QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
1ST CONSTITUTION BANCORP |
(State of Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s Telephone Number, Including Area Code) |
(Former name, former address and former fiscal year, if changed since last report) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Large accelerated filer | ☐ | ☒ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company | ||||
If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ |
Page | ||
PART I. | FINANCIAL INFORMATION | |
Item 1. | Financial Statements | |
Consolidated Balance Sheets at June 30, 2020 and December 31, 2019 (unaudited) | ||
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2020 and June 30, 2019 (unaudited) | ||
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2020 and June 30, 2019 (unaudited) | ||
Consolidated Statements of Changes in Shareholders' Equity for the Three and Six Months Ended June 30, 2020 and June 30, 2019 (unaudited) | ||
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and June 30, 2019 (unaudited) | ||
Notes to Consolidated Financial Statements (unaudited) | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. | Controls and Procedures | |
PART II. | OTHER INFORMATION | |
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3. | Defaults Upon Senior Securities | |
June 30, 2020 | December 31, 2019 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | $ | ||||||
Interest-earning deposits | ||||||||
Total cash and cash equivalents | ||||||||
Investment securities | ||||||||
Available for sale, at fair value | ||||||||
Held to maturity (fair value of $97,567 and $78,223 at June 30, 2020 and December 31, 2019, respectively) | ||||||||
Total investment securities | ||||||||
Loans held for sale | ||||||||
Loans | ||||||||
Less: allowance for loan losses | ( | ) | ( | ) | ||||
Net loans | ||||||||
Premises and equipment, net | ||||||||
Right-of-use assets | ||||||||
Accrued interest receivable | ||||||||
Bank-owned life insurance | ||||||||
Other real estate owned | ||||||||
Goodwill and intangible assets | ||||||||
Other assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
LIABILITIES | ||||||||
Deposits | ||||||||
Non-interest bearing | $ | $ | ||||||
Interest bearing | ||||||||
Total deposits | ||||||||
Short-term borrowings | ||||||||
Redeemable subordinated debentures | ||||||||
Accrued interest payable | ||||||||
Lease liability | ||||||||
Accrued expenses and other liabilities | ||||||||
Total liabilities | ||||||||
SHAREHOLDERS' EQUITY | ||||||||
Preferred stock, no par value; 5,000,000 shares authorized; none issued | ||||||||
Common stock, no par value; 30,000,000 shares authorized; 10,258,374 and 10,224,974 shares issued and 10,219,048 and 10,191,676 shares outstanding as of June 30, 2020 and December 31, 2019, respectively | ||||||||
Retained earnings | ||||||||
Treasury stock, 39,326 and 33,298 shares at June 30, 2020 and December 31, 2019, respectively | ( | ) | ( | ) | ||||
Accumulated other comprehensive income | ||||||||
Total shareholders' equity | ||||||||
Total liabilities and shareholders' equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
INTEREST INCOME | |||||||||||||||
Loans, including fees | $ | $ | $ | $ | |||||||||||
Securities: | |||||||||||||||
Taxable | |||||||||||||||
Tax-exempt | |||||||||||||||
Federal funds sold and short-term investments | |||||||||||||||
Total interest income | |||||||||||||||
INTEREST EXPENSE | |||||||||||||||
Deposits | |||||||||||||||
Borrowings | |||||||||||||||
Redeemable subordinated debentures | |||||||||||||||
Total interest expense | |||||||||||||||
Net interest income | |||||||||||||||
PROVISION FOR LOAN LOSSES | |||||||||||||||
Net interest income after provision for loan losses | |||||||||||||||
NON-INTEREST INCOME | |||||||||||||||
Service charges on deposit accounts | |||||||||||||||
Gain on sales of loans | |||||||||||||||
Income on bank-owned life insurance | |||||||||||||||
Gain on sales and calls of securities | |||||||||||||||
Other income | |||||||||||||||
Total non-interest income | |||||||||||||||
NON-INTEREST EXPENSES | |||||||||||||||
Salaries and employee benefits | |||||||||||||||
Occupancy expense | |||||||||||||||
Data processing expenses | |||||||||||||||
FDIC insurance expense | |||||||||||||||
Other real estate owned expenses | |||||||||||||||
Merger-related expenses | |||||||||||||||
Other operating expenses | |||||||||||||||
Total non-interest expenses | |||||||||||||||
Income before income taxes | |||||||||||||||
INCOME TAXES | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
EARNINGS PER COMMON SHARE | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ | |||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||||||||||
Basic | |||||||||||||||
Diluted |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Other comprehensive income (loss): | |||||||||||||||
Unrealized holding gains on securities available for sale | |||||||||||||||
Tax effect | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net of tax amount | |||||||||||||||
Reclassification adjustment for gains on securities available for sale(1) | ( | ) | ( | ) | |||||||||||
Tax effect (2) | |||||||||||||||
Net of tax amount | ( | ) | ( | ) | |||||||||||
Reclassification adjustment for unrealized impairment loss on held to maturity security(3) | |||||||||||||||
Tax effect | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net of tax amount | |||||||||||||||
Pension liability | |||||||||||||||
Tax effect | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net of tax amount | |||||||||||||||
Reclassification adjustment for actuarial gains for unfunded pension liability(4) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Tax effect (2) | |||||||||||||||
Net of tax amount | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total other comprehensive income | |||||||||||||||
Comprehensive income | $ | $ | $ | $ |
Common Stock | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||
Balance, April 1, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | 131,207 | |||||||||
Net income | — | — | — | 3,370 | |||||||||||||||
Exercise of stock options and issuance of restricted shares (10,555 shares and 14,181 shares, respectively) | — | — | — | 66 | |||||||||||||||
Share-based compensation | — | — | — | 296 | |||||||||||||||
Cash dividends ($0.075 per share) | — | ( | ) | — | — | (647 | ) | ||||||||||||
Other comprehensive income | — | — | — | 783 | |||||||||||||||
Balance, June 30 2019 | $ | 80,190 | $ | 55,224 | $ | (368 | ) | $ | 29 | $ | 135,075 | ||||||||
Balance, April 1, 2020 | $ | $ | $ | ( | ) | $ | $ | 173,105 | |||||||||||
Net income | — | — | — | 3,690 | |||||||||||||||
Share-based compensation | — | — | — | 292 | |||||||||||||||
Cash dividends ($0.09 per share) | — | ( | ) | — | — | (918 | ) | ||||||||||||
Other comprehensive income | — | — | — | 1,315 | |||||||||||||||
Balance, June 30, 2020 | $ | 110,546 | $ | 66,067 | $ | (503 | ) | $ | 1,374 | $ | 177,484 |
Common Stock | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||
Balance, January 1, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | 127,085 | |||||||||
Net income | — | — | — | 6,767 | |||||||||||||||
Exercise of stock options and issuance of restricted shares (15,919 shares and 28,581 shares, respectively) | — | — | — | 89 | |||||||||||||||
Share-based compensation | — | — | — | 565 | |||||||||||||||
Cash dividends ($0.15 per share) | — | ( | ) | — | — | (1,293 | ) | ||||||||||||
Other comprehensive income | — | — | — | 1,862 | |||||||||||||||
Balance, June 30, 2019 | $ | 80,190 | $ | 55,224 | $ | (368 | ) | $ | 29 | $ | 135,075 | ||||||||
Balance, January 1, 2020 | $ | $ | $ | ( | ) | $ | $ | 170,578 | |||||||||||
Net income | — | — | — | 7,111 | |||||||||||||||
Share-based compensation | — | — | — | 582 | |||||||||||||||
Cash dividends ($0.18 per share) | — | ( | ) | — | — | (1,835 | ) | ||||||||||||
Treasury stock purchased (6,028 shares) | — | — | ( | ) | — | (135 | ) | ||||||||||||
Other comprehensive income | — | — | — | 1,183 | |||||||||||||||
Balance, June 30, 2020 | $ | 110,546 | $ | 66,067 | $ | (503 | ) | $ | 1,374 | $ | 177,484 |
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
OPERATING ACTIVITIES: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities- | |||||||
Provision for loan losses | |||||||
Depreciation and amortization | |||||||
Net amortization of premiums and discounts on securities | |||||||
SBA loan discount accretion | ( | ) | ( | ) | |||
Gains on sales and calls of securities available for sale | ( | ) | |||||
Gains on sales and calls of securities held to maturity | ( | ) | |||||
Gains on sales of other real estate owned | ( | ) | |||||
Gains on sales of loans held for sale | ( | ) | ( | ) | |||
Originations of loans held for sale | ( | ) | ( | ) | |||
Proceeds from sales of loans held for sale | |||||||
Increase in cash surrender value on bank–owned life insurance | ( | ) | ( | ) | |||
Gain on cash surrender value on bank-owned life insurance | ( | ) | |||||
Share-based compensation expense | |||||||
Decrease in deferred tax asset | |||||||
Noncash rent and equipment expense | |||||||
Increase in accrued interest receivable | ( | ) | ( | ) | |||
Increase in other assets | ( | ) | ( | ) | |||
(Decrease) increase in accrued interest payable | ( | ) | |||||
Increase (decrease) in accrued expenses and other liabilities | ( | ) | |||||
Net cash provided by operating activities | |||||||
INVESTING ACTIVITIES: | |||||||
Purchases of securities: | |||||||
Available for sale | ( | ) | ( | ) | |||
Held to maturity | ( | ) | ( | ) | |||
Proceeds from calls, maturities and payments of securities: | |||||||
Available for sale | |||||||
Held to maturity | |||||||
Proceeds from bank-owned life insurance benefits paid | — | ||||||
Net purchase of restricted stock | ( | ) | ( | ) | |||
Net increase in loans | ( | ) | ( | ) | |||
Capital expenditures | ( | ) | ( | ) | |||
Proceeds from sales of other real estate owned | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
FINANCING ACTIVITIES: | |||||||
Exercise of stock options | |||||||
Purchase of treasury shares | ( | ) | |||||
Cash dividends paid to shareholders | ( | ) | ( | ) | |||
Net increase in deposits | |||||||
Increase in short-term borrowings | |||||||
Net cash provided by financing activities | |||||||
(Decrease) increase in cash and cash equivalents | ( | ) | |||||
Cash and cash equivalents at beginning of period | |||||||
Cash and cash equivalents at end of period | $ | $ |
Supplemental Disclosures of Cash Flow Information | |||||||
Cash paid during the period for - | |||||||
Interest | $ | $ | |||||
Income taxes | |||||||
Noncash items: | |||||||
Right-of-use assets | $ | $ | |||||
Lease liability | |||||||
1. | The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year; |
2. | The amount and timing of plan assets expected to be returned to the employer; |
3. | The disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law; |
4. | Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan; |
5. | For nonpublic entities, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy. However, nonpublic entities will be required to disclose separately the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets; and |
6. | For public entities, the effects of a one-percentage point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits. |
1. | The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates; and |
2. | An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. |
1. | The projected benefit obligation (“PBO”) and fair value of plan assets for plans with PBOs in excess of plan assets; and |
2. | The accumulated benefit obligation (“ABO”) and fair value of plan assets for plans with ABOs in excess of plan assets. |
(Dollars in thousands) | Amount | ||
Consideration paid: | |||
Company stock issued | $ | ||
Cash payment | |||
Cash payment for unexercised outstanding stock options | |||
Total consideration paid | $ | ||
Recognized amounts of identifiable assets acquired and liabilities assumed at fair value: | |||
Cash and cash equivalents | $ | ||
Investment securities available for sale | |||
Loans | |||
Premises and equipment, net | |||
Core deposit intangible asset | |||
Bank-owned life insurance | |||
Right-of-use assets | |||
Accrued interest receivable | |||
Other real estate owned | |||
Other assets | |||
Deposits | ( | ) | |
Lease liability | ( | ) | |
Other liabilities | ( | ) | |
Total identifiable assets and liabilities, net | $ | ||
Goodwill recorded from Shore merger | $ |
At November 8, 2019 | ||||||||||||
(Dollars in thousands) | Loans acquired with no credit quality deterioration | Loans acquired with credit quality deterioration | Total | |||||||||
Commercial | ||||||||||||
Construction | $ | $ | $ | |||||||||
Commercial real estate | ||||||||||||
Commercial business | ||||||||||||
Residential real estate | ||||||||||||
Consumer | ||||||||||||
Total loans | $ | $ | $ |
(Dollars in thousands) | Acquired Credit Impaired Loans | ||
Contractually required principal and interest at acquisition | $ | ||
Contractual cash flows not expected to be collected (non-accretable difference) | |||
Expected cash flows at acquisition | |||
Interest component of expected cash flows (accretable difference) | |||
Fair value of acquired loans | $ |
(Dollars in thousands) | Amount | ||
Year | |||
2020 | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
Thereafter | |||
Total | $ |
(Dollars in thousands) | Shore Six Months Ended June 30, 2020 | Actual for the Six Months Ended June 30, 2020 | Pro Forma for the Three Months Ended June 30, 2019 | Pro Forma for the Six Months Ended June 30, 2019 | |||||||||||
Net interest income | $ | $ | $ | $ | |||||||||||
Non-interest income | |||||||||||||||
Non-interest expenses | |||||||||||||||
Income taxes | |||||||||||||||
Net income |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(Dollars in thousands, except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Basic weighted average shares outstanding | |||||||||||||||
Plus: common stock equivalents | |||||||||||||||
Diluted weighted average shares outstanding | |||||||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | $ | |||||||||||||
Diluted | $ | $ |
June 30, 2020 | |||||||||||||||
(Dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||
U.S. Treasury securities and obligations of U.S. Government sponsored entities (“GSE”) | $ | $ | $ | ( | ) | $ | |||||||||
Residential collateralized mortgage obligations - GSE | ( | ) | |||||||||||||
Residential mortgage backed securities - GSE | ( | ) | |||||||||||||
Obligations of state and political subdivisions | |||||||||||||||
Trust preferred debt securities - single issuer | ( | ) | |||||||||||||
Corporate debt securities | ( | ) | |||||||||||||
Other debt securities | ( | ) | |||||||||||||
Total | $ | $ | $ | ( | ) | $ |
December 31, 2019 | |||||||||||||||
(Dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||
U.S. Treasury securities and obligations of U.S. Government sponsored entities (“GSE”) | $ | $ | $ | ( | ) | $ | |||||||||
Residential collateralized mortgage obligations - GSE | ( | ) | |||||||||||||
Residential mortgage backed securities - GSE | ( | ) | |||||||||||||
Obligations of state and political subdivisions | |||||||||||||||
Trust preferred debt securities - single issuer | ( | ) | |||||||||||||
Corporate debt securities | ( | ) | |||||||||||||
Other debt securities | ( | ) | |||||||||||||
Total | $ | $ | $ | ( | ) | $ |
June 30, 2020 | |||||||||||||||||||||||
(Dollars in thousands) | Amortized Cost | Other-Than- Temporary Impairment Recognized In Accumulated Other Comprehensive Loss | Carrying Value | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||
Residential collateralized mortgage obligations - GSE | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Residential mortgage backed securities - GSE | |||||||||||||||||||||||
Obligations of state and political subdivisions | ( | ) | |||||||||||||||||||||
Trust preferred debt securities - pooled | ( | ) | |||||||||||||||||||||
Other debt securities | |||||||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ |
December 31, 2019 | |||||||||||||||||||||||
(Dollars in thousands) | Amortized Cost | Other-Than- Temporary Impairment Recognized In Accumulated Other Comprehensive Loss | Carrying Value | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||
Residential collateralized mortgage obligations - GSE | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Residential mortgage backed securities - GSE | ( | ) | |||||||||||||||||||||
Obligations of state and political subdivisions | ( | ) | |||||||||||||||||||||
Trust preferred debt securities - pooled | ( | ) | |||||||||||||||||||||
Other debt securities | ( | ) | |||||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ |
June 30, 2020 | ||||||||||
(Dollars in thousands) | Amortized Cost | Fair Value | Yield | |||||||
Available for sale | ||||||||||
Due in one year or less | $ | $ | % | |||||||
Due after one year through five years | % | |||||||||
Due after five years through ten years | % | |||||||||
Due after ten years | % | |||||||||
Total | $ | $ | % | |||||||
Carrying Value | Fair Value | Yield | ||||||||
Held to maturity | ||||||||||
Due in one year or less | $ | $ | % | |||||||
Due after one year through five years | % | |||||||||
Due after five years through ten years | % | |||||||||
Due after ten years | % | |||||||||
Total | $ | $ | % |
June 30, 2020 | |||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||
(Dollars in thousands) | Number of Securities | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
U.S. Treasury securities and obligations of U.S. Government sponsored entities (GSE) and agencies | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | |||||||||||||||
Residential collateralized mortgage obligations - GSE | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Residential mortgage backed securities - GSE | ( | ) | ( | ) | |||||||||||||||||||||
Obligations of state and political subdivisions | ( | ) | ( | ) | |||||||||||||||||||||
Trust preferred debt securities - single issuer | ( | ) | ( | ) | |||||||||||||||||||||
Corporate debt securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Other debt securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Total temporarily impaired securities | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) |
December 31, 2019 | |||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||
(Dollars in thousands) | Number of Securities | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
U.S. Treasury securities and obligations of U.S. Government sponsored entities (GSE) and agencies | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | |||||||||||||||
Residential collateralized mortgage obligations - GSE | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Residential mortgage backed securities - GSE | ( | ) | ( | ) | |||||||||||||||||||||
Obligations of state and political subdivisions | ( | ) | ( | ) | |||||||||||||||||||||
Trust preferred debt securities - single issuer | ( | ) | ( | ) | |||||||||||||||||||||
Corporate debt securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Other debt securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Total temporarily impaired securities | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) |
(Dollars in thousands) | 30-59 Days | 60-89 Days | Greater than 90 Days | Total Past Due | Current | Total Loans Receivable | Recorded Investment > 90 Days Accruing | Non-accrual Loans | |||||||||||||||||||||||
Commercial real estate | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Mortgage warehouse lines | |||||||||||||||||||||||||||||||
Construction | |||||||||||||||||||||||||||||||
Commercial business | |||||||||||||||||||||||||||||||
Residential real estate | |||||||||||||||||||||||||||||||
Loans to individuals | |||||||||||||||||||||||||||||||
Other loans | |||||||||||||||||||||||||||||||
Total loans | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Deferred loan (fees) costs, net | ( | ) | |||||||||||||||||||||||||||||
Total loans | $ |
(Dollars in thousands) | 30-59 Days | 60-89 Days | Greater than 90 Days | Total Past Due | Current | Total Loans Receivable | Recorded Investment > 90 Days Accruing | Non-accrual Loans | |||||||||||||||||||||||
Commercial real estate | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Mortgage warehouse lines | |||||||||||||||||||||||||||||||
Construction | |||||||||||||||||||||||||||||||
Commercial business | |||||||||||||||||||||||||||||||
Residential real estate | |||||||||||||||||||||||||||||||
Loans to individuals | |||||||||||||||||||||||||||||||
Other loans | |||||||||||||||||||||||||||||||
Total loans | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Deferred loan costs, net | |||||||||||||||||||||||||||||||
Total loans | $ |
(Dollars in thousands) | |||||||||||||||||||
Commercial Credit Exposure - By Internally Assigned Grade | Construction | Commercial Business | Commercial Real Estate | Mortgage Warehouse Lines | Residential Real Estate | ||||||||||||||
Pass | $ | $ | $ | $ | $ | ||||||||||||||
Special Mention | |||||||||||||||||||
Substandard | |||||||||||||||||||
Doubtful | |||||||||||||||||||
Total | $ | $ | $ | $ | $ |
Consumer Credit Exposure - By Payment Activity | Loans To Individuals | Other loans | |||||
Performing | $ | $ | |||||
Non-performing | |||||||
Total | $ | $ |
(Dollars in thousands) | |||||||||||||||||||
Commercial Credit Exposure - By Internally Assigned Grade | Construction | Commercial Business | Commercial Real Estate | Mortgage Warehouse Lines | Residential Real Estate | ||||||||||||||
Pass | $ | $ | $ | $ | $ | ||||||||||||||
Special Mention | |||||||||||||||||||
Substandard | |||||||||||||||||||
Doubtful | |||||||||||||||||||
Total | $ | $ | $ | $ | $ |
Consumer Credit Exposure - By Payment Activity | Loans To Individuals | Other loans | |||||
Performing | $ | $ | |||||
Non-performing | |||||||
Total | $ | $ |
June 30, 2020 | |||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Construction | Commercial Business | Commercial Real Estate | Mortgage Warehouse Lines | Residential Real Estate | Loans to Individuals | Other loans | Unallocated | Total | ||||||||||||||||||||||||||
Allowance for loan losses: | |||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Loans acquired with deteriorated credit quality | |||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | |||||||||||||||||||||||||||||||||||
Ending Balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Loans receivable: | |||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Loans acquired with deteriorated credit quality | |||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | |||||||||||||||||||||||||||||||||||
Ending Balance | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Deferred loan (fees) costs, net | ( | ) | |||||||||||||||||||||||||||||||||
$ |
December 31, 2019 | |||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Construction | Commercial Business | Commercial Real Estate | Mortgage Warehouse Lines | Residential Real Estate | Loans to Individuals | Other loans | Unallocated | Total | ||||||||||||||||||||||||||
Allowance for loan losses: | |||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Loans acquired with deteriorated credit quality | |||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | |||||||||||||||||||||||||||||||||||
Ending Balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Loans receivable: | |||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Loans acquired with deteriorated credit quality | |||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | |||||||||||||||||||||||||||||||||||
Ending Balance | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Deferred loan (fees) costs, net | |||||||||||||||||||||||||||||||||||
$ |
Balance - (Dollars in thousands) | Construction | Commercial Business | Commercial Real Estate | Mortgage Warehouse Lines | Residential Real Estate | Loans to Individuals | Other Loans | Unallocated | Total | |||||||||||||||||||||||||||
Balance - April 1, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Provision charged/(credited) to operations | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Loans charged off | ||||||||||||||||||||||||||||||||||||
Recoveries of loans charged off | ||||||||||||||||||||||||||||||||||||
Balance - June 30, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Balance - April 1, 2019 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Provision charged/(credited) to operations | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Loans charged off | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Recoveries of loans charged off | ||||||||||||||||||||||||||||||||||||
Balance - June 30, 2019 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
(Dollars in thousands) | Construction | Commercial Business | Commercial Real Estate | Mortgage Warehouse Lines | Residential Real Estate | Loans to Individuals | Other Loans | Unallocated | Total | |||||||||||||||||||||||||||
Balance - January 1, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Provision charged/(credited) to operations | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Loans charged off | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Recoveries of loans charged off | ||||||||||||||||||||||||||||||||||||
Balance - June 30, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
January 1, 2019 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Provision charged/(credited) to operations | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Loans charged off | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Recoveries of loans charged off | ||||||||||||||||||||||||||||||||||||
Balance - June 30, 2019 | $ | $ | $ | $ | $ | $ | $ | $ | $ |
Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||
(Dollars in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | ||||||||||||||||||||
With no allowance: | |||||||||||||||||||||||||||
Commercial: | |||||||||||||||||||||||||||
Construction | $ | $ | $ | — | $ | $ | $ | $ | |||||||||||||||||||
Commercial Business | — | ||||||||||||||||||||||||||
Commercial Real Estate | — | ||||||||||||||||||||||||||
Mortgage Warehouse Lines | — | ||||||||||||||||||||||||||
Subtotal | — | ||||||||||||||||||||||||||
Residential Real Estate | — | ||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||
Loans to Individuals | — | ||||||||||||||||||||||||||
Other loans | — | ||||||||||||||||||||||||||
Subtotal | — | ||||||||||||||||||||||||||
With no allowance: | $ | $ | $ | — | $ | $ | $ | $ | |||||||||||||||||||
With an allowance: | |||||||||||||||||||||||||||
Commercial: | |||||||||||||||||||||||||||
Construction | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Commercial Business | |||||||||||||||||||||||||||
Commercial Real Estate | |||||||||||||||||||||||||||
Mortgage Warehouse Lines | |||||||||||||||||||||||||||
Subtotal | |||||||||||||||||||||||||||
Residential Real Estate | |||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||
Loans to Individuals | |||||||||||||||||||||||||||
Other loans | |||||||||||||||||||||||||||
Subtotal | |||||||||||||||||||||||||||
With an allowance: | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Total: | |||||||||||||||||||||||||||
Construction | |||||||||||||||||||||||||||
Commercial Business | |||||||||||||||||||||||||||
Commercial Real Estate | |||||||||||||||||||||||||||
Mortgage Warehouse Lines | |||||||||||||||||||||||||||
Residential Real Estate | |||||||||||||||||||||||||||
Consumer | |||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ |
December 31, 2019 | ||||||||||||
(Dollars in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | |||||||||
With no allowance: | ||||||||||||
Commercial: | ||||||||||||
Construction | $ | $ | $ | — | ||||||||
Commercial Business | — | |||||||||||
Commercial Real Estate | — | |||||||||||
Mortgage Warehouse Lines | — | |||||||||||
Subtotal | — | |||||||||||
Residential Real Estate | — | |||||||||||
Consumer: | ||||||||||||
Loans to Individuals | — | |||||||||||
Other loans | — | |||||||||||
Subtotal | — | |||||||||||
With no allowance | $ | $ | $ | — | ||||||||
With an allowance: | ||||||||||||
Commercial: | ||||||||||||
Construction | $ | $ | $ | |||||||||
Commercial Business | ||||||||||||
Commercial Real Estate | ||||||||||||
Mortgage Warehouse Lines | ||||||||||||
Subtotal | ||||||||||||
Residential Real Estate | ||||||||||||
Consumer: | ||||||||||||
Loans to Individuals | ||||||||||||
Other loans | ||||||||||||
Subtotal | ||||||||||||
With an allowance | $ | $ | $ | |||||||||
Total: | ||||||||||||
Construction | $ | $ | $ | |||||||||
Commercial Business | ||||||||||||
Commercial Real Estate | ||||||||||||
Mortgage Warehouse Lines | ||||||||||||
Residential Real Estate | ||||||||||||
Consumer | ||||||||||||
Total | $ | $ | $ |
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | ||||||||||||||
(Dollars in thousands) | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | |||||||||||
With no allowance: | |||||||||||||||
Commercial: | |||||||||||||||
Construction | $ | $ | $ | $ | |||||||||||
Commercial Business | |||||||||||||||
Commercial Real Estate | |||||||||||||||
Mortgage Warehouse Lines | |||||||||||||||
Subtotal | |||||||||||||||
Residential Real Estate | |||||||||||||||
Consumer: | |||||||||||||||
Loans to Individuals | |||||||||||||||
Other loans | |||||||||||||||
Subtotal | |||||||||||||||
With no allowance | $ | $ | $ | $ | |||||||||||
With an allowance: | |||||||||||||||
Commercial: | |||||||||||||||
Construction | $ | $ | $ | ||||||||||||
Commercial Business | |||||||||||||||
Commercial Real Estate | |||||||||||||||
Mortgage Warehouse Lines | |||||||||||||||
Subtotal | |||||||||||||||
Residential Real Estate | |||||||||||||||
Consumer: | |||||||||||||||
Loans to Individuals | |||||||||||||||
Other loans | |||||||||||||||
Subtotal | |||||||||||||||
With an allowance | $ | $ | $ | $ | |||||||||||
Total: | |||||||||||||||
Construction | $ | $ | |||||||||||||
Commercial Business | |||||||||||||||
Commercial Real Estate | |||||||||||||||
Mortgage Warehouse Lines | |||||||||||||||
Residential Real Estate | |||||||||||||||
Consumer | |||||||||||||||
Total | $ | $ | $ | $ |
(Dollars in thousands) | June 30, 2020 | December 31, 2019 | |||||
Outstanding balance | $ | $ | |||||
Carrying amount | $ | $ |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(Dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Balance at beginning of period | $ | $ | $ | $ | |||||||||||
Acquisition of impaired loans | |||||||||||||||
Accretion of discount | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Balance at end of period | $ | $ | $ | $ |
June 30, 2020 | December 31, 2019 | |||||||||
Number of loans | Recorded Investment | Number of loans | Recorded Investment | |||||||
$ | $ |
Three months ended | Six months ended | |||||||||||||
(Dollars in thousands) | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||
Service charges on deposit accounts: | ||||||||||||||
Overdraft fees | $ | $ | $ | $ | ||||||||||
Other | ||||||||||||||
Interchange income | ||||||||||||||
Other income - in scope | ||||||||||||||
Gain on sale of OREO | ||||||||||||||
Income on bank-owned life insurance (1) | ||||||||||||||
Net gains on sales of loans (1) | ||||||||||||||
Loan servicing fees (1) | ||||||||||||||
Gains on sales and calls of securities (1) | ||||||||||||||
Other income (1) | ||||||||||||||
$ | $ | $ | $ |
(Dollars in thousands, except share amounts) | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | ||||||||
Outstanding at January 1, 2020 | $ | |||||||||||
Granted | ||||||||||||
Outstanding at June 30, 2020 | $ | $ | ||||||||||
Exercisable at June 30, 2020 | $ | $ |
Grant Date | ||||||
January 6, 2020 | March 19, 2020 | |||||
Fair value of options granted | $ | $ | ||||
Risk-free rate of return | % | % | ||||
Expected option life in years | ||||||
Expected volatility | % | % | ||||
Expected dividends | % | % |
(Dollars in thousands, except share amounts) | Number of Shares | Average Grant-Date Fair Value | ||||
Outstanding at January 1, 2020 | $ | |||||
Granted | ||||||
Vested | ( | ) | ||||
Non-vested at June 30, 2020 | $ |
(Dollars in thousands, except share amounts) | Number of Shares | Average Grant-Date Fair Value | ||||
Outstanding at January 1, 2020 | $ | |||||
Granted | ||||||
Vested | ( | ) | ||||
Non-vested at June 30, 2020 | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(Dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Service cost | $ | $ | $ | $ | |||||||||||
Interest cost | |||||||||||||||
Actuarial gain recognized | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total | $ | $ | $ | $ |
June 30, 2020 | |||||||||||
(Dollars in thousands) | Before-Tax Amount | Income Tax Effect | Net-of-Tax Amount | ||||||||
Net unrealized holding gains on investment securities available for sale | $ | $ | ( | ) | $ | ||||||
Unrealized impairment loss on held to maturity security | ( | ) | ( | ) | |||||||
Gains on unfunded pension liability | ( | ) | |||||||||
Accumulated other comprehensive income | $ | $ | ( | ) | $ |
December 31, 2019 | |||||||||||
(Dollars in thousands) | Before-Tax Amount | Income Tax Effect | Net-of-Tax Amount | ||||||||
Net unrealized holding gains on investment securities available for sale | $ | $ | ( | ) | $ | ||||||
Unrealized impairment loss on held to maturity security | ( | ) | ( | ) | |||||||
Gains on unfunded pension liability | ( | ) | |||||||||
Accumulated other comprehensive income | $ | $ | ( | ) | $ |
(Dollars in thousands) | Unrealized Holding Gains (Losses) on Available for Sale Securities | Unrealized Impairment Loss on Held to Maturity Security | Unfunded Pension Liability | Accumulated Other Comprehensive Income (Loss) | ||||||||||||
Balance - April 1, 2020 | $ | $ | ( | ) | $ | $ | ||||||||||
Other comprehensive income (loss) before reclassifications | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | ( | ) | ( | ) | |||||||||||
Reclassification adjustment for gains realized in income | ( | ) | — | — | ( | ) | ||||||||||
Other comprehensive income | ||||||||||||||||
Balance - June 30, 2020 | $ | $ | ( | ) | $ | $ | ||||||||||
Balance - April 1, 2019 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Other comprehensive income (loss) before reclassifications | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | ( | ) | ( | ) | |||||||||||
Reclassification adjustment for gains realized in income | — | — | ||||||||||||||
Other comprehensive income | ||||||||||||||||
Balance - June 30, 2019 | $ | $ | ( | ) | $ | $ | ||||||||||
January 1, 2020 | $ | $ | ( | ) | $ | $ | ||||||||||
Other comprehensive income (loss) before reclassifications | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | ( | ) | ( | ) | |||||||||||
Reclassification adjustment for gains realized in income | ( | ) | — | — | ( | ) | ||||||||||
Other comprehensive income | ||||||||||||||||
Balance - June 30, 2020 | $ | $ | ( | ) | $ | $ | ||||||||||
January 1, 2019 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Other comprehensive income (loss) before reclassifications | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | ( | ) | ( | ) | |||||||||||
Reclassification adjustment for gains realized in income | — | — | ||||||||||||||
Other comprehensive income | ||||||||||||||||
Balance - June 30, 2019 | $ | $ | ( | ) | $ | $ |
Level 1: | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities. |
Level 2: | Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. |
Level 3: | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity). |
June 30, 2020 | |||||||||||||||
(Dollars in thousands) | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | |||||||||||
Securities available for sale: | |||||||||||||||
U.S. Treasury securities and obligations of U.S. Government sponsored entities (“GSE”) and agencies | $ | $ | $ | $ | |||||||||||
Residential collateralized mortgage obligations - GSE | |||||||||||||||
Residential mortgage backed securities - GSE | |||||||||||||||
Obligations of state and political subdivisions | |||||||||||||||
Trust preferred debt securities - single issuer | |||||||||||||||
Corporate debt securities | |||||||||||||||
Other debt securities | |||||||||||||||
Interest rate lock derivative | |||||||||||||||
Total | $ | $ | $ | $ |
December 31, 2019 | |||||||||||||||
(Dollars in thousands) | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | |||||||||||
Securities available for sale: | |||||||||||||||
U.S. Treasury securities and obligations of U.S. Government sponsored entities (“GSE”) and agencies | $ | $ | $ | $ | |||||||||||
Residential collateralized mortgage obligations - GSE | |||||||||||||||
Residential mortgage backed securities - GSE | |||||||||||||||
Obligations of state and political subdivisions | |||||||||||||||
Trust preferred debt securities - single issuer | |||||||||||||||
Corporate debt securities | |||||||||||||||
Other debt securities | |||||||||||||||
Interest rate lock derivative | |||||||||||||||
Total | $ | $ | $ | $ |
(Dollars in thousands) | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | |||||||||||
June 30, 2020 | |||||||||||||||
Impaired loans | $ | $ | $ | $ | |||||||||||
Other real estate owned | |||||||||||||||
December 31, 2019 | |||||||||||||||
Impaired loans | $ | $ | $ | $ | |||||||||||
Other real estate owned |
(Dollars in thousands) | Fair Value Estimate | Valuation Techniques | Unobservable Input | Range (Weighted Average) | |||||
June 30, 2020 | |||||||||
Impaired loans | $ | Appraisal of collateral (1) | Appraisal adjustments (2) | 0.5% - 26.6% (11.5%) | |||||
Other real estate owned | $ | Appraisal of collateral (1) | Appraisal adjustments (2) | 47.0% (47.0%) | |||||
December 31, 2019 | |||||||||
Impaired loans | $ | Appraisal of collateral (1) | Appraisal adjustments (2) | 0.1% - 40.4% (12.6%) | |||||
Other real estate owned | $ | Appraisal of collateral (1) | Appraisal adjustments (2) | 47.0% (47.0%) |
(1) | Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs that are not identifiable. |
(2) | Includes qualitative adjustments by management and estimated liquidation expenses. |
June 30, 2020 | |||||||||||||||||||
Carrying | Level 1 | Level 2 | Level 3 | Fair | |||||||||||||||
(Dollars in thousands) | Value | Inputs | Inputs | Inputs | Value | ||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||
Securities available for sale | |||||||||||||||||||
Securities held to maturity | |||||||||||||||||||
Loans held for sale | |||||||||||||||||||
Net loans | |||||||||||||||||||
SBA servicing asset | |||||||||||||||||||
Interest rate lock derivative | |||||||||||||||||||
Accrued interest receivable | |||||||||||||||||||
FHLB stock | |||||||||||||||||||
Deposits | ( | ) | ( | ) | ( | ) | |||||||||||||
Short-term borrowings | ( | ) | ( | ) | ( | ) | |||||||||||||
Redeemable subordinated debentures | ( | ) | ( | ) | ( | ) | |||||||||||||
Accrued interest payable | ( | ) | ( | ) | ( | ) |
December 31, 2019 | |||||||||||||||||||
Carrying | Level 1 | Level 2 | Level 3 | Fair | |||||||||||||||
(Dollars in thousands) | Value | Inputs | Inputs | Inputs | Value | ||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||
Securities available for sale | |||||||||||||||||||
Securities held to maturity | |||||||||||||||||||
Loans held for sale | |||||||||||||||||||
Net loans | |||||||||||||||||||
SBA servicing asset | |||||||||||||||||||
Interest rate lock derivative | |||||||||||||||||||
Accrued interest receivable | |||||||||||||||||||
FHLB stock | |||||||||||||||||||
Deposits | ( | ) | ( | ) | ( | ) | |||||||||||||
Short-term borrowings | ( | ) | ( | ) | ( | ) | |||||||||||||
Redeemable subordinated debentures | ( | ) | ( | ) | ( | ) | |||||||||||||
Accrued interest payable | ( | ) | ( | ) | ( | ) |
(In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2020 | 2019 | 2019 | 2018 | ||||||||||||
Operating lease cost: | |||||||||||||||
Fixed rent expense and equipment expense | $ | $ | $ | $ | |||||||||||
Variable rent expense | |||||||||||||||
Short-term lease expense | |||||||||||||||
Sublease income | |||||||||||||||
Net lease cost | $ | $ | $ | $ |
(In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2020 | 2019 | 2019 | 2018 | ||||||||||||
Lease cost - occupancy expense | $ | $ | $ | $ | |||||||||||
Lease cost - other expense | |||||||||||||||
Net lease cost | $ | $ | $ | $ |
Six Months Ended June 30, | |||||||
(In thousands) | 2020 | 2019 | |||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||
Operating cash flows from operating leases | $ | $ | |||||
Non-cash investing and financing activities: | |||||||
Additions to ROU assets obtained from: | |||||||
Net lease cost | |||||||
New operating lease liabilities |
At June 30 | |||||||
(In thousands) | 2020 | 2019 | |||||
Due in less than one year | $ | $ | |||||
Due in one year but less than two years | |||||||
Due in two years but less than three years | |||||||
Due in three years but less than four years | |||||||
Due in four years but less than five years | |||||||
Thereafter | |||||||
Total future payments | $ | $ | |||||
Less: Implied interest | ( | ) | ( | ) | |||
Total lease liability | $ | $ |
• | Effective March 24, 2020 adjusted branch hours and temporarily closed our branch lobbies to customers, |
• | Continued to service our customers through drive-up facilities, ATMs and our robust technology capabilities |
• | Provided our employees with masks, gloves and hand sanitizer. |
• | Installed protective shields and partitions in branch offices and social distancing markings. |
• | Effective June 22, 2020 re-opened our lobby facilities and require that customers entering our locations to have |
• | We are working tirelessly to provide access to additional credit and forbearance on loan interest and or principal payments for up to 90 days where management has determined that it is warranted. As of June 30, 2020, $147.5 million of loans ($139.1 million of commercial loans and $8.4 million of consumer loans) were modified to provide deferral of interest and or principal by borrowers for up to 90 days. |
• | In connection with the review of the adequacy of the allowance for loan losses at June 30, 2020, management reviewed over 81% of the $139.1 million of commercial business and commercial real estate loans that had been modified to defer interest and or principal for up to 90 days and also reviewed over 97% of the hotel loans and 87% of the restaurant-food service loans. |
• | As a long-standing Small Business Administration (“SBA”) preferred lender, we are actively participating in the SBA’s Paycheck Protection Program (“PPP”) established under the CARES Act. As of June 30, 2020, we have funded 459 SBA PPP loans totaling $75.1 million. |
• | We registered to utilize the Main Street New Loan Facility (“Facility”) established by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) under the CARES Act to provide financing to our customers and communities. This Facility is intended to facilitate lending by banks to small and medium sized businesses, which we believe may be beneficial to certain of our customers. |
• | We are participating in the Federal Reserve's Paycheck Protection Program Liquidity Facility (“PPPLF”) and may pledge the SBA PPP loans to collateralize a like amount of borrowings from the Federal Reserve at a favorable interest rate of 0.35% up to a 2 year term. |
• | The provision for loan losses and allowance for loan losses may increase as borrowers continue to be negatively affected by the contraction of economic activity and the dramatic increase in unemployment. |
• | Due to the asset sensitive nature of the Company’s balance sheet, the Federal Reserve’s reduction in the targeted fed funds rate to zero to 0.25% and the concomitant decline in the prime rate to 3.25% in March 2020 caused a reduction in the average yield of loans tied to the prime rate and the net interest margin declined in the second quarter of 2020. The net interest margin was also impacted by the funding of the PPP loans with a 1.0% interest rate, which will be partially offset by the recognition of the loan fees earned on these loans. The timing and impact to the net interest margin will be contingent on how quickly and the extent to which the PPP loans become grants that are repaid by the SBA over the next two years. The net interest margin and the net interest income may decline in future periods if the Company cannot reduce the cost of interest-bearing liabilities at the same time and to the same extent as the decline in the average yield of assets. |
• | It is expected that residential real estate sales, and therefore the origination and sale of residential mortgages may decline as a result of the restrictions implemented to contain the spread of COVID-19, such as business closures and social distancing measures. This decline in turn, would result in lower gain on sales of loans and a decrease in non-interest income. |
• | A significant increase in non-performing loans could result in increased non-interest expense due to higher expenses for loan collection and recovery costs. |
• | Return on average total assets and return on average shareholders' equity were 0.89% and 8.50%, respectively. |
• | Net interest income was $13.8 million and net interest margin was 3.64% on a tax equivalent basis. |
• | A provision for loan losses of $2.1 million was recorded for the second quarter of 2020 and there were no charge-offs. |
• | Total loans were $1.4 billion at June 30, 2020 and increased $138.0 million from March 31, 2020. Mortgage warehouse loans increased $72.3 million and commercial real estate loans increased $15.4 million from March 31, 2020. |
• | During the second quarter of 2020, the Bank funded $75.1 million in SBA PPP loans under the CARES Act. |
• | Total deposits were $1.4 billion at June 30, 2020 and increased $111.4 million with non-interest demand deposits increasing $98.1 million from March 31, 2020. |
• | Non-performing assets were $14.0 million, or 0.80% of total assets at June 30, 2020, relatively unchanged from March 31, 2020, and included $470,000 of other real estate owned ("OREO"). |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(Dollars in thousands, except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Adjusted net income | |||||||||||||||
Net income | $ | 3,690 | $ | 3,370 | $ | 7,111 | $ | 6,767 | |||||||
Adjustments: | |||||||||||||||
Merger-related expenses | — | 258 | 64 | 273 | |||||||||||
Income tax effect of adjustments | — | (77 | ) | (19 | ) | (82 | ) | ||||||||
Adjusted net income | $ | 3,690 | $ | 3,551 | $ | 7,156 | $ | 6,958 | |||||||
Adjusted earnings per diluted share | |||||||||||||||
Adjusted net income | $ | 3,690 | $ | 3,551 | $ | 7,156 | $ | 6,958 | |||||||
Diluted shares outstanding | 10,248,156 | 8,696,943 | 10,256,481 | 8,692,063 | |||||||||||
Adjusted net income per diluted share | $ | 0.36 | $ | 0.41 | $ | 0.70 | $ | 0.80 | |||||||
Adjusted return on average total assets | |||||||||||||||
Adjusted net income | $ | 3,690 | $ | 3,551 | $ | 7,156 | $ | 6,958 | |||||||
Average assets | 1,668,600 | 1,227,743 | 1,609,991 | 1,198,211 | |||||||||||
Adjusted return on average total assets | 0.89 | % | 1.16 | % | 0.89 | % | 1.17 | % | |||||||
Adjusted return on average shareholders' equity | |||||||||||||||
Adjusted net income | $ | 3,690 | $ | 3,551 | $ | 7,156 | $ | 6,958 | |||||||
Average equity | 174,603 | 132,222 | 173,217 | 130,099 | |||||||||||
Adjusted return on average shareholders' equity | 8.50 | % | 10.77 | % | 8.31 | % | 10.79 | % | |||||||
Book value and tangible book value per common share | |||||||||||||||
Shareholders' equity | $ | 177,484 | $ | 135,075 | |||||||||||
Less: goodwill and intangible assets | 36,563 | 12,196 | |||||||||||||
Tangible shareholders' equity | 140,921 | 122,879 | |||||||||||||
Shares outstanding | 10,219,048 | 8,648,993 | |||||||||||||
Book value per common share | $ | 17.37 | $ | 15.62 | |||||||||||
Tangible book value per common share | $ | 13.79 | $ | 14.21 | |||||||||||
1 The Company used the non-GAAP financial measures, Adjusted net income, Adjusted net income per diluted share, Adjusted return on average total assets, Adjusted return on average shareholders' equity and tangible book value per common share, because the Company believes that it is helpful to readers in understanding the Company's financial performance and the effect on its financial statements of the merger-related expenses related to the Shore Merger in 2019. These non-GAAP measures improve the comparability of the current period results with the results of the prior periods. The Company cautions that the non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company's GAAP financial results. |
Three months ended June 30, 2020 | Three months ended June 30, 2019 | ||||||||||||||||||||
(Dollars in thousands except yield/cost information) | Average Balance | Interest | Average Yield | Average Balance | Interest | Average Yield | |||||||||||||||
Assets | |||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||
Federal funds sold/short-term investments | $ | 16,807 | $ | 4 | 0.10 | % | $ | 7,650 | $ | 47 | 2.46 | % | |||||||||
Investment securities: | |||||||||||||||||||||
Taxable | 168,415 | 852 | 2.02 | % | 166,287 | 1,215 | 2.92 | % | |||||||||||||
Tax-exempt (1) | 82,709 | 627 | 3.03 | % | 57,425 | 534 | 3.72 | % | |||||||||||||
Total investment securities | 251,124 | 1,479 | 2.36 | % | 223,712 | 1,749 | 3.13 | % | |||||||||||||
Loans: (2) | |||||||||||||||||||||
Commercial real estate | 579,640 | 7,791 | 5.32 | % | 403,980 | 5,187 | 5.08 | % | |||||||||||||
Mortgage warehouse lines | 223,696 | 2,284 | 4.08 | % | 151,929 | 2,214 | 5.76 | % | |||||||||||||
Construction | 140,593 | 1,992 | 5.70 | % | 158,097 | 2,768 | 7.02 | % | |||||||||||||
Commercial business | 145,209 | 1,567 | 4.34 | % | 122,005 | 1,833 | 6.03 | % | |||||||||||||
SBA PPP loans | 54,285 | 348 | 2.58 | % | — | — | — | % | |||||||||||||
Residential real estate | 87,878 | 952 | 4.29 | % | 47,280 | 523 | 4.42 | % | |||||||||||||
Loans to individuals | 28,809 | 316 | 4.34 | % | 21,964 | 292 | 5.26 | % | |||||||||||||
Loans held for sale | 14,472 | 114 | 3.15 | % | 4,104 | 42 | 4.09 | % | |||||||||||||
All other loans | 890 | 10 | 4.44 | % | 895 | 10 | 4.42 | % | |||||||||||||
Total loans | 1,275,472 | 15,374 | 4.85 | % | 910,254 | 12,869 | 5.67 | % | |||||||||||||
Total interest-earning assets | 1,543,403 | $ | 16,857 | 4.39 | % | 1,141,616 | $ | 14,665 | 5.15 | % | |||||||||||
Non-interest-earning assets: | |||||||||||||||||||||
Allowance for loan losses | (10,232 | ) | (8,755 | ) | |||||||||||||||||
Cash and due from banks | 11,712 | 10,968 | |||||||||||||||||||
Other assets | 123,717 | 83,914 | |||||||||||||||||||
Total non-interest-earning assets | 125,197 | 86,127 | |||||||||||||||||||
Total assets | $ | 1,668,600 | $ | 1,227,743 | |||||||||||||||||
Liabilities and shareholders’ equity | |||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Money market and NOW accounts | $ | 425,347 | $ | 611 | 0.58 | % | $ | 340,048 | $ | 683 | 0.81 | % | |||||||||
Savings accounts | 271,772 | 547 | 0.81 | % | 191,586 | 464 | 0.97 | % | |||||||||||||
Certificates of deposit | 353,160 | 1,566 | 1.78 | % | 266,662 | 1,524 | 2.29 | % | |||||||||||||
Federal Reserve Bank PPPLF borrowings | 3,970 | 3 | 0.30 | % | — | — | — | % | |||||||||||||
Short-term borrowings | 35,679 | 45 | 0.51 | % | 39,187 | 257 | 2.63 | % | |||||||||||||
Redeemable subordinated debentures | 18,557 | 106 | 2.26 | % | 18,557 | 192 | 4.14 | % | |||||||||||||
Total interest-bearing liabilities | 1,108,485 | $ | 2,878 | 1.04 | % | 856,040 | $ | 3,120 | 1.46 | % | |||||||||||
Non-interest-bearing liabilities: | |||||||||||||||||||||
Demand deposits | 356,322 | 215,530 | |||||||||||||||||||
Other liabilities | 29,190 | 23,951 | |||||||||||||||||||
Total non-interest-bearing liabilities | 385,512 | 239,481 | |||||||||||||||||||
Shareholders’ equity | 174,603 | 132,222 | |||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,668,600 | $ | 1,227,743 | |||||||||||||||||
Net interest spread (3) | 3.35 | % | 3.69 | % | |||||||||||||||||
Net interest income and margin (4) | $ | 13,979 | 3.64 | % | $ | 11,545 | 4.06 | % |
Six months ended June 30, 2020 | Six months ended June 30, 2019 | ||||||||||||||||||||
(Dollars in thousands except yield/cost information) | Average Balance | Interest | Average Yield | Average Balance | Interest | Average Yield | |||||||||||||||
Assets | |||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||
Federal funds sold/short-term investments | $ | 20,682 | $ | 93 | 0.90 | % | $ | 7,490 | $ | 94 | 2.53 | % | |||||||||
Investment securities: | |||||||||||||||||||||
Taxable | 168,393 | 1,908 | 2.27 | % | 163,454 | 2,485 | 3.04 | % | |||||||||||||
Tax-exempt (1) | 73,954 | 1,182 | 3.20 | % | 58,621 | 1,093 | 3.73 | % | |||||||||||||
Total investment securities | 242,347 | 3,090 | 2.55 | % | 222,075 | 3,578 | 3.22 | % | |||||||||||||
Loans: (2) | |||||||||||||||||||||
Commercial real estate | 577,140 | 15,146 | 5.19 | % | 397,154 | 10,199 | 5.11 | % | |||||||||||||
Mortgage warehouse lines | 199,485 | 4,319 | 4.33 | % | 137,741 | 4,038 | 5.86 | % | |||||||||||||
Construction | 144,044 | 4,171 | 5.82 | % | 156,987 | 5,430 | 6.98 | % | |||||||||||||
Commercial business | 144,001 | 3,370 | 4.71 | % | 122,456 | 3,655 | 6.02 | % | |||||||||||||
SBA PPP loans | 27,143 | 348 | 2.58 | % | — | — | — | % | |||||||||||||
Residential real estate | 89,119 | 1,948 | 4.32 | % | 47,277 | 1,058 | 4.45 | % | |||||||||||||
Loans to individuals | 29,653 | 708 | 4.72 | % | 22,353 | 567 | 5.05 | % | |||||||||||||
Loans held for sale | 9,229 | 149 | 3.23 | % | 2,741 | 58 | 4.23 | % | |||||||||||||
All other loans | 1,346 | 20 | 2.94 | % | 936 | 21 | 4.46 | % | |||||||||||||
Total loans | 1,221,160 | 30,179 | 4.97 | % | 887,645 | 25,026 | 5.69 | % | |||||||||||||
Total interest-earning assets | 1,484,189 | $ | 33,362 | 4.52 | % | 1,117,210 | $ | 28,698 | 5.18 | % | |||||||||||
Non-interest-earning assets: | |||||||||||||||||||||
Allowance for loan losses | (9,843 | ) | (8,645 | ) | |||||||||||||||||
Cash and due from banks | 12,547 | 11,060 | |||||||||||||||||||
Other assets | 123,098 | 78,586 | |||||||||||||||||||
Total non-interest-earning assets | 125,802 | 81,001 | |||||||||||||||||||
Total assets | $ | 1,609,991 | $ | 1,198,211 | |||||||||||||||||
Liabilities and shareholders’ equity | |||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Money market and NOW accounts | $ | 413,592 | $ | 1,371 | 0.67 | % | $ | 337,516 | $ | 1,257 | 0.75 | % | |||||||||
Savings accounts | 268,413 | 1,151 | 0.86 | % | 190,387 | 889 | 0.94 | % | |||||||||||||
Certificates of deposit | 356,521 | 3,440 | 1.94 | % | 257,251 | 2,842 | 2.23 | % | |||||||||||||
Federal Reserve Bank PPPLF borrowings | 1,984 | 3 | 0.30 | % | — | — | — | % | |||||||||||||
Short-term borrowings | 27,298 | 107 | 0.79 | % | 32,729 | 430 | 2.65 | % | |||||||||||||
Redeemable subordinated debentures | 18,557 | 258 | 2.75 | % | 18,557 | 391 | 4.21 | % | |||||||||||||
Total interest-bearing liabilities | 1,086,365 | $ | 6,330 | 1.17 | % | 836,440 | $ | 5,809 | 1.40 | % | |||||||||||
Non-interest-bearing liabilities: | |||||||||||||||||||||
Demand deposits | 319,920 | 211,575 | |||||||||||||||||||
Other liabilities | 30,489 | 20,097 | |||||||||||||||||||
Total non-interest-bearing liabilities | 350,409 | 231,672 | |||||||||||||||||||
Shareholders’ equity | 173,217 | 130,099 | |||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,609,991 | $ | 1,198,211 | |||||||||||||||||
Net interest spread (3) | 3.35 | % | 3.78 | % | |||||||||||||||||
Net interest income and margin (4) | $ | 27,032 | 3.66 | % | $ | 22,889 | 4.13 | % |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(Dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Salaries and employee benefits | $ | 6,001 | $ | 5,278 | $ | 12,170 | $ | 10,241 | |||||||
Occupancy expense | 1,205 | 991 | 2,375 | 2,012 | |||||||||||
Data processing expenses | 470 | 345 | 916 | 693 | |||||||||||
Equipment expense | 412 | 295 | 823 | 619 | |||||||||||
Marketing | 34 | 111 | 78 | 191 | |||||||||||
Telephone | 129 | 97 | 254 | 193 | |||||||||||
Regulatory, professional and consulting fees | 497 | 376 | 961 | 833 | |||||||||||
Insurance | 127 | 97 | 246 | 187 | |||||||||||
Supplies | 111 | 57 | 208 | 123 | |||||||||||
FDIC insurance expense | 225 | 60 | 259 | 160 | |||||||||||
Other real estate owned expenses | 14 | 34 | 31 | 82 | |||||||||||
Merger-related expense | — | 258 | 64 | 273 | |||||||||||
Amortization of intangible assets | 91 | 31 | 213 | 63 | |||||||||||
Other expenses | 521 | 536 | 1,032 | 990 | |||||||||||
Total | $ | 9,837 | $ | 8,566 | $ | 19,630 | $ | 16,660 |
June 30, 2020 | December 31, 2019 | ||||||||||||
(Dollars in thousands) | Amount | % | Amount | % | |||||||||
Commercial real estate | $ | 592,276 | 44 | % | $ | 567,655 | 47 | % | |||||
Mortgage warehouse lines | 297,093 | 22 | 236,672 | 20 | |||||||||
Construction loans | 135,182 | 10 | 148,939 | 12 | |||||||||
Commercial business | 216,249 | 16 | 139,271 | 11 | |||||||||
Residential real estate | 87,862 | 6 | 90,259 | 7 | |||||||||
Loans to individuals | 28,320 | 2 | 32,604 | 3 | |||||||||
Other loans | 128 | — | 137 | — | |||||||||
Total loans | 1,357,110 | 100 | % | 1,215,537 | 100 | % | |||||||
Deferred loan (fees) costs, net | (1,674 | ) | 491 | ||||||||||
Total loans, including deferred loans (fees) costs, net | $ | 1,355,436 | $ | 1,216,028 |
(Dollars in thousands) | June 30, 2020 | December 31, 2019 | |||||
Non-performing loans: | |||||||
Loans 90 days or more past due and still accruing | $ | — | $ | — | |||
Non-accrual loans | 13,519 | 4,497 | |||||
Total non-performing loans | 13,519 | 4,497 | |||||
Other real estate owned | 470 | 571 | |||||
Other repossessed assets | — | — | |||||
Total non-performing assets | 13,989 | 5,068 | |||||
Performing troubled debt restructurings | 6,102 | 6,132 | |||||
Performing troubled debt restructurings and total non-performing assets | $ | 20,091 | $ | 11,200 | |||
Non-performing loans to total loans | 1.00 | % | 0.37 | % | |||
Non-performing loans to total loans excluding mortgage warehouse lines | 1.28 | % | 0.46 | % | |||
Non-performing assets to total assets | 0.80 | % | 0.32 | % | |||
Non-performing assets to total assets excluding mortgage warehouse lines | 0.97 | % | 0.38 | % | |||
Total non-performing assets and performing troubled debt restructurings to total assets | 1.15 | % | 0.71 | % |
• | Delinquencies and non-accruals; |
• | Portfolio quality; |
• | Concentration of credit; |
• | Trends in volume of loans; |
• | Quality of collateral; |
• | Policy and procedures; |
• | Experience, ability and depth of management; |
• | Economic trends - national and local; and |
• | External factors - competition, legal and regulatory. |
(Dollars in thousands) | Balance | % of Total Loans | COVID-19 Deferrals | SBA Paying P&I | PPP Loans | ||||||||
Hotel | $ | 67,688 | 5.0% | $ | 32,094 | $ | 1,662 | $ | 662 | ||||
Restaurant-food service | 47,709 | 3.5% | 6,180 | 4,265 | 10,403 |
(Dollars in thousands) | Six Months Ended June 30, 2020 | Year Ended December 31, 2019 | Six Months Ended June 30, 2019 | ||||||||
Balance, beginning of period | $ | 9,271 | $ | 8,402 | $ | 8,402 | |||||
Provision charged to operating expenses | 3,020 | 1,350 | 700 | ||||||||
Loans charged off: | |||||||||||
Residential real estate loans | — | — | — | ||||||||
Commercial business and commercial real estate | (165 | ) | (463 | ) | (420 | ) | |||||
Loans to individuals | — | (7 | ) | — | |||||||
All other loans | — | (43 | ) | (43 | ) | ||||||
Total loans charged off | (165 | ) | (513 | ) | (463 | ) | |||||
Recoveries: | |||||||||||
Commercial business and commercial real estate | — | 26 | — | ||||||||
Loans to individuals | — | 6 | 2 | ||||||||
All other loans | — | — | — | ||||||||
Total recoveries | — | 32 | 2 | ||||||||
Net charge offs | (165 | ) | (481 | ) | (461 | ) | |||||
Balance, end of period | $ | 12,126 | $ | 9,271 | $ | 8,641 | |||||
Loans: | |||||||||||
At period end | $ | 1,355,436 | $ | 1,216,028 | $ | 967,820 | |||||
Average during the period | 1,221,160 | 964,920 | 887,645 | ||||||||
Net charge offs to average loans outstanding | (0.01 | )% | (0.05 | )% | (0.05 | )% | |||||
Net charge offs to average loans outstanding, excluding mortgage warehouse loans | (0.02 | )% | (0.06 | )% | (0.06 | )% | |||||
Allowance for loan losses to: | |||||||||||
Total loans at period end | 0.89 | % | 0.76 | % | 0.89 | % | |||||
Total loans at period end excluding mortgage warehouse loans | 1.15 | % | 0.84 | % | 1.01 | % | |||||
Non-performing loans | 89.70 | % | 206.16 | % | 216.84 | % |
June 30, 2020 | December 31, 2019 | ||||||||||||||||||
(Dollars in thousands) | Amount | As a % of Loan Class | Loans as a % of Total Loans | Amount | As a % of Loan Class | Loans as a % of Total Loans | |||||||||||||
Commercial real estate loans | $ | 6,619 | 1.12 | % | 44 | % | $ | 4,524 | 0.80 | % | 47 | % | |||||||
Commercial Business | 1,780 | 0.82 | % | 16 | % | 1,409 | 1.01 | % | 11 | % | |||||||||
Construction loans | 1,661 | 1.23 | % | 10 | % | 1,389 | 0.93 | % | 12 | % | |||||||||
Residential real estate loans | 506 | 0.58 | % | 6 | % | 412 | 0.46 | % | 7 | % | |||||||||
Loans to individuals | 182 | 0.64 | % | 2 | % | 185 | 0.57 | % | 3 | % | |||||||||
Subtotal | 10,748 | 1.01 | % | 78 | % | 7,919 | 0.81 | % | 80 | % | |||||||||
Mortgage warehouse lines | 1,337 | 0.45 | % | 22 | % | 1,083 | 0.46 | % | 20 | % | |||||||||
Unallocated reserves | 41 | — | — | 269 | — | — | |||||||||||||
Total | $ | 12,126 | 0.89 | % | 100 | % | $ | 9,271 | 0.76 | % | 100 | % |
(Dollars in thousands) | June 30, 2020 | December 31, 2019 | ||||||
Demand | ||||||||
Non-interest bearing | $ | 397,238 | $ | 287,555 | ||||
Interest bearing | 402,662 | 393,392 | ||||||
Savings | 279,879 | 259,033 | ||||||
Certificates of deposit | 329,613 | 337,382 | ||||||
Total | $ | 1,409,392 | $ | 1,277,362 |
Actual | For Capital Adequacy Purposes | To Be Well Capitalized Under Prompt Corrective Action Provision | |||||||||||||||
(Dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||
As of June 30, 2020 | |||||||||||||||||
Common equity Tier 1 (CET1) | $ | 139,006 | 9.33 | % | $ | 67,083 | 4.50 | % | N/A | N/A | |||||||
Total capital to risk-weighted assets | 169,132 | 11.35 | % | 119,179 | 8.00 | % | N/A | N/A | |||||||||
Tier 1 capital to risk-weighted assets | 157,006 | 10.54 | % | 89,384 | 6.00 | % | N/A | N/A | |||||||||
Tier 1 leverage capital | 157,006 | 9.65 | % | 65,061 | 4.00 | % | N/A | N/A | |||||||||
As of December 31, 2019: | |||||||||||||||||
Common equity Tier 1 (CET1) | $ | 133,046 | 9.70 | % | $ | 61,604 | 4.50 | % | N/A | N/A | |||||||
Total capital to risk-weighted assets | 160,317 | 11.69 | % | 109,519 | 8.00 | % | N/A | N/A | |||||||||
Tier 1 capital to risk-weighted assets | 151,046 | 11.01 | % | 82,139 | 6.00 | % | N/A | N/A | |||||||||
Tier 1 leverage capital | 151,046 | 10.56 | % | 57,245 | 4.00 | % | N/A | N/A |
Actual | For Capital Adequacy Purposes | To Be Well Capitalized Under Prompt Corrective Action Provision | ||||||||||||||||
(Dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||
As of June 30, 2020 | ||||||||||||||||||
Common equity Tier 1 (CET1) | $ | 156,746 | 10.53 | % | $ | 67,013 | 4.50% | $ | 96,797 | 6.50% | ||||||||
Total capital to risk-weighted assets | 168,872 | 11.34 | % | 119,134 | 8.00% | 148,918 | 10.00% | |||||||||||
Tier 1 capital to risk-weighted assets | 156,746 | 10.53 | % | 89,351 | 6.00% | 119,134 | 8.00% | |||||||||||
Tier 1 leverage capital | 156,746 | 9.64 | % | 65,039 | 4.00% | 81,298 | 5.00% | |||||||||||
As of December 31, 2019: | ||||||||||||||||||
Common equity Tier 1 (CET1) | $ | 150,725 | 10.99 | % | $ | 61,579 | 4.50% | $ | 88,948 | 6.50% | ||||||||
Total capital to risk-weighted assets | 159,996 | 11.67 | % | 109,474 | 8.00% | 136,843 | 10.00% | |||||||||||
Tier 1 capital to risk-weighted assets | 150,725 | 10.99 | % | 82,106 | 6.00% | 109,474 | 8.00% | |||||||||||
Tier 1 leverage capital | 150,725 | 10.54 | % | 57,222 | 4.00% | 71,528 | 5.00% |
(Dollars in thousands) | Next 12 Months Net Interest Income | Economic Value of Equity (2) | ||||||||||||||||||||
Interest Rate Change in Basis Points (1) | Dollar Amount | $ Change | % Change | Dollar Amount | $ Change | % Change | ||||||||||||||||
+300 | $ | 62,128 | $ | 1,971 | 3.28 | % | $ | 201,981 | $ | (1,532 | ) | (0.75 | )% | |||||||||
+200 | 61,132 | 975 | 1.62 | % | 203,550 | 37 | 0.02 | % | ||||||||||||||
— | 60,157 | — | — | % | 203,513 | — | — | % |
(1) | Assumes an instantaneous and parallel shift in interest rates at all maturities. |
(2) | Economic value of equity is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts. |
• | Actively market commercial business loan originations, which tend to have adjustable rate features and which generate customer relationships that can result in higher core deposit accounts; |
• | Actively market commercial mortgage loan originations, which tend to have shorter maturity terms and higher interest rates than residential mortgage loans and which generate customer relationships that can result in higher core deposit accounts; |
• | Actively market core deposit relationships, which are generally longer duration liabilities; |
• | Utilize short term and long-term certificates of deposit and/or borrowings to manage liability duration; |
• | Closely monitor and actively manage the investment portfolio, including management of duration, prepayment and interest rate risk; |
• | Maintain adequate levels of capital; and |
• | Utilize loan sales and/or loan participations. |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased As Part of Publicly Announced Program | Maximum Number of Shares That May Yet be Purchased Under the Program | ||||||||||
Beginning | Ending | |||||||||||||
April 1, 2020 | April 30, 2020 | — | $ | — | — | 388,113 | ||||||||
May 1, 2020 | May 31, 2020 | — | $ | — | — | 388,113 | ||||||||
June 1, 2020 | June 30, 2020 | — | $ | — | — | 388,113 | ||||||||
Total | — | $ | — | — | 388,113 |
# | ||
*# | ||
* | ||
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101.INS | * | Inline XBRL Instance Document |
101.SCH | * | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | * | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | * | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | * | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | * | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
1ST CONSTITUTION BANCORP | ||||
Date: | August 7, 2020 | By: | /s/ ROBERT F. MANGANO | |
Robert F. Mangano | ||||
President and Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
Date: | August 7, 2020 | By: | /s/ STEPHEN J. GILHOOLY | |
Stephen J. Gilhooly | ||||
Senior Vice President, Treasurer and Chief Financial Officer | ||||
(Principal Financial Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of 1st Constitution Bancorp; |
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(s) 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: |
5. | The registrant’s other certifying officer(s) 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): |
1. | I have reviewed this quarterly report on Form 10-Q of 1st Constitution Bancorp; |
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(s) 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: |
5. | The registrant’s other certifying officer(s) 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): |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Held to maturity, fair value (in Dollars) | $ 97,567 | $ 78,223 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in Shares) | 0 | 0 |
Common stock, shares authorized (in Shares) | 30,000,000 | 30,000,000 |
Common stock, shares issued (in Shares) | 10,258,374 | 10,224,974 |
Common Stock, shares outstanding (in Shares) | 10,219,048 | 10,191,676 |
Treasury stock (in Shares) | 39,326 | 33,298 |
Consolidated Statements of Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
INTEREST INCOME | ||||
Loans, including fees | $ 15,374 | $ 12,869 | $ 30,179 | $ 25,026 |
Securities: | ||||
Taxable | 852 | 1,215 | 1,908 | 2,485 |
Tax-exempt | 496 | 422 | 934 | 863 |
Federal funds sold and short-term investments | 4 | 47 | 93 | 94 |
Total interest income | 16,726 | 14,553 | 33,114 | 28,468 |
INTEREST EXPENSE | ||||
Deposits | 2,724 | 2,671 | 5,962 | 4,988 |
Borrowings | 48 | 257 | 110 | 430 |
Redeemable subordinated debentures | 106 | 192 | 258 | 390 |
Total interest expense | 2,878 | 3,120 | 6,330 | 5,808 |
Net interest income | 13,848 | 11,433 | 26,784 | 22,660 |
PROVISION FOR LOAN LOSSES | 2,125 | 400 | 3,020 | 700 |
Net interest income after provision for loan losses | 11,723 | 11,033 | 23,764 | 21,960 |
NON-INTEREST INCOME | ||||
Service charges on deposit accounts | 132 | 159 | 345 | 325 |
Gain on sales of loans | 2,121 | 1,160 | 3,591 | 2,205 |
Income on bank-owned life insurance | 264 | 149 | 444 | 288 |
Gain on sales and calls of securities | 10 | 0 | 18 | 0 |
Other income | 573 | 702 | 1,158 | 1,218 |
Total non-interest income | 3,100 | 2,170 | 5,556 | 4,036 |
NON-INTEREST EXPENSES | ||||
Salaries and employee benefits | 6,001 | 5,278 | 12,170 | 10,241 |
Occupancy expense | 1,205 | 991 | 2,375 | 2,012 |
Data processing expenses | 470 | 345 | 916 | 693 |
FDIC insurance expense | 225 | 60 | 259 | 160 |
Other real estate owned expenses | 14 | 34 | 31 | 82 |
Merger-related expenses | 0 | 258 | 64 | 273 |
Other operating expenses | 1,922 | 1,600 | 3,815 | 3,199 |
Total non-interest expenses | 9,837 | 8,566 | 19,630 | 16,660 |
Income before income taxes | 4,986 | 4,637 | 9,690 | 9,336 |
INCOME TAXES | 1,296 | 1,267 | 2,579 | 2,569 |
Net income | $ 3,690 | $ 3,370 | $ 7,111 | $ 6,767 |
EARNINGS PER COMMON SHARE | ||||
Basic (in Dollars per share) | $ 0.36 | $ 0.39 | $ 0.70 | $ 0.78 |
Diluted (in Dollars per share) | $ 0.36 | $ 0.39 | $ 0.69 | $ 0.78 |
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||
Basic (in Shares) | 10,209,295 | 8,634,251 | 10,205,065 | 8,629,197 |
Diluted (in Shares) | 10,248,156 | 8,696,943 | 10,256,481 | 8,692,063 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|||||||||
Statement of Comprehensive Income [Abstract] | ||||||||||||
Net income | $ 3,690 | $ 3,370 | $ 7,111 | $ 6,767 | ||||||||
Unrealized holding gains on securities available for sale | ||||||||||||
Unrealized holding gains on securities available for sale | 1,716 | 1,021 | 1,529 | 2,431 | ||||||||
Tax effect | (418) | (251) | (372) | (590) | ||||||||
Net of tax amount | 1,298 | 770 | 1,157 | 1,841 | ||||||||
Reclassification adjustment for gains on securities available for sale | ||||||||||||
Reclassification adjustment for gains on securities available for sale | [1] | (10) | 0 | (11) | 0 | |||||||
Tax effect | [2] | 3 | 0 | 3 | 0 | |||||||
Net of tax amount | (7) | 0 | (8) | 0 | ||||||||
Reclassification adjustment for unrealized impairment loss on held to maturity security | ||||||||||||
Reclassification adjustment for unrealized impairment loss on held to maturity security | [3] | 5 | 3 | 8 | 4 | |||||||
Tax effect | (2) | (1) | (3) | (1) | ||||||||
Net of tax amount | 3 | 2 | 5 | 3 | ||||||||
Pension liability | ||||||||||||
Pension liability | 85 | 56 | 141 | 111 | ||||||||
Tax effect | (25) | (14) | (42) | (31) | ||||||||
Net of tax amount | 60 | 42 | 99 | 80 | ||||||||
Reclassification adjustment for actuarial gains for unfunded pension liability | ||||||||||||
Reclassification adjustment for actuarial gains for unfunded pension liability | [4] | (56) | (44) | (100) | (88) | |||||||
Tax effect | [2] | 17 | 13 | 30 | 26 | |||||||
Net of tax amount | (39) | (31) | (70) | (62) | ||||||||
Total other comprehensive income | 1,315 | 783 | 1,183 | 1,862 | ||||||||
Comprehensive income | $ 5,005 | $ 4,153 | $ 8,294 | $ 8,629 | ||||||||
|
Consolidated Statements of Changes in Shareholders' Equity (Parentheticals) - $ / shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Statement of Stockholders' Equity [Abstract] | ||||
Stock issued for stock options exercised (in Shares) | 10,555 | 15,919 | ||
Restricted shares issued (in Shares) | 14,181 | 28,581 | ||
Treasury stock purchased (in shares) | 6,028 | |||
Cash dividends declared per share (in dollars per share) | $ 0.09 | $ 0.075 | $ 0.18 | $ 0.150 |
Summary of Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies The accompanying unaudited consolidated financial statements include 1ST Constitution Bancorp (the “Company”), its wholly-owned subsidiary, 1ST Constitution Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, 1ST Constitution Investment Company of New Jersey, Inc. and FCB Assets Holdings, Inc. 1ST Constitution Capital Trust II, a subsidiary of the Company, is not included in the Company’s consolidated financial statements, as it is a variable interest entity and the Company is not the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting policies of the Company and its subsidiaries conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and to the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16, 2020. Goodwill During the second quarter of 2020, management determined that a triggering event had occurred with respect to goodwill, which required a review of goodwill for impairment. Management completed its review of goodwill and concluded that it was more likely than not that the fair value of goodwill exceeded the carrying amount of goodwill at June 30, 2020. Accordingly, goodwill was not impaired at June 30, 2020. In the opinion of the Company, all adjustments (consisting only of normal recurring accruals) that are necessary for a fair presentation of the operating results for the interim periods have been included. The results of operations for periods of less than a year are not necessarily indicative of results for the full year. The Company has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2020 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued. COVID-19 Impact The sudden emergence of the COVID-19 global pandemic in the first quarter of 2020, and the responses thereto (including business and school closures, restrictions on travel and social distancing protocols), has caused, and is continuing to cause, widespread uncertainty, social and economic disruption, highly volatile financial markets and unprecedented increases in unemployment levels in a short period of time. As a result, almost all businesses located in the Bank’s primary market areas of northern and central New Jersey, communities along the New Jersey shore, and the New York City metropolitan area, and their employees, have been adversely impacted. The ultimate impact of the COVID-19 pandemic on the businesses and the people in the communities that the Bank serves, and on the Company’s operations and financial performance, will depend on future developments related to the duration, extent and severity of the pandemic and measures taken by governmental and private parties in response thereto. However, to the extent that the Bank’s customers are not able to fulfill their contractual obligations, the Company’s business operations, asset valuations, financial condition, cash flows and results of operations could be materially adversely impacted. Material adverse impacts may also include all or a combination of valuation impairments on our intangible assets, investments, loans, deferred tax assets, or other real estate owned ("OREO"). Similarly, the Company’s operations rely on third-party vendors to process, record and monitor transactions. If any of these vendors are unable to provide these services, our ability to serve customers could be disrupted. The pandemic could also negatively impact customers’ ability to conduct banking and other financial transactions. The Company’s operations could also be adversely impacted if key personnel or a significant number of employees were unable to work due to illness or restrictions. On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief and Economic Security (“CARES”) Act in response to the coronavirus pandemic. This legislation aims at providing relief for individuals and businesses that have been negatively impacted by the coronavirus pandemic. The CARES Act includes a provision for the Company to opt out of applying the “troubled-debt restructuring” accounting guidance in ASC 310-40 for certain loan modifications. Loan modifications made between March 1, 2020 and the earlier of i) December 30, 2020 or ii) 60 days after the President declares a termination of the COVID-19 national emergency are eligible for this relief if the related loans were not more than 30 days past due as of December 31, 2019. The Bank adopted this provision as of March 31, 2020. Adoption of New Accounting Standards ASU 2018-15 - Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in this Update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this Update. The amendments in this ASU also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The term of the hosting arrangement includes the non-cancellable period of the arrangement plus periods covered by (1) an option to extend the arrangement if the customer is reasonably certain to exercise that option, (2) an option to terminate the arrangement if the customer is reasonably certain not to exercise the termination option, and (3) an option to extend (or not to terminate) the arrangement in which exercise of the option is in the control of the vendor. The entity also is required to apply the existing impairment guidance in Subtopic 350-40 to the capitalized implementation costs as if the costs were long-lived assets. The amendments in this ASU also require the entity to present the expense related to the capitalized implementation costs in the same line item in the consolidated statements of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the consolidated statements of cash flows in the same manner as payments made for fees associated with the hosting element. The entity is also required to present the capitalized implementation costs in the consolidated balance sheets in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. The adoption of this guidance in 2020 did not have a material impact on the Company's consolidated financial statements. ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) In August 2018, the FASB issued ASU 2018-14 - “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20),” which consists of amendments to the disclosure framework project to improve the effectiveness of disclosures in the notes to the financial statements. The amendments in this Update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The following disclosure requirements are removed from Subtopic 715-20:
The following disclosure requirements are added to Subtopic 715-20:
The amendments in this ASU also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed:
The amendments in this ASU remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures and add disclosure requirements identified as relevant. Although narrow in scope, the amendments are considered an important part of the FASB’s efforts to improve the effectiveness of disclosures in the notes to financial statements by applying concepts in the Concepts Statement. For the Company, the provisions of this ASU are effective for fiscal years ending after December 15, 2020. The adoption of this guidance in 2020 did not have a material impact on the Company's consolidated financial statements. |
Acquisition of Shore Community Bank |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition of Shore Community Bank | Acquisition of Shore Community Bank On November 8, 2019, the Company completed its acquisition of 100 percent of the shares of common stock of Shore Community Bank ("Shore"), which merged with and into the Bank (the “Shore Merger”). The former shareholders of Shore received total consideration of $54.3 million, which was comprised of 1,509,275 shares of common stock of the Company with a market value of $29.2 million and cash of $25.1 million, of which $925,000 was cash paid in exchange for unexercised outstanding stock options. The Shore Merger was accounted for under the acquisition method of accounting, and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at preliminary estimated fair values as of the Shore Merger date. The excess of the fair value of the consideration paid over the preliminary net fair value of Shore's assets and liabilities resulted in the recognition of goodwill of $23.2 million. Shore’s results of operations have been included in the Company’s Consolidated Financial Statements since November 8, 2019. The assets acquired and liabilities assumed in the merger were recorded at their estimated fair values based on management’s best estimates, using information available at the date of the merger, including the use of third party valuation specialists. The fair values are preliminary estimates and subject to adjustment for up to one year after the closing date of the Shore Merger. The following table summarizes the fair value of the acquired assets and liabilities assumed:
Accounting Standards Codification (“ASC”) Topic 805-10 provides that if the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report, in its financial statements, provisional amounts for the items for which the accounting is incomplete. During the measurement period, the acquirer shall adjust the provisional amounts recognized at the acquisition date and may recognize additional assets or liabilities to reflect new information obtained from facts and circumstances that existed as of the acquisition date. Thus, the acquirer shall adjust its financial statements as needed, including recognizing in its current-period earnings the full effect of a change in depreciation, amortization, or other income effects, if any, as a result of the change to provisional amounts calculated as if the accounting had been completed at the acquisition date. The measurement period may not exceed one year from the acquisition date. Investments were recorded at fair value, utilizing quoted market prices on nationally recognized exchanges (Level 1) or by using Level 2 inputs. For Level 2 securities, the Company obtained fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the security’s terms and conditions, among other things. Loans acquired in the Shore Merger were recorded at fair value and subsequently accounted for in accordance with ASC Topic 310. The fair values of loans acquired were estimated, utilizing cash flow projections based on the remaining maturity and repricing terms. Cash flows were adjusted for estimated future credit losses of approximately $3.6 million and estimated prepayments. Projected cash flows were then discounted to present value, utilizing a risk-adjusted market rate for similar loans that management determined market participants would likely use. At the Shore Merger date, the Company recorded $201.3 million of loans without evidence of credit quality deterioration and $4.6 million of loans with evidence of credit quality deterioration. The following table summarizes the composition of the loans acquired and recorded at fair value:
The following is a summary of the loans acquired with evidence of deteriorated credit quality in the Shore Merger as of the date of the closing of the merger:
Bank-owned life insurance was recorded at the cash surrender value of the insurance policies, which approximates the redemption value of the policies. The Company recorded a core deposit intangible asset related to a value ascribed to demand, interest checking, money market and savings account, referred to as core deposits, acquired as part of the acquisition. The value assigned to the acquired core deposits represents the future economic benefit of the potential cost savings from acquiring the core deposits, net of operating expenses and including ancillary fee income, compared to the cost of obtaining alternative funds from available market sources. Management used estimates including the expected attrition rates of depository accounts, future interest rate levels, and the cost of servicing various depository products. The core deposit intangible asset totaled $1.5 million and is being amortized over its estimated useful life of approximately 10 years, using an accelerated method. The following table presents the projected amortization of the core deposit intangible asset for each period beginning July 1, 2020:
The fair values of deposit liabilities with no stated maturities, such as checking, money market and savings accounts, were assumed to equal the carrying value amounts since these deposits are payable on demand. The fair values of certificates of deposit represent the present value of contractual cash flows discounted at market rates for similar certificates of deposit. Direct costs related to the Shore Merger were expensed as incurred. For the year ended December 31, 2019, the Company incurred $1.7 million of expenses for termination of contracts, legal and financial advisory fees, severance and other integration related expenses, which have been separately stated as merger-related expenses in the Company’s Consolidated Statements of Income. Supplemental Financial Information The following table presents financial information regarding the former Shore operations included in the Company’s Consolidated Statements of Income for the six months ended June 30, 2020 under the column "Shore Six Months Ended June 30, 2020." In addition, the table presents unaudited condensed pro forma financial information for the three and six months ended June 30, 2019 assuming that the Shore Merger had been completed as of January 1, 2019. The table has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the Shore Merger occurred as of the beginning of the periods presented, nor is it indicative of future results. Furthermore, the unaudited pro forma financial information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings that may have occurred as a result of the integration and consolidation of Shore’s operations.
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Earnings Per Common Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Common Share | Earnings Per Common Share Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding during each period. Diluted earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding, as adjusted for the assumed exercise of dilutive common stock options using the treasury stock method. Awards of restricted shares are included in outstanding shares when granted. Unvested restricted shares are entitled to non-forfeitable dividends and participate in undistributed earnings with common shares. Awards of this nature are considered participating securities and basic and diluted earnings per share are computed under the two-class method. Dilutive securities in the tables below exclude common stock options with exercise prices that exceed the average market price of the Company’s common stock during the periods presented. Inclusion of these common stock options would be anti-dilutive to the diluted earnings per common share calculation. For the three months ended June 30, 2020 and 2019, 54,930 and 29,530 options, respectively, were anti-dilutive and were not included in the computation of diluted earnings per share. For the six months ended June 30, 2020 and 2019, 41,430 and 29,530 options, respectively, were anti-dilutive and were not included in the computation of diluted earnings per share. The following table illustrates the calculation of both basic and diluted earnings per share for the three and six months ended June 30, 2020 and 2019:
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Investment Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | Investment Securities A summary of amortized cost and fair value of investment securities available for sale follows:
A summary of amortized cost, carrying value and fair value of investment securities held to maturity follows:
At June 30, 2020 and December 31, 2019, $99.1 million and $92.2 million of investment securities, respectively, were pledged to secure public funds and collateralized borrowings from the Federal Home Loan Bank of New York (“FHLB”) and for other purposes required or permitted by law. Restricted stock was included in other assets at June 30, 2020 and December 31, 2019 and totaled $6.0 million and $4.3 million, respectively. Restricted stock consisted of $5.9 million of FHLB stock and $160,000 of Atlantic Community Bankers Bank stock at June 30, 2020 and $4.2 million of FHLB and $160,000 of Atlantic Community Bankers Bank stock at December 31, 2019. The following table sets forth certain information regarding the amortized cost, carrying value, fair value, weighted average yields and contractual maturities of the Company’s investment portfolio as of June 30, 2020. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Gross unrealized losses on available for sale and held to maturity securities and the fair value of the related securities aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2020 and December 31, 2019 were as follows:
U.S. Treasury securities and obligations of U.S. government-sponsored entities and agencies: The unrealized losses on investments in these securities were caused by increases in market interest rates. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Residential collateralized mortgage obligations and residential mortgage backed securities: The unrealized losses on investments in residential collateralized mortgage obligations and mortgage backed securities were caused by increases in market interest rates. The contractual cash flows of these securities are guaranteed by the issuers, which are primarily government or government sponsored agencies. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. The decline in fair value is attributable to changes in interest rates and not credit quality. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Obligations of state and political subdivisions: The unrealized losses on investments in these securities were caused by increases in market interest rates. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. None of the issuers have defaulted on interest payments. These investments are not considered to be other than temporarily impaired because the decline in fair value is attributable to changes in interest rates and not credit quality. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Trust preferred debt securities – single issuer: The investments in these securities with unrealized losses are comprised of two corporate trust preferred securities issued by one large financial institution that mature in 2027. The contractual terms of the trust preferred securities do not allow the issuer to settle the securities at a price less than the face value of the trust preferred securities, which is greater than the amortized cost of the trust preferred securities. The issuer maintains an investment grade credit rating and has not defaulted on interest payments. The decline in fair value is attributable to the widening of interest rate and credit spreads and the lack of an active trading market for these securities. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Corporate debt securities. The unrealized losses on investments in corporate debt securities were caused by an increase in market interest rates, which includes the yield required by market participants for the issuer’s credit risk. All of the issuers maintain an investment grade rating and none of the corporate issuers have defaulted on interest payments. The decline in fair value is attributable to changes in market interest rates. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Other debt securities. The unrealized losses on investments in other debt securities were caused by an increase in market interest rates, which includes the yield required by market participants for the issuer’s credit risk. All of the issuers maintain an investment grade rating and none of the issuers have defaulted on interest payments. The decline in fair value is attributable to changes in market interest rates. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Trust preferred debt securities – pooled: This trust preferred debt security was issued by a two issuer pool (Preferred Term Securities XXV, Ltd. co-issued by Keefe, Bruyette and Woods, Inc. and First Tennessee (“PRETSL XXV”)), consisting primarily of financial institution holding companies. During 2009, the Company recognized an other-than-temporary impairment charge of $865,000, of which $364,000 was determined to be a credit loss and charged to operations and $501,000 was recognized in the other comprehensive income (loss) component of shareholders’ equity. The primary factor used to determine the credit portion of the impairment loss to be recognized in the income statement for this security was the discounted present value of projected cash flow, where that present value of cash flow was less than the amortized cost basis of the security. The present value of cash flow was developed using a model that considered performing collateral ratios, the level of subordination to senior tranches of the security and credit ratings of and projected credit defaults in the underlying collateral. Due to recovery of the cash flows underlying the security, the Company began to accrete the $501,000 of impairment charge in the other comprehensive income component in 2019. Total accretion of $8,000 was recognized in the first six months of 2020 as an increase in the carrying amount of the security. On a quarterly basis, management evaluates this security to determine if any additional other-than-temporary impairment is required. As of June 30, 2020, management concluded that no additional other-than-temporary impairment had occurred. |
Allowance for Loan Losses and Credit Quality |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Loan Losses and Credit Quality | Allowance for Loan Losses and Credit Quality The Company’s primary lending emphasis is the origination of commercial real estate loans, mortgage warehouse lines of credit and commercial business loans. Based on the composition of the loan portfolio, the inherent primary risks are deteriorating credit quality, a decline in the economy and a decline in New Jersey and New York City metropolitan area real estate market values. Any one, or a combination, of these events may adversely affect the loan portfolio and may result in increased delinquencies, loan losses and increased future provision levels. The following table provides an aging of the loan portfolio by loan class at June 30, 2020:
The following table provides an aging of the loan portfolio by loan class at December 31, 2019:
As provided by Accounting Standards Codification (“ASC”) 310-30, the excess of cash flows expected at acquisition over the initial investment in the loan is recognized as interest income over the life of the loan. At June 30, 2020 and December 31, 2019, there were $5.2 million and $5.4 million of purchased credit impaired loans, respectively, that were not classified as non-performing loans due to the accretion of income. The Company’s internal credit risk grades are based on the definitions currently utilized by the banking regulatory agencies. The grades assigned and their definitions are as follows: 1. Excellent - Loans that are based upon cash collateral held at the Company and adequately margined. Loans that are based upon “blue chip” stocks listed on the major stock exchanges and adequately margined. 2. Above Average - Loans to companies whose balance sheets show excellent liquidity and long-term debt is on well-spread schedules of repayment easily covered by cash flow. Such companies have been consistently profitable and have diversification in their product lines or sources of revenue. The continuation of profitable operations for the foreseeable future is likely. Management is comprised of a mix of ages, experience and backgrounds and management succession is in place. Sources of raw materials and, for service companies, the sources of revenue are abundant. Future needs have been planned for. Character and management ability of individuals or company principals are excellent. Loans to individuals are supported by their high net worth and liquid assets. 3. Good - Loans to companies whose balance sheets show good liquidity and cash flow adequate to meet maturities of long-term debt with a comfortable margin. Such companies have established profitable records over a number of years, and there has been growth in net worth. Operating ratios are in line with those of the industry, and expenses are in proper relationship to the volume of business done and the profits achieved. Management is well-balanced and competent in their responsibilities. Economic environment is favorable; however, competition is strong. The prospects for growth are good. Loans in this category do not meet the collateral requirements of loans graded excellent and above average. 3w. Watch - Included in this category are loans evidencing problems identified by Company management that require closer supervision, but do not require a “special mention” rating. This category also covers situations where the Company does not have adequate current information upon which credit quality can be determined. The account officer has the obligation to correct these deficiencies within 30 days from the time of notification. Loans that received modification to provide a deferral of interest and or principal for up to 90 days that complied with the CARES Act criteria were rated watch by management. 4. Special Mention - A “special mention” loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. 5. Substandard - A “substandard” loan is inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. 6. Doubtful - A loan classified as “doubtful” has all the weaknesses inherent of a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. 7. Loss - A loan classified as “loss” is considered uncollectible and of such little value that its continuance on the books is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value. Rather, this classification indicates that it is not practical or desirable to defer writing off this loan even though partial recovery may occur in the future. Loans graded as “excellent,” “above average,” “good” and “watch” are treated as “pass” for grading purposes. The following table provides a breakdown of the loan portfolio by credit quality indicator at June 30, 2020:
The following table provides a breakdown of the loan portfolio by credit quality indicator at December 31, 2019:
At June 30, 2020, there were $75.1 million of Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans which are 100% guaranteed by the SBA and, accordingly, no reserve was provided for such loans. Impaired Loans Loans are considered to be impaired when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan agreement, including scheduled interest payments. When a loan is placed on non-accrual status, it is also considered to be impaired. Loans are placed on non-accrual status when: (1) the full collection of interest or principal becomes uncertain or (2) the loans are contractually past due 90 days or more as to interest or principal payments unless the loans are both well secured and in the process of collection. The following tables summarize the distribution of the allowance for loan losses and loans receivable by loan class and impairment method at June 30, 2020 and December 31, 2019:
The activity in the allowance for loan loss by loan class for the three and six months ended June 30, 2020 and 2019 was as follows:
When a loan is identified as impaired, the measurement of impairment is based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole remaining source of repayment for the loan is the liquidation of the collateral. In such cases, the current fair value of the collateral less selling costs is used. If the value of the impaired loan is less than the recorded investment in the loan, the impairment is recognized through an allowance estimate or a charge to the allowance. Impaired Loans Receivables (By Class)
Impaired Loans Receivables (By Class)
Impaired Loans Receivables (By Class)
Purchased Credit-Impaired Loans Purchased credit-impaired loans (“PCI”) are loans acquired at a discount due in part to the deteriorated credit quality. On November 8, 2019, as part of the Shore Merger, the Company acquired purchased credit-impaired loans with loan balances totaling $6.3 million and fair values totaling $4.6 million. The following table presents additional information regarding purchased credit-impaired loans at June 30, 2020 and December 31, 2019:
Changes in accretable discount for purchased credit-impaired loans for the three and six months ended June 30, 2020 and June 30, 2019 were as follows:
Consumer Mortgage Loans Secured by Residential Real Estate in Process of Foreclosure The following table summarizes the recorded investment in consumer mortgage loans secured by residential real estate in the process of foreclosure (dollars in thousands):
Troubled Debt Restructurings In the normal course of business, the Bank may consider modifying loan terms for various reasons. These reasons may include as a retention strategy to compete in the current interest rate environment or to re-amortize or extend a loan term to better match the loan’s repayment stream with the borrower’s cash flow. A modified loan would be considered a troubled debt restructuring (“TDR”) if the Bank grants a concession to a borrower and has determined that the borrower is troubled (i.e., experiencing financial difficulties). If the Bank restructures a loan to a troubled borrower, the loan terms (i.e., interest rate, payment, amortization period and maturity date) may be modified in various ways to enable the borrower to cover the modified debt service payments based on current financial statements and cash flow adequacy. If a borrower’s hardship is thought to be temporary, then modified terms may be offered for only that time period. Where possible, the Bank attempts to obtain additional collateral and/or secondary repayment sources at the time of the restructuring in order to put the Bank in the best possible position if the borrower is not able to meet the modified terms. The Bank will not offer modified terms if it believes that modifying the loan terms will only delay an inevitable permanent default. In evaluating whether a restructuring constitutes a TDR, applicable guidance requires that a creditor must separately conclude that the restructuring constitutes a concession and the borrower is experiencing financial difficulties. There were no loans modified as a TDR during the six months ended June 30, 2020 and June 30, 2019. There were no TDRs that subsequently defaulted within 12 months of restructuring during the six months ended June 30, 2020. Pursuant to the CARES Act, loan modifications made between March 1, 2020 and the earlier of i) December 30, 2020 or ii) 60 days after the President declares a termination of the COVID-19 national emergency are not classified as TDRs if the related loans were not more than 30 days past due as of December 31, 2019. As of June 30, 2020, $147.5 million of loans to borrowers had been modified to defer the payment of interest and or principal for up to 90 days and were comprised of $139.1 million of commercial loans and $8.4 million of consumer loans. These modified loans were not considered to be TDRs. Deferrals for $49.2 million of these modified loans expired in July 2020, at which time a full monthly loan payment was due. As of July 31, 2020, customers had made the required monthly loan payments on $45.6 million of these loans, payments were due on $2.6 million of these loans and one loan relationship totaling $1.0 million received a second modification to extend the deferral for another 90 days. As of July 31, 2020, loan deferrals totaled $99.4 million and were comprised of $94.3 million of commercial loans and $5.1 million of consumer loans. |
Revenue from Contracts with Customers |
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Revenue from Contracts with Customers | Revenue from Contracts with Customers All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The following table presents the Company’s sources of non-interest income for the three and six months ended June 30, 2020 and 2019. Items outside the scope of ASC 606 are noted as such.
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Share-Based Compensation |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Share-Based Compensation The Company’s share-based incentive plans (“Stock Plans”) authorize the issuance of an aggregate of 945,873 shares of the Company’s common stock (as adjusted for stock dividends) through awards that may be granted in the form of stock options to purchase common stock (each an “Option” and collectively, “Options”), awards of restricted shares of common stock (“Stock Awards”), restricted stock units (“RSUs”), stock appreciation rights or such other awards as the Compensation Committee of the Board of Directors (the “Compensation Committee”) may determine. As of June 30, 2020, there were 398,591 shares of common stock available for future grants under the Stock Plans. The following table summarizes Options activity during the six months ended June 30, 2020:
The fair value of each Option and the significant weighted average assumptions used to calculate the fair value of the Options granted during the six months ended June 30, 2020 were as follows:
Share-based compensation expense related to Options was $45,000 and $35,000 for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, there was approximately $122,000 of unrecognized compensation cost related to unvested Options. The following table summarizes the activity in Stock Awards for the six months ended June 30, 2020:
Share-based compensation expense related to Stock Awards was $537,000 and $530,000 for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, there was approximately $1.8 million of unrecognized compensation cost related to unvested Stock Awards. The following table summarizes the activity in RSUs for the six months ended June 30, 2020:
Share-based compensation expense related to RSUs was $112,000 and $33,000 for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, there was approximately $303,000 of unrecognized compensation cost related to unvested Stock Awards. RSUs vest pro-rata over 3 years subject to achievement of certain established performance metrics. The ultimate number of RSUs earned, if any, will depend on the performance measured over each annual period during the applicable 3-year performance period. If performance measures are achieved, the RSUs will vest on the date of certification of performance achievement by the Compensation Committee following each annual performance period. On March 19, 2020, the Compensation Committee certified that the applicable performance metrics were achieved at 138% of target for 2019. Awards of RSUs are settled in cash unless the recipient timely elects for the RSUs to be settled in shares of common stock. The RSUs are recorded as a liability by the Company and the liability is adjusted as the market value of the Company's stock price changes.. |
Benefit Plans |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit Plans | Benefit Plans The Bank has a 401(k) plan that covers substantially all employees with six months or more of service. The Bank’s 401(k) plan permits all eligible employees to make contributions to the plan up to the IRS salary deferral limit. The Bank’s contributions to the 401(k) plan are expensed as incurred. The Company also provides retirement benefits to certain employees under supplemental executive retirement plans. The plans are unfunded and the Company accrues actuarially determined benefit costs over the estimated service period of the employees in the plans. The Company recognizes the over-funded or under-funded status of a defined benefit post-retirement plan as an asset or liability on its balance sheet and recognizes changes in that funded status in the year in which the changes occur through comprehensive income. At June 30, 2020 and December 31, 2019, the Company’s President and Chief Executive Officer was the only eligible participant in the supplemental executive retirement plans. In connection with the benefit plans, the Bank has life insurance policies on the lives of its executive officers, directors and certain employees. The Bank is the owner and beneficiary of these policies. The cash surrender values of these policies totaled approximately $36.9 million and $36.7 million at June 30, 2020 and December 31, 2019, respectively. The components of net periodic expense for the Company’s supplemental executive retirement plans for the three and six months ended June 30, 2020 and 2019 were as follows:
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Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) Other comprehensive income (loss) is the total of (1) net income (loss) and (2) all other changes in equity from non-shareholder sources, which are referred to as other comprehensive income (loss). The components of accumulated other comprehensive income (loss), and the related tax effects, are as follows:
Changes in the components of accumulated other comprehensive income (loss) are as follows and are presented net of tax for the three and six months ended June 30, 2020 and June 30, 2019:
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Recent Accounting Pronouncements |
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Accounting Standards Update and Change in Accounting Principle [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13 "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which requires credit losses on most financial assets to be measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument. The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination ("PCD assets") should be determined in a similar manner to other financial assets measured on an amortized cost basis. Upon initial recognition, the allowance for credit losses is added to the purchase price ("gross up approach") to determine the initial amortized cost basis. The subsequent accounting for PCD assets will use the CECL model described above. The ASU made certain targeted amendments to the existing impairment model for available-for-sale (AFS) debt securities. For an AFS debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis. For the Company, the provisions of this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted for all entities as of the fiscal year beginning after December 15, 2018, including interim periods within those fiscal years. The Company has completed the initial analysis of its financial assets and will continue to build and validate the CECL models in 2020 to evaluate the impact of the adoption of the new standard on its consolidated financial statements. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments in this ASU make minor improvements to the Codification by eliminating certain inconsistencies and clarifying the current guidance. In June 2019, the FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief. This ASU provides optional targeted transition relief that allows reporting entities to irrevocably elect the fair value option on financial instruments that 1) were previously recorded at amortized cost and 2) are within the scope of Topic 326 if the instruments are eligible for the fair value option under Topic 825. The new guidance is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. In November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). ASU 2019-10 provides that the FASB’s recently developed philosophy regarding the implementation of effective dates applies to ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), among other ASUs. For the Company, the provisions of this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted for all entities as of the fiscal year beginning after December 15, 2018, including interim periods within those fiscal years. See the discussions regarding the adoption of ASU 2016-13 above. Also in November 2019, the FASB issued ASU No. 2019-11, “Financial Instruments - Credit Losses: Codification Improvements (Topic 326)” to clarify its new credit impairment guidance in ASC 326, based on implementation issues raised by stakeholders. ASU 2019-11 clarifies that expected recoveries are to be included in the allowance for credit losses for these financial assets; an accounting policy election can be made to adjust the effective interest rate for existing troubled debt restructurings based on the prepayment assumptions instead of the prepayment assumptions applicable immediately prior to the restructuring event; and extends the practical expedient to exclude accrued interest receivable from all additional relevant disclosures involving the amortized cost basis. For the Company, the provisions of this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted for all entities as of the fiscal year beginning after December 15, 2018, including interim periods within those fiscal years. See the discussions regarding the adoption of ASU 2016-13 above. ASU 2020-02 - Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842) In January 2020, the FASB issued ASU No. 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842).” This ASU adds and amends SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 119, related to the new credit losses standard, and comments by the SEC staff related to the revised effective date of the new leases standard. This ASU is effective upon issuance. See the discussion regarding the adoption of ASU 2016-13 above. ASU 2020-03 - Codification Improvements to Financial Instruments In March 2020, the FASB issued ASU No. 2020-3, “Codification Improvements to Financial Instruments.” This ASU clarifies various financial instruments topics, including the CECL standard issued in 2016. Amendments related to ASU 2016-13 for entities that have not yet adopted that guidance are effective upon adoption of the amendments in ASU 2016-13. Early adoption is not permitted before an entity’s adoption of ASU 2016-13. Other amendments are effective upon issuance of this ASU. See the discussion regarding the adoption of ASU 2016-13 above. ASU 2020-04 - Reference Rate Reform (Topic 848) In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848)" provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued, subject to meeting certain criteria. Under the new guidance, an entity can elect by accounting topic or industry subtopic to account for the modification of a contract affected by reference rate reform as a continuation of the existing contract, if certain conditions are met. In addition, the new guidance allows an entity to elect on a hedge-by-hedge basis to continue to apply hedge accounting for hedging relationships in which the critical terms change due to reference rate reform, if certain conditions are met. A one-time election to sell and/or transfer held-to-maturity debt securities that reference a rate affected by reference rate reform is also allowed. ASU No. 2020-04 became effective for all entities as of March 12, 2020 and will apply to all LIBOR reference rate modifications through December 31, 2022. |
Fair Value Disclosures |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures | Fair Value Disclosures U.S. GAAP has established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and counterparty creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Securities Available for Sale. Securities classified as available for sale are reported at fair value utilizing Level 1 and Level 2 inputs. For Level 2 securities, the fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the security’s terms and conditions, among other things. Interest Rate Lock Derivatives. Interest rate lock commitments do not trade in active markets with readily observable prices. The fair value of an interest rate lock commitment is estimated based upon the forward sales price that is obtained in the best efforts commitment at the time the borrower locks in the interest rate on the loan and the probability that the locked rate commitment will close. Impaired Loans. Impaired loans are those which the Company has measured and recognized impairment, generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the collateral or discounted cash flows based on the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consists of the loan balances less specific valuation allowances. Other Real Estate Owned. Foreclosed properties are adjusted to fair value less estimated selling costs at the time of foreclosure in preparation for transfer from portfolio loans to other real estate owned (“OREO”), thereby establishing a new accounting basis. The Company subsequently adjusts the fair value of the OREO, utilizing Level 3 inputs on a non-recurring basis to reflect partial write-downs based on the observable market price, current appraised value of the asset or other estimates of fair value. The fair value of other real estate owned is determined using appraisals, which may be discounted based on management’s review and changes in market conditions. The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Assets and liabilities subject to fair value adjustments (impairment) on a nonrecurring basis at June 30, 2020 and December 31, 2019 were as follows:
Impaired loans measured at fair value and included in the above table at June 30, 2020 consisted of seven loans having an aggregate recorded investment of $4.0 million and specific loan loss allowance of $125,000. Impaired loans measured at fair value and included in the above table at December 31, 2019 consisted of twelve loans having an aggregate balance of $7.2 million with specific loan loss allowance of $69,000. The following table presents additional qualitative information about assets measured at fair value on a nonrecurring basis, where there was evidence of impairment, and for which the Company has utilized Level 3 inputs to determine fair value:
The following is a summary of fair value versus carrying value of all of the Company’s financial instruments. For the Company and the Bank, as with most financial institutions, the bulk of assets and liabilities are considered financial instruments. Many of the financial instruments lack an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction. Therefore, significant estimations and present value calculations were used for the purpose of this note. Changes in assumptions could significantly affect these estimates. The estimated fair values and carrying amounts of financial assets and liabilities as of June 30, 2020 and December 31, 2019 were as follows:
Loan commitments and standby letters of credit as of June 30, 2020 and December 31, 2019 were based on fees charged for similar agreements; accordingly, the estimated fair value of loan commitments and standby letters of credit was nominal. |
Leases |
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Leases | Leases At June 30, 2020, the Company had 35 operating leases under which the Company is a lessee. Of the 35 leases, 23 leases were for real property, including leases for 19 of the Company’s branch offices and 4 leases for general office space including the Company’s headquarters. All of the real property leases include one or more options to extend the lease term. Four of the branch office leases are for the land on which the branch offices are located and the Company owns the leasehold improvements. In addition, the Company had 10 leases for office equipment, which are primarily copiers and printers, and two automobile leases. None of these leases include extensions and generally have three to five year terms. The Company does not have any finance leases. During the three and six months ended June 30, 2020 and 2019, the Company recognized rent and equipment expense associated with leases as follows:
During the six months ended June 30, 2020 and 2019, the following cash and non-cash activities were associated with the leases:
The future payments due under operating leases at June 30, 2020 and 2019 were as follows:
As of June 30, 2020, future payments due under operating leases were based on ASC Topic 842 and included, in general, at least one lease renewal option on all real estate leases except on one land lease where all renewal options were included. As of June 30, 2020, the weighted-average remaining lease term for all operating leases is 14.9 years. The weighted average discount rate associated with the operating leases as of June 30, 2020 was 3.35%. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Consolidation Policy | The accompanying unaudited consolidated financial statements include 1ST Constitution Bancorp (the “Company”), its wholly-owned subsidiary, 1ST Constitution Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, 1ST Constitution Investment Company of New Jersey, Inc. and FCB Assets Holdings, Inc. 1ST Constitution Capital Trust II, a subsidiary of the Company, is not included in the Company’s consolidated financial statements, as it is a variable interest entity and the Company is not the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting policies of the Company and its subsidiaries conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and to the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16, 2020. Goodwill During the second quarter of 2020, management determined that a triggering event had occurred with respect to goodwill, which required a review of goodwill for impairment. Management completed its review of goodwill and concluded that it was more likely than not that the fair value of goodwill exceeded the carrying amount of goodwill at June 30, 2020. Accordingly, goodwill was not impaired at June 30, 2020. In the opinion of the Company, all adjustments (consisting only of normal recurring accruals) that are necessary for a fair presentation of the operating results for the interim periods have been included. The results of operations for periods of less than a year are not necessarily indicative of results for the full year. |
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Subsequent Events | The Company has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2020 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.
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Adoption of New Accounting Standards | Adoption of New Accounting Standards ASU 2018-15 - Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in this Update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this Update. The amendments in this ASU also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The term of the hosting arrangement includes the non-cancellable period of the arrangement plus periods covered by (1) an option to extend the arrangement if the customer is reasonably certain to exercise that option, (2) an option to terminate the arrangement if the customer is reasonably certain not to exercise the termination option, and (3) an option to extend (or not to terminate) the arrangement in which exercise of the option is in the control of the vendor. The entity also is required to apply the existing impairment guidance in Subtopic 350-40 to the capitalized implementation costs as if the costs were long-lived assets. The amendments in this ASU also require the entity to present the expense related to the capitalized implementation costs in the same line item in the consolidated statements of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the consolidated statements of cash flows in the same manner as payments made for fees associated with the hosting element. The entity is also required to present the capitalized implementation costs in the consolidated balance sheets in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. The adoption of this guidance in 2020 did not have a material impact on the Company's consolidated financial statements. ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) In August 2018, the FASB issued ASU 2018-14 - “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20),” which consists of amendments to the disclosure framework project to improve the effectiveness of disclosures in the notes to the financial statements. The amendments in this Update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The following disclosure requirements are removed from Subtopic 715-20:
The following disclosure requirements are added to Subtopic 715-20:
The amendments in this ASU also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed:
The amendments in this ASU remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures and add disclosure requirements identified as relevant. Although narrow in scope, the amendments are considered an important part of the FASB’s efforts to improve the effectiveness of disclosures in the notes to financial statements by applying concepts in the Concepts Statement. For the Company, the provisions of this ASU are effective for fiscal years ending after December 15, 2020. The adoption of this guidance in 2020 did not have a material impact on the Company's consolidated financial statements. ASU 2020-02 - Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842) In January 2020, the FASB issued ASU No. 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842).” This ASU adds and amends SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 119, related to the new credit losses standard, and comments by the SEC staff related to the revised effective date of the new leases standard. This ASU is effective upon issuance. See the discussion regarding the adoption of ASU 2016-13 above. ASU 2020-03 - Codification Improvements to Financial Instruments In March 2020, the FASB issued ASU No. 2020-3, “Codification Improvements to Financial Instruments.” This ASU clarifies various financial instruments topics, including the CECL standard issued in 2016. Amendments related to ASU 2016-13 for entities that have not yet adopted that guidance are effective upon adoption of the amendments in ASU 2016-13. Early adoption is not permitted before an entity’s adoption of ASU 2016-13. Other amendments are effective upon issuance of this ASU. See the discussion regarding the adoption of ASU 2016-13 above. ASU 2020-04 - Reference Rate Reform (Topic 848) In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848)" provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued, subject to meeting certain criteria. Under the new guidance, an entity can elect by accounting topic or industry subtopic to account for the modification of a contract affected by reference rate reform as a continuation of the existing contract, if certain conditions are met. In addition, the new guidance allows an entity to elect on a hedge-by-hedge basis to continue to apply hedge accounting for hedging relationships in which the critical terms change due to reference rate reform, if certain conditions are met. A one-time election to sell and/or transfer held-to-maturity debt securities that reference a rate affected by reference rate reform is also allowed. ASU No. 2020-04 became effective for all entities as of March 12, 2020 and will apply to all LIBOR reference rate modifications through December 31, 2022. |
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Investment Securities | U.S. Treasury securities and obligations of U.S. government-sponsored entities and agencies: The unrealized losses on investments in these securities were caused by increases in market interest rates. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Residential collateralized mortgage obligations and residential mortgage backed securities: The unrealized losses on investments in residential collateralized mortgage obligations and mortgage backed securities were caused by increases in market interest rates. The contractual cash flows of these securities are guaranteed by the issuers, which are primarily government or government sponsored agencies. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. The decline in fair value is attributable to changes in interest rates and not credit quality. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Obligations of state and political subdivisions: The unrealized losses on investments in these securities were caused by increases in market interest rates. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. None of the issuers have defaulted on interest payments. These investments are not considered to be other than temporarily impaired because the decline in fair value is attributable to changes in interest rates and not credit quality. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Trust preferred debt securities – single issuer: The investments in these securities with unrealized losses are comprised of two corporate trust preferred securities issued by one large financial institution that mature in 2027. The contractual terms of the trust preferred securities do not allow the issuer to settle the securities at a price less than the face value of the trust preferred securities, which is greater than the amortized cost of the trust preferred securities. The issuer maintains an investment grade credit rating and has not defaulted on interest payments. The decline in fair value is attributable to the widening of interest rate and credit spreads and the lack of an active trading market for these securities. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Corporate debt securities. The unrealized losses on investments in corporate debt securities were caused by an increase in market interest rates, which includes the yield required by market participants for the issuer’s credit risk. All of the issuers maintain an investment grade rating and none of the corporate issuers have defaulted on interest payments. The decline in fair value is attributable to changes in market interest rates. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Other debt securities. The unrealized losses on investments in other debt securities were caused by an increase in market interest rates, which includes the yield required by market participants for the issuer’s credit risk. All of the issuers maintain an investment grade rating and none of the issuers have defaulted on interest payments. The decline in fair value is attributable to changes in market interest rates. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity. Therefore, these investments are not considered other-than-temporarily impaired. Trust preferred debt securities – pooled: This trust preferred debt security was issued by a two issuer pool (Preferred Term Securities XXV, Ltd. co-issued by Keefe, Bruyette and Woods, Inc. and First Tennessee (“PRETSL XXV”)), consisting primarily of financial institution holding companies. During 2009, the Company recognized an other-than-temporary impairment charge of $865,000, of which $364,000 was determined to be a credit loss and charged to operations and $501,000 was recognized in the other comprehensive income (loss) component of shareholders’ equity. The primary factor used to determine the credit portion of the impairment loss to be recognized in the income statement for this security was the discounted present value of projected cash flow, where that present value of cash flow was less than the amortized cost basis of the security. The present value of cash flow was developed using a model that considered performing collateral ratios, the level of subordination to senior tranches of the security and credit ratings of and projected credit defaults in the underlying collateral. Due to recovery of the cash flows underlying the security, the Company began to accrete the $501,000 of impairment charge in the other comprehensive income component in 2019. Total accretion of $8,000 was recognized in the first six months of 2020 as an increase in the carrying amount of the security. On a quarterly basis, management evaluates this security to determine if any additional other-than-temporary impairment is required. As of June 30, 2020, management concluded that no additional other-than-temporary impairment had occurred. |
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Allowance for Loan Losses and Credit Quality | The Company’s internal credit risk grades are based on the definitions currently utilized by the banking regulatory agencies. The grades assigned and their definitions are as follows: 1. Excellent - Loans that are based upon cash collateral held at the Company and adequately margined. Loans that are based upon “blue chip” stocks listed on the major stock exchanges and adequately margined. 2. Above Average - Loans to companies whose balance sheets show excellent liquidity and long-term debt is on well-spread schedules of repayment easily covered by cash flow. Such companies have been consistently profitable and have diversification in their product lines or sources of revenue. The continuation of profitable operations for the foreseeable future is likely. Management is comprised of a mix of ages, experience and backgrounds and management succession is in place. Sources of raw materials and, for service companies, the sources of revenue are abundant. Future needs have been planned for. Character and management ability of individuals or company principals are excellent. Loans to individuals are supported by their high net worth and liquid assets. 3. Good - Loans to companies whose balance sheets show good liquidity and cash flow adequate to meet maturities of long-term debt with a comfortable margin. Such companies have established profitable records over a number of years, and there has been growth in net worth. Operating ratios are in line with those of the industry, and expenses are in proper relationship to the volume of business done and the profits achieved. Management is well-balanced and competent in their responsibilities. Economic environment is favorable; however, competition is strong. The prospects for growth are good. Loans in this category do not meet the collateral requirements of loans graded excellent and above average. 3w. Watch - Included in this category are loans evidencing problems identified by Company management that require closer supervision, but do not require a “special mention” rating. This category also covers situations where the Company does not have adequate current information upon which credit quality can be determined. The account officer has the obligation to correct these deficiencies within 30 days from the time of notification. Loans that received modification to provide a deferral of interest and or principal for up to 90 days that complied with the CARES Act criteria were rated watch by management. 4. Special Mention - A “special mention” loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. 5. Substandard - A “substandard” loan is inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. 6. Doubtful - A loan classified as “doubtful” has all the weaknesses inherent of a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. 7. Loss - A loan classified as “loss” is considered uncollectible and of such little value that its continuance on the books is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value. Rather, this classification indicates that it is not practical or desirable to defer writing off this loan even though partial recovery may occur in the future. |
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Fair Value Disclosures | U.S. GAAP has established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and counterparty creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Securities Available for Sale. Securities classified as available for sale are reported at fair value utilizing Level 1 and Level 2 inputs. For Level 2 securities, the fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the security’s terms and conditions, among other things. Interest Rate Lock Derivatives. Interest rate lock commitments do not trade in active markets with readily observable prices. The fair value of an interest rate lock commitment is estimated based upon the forward sales price that is obtained in the best efforts commitment at the time the borrower locks in the interest rate on the loan and the probability that the locked rate commitment will close. Impaired Loans. Impaired loans are those which the Company has measured and recognized impairment, generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the collateral or discounted cash flows based on the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consists of the loan balances less specific valuation allowances. Other Real Estate Owned. Foreclosed properties are adjusted to fair value less estimated selling costs at the time of foreclosure in preparation for transfer from portfolio loans to other real estate owned (“OREO”), thereby establishing a new accounting basis. The Company subsequently adjusts the fair value of the OREO, utilizing Level 3 inputs on a non-recurring basis to reflect partial write-downs based on the observable market price, current appraised value of the asset or other estimates of fair value. The fair value of other real estate owned is determined using appraisals, which may be discounted based on management’s review and changes in market conditions. |
Acquisition of Shore Community Bank (Tables) |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the fair value of the acquired assets and liabilities assumed:
The following table summarizes the composition of the loans acquired and recorded at fair value:
The following is a summary of the loans acquired with evidence of deteriorated credit quality in the Shore Merger as of the date of the closing of the merger:
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Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination | The following table presents the projected amortization of the core deposit intangible asset for each period beginning July 1, 2020:
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Schedule of Business Acquisition, Pro Forma Information | The following table presents financial information regarding the former Shore operations included in the Company’s Consolidated Statements of Income for the six months ended June 30, 2020 under the column "Shore Six Months Ended June 30, 2020." In addition, the table presents unaudited condensed pro forma financial information for the three and six months ended June 30, 2019 assuming that the Shore Merger had been completed as of January 1, 2019. The table has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the Shore Merger occurred as of the beginning of the periods presented, nor is it indicative of future results. Furthermore, the unaudited pro forma financial information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings that may have occurred as a result of the integration and consolidation of Shore’s operations.
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Earnings Per Common Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table illustrates the calculation of both basic and diluted earnings per share for the three and six months ended June 30, 2020 and 2019:
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Investment Securities (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Available-for-sale Securities | A summary of amortized cost and fair value of investment securities available for sale follows:
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Schedule of Held-to-maturity Securities | A summary of amortized cost, carrying value and fair value of investment securities held to maturity follows:
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Schedule of Investments Classified by Contractual Maturity Date | The following table sets forth certain information regarding the amortized cost, carrying value, fair value, weighted average yields and contractual maturities of the Company’s investment portfolio as of June 30, 2020. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
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Schedule of Investment Securities, Continuous Unrealized Loss Position, Fair Value | Gross unrealized losses on available for sale and held to maturity securities and the fair value of the related securities aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2020 and December 31, 2019 were as follows:
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Allowance for Loan Losses and Credit Quality (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financing Receivable, Past Due | The following table provides an aging of the loan portfolio by loan class at June 30, 2020:
The following table provides an aging of the loan portfolio by loan class at December 31, 2019:
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Schedule of Financing Receivable Credit Quality Indicators | The following table provides a breakdown of the loan portfolio by credit quality indicator at June 30, 2020:
The following table provides a breakdown of the loan portfolio by credit quality indicator at December 31, 2019:
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Schedule of Allowance for Credit Losses on Financing Receivables | The following tables summarize the distribution of the allowance for loan losses and loans receivable by loan class and impairment method at June 30, 2020 and December 31, 2019:
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Schedule of Credit Losses Related to Financing Receivables, Current and Noncurrent | The activity in the allowance for loan loss by loan class for the three and six months ended June 30, 2020 and 2019 was as follows:
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Schedule of Impaired Financing Receivables | Impaired Loans Receivables (By Class)
Impaired Loans Receivables (By Class)
Impaired Loans Receivables (By Class)
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Schedule of Credit Impaired Loans Acquired, Change In Amortizable Yield | Changes in accretable discount for purchased credit-impaired loans for the three and six months ended June 30, 2020 and June 30, 2019 were as follows:
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Schedule of Troubled Debt Restructurings on Financing Receivables | The following table summarizes the recorded investment in consumer mortgage loans secured by residential real estate in the process of foreclosure (dollars in thousands):
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Revenue from Contracts with Customers (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregation of Revenue | The following table presents the Company’s sources of non-interest income for the three and six months ended June 30, 2020 and 2019. Items outside the scope of ASC 606 are noted as such.
(1) Not within the scope of ASC 606 |
Share-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Compensation, Stock Options, Activity | The following table summarizes Options activity during the six months ended June 30, 2020:
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Schedule of Fair Value Inputs, Assets, Quantitative Information | The fair value of each Option and the significant weighted average assumptions used to calculate the fair value of the Options granted during the six months ended June 30, 2020 were as follows:
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Schedule of Nonvested Restricted Stock Shares Activity | The following table summarizes the activity in Stock Awards for the six months ended June 30, 2020:
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Schedule of Nonvested Restricted Stock Units Activity | The following table summarizes the activity in RSUs for the six months ended June 30, 2020:
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Benefit Plans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Net Periodic Expense | The components of net periodic expense for the Company’s supplemental executive retirement plans for the three and six months ended June 30, 2020 and 2019 were as follows:
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Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The components of accumulated other comprehensive income (loss), and the related tax effects, are as follows:
Changes in the components of accumulated other comprehensive income (loss) are as follows and are presented net of tax for the three and six months ended June 30, 2020 and June 30, 2019:
|
Fair Value Disclosures (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets Measured on Recurring Basis | The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
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Schedule of Fair Value Measurements, Nonrecurring | Assets and liabilities subject to fair value adjustments (impairment) on a nonrecurring basis at June 30, 2020 and December 31, 2019 were as follows:
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Schedule of Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques | The following table presents additional qualitative information about assets measured at fair value on a nonrecurring basis, where there was evidence of impairment, and for which the Company has utilized Level 3 inputs to determine fair value:
(2) Includes qualitative adjustments by management and estimated liquidation expenses. |
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Schedule of Fair Value, by Balance Sheet Grouping | The estimated fair values and carrying amounts of financial assets and liabilities as of June 30, 2020 and December 31, 2019 were as follows:
|
Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Lease, Cost | During the three and six months ended June 30, 2020 and 2019, the Company recognized rent and equipment expense associated with leases as follows:
During the six months ended June 30, 2020 and 2019, the following cash and non-cash activities were associated with the leases:
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Schedule of Lessee, Operating Lease, Liability, Maturity | The future payments due under operating leases at June 30, 2020 and 2019 were as follows:
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Acquisition of Shore Community Bank (Summary of Assets Acquired and Liabilities Assumed) (Details) - Shore Community Bank $ in Thousands |
Nov. 08, 2019
USD ($)
|
---|---|
Consideration paid: | |
Company stock issued | $ 29,175 |
Cash payment | 24,233 |
Cash payment for unexercised outstanding stock options | 925 |
Total consideration paid | 54,333 |
Recognized amounts of identifiable assets acquired and liabilities assumed at fair value: | |
Cash and cash equivalents | 32,599 |
Investment securities available for sale | 26,440 |
Loans | 205,833 |
Premises and equipment, net | 4,433 |
Core deposit intangible asset | 1,467 |
Bank-owned life insurance | 7,250 |
Right-of-use assets | 3,226 |
Accrued interest receivable | 778 |
Other real estate owned | 605 |
Other assets | 2,518 |
Deposits | (249,836) |
Lease liability | (3,226) |
Other liabilities | (948) |
Total identifiable assets and liabilities, net | 31,139 |
Goodwill recorded from Shore merger | $ 23,194 |
Acquisition of Shore Community Bank (Summary of Loans Acquired with Credit Quality Deterioration) (Details) - Shore Community Bank $ in Thousands |
Nov. 08, 2019
USD ($)
|
---|---|
Business Acquisition [Line Items] | |
Fair value of acquired loans | $ 205,833 |
Financial Asset Acquired with Credit Deterioration | |
Business Acquisition [Line Items] | |
Contractually required principal and interest at acquisition | 7,584 |
Contractual cash flows not expected to be collected (non-accretable difference) | 2,355 |
Expected cash flows at acquisition | 5,229 |
Interest component of expected cash flows (accretable difference) | 658 |
Fair value of acquired loans | $ 4,571 |
Acquisition of Shore Community Bank (Projected Amortization Expense of Core Deposits Acquired) (Details) - Core Deposits - Shore Community Bank $ in Thousands |
Nov. 08, 2019
USD ($)
|
---|---|
Business Acquisition [Line Items] | |
2020 | $ 129 |
2021 | 236 |
2022 | 209 |
2023 | 182 |
2024 | 156 |
Thereafter | 378 |
Total | $ 1,290 |
Acquisition of Shore Community Bank (Pro Forma Information) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Business Acquisition [Line Items] | ||||
Net interest income | $ 13,848 | $ 11,433 | $ 26,784 | $ 22,660 |
Non-interest income | 3,100 | 2,170 | 5,556 | 4,036 |
Non-interest expenses | 9,837 | 8,566 | 19,630 | 16,660 |
Income taxes | 1,296 | 1,267 | 2,579 | 2,569 |
Net income | $ 3,690 | 3,370 | 7,111 | 6,767 |
Shore Community Bank | ||||
Business Acquisition [Line Items] | ||||
Pro forma, Net interest income | 14,010 | 26,784 | 27,776 | |
Pro forma, Non-interest income | 2,331 | 5,556 | 4,375 | |
Pro forma, Non-interest expense | 10,385 | 19,630 | 20,009 | |
Pro forma, Income taxes | 1,615 | 2,579 | 3,247 | |
Pro forma, Net income | $ 3,942 | 7,111 | $ 8,166 | |
Shore Community Bank | ||||
Business Acquisition [Line Items] | ||||
Net interest income | 4,678 | |||
Non-interest income | 199 | |||
Non-interest expenses | 1,928 | |||
Income taxes | 725 | |||
Net income | $ 1,849 |
Earnings Per Common Share (Narrative) (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
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Equity Option | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 54,930 | 29,530 | 41,430 | 29,530 |
Earnings Per Common Share (Reconciliation of Basic and Diluted Earnings Per Common Share) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Earnings Per Share [Abstract] | ||||
Net income | $ 3,690 | $ 3,370 | $ 7,111 | $ 6,767 |
Basic weighted average shares outstanding | ||||
Basic weighted average shares outstanding (in Shares) | 10,209,295 | 8,634,251 | 10,205,065 | 8,629,197 |
Plus: common stock equivalents (in Shares) | 38,861 | 62,692 | 51,416 | 62,866 |
Diluted weighted average shares outstanding (in Shares) | 10,248,156 | 8,696,943 | 10,256,481 | 8,692,063 |
Earnings per share: | ||||
Basic (in Dollars per share) | $ 0.36 | $ 0.39 | $ 0.70 | $ 0.78 |
Diluted (in Dollars per share) | $ 0.36 | $ 0.39 | $ 0.69 | $ 0.78 |
Allowance for Loan Losses and Credit Quality (Acquired Credit Impaired Loans) (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Financing Receivable, Impaired [Line Items] | ||
Outstanding balance | $ 29,809 | $ 20,999 |
Carrying amount | 1,355,436 | 1,216,028 |
Financial Asset Acquired with Credit Deterioration | ||
Financing Receivable, Impaired [Line Items] | ||
Outstanding balance | 7,479 | 8,038 |
Carrying amount | $ 6,003 | $ 6,257 |
Allowance for Loan Losses and Credit Quality (Changes in Accretable Discount for Acquired Credit Impaired Loans) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward] | ||||
Balance at beginning of period | $ 522 | $ 129 | $ 657 | $ 164 |
Acquisition of impaired loans | 0 | 0 | 0 | 0 |
Accretion of discount | (96) | (35) | (231) | (70) |
Balance at end of period | $ 426 | $ 94 | $ 426 | $ 94 |
Allowance for Loan Losses and Credit Quality (Consumer Mortgage Loans Secured by Residential Real Estate in Process of Foreclosure) (Details) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2020
USD ($)
loan
|
Dec. 31, 2019
USD ($)
loan
|
|
Receivables [Abstract] | ||
Number of loans | loan | 2 | 2 |
Recorded Investment | $ | $ 475 | $ 382 |
Share-Based Compensation (Schedule of Transactions under Stock Plans) (Details) - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2020 |
Dec. 31, 2019 |
|
Number of Shares | ||
Outstanding, beginning of period (in Shares) | 122,151 | |
Granted (in Shares) | 27,000 | |
Outstanding, end of period (in Shares) | 149,151 | 122,151 |
Exercisable, end of period (in Shares) | 115,751 | |
Weighted Average Exercise Price | ||
Outstanding, beginning of period (in Dollars per share) | $ 9.85 | |
Granted (in Dollars per share) | 17.53 | |
Outstanding, end of period (in Dollars per share) | 11.24 | $ 9.85 |
Exercisable, end of period (in Dollars per share) | $ 9.29 | |
Weighted Average Remaining Contractual Term (Years) | ||
Outstanding, end of period | 4 years 6 months | 3 years 10 months 24 days |
Granted | 9 years 7 months 6 days | |
Exercisable, end of period | 3 years 2 months 12 days | |
Aggregate Intrinsic Value | ||
Outstanding, end of period | $ 490,000 | $ 1,500 |
Exercisable, end of period | $ 490,000 |
Share-Based Compensation (Schedule of Fair Value and Weighted Average Assumptions) (Details) - $ / shares |
Mar. 19, 2020 |
Jan. 06, 2020 |
---|---|---|
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract] | ||
Fair value of options granted (in Dollars per share) | $ 2.10 | $ 5.27 |
Risk-free rate of return | 1.00% | 1.72% |
Expected option life in years | 7 years | 7 years |
Expected volatility | 24.63% | 24.53% |
Expected dividends | 2.86% | 1.35% |
Share-Based Compensation (Schedule of Restricted Shares Activity) (Details) - Restricted Stock |
6 Months Ended |
---|---|
Jun. 30, 2020
$ / shares
shares
| |
Number of Shares | |
Outstanding, beginning of period (in Shares) | shares | 134,359 |
Granted (in Shares) | shares | 33,400 |
Vested (in Shares) | shares | (37,651) |
Non-vested, end of period (in Shares) | shares | 130,108 |
Average Grant Date Fair Value (in dollars per share) | |
Outstanding, beginning of period (in Dollars per share) | $ / shares | $ 13.84 |
Granted (in Dollars per share) | $ / shares | 16.53 |
Vested (in Dollars per share) | $ / shares | 17.38 |
Non-vested, end of period (in Dollars per share) | $ / shares | $ 13.51 |
Share-Based Compensation (Schedule of Restricted Stock Units Activity) (Details) - Restricted Stock Units (RSUs) |
6 Months Ended |
---|---|
Jun. 30, 2020
$ / shares
shares
| |
Number of Shares | |
Outstanding, beginning of period (in Shares) | shares | 10,300 |
Granted (in Shares) | shares | 18,950 |
Vested (in Shares) | shares | (3,433) |
Non-vested, end of period (in Shares) | shares | 25,817 |
Average Grant Date Fair Value (in dollars per share) | |
Outstanding, beginning of period (in Dollars per share) | $ / shares | $ 19.38 |
Granted (in Dollars per share) | $ / shares | 21.92 |
Vested (in Dollars per share) | $ / shares | 19.38 |
Non-vested, end of period (in Dollars per share) | $ / shares | $ 21.24 |
Benefit Plans (Narrative) (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Dec. 31, 2019 |
|
Retirement Benefits [Abstract] | ||
Period of service | 6 months | |
Cash surrender value of life insurance | $ 36.9 | $ 36.7 |
Benefit Plans (Schedule of Components of Net Periodic Benefit Cost) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Retirement Benefits [Abstract] | ||||
Service cost | $ 45 | $ 47 | $ 92 | $ 94 |
Interest cost | 41 | 41 | 82 | 82 |
Actuarial gain recognized | (56) | (44) | (100) | (88) |
Net periodic benefit cost | $ 30 | $ 44 | $ 74 | $ 88 |
Fair Value Disclosures (Financial Assets and Liabilities at Fair Value Measured on Non-recurring Basis) (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impaired loans | $ 3,833 | $ 7,092 |
Other real estate owned | 93 | 93 |
Level 1 Inputs | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impaired loans | 0 | 0 |
Other real estate owned | 0 | 0 |
Level 2 Inputs | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impaired loans | 0 | 0 |
Other real estate owned | 0 | 0 |
Level 3 Inputs | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impaired loans | 3,833 | 7,092 |
Other real estate owned | $ 93 | $ 93 |
Fair Value Disclosures (Narrative) (Details) $ in Thousands |
Jun. 30, 2020
USD ($)
loan
|
Dec. 31, 2019
USD ($)
loan
|
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impaired loans, recorded investment | $ 25,625 | $ 16,886 |
Related Allowance | $ 125 | $ 69 |
Level 3 Inputs | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Number of impaired loans | loan | 7 | 12 |
Impaired loans, recorded investment | $ 4,000 | $ 7,200 |
Related Allowance | $ 125 | $ 69 |
Fair Value Disclosures (Fair Value Qualitative Information) (Details) $ in Thousands |
Jun. 30, 2020
USD ($)
|
Dec. 31, 2019
USD ($)
|
---|---|---|
Fair Value Qualitative Information [Line Items] | ||
Impaired loans | $ 3,833 | $ 7,092 |
Other real estate owned | $ 93 | $ 93 |
Appraisal adjustments | Minimum | ||
Fair Value Qualitative Information [Line Items] | ||
Loans and leases, measurement input | 0.005 | 0.001 |
Other real estate owned, measurement input | 0.470 | 0.470 |
Appraisal adjustments | Maximum | ||
Fair Value Qualitative Information [Line Items] | ||
Loans and leases, measurement input | 0.266 | 0.404 |
Appraisal adjustments | Weighted Average | ||
Fair Value Qualitative Information [Line Items] | ||
Loans and leases, measurement input | 0.115 | 0.126 |
Other real estate owned, measurement input | 0.470 | 0.470 |
Leases (Components of Lease Expense) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Operating lease cost: | ||||
Fixed rent expense and equipment expense | $ 670 | $ 492 | $ 1,337 | $ 976 |
Variable rent expense | 0 | 0 | 0 | 0 |
Short-term lease expense | 11 | 2 | 23 | 4 |
Sublease income | 0 | 0 | 0 | 0 |
Net lease cost | 681 | 494 | 1,360 | 980 |
Occupancy, Net | ||||
Operating lease cost: | ||||
Net lease cost | 626 | 430 | 1,240 | 857 |
Other Expense | ||||
Operating lease cost: | ||||
Net lease cost | $ 55 | $ 64 | $ 120 | $ 123 |
Leases (Summary of Cash and Non-Cash Items) (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 1,266 | $ 868 |
Additions to ROU assets obtained from: | ||
Net lease cost | 0 | 0 |
New operating lease liabilities | $ 144 | $ 412 |
Leases (Future Payments Under Operating Leases) (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
Jun. 30, 2019 |
---|---|---|---|
Operating Lease, After Adoption of 842 | |||
Due in less than one year | $ 2,058 | $ 1,832 | |
Due in one year but less than two years | 2,030 | 1,816 | |
Due in two years but less than three years | 2,021 | 1,788 | |
Due in three years but less than four years | 1,929 | 1,784 | |
Due in four years but less than five years | 1,766 | 1,687 | |
Thereafter | 14,243 | 12,865 | |
Total future payments | 24,047 | 21,772 | |
Less: Implied interest | (6,011) | (5,751) | |
Total lease liability | $ 18,036 | $ 18,617 | $ 16,021 |
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