QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Securities Registered Pursuant to Section 12(b) of the Act: | ||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Large accelerated filer | ☐ | Accelerated filer | ☐ | Emerging growth company | |
☒ | Smaller reporting company |
Page | ||
June 30, 2020 | December 31, 2019 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | $ | ||||||
Interest earning deposits in other banks | ||||||||
Cash and cash equivalents | ||||||||
Securities available-for-sale, at fair value | ||||||||
Loans held-for-sale, at lower of cost or fair value | ||||||||
Loans held-for-investment, net of allowance for loan losses of $6,763 and $6,191 at June 30, 2020 and December 31, 2019, respectively | ||||||||
Federal home loan and federal reserve bank stock, at cost | ||||||||
Accrued interest receivable | ||||||||
Other real estate owned, net | ||||||||
Premises and equipment, net | ||||||||
Operating lease right-of-use assets | ||||||||
Derivative assets | ||||||||
Low income housing tax credit investment | ||||||||
Other assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Deposits: | ||||||||
Noninterest bearing demand accounts | $ | $ | ||||||
Interest bearing accounts | ||||||||
Total deposits | ||||||||
Federal home loan bank advances | ||||||||
Notes payable | ||||||||
Subordinated debentures, net | ||||||||
Operating lease liabilities | ||||||||
Accrued expenses and other liabilities | ||||||||
Total liabilities | ||||||||
Commitments and contingencies | ||||||||
Preferred stock, $0.01 par value—authorized 10,000 shares; no shares issued or outstanding at June 30, 2020 and December 31, 2019 | ||||||||
Class A common stock, $0.01 par value—authorized 125,000 shares; 18,379 and 17,775 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively | ||||||||
Class B non-voting common stock, $0.01 par value—authorized 25,000 shares; 297 and 893 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively | ||||||||
Additional paid-in capital | ||||||||
Retained earnings | ||||||||
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 | $ | $ | $ | $ | ||||||||||||
Taxable securities | ||||||||||||||||
Tax-exempt securities | ||||||||||||||||
Other interest earning assets | ||||||||||||||||
Dividends and other | ||||||||||||||||
Total interest income | ||||||||||||||||
Interest expense | ||||||||||||||||
Deposits | ||||||||||||||||
Federal home loan bank advances | ||||||||||||||||
Notes payable and other | ||||||||||||||||
Subordinated debentures | ||||||||||||||||
Total interest expense | ||||||||||||||||
Net interest income before provision for loan losses | ||||||||||||||||
Provision for loan losses | ||||||||||||||||
Net interest income after provision for loan losses | ||||||||||||||||
Noninterest income | ||||||||||||||||
Mortgage warehouse fee income | ||||||||||||||||
Service fees related to off-balance sheet deposits | ||||||||||||||||
Deposit related fees | ||||||||||||||||
Gain on sale of securities, net | ||||||||||||||||
(Loss) gain on sale of loans, net | ( | ) | ||||||||||||||
Gain on sale of branch, net | ||||||||||||||||
Gain on extinguishment of debt | ||||||||||||||||
Other income | ||||||||||||||||
Total noninterest income | ||||||||||||||||
Noninterest expense | ||||||||||||||||
Salaries and employee benefits | ||||||||||||||||
Occupancy and equipment | ||||||||||||||||
Communications and data processing | ||||||||||||||||
Professional services | ||||||||||||||||
Federal deposit insurance | ||||||||||||||||
Correspondent bank charges | ||||||||||||||||
Other loan expense | ||||||||||||||||
Other real estate owned expense | ||||||||||||||||
Other general and administrative | ||||||||||||||||
Total noninterest expense | ||||||||||||||||
Income before income taxes | ||||||||||||||||
Income tax expense | ||||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Basic earnings per share | $ | $ | $ | $ | ||||||||||||
Diluted earnings per share | $ | $ | $ | $ | ||||||||||||
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): | ||||||||||||||||
Change in net unrealized gain on available-for-sale securities | ||||||||||||||||
Less: Reclassification adjustment for net gains included in net income | ( | ) | ( | ) | ||||||||||||
Income tax effect | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Unrealized gain on available-for-sale securities, net of tax | ||||||||||||||||
Change in net unrealized gain on derivative assets | ||||||||||||||||
Less: Reclassification adjustment for net gains included in net income | ( | ) | ( | ) | ||||||||||||
Income tax effect | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Unrealized gain on derivative instruments, net of tax | ||||||||||||||||
Other comprehensive income | ||||||||||||||||
Total comprehensive income | $ | $ | $ | $ |
Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||
Balance at January 1, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
Total comprehensive income, net of tax | — | — | — | — | — | |||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||
Balance at March 31, 2019 | ( | ) | ||||||||||||||||||||||||||||
Total comprehensive income, net of tax | — | — | — | — | — | |||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||
Exercise of stock options, net of shares withheld for employee taxes | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | $ | $ |
Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||
Balance at January 1, 2020 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Total comprehensive income, net of tax | — | — | — | — | — | |||||||||||||||||||||||||
Conversion of Class B common stock to Class A common stock | ( | ) | ( | ) | — | — | — | |||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||
Exercise of stock options, net of shares withheld for employee taxes | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||||
Balance at March 31, 2020 | ||||||||||||||||||||||||||||||
Total comprehensive income, net of tax | — | — | — | — | — | |||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||
Exercise of stock options, net of shares withheld for employee taxes | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | $ | $ | $ | $ |
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | $ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | ||||||||
Amortization of securities premiums and discounts, net | ||||||||
Amortization of loan premiums and discounts and deferred loan origination fees and costs, net | ( | ) | ||||||
Stock-based compensation | ||||||||
Deferred income tax expense | ||||||||
Provision for loan losses | ||||||||
Gain on sale of loans, net | ( | ) | ( | ) | ||||
Gain on sale of securities, net | ( | ) | ||||||
Originations/purchases of loans held-for-sale | ( | ) | ( | ) | ||||
Proceeds from sales of loans held-for-sale | ||||||||
Gain on sale of branch, net | ( | ) | ||||||
Gain on extinguishment of debt | ( | ) | ||||||
Other, net | ( | ) | ||||||
Changes in operating assets and liabilities: | ||||||||
Accrued interest receivable and other assets | ( | ) | ( | ) | ||||
Accrued expenses and other liabilities | ( | ) | ||||||
Net cash provided by operating activities | ||||||||
Cash flows from investing activities | ||||||||
Purchases of securities available-for-sale | ( | ) | ( | ) | ||||
Proceeds from paydowns and maturities of securities available-for-sale | ||||||||
Proceeds from sale of securities available-for-sale | ||||||||
Loan originations/purchases and payments, net | ( | ) | ( | ) | ||||
Proceeds from sale of loans held-for-sale previously classified as held-for-investment | ||||||||
Purchase of federal home loan and federal reserve bank stock, net | ( | ) | ( | ) | ||||
Proceeds from sale of other real estate owned | ||||||||
Purchase of premises and equipment | ( | ) | ( | ) | ||||
Proceeds from sale of branch, net of cash | ||||||||
Proceeds from (purchases of) derivative contracts, net | ( | ) | ||||||
Other, net | ||||||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Cash flows from financing activities | ||||||||
Net change in noninterest bearing deposits | ||||||||
Net change in interest bearing deposits | ( | ) | ||||||
Net change in federal home loan bank advances | ||||||||
Net change in other borrowings | ||||||||
Payments made on notes payable | ( | ) | ( | ) | ||||
Taxes paid related to net share settlement of equity awards | ( | ) | ( | ) | ||||
Other, net | ( | ) | ||||||
Net cash provided by financing activities | ||||||||
Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
Cash and cash equivalents, beginning of period | ||||||||
Cash and cash equivalents, end of period | $ | $ |
Available-for-sale securities | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
June 30, 2020 | ||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||
Government agency mortgage-backed securities | $ | $ | $ | ( | ) | $ | ||||||||||
Government agency collateralized mortgage obligation | ( | ) | ||||||||||||||
Private-label collateralized mortgage obligation | ( | ) | ||||||||||||||
Commercial mortgage-backed securities: | ||||||||||||||||
Private-label collateralized mortgage obligation | ||||||||||||||||
Municipal bonds: | ||||||||||||||||
Tax-exempt | ||||||||||||||||
Taxable | ||||||||||||||||
Asset backed securities: | ||||||||||||||||
Government sponsored student loan pools | ( | ) | ||||||||||||||
$ | $ | $ | ( | ) | $ |
Available-for-sale securities | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
December 31, 2019 | ||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||
Government agency mortgage-backed securities | $ | $ | $ | $ | ||||||||||||
Government agency collateralized mortgage obligation | ( | ) | ||||||||||||||
Private-label collateralized mortgage obligation | ( | ) | ||||||||||||||
Commercial mortgage-backed securities: | ||||||||||||||||
Private-label collateralized mortgage obligation | ( | ) | ||||||||||||||
Asset backed securities: | ||||||||||||||||
Government sponsored student loan pools | ( | ) | ||||||||||||||
$ | $ | $ | ( | ) | $ |
Available-for-sale securities | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
June 30, 2020 | ||||||||||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||
Government agency mortgage-backed securities | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||||||
Government agency collateralized mortgage obligation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Private-label collateralized mortgage obligation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Asset backed securities: | ||||||||||||||||||||||||
Government sponsored student loan pools | ( | ) | ( | ) | ||||||||||||||||||||
$ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) |
Available-for-sale securities | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||
Government agency collateralized mortgage obligation | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
Private-label collateralized mortgage obligation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Commercial mortgage-backed securities: | ||||||||||||||||||||||||
Private-label collateralized mortgage obligation | ( | ) | ( | ) | ||||||||||||||||||||
Asset backed securities: | ||||||||||||||||||||||||
Government sponsored student loan pools | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
$ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) |
June 30, 2020 | December 31, 2019 | |||||||
(Dollars in thousands) | ||||||||
Real estate loans: | ||||||||
One-to-four family | $ | $ | ||||||
Multi-family | ||||||||
Commercial | ||||||||
Construction | ||||||||
Commercial and industrial | ||||||||
Consumer and other | ||||||||
Reverse mortgage | ||||||||
Mortgage warehouse | ||||||||
Total gross loans held-for-investment | ||||||||
Deferred fees, net | ||||||||
Total loans held-for-investment | ||||||||
Allowance for loan losses | ( | ) | ( | ) | ||||
Total loans held-for-investment, net | $ | $ | ||||||
Total loans held-for-sale(1) | $ | $ |
(1) | Loans held-for-sale included $ |
Three Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
One-to -Four Family | Multi- Family | Commercial Real Estate | Construction | Commercial and Industrial | Consumer and Other | Reverse Mortgage | Mortgage Warehouse | Total | ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Balance, March 31, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Charge-offs | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Recoveries | ||||||||||||||||||||||||||||||||||||
Provision for loan losses | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Balance, June 30, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | $ |
Three Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||
One-to -Four Family | Multi- Family | Commercial Real Estate | Construction | Commercial and Industrial | Consumer and Other | Reverse Mortgage | Mortgage Warehouse | Total | ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Balance, March 31, 2019 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Charge-offs | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Recoveries | ||||||||||||||||||||||||||||||||||||
Provision for loan losses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
Balance, June 30, 2019 | $ | $ | $ | $ | $ | $ | $ | $ | $ |
Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
One-to -Four Family | Multi- Family | Commercial Real Estate | Construction | Commercial and Industrial | Consumer and Other | Reverse Mortgage | Mortgage Warehouse | Total | ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Balance, December 31, 2019 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Charge-offs | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Recoveries | ||||||||||||||||||||||||||||||||||||
Provision for loan losses | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Balance, June 30, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | $ |
Six Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||
One-to -Four Family | Multi- Family | Commercial Real Estate | Construction | Commercial and Industrial | Consumer and Other | Reverse Mortgage | Mortgage Warehouse | Total | ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Balance, December 31, 2018 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Charge-offs | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Recoveries | ||||||||||||||||||||||||||||||||||||
Provision for loan losses | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Balance, June 30, 2019 | $ | $ | $ | $ | $ | $ | $ | $ | $ |
June 30, 2020 | ||||||||||||||||||||||||||||||||||||
One-to -Four Family | Multi- Family | Commercial Real Estate | Construction | Commercial and Industrial | Consumer and Other | Reverse Mortgage | Mortgage Warehouse | Total | ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Amount of allowance attributed to: | ||||||||||||||||||||||||||||||||||||
Specifically evaluated impaired loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
General portfolio allocation | ||||||||||||||||||||||||||||||||||||
Total allowance for loan losses | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Loans evaluated for impairment: | ||||||||||||||||||||||||||||||||||||
Specifically evaluated | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Collectively evaluated | ||||||||||||||||||||||||||||||||||||
Total gross loans held-for-investment | $ | $ | $ | $ | $ | $ | $ | $ | $ |
December 31, 2019 | ||||||||||||||||||||||||||||||||||||
One-to -Four Family | Multi- Family | Commercial Real Estate | Construction | Commercial and Industrial | Consumer and Other | Reverse Mortgage | Mortgage Warehouse | Total | ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Amount of allowance attributed to: | ||||||||||||||||||||||||||||||||||||
Specifically evaluated impaired loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
General portfolio allocation | ||||||||||||||||||||||||||||||||||||
Total allowance for loan losses | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Loans evaluated for impairment: | ||||||||||||||||||||||||||||||||||||
Specifically evaluated | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Collectively evaluated | ||||||||||||||||||||||||||||||||||||
Total gross loans held-for-investment | $ | $ | $ | $ | $ | $ | $ | $ | $ |
June 30, 2020 | ||||||||||||
Unpaid Principal Balance | Recorded Investment | Related Allowance | ||||||||||
(Dollars in thousands) | ||||||||||||
With no related allowance recorded: | ||||||||||||
Real estate loans: | ||||||||||||
One-to-four family | $ | $ | $ | — | ||||||||
Commercial | — | |||||||||||
Commercial and industrial | — | |||||||||||
Reverse mortgage | — | |||||||||||
— | ||||||||||||
With an allowance recorded: | ||||||||||||
Real estate loans: | ||||||||||||
One-to-four family | ||||||||||||
Reverse mortgage | ||||||||||||
Total impaired loans | $ | $ | $ |
December 31, 2019 | ||||||||||||
Unpaid Principal Balance | Recorded Investment | Related Allowance | ||||||||||
(Dollars in thousands) | ||||||||||||
With no related allowance recorded: | ||||||||||||
Real estate loans: | ||||||||||||
One-to-four family | $ | $ | $ | — | ||||||||
Commercial | — | |||||||||||
Commercial and industrial | — | |||||||||||
Reverse mortgage | — | |||||||||||
— | ||||||||||||
With an allowance recorded: | ||||||||||||
Real estate loans: | ||||||||||||
One-to-four family | ||||||||||||
Reverse mortgage | ||||||||||||
Total impaired loans | $ | $ | $ |
Three Months Ended June 30, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
With no related allowance recorded: | ||||||||||||||||
Real estate loans: | ||||||||||||||||
One-to-four family | $ | $ | $ | $ | ||||||||||||
Commercial | ||||||||||||||||
Commercial and industrial | ||||||||||||||||
Reverse mortgage | ||||||||||||||||
With an allowance recorded: | ||||||||||||||||
Real estate loans: | ||||||||||||||||
One-to-four family | ||||||||||||||||
Reverse mortgage | ||||||||||||||||
Total impaired loans | $ | $ | $ | $ |
Six Months Ended June 30, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
With no related allowance recorded: | ||||||||||||||||
Real estate loans: | ||||||||||||||||
One-to-four family | $ | $ | $ | $ | ||||||||||||
Commercial | ||||||||||||||||
Commercial and industrial | ||||||||||||||||
Reverse mortgage | ||||||||||||||||
With an allowance recorded: | ||||||||||||||||
Real estate loans: | ||||||||||||||||
One-to-four family | ||||||||||||||||
Reverse mortgage | ||||||||||||||||
Total impaired loans | $ | $ | $ | $ |
June 30, 2020 | ||||||||||||||||||||||||||||||||
30-59 Days Past Due | 60-89 Days Past Due | Greater than 89 Days Past Due | Total Past Due | Current | Total | Nonaccruing | Loans Receivable > 89 Days and Accruing | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||||||||||
One-to-four family | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Multi-family | ||||||||||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||||||
Construction | ||||||||||||||||||||||||||||||||
Commercial and industrial | ||||||||||||||||||||||||||||||||
Consumer and other | ||||||||||||||||||||||||||||||||
Reverse mortgage | ||||||||||||||||||||||||||||||||
Mortgage warehouse | ||||||||||||||||||||||||||||||||
Total gross loans held-for-investment | $ | $ | $ | $ | $ | $ | $ | $ |
December 31, 2019 | ||||||||||||||||||||||||||||||||
30-59 Days Past Due | 60-89 Days Past Due | Greater than 89 Days Past Due | Total Past Due | Current | Total | Nonaccruing | Loans Receivable > 89 Days and Accruing | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||||||||||
One-to-four family | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Multi-family | ||||||||||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||||||
Construction | ||||||||||||||||||||||||||||||||
Commercial and industrial | ||||||||||||||||||||||||||||||||
Consumer and other | ||||||||||||||||||||||||||||||||
Reverse mortgage | ||||||||||||||||||||||||||||||||
Mortgage warehouse | ||||||||||||||||||||||||||||||||
Total gross loans held-for-investment | $ | $ | $ | $ | $ | $ | $ | $ |
Three and Six Months Ended June 30, 2019 | ||||||||||
Number of Loans | Pre- Modifications Outstanding Recorded Investment | Post- Modifications Outstanding Recorded Investment | ||||||||
(Dollars in thousands) | ||||||||||
Troubled debt restructurings: | ||||||||||
Real estate loans: | ||||||||||
One-to-four family | $ | $ | ||||||||
Commercial and industrial | ||||||||||
Six Months Ended June 30, 2020 | ||||||
Number of Loans | Loan Balance At Period End | |||||
(Dollars in thousands) | ||||||
COVID-19 related modifications: | ||||||
Real estate loans: | ||||||
One-to-four family | $ | |||||
Commercial | ||||||
Commercial and industrial | ||||||
Total COVID-19 related modifications | $ |
Pass: | Loans in all classes that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass. | |
Special mention: | Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. | |
Substandard: | Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified 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. | |
Doubtful: | Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. | |
Loss: | Credits rated as loss are charged-off. Management has no expectation of the recovery of any payments in respect of credits rated as loss. |
Credit Risk Grades | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
June 30, 2020 | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
One-to-four family | $ | $ | $ | $ | $ | |||||||||||||||
Multi-family | ||||||||||||||||||||
Commercial | ||||||||||||||||||||
Construction | ||||||||||||||||||||
Commercial and industrial | ||||||||||||||||||||
Consumer and other | ||||||||||||||||||||
Reverse mortgage | ||||||||||||||||||||
Mortgage warehouse | ||||||||||||||||||||
Total gross loans held-for-investment | $ | $ | $ | $ | $ |
Credit Risk Grades | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
One-to-four family | $ | $ | $ | $ | $ | |||||||||||||||
Multi-family | ||||||||||||||||||||
Commercial | ||||||||||||||||||||
Construction | ||||||||||||||||||||
Commercial and industrial | ||||||||||||||||||||
Consumer and other | ||||||||||||||||||||
Reverse mortgage | ||||||||||||||||||||
Mortgage warehouse | ||||||||||||||||||||
Total gross loans held-for-investment | $ | $ | $ | $ | $ |
Six Months Ended June 30, 2020 | Year Ended December 31, 2019 | |||||||
(Dollars in thousands) | ||||||||
Amount outstanding at period-end | $ | $ | ||||||
Weighted average interest rate at period-end | % | % | ||||||
Maximum month-end balance during the period | $ | $ | ||||||
Average balance outstanding during the period | $ | $ | ||||||
Weighted average interest rate during the period | % | % |
June 30, 2020 | December 31, 2019 | |||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||||
(Dollars in thousands) | ||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||
Cash flow hedge interest rate floor | Derivative assets | $ | Derivative assets | $ | ||||||||
Cash flow hedge interest rate cap | Derivative assets | Derivative assets | ||||||||||
Fair value hedge interest rate swap | Derivative assets | Derivative assets | ||||||||||
Fair value hedge interest rate swap | Other liabilities | ( | ) | Other liabilities |
Carrying Amount of the Hedged Asset (Liability) | Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets/(Liabilities) | |||||||||||||||
June 30, 2020 | December 31, 2019 | June 30, 2020 | December 31, 2019 | |||||||||||||
Line Item in the Statement of Financial Condition of Hedged Item: | (Dollars in thousands) | |||||||||||||||
Securities available-for-sale | $ | $ | $ | $ |
Amount of Gain (Loss) Recognized in OCI | Location of Gain (Loss) Reclassified from Accumulated OCI into Income | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income | ||||||||||||||||
Three Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||
Cash flow hedge interest rate floor | $ | $ | Interest income - Other interest earning assets | $ | $ | ( | ) | |||||||||||
Cash flow hedge interest rate floor | Interest income - Securities | ( | ) | |||||||||||||||
Cash flow hedge interest rate cap | ( | ) | ( | ) | Interest expense - Subordinated debentures | ( | ) | ( | ) |
Amount of Gain (Loss) Recognized in OCI | Location of Gain (Loss) Reclassified from Accumulated OCI into Income | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income | ||||||||||||||||
Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||
Cash flow hedge interest rate floor | $ | $ | Interest income - Other interest earning assets | $ | $ | ( | ) | |||||||||||
Cash flow hedge interest rate floor | Interest income - Securities | ( | ) | |||||||||||||||
Cash flow hedge interest rate cap | ( | ) | ( | ) | Interest expense - Subordinated debentures | ( | ) | ( | ) |
Three Months Ended June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
Amount | Rate | Amount | Rate | |||||||||||
(Dollars in thousands) | ||||||||||||||
Statutory federal tax | $ | % | $ | % | ||||||||||
State tax, net of federal benefit | % | % | ||||||||||||
Tax credits | ( | ) | ( | )% | ( | ) | ( | )% | ||||||
Tax-exempt income | ( | ) | ( | )% | ||||||||||
Excess tax benefit from stock-based compensation | ( | ) | ( | )% | ( | ) | ( | )% | ||||||
Other items, net | % | ( | ) | ( | )% | |||||||||
Actual tax expense | $ | % | $ | % |
Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
Amount | Rate | Amount | Rate | |||||||||||
(Dollars in thousands) | ||||||||||||||
Statutory federal tax | $ | % | $ | % | ||||||||||
State tax, net of federal benefit | % | % | ||||||||||||
Tax credits | ( | ) | ( | )% | ( | ) | ( | )% | ||||||
Tax-exempt income | ( | ) | ( | )% | ||||||||||
Excess tax benefit from stock-based compensation | ( | ) | ( | )% | ( | ) | ( | )% | ||||||
Other items, net | % | % | ||||||||||||
Actual tax expense | $ | % | $ | % |
June 30, 2020 | December 31, 2019 | |||||||
(Dollars in thousands) | ||||||||
Unfunded lines of credit | $ | $ | ||||||
Letters of credit | ||||||||
Total credit extension commitments | $ | $ |
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value (in thousands) | ||||||||||
Outstanding at January 1, 2020 | $ | ||||||||||||
Granted | |||||||||||||
Exercised | ( | ) | |||||||||||
Forfeited/Expired | ( | ) | |||||||||||
Outstanding at June 30, 2020 | $ | $ | |||||||||||
Exercisable at June 30, 2020 | $ | $ | |||||||||||
Vested or Expected to Vest at June 30, 2020 | $ | $ |
Number of Shares | Weighted-Average Grant Date Fair Value Per Share | ||||||
Nonvested at January 1, 2020 | $ | ||||||
Granted | |||||||
Canceled or Forfeited | ( | ) | |||||
Nonvested at June 30, 2020 | $ |
Actual | Minimum capital adequacy | To be well capitalized | |||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
June 30, 2020 | |||||||||||||||||||||
The Company | |||||||||||||||||||||
Tier 1 leverage ratio | $ | % | $ | % | N/A | N/A | |||||||||||||||
Common equity tier 1 capital ratio | % | % | N/A | N/A | |||||||||||||||||
Tier 1 risk-based capital ratio | % | % | N/A | N/A | |||||||||||||||||
Total risk-based capital ratio | % | % | N/A | N/A | |||||||||||||||||
The Bank | |||||||||||||||||||||
Tier 1 leverage ratio | % | % | $ | % | |||||||||||||||||
Common equity tier 1 capital ratio | % | % | % | ||||||||||||||||||
Tier 1 risk-based capital ratio | % | % | % | ||||||||||||||||||
Total risk-based capital ratio | % | % | % |
Actual | Minimum capital adequacy | To be well capitalized | |||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||
The Company | |||||||||||||||||||||
Tier 1 leverage ratio | $ | % | $ | % | N/A | N/A | |||||||||||||||
Common equity tier 1 capital ratio | % | % | N/A | N/A | |||||||||||||||||
Tier 1 risk-based capital ratio | % | % | N/A | N/A | |||||||||||||||||
Total risk-based capital ratio | % | % | N/A | N/A | |||||||||||||||||
The Bank | |||||||||||||||||||||
Tier 1 leverage ratio | % | % | $ | % | |||||||||||||||||
Common equity tier 1 capital ratio | % | % | % | ||||||||||||||||||
Tier 1 risk-based capital ratio | % | % | % | ||||||||||||||||||
Total risk-based capital ratio | % | % | % |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
June 30, 2020 | ||||||||||||||||
Assets | ||||||||||||||||
Securities available-for-sale | $ | $ | $ | $ | ||||||||||||
Derivative assets | ||||||||||||||||
$ | $ | $ | $ |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
December 31, 2019 | ||||||||||||||||
Assets | ||||||||||||||||
Securities available-for-sale | $ | $ | $ | $ | ||||||||||||
Derivative assets | ||||||||||||||||
$ | $ | $ | $ |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
June 30, 2020 | ||||||||||||||||
Assets | ||||||||||||||||
Impaired loans: | ||||||||||||||||
Reverse mortgage | $ | $ | $ | $ | ||||||||||||
Other real estate owned | ||||||||||||||||
$ | $ | $ | $ |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
December 31, 2019 | ||||||||||||||||
Assets | ||||||||||||||||
Impaired loans: | ||||||||||||||||
Real estate: | ||||||||||||||||
One-to-four family | $ | $ | $ | $ | ||||||||||||
Reverse mortgage | ||||||||||||||||
Other real estate owned | ||||||||||||||||
$ | $ | $ | $ |
Fair Value | Valuation Technique(s) | Significant Unobservable Inputs | Range | Weighted Average(1) | ||||||||||
(Dollars in thousands) | ||||||||||||||
June 30, 2020 | ||||||||||||||
Collateral-dependent impaired loans | $ | Market comparable properties | Marketability discount | % | % | |||||||||
Selling cost | % | % | ||||||||||||
Other real estate owned | Market comparable properties | Sales commission | % | % | ||||||||||
Other selling costs | % | % |
(1) | Unobservable inputs were weighted by the relative fair value of the instruments. |
Carrying Amount | Fair Value Measurements Using | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
June 30, 2020 | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and due from banks | $ | $ | $ | $ | $ | |||||||||||||||
Interest earning deposits | ||||||||||||||||||||
Loans held-for-sale | ||||||||||||||||||||
Loans held-for-investment, net | ||||||||||||||||||||
Accrued interest receivable | ||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Deposits | $ | $ | $ | $ | $ | |||||||||||||||
FHLB advances | ||||||||||||||||||||
Subordinated debentures | ||||||||||||||||||||
Accrued interest payable |
Carrying Amount | Fair Value Measurements Using | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and due from banks | $ | $ | $ | $ | $ | |||||||||||||||
Interest earning deposits | ||||||||||||||||||||
Loans held-for-sale | ||||||||||||||||||||
Loans held-for-investment, net | ||||||||||||||||||||
Accrued interest receivable | ||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Deposits | $ | $ | $ | $ | $ | |||||||||||||||
Notes payable | ||||||||||||||||||||
Subordinated debentures | ||||||||||||||||||||
Accrued interest payable |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Basic | ||||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Weighted average common shares outstanding | ||||||||||||||||
Basic earnings per common share | $ | $ | $ | $ | ||||||||||||
Diluted | ||||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Weighted average common shares outstanding for basic earnings per common share | ||||||||||||||||
Add: Dilutive effects of stock-based awards | ||||||||||||||||
Average shares and dilutive potential common shares | ||||||||||||||||
Dilutive earnings per common share | $ | $ | $ | $ |
Six Months Ended June 30, 2020 | ||||||||
Number of Loans | Loan Balance At Period End | Percentage of Loan Portfolio Balance | ||||||
(Dollars in thousands) | ||||||||
COVID-19 related modifications: | ||||||||
Real estate loans: | ||||||||
One-to-four family | 19 | $ | 11,970 | 6% | ||||
Commercial industry sectors: | ||||||||
Retail | 13 | 52,207 | 63% | |||||
Hospitality | 8 | 39,466 | 85% | |||||
Office | 4 | 21,282 | 37% | |||||
Industrial | 1 | 4,835 | 6% | |||||
Other | 2 | 5,710 | 13% | |||||
Total Commercial | 28 | 123,500 | 39% | |||||
Commercial and industrial | 2 | 1,373 | 6% | |||||
Total COVID-19 related modifications | 49 | $ | 136,843 | 17% |
June 30, 2020 | ||||||||||
Number of Loans | Loan Balance At Period End | Weighted Average Loan-to-Value | Percentage of Loan Portfolio Balance | |||||||
(Dollars in thousands) | ||||||||||
Loan Segment: | ||||||||||
Real estate loans: | ||||||||||
One-to-four family | 505 | $ | 216,038 | 55% | 27% | |||||
Multi-family | 58 | 72,007 | 50% | 9% | ||||||
Commercial industry sectors: | ||||||||||
Retail | 33 | 82,720 | 54% | 10% | ||||||
Hospitality | 13 | 46,228 | 44% | 6% | ||||||
Office | 13 | 57,565 | 63% | 7% | ||||||
Industrial | 23 | 86,834 | 60% | 11% | ||||||
Other | 20 | 43,468 | 47% | 5% | ||||||
Total Commercial | 102 | 316,815 | 55% | 40% | ||||||
Construction | 6 | 10,822 | 51% | 1% | ||||||
Commercial and industrial | 14 | 24,707 | 58% | 3% | ||||||
Reverse mortgage and other | 15 | 1,552 | 88% | 0% | ||||||
Mortgage warehouse | N/A | 155,308 | N/A | 19% | ||||||
700 | $ | 797,249 | N/A | 100% |
• | Significant and Growing Industry: Digital currency presented a revolutionary model for executing financial transactions with substantial potential for growth. |
• | Infrastructure Needs: In order to become widely adopted, digital currency would need to rely on many traditional elements of financial services, including those services that support funds transfers, customer account controls and other security measures. |
• | Regulatory Complexity as a Barrier to Entry: Providing infrastructure solutions and services to the digital currency industry would require specialized compliance capabilities and a management team with a deep understanding of both the digital currency and the financial services industries. |
• | Digital Currency Exchanges: Exchanges through which digital currencies are bought and sold; includes over-the-counter, or OTC, trading desks. |
• | Institutional Investors: Hedge funds, venture capital funds, private equity funds, family offices and traditional asset managers, which are investing in digital currencies as an asset class. |
• | Other Customers: Companies developing new protocols, platforms and applications; mining operations; and providers of other services. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
# of SEN Transactions | 40,286 | 12,254 | 71,691 | 19,351 | ||||||||||||
$ of Volume of SEN Transfers | $ | 22,423 | $ | 8,625 | $ | 39,795 | $ | 12,702 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Statement of Operations Data: | ||||||||||||||||
Interest income | $ | 18,015 | $ | 19,472 | $ | 38,077 | $ | 39,535 | ||||||||
Interest expense | 1,963 | 1,904 | 6,547 | 2,651 | ||||||||||||
Net interest income | 16,052 | 17,568 | 31,530 | 36,884 | ||||||||||||
Provision for loan losses | 222 | 152 | 589 | 419 | ||||||||||||
Net interest income after provision | 15,830 | 17,416 | 30,941 | 36,465 | ||||||||||||
Noninterest income | 5,434 | 2,154 | 10,365 | 10,025 | ||||||||||||
Noninterest expense | 13,972 | 12,721 | 27,847 | 26,207 | ||||||||||||
Income before income taxes | 7,292 | 6,849 | 13,459 | 20,283 | ||||||||||||
Income tax expense | 1,826 | 1,693 | 3,600 | 5,691 | ||||||||||||
Net income | $ | 5,466 | $ | 5,156 | $ | 9,859 | $ | 14,592 | ||||||||
Financial Ratios(1): | ||||||||||||||||
Return on average assets (ROAA)(2) | 1.02 | % | 1.03 | % | 0.90 | % | 1.48 | % | ||||||||
Return on average equity (ROAE)(2) | 8.72 | % | 10.04 | % | 7.94 | % | 14.64 | % | ||||||||
Net interest margin(3) | 3.14 | % | 3.56 | % | 3.00 | % | 3.78 | % | ||||||||
Noninterest income to average assets(2) | 1.01 | % | 0.43 | % | 0.95 | % | 1.02 | % | ||||||||
Noninterest expense to average assets | 2.60 | % | 2.54 | % | 2.55 | % | 2.65 | % | ||||||||
Efficiency ratio(2)(4) | 65.03 | % | 64.50 | % | 66.47 | % | 55.87 | % | ||||||||
Loan yield(5) | 4.67 | % | 5.45 | % | 4.91 | % | 5.60 | % | ||||||||
Cost of deposits | 0.37 | % | 0.28 | % | 0.62 | % | 0.18 | % | ||||||||
Cost of funds | 0.42 | % | 0.43 | % | 0.68 | % | 0.30 | % | ||||||||
Share Data: | ||||||||||||||||
Basic earnings per share | $ | 0.29 | $ | 0.29 | $ | 0.53 | $ | 0.82 | ||||||||
Diluted earnings per share | $ | 0.29 | $ | 0.28 | $ | 0.52 | $ | 0.80 | ||||||||
Basic weighted average shares outstanding | 18,672 | 17,836 | 18,670 | 17,837 | ||||||||||||
Diluted weighted average shares outstanding | 19,106 | 18,257 | 19,112 | 18,267 |
(1) | Data has been annualized except for efficiency ratio. |
(2) | Excluding the gain attributed to the branch sale, net income would have been $10.7 million and ROAA, ROAE, noninterest income to average assets and efficiency ratio would have been 1.08%, 10.69%, 0.46% and 63.30%, respectively, for the six months ended June 30, 2019. See “Non-GAAP Financial Measures” for a reconciliation of these metrics. |
(3) | Net interest margin is a ratio calculated as annualized net interest income, on a fully taxable equivalent basis for interest income on tax-exempt securities using the federal statutory tax rate of 21.0%, divided by average interest earning assets for the same period. |
(4) | Efficiency ratio is calculated by dividing noninterest expenses by net interest income plus noninterest income. |
(5) | Includes nonaccrual loans and loans 90 days and more past due. |
June 30, 2020 | December 31, 2019 | |||||||
(Dollars in thousands) | ||||||||
Statement of Financial Condition Data: | ||||||||
Cash and cash equivalents | $ | 199,444 | $ | 133,604 | ||||
Securities | 951,094 | 897,766 | ||||||
Loans held-for-sale | 321,835 | 375,922 | ||||||
Loans held-for-investment, net | 793,548 | 664,622 | ||||||
Other assets | 74,792 | 56,213 | ||||||
Total assets | $ | 2,340,713 | $ | 2,128,127 | ||||
Deposits | $ | 1,670,909 | $ | 1,814,654 | ||||
Borrowings | 375,823 | 68,530 | ||||||
Other liabilities | 25,876 | 13,907 | ||||||
Total liabilities | 2,072,608 | 1,897,091 | ||||||
Total shareholders’ equity | 268,105 | 231,036 | ||||||
Total liabilities and shareholders' equity | $ | 2,340,713 | $ | 2,128,127 | ||||
Nonperforming Assets: | ||||||||
Nonperforming loans | $ | 4,528 | $ | 5,909 | ||||
Troubled debt restructurings | $ | 1,620 | $ | 1,791 | ||||
Other real estate owned, net | $ | 51 | $ | 128 | ||||
Nonperforming assets | $ | 4,579 | $ | 6,037 | ||||
Asset Quality Ratios: | ||||||||
Nonperforming assets to total assets | 0.20 | % | 0.28 | % | ||||
Nonperforming loans to gross loans(1) | 0.57 | % | 0.88 | % | ||||
Nonperforming assets to gross loans and other real estate owned(1) | 0.57 | % | 0.90 | % | ||||
Net charge-offs to average total loans(1) | 0.00 | % | 0.01 | % | ||||
Allowance for loan losses to gross loans(1) | 0.85 | % | 0.93 | % | ||||
Allowance for loan losses to nonperforming loans | 149.36 | % | 104.77 | % | ||||
Company Capital Ratios: | ||||||||
Tier 1 leverage ratio | 11.57 | % | 11.23 | % | ||||
Common equity tier 1 capital ratio | 23.32 | % | 24.52 | % | ||||
Tier 1 risk-based capital ratio | 24.86 | % | 26.21 | % | ||||
Total risk-based capital ratio | 25.54 | % | 26.90 | % | ||||
Total shareholders’ equity to total assets | 11.45 | % | 10.86 | % | ||||
Book value per share | $ | 14.36 | $ | 12.38 | ||||
Bank Capital Ratios: | ||||||||
Tier 1 leverage ratio | 10.92 | % | 10.52 | % | ||||
Common equity tier 1 capital ratio | 23.48 | % | 24.55 | % | ||||
Tier 1 risk-based capital ratio | 23.48 | % | 24.55 | % | ||||
Total risk-based capital ratio | 24.17 | % | 25.24 | % | ||||
Other: | ||||||||
Total headcount | 213 | 215 |
(1) | Loans exclude loans held-for-sale at each of the dates presented. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2020 | 2019 | % Increase/ (Decrease) | 2020 | 2019 | % Increase/ (Decrease) | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Interest income | $ | 18,015 | $ | 19,472 | (7.5 | )% | $ | 38,077 | $ | 39,535 | (3.7 | )% | ||||||||||
Interest expense | 1,963 | 1,904 | 3.1 | % | 6,547 | 2,651 | 147.0 | % | ||||||||||||||
Net interest income | 16,052 | 17,568 | (8.6 | )% | 31,530 | 36,884 | (14.5 | )% | ||||||||||||||
Provision for loan losses | 222 | 152 | 46.1 | % | 589 | 419 | 40.6 | % | ||||||||||||||
Net interest income after provision | 15,830 | 17,416 | (9.1 | )% | 30,941 | 36,465 | (15.1 | )% | ||||||||||||||
Noninterest income | 5,434 | 2,154 | 152.3 | % | 10,365 | 10,025 | 3.4 | % | ||||||||||||||
Noninterest expense | 13,972 | 12,721 | 9.8 | % | 27,847 | 26,207 | 6.3 | % | ||||||||||||||
Net income before income taxes | 7,292 | 6,849 | 6.5 | % | 13,459 | 20,283 | (33.6 | )% | ||||||||||||||
Income tax expense | 1,826 | 1,693 | 7.9 | % | 3,600 | 5,691 | (36.7 | )% | ||||||||||||||
Net income | $ | 5,466 | $ | 5,156 | 6.0 | % | $ | 9,859 | $ | 14,592 | (32.4 | )% |
Three Months Ended June 30, | ||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||
Average Outstanding Balance | Interest Income/ Expense | Average Yield/ Rate | Average Outstanding Balance | Interest Income/ Expense | Average Yield/ Rate | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Assets | ||||||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||
Interest earning deposits in other banks | $ | 168,297 | $ | 405 | 0.97 | % | $ | 530,325 | $ | 3,058 | 2.31 | % | ||||||||||
Taxable securities | 690,810 | 4,123 | 2.40 | % | 579,464 | 4,501 | 3.12 | % | ||||||||||||||
Tax-exempt securities(1) | 231,232 | 1,996 | 3.47 | % | — | — | — | |||||||||||||||
Loans(2)(3) | 1,008,242 | 11,710 | 4.67 | % | 860,682 | 11,684 | 5.45 | % | ||||||||||||||
Other | 13,224 | 200 | 6.08 | % | 10,743 | 229 | 8.55 | % | ||||||||||||||
Total interest earning assets | 2,111,805 | 18,434 | 3.51 | % | 1,981,214 | 19,472 | 3.94 | % | ||||||||||||||
Noninterest earning assets | 51,776 | 28,440 | ||||||||||||||||||||
Total assets | $ | 2,163,581 | $ | 2,009,654 | ||||||||||||||||||
Liabilities and Shareholders’ Equity | ||||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||
Interest bearing deposits | $ | 190,394 | $ | 1,652 | 3.49 | % | $ | 270,360 | $ | 1,194 | 1.77 | % | ||||||||||
FHLB advances and other borrowings | 78,266 | 44 | 0.23 | % | 60,639 | 443 | 2.93 | % | ||||||||||||||
Subordinated debentures | 15,821 | 267 | 6.79 | % | 15,807 | 267 | 6.78 | % | ||||||||||||||
Total interest bearing liabilities | 284,481 | 1,963 | 2.78 | % | 346,806 | 1,904 | 2.20 | % | ||||||||||||||
Noninterest bearing liabilities: | ||||||||||||||||||||||
Noninterest bearing deposits | 1,611,972 | 1,445,529 | ||||||||||||||||||||
Other liabilities | 15,070 | 11,371 | ||||||||||||||||||||
Shareholders’ equity | 252,058 | 205,948 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,163,581 | $ | 2,009,654 | ||||||||||||||||||
Net interest spread(4) | 0.73 | % | 1.74 | % | ||||||||||||||||||
Net interest income, taxable equivalent basis | $ | 16,471 | $ | 17,568 | ||||||||||||||||||
Net interest margin(5) | 3.14 | % | 3.56 | % | ||||||||||||||||||
Reconciliation to reported net interest income: | ||||||||||||||||||||||
Adjustments for taxable equivalent basis | (419 | ) | — | |||||||||||||||||||
Net interest income, as reported | $ | 16,052 | $ | 17,568 |
(1) | Interest income on tax-exempt securities is presented on a taxable equivalent basis using the federal statutory tax rate of 21.0% for all periods presented. |
(2) | Loans include nonaccrual loans and loans held-for-sale, net of deferred fees and before allowance for loan losses. |
(3) | Interest income includes amortization of deferred loan fees, net of deferred loan costs. |
(4) | Net interest spread is the difference between interest rates earned on interest earning assets and interest rates paid on interest bearing liabilities. |
(5) | Net interest margin is a ratio calculated as annualized net interest income, on a taxable equivalent basis, divided by average interest earning assets for the same period. |
Six Months Ended June 30, | ||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||
Average Outstanding Balance | Interest Income/ Expense | Average Yield/ Rate | Average Outstanding Balance | Interest Income/ Expense | Average Yield/ Rate | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Assets | ||||||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||
Interest earning deposits in other banks | $ | 201,326 | $ | 1,129 | 1.13 | % | $ | 582,410 | $ | 6,855 | 2.37 | % | ||||||||||
Taxable securities | 796,487 | 10,171 | 2.57 | % | 480,483 | 7,534 | 3.16 | % | ||||||||||||||
Tax-exempt securities(1) | 118,922 | 2,057 | 3.48 | % | — | — | — | |||||||||||||||
Loans(2)(3) | 1,016,612 | 24,831 | 4.91 | % | 892,856 | 24,795 | 5.60 | % | ||||||||||||||
Other | 11,985 | 321 | 5.39 | % | 10,630 | 351 | 6.66 | % | ||||||||||||||
Total interest earning assets | 2,145,332 | 38,509 | 3.61 | % | 1,966,379 | 39,535 | 4.05 | % | ||||||||||||||
Noninterest earning assets | 50,542 | 24,792 | ||||||||||||||||||||
Total assets | $ | 2,195,874 | $ | 1,991,171 | ||||||||||||||||||
Liabilities and Shareholders’ Equity | ||||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||
Interest bearing deposits | $ | 316,038 | $ | 5,703 | 3.63 | % | $ | 235,968 | $ | 1,535 | 1.31 | % | ||||||||||
FHLB advances and other borrowings | 72,748 | 307 | 0.85 | % | 38,901 | 585 | 3.03 | % | ||||||||||||||
Subordinated debentures | 15,819 | 537 | 6.83 | % | 15,805 | 531 | 6.78 | % | ||||||||||||||
Total interest bearing liabilities | 404,605 | 6,547 | 3.25 | % | 290,674 | 2,651 | 1.84 | % | ||||||||||||||
Noninterest bearing liabilities: | ||||||||||||||||||||||
Noninterest bearing deposits | 1,524,017 | 1,488,465 | ||||||||||||||||||||
Other liabilities | 17,485 | 11,036 | ||||||||||||||||||||
Shareholders’ equity | 249,767 | 200,996 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,195,874 | $ | 1,991,171 | ||||||||||||||||||
Net interest spread(4) | 0.36 | % | 2.21 | % | ||||||||||||||||||
Net interest income, taxable equivalent basis | $ | 31,962 | $ | 36,884 | ||||||||||||||||||
Net interest margin(5) | 3.00 | % | 3.78 | % | ||||||||||||||||||
Reconciliation to reported net interest income: | ||||||||||||||||||||||
Adjustments for taxable equivalent basis | (432 | ) | — | |||||||||||||||||||
Net interest income, as reported | $ | 31,530 | $ | 36,884 |
(1) | Interest income on tax-exempt securities is presented on a taxable equivalent basis using the federal statutory tax rate of 21.0% for all periods presented. |
(2) | Loans include nonaccrual loans and loans held-for-sale, net of deferred fees and before allowance for loan losses. |
(3) | Interest income includes amortization of deferred loan fees, net of deferred loan costs. |
(4) | Net interest spread is the difference between interest rates earned on interest earning assets and interest rates paid on interest bearing liabilities. |
(5) | Net interest margin is a ratio calculated as annualized net interest income, on a taxable equivalent basis, divided by average interest earning assets for the same period. |
For the Three Months Ended June 30, 2020 Compared to 2019 | For the Six Months Ended June 30, 2020 Compared to 2019 | |||||||||||||||||||||||
Change Due To | Interest Variance | Change Due To | Interest Variance | |||||||||||||||||||||
Volume | Rate | Volume | Rate | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest Income: | ||||||||||||||||||||||||
Interest earning deposits in other banks | $ | (1,431 | ) | $ | (1,222 | ) | $ | (2,653 | ) | $ | (3,181 | ) | $ | (2,545 | ) | $ | (5,726 | ) | ||||||
Taxable securities | 774 | (1,152 | ) | (378 | ) | 4,238 | (1,601 | ) | 2,637 | |||||||||||||||
Tax-exempt securities(1) | 1,996 | — | 1,996 | 2,057 | — | 2,057 | ||||||||||||||||||
Loans | 1,846 | (1,820 | ) | 26 | 3,215 | (3,179 | ) | 36 | ||||||||||||||||
Other | 46 | (75 | ) | (29 | ) | 41 | (71 | ) | (30 | ) | ||||||||||||||
Total interest income | 3,231 | (4,269 | ) | (1,038 | ) | 6,370 | (7,396 | ) | (1,026 | ) | ||||||||||||||
Interest Expense: | ||||||||||||||||||||||||
Interest bearing deposits | (433 | ) | 891 | 458 | 669 | 3,499 | 4,168 | |||||||||||||||||
FHLB advances and other borrowings | 100 | (499 | ) | (399 | ) | 309 | (587 | ) | (278 | ) | ||||||||||||||
Subordinated debentures | — | — | — | — | 6 | 6 | ||||||||||||||||||
Total interest expense | (333 | ) | 392 | 59 | 978 | 2,918 | 3,896 | |||||||||||||||||
Net interest income, taxable equivalent basis | $ | 3,564 | $ | (4,661 | ) | $ | (1,097 | ) | $ | 5,392 | $ | (10,314 | ) | $ | (4,922 | ) |
(1) | Interest income on tax-exempt securities is presented on a taxable equivalent basis using the federal statutory tax rate of 21.0% for all periods presented. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2020 | 2019 | % Increase/ (Decrease) | 2020 | 2019 | % Increase/ (Decrease) | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Noninterest income: | ||||||||||||||||||||||
Mortgage warehouse fee income | $ | 450 | $ | 346 | 30.1 | % | $ | 832 | $ | 712 | 16.9 | % | ||||||||||
Service fees related to off-balance sheet deposits | 7 | 412 | (98.3 | )% | 77 | 1,171 | (93.4 | )% | ||||||||||||||
Deposit related fees | 2,438 | 1,171 | 108.2 | % | 4,204 | 2,158 | 94.8 | % | ||||||||||||||
Gain on sale of securities, net | 2,556 | — | N/M | 3,753 | — | N/M | ||||||||||||||||
(Loss) gain on sale of loans, net | (56 | ) | 156 | (135.9 | )% | 450 | 345 | 30.4 | % | |||||||||||||
Gain on sale of branch, net | — | — | — | — | 5,509 | N/M | ||||||||||||||||
Gain on extinguishment of debt | — | — | — | 925 | — | N/M | ||||||||||||||||
Other income | 39 | 69 | (43.5 | )% | 124 | 130 | (4.6 | )% | ||||||||||||||
Total noninterest income | $ | 5,434 | $ | 2,154 | 152.3 | % | $ | 10,365 | $ | 10,025 | 3.4 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2020 | 2019 | % Increase/ (Decrease) | 2020 | 2019 | % Increase/ (Decrease) | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Noninterest expense: | ||||||||||||||||||||||
Salaries and employee benefits | $ | 9,002 | $ | 8,082 | 11.4 | % | $ | 17,957 | $ | 16,847 | 6.6 | % | ||||||||||
Occupancy and equipment | 894 | 1,012 | (11.7 | )% | 1,801 | 1,885 | (4.5 | )% | ||||||||||||||
Communications and data processing | 1,313 | 1,123 | 16.9 | % | 2,574 | 2,160 | 19.2 | % | ||||||||||||||
Professional services | 1,105 | 1,073 | 3.0 | % | 2,090 | 2,518 | (17.0 | )% | ||||||||||||||
Federal deposit insurance | 182 | 168 | 8.3 | % | 305 | 343 | (11.1 | )% | ||||||||||||||
Correspondent bank charges | 347 | 301 | 15.3 | % | 720 | 580 | 24.1 | % | ||||||||||||||
Other loan expense | 99 | 118 | (16.1 | )% | 221 | 243 | (9.1 | )% | ||||||||||||||
Other real estate owned expense | — | 5 | N/M | — | 5 | N/M | ||||||||||||||||
Other general and administrative | 1,030 | 839 | 22.8 | % | 2,179 | 1,626 | 34.0 | % | ||||||||||||||
Total noninterest expense | $ | 13,972 | $ | 12,721 | 9.8 | % | $ | 27,847 | $ | 26,207 | 6.3 | % |
One Year or Less | More Than One Year Through Five Years | More Than Five Years Through 10 Years | More Than 10 Years | Total | ||||||||||||||||||||||||||||||||||
Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Amortized Cost | Fair Value | Weighted Average Yield | ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||
June 30, 2020 | ||||||||||||||||||||||||||||||||||||||
Securities Available-for-Sale: | ||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||
Government agency mortgage-backed securities | $ | — | — | $ | — | — | $ | — | — | $ | 674 | 3.54 | % | $ | 674 | $ | 689 | 3.54 | % | |||||||||||||||||||
Government agency collateralized mortgage obligation | — | — | — | — | 291 | 1.32 | % | 227,481 | 0.90 | % | 227,772 | 227,984 | 0.90 | % | ||||||||||||||||||||||||
Private-label collateralized mortgage obligation | — | — | — | — | — | — | 22,945 | 2.61 | % | 22,945 | 19,808 | 2.61 | % | |||||||||||||||||||||||||
Commercial mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||
Private-label collateralized mortgage obligation | — | — | — | — | — | — | 164,653 | 3.21 | % | 164,653 | 180,267 | 3.21 | % | |||||||||||||||||||||||||
Municipal bonds: | ||||||||||||||||||||||||||||||||||||||
Tax-exempt | — | — | — | — | 11,930 | 3.30 | % | 235,602 | 2.75 | % | 247,532 | 265,001 | 2.78 | % | ||||||||||||||||||||||||
Taxable | — | — | — | — | — | — | 15,727 | 2.72 | % | 15,727 | 16,129 | 2.72 | % | |||||||||||||||||||||||||
Asset backed securities: | ||||||||||||||||||||||||||||||||||||||
Government sponsored student loan pools | — | — | — | — | — | — | 253,960 | 1.56 | % | 253,960 | 241,216 | 1.56 | % | |||||||||||||||||||||||||
Total securities | $ | — | — | $ | — | — | $ | 12,221 | 3.25 | % | $ | 921,042 | 2.05 | % | $ | 933,263 | $ | 951,094 | 2.06 | % |
June 30, 2020 | December 31, 2019 | |||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Securities Available-for-Sale: | ||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||
Government agency mortgage-backed securities | $ | 674 | $ | 689 | $ | 769 | $ | 801 | ||||||||
Government agency collateralized mortgage obligation | 227,772 | 227,984 | 242,203 | 241,918 | ||||||||||||
Private-label collateralized mortgage obligation | 22,945 | 19,808 | 26,346 | 26,500 | ||||||||||||
Commercial mortgage-backed securities: | ||||||||||||||||
Private-label collateralized mortgage obligation | 164,653 | 180,267 | 364,719 | 377,016 | ||||||||||||
Municipal bonds: | ||||||||||||||||
Tax-exempt | 247,532 | 265,001 | — | — | ||||||||||||
Taxable | 15,727 | 16,129 | — | — | ||||||||||||
Asset backed securities: | ||||||||||||||||
Government sponsored student loan pools | 253,960 | 241,216 | 258,022 | 251,531 | ||||||||||||
Total securities | $ | 933,263 | $ | 951,094 | $ | 892,059 | $ | 897,766 |
June 30, 2020 | December 31, 2019 | |||||||||||||
Amount | Percent | Amount | Percent | |||||||||||
(Dollars in thousands) | ||||||||||||||
Real estate: | ||||||||||||||
One-to-four family | $ | 216,038 | 27.1 | % | $ | 193,367 | 28.9 | % | ||||||
Multi-family | 72,007 | 9.0 | % | 81,233 | 12.2 | % | ||||||||
Commercial | 316,815 | 39.7 | % | 331,052 | 49.6 | % | ||||||||
Construction | 10,822 | 1.4 | % | 7,213 | 1.1 | % | ||||||||
Commercial and industrial | 24,707 | 3.1 | % | 14,440 | 2.1 | % | ||||||||
Consumer and other | 243 | 0.0 | % | 122 | 0.0 | % | ||||||||
Reverse mortgage | 1,309 | 0.2 | % | 1,415 | 0.2 | % | ||||||||
Mortgage warehouse | 155,308 | 19.5 | % | 39,247 | 5.9 | % | ||||||||
Total gross loans held-for-investment | 797,249 | 100.0 | % | 668,089 | 100.0 | % | ||||||||
Deferred fees, net | 3,062 | 2,724 | ||||||||||||
Total loans held-for-investment | 800,311 | 670,813 | ||||||||||||
Allowance for loan losses | (6,763 | ) | (6,191 | ) | ||||||||||
Total net loans held-for-investment | $ | 793,548 | $ | 664,622 | ||||||||||
Loans held-for-sale | $ | 321,835 | $ | 375,922 |
June 30, 2020 | ||||||||||||||||
Due in One Year or Less | Due in One to Five Years | Due After Five Years | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Real estate: | ||||||||||||||||
One-to-four family | $ | 5 | $ | 457 | $ | 215,576 | $ | 216,038 | ||||||||
Multi-family | 426 | 30,886 | 40,695 | 72,007 | ||||||||||||
Commercial | 35,235 | 137,029 | 144,551 | 316,815 | ||||||||||||
Construction | 7,800 | 3,022 | — | 10,822 | ||||||||||||
Commercial and industrial | 22,015 | 2,692 | — | 24,707 | ||||||||||||
Consumer and other | 243 | — | — | 243 | ||||||||||||
Reverse mortgage | — | — | 1,309 | 1,309 | ||||||||||||
Mortgage warehouse | 155,308 | — | — | 155,308 | ||||||||||||
Total gross loans held-for-investment | $ | 221,032 | $ | 174,086 | $ | 402,131 | $ | 797,249 | ||||||||
Amounts with fixed rates | $ | 166,622 | $ | 97,333 | $ | 112,406 | $ | 376,361 | ||||||||
Amounts with floating rates | $ | 54,410 | $ | 76,753 | $ | 289,725 | $ | 420,888 |
June 30, 2020 | December 31, 2019 | |||||||
(Dollars in thousands) | ||||||||
Nonaccrual loans | ||||||||
Real estate: | ||||||||
One-to-four family | $ | 3,174 | $ | 3,963 | ||||
Commercial and industrial | 498 | 1,098 | ||||||
Reverse mortgage | 856 | 848 | ||||||
Accruing loans 90 or more days past due | — | — | ||||||
Total gross nonperforming loans | 4,528 | 5,909 | ||||||
Other real estate owned, net | 51 | 128 | ||||||
Total nonperforming assets | $ | 4,579 | $ | 6,037 | ||||
Ratio of nonperforming loans to total loans(1) | 0.57 | % | 0.88 | % | ||||
Ratio of nonperforming assets to total assets | 0.20 | % | 0.28 | % | ||||
Troubled debt restructurings | ||||||||
Restructured loans-nonaccrual | $ | 1,033 | $ | 1,202 | ||||
Restructured loans-accruing | 587 | 589 | ||||||
Total troubled debt restructurings | $ | 1,620 | $ | 1,791 |
(1) | Total loans exclude loans held-for-sale at each of the dates presented. |
• | Pass. Loans in all classes that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass. |
• | Special Mention. A special mention loan has potential weaknesses deserving of management’s close attention. If uncorrected, such weaknesses may result in deterioration of the repayment prospects for the asset or in our credit position at some future date. |
• | Substandard. A substandard loan is inadequately protected by the current financial condition and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if deficiencies are not corrected. |
• | Doubtful. A doubtful loan has all weaknesses inherent in one classified as substandard, with the added characteristic that weaknesses make collection or liquidation in full, on the basis of existing facts, conditions, and values, highly questionable and improbable. |
• | Loss. Credits rated as loss are charged-off. We have no expectation of the recovery of any payments in respect of credits rated as loss. |
Credit Risk Grades | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
June 30, 2020 | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
One-to-four family | $ | 212,864 | $ | — | $ | 3,174 | $ | — | $ | 216,038 | ||||||||||
Multi-family | 72,007 | — | — | — | 72,007 | |||||||||||||||
Commercial | 309,358 | 7,457 | — | — | 316,815 | |||||||||||||||
Construction | 10,822 | — | — | — | 10,822 | |||||||||||||||
Commercial and industrial | 22,837 | — | 1,870 | — | 24,707 | |||||||||||||||
Consumer and other | 243 | — | — | — | 243 | |||||||||||||||
Reverse mortgage | 453 | — | 856 | — | 1,309 | |||||||||||||||
Mortgage warehouse | 155,308 | — | — | — | 155,308 | |||||||||||||||
Total gross loans held-for-investment | $ | 783,892 | $ | 7,457 | $ | 5,900 | $ | — | $ | 797,249 |
Credit Risk Grades | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
One-to-four family | $ | 189,405 | $ | — | $ | 3,962 | $ | — | $ | 193,367 | ||||||||||
Multi-family | 81,233 | — | — | — | 81,233 | |||||||||||||||
Commercial | 322,671 | 8,381 | — | — | 331,052 | |||||||||||||||
Construction | 7,213 | — | — | — | 7,213 | |||||||||||||||
Commercial and industrial | 11,726 | — | 2,714 | — | 14,440 | |||||||||||||||
Consumer and other | 122 | — | — | — | 122 | |||||||||||||||
Reverse mortgage | 435 | 132 | 848 | — | 1,415 | |||||||||||||||
Mortgage warehouse | 39,247 | — | — | — | 39,247 | |||||||||||||||
Total gross loans held-for-investment | $ | 652,052 | $ | 8,513 | $ | 7,524 | $ | — | $ | 668,089 |
• | For residential mortgage loans, the borrower’s ability to repay the loan, including a consideration of the debt-to-income ratio and employment and income stability, the loan-to-value ratio, and the age, condition and marketability of the collateral; |
• | For commercial and multi-family mortgage loans, the debt service coverage ratio, operating results of the owner in the case of owner-occupied properties, the loan-to-value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical of properties of that type; |
• | For construction loans, the perceived feasibility of the project including the ability to sell improvements constructed for resale, the quality and nature of contracts for presale, if any, experience and ability of the builder, loan-to-cost ratio and loan-to-value ratio; |
• | For commercial and industrial loans, the debt service coverage ratio (income from the business exceeding operating expenses compared to loan repayment requirements), the operating results of the commercial or professional enterprise, the borrower’s business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and the value, nature and marketability of collateral, risks related to new product offerings such as loans secured by bitcoin and the volatility of this particular collateral type; and |
• | For mortgage warehouse loans held-for-investment, despite our negligible loss history, we provide a loss allowance factor subject to quarterly adjustment. Mortgage warehouse loans held-for-sale are not subject to any loan loss allowance and are recorded at lower of cost or fair market value. |
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
(Dollars in thousands) | ||||||||
Allowance for loan losses at beginning of period | $ | 6,191 | $ | 6,723 | ||||
Charge-offs: | ||||||||
Real estate: | ||||||||
One-to-four family | 17 | 93 | ||||||
Total charge-offs | 17 | 93 | ||||||
Total recoveries | — | — | ||||||
Net charge-offs | 17 | 93 | ||||||
Provision for loan losses | 589 | 419 | ||||||
Allowance for loan losses at period end | $ | 6,763 | $ | 7,049 | ||||
Total gross loans outstanding (end of period) | $ | 797,249 | $ | 688,602 | ||||
Average loans outstanding | $ | 694,751 | $ | 630,843 | ||||
Allowance for loan losses to period end loans | 0.85 | % | 1.02 | % | ||||
Net charge-offs to average loans | 0.00 | % | 0.01 | % |
June 30, 2020 | December 31, 2019 | |||||||||||||
Amount | Percent(1) | Amount | Percent(1) | |||||||||||
(Dollars in thousands) | ||||||||||||||
Real estate: | ||||||||||||||
One-to-four family | $ | 1,514 | 0.19 | % | $ | 2,051 | 0.31 | % | ||||||
Multi-family | 822 | 0.10 | % | 653 | 0.10 | % | ||||||||
Commercial | 1,947 | 0.25 | % | 2,791 | 0.41 | % | ||||||||
Construction | 1,018 | 0.13 | % | 96 | 0.01 | % | ||||||||
Commercial and industrial | 763 | 0.10 | % | 312 | 0.05 | % | ||||||||
Consumer and other | 1 | 0.00 | % | 1 | 0.00 | % | ||||||||
Reverse mortgage | 39 | 0.00 | % | 37 | 0.01 | % | ||||||||
Mortgage warehouse | 659 | 0.08 | % | 250 | 0.04 | % | ||||||||
Total allowance for loan losses | $ | 6,763 | 0.85 | % | $ | 6,191 | 0.93 | % |
(1) | Loan amount as a percentage of total gross loans. |
June 30, 2020 | December 31, 2019 | |||||||||||||
Number of Customers | Total Deposits(1) | Number of Customers | Total Deposits(1) | |||||||||||
(Dollars in millions) | ||||||||||||||
Digital currency exchanges | 64 | $ | 601 | 60 | $ | 527 | ||||||||
Institutional investors | 566 | 577 | 509 | 432 | ||||||||||
Other customers | 251 | 331 | 235 | 286 | ||||||||||
Total | 881 | $ | 1,509 | 804 | $ | 1,246 |
(1) | Total deposits may not foot due to rounding. |
Six Months Ended June 30, 2020 | Year Ended December 31, 2019 | |||||||||||||
Average Balance | Average Rate | Average Balance | Average Rate | |||||||||||
(Dollars in thousands) | ||||||||||||||
Noninterest bearing demand accounts | $ | 1,524,017 | — | $ | 1,445,232 | — | ||||||||
Interest bearing accounts: | ||||||||||||||
Interest bearing demand accounts | 48,097 | 0.14 | % | 49,052 | 0.14 | % | ||||||||
Money market and savings accounts | 74,134 | 0.71 | % | 90,551 | 0.87 | % | ||||||||
Certificates of deposit: | ||||||||||||||
Brokered certificates of deposit | 192,272 | 5.65 | % | 187,966 | 3.54 | % | ||||||||
Other | 1,535 | 0.92 | % | 13,026 | 1.49 | % | ||||||||
Total interest bearing deposits | 316,038 | 3.63 | % | 340,595 | 2.26 | % | ||||||||
Total deposits | $ | 1,840,055 | 0.62 | % | $ | 1,785,827 | 0.43 | % |
Three Months or Less | Over Three Through Six Months | Over Six Through Twelve Months | Over Twelve Months | Total | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
$100,000 or more | $ | 250 | $ | 121 | $ | 162 | $ | 474 | $ | 1,007 | ||||||||||
Less than $100,000 | 17 | — | 109 | 247 | 373 | |||||||||||||||
Total | $ | 267 | $ | 121 | $ | 271 | $ | 721 | $ | 1,380 |
Six Months Ended June 30, 2020 | Year Ended December 31, 2019 | |||||||
(Dollars in thousands) | ||||||||
Amount outstanding at period-end | $ | 360,000 | $ | 49,000 | ||||
Weighted average interest rate at period-end | 0.23 | % | 1.66 | % | ||||
Maximum month-end balance during the period | $ | 360,000 | $ | 218,000 | ||||
Average balance outstanding during the period | $ | 78,263 | $ | 28,205 | ||||
Weighted average interest rate during the period | 0.22 | % | 1.94 | % |
Actual | Minimum capital adequacy | To be well capitalized | |||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
June 30, 2020 | |||||||||||||||||||||
The Company | |||||||||||||||||||||
Tier 1 leverage ratio | $ | 250,335 | 11.57 | % | $ | 86,543 | 4.00 | % | N/A | N/A | |||||||||||
Common equity tier 1 capital ratio | 234,835 | 23.32 | % | 45,317 | 4.50 | % | N/A | N/A | |||||||||||||
Tier 1 risk-based capital ratio | 250,335 | 24.86 | % | 60,423 | 6.00 | % | N/A | N/A | |||||||||||||
Total risk-based capital ratio | 257,213 | 25.54 | % | 80,564 | 8.00 | % | N/A | N/A | |||||||||||||
The Bank | |||||||||||||||||||||
Tier 1 leverage ratio | 236,281 | 10.92 | % | 86,519 | 4.00 | % | $ | 108,149 | 5.00 | % | |||||||||||
Common equity tier 1 capital ratio | 236,281 | 23.48 | % | 45,279 | 4.50 | % | 65,404 | 6.50 | % | ||||||||||||
Tier 1 risk-based capital ratio | 236,281 | 23.48 | % | 60,373 | 6.00 | % | 80,497 | 8.00 | % | ||||||||||||
Total risk-based capital ratio | 243,159 | 24.17 | % | 80,497 | 8.00 | % | 100,621 | 10.00 | % |
Actual | Minimum capital adequacy | To be well capitalized | |||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||
The Company | |||||||||||||||||||||
Tier 1 leverage ratio | $ | 240,135 | 11.23 | % | $ | 85,501 | 4.00 | % | N/A | N/A | |||||||||||
Common equity tier 1 capital ratio | 224,635 | 24.52 | % | 41,233 | 4.50 | % | N/A | N/A | |||||||||||||
Tier 1 risk-based capital ratio | 240,135 | 26.21 | % | 54,978 | 6.00 | % | N/A | N/A | |||||||||||||
Total risk-based capital ratio | 246,447 | 26.90 | % | 73,304 | 8.00 | % | N/A | N/A | |||||||||||||
The Bank | |||||||||||||||||||||
Tier 1 leverage ratio | 224,605 | 10.52 | % | 85,399 | 4.00 | % | $ | 106,749 | 5.00 | % | |||||||||||
Common equity tier 1 capital ratio | 224,605 | 24.55 | % | 41,163 | 4.50 | % | 59,458 | 6.50 | % | ||||||||||||
Tier 1 risk-based capital ratio | 224,605 | 24.55 | % | 54,884 | 6.00 | % | 73,179 | 8.00 | % | ||||||||||||
Total risk-based capital ratio | 230,917 | 25.24 | % | 73,179 | 8.00 | % | 91,474 | 10.00 | % |
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Net income | ||||||||
Net income, as reported | $ | 9,859 | $ | 14,592 | ||||
Adjustments: | ||||||||
Gain on sale of branch, net | — | (5,509 | ) | |||||
Tax effect(1) | — | 1,574 | ||||||
Adjusted net income | $ | 9,859 | $ | 10,657 | ||||
Noninterest income / average assets(2) | ||||||||
Noninterest income | $ | 10,365 | $ | 10,025 | ||||
Adjustments: | ||||||||
Gain on sale of branch, net | — | (5,509 | ) | |||||
Adjusted noninterest income | 10,365 | 4,516 | ||||||
Average assets | 2,195,874 | 1,991,171 | ||||||
Noninterest income / average assets, as reported | 0.95 | % | 1.02 | % | ||||
Adjusted noninterest income / average assets | 0.95 | % | 0.46 | % | ||||
Return on average assets (ROAA)(2) | ||||||||
Adjusted net income | $ | 9,859 | $ | 10,657 | ||||
Average assets | 2,195,874 | 1,991,171 | ||||||
Return on average assets (ROAA), as reported | 0.90 | % | 1.48 | % | ||||
Adjusted return on average assets | 0.90 | % | 1.08 | % | ||||
Return on average equity (ROAE)(2) | ||||||||
Adjusted net income | $ | 9,859 | $ | 10,657 | ||||
Average equity | 249,767 | 200,996 | ||||||
Return on average equity (ROAE), as reported | 7.94 | % | 14.64 | % | ||||
Adjusted return on average equity | 7.94 | % | 10.69 | % | ||||
Efficiency ratio | ||||||||
Noninterest expense | $ | 27,847 | $ | 26,207 | ||||
Net interest income | 31,530 | 36,884 | ||||||
Noninterest income | 10,365 | 10,025 | ||||||
Total net interest income and noninterest income | 41,895 | 46,909 | ||||||
Adjustments: | ||||||||
Gain on sale of branch, net | — | (5,509 | ) | |||||
Adjusted total net interest income and noninterest income | 41,895 | 41,400 | ||||||
Efficiency ratio, as reported | 66.47 | % | 55.87 | % | ||||
Adjusted efficiency ratio | 66.47 | % | 63.30 | % |
(1) | Amount represents the total income tax effect of the adjustment, which is calculated based on the applicable marginal tax rate of 28.58%. |
(2) | Data has been annualized. |
Within One Month | After One Month Through Three Months | After Three Through Twelve Months | Within One Year | Greater Than One Year or Non -Sensitive | Total | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
June 30, 2020 | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Interest earning assets | ||||||||||||||||||||||||
Loans(1) | $ | 547,989 | $ | 53,974 | $ | 172,883 | $ | 774,846 | $ | 347,300 | $ | 1,122,146 | ||||||||||||
Securities(2) | 467,012 | 2,186 | 17,843 | 487,041 | 477,552 | 964,593 | ||||||||||||||||||
Interest earning deposits in other banks | 183,183 | 349 | 2,135 | 185,667 | — | 185,667 | ||||||||||||||||||
Total earning assets | $ | 1,198,184 | $ | 56,509 | $ | 192,861 | $ | 1,447,554 | $ | 824,852 | $ | 2,272,406 | ||||||||||||
Liabilities | ||||||||||||||||||||||||
Interest bearing liabilities | ||||||||||||||||||||||||
Interest bearing deposits | $ | 106,125 | $ | — | $ | — | $ | 106,125 | $ | 268 | $ | 106,393 | ||||||||||||
Certificates of deposit | — | 267 | 392 | 659 | 721 | 1,380 | ||||||||||||||||||
Total interest bearing deposits | 106,125 | 267 | 392 | 106,784 | 989 | 107,773 | ||||||||||||||||||
FHLB advances | 350,000 | — | 10,000 | 360,000 | — | 360,000 | ||||||||||||||||||
Total interest bearing liabilities | $ | 456,125 | $ | 267 | $ | 10,392 | $ | 466,784 | $ | 989 | $ | 467,773 | ||||||||||||
Period gap | $ | 742,059 | $ | 56,242 | $ | 182,469 | $ | 980,770 | $ | 823,863 | $ | 1,804,633 | ||||||||||||
Cumulative gap | $ | 742,059 | $ | 798,301 | $ | 980,770 | $ | 980,770 | $ | 1,804,633 | ||||||||||||||
Ratio of cumulative gap to total earning assets | 32.66 | % | 35.13 | % | 43.16 | % | 43.16 | % | 79.42 | % |
(1) | Includes loans held-for-sale. |
(2) | Includes FHLB and FRB stock. |
Earnings at Risk as of: | -100 bps | Flat | +100 bps | +200 bps | +300 bps | ||||||||||
June 30, 2020 | (2.41 | )% | 0.00 | % | 7.91 | % | 14.84 | % | 21.71 | % |
As of: | -100 bps | Flat | +100 bps | +200 bps | +300 bps | ||||||||||
June 30, 2020 | (5.25 | )% | 0.00 | % | 4.84 | % | 6.15 | % | 5.93 | % |
Number | Description | |
3.1 | ||
3.2 | ||
10.1 | ||
10.2 | ||
10.3 | ||
31.1 | ||
31.2 | ||
32.1 | ||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definitions Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
SILVERGATE CAPITAL CORPORATION | ||||
Date: | August 11, 2020 | By: | /s/ Alan J. Lane | |
Alan J. Lane | ||||
President and Chief Executive Officer (Principal Executive Officer) | ||||
Date: | August 11, 2020 | By: | /s/ Antonio Martino | |
Antonio Martino | ||||
Chief Financial Officer (Principal Financial and Accounting Officer) |
By: /s/ Dennis Frank |
Dennis Frank Its: Chairman of the Board |
• | Access data solely in order to perform his/her job responsibilities; |
• | Not seek personal benefit or permit others to benefit personally from any data that has come to them through their work assignments; |
• | Not make or permit unauthorized use of any information in the Bank’s information systems or records; |
• | Not enter, change, delete, or add data to any information system or files outside the scope of their job responsibilities, that is in conflict with a Bank policy, or has malicious, fraudulent, or negligent intent; |
• | Not include or cause to be included in any record or report a false, inaccurate, or misleading entry known to the user as such; |
• | Not alter or delete or cause to be altered or deleted from any records, report or information system, a true and correct entry; |
• | Not release Bank data other than what is required for the completion of job responsibilities; |
• | Not exhibit or divulge the contents of any record, file, or information system to any person unless it is necessary for the completion of their job responsibilities. |
• | All transactions processed by a user ID and password are the responsibility of the person to whom the user ID was assigned. The user ID and password must remain confidential and must not be shared with anyone. |
§ | Using someone else’s password is a violation of policy, no matter how it was obtained. |
§ | To reduce the risk of passwords being shared, passwords are not to be posted on or near workstations. |
§ | It is each individual’s responsibility to change their password immediately if there is a belief that someone else has or could have obtained it. |
§ | Passwords must be changed periodically and/or if there is reason to believe they have been compromised or revealed inadvertently. |
• | Access to any customer or employee/intern information (in any format) is to be determined based on specific job requirements. Users are prohibited from viewing or accessing additional information (in any format) unless authorized to do so. Any access obtained without authorization is considered unauthorized access. Users may not divulge customer or employee/intern information to any third party without specific approval from senior management or the Chief Information Security Officer. |
• | To prevent unauthorized access, users must log off of all applications that are sensitive in nature, such as customer/employee/intern personal information, when leaving their workstation. Users agree to log off or secure their workstations during any period of absence. |
• | Temporary employees and interns should not have access to Bank systems, by default. Written approval from senior management and the Chief Information Officer is required if it is determined that access is required. |
• | Users agree to properly secure and dispose of any outputs or files created or used in the course of their job functions in a manner that fully protects the confidentiality of the records. |
• | Customer and employee/intern data must be secured during any absence from a user’s workstation. |
Alan J. Lane | /s/ Alan J. Lane | August 7, 2020 | ||
Name | Signature | Date |
By: /s/ Alan J. Lane |
Alan J. Lane Its: Chief Executive Officer |
• | Access data solely in order to perform his/her job responsibilities; |
• | Not seek personal benefit or permit others to benefit personally from any data that has come to them through their work assignments; |
• | Not make or permit unauthorized use of any information in the Bank’s information systems or records; |
• | Not enter, change, delete, or add data to any information system or files outside the scope of their job responsibilities, that is in conflict with a Bank policy, or has malicious, fraudulent, or negligent intent; |
• | Not include or cause to be included in any record or report a false, inaccurate, or misleading entry known to the user as such; |
• | Not alter or delete or cause to be altered or deleted from any records, report or information system, a true and correct entry; |
• | Not release Bank data other than what is required for the completion of job responsibilities; |
• | Not exhibit or divulge the contents of any record, file, or information system to any person unless it is necessary for the completion of their job responsibilities. |
• | All transactions processed by a user ID and password are the responsibility of the person to whom the user ID was assigned. The user ID and password must remain confidential and must not be shared with anyone. |
§ | Using someone else’s password is a violation of policy, no matter how it was obtained. |
§ | To reduce the risk of passwords being shared, passwords are not to be posted on or near workstations. |
§ | It is each individual’s responsibility to change their password immediately if there is a belief that someone else has or could have obtained it. |
§ | Passwords must be changed periodically and/or if there is reason to believe they have been compromised or revealed inadvertently. |
• | Access to any customer or employee/intern information (in any format) is to be determined based on specific job requirements. Users are prohibited from viewing or accessing additional information (in any format) unless authorized to do so. Any access obtained without authorization is considered unauthorized access. Users may not divulge customer or employee/intern information to any third party without specific approval from senior management or the Chief Information Security Officer. |
• | To prevent unauthorized access, users must log off of all applications that are sensitive in nature, such as customer/employee/intern personal information, when leaving their workstation. Users agree to log off or secure their workstations during any period of absence. |
• | Temporary employees and interns should not have access to Bank systems, by default. Written approval from senior management and the Chief Information Officer is required if it is determined that access is required. |
• | Users agree to properly secure and dispose of any outputs or files created or used in the course of their job functions in a manner that fully protects the confidentiality of the records. |
• | Customer and employee/intern data must be secured during any absence from a user’s workstation. |
Derek J. Eisele | /s/ Derek J. Eisele | August 7, 2020 | ||
Name | Signature | Date |
By: /s/ Alan J. Lane |
Alan J. Lane Its: Chief Executive Officer |
• | Access data solely in order to perform his/her job responsibilities; |
• | Not seek personal benefit or permit others to benefit personally from any data that has come to them through their work assignments; |
• | Not make or permit unauthorized use of any information in the Bank’s information systems or records; |
• | Not enter, change, delete, or add data to any information system or files outside the scope of their job responsibilities, that is in conflict with a Bank policy, or has malicious, fraudulent, or negligent intent; |
• | Not include or cause to be included in any record or report a false, inaccurate, or misleading entry known to the user as such; |
• | Not alter or delete or cause to be altered or deleted from any records, report or information system, a true and correct entry; |
• | Not release Bank data other than what is required for the completion of job responsibilities; |
• | Not exhibit or divulge the contents of any record, file, or information system to any person unless it is necessary for the completion of their job responsibilities. |
• | All transactions processed by a user ID and password are the responsibility of the person to whom the user ID was assigned. The user ID and password must remain confidential and must not be shared with anyone. |
§ | Using someone else’s password is a violation of policy, no matter how it was obtained. |
§ | To reduce the risk of passwords being shared, passwords are not to be posted on or near workstations. |
§ | It is each individual’s responsibility to change their password immediately if there is a belief that someone else has or could have obtained it. |
§ | Passwords must be changed periodically and/or if there is reason to believe they have been compromised or revealed inadvertently. |
• | Access to any customer or employee/intern information (in any format) is to be determined based on specific job requirements. Users are prohibited from viewing or accessing additional information (in any format) unless authorized to do so. Any access obtained without authorization is considered unauthorized access. Users may not divulge customer or employee/intern information to any third party without specific approval from senior management or the Chief Information Security Officer. |
• | To prevent unauthorized access, users must log off of all applications that are sensitive in nature, such as customer/employee/intern personal information, when leaving their workstation. Users agree to log off or secure their workstations during any period of absence. |
• | Temporary employees and interns should not have access to Bank systems, by default. Written approval from senior management and the Chief Information Officer is required if it is determined that access is required. |
• | Users agree to properly secure and dispose of any outputs or files created or used in the course of their job functions in a manner that fully protects the confidentiality of the records. |
• | Customer and employee/intern data must be secured during any absence from a user’s workstation. |
Benjamin C. Reynolds | /s/ Benjamin C. Reynolds | August 7, 2020 | ||
Name | Signature | Date |
1. | I have reviewed this periodic report on Form 10-Q of Silvergate Capital Corporation; |
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 statement 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 reports; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and |
(d) | disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
SILVERGATE CAPITAL CORPORATION | ||||
Date: | August 11, 2020 | By: | /s/ Alan J. Lane | |
Alan J. Lane | ||||
President and Chief Executive Officer |
1. | I have reviewed this periodic report on Form 10-Q of Silvergate Capital Corporation; |
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 statement 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 reports; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and |
(d) | disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
SILVERGATE CAPITAL CORPORATION | ||||
Date: | August 11, 2020 | By: | /s/ Antonio Martino | |
Antonio Martino | ||||
Chief Financial Officer |
(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. |
SILVERGATE CAPITAL CORPORATION | ||||
Date: | August 11, 2020 | By: | /s/ Alan J. Lane | |
Alan J. Lane | ||||
President and Chief Executive Officer | ||||
Date: | August 11, 2020 | By: | /s/ Antonio Martino | |
Antonio Martino | ||||
Chief Financial Officer |
Consolidated Statements of Financial Condition (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
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Allowance for loan losses | $ 6,763 | $ 6,191 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Class A Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 125,000,000 | 125,000,000 |
Common stock, shares issued (in shares) | 18,379,000 | 17,775,000 |
Common stock, shares outstanding (in shares) | 18,379,000 | 17,775,000 |
Class B Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 25,000,000 | 25,000,000 |
Common stock, shares issued (in shares) | 297,000 | 893,000 |
Common stock, shares outstanding (in shares) | 297,000 | 893,000 |
Nature of Business and Summary of Significant Accounting Policies |
6 Months Ended |
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Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Nature of Business and Summary of Significant Accounting Policies | Nature of Business and Summary of Significant Accounting Policies Nature of Business The accompanying consolidated financial statements include the accounts of Silvergate Capital Corporation, a Maryland corporation and its wholly-owned subsidiary, Silvergate Bank (the “Bank”), collectively referred to as (the “Company” or “Silvergate”). The Bank was incorporated in 1987 and commenced business in 1988 under the California Financial Code as an industrial bank. In February 2009 the Bank converted its charter to a California commercial bank, which gave it the added authority to accept demand deposits. At the same time, the Company also became a registered bank holding company under the federal Bank Holding Company Act. The Bank became a member of the Federal Reserve System in December 2012. The Bank is subject to regulation by the California Department of Business Oversight (“DBO”), and the Federal Reserve Bank of San Francisco (“FRB”), and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to applicable legal limits. On November 15, 2018, the Company and the Bank entered into a purchase and assumption agreement to sell the Bank’s retail branch located in San Marcos, California and business loan portfolio to HomeStreet Bank. The Company completed the sale in March 2019, which included the reduction of $115.4 million in loans and $74.5 million in deposits and resulted in a pre-tax gain on sale of $5.5 million. Financial Statement Preparation and Presentation The accompanying interim condensed consolidated financial statements have been prepared by the Company, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair statement of the Company’s condensed consolidated financial statements. These consolidated statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K dated March 10, 2020. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. The consolidated financial statements include the accounts of the Company and all other entities in which it has a controlling financial interest. All significant intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its wholly owned subsidiaries. The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. We evaluate estimates on an ongoing basis including the economic impact of Coronavirus Disease 2019 (or “COVID-19”). Actual results could materially differ from those estimates. Recently issued accounting pronouncements not yet effective In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (or “ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326) to replace the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (or “CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held to maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. These amendments were initially effective for fiscal years beginning after December 15, 2019 for SEC registrants and after December 15, 2020, for Public Business Entities, or PBEs. In November 2019, the FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which finalized the delay of the effective date for smaller reporting companies, such as the Company, to apply the standards related to CECL, until fiscal years beginning after December 15, 2022. For debt securities with other than temporary impairment (OTTI), the guidance will be applied prospectively and for existing purchased credit impaired (PCI) assets will be grandfathered and classified as purchased credit deteriorated (PCD) assets at the date of adoption. The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield such assets as of the adoption date. Subsequent changes in expected credit losses will be recorded through the allowance. For all other assets with the scope of CECL, the cumulative effect adjustment will be recognized in retained earnings as of the beginning of the first reporting period in which the guidance is effective. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The Company formed a CECL implementation committee in 2018 which prepared a project plan to migrate towards the adoption date. As part of the project plan, the Company contracted a third-party vendor to assist in the application and analysis of ASU 2016-13 as well as a third-party vendor to perform an independent model validation. As part of this process, the Company has determined preliminary loan pool segmentation under CECL, as well as evaluated the key economic loss drivers for each segment. The Company operationalized an initial CECL model during the second quarter of 2019 and is running this preliminary CECL model alongside the existing incurred loss methodology. The Company intends to continue to refine and run the model until the date of adoption. The Company continues to evaluate the effects of ASU 2016-13 on its financial statements and disclosures and whether to early adopt the guidance. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (or “ASU 2020-04”), which provides temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the transition away from the London Interbank Offered Rate (or “LIBOR”) or other interbank offered rate (reference rates) on financial reporting, which currently is expected to be discontinued by the end of 2021. To help with the transition to new reference rates, the ASU provides optional expedients and exceptions for applying GAAP to affected contract modifications and hedge accounting relationships. The guidance is applicable only to contracts or hedge accounting relationships that reference LIBOR or another reference rate expected to be discontinued. The expedients and exceptions in this update are available to all entities starting March 12, 2020 through December 31, 2022. The Company is evaluating the impact that ASU 2020-04 will have on those financial assets where LIBOR is used as an index rate. Except for the updated standards discussed above, there have been no new accounting pronouncements not yet effective that have significance, or potential significance, to the Company’s consolidated financial statements.
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Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities | Securities The fair value of available-for-sale securities and their related gross unrealized gains and losses at the dates indicated are as follows:
There were no investment securities pledged for borrowings or for other purposes as required or permitted by law as of June 30, 2020 and December 31, 2019. At June 30, 2020, the total fair value of securities issued by four individual issuers, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity was $158.6 million. Securities with unrealized losses as of the dates indicated, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:
As indicated in the tables above, as of June 30, 2020, the Company’s investment securities had gross unrealized losses totaling approximately $16.5 million, compared to approximately $7.7 million at December 31, 2019. The Company analyzed all of its securities with an unrealized loss position. For each security, the Company analyzed the credit quality and performed a projected cash flow analysis. In analyzing the credit quality, management may consider whether the securities are issued by the federal government, its agencies or its sponsored entities, or non-governmental entities, whether downgrades by bond rating agencies have occurred, and if credit quality has deteriorated. When performing a cash flow analysis the Company uses models that project prepayments, default rates, and loss severities on the collateral supporting the security, based on underlying loan level borrower and loan characteristics and interest rate assumptions. In addition, the Company has contracted with third party companies to perform independent cash flow analyses of its securities portfolio as needed. The unrealized losses on private-label collateralized mortgage obligations are due primarily to increased credit spreads as of June 30, 2020. The Company has an adequate amount of credit enhancement to cover any expected losses at this time. Based on these analyses and reviews conducted by the Company, and assisted by independent third parties, the Company determined that none of its securities required an other-than-temporary impairment charge at June 30, 2020 or December 31, 2019. Management continues to expect to recover the adjusted amortized cost basis of these bonds. As of June 30, 2020, the Company had 33 securities whose estimated fair value declined 3.51% from the Company’s amortized cost; at December 31, 2019, the Company had 33 securities whose estimated fair value declined 1.72% from the Company’s amortized cost. The increase in percentage of unrealized losses is related to market liquidity concerns associated with COVID-19, which persisted though the second quarter of 2020, and widened credit spreads on securities and changes in market interest rates since the purchase dates. Unrecognized losses associated with liquidity concerns as a result of COVID-19 are not expected to remain constant in the future, however, unrecognized losses will continue to vary with general market interest rate fluctuations. Fair values are expected to recover as the securities approach their respective maturity dates and management believes it is not more likely than not it will be required to sell before recovery of the amortized cost basis. For the three months ended June 30, 2020 the Company received $202.3 million in proceeds and recognized a $3.5 million gain and $0.9 million loss on sales of available-for-sale securities. For the six months ended June 30, 2020 the Company received $216.4 million in proceeds and recognized a $4.7 million gain and $0.9 million loss on sales of available-for-sale securities. There were no sales and calls of securities for the three and six months ended June 30, 2019. There were no credit losses associated with our securities portfolio recognized in earnings for the three and six months ended June 30, 2020 and 2019.
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Loans |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans | Loans The following disclosure reports the Company’s loan portfolio segments and classes. Segments are groupings of similar loans at a level in which the Company has adopted systematic methods of documentation for determining its allowance for loan and credit losses. Classes are a disaggregation of the portfolio segments. The Company’s loan portfolio segments are: Real estate loans. Real estate includes loans for which the Company holds one-to-four family, multi-family, commercial and construction real property as collateral. Commercial real estate lending activity is typically restricted to owner-occupied properties or to investor properties that are owned by customers with a current banking relationship. The primary risks of real estate mortgage loans include the borrower’s inability to pay, material decreases in the value of the real estate that is being held as collateral and significant increases in interest rates, which may make the real estate mortgage loan unprofitable. Real estate loans also may be adversely affected by conditions in the real estate markets or in the general economy. Commercial and industrial. Commercial and industrial loans consist of loans and lines of credit to small and medium-sized businesses in a wide variety of industries, including distributors, manufacturers, software developers, business services companies and independent finance companies. Commercial and industrial loans are generally collateralized by accounts receivable, inventory, equipment, loan and lease receivables, and other commercial assets, and may be supported by other credit enhancements such as personal guarantees. Risk may arise from differences between expected and actual cash flows and/or liquidity levels of the borrowers, as well as the type of collateral securing these loans and the reliability of the conversion thereof to cash. Since the March 2019 sale of the business loan portfolio, commercial and industrial loans consist primarily of asset based loans. In the first quarter of 2020, the Company began offering a new pilot product called SEN Leverage, which will allow Silvergate customers to obtain U.S. dollar loans collateralized by bitcoin held at select digital currency exchanges or custodians that are also Silvergate customers. The Company plans to expand this offering in the latter part of 2020. The outstanding balance of SEN Leverage loans was $20.0 million as of June 30, 2020. Consumer and other. Consumer loans consist of consumer loans and other loans secured by personal property. Reverse mortgage. From 2012 to 2014, the Company purchased home equity conversion mortgage (“HECM”) loans (also known as reverse mortgage loans) which are a special type of home loan, for homeowners aged 62 years or older, that requires no monthly mortgage payments. Reverse mortgage loan insurance is provided by the U.S. Federal Housing Administration through the HECM program which protects lenders from losses due to non-repayment of the loans. In mid-2014, the Company ceased purchases of reverse mortgage loans and, began selling its remaining loans in the secondary market. Mortgage warehouse. The Company’s mortgage warehouse lending division provides short-term interim funding for single-family residential mortgage loans originated by mortgage bankers or other lenders pending the sale of such loans in the secondary market. The Company’s risk is mitigated by comprehensive policies, procedures, and controls governing this activity, partial loan funding by the originating lender, guaranties or additional monies pledged to the Company as security, and the short holding period of funded loans on the Company’s balance sheet. In addition, the loss rates of this portfolio have historically been minimal, and these loans are all subject to written purchase commitments from takeout investors or are hedged. The Company’s mortgage warehouse loans may either be held-for-investment or held-for-sale depending on the underlying contract. The Company sold approximately $20.2 million and $36.8 million of loans to participants during the three months ended June 30, 2020 and 2019, respectively. The Company sold approximately $41.9 million and $100.6 million of loans to participants during the six months ended June 30, 2020 and 2019, respectively. At June 30, 2020 and December 31, 2019, gross mortgage warehouse loans were approximately $477.1 million and $405.0 million, respectively. A summary of loans as of the periods presented are as follows:
At June 30, 2020 and December 31, 2019, approximately $617.0 million and $614.3 million, respectively, of the Company’s loan portfolio were collateralized by various forms of real estate. A significant percentage of such loans are collateralized by properties located in California (74.1% and 64.8% as of June 30, 2020 and December 31, 2019, respectively) and Arizona (6.5% and 10.2% as of June 30, 2020 and December 31, 2019, respectively) with no other state greater than 5%. The Company attempts to address and mitigate concentrations of credit risk by making loans that are diversified by collateral type, placing limits on the amounts of various categories of loans relative to total Company capital, and conducting quarterly reviews of its portfolio by collateral type, geography, and other characteristics. While management believes that the collateral presently securing its portfolio and the recorded allowance for loan losses are adequate to absorb potential losses, there can be no assurances that significant deterioration in the California and Arizona real estate markets would not expose the Company to significantly greater credit risk. Recorded investment in loans excludes accrued interest receivable, loan origination fees, net and unamortized premium or discount, net due to immateriality. Accrued interest on loans held-for-investment totaled approximately $2.6 million and $2.2 million and deferred fees totaled approximately $3.1 million and $2.7 million at June 30, 2020 and December 31, 2019, respectively. Allowance for Loan Losses During the three and six months ended June 30, 2020, the Company recorded a provision for loan losses of $0.2 million and $0.6 million, respectively, and the ratio of the allowance for loan losses to gross loans held-for-investment at June 30, 2020 was 0.85%. The level of the allowance was based on modest increases in loan portfolio balances, Silvergate’s historically strong credit quality and minimal loan charge-offs, and the low to moderate loan-to-value margins in the Company's commercial, multi-family and one-to-four family real estate loans, as evidenced by weighted average loan-to-value ratios, based on last required appraisal value, in the low- to mid-50% range as of June 30, 2020. Although there is significant uncertainty in the current economic environment due to the impact of the COVID-19 pandemic, the Company believes the relatively low to moderate loan-to-value ratios provides a lower probability of loss in the event of defaults in the Company’s loan portfolio. The Company will continue to monitor trends in its portfolio segments for any known or probable adverse conditions with an emphasis on retail and hospitality loans within the commercial real estate loan portfolio. As of June 30, 2020, the Company enhanced its qualitative adjustment framework within the calculation of the allowance for loan losses to ensure consistency in the calculation. The change provided a structured framework using Company and peer historical data covering a full credit cycle to determine the range of potential loss for each qualitative adjustment. The overall change was not material to the overall allowance, however within loan segments the allowance was reallocated based on the weighted qualitative adjustment specific for each loan segment. The following tables present the allocation of the allowance for loan losses, as well as the activity in the allowance by loan class, and recorded investment in loans held-for-investment as of and for the periods presented:
Impaired Loans The following tables provide a summary of the Company’s investment in impaired loans as of and for the periods presented:
For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs. Cash basis interest income is not materially different than interest income recognized. Nonaccrual and Past Due Loans Nonperforming loans include individually evaluated impaired loans. Nonperforming loans consist of loans on nonaccrual status for which the accrual of interest has been discontinued and loans 90 days or more past due and still accruing interest. The following tables present by loan class the aging analysis based on contractual terms, nonaccrual loans, and the Company’s recorded investment in loans held-for-investment as of the periods presented:
Troubled Debt Restructurings A loan is identified as a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulties and, for economic or legal reasons related to these difficulties, the Company grants a concession to the borrower in the restructuring that it would not otherwise consider. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. The Company has granted a concession when, as a result of the restructuring, it does not expect to collect all amounts due or within the time periods originally due under the original contract, including one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a temporary forbearance with regard to the payment of principal or interest. All troubled debt restructurings are reviewed for potential impairment. Generally, a nonaccrual loan that is restructured remains on nonaccrual status for a minimum period of six months to demonstrate that the borrower can perform under the restructured terms. If the borrower’s performance under the new terms is not reasonably assured, the loan remains classified as a nonaccrual loan. Loans classified as TDRs are reported as impaired loans. As of June 30, 2020 and December 31, 2019, the Company had a recorded investment in TDR’s of $1.6 million and $1.8 million, respectively. The Company has not allocated any amount of specific allowance for those loans at June 30, 2020 and December 31, 2019. The Company has not committed to lend additional amounts to these TDRs. No loans were modified as TDRs during the three and six months ended June 30, 2020. Modifications of loans classified as TDRs during the periods presented, are as follows:
The TDR’s described above had no impact the allowance for loan losses and charge-offs during the three and six months ended June 30, 2019. A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. There were no loans modified as TDRs for which there was a payment default within twelve months during the three and six months ended June 30, 2020 or 2019. There was no provision for loan loss or charge-offs for TDR’s that subsequently defaulted during the three and six months ended June 30, 2020 or 2019. COVID-19 Related Modifications In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, (“the agencies”) issued an interagency statement on loan modifications for financial institutions working with customers affected by the Coronavirus. The interagency statement was effective immediately and impacted accounting for loan modifications. Under Accounting Standards Codification 310-40, “Receivables—Troubled Debt Restructurings by Creditors” a restructuring of debt constitutes a TDR if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Loans qualifying for these modifications will not be required to be reported as delinquent, nonaccrual, impaired or criticized solely as a result of a COVID-19 loan modification for the months of payment deferrals. Borrowers considered current are those that are less than 30 days past due on their modified contractual payments. A revised statement issued in April 2020, further clarified the interaction between the interagency statement and the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) that was signed into law in March 2020. The Company elected to adopt these provisions of the CARES Act for the temporary modifications described above. In April 2020, the Company implemented a short-term loan modification program for customers impacted financially by the COVID-19 pandemic to provide temporary relief to certain borrowers who meet the program’s qualifications. The program was offered to borrowers to modify their existing loans to temporarily defer principal and/or interest payments for a specified period of time, extend loan maturity dates and/or waive certain loan covenants. Deferred payments may be extended for continued hardship but are not to exceed a total of six months. The majority of short-term loan modifications for commercial real estate loan borrowers consist of deferred payments which may include principal, interest and escrow. Deferred interest is capitalized to the loan balance and deferred principal is added to the maturity or payoff date. For one-to-four family loans, the majority of short-term modifications consist of deferring full monthly payment of principal, interest and escrow, with deferred payments due at maturity or payoff of the loan. During the six months ended June 30, 2020, the Company modified 49 loans representing $136.8 million in loan balances, or 17%, of total gross loans held-for-investment as of June 30, 2020. All loans modified under these programs are maintained on full accrual status during the deferral period. No specific loan loss reserve allocation was deemed necessary for these modified loans. None of the modified loans met the criteria of a TDR under the CARES Act or the related interagency statement. Loans modified that were not classified as TDRs during the period presented, are as follows:
Credit Quality Indicators The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. This analysis typically includes larger, nonhomogeneous loans such as commercial real estate and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:
The following tables present by portfolio class the Company’s internal risk grading system as well as certain other information concerning the credit quality of the Company’s recorded investment in loans held-for-investment as of the periods presented. No assets were classified as loss or doubtful during the periods presented.
Related Party Loans The Company had related party loans with an outstanding balance of $4.6 million as of June 30, 2020 and December 31, 2019. During the six months ended June 30, 2020, the balance of related party loans decreased by $40,000 due to principal payments.
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FHLB Advances and Other Borrowings |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FHLB Advances and Other Borrowings | FHLB Advances and Other Borrowings Federal Home Loan Bank (“FHLB”) Advances The following table sets forth certain information on our FHLB advances during the period presented:
FHLB advances are secured with eligible collateral consisting of certain real estate loans. Advances from the FHLB are subject to the FHLB’s collateral and underwriting requirements, and as of June 30, 2020 and December 31, 2019, were limited in the aggregate to 35% of the Company’s total assets. Loans with carrying values of approximately $1.0 billion and $875.9 million were pledged to the FHLB as of June 30, 2020 and December 31, 2019, respectively. Unused borrowing capacity based on the lesser of the percentage of total assets and pledged collateral was approximately $193.3 million as of June 30, 2020. During the three months ended March 31, 2020, the Company initiated and settled a $64.0 million FHLB five-year term advance. Due to an increase in FHLB advance rates after settlement, the Company repaid the advance and recorded a gain on extinguishment of debt of $0.9 million. FRB Advances The Company is also approved to borrow through the Discount Window of the Federal Reserve Bank of San Francisco on a collateralized basis without any fixed dollar limit. Loans with a carrying value of approximately $6.4 million and $10.1 million were pledged to the FRB at June 30, 2020 and December 31, 2019, respectively. The Company’s borrowing capacity under the Federal Reserve’s discount window program was $4.5 million as of June 30, 2020. At June 30, 2020 and December 31, 2019, there were no borrowings outstanding under any of these lines. Federal Funds Purchased The Company may borrow up to an aggregate $68.0 million, overnight on an unsecured basis, from three of its correspondent banks. Access to these funds is subject to liquidity availability, market conditions and any negative material change in the Company’s credit profile. As of June 30, 2020 and December 31, 2019, the Company had no outstanding balance of federal funds purchased.
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Notes Payable |
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Jun. 30, 2020 | |
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Debt Instrument [Line Items] | |
Notes Payable | Notes PayableOn January 29, 2016, the Company entered into a term loan with a commercial bank for a single principal advance of $8.0 million due to mature on January 29, 2021. Loan interest and principal was payable quarterly commencing April 2016 and accrued interest at an annual rate equal to 2.60% plus the greater of zero percent and the one-month LIBOR rate. The proceeds were used to redeem preferred stock and could be prepaid at any time. During the three months ended March 31, 2020, the Company paid off the note in full. The outstanding principal balance at December 31, 2019 was $3.7 million. |
Subordinated Debentures, Net |
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Jun. 30, 2020 | |
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Subordinated Debentures, Net | Subordinated Debentures, Net A trust formed by the Company issued $12.5 million of floating rate trust preferred securities in July 2001 as part of a pooled offering of such securities. The Company issued subordinated debentures to the trust in exchange for its proceeds from the offering. The debentures and related accrued interest represent substantially all of the assets of the trust. The subordinated debentures bear interest at six-month LIBOR plus 375 basis points, which adjusts every six months in January and July of each year. Interest is payable semiannually. At June 30, 2020, the interest rate for the Company’s next scheduled payment was 5.51%, based on six-month LIBOR of 1.76%. On any January 25 or July 25 the Company may redeem the 2001 subordinated debentures at 100% of principal amount plus accrued interest. The 2001 subordinated debentures mature on July 25, 2031. A second trust formed by the Company issued $3.0 million of trust preferred securities in January 2005 as part of a pooled offering of such securities. The Company issued subordinated debentures to the trust in exchange for its proceeds from the offering. The debentures and related accrued interest represent substantially all of the assets of the trust. The subordinated debentures bear interest at three-month LIBOR plus 185 basis points, which adjusts every three months. Interest is payable quarterly. At June 30, 2020, the interest rate for the Company’s next scheduled payment was 2.16%, based on three-month LIBOR of 0.31%. On the 15th day of any March, June, September, or December, the Company may redeem the 2005 subordinated debentures at 100% of principal amount plus accrued interest. The 2005 subordinated debentures mature on March 15, 2035. The Company also retained a 3% minority interest in each of these trusts which is included in subordinated debentures. The balance of the equity in the trusts is comprised of mandatorily redeemable preferred securities. The subordinated debentures may be included in Tier I capital (with certain limitations applicable) under current regulatory guidelines and interpretations. The Company has the right to defer interest payments on the subordinated debentures from time to time for a period not to exceed five years.
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Derivative and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative and Hedging Activities | Derivative and Hedging Activities The Company is exposed to certain risks relating to its ongoing business operations. The Company utilizes interest rate derivatives as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the derivative does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual derivative agreements. In accordance with accounting guidance, changes in the fair value of derivatives designated and that qualify as cash flow hedges are initially recorded in other comprehensive income (“OCI”), reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions. The initial fair value of hedge components excluded from the assessment of effectiveness is recognized in the statement of financial condition under a systematic and rational method over the life of the hedging instrument and is presented in the same income statement line item as the earnings effect of the hedged item. Any difference between the change in the fair value of the hedge components excluded from the assessment of effectiveness and the amounts recognized in earnings is recorded as a component of other comprehensive income. For a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. The changes in fair value of the hedged item is recorded as a basis adjustment to the hedged assets or liabilities. The amount included as basis adjustments would be reclassified to current earnings on a straight-line basis over the original life of the hedged item should the hedges no longer be considered effective. Interest rate swap. In 2020, the Company entered into two pay-fixed/receive floating rate interest rate swaps (the “Swap Agreements”) for a notional amount of $14.3 million that were designated as fair value hedges of certain available-for-sale securities. The Swap Agreements were determined to be fully effective during the periods presented and therefore no amount of ineffectiveness has been included in net income. The Swap Agreements are based on three-month LIBOR and expire in 2030 and 2031. The Company expects the Swap Agreements to remain effective during the remaining term of the Swap Agreements. Interest rate floor. In 2019, the Company entered into 20 interest rate floor agreements (the "Floor Agreements") for a total notional amount of $400.0 million to hedge cash flow receipts on cash and securities or loans, if needed. The original Floor Agreements expire on various dates in April 2024 and July 2029. The Company utilizes one-month LIBOR and three-month LIBOR interest rate floors as hedges against adverse changes in cash flows on the designated cash, securities or loans attributable to fluctuations in the federal funds rate or three-month LIBOR below 2.50% or 2.25%, as applicable. The Floor Agreements were determined to be fully effective during all periods presented and, as such, no amount of ineffectiveness has been included in net income. The upfront fee paid to the counterparty in entering into these Floor Agreements was approximately $20.8 million. During the three months ended March 31, 2020, the Company sold $200.0 million of its total $400.0 million notional amount of interest rate floors for $13.0 million, which resulted in a net gain of $8.4 million, to be recognized over the weighted average remaining term of 4.1 years. The remaining agreements are one-month LIBOR floors with a strike price of 2.25% and expire in July 2029. Interest rate cap. In 2012, the Company entered into a $12.5 million and a $3.0 million notional forward interest rate cap agreement (the “Cap Agreements”) to hedge its variable rate subordinated debentures. The Cap Agreements expire July 25, 2022 and March 15, 2022, respectively. The Company utilizes interest rate caps as hedges against adverse changes in cash flows on the designated preferred trusts attributable to fluctuations in three-month LIBOR beyond 0.50% for the $3.0 million subordinated debenture and six-month LIBOR beyond 0.75% for the $12.5 million subordinated debenture. The Cap Agreements were determined to be fully effective during all periods presented and, as such, no amount of ineffectiveness has been included in net income. The upfront fee paid to the counterparty in entering into these Cap Agreements was approximately $2.5 million. The table below presents the fair value of the Company’s derivative financial instruments as well as the classification within the consolidated statements of financial condition.
The following table presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of those items as of the periods presented.
The following table summarizes the effects of derivatives in cash flow hedging relationships designated as hedging instruments on the Company’s consolidated statements of operations for the periods presented.
The Company estimates that approximately $4.8 million of net derivative gain included in OCI will be reclassified into earnings within the next 12 months. No gain or loss was reclassified from OCI into earnings as a result of forecasted transactions that failed to occur during the periods presented.
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Comparison of the federal statutory income tax rates to the Company’s effective income tax rates for the periods presented are as follows:
Income tax expense was $1.8 million for the three months ended June 30, 2020 compared to $1.7 million for the three months ended June 30, 2019. The increase was primarily related to higher net income. The effective tax rates for the three months ended June 30, 2020 and 2019 were 25.0% and 24.7%, respectively. The Company’s effective tax rate for the three months ended June 30, 2020 benefited from tax-exempt income earned on certain municipal bonds that were purchased beginning in late March 2020. The effective tax rate for the three months ended June 30, 2019 benefited from the recognition of tax benefits, including excess benefit from stock-based compensation. Income tax expense was $3.6 million for the six months ended June 30, 2020 compared to $5.7 million for the six months ended June 30, 2019. The decrease was primarily related to reduced pre-tax income for the six months ended June 30, 2020 when compared to the six months ended June 30, 2019. The effective tax rates for the six months ended June 30, 2020 and 2019 were 26.7% and 28.1%, respectively. The decrease in the Company’s effective tax rate was primarily related to tax-exempt income earned on certain municipal bonds. The deferred tax liability balance as of June 30, 2020 was $11.8 million compared to $0.4 million as of December 31, 2019. The primary change in balance was due to the increase in unrealized gains on derivative assets and available-for-sale securities portfolio.
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Off-Balance Sheet Items In the normal course of business, the Company enters into various transactions, which, in accordance with GAAP, are not included in the consolidated statements of financial condition. The Company enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and issue letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk exceeding the amounts recognized on the consolidated statements of financial condition. The Company’s exposure to credit loss is represented by the contractual amounts of these commitments. The same credit policies and procedures are used in making these commitments as for on-balance sheet instruments. The Company is not aware of any accounting loss to be incurred by funding these commitments, however, an allowance for off-balance sheet credit risk is recorded in other liabilities on the statements of financial condition. The allowance for these commitments amounted to approximately $0.1 million as of June 30, 2020 and December 31, 2019, respectively. The Company’s commitments associated with outstanding letters of credit and commitments to extend credit expiring by period as of the date indicated are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.
Unfunded lines of credit represent unused credit facilities to the Company’s current borrowers that represent no change in credit risk that exist in the Company’s portfolio. Lines of credit generally have variable interest rates. Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. In the event of nonperformance by the customer in accordance with the terms of the agreement with the third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, the Company would be entitled to seek recovery from the client from the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and/or marketable securities. The Company’s policies generally require that letter of credit arrangements contain security and debt covenants like those contained in loan agreements and our credit risk associated with issuing letters of credit is essentially the same as the risk involved in extending loan facilities to customers. The Company minimizes its exposure to loss under letters of credit and credit commitments by subjecting them to the same credit approval and monitoring procedures used for on-balance sheet instruments. The effect on the Company’s revenue, expenses, cash flows and liquidity of the unused portions of these letters of credit commitments cannot be precisely predicted because there is no guarantee that the lines of credit will be used. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract, for a specific purpose. Commitments generally have variable interest rates, fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company is based on management’s credit evaluation of the customer. Litigation The Company is involved in various matters of litigation which have arisen in the ordinary course of its business. In the opinion of management, the disposition of such pending litigation will not have a material adverse effect on the Company’s financial statements.
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Stock-based Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation | Stock-based Compensation In June 2018, the Company adopted the 2018 Equity Compensation Plan, or 2018 Plan, that permits the Compensation Committee, in its sole discretion, to grant various forms of incentive awards. Under the 2018 Plan, the Compensation Committee has the power to grant stock options, stock appreciation rights, or SARs, restricted stock and restricted stock units. The number of shares that may be issued pursuant to awards under the 2018 Plan is 1,596,753. In 2010, the Company adopted an equity compensation plan, or 2010 Plan, that provides for the grant of stock options to employees, directors, and other persons referred to in Rule 701 under the U.S. Securities Act of 1933. The number of shares that may be issued pursuant to awards under the 2010 Plan is 730,784. The Compensation Committee of the Company’s Board of Directors is responsible for administrating the 2010 Plan and determining the terms of all awards under it, including their vesting, except that in the case of a change in control of the Company all options granted under the 2010 Plan shall become 100% vested. As of June 30, 2020, there are no shares available for issuance under the 2010 Plan. In accordance with authoritative guidance for stock-based compensation, compensation expense is recognized only for those shares expected to vest, based on the Company’s historical experience and future expectations. The Company has elected a policy of estimating expected forfeitures. Total stock-based compensation expense was $0.2 million and $30,000 for the three months ended June 30, 2020 and 2019, respectively. Total stock-based compensation expense was $0.4 million and $49,000 for the six months ended June 30, 2020 and 2019, respectively. A summary of stock option activity as of June 30, 2020 and changes during the six months ended June 30, 2020 is presented below:
As of June 30, 2020, there was $0.7 million of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted-average period of 3.2 years. Restricted Stock Units A summary of the status of the Company’s nonvested restricted stock unit awards as of June 30, 2020, and changes during the six months ended June 30, 2020, is presented below:
At June 30, 2020, there was approximately $1.0 million of total unrecognized compensation expense related to nonvested restricted stock unit awards, which is expected to be recognized over a weighted-average period of 2.5 years.
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Regulatory Capital |
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Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Regulatory Capital | Regulatory Capital Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. As of January 1, 2019, the capital conservation buffer had fully phased in to 2.50%. Management believes, as of June 30, 2020, the Company and the Bank meet all capital adequacy requirements to which they are subject. Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. For the periods presented, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category. Actual capital amounts and ratios for the Company (assuming minimum capital adequacy ratios were applicable to the Company) and the Bank as of June 30, 2020 and December 31, 2019, are presented in the following tables:
The Bank is restricted as to the amount of dividends that it can pay to the Company. Dividends declared in excess of the lesser of the Bank’s undivided profits or the Bank’s net income for its last three fiscal years less the amount of any distribution made to the Bank’s shareholders during the same period must be approved by the California DBO. Also, the Bank may not pay dividends that would result in capital levels being reduced below the minimum requirements shown above.
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Fair Value |
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Fair Value | Fair Value Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This standard’s fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1—Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2—Significant observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3—Significant unobservable inputs that reflect a Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. Financial Instruments Required To Be Carried At Fair Value The following is a description of valuation methodologies used for assets and liabilities recorded at fair value: Securities available-for-sale. The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2). Derivatives. The Company’s derivative assets and liabilities are carried at fair value as required by GAAP. The estimated fair values of the derivative assets and liabilities are based on current market prices for similar instruments. Given the meaningful level of secondary market activity for derivative contracts, active pricing is available for similar assets and accordingly, the Company classifies its derivative assets and liabilities as Level 2. Impaired loans (collateral-dependent). The Company does not record impaired loans at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded on these loans to reflect (1) partial write-downs, through charge-offs or specific allowances, that are based on the current appraised or market-quoted value of the underlying collateral or (2) the full charge-off of the loan carrying value. In some cases, the properties for which market quotes or appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. Fair value estimates for collateral-dependent impaired loans are obtained from real estate brokers or other third-party consultants. These appraisals may utilize a single valuation approach or a combination of approaches, which generally include various Level 3 inputs. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available and such adjustments are typically significant. Appraisals may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of these possible adjustments may vary. Impaired loans presented in the table below as of the periods presented include impaired loans with specific allowances as well as impaired loans that have been partially charged-off. Other real estate owned. Fair value estimates for foreclosed real estate are obtained from real estate brokers or other third-party consultants (Level 3). When a current appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value as a result of known changes in the market or the collateral and there is no observable market price, such valuation inputs result in a fair value measurement that is categorized as a Level 3 measurement. To the extent a negotiated sales price or reduced listing price represents a significant discount to an observable market price, such valuation input would result in a fair value measurement that is also considered a Level 3 measurement. The following tables provide the hierarchy and fair value for each class of assets and liabilities measured at fair value at June 30, 2020 and December 31, 2019. As of June 30, 2020 and December 31, 2019, assets and liabilities measured at fair value on a recurring basis are as follows:
As of June 30, 2020 and December 31, 2019, assets measured at fair value on a non-recurring basis are summarized as follows:
Quantitative Information about Level 3 Fair Value Measurements The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis as of the date indicated:
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Financial Instruments Not Required To Be Carried At Fair Value FASB ASC Topic 825, Financial Instruments, requires the disclosure of the estimated fair value of financial instruments. The Company’s estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to develop the estimates of fair value. Accordingly, the estimates are not necessarily indicative of the amounts the Company could have realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The following tables present information about the Company’s assets and liabilities that are not measured at fair value in the consolidated statements of financial condition as of the dates presented:
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Earnings Per Share | Earnings Per Share The computation of basic and diluted earnings per share is shown below.
Stock options for 238,000 and 110,000 shares of common stock for the three months ended June 30, 2020 and 2019, respectively, and 237,000 and 110,000 shares of common stock for the six months ended June 30, 2020 and 2019, respectively were excluded from the computation of diluted earnings per share, because they were anti-dilutive.
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Nature of Business and Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |
Nature of Business | Nature of Business The accompanying consolidated financial statements include the accounts of Silvergate Capital Corporation, a Maryland corporation and its wholly-owned subsidiary, Silvergate Bank (the “Bank”), collectively referred to as (the “Company” or “Silvergate”). The Bank was incorporated in 1987 and commenced business in 1988 under the California Financial Code as an industrial bank. In February 2009 the Bank converted its charter to a California commercial bank, which gave it the added authority to accept demand deposits. At the same time, the Company also became a registered bank holding company under the federal Bank Holding Company Act. The Bank became a member of the Federal Reserve System in December 2012. The Bank is subject to regulation by the California Department of Business Oversight (“DBO”), and the Federal Reserve Bank of San Francisco (“FRB”), and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to applicable legal limits.
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Financial Statement Preparation and Presentation | Financial Statement Preparation and Presentation The accompanying interim condensed consolidated financial statements have been prepared by the Company, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair statement of the Company’s condensed consolidated financial statements. These consolidated statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K dated March 10, 2020. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. The consolidated financial statements include the accounts of the Company and all other entities in which it has a controlling financial interest. All significant intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its wholly owned subsidiaries. The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. We evaluate estimates on an ongoing basis including the economic impact of Coronavirus Disease 2019 (or “COVID-19”). Actual results could materially differ from those estimates.
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Recently issued accounting pronouncements not yet effective | Recently issued accounting pronouncements not yet effective In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (or “ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326) to replace the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (or “CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held to maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. These amendments were initially effective for fiscal years beginning after December 15, 2019 for SEC registrants and after December 15, 2020, for Public Business Entities, or PBEs. In November 2019, the FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which finalized the delay of the effective date for smaller reporting companies, such as the Company, to apply the standards related to CECL, until fiscal years beginning after December 15, 2022. For debt securities with other than temporary impairment (OTTI), the guidance will be applied prospectively and for existing purchased credit impaired (PCI) assets will be grandfathered and classified as purchased credit deteriorated (PCD) assets at the date of adoption. The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield such assets as of the adoption date. Subsequent changes in expected credit losses will be recorded through the allowance. For all other assets with the scope of CECL, the cumulative effect adjustment will be recognized in retained earnings as of the beginning of the first reporting period in which the guidance is effective. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The Company formed a CECL implementation committee in 2018 which prepared a project plan to migrate towards the adoption date. As part of the project plan, the Company contracted a third-party vendor to assist in the application and analysis of ASU 2016-13 as well as a third-party vendor to perform an independent model validation. As part of this process, the Company has determined preliminary loan pool segmentation under CECL, as well as evaluated the key economic loss drivers for each segment. The Company operationalized an initial CECL model during the second quarter of 2019 and is running this preliminary CECL model alongside the existing incurred loss methodology. The Company intends to continue to refine and run the model until the date of adoption. The Company continues to evaluate the effects of ASU 2016-13 on its financial statements and disclosures and whether to early adopt the guidance. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (or “ASU 2020-04”), which provides temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the transition away from the London Interbank Offered Rate (or “LIBOR”) or other interbank offered rate (reference rates) on financial reporting, which currently is expected to be discontinued by the end of 2021. To help with the transition to new reference rates, the ASU provides optional expedients and exceptions for applying GAAP to affected contract modifications and hedge accounting relationships. The guidance is applicable only to contracts or hedge accounting relationships that reference LIBOR or another reference rate expected to be discontinued. The expedients and exceptions in this update are available to all entities starting March 12, 2020 through December 31, 2022. The Company is evaluating the impact that ASU 2020-04 will have on those financial assets where LIBOR is used as an index rate. Except for the updated standards discussed above, there have been no new accounting pronouncements not yet effective that have significance, or potential significance, to the Company’s consolidated financial statements.
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Financial Instruments Required To Be Carried At Fair Value | Financial Instruments Required To Be Carried At Fair Value The following is a description of valuation methodologies used for assets and liabilities recorded at fair value: Securities available-for-sale. The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2). Derivatives. The Company’s derivative assets and liabilities are carried at fair value as required by GAAP. The estimated fair values of the derivative assets and liabilities are based on current market prices for similar instruments. Given the meaningful level of secondary market activity for derivative contracts, active pricing is available for similar assets and accordingly, the Company classifies its derivative assets and liabilities as Level 2. Impaired loans (collateral-dependent). The Company does not record impaired loans at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded on these loans to reflect (1) partial write-downs, through charge-offs or specific allowances, that are based on the current appraised or market-quoted value of the underlying collateral or (2) the full charge-off of the loan carrying value. In some cases, the properties for which market quotes or appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. Fair value estimates for collateral-dependent impaired loans are obtained from real estate brokers or other third-party consultants. These appraisals may utilize a single valuation approach or a combination of approaches, which generally include various Level 3 inputs. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available and such adjustments are typically significant. Appraisals may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of these possible adjustments may vary. Impaired loans presented in the table below as of the periods presented include impaired loans with specific allowances as well as impaired loans that have been partially charged-off. Other real estate owned. Fair value estimates for foreclosed real estate are obtained from real estate brokers or other third-party consultants (Level 3). When a current appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value as a result of known changes in the market or the collateral and there is no observable market price, such valuation inputs result in a fair value measurement that is categorized as a Level 3 measurement. To the extent a negotiated sales price or reduced listing price represents a significant discount to an observable market price, such valuation input would result in a fair value measurement that is also considered a Level 3 measurement.
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Securities (Tables) |
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized Gain (Loss) on Investments | The fair value of available-for-sale securities and their related gross unrealized gains and losses at the dates indicated are as follows:
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Debt Securities, Available-for-sale, Unrealized Loss Position, Fair Value | Securities with unrealized losses as of the dates indicated, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:
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Loans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts, Notes, Loans and Financing Receivable | A summary of loans as of the periods presented are as follows:
(1) Loans held-for-sale included $321.8 million and $365.8 million of mortgage warehouse loans at June 30, 2020 and December 31, 2019, respectively.
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Financing Receivable, Allowance for Credit Loss | The following tables present the allocation of the allowance for loan losses, as well as the activity in the allowance by loan class, and recorded investment in loans held-for-investment as of and for the periods presented:
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Impaired Financing Receivables | The following tables provide a summary of the Company’s investment in impaired loans as of and for the periods presented:
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Financing Receivable, Past Due | The following tables present by loan class the aging analysis based on contractual terms, nonaccrual loans, and the Company’s recorded investment in loans held-for-investment as of the periods presented:
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Financing Receivable, Troubled Debt Restructuring | Modifications of loans classified as TDRs during the periods presented, are as follows:
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Financing Receivable, Modification Other Than Trouble Debt Restructuring | Loans modified that were not classified as TDRs during the period presented, are as follows:
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Financing Receivable Credit Quality Indicators Description | The Company uses the following definitions for risk ratings:
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Financing Receivable Credit Quality Indicators | The following tables present by portfolio class the Company’s internal risk grading system as well as certain other information concerning the credit quality of the Company’s recorded investment in loans held-for-investment as of the periods presented. No assets were classified as loss or doubtful during the periods presented.
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FHLB Advances and Other Borrowings (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of FHLB Advances | The following table sets forth certain information on our FHLB advances during the period presented:
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Derivative and Hedging Activities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The table below presents the fair value of the Company’s derivative financial instruments as well as the classification within the consolidated statements of financial condition.
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Schedule Of Cumulative Basis Adjustments And Related Amortized Cost | The following table presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of those items as of the periods presented.
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Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) | The following table summarizes the effects of derivatives in cash flow hedging relationships designated as hedging instruments on the Company’s consolidated statements of operations for the periods presented.
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Income Taxes (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effective Income Tax Rate Reconciliation | Comparison of the federal statutory income tax rates to the Company’s effective income tax rates for the periods presented are as follows:
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Commitments and Contingencies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Off-Balance Sheet Items | The Company’s commitments associated with outstanding letters of credit and commitments to extend credit expiring by period as of the date indicated are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.
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Stock-based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Compensation Plans | A summary of stock option activity as of June 30, 2020 and changes during the six months ended June 30, 2020 is presented below:
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Share-based Payment Arrangement, Restricted Stock Unit, Activity | A summary of the status of the Company’s nonvested restricted stock unit awards as of June 30, 2020, and changes during the six months ended June 30, 2020, is presented below:
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Regulatory Capital (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations | Actual capital amounts and ratios for the Company (assuming minimum capital adequacy ratios were applicable to the Company) and the Bank as of June 30, 2020 and December 31, 2019, are presented in the following tables:
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Fair Value (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis | As of June 30, 2020 and December 31, 2019, assets and liabilities measured at fair value on a recurring basis are as follows:
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Schedule of Assets Measured at Fair Value on Non-Recurring Basis | As of June 30, 2020 and December 31, 2019, assets measured at fair value on a non-recurring basis are summarized as follows:
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Fair Value Measurement Inputs and Valuation Techniques | The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis as of the date indicated:
________________________ (1) Unobservable inputs were weighted by the relative fair value of the instruments.
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Schedule of Fair Value by Balance Sheet Grouping | The following tables present information about the Company’s assets and liabilities that are not measured at fair value in the consolidated statements of financial condition as of the dates presented:
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Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The computation of basic and diluted earnings per share is shown below.
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Nature of Business and Summary of Significant Accounting Policies - Sale of Retail Branch (Details) - Disposal Group, Disposed of by Sale, Not Discontinued Operations - Retail Branch in San Marcos, California $ in Millions |
1 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Reduction in loans | $ 115.4 |
Reduction in deposits | 74.5 |
Pre-tax gain on sale | $ 5.5 |
Loans - Trouble Debt Restructurings (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020
contract
|
Jun. 30, 2019
USD ($)
contract
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Jun. 30, 2020
contract
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Jun. 30, 2019
USD ($)
contract
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Financing Receivable, Troubled Debt Restructuring [Line Items] | ||||
Number of Loans | contract | 0 | 3 | 0 | 3 |
Pre- Modifications Outstanding Recorded Investment | $ 1,512 | $ 1,512 | ||
Post- Modifications Outstanding Recorded Investment | $ 1,608 | $ 1,608 | ||
Real estate loans | Residential | One-to-four family | ||||
Financing Receivable, Troubled Debt Restructuring [Line Items] | ||||
Number of Loans | contract | 2 | 2 | ||
Pre- Modifications Outstanding Recorded Investment | $ 1,018 | $ 1,018 | ||
Post- Modifications Outstanding Recorded Investment | $ 1,114 | $ 1,114 | ||
Commercial and industrial | Commercial and industrial | ||||
Financing Receivable, Troubled Debt Restructuring [Line Items] | ||||
Number of Loans | contract | 1 | 1 | ||
Pre- Modifications Outstanding Recorded Investment | $ 494 | $ 494 | ||
Post- Modifications Outstanding Recorded Investment | $ 494 | $ 494 |
FHLB Advances and Other Borrowings - Schedule of FHLB Advances (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2020 |
Dec. 31, 2019 |
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Debt Disclosure [Abstract] | ||
Amount outstanding at period-end | $ 360,000 | $ 49,000 |
Weighted average interest rate at period-end | 0.23% | 1.66% |
Maximum month-end balance during the period | $ 360,000 | $ 218,000 |
Average balance outstanding during the period | $ 78,263 | $ 28,205 |
Weighted average interest rate during the period | 0.22% | 1.94% |
Notes Payable (Details) - USD ($) |
Jan. 29, 2016 |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Outstanding principal balance | $ 0 | $ 3,714,000 | |
Term Loan | 2.60% Note Payable Due January 29, 2021 | |||
Debt Instrument [Line Items] | |||
Principal amount | $ 8,000,000.0 | ||
Interest rate | 2.60% | ||
Outstanding principal balance | $ 3,700,000 | ||
Minimum | Term Loan | 2.60% Note Payable Due January 29, 2021 | London Interbank Offered Rate (LIBOR) | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 0.00% |
Derivative and Hedging Activities - Fair Value by Balance Sheet Location (Details) - Derivatives designated as hedging instruments - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Derivative assets | Cash flow hedge interest rate floor | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | $ 35,740 | $ 23,054 |
Derivative assets | Cash flow hedge interest rate cap | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 14 | 386 |
Derivative assets | Fair value hedge interest rate swap | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 16 | 0 |
Other liabilities | Fair value hedge interest rate swap | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability | $ (42) | $ 0 |
Derivative and Hedging Activities - Cumulative Amount of Fair Value Hedging Adjustments (Details) - Securities available-for-sale - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Carrying Amount of the Hedged Asset (Liability) | $ 15,727 | $ 0 |
Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets/(Liabilities) | $ 26 | $ 0 |
Income Taxes - Effective Income Tax Rate Reconciliation (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
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Amount | ||||
Statutory federal tax | $ 1,531 | $ 1,439 | $ 2,826 | $ 4,260 |
State tax, net of federal benefit | 613 | 519 | 1,107 | 1,537 |
Tax credits | (67) | (42) | (123) | (85) |
Tax-exempt income | (247) | 0 | (247) | 0 |
Excess tax benefit from stock-based compensation | (20) | (86) | (20) | (86) |
Other items, net | 16 | (137) | 57 | 65 |
Actual tax expense | $ 1,826 | $ 1,693 | $ 3,600 | $ 5,691 |
Rate | ||||
Statutory federal tax | 21.00% | 21.00% | 21.00% | 21.00% |
State tax, net of federal benefit | 8.40% | 7.60% | 8.20% | 7.60% |
Tax credits | (0.90%) | (0.60%) | (0.90%) | (0.40%) |
Tax-exempt income | (3.40%) | 0.00% | (1.80%) | 0.00% |
Excess tax benefit from stock-based compensation | (0.30%) | (1.30%) | (0.20%) | (0.40%) |
Other items, net | 0.20% | (2.00%) | 0.40% | 0.30% |
Actual tax expense | 25.00% | 24.70% | 26.70% | 28.10% |
Income Taxes - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
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Income Tax Disclosure [Abstract] | |||||
Income tax expense | $ 1,826 | $ 1,693 | $ 3,600 | $ 5,691 | |
Effective tax rate | 25.00% | 24.70% | 26.70% | 28.10% | |
Deferred tax liabilities | $ 11,800 | $ 11,800 | $ 400 |
Commitments and Contingencies - Off-Balance Sheet Items (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Debt Instrument [Line Items] | ||
Total credit extension commitments | $ 45,998 | $ 48,088 |
Allowance for commitments | 100 | 100 |
Unfunded lines of credit | ||
Debt Instrument [Line Items] | ||
Total credit extension commitments | 45,458 | 47,433 |
Letters of credit | ||
Debt Instrument [Line Items] | ||
Total credit extension commitments | $ 540 | $ 655 |
Stock-based Compensation - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2010 |
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock-based compensation expense | $ 200 | $ 30 | $ 400 | $ 49 | ||
Unrecognized stock-based compensation expense related to stock options | $ 700 | $ 700 | ||||
Period unrecognized expenses is expected to be recognized | 3 years 2 months 12 days | |||||
2018 Plan | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares authorized (in shares) | 1,596,753 | |||||
2010 Plan | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares authorized (in shares) | 0 | 0 | 730,784 | |||
Award vesting rights, percentage, change in control | 100.00% |
Stock-based Compensation - Restricted Stock Units Activity (Details) $ / shares in Units, $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
$ / shares
shares
| |
Weighted-Average Grant Date Fair Value Per Share | |
Period unrecognized expenses is expected to be recognized | 3 years 2 months 12 days |
Restricted Stock Units | |
Number of Shares | |
Beginning balance (in shares) | shares | 82,627 |
Granted (in shares) | shares | 15,567 |
Canceled or Forfeited (in shares) | shares | (7,014) |
Ending balance (in shares) | shares | 91,180 |
Weighted-Average Grant Date Fair Value Per Share | |
Beginning balance (in dollars per share) | $ / shares | $ 16.09 |
Granted (in dollars per share) | $ / shares | 14.61 |
Canceled or Forfeited (in dollars per share) | $ / shares | 16.09 |
Ending balance (in dollars per share) | $ / shares | $ 15.82 |
Unrecognized stock-based compensation expense | $ | $ 1.0 |
Period unrecognized expenses is expected to be recognized | 2 years 6 months |
Fair Value - Recurring Basis (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Assets | ||
Securities available-for-sale | $ 951,094 | $ 897,766 |
Derivative assets | 35,770 | 23,440 |
Recurring Basis | ||
Assets | ||
Securities available-for-sale | 951,094 | 897,766 |
Derivative assets | 35,770 | 23,440 |
Total | 986,864 | 921,206 |
Recurring Basis | Level 1 | ||
Assets | ||
Securities available-for-sale | 0 | 0 |
Derivative assets | 0 | 0 |
Total | 0 | 0 |
Recurring Basis | Level 2 | ||
Assets | ||
Securities available-for-sale | 951,094 | 897,766 |
Derivative assets | 35,770 | 23,440 |
Total | 986,864 | 921,206 |
Recurring Basis | Level 3 | ||
Assets | ||
Securities available-for-sale | 0 | 0 |
Derivative assets | 0 | 0 |
Total | $ 0 | $ 0 |
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