||
Total
|
$
|
753,910
|
$
|
554,756
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Net charge-offs (recoveries) during the period
|
||||||||||||||||
Commercial real estate
|
$
|
—
|
$
|
—
|
$
|
(418
|
)
|
$
|
—
|
|||||||
Commercial – specialized
|
(831
|
)
|
(4
|
)
|
(836
|
)
|
(98
|
)
|
||||||||
Commercial – general
|
(135
|
)
|
(61
|
)
|
(76
|
)
|
186
|
|||||||||
Consumer:
|
||||||||||||||||
1-4 family residential
|
15
|
(2
|
)
|
53
|
47
|
|||||||||||
Auto loans
|
27
|
91
|
105
|
335
|
||||||||||||
Other consumer
|
270
|
171
|
580
|
401
|
||||||||||||
Construction
|
—
|
—
|
166
|
(4
|
)
|
|||||||||||
Total net charge-offs (recoveries) during the period
|
(654
|
)
|
195
|
(426
|
)
|
867
|
||||||||||
Total average loans outstanding during period
|
$
|
2,671,183
|
$
|
2,451,655
|
$
|
2,567,683
|
$
|
2,387,690
|
||||||||
Total ratio of net charge-offs (recoveries) to average loans during the period (annualized)
|
(0.10
|
)%
|
0.03
|
%
|
(0.02
|
)%
|
0.05
|
%
|
September 30,
2022
|
December 31,
2021
|
|||||||
(Dollars in thousands)
|
||||||||
Total loans held for investment outstanding
|
$
|
2,690,366
|
$
|
2,437,577
|
||||
Nonaccrual loans
|
$
|
4,945
|
$
|
9,518
|
||||
Allowance for loan losses
|
$
|
39,657
|
$
|
42,098
|
||||
Ratio of allowance to total loans held for investment
|
1.47
|
%
|
1.73
|
%
|
||||
Ratio of allowance to nonaccrual loans
|
801.96
|
%
|
442.30
|
%
|
||||
Ratio of nonaccrual loans to total loans held for investment
|
0.18
|
%
|
0.39
|
%
|
September 30, 2022
|
December 31, 2021
|
|||||||||||||||
Amount
|
% of Total
|
Amount
|
% of Total
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Commercial real estate
|
$
|
12,611
|
31.8
|
%
|
$
|
17,245
|
41.0
|
%
|
||||||||
Commercial – specialized
|
3,705
|
9.3
|
4,363
|
10.4
|
||||||||||||
Commercial – general
|
10,425
|
26.3
|
8,466
|
20.1
|
||||||||||||
Consumer:
|
||||||||||||||||
1-4 family residential
|
5,561
|
14.0
|
5,268
|
12.5
|
||||||||||||
Auto loans
|
3,892
|
9.8
|
3,653
|
8.7
|
||||||||||||
Other consumer
|
1,455
|
3.7
|
1,357
|
3.2
|
||||||||||||
Construction
|
2,008
|
5.1
|
1,746
|
4.1
|
||||||||||||
Total allowance for loan losses
|
$
|
39,657
|
100.0
|
%
|
$
|
42,098
|
100.0
|
%
|
As of September 30, 2022
|
||||||||||||||||||||||||||||||||
Due in One
Year or Less
|
Due after One Year
Through Five Years
|
Due after Five Years
Through Ten Years
|
Due after
Ten Years
|
|||||||||||||||||||||||||||||
Amortized
Cost
|
Weighted
Average
Yield
|
Amortized
Cost
|
Weighted
Average
Yield
|
Amortized
Cost
|
Weighted
Average
Yield
|
Amortized
Cost
|
Weighted
Average
Yield
|
|||||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||
Available-for-sale
|
||||||||||||||||||||||||||||||||
State and municipal
|
$
|
1,901
|
3.43
|
%
|
$
|
8,704
|
2.16
|
%
|
$
|
7,532
|
2.22
|
%
|
$
|
242,144
|
2.24
|
%
|
||||||||||||||||
Mortgage-backed securities
|
5
|
1.99
|
%
|
3,008
|
1.98
|
54,125
|
2.21
|
388,174
|
2.20
|
|||||||||||||||||||||||
Collateralized mortgage obligations
|
—
|
—
|
—
|
—
|
86,120
|
3.52
|
—
|
—
|
||||||||||||||||||||||||
Asset-backed and other amortizing securities
|
—
|
—
|
—
|
—
|
1,758
|
2.92
|
20,408
|
2.81
|
||||||||||||||||||||||||
Other securities
|
—
|
—
|
—
|
—
|
12,000
|
4.47
|
—
|
—
|
||||||||||||||||||||||||
Total available-for-sale
|
$
|
1,906
|
3.43
|
%
|
$
|
11,712
|
2.12
|
%
|
$
|
161,535
|
3.09
|
%
|
$
|
650,726
|
2.24
|
%
|
As of December 31, 2021
|
||||||||||||||||||||||||||||||||
Due in One
Year or Less
|
Due after One Year
Through Five Years
|
Due after Five Years
Through Ten Years
|
Due after
Ten Years
|
|||||||||||||||||||||||||||||
Amortized
Cost
|
Weighted
Average
Yield
|
Amortized
Cost
|
Weighted
Average
Yield
|
Amortized
Cost
|
Weighted
Average
Yield
|
Amortized
Cost
|
Weighted
Average
Yield
|
|||||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||
Available-for-sale
|
||||||||||||||||||||||||||||||||
State and municipal
|
$
|
1,939
|
2.74
|
%
|
$
|
7,563
|
2.58
|
%
|
$
|
10,502
|
2.11
|
%
|
$
|
245,139
|
2.24
|
%
|
||||||||||||||||
Mortgage-backed securities
|
—
|
—
|
1,476
|
1.43
|
59,116
|
2.20
|
242,381
|
1.86
|
||||||||||||||||||||||||
Collateralized mortgage obligations
|
—
|
—
|
—
|
—
|
106,733
|
0.56
|
—
|
—
|
||||||||||||||||||||||||
Asset-backed and other amortizing securities
|
—
|
—
|
—
|
—
|
2,328
|
2.90
|
23,718
|
2.82
|
||||||||||||||||||||||||
Other securities
|
—
|
—
|
—
|
—
|
12,000
|
4.47
|
—
|
—
|
||||||||||||||||||||||||
Total available-for-sale
|
$
|
1,939
|
2.74
|
%
|
$
|
9,039
|
2.39
|
%
|
$
|
190,679
|
1.43
|
%
|
$
|
511,238
|
2.09
|
%
|
September 30, 2022
|
December 31, 2021
|
|||||||||||||||
Amount
|
% of Total
|
Amount
|
% of Total
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Noninterest-bearing deposits
|
$
|
1,262,072
|
36.5
|
%
|
$
|
1,071,367
|
32.1
|
%
|
||||||||
NOW and other transaction accounts
|
353,871
|
10.2
|
395,322
|
11.8
|
||||||||||||
Money market and other savings
|
1,518,485
|
43.9
|
1,534,795
|
45.9
|
||||||||||||
Time deposits
|
326,108
|
9.4
|
339,738
|
10.2
|
||||||||||||
Total deposits
|
$
|
3,460,536
|
100.0
|
%
|
$
|
3,341,222
|
100.0
|
%
|
Three Months Ended September 30,
|
||||||||||||||||
2022
|
2021
|
|||||||||||||||
Average
Balance
|
Weighted
Average Rate
|
Average
Balance
|
Weighted
Average Rate
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Noninterest-bearing deposits
|
$
|
1,248,804
|
0.00
|
%
|
$
|
1,035,910
|
0.00
|
%
|
||||||||
Interest-bearing deposits:
|
||||||||||||||||
NOW and interest-bearing demand accounts
|
345,048
|
0.62
|
%
|
356,868
|
0.01
|
%
|
||||||||||
Savings accounts
|
153,848
|
0.34
|
%
|
134,436
|
0.09
|
%
|
||||||||||
Money market accounts
|
1,374,890
|
0.82
|
%
|
1,329,373
|
0.29
|
%
|
||||||||||
Time deposits
|
330,133
|
1.23
|
%
|
330,161
|
1.23
|
%
|
||||||||||
Total interest-bearing deposits
|
2,203,919
|
0.82
|
%
|
2,150,838
|
0.37
|
%
|
||||||||||
Total deposits
|
$
|
3,452,723
|
0.52
|
%
|
$
|
3,186,748
|
0.25
|
%
|
Nine Months Ended September 30,
|
||||||||||||||||
2022
|
2021
|
|||||||||||||||
Average
Balance
|
Weighted
Average Rate
|
Average
Balance
|
Weighted
Average Rate
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Noninterest-bearing deposits
|
$
|
1,174,783
|
0.00
|
%
|
$
|
991,331
|
0.00
|
%
|
||||||||
Interest-bearing deposits:
|
||||||||||||||||
NOW and interest-bearing demand accounts
|
357,547
|
0.31
|
%
|
349,646
|
0.03
|
%
|
||||||||||
Savings accounts
|
150,133
|
0.18
|
%
|
129,004
|
0.08
|
%
|
||||||||||
Money market accounts
|
1,397,321
|
0.45
|
%
|
1,355,463
|
0.31
|
%
|
||||||||||
Time deposits
|
334,686
|
1.18
|
%
|
326,862
|
1.27
|
%
|
||||||||||
Total interest-bearing deposits
|
2,239,687
|
0.52
|
%
|
2,160,975
|
0.39
|
%
|
||||||||||
Total deposits
|
$
|
3,414,470
|
0.34
|
%
|
$
|
3,152,306
|
0.27
|
%
|
(Dollars in thousands)
|
Three
Months
|
Three to
Six Months
|
Six to
12 Months
|
After
12 Months
|
Total
|
|||||||||||||||
$
|
37,983
|
$
|
27,761
|
$
|
12,920
|
$
|
3,504
|
$
|
82,168
|
As of/For the
Three Months Ended
September 30,
|
As of/For the
Nine Months Ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Amount outstanding at end of the period
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||
Weighted average interest rate at end of the period
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
||||||||
Maximum month-end balance during the period
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
75,000
|
||||||||
Average balance outstanding during the period
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
26,188
|
||||||||
Weighted average interest rate during the period
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
0.19
|
%
|
Name of Trust
|
Issue
Date
|
Amount of
Trust Preferred
Securities
|
Amount of
Debentures
|
Stated
Maturity Date of
Trust Preferred
Securities and
Debentures(1)
|
Interest Rate of
Trust Preferred
Securities and
Debentures(2)(3)
|
||||||||||
(Dollars in thousands)
|
|||||||||||||||
South Plains Financial Capital Trust III
|
2004
|
$
|
10,000
|
$
|
10,310
|
2034
|
3-mo. LIBOR + 265 bps; 3.83%
|
||||||||
South Plains Financial Capital Trust IV
|
2005
|
20,000
|
20,619
|
2035
|
3-mo. LIBOR + 139 bps; 3.22%
|
||||||||||
South Plains Financial Capital Trust V
|
2007
|
15,000
|
15,464
|
2037
|
3-mo. LIBOR + 150 bps; 3.33%
|
||||||||||
Total
|
$
|
45,000
|
$
|
46,393
|
(1) |
May be redeemed at the Company’s option.
|
(2) |
Interest payable quarterly with principal due at maturity.
|
(3) |
Rate as of last reset date, prior to September 30, 2022.
|
September 30, 2022
|
December 31, 2021
|
|||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
South Plains Financial, Inc.:
|
||||||||||||||||
Total capital (to risk-weighted assets)
|
$
|
551,832
|
16.46
|
%
|
$
|
524,836
|
18.40
|
%
|
||||||||
Tier 1 capital (to risk-weighted assets)
|
436,081
|
13.01
|
413,322
|
14.49
|
||||||||||||
CET1 capital (to risk-weighted assets)
|
391,081
|
11.67
|
368,322
|
12.91
|
||||||||||||
Tier 1 capital (to average assets)
|
436,081
|
10.95
|
413,322
|
10.77
|
||||||||||||
City Bank:
|
||||||||||||||||
Total capital (to risk-weighted assets)
|
$
|
448,194
|
13.37
|
%
|
$
|
425,748
|
14.93
|
%
|
||||||||
Tier 1 capital (to risk-weighted assets)
|
408,357
|
12.18
|
390,015
|
13.67
|
||||||||||||
CET1 capital (to risk-weighted assets)
|
408,357
|
12.18
|
390,015
|
13.67
|
||||||||||||
Tier 1 capital (to average assets)
|
408,357
|
10.26
|
390,015
|
10.16
|
September 30,
2022
|
December 31,
2021
|
||||||||
Change in Interest Rates (Basis Points)
|
Percent Change in
Net Interest Income
|
Percent Change in
Net Interest Income
|
|||||||
+300
|
2.03
|
%
|
6.89
|
%
|
|||||
+200
|
1.29
|
%
|
4.53
|
%
|
|||||
+100
|
0.74
|
%
|
2.02
|
%
|
|||||
-100
|
(1.96
|
)%
|
(1.05
|
)%
|
September 30,
2022
|
December 31,
2021
|
|||||||
(Dollars in thousands)
|
||||||||
Total stockholders’ equity
|
$
|
341,799
|
$
|
407,427
|
||||
Less: Goodwill and other intangibles
|
(24,228
|
)
|
(25,403
|
)
|
||||
Tangible common equity
|
$
|
317,571
|
$
|
382,024
|
||||
Total assets
|
$
|
3,992,690
|
$
|
3,901,855
|
||||
Less: Goodwill and other intangibles
|
(24,228
|
)
|
(25,403
|
)
|
||||
Tangible assets
|
$
|
3,968,462
|
$
|
3,876,452
|
||||
Shares outstanding
|
17,064,640
|
17,760,243
|
||||||
Total stockholders’ equity to total assets
|
8.56
|
%
|
10.44
|
%
|
||||
Tangible common equity to tangible assets
|
8.00
|
%
|
9.85
|
%
|
||||
Book value per share
|
$
|
20.03
|
$
|
22.94
|
||||
Tangible book value per share
|
$
|
18.61
|
$
|
21.51
|
Item 3. |
Quantitative and Qualitative Disclosure about Market Risk
|
Item 4. |
Controls and Procedures
|
Item 1. |
Legal Proceedings
|
Item 1A. |
Risk Factors
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
Total Shares
Repurchased
|
Average Price
Paid Per Share
|
Total Dollar Amount
Purchased Pursuant to
Publicly-Announced Plan
|
Maximum Dollar Amount
Remaining Available for
Repurchase Pursuant to
Publicly-Announced Plan
|
|||||||||||||
July 2022
|
42,125
|
$
|
24.04
|
$
|
1,012,803
|
$
|
12,500,532
|
|||||||||
August 2022
|
194,852
|
26.46
|
5,155,013
|
7,345,519
|
||||||||||||
September 2022
|
129,150
|
27.49
|
3,550,729
|
3,794,789
|
||||||||||||
Total
|
366,127
|
Item 3. |
Defaults upon Senior Securities
|
Item 4. |
Mine Safety Disclosures
|
Item 5. |
Other Information
|
Exhibit
Number
|
Description
|
|
Amended and Restated Certificate of Formation of South Plains Financial, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Form S-1 filed with the SEC on April 12, 2019)
(File No. 333-230851).
|
||
Second Amended and Restated Bylaws of South Plains Financial, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 1,
2021) (File No. 001-38895).
|
||
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
||
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
||
101*
|
The following material from South Plains Financial, Inc.’s Form 10-Q for the quarter ended September 30, 2022, formatted in XBRL (eXtensible Business Reporting Language), filed herewith:
(i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Changes in Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Consolidated
Financial Statements.
|
* |
Filed with this Form 10-Q
|
** |
Furnished with this Form 10-Q
|
South Plains Financial, Inc.
|
|||
Date:
|
November 8, 2022
|
By:
|
/s/ Curtis C. Griffith
|
Curtis C. Griffith
|
|||
Chairman and Chief Executive Officer
|
|||
Date:
|
November 8, 2022
|
By:
|
/s/ Steven B. Crockett
|
Steven B. Crockett
|
|||
Chief Financial Officer and Treasurer
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of South Plains Financial, Inc. (the “registrant”) for the quarter ended September 30, 2022 (this “report”);
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 8, 2022
|
By:
|
/s/ Curtis C. Griffith
|
Curtis C. Griffith
|
||
Chairman and Chief Executive Officer
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of South Plains Financial, Inc. (the “registrant”) for the quarter ended September 30, 2022 (this “report”);
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 8, 2022
|
By:
|
/s/ Steven B. Crockett
|
Steven B. Crockett
|
||
Chief Financial Officer
|
(1) |
The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 8, 2022
|
By:
|
/s/ Curtis C. Griffith
|
Curtis C. Griffith
|
||
Chairman and Chief Executive Officer
|
(1) |
The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 8, 2022
|
By:
|
/s/ Steven B. Crockett
|
Steven B. Crockett
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Chief Financial Officer
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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Stockholders' equity: | ||
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized (in shares) | 30,000,000 | 30,000,000 |
Common stock, shares issued (in shares) | 17,064,640 | 17,760,243 |
Common stock, shares outstanding (in shares) | 17,064,640 | 17,760,243 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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Interest income: | ||||
Loans, including fees | $ 34,463 | $ 30,818 | $ 99,260 | $ 89,458 |
Securities: | ||||
Taxable | 4,224 | 2,346 | 10,142 | 7,219 |
Non-taxable | 1,128 | 1,160 | 3,409 | 3,487 |
Federal funds sold and interest-bearing deposits in banks | 1,293 | 114 | 2,129 | 272 |
Total interest income | 41,108 | 34,438 | 114,940 | 100,436 |
Interest expense: | ||||
Deposits | 4,537 | 2,030 | 8,744 | 6,373 |
Notes payable & other borrowings | 0 | 0 | 0 | 43 |
Subordinated debt securities | 1,012 | 1,013 | 3,037 | 3,044 |
Junior subordinated deferrable interest debentures | 457 | 217 | 1,005 | 661 |
Total interest expense | 6,006 | 3,260 | 12,786 | 10,121 |
Net interest income | 35,102 | 31,178 | 102,154 | 90,315 |
Provision for loan losses | (782) | 0 | (2,867) | (1,918) |
Net interest income, after provision for loan losses | 35,884 | 31,178 | 105,021 | 92,233 |
Noninterest income: | ||||
Service charges on deposit accounts | 1,764 | 1,851 | 5,149 | 5,023 |
Income from insurance activities | 4,856 | 3,794 | 8,003 | 6,146 |
Net gain on sales of loans | 4,452 | 12,848 | 17,924 | 41,108 |
Bank card services and interchange fees | 3,156 | 3,045 | 9,856 | 8,760 |
Other mortgage banking income | 1,836 | 1,954 | 10,670 | 6,221 |
Investment commissions | 391 | 430 | 1,403 | 1,390 |
Fiduciary fees | 568 | 556 | 1,815 | 2,234 |
Other | 3,914 | 1,313 | 8,649 | 3,659 |
Total noninterest income | 20,937 | 25,791 | 63,469 | 74,541 |
Noninterest expense: | ||||
Salaries and employee benefits | 22,927 | 24,116 | 67,620 | 71,811 |
Occupancy and equipment, net | 4,132 | 3,896 | 11,902 | 10,960 |
Professional services | 2,523 | 1,388 | 7,795 | 4,483 |
Marketing and development | 913 | 777 | 2,391 | 2,157 |
IT and data services | 908 | 1,068 | 2,902 | 3,029 |
Bank card expenses | 1,399 | 1,339 | 4,050 | 3,640 |
Appraisal expenses | 359 | 790 | 1,432 | 2,350 |
Other | 4,240 | 4,689 | 13,289 | 13,468 |
Total noninterest expense | 37,401 | 38,063 | 111,381 | 111,898 |
Income before income taxes | 19,420 | 18,906 | 57,109 | 54,876 |
Income tax expense | 3,962 | 3,716 | 11,490 | 10,876 |
Net income | $ 15,458 | $ 15,190 | $ 45,619 | $ 44,000 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 0.89 | $ 0.85 | $ 2.61 | $ 2.44 |
Diluted (in dollars per share) | $ 0.86 | $ 0.82 | $ 2.52 | $ 2.38 |
Net income | $ 15,458 | $ 15,190 | $ 45,619 | $ 44,000 |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on securities available for sale | (39,102) | (5,964) | (126,076) | (13,835) |
Less: Change in fair value on hedged state and municipal securities | 5,332 | 760 | 15,681 | 4,943 |
Tax effect | 7,092 | 1,093 | 23,183 | 1,867 |
Other comprehensive income (loss) | (26,678) | (4,111) | (87,212) | (7,025) |
Comprehensive income (loss) | $ (11,220) | $ 11,079 | $ (41,593) | $ 36,975 |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY [Abstract] | |||
Cash dividends, common (in dollars per share) | $ 0.12 | $ 0.34 | $ 0.21 |
Exercise of employee stock options, shares for cashless exercise (in shares) | 11,431 | 16,255 | 2,906 |
Exercise of employee stock options, shares for taxes (in shares) | 3,997 | 11,126 | 5,013 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended | ||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations – South Plains Financial, Inc.
(“SPFI”) is a Texas corporation and registered bank holding company that conducts its principal activities through its subsidiaries from offices located throughout Texas and Eastern New Mexico. Principal activities include commercial and retail
banking, along with insurance, investment, trust, and mortgage services. The following are subsidiaries of SPFI:
Basis of Presentation and Consolidation – The consolidated financial statements in
this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2022 (this “Form 10-Q”) include the accounts of SPFI and its wholly-owned consolidated subsidiaries (collectively referred to as the “Company”) identified above. All
significant intercompany balances and transactions have been eliminated in consolidation.
The interim consolidated financial statements in this Form 10-Q have not been audited by an independent registered public accounting firm, but in the opinion of
management, reflect all adjustments necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows. All such adjustments were of a normal and recurring nature. The consolidated financial statements 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 adopted by the Securities and Exchange Commission (“SEC”).
Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements, and notes thereto
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.
Use of Estimates – 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 and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates. Determination of the adequacy of the allowance for loan losses is a material estimate that is particularly susceptible to significant change in the
near term; the assumptions used in stock-based compensation, derivatives, mortgage servicing rights, the valuation of foreclosed assets, and fair values of financial instruments can also involve significant management estimates.
Securities – Investment securities may be classified into
trading, held to maturity (“HTM”) or available for sale (“AFS”) portfolios. Securities that are held principally for resale in the near term are classified as trading. Securities that management has the ability and positive intent to hold to
maturity are classified as HTM and recorded at amortized cost. Securities not classified as trading or HTM are AFS and are reported at fair value with unrealized gains and losses excluded from earnings, but included in the determination of other
comprehensive income (loss). Management uses these assets as part of its
asset/liability management strategy; they may be sold in response to changes in liquidity needs, interest rates, resultant prepayment risk changes, and other factors. Management determines the appropriate classification of securities at the time
of purchase. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Realized gains and losses and declines in value judged to be other-than-temporary are included in gain
(loss) on sale of securities. The cost of securities sold is based on the specific identification method.
When the fair value of a security is below its amortized cost, additional analysis is performed to determine whether an other-than-temporary impairment condition
exists. The analysis considers (i) whether there is intent to sell securities prior to recovery and/or maturity, (ii) whether it is more likely than not that securities will have to be sold prior to recovery and/or maturity, and (iii) whether there
is a credit loss component to the impairment. Often, the information available to conduct these assessments is limited and rapidly changing, making estimates of fair value subject to judgment. If actual information or conditions are different than
estimated, the extent of the impairment of a security may be different than previously estimated, which could have a material effect on the Company’s results of operations and financial condition.
Loans – Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their outstanding principal balances net of any unearned income, charge-offs, unamortized deferred fees and costs on originated loans, and premiums or discounts on purchased loans.
Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the straight-line method, which is not materially
different from the effective interest method required by GAAP.
Loans are placed on nonaccrual status when, in management’s opinion, collection of interest is unlikely, which typically occurs when principal or interest payments are
more than ninety days past due. When interest accrual is discontinued, all unpaid accrued interest is reversed against interest income.
The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and
future payments are reasonably assured.
Allowance for Loan Losses – The allowance for loan losses is established
by management as an estimate to cover probable loan losses through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent
recoveries, if any, are credited to the allowance. The Company’s allowance for loan losses consists of specific valuation allowances established for probable losses on specific loans and general valuation allowances calculated based on historical
loan loss experience for similar loans with similar characteristics and trends, judgmentally adjusted for general economic conditions and other qualitative risk factors internal and external to the Company.
The allowance for loan losses is evaluated on a quarterly basis by management and is based upon management’s review of the collectability of the loans in the Company’s
loan portfolio in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This
evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The determination of the adequacy of the allowance for loan losses is based on estimates that are
particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral. Loans
originated by the bank subsidiary are generally secured by specific items of collateral including real property, crops, livestock, consumer assets, and other business assets.
While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on various factors.
In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the bank subsidiary to recognize additional losses based on their judgments about
information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably
possible cannot be estimated.
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan agreement. All loans rated substandard or worse and greater than $250
thousand are specifically reviewed to determine if they are impaired. Factors considered by management in determining whether a loan is impaired include payment status and the sources, amounts, and probabilities of estimated cash flow available to
service debt in relation to amounts due according to contractual terms. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and
payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of
the shortfall in relation to the principal and interest owed.
Loans that are determined to be impaired are then evaluated to determine estimated impairment, if any. GAAP allows impairment to be measured on a loan-by-loan basis by
either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Loans that are not individually
determined to be impaired or are not subject to the specific review of impaired status are subject to the general valuation allowance portion of the allowance for loan losses.
The Company may modify its loan agreement with a borrower. The modification will be considered a troubled debt restructuring (“TDR”) if the following criteria are met:
(1) the borrower is experiencing a financial difficulty and (2) the Company makes a concession that it would not otherwise make. Concessions may include debt forgiveness, interest rate change, or maturity extension. Each of these loans is impaired
and is evaluated for impairment, with a specific reserve recorded as necessary based on probable losses related to collateral and cash flow. A loan will no longer be required to be reported as restructured in calendar years following the restructure
if the interest rate at the time of restructure is greater than or equal to the rate the Company was willing to accept for a new extension of credit with similar risk and the loan is in compliance with its modified terms.
Acquired Loans – Loans that the Company acquires in connection with
business combinations are recorded at fair value with no carryover of the acquired entity’s related allowance for loan losses. The fair value of the acquired loans involves estimating the amount and timing of principal and interest cash flows
expected to be collected on the loans and discounting those cash flows at a market rate of interest.
Any
loans the Company determines have evidence of deterioration of credit quality since origination, and it is probable, at acquisition, that all contractually required payments will not be collected, are considered to be purchase credit impaired
loans. The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the
remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable discount. These loans are accounted for under Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. The nonaccretable discount includes estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows will require the Company
to evaluate the need for an additional allowance. Subsequent improvement in expected cash flows will result in the reversal of a corresponding amount of the nonaccretable discount which the Company will then reclassify as accretable discount that
will be recognized into interest income over the remaining life of the loan.
Loans acquired through business combinations that do not meet the specific criteria of ASC 310-30 are accounted for under ASC 310-20, Receivables—Nonrefundable
Fees and Other Costs. These loans are initially recorded at fair value, and include credit and interest rate marks associated with acquisition accounting adjustments. Purchase premiums or discounts are subsequently amortized as an adjustment
to yield over the estimated contractual lives of the loans. There is no allowance for loan losses established at the acquisition date for acquired performing loans. An allowance for loan losses is recorded for any credit deterioration in these loans
subsequent to acquisition.
Acquired loans that met the criteria for impaired or nonaccrual of interest prior to the acquisition may be considered performing upon acquisition, regardless of whether
the customer is contractually delinquent, if the Company expects to fully collect the new carrying value (i.e., fair value) of the loans. As such, the Company may no longer consider the loan to be nonaccrual or nonperforming at the date of
acquisition and may accrue interest on these loans, including the impact of any accretable discount. In addition, charge-offs on such loans would be first applied to the nonaccretable difference portion of the fair value adjustment.
Mortgage Servicing Rights – When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with
the income statement effect recorded in net gain on sale of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates present value of
estimated future servicing income.
Under the fair value measurement method, the Company measures servicing rights at fair value at each reporting date and reports change in fair value of servicing
assets in earnings in the period in which the changes occur, and are included with other noninterest income in the combined financial statements. The fair values of servicing rights are subject to significant fluctuations as a result of changes in
estimated and actual prepayment speeds and default rates and losses.
Goodwill
and Other Intangible Assets – Goodwill resulting from business combinations is
generally determined as the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill is not amortized, but is tested for impairment on
October 31 of each year or more frequently if events and circumstances exist that indicate that an impairment test should be performed. There was no
goodwill impairment recorded for the nine months ended September 30, 2022 and the year ended December 31, 2021.
Core deposit intangible (“CDI”) is a measure of the value of checking and savings
deposit relationships acquired in a business combination. The fair value of the CDI stemming from any given business combination is based on the present value of the expected cost savings attributable to the core deposit funding relative to an
alternative source of funding. CDI is amortized over the estimated useful lives of the existing deposit relationships acquired, but does not exceed 10
years. Substantially all CDI is amortized using the sum of the years’ digits method.
The remaining other intangible assets consist of customer relationship and
employment agreement intangible assets and are amortized over their estimated useful lives of 5 years using the straight-line method.
Mortgage Banking Derivatives – Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market, forward commitments for the future delivery of these mortgage loans,
and forward sales of mortgage-backed securities are accounted for as free standing derivatives. At the time of the interest rate lock, the Company determines whether the loan will be sold through a best efforts contract or a mandatory delivery
contract.
In order to hedge the change in interest rates resulting from the commitments to fund the loans that will be sold through a best efforts contract, the Company enters
into forward loans sales commitments for the future delivery of mortgage loans when interest rate locks are entered. At inception, these interest rate locks and the related forward loan sales commitments, adjusted for the expected exercise of the
commitment before the loan is funded, are recorded with a zero value. Subsequent changes in fair value are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked.
In order to hedge the change in interest rates resulting from all other mortgage commitments to funds loans, the Company enters into forward sales of mortgage-backed
securities contracts. At inception, these interest rate locks are recorded at fair value and are adjusted for the expected exercise of the commitment before the loan is funded. Subsequent changes in fair value are estimated based on changes in
mortgage interest rates from the date the interest on the loan is locked. Changes in the fair values of these derivatives are included in net gain on sales of loans in the consolidated financial statements.
Derivatives – At the inception of a derivative contract,
the Company designates the derivative as one of three types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an
unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or (3) an instrument with no
hedging designation (“stand-alone derivative”). For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. For a cash flow
hedge, the gain or loss on the derivative is reported in other comprehensive income (loss) and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For both types of hedges, changes in the fair
value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for
hedge accounting are reported currently in earnings, as noninterest income.
Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash
settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.
The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge
transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The
Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Company
discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no
longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.
When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as noninterest income. When a fair value hedge is discontinued,
the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash
flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income (loss) are amortized into earnings over the same periods which the hedged transactions will affect earnings.
Leases – During the second quarter of 2022, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02 — Leases (Topic 842), effective as of
January 1, 2022, using the alternative transition method under the option to apply the lease standard at its effective date without adjusting the prior period comparative financial statements. The Company elected the package of practical
expedients to not reassess: (i) whether any existing contracts are or contain a lease, (ii) the lease classification of any existing leases, and (iii) initial direct costs related to existing leases. The Company also elected to apply additional
practical expedients to include both the lease and nonlease components of all leases as a single component and account for it as a lease and to use hindsight for leases existing at the adoption date. The Company recorded a $9.4 million right-of-use (“ROU”) asset, offset by a $10.3
million lease liability, and a $717 thousand, net of tax, cumulative effect adjustment debit
to retained earnings.
The Company determines if an arrangement is a lease at inception. Operating leases with a term of greater than one year are
included in other assets and other liabilities on the Company’s Consolidated Balance Sheets. Finance leases, if any, are included in premises and equipment and other liabilities on the Company’s Consolidated Balance Sheets. The Company has lease
agreements with lease and nonlease components, which are generally accounted for as a single lease component. The Company has made an accounting policy election not to recognize short-term lease assets and liabilities (less than a 12-month term) or
equipment leases (deemed not significant) on its Consolidated Balance Sheets; instead, the Company recognizes the lease expense for these leases on a straight-line basis over the life of the lease.
ROU assets represent the Company’s right to use an
underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized on the lease commencement date based on the present value
of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an estimated incremental collateralized borrowing rate at lease inception, on a collateralized basis, over a similar
term, when determining the present value of lease payments.
No significant judgments or assumptions were involved in developing the estimated operating lease liabilities as the
Company’s operating lease liabilities largely represent the future rental expenses associated with operating leases, and the incremental borrowing rates are based on publicly available interest rates. The operating lease ROU asset also includes any
lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease. These options to extend or terminate are assessed on a lease-by-lease basis, and the ROU assets and lease liabilities
are adjusted when it is reasonably certain that an option will be exercised. Rental expense for lease payments is recognized on a straight-line basis over the lease term and is included in occupancy and equipment, net within our Consolidated
Statements of Comprehensive Income (Loss).
The Company leases and subleases certain facilities and office space to outside parties; however, these leases are not
significant.
Stock-Based Compensation – The Company sponsors an equity incentive plan under which
options to acquire shares of the Company’s common stock may be granted periodically to all full-time employees and directors of the Company or its affiliates at a specific exercise price. Shares are issued out of authorized and unissued common
shares that have been reserved for issuance under such plan. Compensation cost is measured based on the estimated fair value of the award at the grant date and is recognized in earnings on a straight-line basis over the requisite service period.
The fair value of stock options is estimated at the date of grant using a closed form option valuation (“Black-Scholes”) option pricing model. This model requires assumptions as to the expected stock volatility, dividends, terms and risk-free
rates. The expected volatility is based on the combination of the Company’s historical volatility and the volatility of comparable peer banks. The expected term represents the period of time that options are expected to be outstanding from the
grant date. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the appropriate life of each stock option.
Earnings per Share – Basic earnings per share is net income divided by the weighted average number of
common shares outstanding during the period. Diluted earnings per share includes the dilutive effect of additional potential shares issuable under stock options. Earnings and dividends per share are restated for all stock splits and stock dividends
through the date of issuance of the financial statements.
Segment Information – The Company has two reportable segments: banking and insurance. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company’s
reportable segments are strategic business units that offer different products and services. Operations are managed and financial performance is evaluated on a Company-wide basis.
Reclassifications – Certain amounts from the 2021 consolidated financial statements have been
reclassified to conform to the September 30, 2022 presentation.
Recent Accounting Pronouncements – FASB ASC constitutes GAAP for nongovernmental entities. Updates to ASC are prescribed in ASUs, which are not authoritative until
incorporated into the ASC.
ASU 2021-01, Reference Rate Reform (Topic 848). In January 2021, the FASB issued ASU 2021-01 to clarify the scope of Topic 848 so that derivatives
affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. This update additionally clarified that a receive-variable-rate, pay-variable-rate cross-currency interest rate swap may
be considered an eligible hedging instrument in a net investment hedge if both legs of the swap do not have the same repricing intervals and dates as a result of reference rate reform. This update was effective upon issuance and generally can be
applied through December 31, 2022. See the discussion regarding the adoption of ASU 2020-04 below.
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting. In March 2020, the FASB issued ASU 2020-04
and it provides optional expedients and exceptions for accounting related to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. This update applies only to contracts, hedging
relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and do not apply to contract modifications made and hedging relationships entered into or evaluated
after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The expedients and
exceptions in this update are available to all entities starting March 12, 2020 through December 31, 2022. The adoption of ASU 2020-04 did not significantly impact the Company’s consolidated financial statements.
ASU 2019-12, Income Taxes, Simplifying the Accounting for Income Taxes (Topic 740). In December 2019, the FASB issued ASU 2019-12
to simplify the accounting for income taxes by removing certain exceptions to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition for deferred tax liabilities for
outside basis differences. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The adoption of ASU 2019-12 did not have a material effect on the Company’s financial
statements.
ASU 2016-13 Financial Instruments - Credit Losses (Topic 326). The FASB issued guidance to replace the incurred loss model with an expected loss model, which is
referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held to maturity securities, and debt
securities. ASU 2016-13 is effective for the Company for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Entities will apply the standard’s provisions as a cumulative-effect adjustment to
retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company has contracted with a third-party vendor to assist in the implementation of CECL. The model has been developed and validation is
underway. The Company expects to adopt CECL effective January 1, 2023.
Subsequent Events – The
Company has evaluated subsequent events and transactions from September 30, 2022 through the date this Form 10-Q was filed with the SEC for potential recognition or disclosure as required by GAAP.
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SECURITIES |
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SECURITIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SECURITIES |
2. SECURITIES
The amortized cost and fair value of securities, with gross unrealized gains and losses, at the dates indicated follows (dollars in thousands):
The amortized cost and fair value of securities at September 30, 2022 are presented below by contractual maturity (dollars in thousands). Expected maturities may differ
from contractual maturities because issuers may have the right to call or prepay obligations. Other securities are shown separately since they are not due at a single maturity date.
At both September 30, 2022 and December 31, 2021, there were no
holdings of securities of any one issuer, other than the U.S. government, its agencies, or its sponsored enterprises, in an amount greater than 10% of stockholders’ equity.
Securities with a carrying value of approximately $449.9
million and $474.5 million at September 30, 2022 and December 31, 2021, respectively, were pledged to collateralize public deposits and for
other purposes as required or permitted by law.
The following table segregates securities with unrealized losses at the periods indicated, by the duration they have been in a loss position (dollars in thousands):
There were 174 securities with an unrealized loss at
September 30, 2022, generally due to increases in market
rates. Management does not believe that these losses are other than temporary as there is no intent to sell any of these securities before recovery and it is not probable the Company will be required to
sell any of these securities before recovery, and credit loss, if any, is not material. These unrealized losses are largely due to significant increases in market interest rates experienced during the first nine months of 2022 over the yields
available at the time the underlying securities were purchased, which was attributed to the Federal Open Market Committee (“FOMC”) of the Board of Governors of the Federal Reserve System
(the “Federal Reserve”) repeatedly raising their target benchmark interest rate in the first nine months of 2022, resulting in subsequent prime rate increases of 300 basis points between March and September of 2022. The fair value is expected to recover as the securities approach their maturity date or if market yields for such
investments decline in future periods. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of September 30, 2022, management believes the impairments detailed in the table above are
temporary and no impairment loss has been realized in the Company’s combined financial statements.
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LOANS HELD FOR INVESTMENT |
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LOANS HELD FOR INVESTMENT [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LOANS HELD FOR INVESTMENT |
3. LOANS HELD FOR INVESTMENT
Loans held for investment are summarized by category as of the periods presented below (dollars in thousands):
The Company has certain lending policies, underwriting standards, and procedures in place that are designed to maximize loan income with an acceptable level of risk. Management reviews and approves these
policies, underwriting standards, and procedures on a regular basis and makes changes as appropriate. Management receives frequent reports related to loan originations, quality, concentrations, delinquencies, non-performing, and potential problem
loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions, both by type of loan and geography.
Commercial – General and Specialized – Commercial loans are underwritten
after evaluating and understanding the borrower’s ability to operate profitably. Underwriting standards have been designed to determine whether the borrower possesses sound business ethics and practices, evaluate current and projected cash flows to
determine the ability of the borrower to repay their obligations, as agreed and ensure appropriate collateral is obtained to secure the loan. Commercial loans are primarily made based on the identified cash flows of the borrower and, secondarily, on
the underlying collateral provided by the borrower. Most commercial loans are secured by the assets being financed or other business assets, such as real estate, accounts receivable, or inventory, and include personal guarantees. Owner-occupied real
estate is included in commercial loans, as the repayment of these loans is generally dependent on the operations of the commercial borrower’s business rather than on income-producing properties or the sale of the properties. Commercial loans are
grouped into two distinct sub-categories: specialized and general. Commercial related segments that are considered “specialized” include
agricultural production and real estate loans, energy loans, and finance, investment, and insurance loans. Commercial related segments that contain a broader diversity of borrowers, sub-industries, or serviced industries are grouped into the “general
category.” These include goods, services, restaurant & retail, construction, and other industries.
Commercial Real Estate – Commercial real estate loans are also subject
to underwriting standards and processes similar to commercial loans. These loans are underwritten primarily based on projected cash flows for income-producing properties and collateral values for non-income-producing properties. The repayment of
these loans is generally dependent on the successful operation of the property securing the loans or the sale or refinancing of the property. Real estate loans may be adversely affected by conditions in the real estate markets or in the general
economy. The properties securing the Company’s real estate portfolio are diversified by type and geographic location. This diversity helps reduce the exposure to adverse economic events that affect any single market or industry.
Construction – Loans for residential construction are for single-family
properties to developers, builders, or end-users. These loans are underwritten based on estimates of costs and completed value of the project. Funds are advanced based on estimated percentage of completion for the project. Performance of these loans
is affected by economic conditions as well as the ability to control costs of the projects.
Consumer – Loans to consumers include 1-4 family residential loans, auto
loans, and other loans for recreational vehicles or other purposes. The Company utilizes a computer-based credit scoring analysis to supplement its policies and procedures in underwriting consumer loans. The Company’s loan policy addresses types of
consumer loans that may be originated and the collateral, if secured, which must be perfected. The relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimizes the Company’s risk.
The Company generally requires mortgage title insurance and hazard insurance on 1-4 family residential loans.
The allowance for loan losses was $39.7 million at
September 30, 2022, compared to $42.1 million at December 31, 2021. The ratio of allowance for loan losses to loans held for investment was
1.47% at September 30, 2022 and 1.73%
at December 31, 2021.
The following table details the activity in the allowance for loan losses for the periods indicated (dollars in thousands). Allocation of a portion of the allowance to
one category of loans does not preclude its availability to absorb losses in other categories.
The following table shows the Company’s investment in loans disaggregated based on the method of evaluating impairment at the dates indicated (dollars in thousands):
Impaired loan information at the dates indicated follows (dollars in thousands):
All impaired loans $250 thousand and greater were
specifically evaluated for impairment. Interest income recognized using a cash-basis method on impaired loans for the nine months ended September 30, 2022 and the year ended December 31, 2021 was not significant. Additional funds committed to be
advanced on impaired loans are not significant.
The table below provides an age analysis on accruing past-due loans and nonaccrual loans at the dates indicated (dollars in thousands):
The Company grades its loans on a thirteen-point grading scale. These grades fit in one of
the following categories: (i) pass, (ii) special mention, (iii) substandard, (iv) doubtful, or (v) loss. Loans categorized as loss are charged-off immediately. The grading of loans reflect a judgment by the Company about the risks of default
associated with the loan. The Company reviews the grades on loans as part of the Company's on-going monitoring of the credit quality of the loan portfolio.
Pass loans have financial factors or nature of collateral that are considered reasonable credit risks in the normal course of lending and encompass several grades that
are assigned based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to watch credits which have all the characteristics of an acceptable credit risk but warrant more than the normal level of
monitoring.
Special mention loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of
repayment prospects for the loans at some future date.
Substandard loans are inadequately protected by the current net worth and paying capacity of the borrower or by the collateral pledged, if any. These loans have a
well-defined weakness or weaknesses that jeopardize collection and present the distinct possibility that some loss will be sustained if the deficiencies are not corrected. A protracted workout on these credits is a distinct possibility. Prompt
corrective action is therefore required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious
evaluation of the secondary support to the credit is performed. Substandard loans can be accruing or can be nonaccrual depending on the circumstances of the individual loans.
Doubtful loans have all the weaknesses inherent in substandard loans with the added characteristics that the weaknesses make collection or liquidation in full on the
basis of currently existing facts, conditions, and values highly questionable and improbable. All doubtful loans are on nonaccrual.
The following table summarizes the internal classifications of loans at the dates indicated (dollars in thousands):
Under section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), banks may elect to deem that loan modifications do not result in a classification as a TDR if they are (1)
related to the COVID-19 pandemic; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the national emergency
or (B) December 31, 2020. Under section 540 of the Consolidated Appropriations Act, 2021 (the “Act”), section 4013 of the CARES Act was amended to extend the period for loan modifications to the earlier of (1) January 1, 2022, or (2) 60 days after
the date of termination of the national emergency. The Company elected to adopt the provisions of the CARES Act and the Act.
Additionally, other short-term modifications made on a good faith basis in response to the COVID-19 pandemic to borrowers who were current prior to any relief are not
TDRs under ASC 310-40 and the interagency statement released by the federal banking regulators on April 7, 2020 in response to the COVID-19 pandemic (the “Joint Interagency Regulatory Guidance”). This includes short-term (e.g., up to six months)
modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a
modification program is implemented.
In response to the COVID-19 pandemic, the Company implemented a short-term deferral modification program that complies with ASC 310-40 and the Joint Interagency
Regulatory Guidance. As of September 30, 2022 and December 31, 2021, the Company had no loans under an active modification that comply with ASC 310-40 and the Joint Interagency Regulatory Guidance.
Beginning in April 2020, the Company began offering additional COVID-19 related deferral and modification of principal and/or interest payments to selected borrowers on
a case-by-case basis that were outside the scope of the short-term deferral modification program. These additional modifications comply with the provisions of section 4013 of the CARES
Act and section 501 of the Act. As of September 30, 2022, the Company had no remaining loans subject to these deferral and
modification agreements. As of December 31, 2021 the Company had 3 loans totaling approximately $15.9 million subject to these deferral and modification agreements, representing 0.65%
of outstanding loans held for investment.
There were no loans modified as a TDR during the nine
months ended September 30, 2022 and the year ended December 31, 2021.
Management continues to closely monitor for credit changes resulting from the ongoing COVID-19 pandemic (or any current or future
variants thereof), the rising interest rate environment, and the persistent high inflation levels in the United States and our market areas.
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GOODWILL AND INTANGIBLES |
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GOODWILL AND INTANGIBLES |
4. GOODWILL AND INTANGIBLES
The Company had goodwill of $19.5 million at September
30, 2022 and December 31, 2021.
Other intangible assets, which consist of CDI, customer lists,
and employment agreements at the dates indicated are summarized below (dollars in thousands):
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MORTGAGE SERVICING RIGHTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MORTGAGE SERVICING RIGHTS |
5. MORTGAGE SERVICING RIGHTS
The following table reflects the changes in fair value of the Company’s mortgage servicing rights asset included in the Consolidated Balance Sheets, and other
information related to the serviced portfolio, for the periods or dates presented (dollars in thousands):
The following table reflects the key assumptions used in measuring the fair value of the Company's mortgage servicing rights as of the dates indicated:
|
BORROWING ARRANGEMENTS |
9 Months Ended |
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Sep. 30, 2022 | |
BORROWING ARRANGEMENTS [Abstract] | |
BORROWING ARRANGEMENTS |
6. BORROWING ARRANGEMENTS
Subordinated Debt Securities
In December 2018, the Company issued $26.5 million in
subordinated debt securities. $12.4 million of the subordinated debt securities have a maturity date of Wall Street Journal prime rate, with a floor of 4.5% and a ceiling of 7.5%. These
subordinated debt securities pay interest quarterly, are unsecured, and may be called by the Company at any time after the remaining maturity is five years or less. Additionally, these subordinated debt securities are intended to qualify
for Tier 2 capital treatment, subject to regulatory limitations.
and a weighted average fixed rate of 5.74%
for the first five years. The remaining $14.1
million of subordinated debt securities have a maturity date of and a weighted average fixed rate of 6.41% for the first seven years. After the
fixed rate periods, the subordinated debt securities issued in December 2018 will float at the On
September 29, 2020, the Company issued $50.0 million in subordinated debt securities. Proceeds from the issuance of these subordinated debt securities were reduced by approximately $926 thousand in debt issuance costs. The subordinated debt securities issued in September 2020 have a maturity date of subordinated debt with a fixed rate of 4.50% for the first five years. After the expiration of the fixed rate period, the securities will reset quarterly at a variable rate equal to the then current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, plus 438 basis points. These subordinated debt securities pay interest semi-annually, are unsecured, and may be called by the Company at any time after the remaining maturity is five years or less. Additionally, these subordinated debt securities are intended to qualify for Tier 2 capital treatment, subject to regulatory limitations.
As of September 30, 2022, the total amount of the Company’s subordinated debt securities outstanding
was $76.5 million less approximately $604
thousand of remaining debt issuance costs for a total balance of $75.9 million. As of December 31, 2021, the total amount of
subordinated debt securities outstanding was $76.5 million less approximately $697 thousand of remaining debt issuance costs for a total balance of $75.8
million.
Notes Payable and Other Borrowings
As of September 30, 2022 and December 31, 2021, City Bank had no outstanding advances from the Federal Home Loan Bank of Dallas (“FHLB”).
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STOCK-BASED COMPENSATION |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION |
7. STOCK-BASED COMPENSATION
Equity Incentive Plan
The 2019 Equity Incentive Plan (“Plan”) was approved by the Company’s Board of Directors on January 16, 2019 and by its shareholders on March 6, 2019. The purpose of the
Plan is to: (i) attract and retain the best available personnel for positions of substantial responsibility, (ii) provide additional incentive to employees, directors and consultants, and (iii) promote the success of the Company’s business. This Plan
permits the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares, and other stock-based awards. The maximum aggregate number of
shares of common stock that may be issued pursuant to all awards under the Plan is 2,300,000. The maximum aggregate number of shares that
may be issued under the Plan may be increased annually by up to 3% of the total issued and outstanding common shares of the Company at the
beginning of each fiscal year.
The fair value of each option award is estimated on the date of grant using the Black-Scholes model that uses the assumptions noted in the table below. Expected
volatilities are based on historical volatilities of the Company’s common stock and similar peer company averages. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options
granted represents the period of time that options granted are expected to be outstanding, which takes in to account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on U.S. Treasury
yield curve in effect at the time of the grant.
Options
A summary of activity in the Plan for the period indicated is presented in the table below (dollars in thousands, except per share data):
A summary of assumptions used to calculate the fair values of the awards granted during the periods noted is presented below:
The total intrinsic value of options exercised during the nine months ended September 30, 2022 and September 30, 2021 was $516 thousand and $17 thousand, respectively.
Restricted Stock Awards and Units
A summary of activity in the Plan for the period indicated is presented in the table below:
Restricted stock units granted under the Plan typically vest from
to four years, but vesting periods may vary. Compensation expense for these grants will be recognized over the vesting period of the
awards based on the fair value of the stock at the issue date.The total unrecognized compensation cost for the awards outstanding under the Plan at September 30, 2022 was $3.3 million and will be recognized over a weighted average remaining period of 1.57
years. The total fair value of restricted stock units vested during each of the nine months ended September 30, 2022 and September 30, 2021 was $511
thousand and $489 thousand, respectively.
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OFF-BALANCE-SHEET ACTIVITIES, COMMITMENTS AND CONTINGENCIES |
9 Months Ended | |||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||
OFF-BALANCE-SHEET ACTIVITIES, COMMITMENTS AND CONTINGENCIES [Abstract] | ||||||||||||||||||||||||||||
OFF-BALANCE-SHEET ACTIVITIES, COMMITMENTS AND CONTINGENCIES |
8. OFF-BALANCE-SHEET ACTIVITIES, COMMITMENTS AND CONTINGENCIES
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 and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Company’s consolidated financial
statements. The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for recorded instruments.
Financial instruments whose contract amounts represent credit risk outstanding at the dates indicated follow (dollars in thousands):
Commitments to grant loans and 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. The commitments for lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily
represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.
Standby letters of credit
are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued
have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company requires collateral supporting those commitments if deemed
necessary.
Litigation
- In July 2020, a vendor claimed that City Bank had breached a contract by failing to timely pay amounts allegedly due and owing. City Bank vigorously rejected any such non-payment contentions and filed suit against the vendor. With the lawsuit,
City Bank sought, among other claims and relief, an injunction against the vendor. After an evidentiary hearing, the court entered a temporary injunction against the vendor expressly prohibiting it from, among other things, terminating the contract
pending trial. Based upon discovery in the lawsuit, City Bank also filed a breach of contract claim against the vendor alleging that the vendor violated City Bank’s contractual exclusivity rights. The vendor has filed counterclaims, including for
declaratory relief that the contracts should be declared unenforceable. In October 2021, the vendor filed a counterclaim alleging that City Bank’s attempted enforcement of its exclusivity rights contravenes the Texas Free Enterprise and Antitrust
Act. On or about September 23, 2022, the parties entered into a Settlement Agreement and Mutual Release, pursuant to which the parties agreed to the settlement and release of all claims and counterclaims in the lawsuit. Thereafter, the
parties filed a joint motion to dismiss with prejudice and the court formally dismissed the case by order dated October 7, 2022. A gain contingency was recorded at settlement and that consideration was received on October 3, 2022.
The Company is a
defendant in legal actions arising from time to time in the normal course of business. Management believes that the ultimate liability, if any, arising from these matters will not materially affect the combined financial statements, based on
information known as of the date of the combined financial statements.
FHLB Letters of Credit - The Company may use FHLB letters of credit to pledge to certain public deposits. There were no FHLB letters of credit outstanding at September 30, 2022 or December 31, 2021.
|
LEASES |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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LEASES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES |
9. LEASES
The Company leases space, primarily for branch facilities and small equipment under
operating leases. The Company’s leases often include one or more options to renew at the Company's discretion, and some of the Company’s leases include options to terminate within one year. When it is reasonably certain that the Company will exercise the option to renew or extend the lease term, that option is included in estimating the value of the
ROU asset and lease liability. The Company’s leases contain customary restrictions and covenants and do not contain any residual value guarantees. The Company has certain intercompany leases and subleases between its subsidiaries, and these
transactions and balances have been eliminated in consolidation and are not reflected in the tables and information presented below. As of September 30, 2022, the Company had no finance leases.
The balance sheet components of the Company's leases at the date indicated are as
follows (dollars in thousands):
The Company does not generally enter into leases which contain variable payments,
other than due to the passage of time. Operating lease costs, including short-term lease costs were $761
thousand and $2.2 million, respectively, for the three and nine months ended
September 30, 2022. Operating lease costs were $648 thousand and $1.8 million, respectively, for the three and nine months ended September 30, 2021.
Supplemental cash flow information related to leases for the periods presented is as follows (dollars in thousands):
For operating leases the Company’s weighted average remaining lease terms in years and weighted average discount rate was 9.85 and 4.65%, respectively, as of
September 30, 2022.
Maturities of operating lease liabilities at September 30, 2022, under lease
agreements that had commenced as of or subsequent to January 1, 2022, are presented below (dollars in thousands).
As of September 30, 2022, the Company had no significant additional operating leases that have not yet commenced.
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CAPITAL AND REGULATORY MATTERS |
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CAPITAL AND REGULATORY MATTERS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CAPITAL AND REGULATORY MATTERS |
10. CAPITAL AND REGULATORY MATTERS
The Company and its bank subsidiary are subject to various regulatory capital requirements administered by its banking regulators. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and its bank subsidiary’s financial statements. Under capital guidelines
and the regulatory framework for prompt corrective action, the Company and its bank subsidiary must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to
bank holding companies.
In July 2013, the Federal Reserve published final rules for the adoption of the Basel III regulatory capital framework ("Basel III"). Basel III, among other things, (i)
introduced a new capital measure called Common Equity Tier 1 (“CET1”), (ii) specified that Tier 1 capital consists of CET1 and Additional Tier 1 Capital instruments meeting specified requirements, (iii) defined CET1 narrowly by requiring that most
deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) expanded the scope of the deductions/adjustments as compared to existing regulations. Basel III became effective for the Company
and its bank subsidiary on January 1, 2016 with certain transition provisions fully phased-in on January 1, 2019.
Quantitative measures established by regulation to ensure capital adequacy require the Company and its bank subsidiary to maintain minimum amounts and ratios (set forth
in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of September 30, 2022 and December 31,
2021, that the Company and its bank subsidiary met all capital adequacy requirements to which they are subject.
As of September 30, 2022, the bank subsidiary was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an
institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables. There are no conditions or events since September 30, 2022 that management believes have changed the bank
subsidiary’s category.
The Company and its bank subsidiary’s actual capital amounts and ratios at the dates indicated follows (dollars in thousands):
State banking regulations place certain restrictions on dividends paid by banks to their shareholders.
Dividends paid by the Company’s bank subsidiary would be prohibited if the effect thereof would cause the bank subsidiary’s capital to be reduced below applicable minimum capital requirements.
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DERIVATIVES |
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DERIVATIVES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVES |
11. DERIVATIVES
The Company utilizes
interest rate swap agreements as part of its asset-liability management strategy to help manage its interest rate risk position. These interest rate swaps are designated and qualify as fair value hedges and are entered into to reduce exposure to
changes in fair value of fixed rate financial instruments. The notional amount of the interest rate swaps do not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amounts and the other terms
of the individual interest rate swap agreements.
The following table reflects the changes in fair value hedges
included in the Consolidated Statements of Comprehensive Income (Loss) as of the periods indicated (dollars in thousands):
The following table reflects the fair value hedges included
in the Consolidated Balance Sheets at the dates indicated (dollars in thousands):
Mortgage banking derivatives
The net gains (losses) relating to free standing derivative
instruments used for risk management are summarized below as of the periods indicated (dollars in thousands):
The following table reflects the amount and fair value of mortgage banking derivatives in the Consolidated Balance Sheets at the dates indicated (dollars in thousands):
The Company had received cash collateral of $19.1 million
to offset asset derivative positions on its interest rate swaps at September 30, 2022. This amount is reported in other liabilities in the Consolidated Balance Sheets. The Company had advanced $1.1 million to offset liability derivative positions on its interest rate swaps at September 30, 2022. Additionally, the Company had advanced $440 thousand on its mortgage forward contracts at September 30, 2022. The advanced cash collateral amounts are reported in cash and due from banks in the Consolidated Balance
Sheets.
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EARNINGS PER SHARE |
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EARNINGS PER SHARE [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE |
12. EARNINGS PER SHARE
The factors used in the earnings per share computation for the periods indicated follow (dollars in thousands, except per share data):
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SEGMENT INFORMATION |
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SEGMENT INFORMATION [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION |
13. SEGMENT INFORMATION
Financial results by reportable segment as of the periods indicated are detailed below (dollars in thousands):
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FAIR VALUE DISCLOSURES |
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FAIR VALUE DISCLOSURES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE DISCLOSURES |
14. FAIR VALUE DISCLOSURES
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value
measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The
price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the
measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i)
independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.
Valuation techniques that are consistent with the market approach, the income approach and/or the cost approach are required by GAAP. The market approach uses prices and
other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount
on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset. Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions
that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from
independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the
circumstances. The fair value hierarchy for valuation inputs gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
The following table summarizes fair value
measurements at the dates indicated (dollars in thousands):
Securities – Fair value is calculated based on market prices of similar securities using
matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded.
Loans held for sale (mandatory) – Loans held for sale originated for mandatory delivery are
reported at fair value. Fair value is determined using quoted prices for similar assets, adjusted for specific attributes of that loan.
Mortgage servicing rights – Mortgage servicing rights are reported at fair value using Level
3 inputs. The mortgage servicing rights asset is valued by projecting net servicing cash flows, which are then discounted to estimate the fair value. The fair value of the mortgage servicing rights asset is impacted by a variety of factors, including
prepayment and discount rates, which are significant unobservable inputs.
Derivatives – Fair value of derivatives is based on valuation models using observable market
data as of the measurement date.
Impaired loans – Impaired loans are reported at the fair value of the underlying collateral,
less estimated disposal costs, if repayment is expected solely from the sale of the collateral. Collateral values are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria.
The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at the dates indicated (dollars in thousands):
The estimated fair values, and related carrying amounts, of the Company’s financial instruments that are not previously disclosed in the recurring fair value section are
as follows (dollars in thousands):
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SUBSEQUENT EVENTS |
9 Months Ended |
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Sep. 30, 2022 | |
SUBSEQUENT EVENTS [Abstract] | |
SUBSEQUENT EVENTS |
15. SUBSEQUENT EVENTS
On October 19, 2022, the Company declared a cash
dividend of $0.12 per share of common stock to be paid on November 15, 2022 to all shareholders of record as of October 31, 2022.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
9 Months Ended | ||||||||||||||||||
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||
Nature of Operations |
Nature of Operations – South Plains Financial, Inc.
(“SPFI”) is a Texas corporation and registered bank holding company that conducts its principal activities through its subsidiaries from offices located throughout Texas and Eastern New Mexico. Principal activities include commercial and retail
banking, along with insurance, investment, trust, and mortgage services. The following are subsidiaries of SPFI:
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Consolidation | The consolidated financial statements in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2022 (this “Form 10-Q”) include the accounts of SPFI and its wholly-owned consolidated subsidiaries (collectively referred to as the “Company”) identified above. All significant intercompany balances and transactions have been eliminated in consolidation. | ||||||||||||||||||
Basis of Presentation |
The interim consolidated financial statements in this Form 10-Q have not been audited by an independent registered public accounting firm, but in the opinion of
management, reflect all adjustments necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows. All such adjustments were of a normal and recurring nature. The consolidated financial statements 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 adopted by the Securities and Exchange Commission (“SEC”).
Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements, and notes thereto
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.
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Use of Estimates |
Use of Estimates – 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 and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates. Determination of the adequacy of the allowance for loan losses is a material estimate that is particularly susceptible to significant change in the
near term; the assumptions used in stock-based compensation, derivatives, mortgage servicing rights, the valuation of foreclosed assets, and fair values of financial instruments can also involve significant management estimates.
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Securities |
Securities – Investment securities may be classified into
trading, held to maturity (“HTM”) or available for sale (“AFS”) portfolios. Securities that are held principally for resale in the near term are classified as trading. Securities that management has the ability and positive intent to hold to
maturity are classified as HTM and recorded at amortized cost. Securities not classified as trading or HTM are AFS and are reported at fair value with unrealized gains and losses excluded from earnings, but included in the determination of other
comprehensive income (loss). Management uses these assets as part of its
asset/liability management strategy; they may be sold in response to changes in liquidity needs, interest rates, resultant prepayment risk changes, and other factors. Management determines the appropriate classification of securities at the time
of purchase. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Realized gains and losses and declines in value judged to be other-than-temporary are included in gain
(loss) on sale of securities. The cost of securities sold is based on the specific identification method.
When the fair value of a security is below its amortized cost, additional analysis is performed to determine whether an other-than-temporary impairment condition
exists. The analysis considers (i) whether there is intent to sell securities prior to recovery and/or maturity, (ii) whether it is more likely than not that securities will have to be sold prior to recovery and/or maturity, and (iii) whether there
is a credit loss component to the impairment. Often, the information available to conduct these assessments is limited and rapidly changing, making estimates of fair value subject to judgment. If actual information or conditions are different than
estimated, the extent of the impairment of a security may be different than previously estimated, which could have a material effect on the Company’s results of operations and financial condition.
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Loans |
Loans – Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their outstanding principal balances net of any unearned income, charge-offs, unamortized deferred fees and costs on originated loans, and premiums or discounts on purchased loans.
Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the straight-line method, which is not materially
different from the effective interest method required by GAAP.
Loans are placed on nonaccrual status when, in management’s opinion, collection of interest is unlikely, which typically occurs when principal or interest payments are
more than ninety days past due. When interest accrual is discontinued, all unpaid accrued interest is reversed against interest income.
The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and
future payments are reasonably assured.
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Allowance for Loan Losses |
Allowance for Loan Losses – The allowance for loan losses is established
by management as an estimate to cover probable loan losses through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent
recoveries, if any, are credited to the allowance. The Company’s allowance for loan losses consists of specific valuation allowances established for probable losses on specific loans and general valuation allowances calculated based on historical
loan loss experience for similar loans with similar characteristics and trends, judgmentally adjusted for general economic conditions and other qualitative risk factors internal and external to the Company.
The allowance for loan losses is evaluated on a quarterly basis by management and is based upon management’s review of the collectability of the loans in the Company’s
loan portfolio in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This
evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The determination of the adequacy of the allowance for loan losses is based on estimates that are
particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral. Loans
originated by the bank subsidiary are generally secured by specific items of collateral including real property, crops, livestock, consumer assets, and other business assets.
While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on various factors.
In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the bank subsidiary to recognize additional losses based on their judgments about
information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably
possible cannot be estimated.
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan agreement. All loans rated substandard or worse and greater than $250
thousand are specifically reviewed to determine if they are impaired. Factors considered by management in determining whether a loan is impaired include payment status and the sources, amounts, and probabilities of estimated cash flow available to
service debt in relation to amounts due according to contractual terms. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and
payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of
the shortfall in relation to the principal and interest owed.
Loans that are determined to be impaired are then evaluated to determine estimated impairment, if any. GAAP allows impairment to be measured on a loan-by-loan basis by
either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Loans that are not individually
determined to be impaired or are not subject to the specific review of impaired status are subject to the general valuation allowance portion of the allowance for loan losses.
The Company may modify its loan agreement with a borrower. The modification will be considered a troubled debt restructuring (“TDR”) if the following criteria are met:
(1) the borrower is experiencing a financial difficulty and (2) the Company makes a concession that it would not otherwise make. Concessions may include debt forgiveness, interest rate change, or maturity extension. Each of these loans is impaired
and is evaluated for impairment, with a specific reserve recorded as necessary based on probable losses related to collateral and cash flow. A loan will no longer be required to be reported as restructured in calendar years following the restructure
if the interest rate at the time of restructure is greater than or equal to the rate the Company was willing to accept for a new extension of credit with similar risk and the loan is in compliance with its modified terms.
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Acquired Loans |
Acquired Loans – Loans that the Company acquires in connection with
business combinations are recorded at fair value with no carryover of the acquired entity’s related allowance for loan losses. The fair value of the acquired loans involves estimating the amount and timing of principal and interest cash flows
expected to be collected on the loans and discounting those cash flows at a market rate of interest.
Any
loans the Company determines have evidence of deterioration of credit quality since origination, and it is probable, at acquisition, that all contractually required payments will not be collected, are considered to be purchase credit impaired
loans. The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the
remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable discount. These loans are accounted for under Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. The nonaccretable discount includes estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows will require the Company
to evaluate the need for an additional allowance. Subsequent improvement in expected cash flows will result in the reversal of a corresponding amount of the nonaccretable discount which the Company will then reclassify as accretable discount that
will be recognized into interest income over the remaining life of the loan.
Loans acquired through business combinations that do not meet the specific criteria of ASC 310-30 are accounted for under ASC 310-20, Receivables—Nonrefundable
Fees and Other Costs. These loans are initially recorded at fair value, and include credit and interest rate marks associated with acquisition accounting adjustments. Purchase premiums or discounts are subsequently amortized as an adjustment
to yield over the estimated contractual lives of the loans. There is no allowance for loan losses established at the acquisition date for acquired performing loans. An allowance for loan losses is recorded for any credit deterioration in these loans
subsequent to acquisition.
Acquired loans that met the criteria for impaired or nonaccrual of interest prior to the acquisition may be considered performing upon acquisition, regardless of whether
the customer is contractually delinquent, if the Company expects to fully collect the new carrying value (i.e., fair value) of the loans. As such, the Company may no longer consider the loan to be nonaccrual or nonperforming at the date of
acquisition and may accrue interest on these loans, including the impact of any accretable discount. In addition, charge-offs on such loans would be first applied to the nonaccretable difference portion of the fair value adjustment.
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Mortgage Servicing Rights |
Mortgage Servicing Rights – When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with
the income statement effect recorded in net gain on sale of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates present value of
estimated future servicing income.
Under the fair value measurement method, the Company measures servicing rights at fair value at each reporting date and reports change in fair value of servicing
assets in earnings in the period in which the changes occur, and are included with other noninterest income in the combined financial statements. The fair values of servicing rights are subject to significant fluctuations as a result of changes in
estimated and actual prepayment speeds and default rates and losses.
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Goodwill and Other Intangible Assets |
Goodwill
and Other Intangible Assets – Goodwill resulting from business combinations is
generally determined as the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill is not amortized, but is tested for impairment on
October 31 of each year or more frequently if events and circumstances exist that indicate that an impairment test should be performed. There was no
goodwill impairment recorded for the nine months ended September 30, 2022 and the year ended December 31, 2021.
Core deposit intangible (“CDI”) is a measure of the value of checking and savings
deposit relationships acquired in a business combination. The fair value of the CDI stemming from any given business combination is based on the present value of the expected cost savings attributable to the core deposit funding relative to an
alternative source of funding. CDI is amortized over the estimated useful lives of the existing deposit relationships acquired, but does not exceed 10
years. Substantially all CDI is amortized using the sum of the years’ digits method.
The remaining other intangible assets consist of customer relationship and
employment agreement intangible assets and are amortized over their estimated useful lives of 5 years using the straight-line method.
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Mortgage Banking Derivatives |
Mortgage Banking Derivatives – Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market, forward commitments for the future delivery of these mortgage loans,
and forward sales of mortgage-backed securities are accounted for as free standing derivatives. At the time of the interest rate lock, the Company determines whether the loan will be sold through a best efforts contract or a mandatory delivery
contract.
In order to hedge the change in interest rates resulting from the commitments to fund the loans that will be sold through a best efforts contract, the Company enters
into forward loans sales commitments for the future delivery of mortgage loans when interest rate locks are entered. At inception, these interest rate locks and the related forward loan sales commitments, adjusted for the expected exercise of the
commitment before the loan is funded, are recorded with a zero value. Subsequent changes in fair value are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked.
In order to hedge the change in interest rates resulting from all other mortgage commitments to funds loans, the Company enters into forward sales of mortgage-backed
securities contracts. At inception, these interest rate locks are recorded at fair value and are adjusted for the expected exercise of the commitment before the loan is funded. Subsequent changes in fair value are estimated based on changes in
mortgage interest rates from the date the interest on the loan is locked. Changes in the fair values of these derivatives are included in net gain on sales of loans in the consolidated financial statements.
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Derivatives |
Derivatives – At the inception of a derivative contract,
the Company designates the derivative as one of three types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an
unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or (3) an instrument with no
hedging designation (“stand-alone derivative”). For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. For a cash flow
hedge, the gain or loss on the derivative is reported in other comprehensive income (loss) and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For both types of hedges, changes in the fair
value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for
hedge accounting are reported currently in earnings, as noninterest income.
Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash
settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.
The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge
transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The
Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Company
discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no
longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.
When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as noninterest income. When a fair value hedge is discontinued,
the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash
flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income (loss) are amortized into earnings over the same periods which the hedged transactions will affect earnings.
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Leases |
Leases – During the second quarter of 2022, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02 — Leases (Topic 842), effective as of
January 1, 2022, using the alternative transition method under the option to apply the lease standard at its effective date without adjusting the prior period comparative financial statements. The Company elected the package of practical
expedients to not reassess: (i) whether any existing contracts are or contain a lease, (ii) the lease classification of any existing leases, and (iii) initial direct costs related to existing leases. The Company also elected to apply additional
practical expedients to include both the lease and nonlease components of all leases as a single component and account for it as a lease and to use hindsight for leases existing at the adoption date. The Company recorded a $9.4 million right-of-use (“ROU”) asset, offset by a $10.3
million lease liability, and a $717 thousand, net of tax, cumulative effect adjustment debit
to retained earnings.
The Company determines if an arrangement is a lease at inception. Operating leases with a term of greater than one year are
included in other assets and other liabilities on the Company’s Consolidated Balance Sheets. Finance leases, if any, are included in premises and equipment and other liabilities on the Company’s Consolidated Balance Sheets. The Company has lease
agreements with lease and nonlease components, which are generally accounted for as a single lease component. The Company has made an accounting policy election not to recognize short-term lease assets and liabilities (less than a 12-month term) or
equipment leases (deemed not significant) on its Consolidated Balance Sheets; instead, the Company recognizes the lease expense for these leases on a straight-line basis over the life of the lease.
ROU assets represent the Company’s right to use an
underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized on the lease commencement date based on the present value
of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an estimated incremental collateralized borrowing rate at lease inception, on a collateralized basis, over a similar
term, when determining the present value of lease payments.
No significant judgments or assumptions were involved in developing the estimated operating lease liabilities as the
Company’s operating lease liabilities largely represent the future rental expenses associated with operating leases, and the incremental borrowing rates are based on publicly available interest rates. The operating lease ROU asset also includes any
lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease. These options to extend or terminate are assessed on a lease-by-lease basis, and the ROU assets and lease liabilities
are adjusted when it is reasonably certain that an option will be exercised. Rental expense for lease payments is recognized on a straight-line basis over the lease term and is included in occupancy and equipment, net within our Consolidated
Statements of Comprehensive Income (Loss).
The Company leases and subleases certain facilities and office space to outside parties; however, these leases are not
significant.
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Stock-Based Compensation |
Stock-Based Compensation – The Company sponsors an equity incentive plan under which
options to acquire shares of the Company’s common stock may be granted periodically to all full-time employees and directors of the Company or its affiliates at a specific exercise price. Shares are issued out of authorized and unissued common
shares that have been reserved for issuance under such plan. Compensation cost is measured based on the estimated fair value of the award at the grant date and is recognized in earnings on a straight-line basis over the requisite service period.
The fair value of stock options is estimated at the date of grant using a closed form option valuation (“Black-Scholes”) option pricing model. This model requires assumptions as to the expected stock volatility, dividends, terms and risk-free
rates. The expected volatility is based on the combination of the Company’s historical volatility and the volatility of comparable peer banks. The expected term represents the period of time that options are expected to be outstanding from the
grant date. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the appropriate life of each stock option.
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Earnings per Share |
Earnings per Share – Basic earnings per share is net income divided by the weighted average number of
common shares outstanding during the period. Diluted earnings per share includes the dilutive effect of additional potential shares issuable under stock options. Earnings and dividends per share are restated for all stock splits and stock dividends
through the date of issuance of the financial statements.
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Segment Information |
Segment Information – The Company has two reportable segments: banking and insurance. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company’s
reportable segments are strategic business units that offer different products and services. Operations are managed and financial performance is evaluated on a Company-wide basis.
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Reclassifications |
Reclassifications – Certain amounts from the 2021 consolidated financial statements have been
reclassified to conform to the September 30, 2022 presentation.
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Recent Accounting Pronouncements |
Recent Accounting Pronouncements – FASB ASC constitutes GAAP for nongovernmental entities. Updates to ASC are prescribed in ASUs, which are not authoritative until
incorporated into the ASC.
ASU 2021-01, Reference Rate Reform (Topic 848). In January 2021, the FASB issued ASU 2021-01 to clarify the scope of Topic 848 so that derivatives
affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. This update additionally clarified that a receive-variable-rate, pay-variable-rate cross-currency interest rate swap may
be considered an eligible hedging instrument in a net investment hedge if both legs of the swap do not have the same repricing intervals and dates as a result of reference rate reform. This update was effective upon issuance and generally can be
applied through December 31, 2022. See the discussion regarding the adoption of ASU 2020-04 below.
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting. In March 2020, the FASB issued ASU 2020-04
and it provides optional expedients and exceptions for accounting related to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. This update applies only to contracts, hedging
relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and do not apply to contract modifications made and hedging relationships entered into or evaluated
after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The expedients and
exceptions in this update are available to all entities starting March 12, 2020 through December 31, 2022. The adoption of ASU 2020-04 did not significantly impact the Company’s consolidated financial statements.
ASU 2019-12, Income Taxes, Simplifying the Accounting for Income Taxes (Topic 740). In December 2019, the FASB issued ASU 2019-12
to simplify the accounting for income taxes by removing certain exceptions to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition for deferred tax liabilities for
outside basis differences. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The adoption of ASU 2019-12 did not have a material effect on the Company’s financial
statements.
ASU 2016-13 Financial Instruments - Credit Losses (Topic 326). The FASB issued guidance to replace the incurred loss model with an expected loss model, which is
referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held to maturity securities, and debt
securities. ASU 2016-13 is effective for the Company for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Entities will apply the standard’s provisions as a cumulative-effect adjustment to
retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company has contracted with a third-party vendor to assist in the implementation of CECL. The model has been developed and validation is
underway. The Company expects to adopt CECL effective January 1, 2023.
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Subsequent Events |
Subsequent Events – The
Company has evaluated subsequent events and transactions from September 30, 2022 through the date this Form 10-Q was filed with the SEC for potential recognition or disclosure as required by GAAP.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||
Subsidiaries Information | The following are subsidiaries of SPFI:
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SECURITIES (Tables) |
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SECURITIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost and Fair Value of Securities with Gross Unrealized Gains and Losses |
The amortized cost and fair value of securities, with gross unrealized gains and losses, at the dates indicated follows (dollars in thousands):
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Amortized Cost and Fair Value of Securities by Contractual Maturity |
The amortized cost and fair value of securities at September 30, 2022 are presented below by contractual maturity (dollars in thousands). Expected maturities may differ
from contractual maturities because issuers may have the right to call or prepay obligations. Other securities are shown separately since they are not due at a single maturity date.
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Securities with Unrealized Losses Segregated by the Period in a Loss Position |
The following table segregates securities with unrealized losses at the periods indicated, by the duration they have been in a loss position (dollars in thousands):
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LOANS HELD FOR INVESTMENT (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LOANS HELD FOR INVESTMENT [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Loans Held for Investment by Category |
Loans held for investment are summarized by category as of the periods presented below (dollars in thousands):
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Activity in Allowance for Loan Losses and Investment in Loans Disaggregated Based on Method of Evaluating Impairment |
The following table details the activity in the allowance for loan losses for the periods indicated (dollars in thousands). Allocation of a portion of the allowance to
one category of loans does not preclude its availability to absorb losses in other categories.
The following table shows the Company’s investment in loans disaggregated based on the method of evaluating impairment at the dates indicated (dollars in thousands):
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Impaired Loan Information |
Impaired loan information at the dates indicated follows (dollars in thousands):
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Age Analysis on Accruing Past-due Loans and Nonaccrual Loans |
The table below provides an age analysis on accruing past-due loans and nonaccrual loans at the dates indicated (dollars in thousands):
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Summary of Internal Classifications of Loans |
The following table summarizes the internal classifications of loans at the dates indicated (dollars in thousands):
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GOODWILL AND INTANGIBLES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND INTANGIBLES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Intangible Assets |
Other intangible assets, which consist of CDI, customer lists,
and employment agreements at the dates indicated are summarized below (dollars in thousands):
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MORTGAGE SERVICING RIGHTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MORTGAGE SERVICING RIGHTS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in Fair Value of Mortgage Servicing Rights Asset and Other Information |
The following table reflects the changes in fair value of the Company’s mortgage servicing rights asset included in the Consolidated Balance Sheets, and other
information related to the serviced portfolio, for the periods or dates presented (dollars in thousands):
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Key Assumptions Used in Measuring Fair Value of Mortgage Servicing Rights |
The following table reflects the key assumptions used in measuring the fair value of the Company's mortgage servicing rights as of the dates indicated:
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STOCK-BASED COMPENSATION (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Option Activity |
A summary of activity in the Plan for the period indicated is presented in the table below (dollars in thousands, except per share data):
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Summary of Assumptions Used to Calculate Fair Value of Awards |
A summary of assumptions used to calculate the fair values of the awards granted during the periods noted is presented below:
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Summary of Activity of Restricted Stock Units |
A summary of activity in the Plan for the period indicated is presented in the table below:
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OFF-BALANCE-SHEET ACTIVITIES, COMMITMENTS AND CONTINGENCIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||
OFF-BALANCE-SHEET ACTIVITIES, COMMITMENTS AND CONTINGENCIES [Abstract] | ||||||||||||||||||||||||||||
Financial Instrument Whose Contract Amounts Represent Credit Risk Outstanding |
Financial instruments whose contract amounts represent credit risk outstanding at the dates indicated follow (dollars in thousands):
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LEASES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Components of Leases |
The balance sheet components of the Company's leases at the date indicated are as
follows (dollars in thousands):
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Supplemental Cash Flow Information Related to Leases |
Supplemental cash flow information related to leases for the periods presented is as follows (dollars in thousands):
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Maturities of Operating Lease Liabilities |
Maturities of operating lease liabilities at September 30, 2022, under lease
agreements that had commenced as of or subsequent to January 1, 2022, are presented below (dollars in thousands).
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CAPITAL AND REGULATORY MATTERS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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CAPITAL AND REGULATORY MATTERS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Actual Capital Amounts and Ratios |
The Company and its bank subsidiary’s actual capital amounts and ratios at the dates indicated follows (dollars in thousands):
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DERIVATIVES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Banking [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Gains (Losses) Relating to Derivative Instruments |
The net gains (losses) relating to free standing derivative
instruments used for risk management are summarized below as of the periods indicated (dollars in thousands):
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Fair Value of Derivatives in Consolidated Balance Sheets |
The following table reflects the amount and fair value of mortgage banking derivatives in the Consolidated Balance Sheets at the dates indicated (dollars in thousands):
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Fair Value Hedging [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Derivatives in Consolidated Balance Sheets |
The following table reflects the fair value hedges included
in the Consolidated Balance Sheets at the dates indicated (dollars in thousands):
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Interest Rate Contracts [Member] | Fair Value Hedging [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Gains (Losses) Relating to Derivative Instruments |
The following table reflects the changes in fair value hedges
included in the Consolidated Statements of Comprehensive Income (Loss) as of the periods indicated (dollars in thousands):
|
EARNINGS PER SHARE (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Factors Used in Earnings Per Share Computation |
The factors used in the earnings per share computation for the periods indicated follow (dollars in thousands, except per share data):
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SEGMENT INFORMATION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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SEGMENT INFORMATION [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Results by Reportable Segment |
Financial results by reportable segment as of the periods indicated are detailed below (dollars in thousands):
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FAIR VALUE DISCLOSURES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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FAIR VALUE DISCLOSURES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets (Liabilities) Measured at Fair Value on Recurring and Non-Recurring Basis |
The following table summarizes fair value
measurements at the dates indicated (dollars in thousands):
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Quantitative Information about Recurring ad Non-Recurring Level 3 Fair Value Measurements |
The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at the dates indicated (dollars in thousands):
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Estimated Fair Values, and Related Carrying Amounts of Financial Instruments |
The estimated fair values, and related carrying amounts, of the Company’s financial instruments that are not previously disclosed in the recurring fair value section are
as follows (dollars in thousands):
|
SECURITIES, Amortized Cost and Fair Value of Securities by Contractual Maturity (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Available for Sale, Amortized Cost [Abstract] | ||
Within 1 year | $ 1,901 | |
After 1 year through 5 years | 8,704 | |
After 5 years through 10 years | 19,532 | |
After 10 years | 242,144 | |
Other | 553,598 | |
Amortized cost | 825,879 | $ 712,895 |
Available for Sale, Fair Value [Abstract] | ||
Within 1 year | 1,906 | |
After 1 year through 5 years | 8,499 | |
After 5 years through 10 years | 18,582 | |
After 10 years | 202,543 | |
Other | 479,882 | |
Fair value | $ 711,412 | $ 724,504 |
SECURITIES, Securities Transferred and Securities Pledged (Details) $ in Millions |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2022
USD ($)
Security
|
Dec. 31, 2021
USD ($)
Security
|
|
SECURITIES [Abstract] | ||
Holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders' equity | Security | 0 | 0 |
Carrying value of securities pledged to collateralize public deposits and for other purposes | $ | $ 449.9 | $ 474.5 |
LOANS HELD FOR INVESTMENT, COVID-19 Related Deferral and Modification (Details) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2022
USD ($)
Loan
|
Dec. 31, 2021
USD ($)
Loan
|
|
CARES Act [Abstract] | ||
TDRs | $ 0 | $ 0 |
Covid-19 [Member] | ||
CARES Act [Abstract] | ||
Number of outstanding loans subject to deferral and modification agreements | Loan | 0 | 3 |
Amount of outstanding loans subject to deferral and modification agreements | $ 15,900 | |
Percentage of loans modified under CARES Act | 0.65% |
GOODWILL AND INTANGIBLES (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Goodwill [Abstract] | ||
Goodwill | $ 19,508 | $ 19,508 |
Amortized Intangible Assets [Abstract] | ||
Other intangible assets, net | 4,720 | 5,895 |
Core Deposit Intangible [Member] | ||
Amortized Intangible Assets [Abstract] | ||
Other intangible assets, gross | 6,679 | 6,679 |
Less: Accumulated amortization | (3,198) | (2,469) |
Other intangible assets, net | 3,481 | 4,210 |
Other Intangibles [Member] | ||
Amortized Intangible Assets [Abstract] | ||
Other intangible assets, gross | 2,972 | 2,972 |
Less: Accumulated amortization | (1,733) | (1,287) |
Other intangible assets, net | $ 1,239 | $ 1,685 |
MORTGAGE SERVICING RIGHTS (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
Mortgage Servicing Rights Asset [Roll Forward] | |||||
Beginning balance | $ 27,505 | $ 15,977 | $ 19,700 | $ 9,049 | $ 9,049 |
Additions | 514 | 2,026 | 2,694 | 8,018 | |
Valuation adjustment | 405 | 119 | 6,030 | 1,055 | |
Ending balance | 28,424 | $ 18,122 | 28,424 | $ 18,122 | 19,700 |
Mortgage Servicing Rights Other Information [Abstract] | |||||
Mortgage loans serviced for others | $ 2,053,183 | $ 2,053,183 | $ 1,953,095 | ||
Mortgage servicing rights asset as a percentage of serviced mortgage loans | 1.38% | 1.38% | 1.01% | ||
Key Assumptions Used in Measuring Fair Value of Mortgage Servicing Rights [Abstract] | |||||
Weighted average constant prepayment rate | 7.34% | 12.35% | |||
Weighted average discount rate | 9.14% | 9.14% | |||
Weighted average life in years | 8 years | 6 years 10 days |
BORROWING ARRANGEMENTS, Notes Payable and Other Borrowings (Details) - USD ($) $ in Millions |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Federal Home Loan Bank Advance [Member] | Federal Home Loan Bank of Dallas [Member] | City Bank [Member] | ||
Detail of Advances from FHLB [Abstract] | ||
Original amount of advances | $ 0 | $ 0 |
STOCK-BASED COMPENSATION, Equity Incentive Plan (Details) - 2019 Equity Incentive Plan [Member] |
Mar. 06, 2019
shares
|
---|---|
Equity Incentive Plan [Abstract] | |
Maximum aggregate number of shares of common stock that may be issued (in shares) | 2,300,000 |
Maximum [Member] | |
Equity Incentive Plan [Abstract] | |
Annual increase in number of shares that may be issued | 3.00% |
STOCK-BASED COMPENSATION, Fair Value Assumptions (Details) - Stock Option [Member] - USD ($) $ / shares in Units, $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Summary of Assumptions Used to Calculate Fair Value of Awards [Abstract] | ||
Expected dividend yield | 1.30% | 1.00% |
Weighted average grant date fair value (in dollars per share) | $ 10.54 | $ 7.07 |
Minimum [Member] | ||
Summary of Assumptions Used to Calculate Fair Value of Awards [Abstract] | ||
Expected volatility | 40.20% | 41.20% |
Expected term | 6 years 1 month 6 days | 6 years 1 month 6 days |
Risk-free interest rate | 1.56% | 0.52% |
Maximum [Member] | ||
Summary of Assumptions Used to Calculate Fair Value of Awards [Abstract] | ||
Expected volatility | 40.29% | 41.32% |
Expected term | 6 years 3 months 18 days | 6 years 2 months 12 days |
Risk-free interest rate | 1.95% | 0.83% |
2019 Equity Incentive Plan [Member] | ||
Equity Incentive Plan [Abstract] | ||
Intrinsic value of options exercised | $ 516 | $ 17 |
OFF-BALANCE-SHEET ACTIVITIES, COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
FHLB Letters of Credit [Abstract] | ||
Letters of credit outstanding balance | $ 0 | $ 0 |
Commitments to Grant Loans and Unfunded Commitments Under Lines of Credit [Member] | ||
Financial instruments with off-balance-sheet risk [Abstract] | ||
Financial instruments whose contract amounts represent credit risk outstanding | 741,347 | 542,338 |
Standby Letters of Credit [Member] | ||
Financial instruments with off-balance-sheet risk [Abstract] | ||
Financial instruments whose contract amounts represent credit risk outstanding | $ 12,563 | $ 12,418 |
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Basic [Abstract] | ||||
Net income | $ 15,458 | $ 15,190 | $ 45,619 | $ 44,000 |
Weighted average common shares outstanding - basic (in shares) | 17,286,531 | 17,931,174 | 17,496,217 | 18,012,963 |
Effect of dilutive securities [Abstract] | ||||
Stock-based compensation awards (in shares) | 615,368 | 532,523 | 607,808 | 503,525 |
Weighted average common shares outstanding - diluted (in shares) | 17,901,899 | 18,463,697 | 18,104,025 | 18,516,488 |
Basic earnings per share (in dollars per share) | $ 0.89 | $ 0.85 | $ 2.61 | $ 2.44 |
Diluted earnings per share (in dollars per share) | $ 0.86 | $ 0.82 | $ 2.52 | $ 2.38 |
SEGMENT INFORMATION (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Financial results by reportable segments [Abstract] | ||||
Net interest income | $ 35,102 | $ 31,178 | $ 102,154 | $ 90,315 |
Provision for loan losses | 782 | 0 | 2,867 | 1,918 |
Noninterest income | 20,937 | 25,791 | 63,469 | 74,541 |
Noninterest expense | (37,401) | (38,063) | (111,381) | (111,898) |
Income before income taxes | 19,420 | 18,906 | 57,109 | 54,876 |
Income tax (expense) benefit | (3,962) | (3,716) | (11,490) | (10,876) |
Net income | 15,458 | 15,190 | 45,619 | 44,000 |
Banking [Member] | Operating Segments [Member] | ||||
Financial results by reportable segments [Abstract] | ||||
Net interest income | 35,102 | 31,178 | 102,154 | 90,315 |
Provision for loan losses | 782 | 0 | 2,867 | 1,918 |
Noninterest income | 16,162 | 22,043 | 55,714 | 68,536 |
Noninterest expense | (34,460) | (35,613) | (105,612) | (107,233) |
Income before income taxes | 17,586 | 17,608 | 55,123 | 53,536 |
Income tax (expense) benefit | (3,577) | (3,495) | (11,071) | (10,645) |
Net income | 14,009 | 14,113 | 44,052 | 42,891 |
Insurance [Member] | Operating Segments [Member] | ||||
Financial results by reportable segments [Abstract] | ||||
Net interest income | 0 | 0 | 0 | 0 |
Provision for loan losses | 0 | 0 | 0 | 0 |
Noninterest income | 4,775 | 3,748 | 7,755 | 6,005 |
Noninterest expense | (2,941) | (2,450) | (5,769) | (4,665) |
Income before income taxes | 1,834 | 1,298 | 1,986 | 1,340 |
Income tax (expense) benefit | (385) | (221) | (419) | (231) |
Net income | $ 1,449 | $ 1,077 | $ 1,567 | $ 1,109 |
SUBSEQUENT EVENTS (Details) - $ / shares |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Oct. 19, 2022 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Dividends [Abstract] | |||||
Dividends declared per share (in dollars per share) | $ 0.12 | $ 0.09 | $ 0.34 | $ 0.21 | |
Subsequent Event [Member] | |||||
Dividends [Abstract] | |||||
Dividends declared date | Oct. 19, 2022 | ||||
Dividends declared per share (in dollars per share) | $ 0.12 | ||||
Dividends payable date | Nov. 15, 2022 | ||||
Dividends record date | Oct. 31, 2022 |
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