UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number:
(Exact name of registrant as specified in its charter)
|
|
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(
(Address, including Zip Code, and telephone number, including area code, of the registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
“ |
|
Not listed |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☐ |
|
|
☐ |
|
Smaller reporting company |
|
|
Emerging growth company |
|
☐ |
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of August 11, 2022, there were
BANKGUAM HOLDING COMPANY
FORM 10-Q
QUARTERLY REPORT
TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements
For purposes of this Quarterly Report, the terms the “Company,” “we,” “us” and “our” refer to BankGuam Holding Company and its subsidiaries. This Quarterly Report on Form 10-Q contains statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be preceded by, followed by or include the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “is designed to” and similar expressions as well as other statements regarding our future operations, financial condition and prospects, and business strategies. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements.
We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about our business that could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. We are not able to predict all of the factors that may affect future results. These include, among other things, the following risks:
|
• |
Competition for loans and deposits and failure to attract or retain deposits and loans; |
|
• |
Local, regional, national and global economic conditions, and the impact they may have on us and our customers, and our assessment of that impact on our estimates, including the allowance for loan losses and fair value measurements; |
|
• |
The effects of the COVID-19 pandemic, including reduced tourism in Guam, volatility in the international and national economy and credit markets, quarantines or other travel or health-related restrictions, the length and severity of the COVID-19 pandemic and the pace of recovery following the COVID-19 pandemic; |
|
• |
Risks associated with concentrations in real estate related loans; |
|
• |
Changes in the level of nonperforming assets and charge-offs and other credit quality measures, and their impact on the adequacy of our allowance for loan losses and our provision for loan losses; |
|
• |
The effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Federal Open Market Committee of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”); and the anticipated elimination of the London Interbank Offered Rate (“LIBOR”) as a benchmark interest rate; |
|
• |
Stability of funding sources and continued availability of borrowings; |
|
• |
The effect of changes in laws and regulations with which the Company and Bank of Guam must comply, including any change in Federal Deposit Insurance Corporation insurance premiums; |
|
• |
Our ability to raise capital or incur debt on reasonable terms; |
|
• |
Regulatory limits on Bank of Guam’s ability to pay dividends to the Company; |
|
• |
The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; |
|
• |
Changes in the deferred tax asset valuation allowance in future quarters; |
|
• |
The costs and effects of legal and regulatory developments, including resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations or reviews; |
|
• |
Our ability to increase market share and control expenses; |
|
• |
Any interruption or security breach of our information systems, or the information systems of our third party service providers, resulting in failures or disruptions in customer services or confidentiality; and |
|
• |
Our success in managing the risks involved in the foregoing items. |
Other factors that might cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” included in filings we make from time to time with the U.S. Securities and Exchange Commission (“SEC”), including our Quarterly Reports on Form 10-Q to be filed by us in our fiscal year ending December 31, 2022. We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or risks, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. New information, future events or risks could cause the forward-looking events we discuss in this Quarterly Report not to occur. You should not place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this Quarterly Report.
2
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
BankGuam Holding Company
Unaudited Condensed Consolidated Statements of Financial Condition
(in Thousands, Except Par Value)
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
ASSETS |
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
|
|
|
$ |
|
|
Interest bearing deposits in banks |
|
|
|
|
|
|
|
|
Total cash and cash equivalents |
|
|
|
|
|
|
|
|
Restricted cash |
|
|
|
|
|
|
|
|
Investment securities available-for-sale, at fair value |
|
|
|
|
|
|
|
|
Investment securities held-to-maturity, at amortized cost (Fair Value $ |
|
|
|
|
|
|
|
|
Federal Home Loan Bank stock, at cost |
|
|
|
|
|
|
|
|
Loans, net of allowance for loan losses ($ |
|
|
|
|
|
|
|
|
Accrued interest receivable |
|
|
|
|
|
|
|
|
Premises and equipment, net |
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
Non-interest bearing |
|
$ |
|
|
|
$ |
|
|
Interest bearing |
|
|
|
|
|
|
|
|
Total deposits |
|
|
|
|
|
|
|
|
Accrued interest payable |
|
|
|
|
|
|
|
|
Subordinated debt, net |
|
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 6) |
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock $ shares issued and 12/31/2021, respectively |
|
|
|
|
|
|
|
|
Preferred stock $ and outstanding at 6/30/2022 and 12/31/2021, respectively |
|
|
|
|
|
|
|
|
Additional paid-in capital, Common stock |
|
|
|
|
|
|
|
|
Additional paid-in capital, Preferred stock |
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
|
|
Accumulated other comprehensive (loss) income |
|
|
( |
) |
|
|
( |
) |
Non-controlling interest |
|
|
|
|
|
|
|
|
Common stock in treasury, at cost ( |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ equity |
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
BankGuam Holding Company
Unaudited Condensed Consolidated Statements of Income
(Dollar and Share Amounts in Thousands, Except Per Share Amounts)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits with banks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other borrowed funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income, after provision for loan losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges and fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of investment securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Income from merchant services, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardholders income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trustee fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology, equipment and depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FDIC assessment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stationery and supplies |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Training and education |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General, administrative and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interest |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
Net income available to BankGuam Holding Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividend |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income attributable to common stockholders |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Earnings per common share (EPS): |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
Basic and diluted EPS |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Dividends declared per common share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Basic and diluted weighted average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
BankGuam Holding Company
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(in Thousands)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain (loss) on available-for-sale securities arising during the period, net of tax |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Reclassification for (gain) realized on available-for- sale securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Amortization of post-transfer unrealized holding loss on held-to-maturity securities during the period, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Total comprehensive income (loss) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
BankGuam Holding Company
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
(Dollar Amounts and Number of Shares in Thousands)
|
|
Number of Common Shares |
|
|
Common Stock |
|
|
Preferred Stock |
|
|
Additional Paid-in Capital - Common |
|
|
Additional Paid-in Capital - Preferred |
|
|
Retained Earnings |
|
|
Accumulated Other Comprehensive Loss |
|
|
Treasury Stock |
|
|
Noncontrolling Interests |
|
|
Total |
|
||||||||||
Balances, January 1, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Change in accumulated other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale securities, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Common stock issued under Employee Stock Purchase Plan & Service Awards |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Return of capital from stocks owned by subsidiary |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Cash dividends on common stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Cash dividends on preferred stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Balances, March 31, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Change in accumulated other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
Unrealized gain on available-for-sale securities, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Return of capital from stocks owned by subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Cash dividends on common stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Cash dividends on preferred stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Balances, June 30, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Common Shares |
|
|
Common Stock |
|
|
Preferred Stock |
|
|
Additional Paid-in Capital - Common |
|
|
Additional Paid-in Capital - Preferred |
|
|
Retained Earnings |
|
|
Accumulated Other Comprehensive Income |
|
|
Treasury Stock |
|
|
Noncontrolling Interests |
|
|
Total |
|
||||||||||
Balances, January 1, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
|
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Change in accumulated other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale securities, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Common stock issued under Employee Stock Purchase Plan & Service Awards |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Cash dividends on common stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Cash dividends on preferred stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Balances, March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
|
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Change in accumulated other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale securities, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Common stock issued under Employee Stock Purchase Plan & Service Awards |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Cash dividends on common stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Cash dividends on preferred stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Balances, June 30, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
BankGuam Holding Company
Unaudited Condensed Consolidated Statements of Cash Flows
(in Thousands)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
Amortization of fees, discounts and premiums |
|
|
|
|
|
|
|
|
Proceeds from sales of loans held for sale |
|
|
|
|
|
|
|
|
Origination of loans held for sale |
|
|
( |
) |
|
|
( |
) |
Decrease (increase) in mortgage servicing rights |
|
|
|
|
|
|
( |
) |
Gross realized gains on sale of available-for-sale securities |
|
|
- |
|
|
|
( |
) |
Realized loss on sale of premises and equipment |
|
|
|
|
|
|
|
|
Noncash lease expense |
|
|
( |
) |
|
|
|
|
Increase in deferred tax asset |
|
|
( |
) |
|
|
( |
) |
Net change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accrued interest receivable |
|
|
|
|
|
|
|
|
Other assets |
|
|
( |
) |
|
|
( |
) |
Accrued interest payable |
|
|
( |
) |
|
|
( |
) |
Lease liability |
|
|
|
|
|
|
( |
) |
Other liabilities |
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
( |
) |
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of available-for-sale securities |
|
|
( |
) |
|
|
( |
) |
Purchases of held-to-maturity securities |
|
|
( |
) |
|
|
- |
|
Proceeds from sales of available-for-sale securities |
|
|
- |
|
|
|
|
|
Maturities, prepayments and calls of available-for-sale securities |
|
|
|
|
|
|
|
|
Maturities, prepayments and calls of held-to-maturity securities |
|
|
|
|
|
|
|
|
Loan originations and principal collections, net |
|
|
( |
) |
|
|
|
|
Income from equity investment in unconsolidated subsidiary |
|
|
- |
|
|
|
( |
) |
Dividends received from unconsolidated subsidiary |
|
|
- |
|
|
|
|
|
Purchase of FHLB stock |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales of premises and equipment |
|
|
- |
|
|
|
|
|
Purchases of premises and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net (decrease) increase in deposits |
|
|
( |
) |
|
|
|
|
Proceeds from issuance of subordinated debt, net |
|
|
- |
|
|
|
|
|
Proceeds from issuance of common stock |
|
|
|
|
|
|
|
|
Dividends paid |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Net change in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
|
$ |
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
|
|
|
$ |
|
|
Income taxes |
|
$ |
|
|
|
$ |
|
|
Supplemental disclosure of noncash investing and financing activities: |
|
|
|
|
|
|
|
|
Net change in unrealized loss on held-to-maturity securities, net of tax |
|
$ |
|
|
|
$ |
|
|
Net change in unrealized gain on available-for-sale securities, net of tax |
|
$ |
( |
) |
|
$ |
( |
) |
Transfer of securities from available-for-sale securities |
|
$ |
- |
|
|
$ |
|
|
Transfer of securities to held-to-maturity securities |
|
$ |
- |
|
|
$ |
( |
) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
7
BankGuam Holding Company
Notes to Condensed Consolidated Financial Statements
(in Thousands, Except Per Share Data)
(Unaudited)
Note 1 – Nature of Business
Organization
The accompanying condensed consolidated financial statements include the accounts of BankGuam Holding Company (“Company”) and its wholly-owned subsidiaries, Bank of Guam (“Bank”) and BankGuam Investment Services (“BGIS”). The Company is a Guam corporation organized on October 29, 2010, to act as the holding company of the Bank, a Guam banking corporation, a
Other than holding the shares of the Bank, BGIS and ASC Trust LLC, the Company conducts no significant activities, although it is authorized, with the prior approval of its principal regulator, the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), to engage in a variety of activities related to the business of banking. Currently, substantially all of the Company’s operations are conducted and substantially all of the assets are owned by the Bank, which accounts for substantially all of our consolidated revenues, expenses and operating income. The Bank provides a variety of financial services to individuals, businesses and governments through its branches. The Bank’s headquarters is located in Hagåtña, Guam. The Bank currently has
For ease of reference we will sometimes refer to the Company and the Bank as “we”, “us” or “our”.
Note 2 – Summary of Significant Accounting Policies and Recent Accounting Pronouncements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all footnotes that would be required for a full presentation of financial condition, results of operations, changes in cash flows and comprehensive income in accordance with generally accepted accounting principles in the United States (“GAAP”). However, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments and accruals) which, in the opinion of our management, are necessary for a fair presentation of our financial condition, results of operations and cash flows for the interim periods presented.
These unaudited condensed consolidated financial statements have been prepared on a basis consistent with prior periods, and should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2021, and the notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission (“SEC”) under the Exchange Act on March 28, 2022. Certain prior period amounts have been reclassified to conform to the current period presentation.
Our condensed consolidated financial condition at June 30, 2022, and the condensed consolidated results of operations for the three and six months ended June 30, 2022, are not necessarily indicative of what our financial condition will be at December 31, 2022, or of the results of our operations that may be expected for the full year ending December 31, 2022.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of income and expenses during the periods presented. Actual results could differ from those estimates.
Restricted Cash
Interest-bearing deposits in banks that mature within one year are carried at cost. $
8
COVID-19
The outbreak of a novel coronavirus (“COVID-19”) in 2020 and subsequent impact on public commerce and related business activities continues to impact the Company as well as a broad range of industries in which the Company’s customers operate and, in some instances, impaired their ability to fulfill their financial obligations to the Company. On March 3, 2020, the Federal Open Market Committee (FOMC) reduced the target range for federal funds by
In the United States, the government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020. The CARES Act, among other things, created a $
Currently one branch in Guam remains closed due to renovations, and will reopen upon completion. The Bank continues to provide a secure telecommuting program for those personnel who are able to perform their responsibilities remotely, the computer hardware and software needed to support those tasks, and established teleconferencing capabilities to reduce the number of people in attendance at all of its larger group meetings. The Company has not materially changed its accounting policies or procedures due to COVID-19.
Russia/Ukraine Conflict
The current Russia and Ukraine conflict has raised economic and financial market concerns causing uncertainty and disruption in financial markets globally and further straining an already struggling global supply chain. Furthermore, such events have the potential to adversely impact the availability of commodities, commodity prices, and create global inflationary pressures. These and other effects of the conflict could have a negative impact on the ability of borrowers to repay their obligations to the Bank, which could impact our reserves for loan losses and have an adverse effect on our results of operations.
Recently Adopted Accounting Pronouncements
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," which provides temporary optional expedients to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (LIBOR) to an alternative reference rate such as Secured Overnight Financing Rate (SOFR). The guidance was effective upon issuance and generally can be applied through December 31, 2022. In , the Company adopted SOFR as a replacement to LIBOR. The Company did not originate loans in 2022 indexed to LIBOR nor enter into modifications which create new LIBOR exposure. The Company believes the adoption of this guidance will not have a material impact on the consolidated financial statements.
Recently Issued but Not Yet Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)”, to amend the standards for the measurement of credit losses on financial instruments by replacing the historical incurred loss impairment methodology of determining the level of the allowance for loan and lease losses (“ALLL”), including losses associated with available-for-sale securities, with a more decision-useful methodology that reflects expected credit losses over the life of a financial instrument based upon historical experience, current conditions, and reasonable and supportable forecasts in determining the ALLL level, as well as the reserve for off-balance-sheet credit exposures. The Company was preparing to implement ASU 2016-13 when it was scheduled to become effective January 1, 2020, but the FASB announced on October 16, 2019, a delay of the effective date for smaller reporting companies until January 1, 2023. The Company continues to evaluate the impact the new guidance will have on its financial position, results of operations and regulatory risk-based capital. The Company’s current planned approach for estimating lifetime credit losses for its loan portfolio includes the following key components:
• An economic forecast period of
• Segmentation of loans into pools that share common risk characteristics; and
• Used the discounted cash flow (DCF) method to measure credit impairment on most of our loan portfolios and estimate
lifetime credit losses using the conceptual components described above.
Management will recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the first reporting period in which the new standard is effective, but cannot yet estimate the magnitude of the adjustment or the overall impact of the new guidance on the Company’s financial position, results of operations or cash flows.
9
The Company classifies its investment securities as available-for-sale or held-to-maturity. The Company’s investment security portfolio consists of U.S. government-sponsored agencies securities, which has an explicit or implicit guarantee from the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. Accordingly, the Company does not anticipate to apply a loss assumption for its investment securities.
Note 3 – Earnings Per Common Share
Basic earnings per common share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Potential common shares that may be issued by the Company relate to shares subscribed but not yet issued in 2022 and 2021 under the Employee Stock Purchase Plan, and are reported as dilutive options.
Earnings per common share are computed based on reported net income, preferred stock dividends and the following common share data:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net income available to BankGuam Holding Company |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Less preferred stock dividends |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income attributable to common stockholders |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Weighted average number of common shares outstanding - used to calculate basic and diluted earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share (EPS): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted EPS |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
10
Note 4 – Investment Securities
The amortized cost and fair value of investment securities, with gross unrealized gains and losses, is presented as follows:
|
|
June 30, 2022 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
Securities Available-for-Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
|
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
|
U.S. government agency pool securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Securities Held-to-Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
|
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
|
U.S. government agency pool securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
Securities Available-for-Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
|
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
|
U.S. government agency pool securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Securities Held-to-Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
|
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
|
U.S. government agency pool securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
At June 30, 2022 and December 31, 2021, investment securities with a carrying value of $
Proceeds and gross realized gains from the sales of available-for-sale investment securities for the six months ended June 30, 2022 and 2021 are shown below. There were no sales of investment securities for the three months ended June 30, 2022 and 2021.
|
|
Six Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Proceeds from sales |
|
$ |
- |
|
|
$ |
|
|
Gross realized gains from sales |
|
$ |
- |
|
|
$ |
|
|
Gross realized losses from sales |
|
$ |
- |
|
|
$ |
- |
|
11
The amortized cost and estimated fair value of investment securities by contractual maturity at June 30, 2022 and December 31, 2021 are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or borrowers the right to prepay obligations with or without call or prepayment penalties. At June 30, 2022, obligations of U.S. government corporations and agencies with amortized costs totaling $
|
|
June 30, 2022 |
|
|||||||||||||
|
|
Available-for-Sale |
|
|
Held-to-Maturity |
|
||||||||||
|
|
Amortized Cost |
|
|
Estimated Fair Value |
|
|
Amortized Cost |
|
|
Estimated Fair Value |
|
||||
Due within one year |
|
$ |
|
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
- |
|
Due after one but within five years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after five but within ten years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after ten years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|||||||||||||
|
|
Available-for-Sale |
|
|
Held-to-Maturity |
|
||||||||||
|
|
Amortized Cost |
|
|
Estimated Fair Value |
|
|
Amortized Cost |
|
|
Estimated Fair Value |
|
||||
Due within one year |
|
$ |
|
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
- |
|
Due after one but within five years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after five but within ten years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after ten years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
12
Temporarily Impaired Securities
The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2022 and December 31, 2021.
|
|
June 30, 2022 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
Securities Available-for-Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
|
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
|
U.S. government agency pool securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Securities Held-to-Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
|
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
|
U.S. government agency pool securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
Securities Available-for-Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
|
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
|
U.S. government agency pool securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Securities Held-to-Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
|
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
|
U.S. government agency pool securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The investment securities that were in an unrealized loss position as of June 30, 2022, which comprised a total of
Total gross unrealized losses were primarily attributable to changes in market interest rates, relative to when the investment securities were purchased, and not due to any change in the credit quality of the investment securities. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is not likely that the Company will be required to sell the investment securities before recovery of their amortized cost, which may be at maturity. However, the Company may elect to sell certain investment securities with an unrealized loss position in its “available for sale” portfolio as needed to replenish its liquidity.
13
Investment in ASC Trust LLC
On July 6, 2021, with the approval of the Federal Reserve Bank of San Francisco, the Company used $
Note 5 – Loans Held for Sale, Loans and Allowance for Loan Losses
Loans Held for Sale
In its normal course of business, the Bank originates mortgage loans held for sale to the FHLMC. The Bank has elected to measure its residential mortgage loans held for sale at lower of cost or market. Origination fees and costs are recognized in earnings at the time of origination. Loans are sold to FHLMC at par.
During the six months ended June 30, 2022, the Bank originated and sold $
Mortgage loans serviced for others are not included in the accompanying condensed consolidated statements of financial condition. The unpaid principal balances of mortgage loans serviced for others were $
We retain mortgage servicing rights on mortgage loans that we sell. Such rights represent the net positive cash flows generated from the servicing of such mortgage loans and we recognize such rights as assets on our statements of financial condition based on their estimated fair values. We receive servicing fees, less any subservicing costs, on the unpaid principal balances of such mortgage loans. Those fees are collected from the monthly payments made by the mortgagors or from the proceeds of the sale or foreclosure and liquidation of the underlying real property collateralizing the loans. At June 30, 2022 and December 31, 2021, mortgage servicing rights totaled $
Loans
Outstanding loan balances are presented net of unearned income, deferred loan fees, and unamortized discount and premium totaling $
14
The loan portfolio consisted of the following at:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Commercial mortgage |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Commercial construction |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Commercial agriculture |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Total commercial |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Home equity |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Automobile |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Other consumer loans1 |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Total consumer |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Gross loans |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Deferred loan (fees) costs, net |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Allowance for loan losses |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Loans, net |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
1 |
|
Paycheck Protection Program
With the passage of the Paycheck Protection Program, or PPP, administered by the Small Business Administration, the Bank actively participated in assisting its customers with applications for resources through the program. PPP loans have either a
On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”) was signed into law which changed key provisions of the PPP, including provisions relating to the maturity of PPP loans, the deferral of PPP loan payments, and the forgiveness of PPP loans. Under the Flexibility Act, as clarified by the SBA in an October 7, 2020 update, the maturity date for PPP loans funded before June 5, 2020 remained at two years from funding while the maturity date for PPP loans funded after June 5, 2020 was five years from funding. In addition, the Flexibility Act increased the period during which PPP loan proceeds are to be used for purposes that would qualify the loan for forgiveness (the “covered period”) from 8 weeks to 24 weeks, at the borrower’s election, for PPP loans made prior to June 5, 2020, and set the covered period for loans made after June 5, 2020 at 24 weeks from funding. Under the Flexibility Act, PPP borrowers are not required to make any payments of principal or interest before the date on which SBA remits the loan forgiveness amount to the Company (or notifies the Company that no loan forgiveness is allowed) and, although PPP borrowers may submit an application for loan forgiveness at any time prior to the maturity date, if PPP borrowers do not submit a loan forgiveness application within 10 months after the end of their covered period, such borrowers will be required to begin paying principal and interest after that period. For loans originated under the SBA's PPP loan program, interest and principal payment on these loans were originally deferred for six months following the funding date, during which time interest would continue to accrue. The Flexibility Act extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans to the date that the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, ten months after the end of the borrower’s loan forgiveness covered period). The extension of the deferral period under the Flexibility Act automatically applied to all PPP loans.
15
Allowance for Loan Losses
The allowance for loan losses is evaluated on a quarterly basis by Bank management, and is based upon management’s periodic review of the collectability of loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available or conditions change.
The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. ASC 310-10 defines an impaired loan as one for which there is uncertainty concerning collection of all principal and interest per the original contractual terms of the loan. For those loans that are classified as impaired, an allowance is established when the discounted cash flow (or the collateral value or the observable market price) of the impaired loan is lower than the carrying value of the loan. The general component covers unimpaired loans, and is estimated using a loss migration analysis based on historical charge-off experience and expected loss, given the default probability derived from the Bank’s internal risk rating process. The loss migration analysis tracks twelve rolling quarters of loan loss history and industry loss factors to determine historical losses by classification category for each loan type, except certain consumer loans. These calculated loss factors are then applied to outstanding loan balances for all non-impaired loans. Additionally, the allowance consist of internally developed qualitative factors based on interagency guidance which are used to supplement the risks that are not captured by the historical loss migration analysis. These qualitative factors that are determined utilizing external economic factors and internal assessments is applied to each homogeneous loan pool. We also conduct individual loan review analyses, as part of the allowance for loan loss allocation process, applying specific monitoring policies and procedures in analyzing the existing loan portfolio.
Beginning in 2020, management increased the loss attributes in a number of the qualitative factors to more appropriately capture the risks stemming from economic deterioration from COVID-19. The Company continually evaluates these factors and makes adjustments each quarter. During the three and six months ended June 30, 2022, management adjusted the economic risk factors to incorporate the current economic implications, which include fluctuations in tourism, unemployment due to the COVID-19 pandemic and inflationary concerns.
Set forth below is a summary of the Bank’s activity in the allowance for loan losses during the three and six months ended June 30, 2022, and 2021, and the year ended December 31, 2021:
|
|
Three Months Ended June 30, 2022 |
|
|
Three Months Ended June 30, 2021 |
|
|
Six Months Ended June 30, 2022 |
|
|
Six Months Ended June 30, 2021 |
|
|
Year Ended December 31, 2021 |
|
|||||
Balance, beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Charged off loans |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries on loans previously charged off |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
16
Set forth below is information regarding loan balances and the related allowance for loan losses, by portfolio type, for the three and six months ended June 30, 2022 and 2021, and the year ended December 31, 2021, respectively.
|
|
Commercial |
|
|
Residential Mortgages |
|
|
Consumer |
|
|
Total |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
Six Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Charge-offs |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance balance at end of period related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Loans collectively evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balances at end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Loans collectively evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Charge-offs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
Provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance balance at end of period related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
|
|
Loans collectively evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balances at end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Loans collectively evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Charge-offs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance balance at end of year related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Loans collectively evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balances at end of year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Loans collectively evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
17
Credit Quality
The following table provides a summary of the delinquency status of the Bank’s loans by portfolio type:
|
|
30-59 Days Past Due |
|
|
60-89 Days Past Due |
|
|
90 Days and Greater Non- Accrual |
|
|
90 Days and Greater Still Accruing |
|
|
Total Past Due |
|
|
Current |
|
|
Total Loans Outstanding |
|
|||||||
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Commercial mortgage |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Commercial agriculture |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Automobile |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Commercial agriculture |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Automobile |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
1 |
Comprised of other revolving credit, installment loans, and overdrafts. |
Generally, the accrual of interest on a loan is discontinued when principal or interest payments become more than
18
The following table provides information as of June 30, 2022 and December 31, 2021, with respect to loans on non-accrual status, by portfolio type:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
(Dollars in thousands) |
|
|||||
Non-accrual loans: |
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
Commercial & industrial |
|
$ |
|
|
|
$ |
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
Total commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
Residential mortgage |
|
$ |
|
|
|
$ |
|
|
Other consumer 1 |
|
|
|
|
|
|
|
|
Total consumer |
|
|
|
|
|
|
|
|
Total non-accrual loans |
|
$ |
|
|
|
$ |
|
|
|
1 |
Comprised of other revolving credit, installment loans, and overdrafts. |
Credit Quality Indicators
The Bank uses several credit quality indicators to manage credit risk, including an internal credit risk rating system that categorizes loans into pass, special mention, substandard, formula classified, doubtful or loss categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics and that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk-rated and monitored collectively. These are typically loans to individuals in the classes which comprise the consumer portfolio segment.
The following are the definitions of the Bank’s credit quality indicators:
Pass (A): Exceptional: Essentially risk-free credit. These are loans of the highest quality that pose virtually no risk of loss to the Bank. This includes loans fully collateralized by means of a savings account(s) and time certificate(s) of deposit, and by at least
Pass (B): Standard: Multiple, strong sources of repayment. These are loans to borrowers with a demonstrated history of financial and managerial performance. The risk of loss is considered to be low. Loans are well-structured, with clearly identified primary and readily available secondary sources of repayment. These loans may be secured by an equal amount of funds in a savings account or time certificate of deposit. These loans may also be secured by marketable collateral whose value can be reasonably determined through outside appraisals. The borrower characteristically has well supported cash flows and low leverage.
Pass (C): Acceptable: Good primary and secondary sources of repayment. These are loans to borrowers of average financial condition, stability and management expertise. The borrower should be a well-established individual or company with adequate financial resources to withstand short-term fluctuations in the marketplace. The borrower’s financial ratios and trends are favorable. The loans may be unsecured or supported by non-real estate collateral for which the value is more difficult to determine, represent a reasonable credit risk and require an average amount of account officer attention. The borrower’s ability to repay unsecured credit is to be of unquestionable strength.
Pass (D): Monitor: Sufficient primary sources of repayment and an acceptable secondary source of repayment. Acceptable business or individual credit, but the borrower’s operations, cash flows or financial conditions carry average levels of risk. These loans are considered to be collectable in full, but may require a greater-than-average amount of loan officer monitoring. Borrowers are capable of absorbing normal setbacks without failing to meet the terms of the loan agreement.
Special Mention: A Special Mention asset has potential weaknesses that deserve a heightened degree of monitoring. These potential weaknesses may result in a deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. The Special Mention classification should neither be a compromise between a pass grade and substandard, nor should it be a “catch all” grade to identify any loan that has a policy exception.
19
Substandard: A Substandard asset is inadequately protected by the current sound worth and payment capacity of the obligor or the collateral pledged. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Assets classified as substandard are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Formula Classified: Formula Classified loans are all loans and credit cards delinquent
Doubtful: A loan with weaknesses well enough defined that eventual repayment in full, on the basis of currently existing facts, conditions and values, is highly questionable, even though certain factors may be present which could improve the status of the loan. The probability of some loss is extremely high, but because of certain known factors that may work to the advantage of strengthening of the assets (i.e. capital injection, perfecting liens on additional collateral, refinancing plans, etc.), its classification as an estimated loss is deferred until its more exact status can be determined.
Loss: Loans classified as “Loss” are considered uncollectible, and are either unsecured or are supported by collateral that is of little to no value. As such, their continuance as recorded assets is not warranted. While this classification does not mandate that a loan has no ultimate recovery value, losses should be taken in the period during which these loans are deemed to be uncollectible. Loans identified as loss are immediately approved for charge-off. The Bank may refer loans to outside collection agencies, attorneys, or its internal collection division to continue collection efforts. Any subsequent recoveries are credited to the Allowance for Loan Losses.
20
The Bank classifies its loan portfolios using internal credit quality ratings, as discussed above under Allowance for Loan Losses.
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
(Dollars in thousands) |
|
|||||
Pass: |
|
|
|
|
|
|
|
|
Commercial & industrial |
|
$ |
|
|
|
$ |
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
Commercial construction |
|
|
|
|
|
|
|
|
Commercial agriculture |
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
|
|
|
|
|
|
Home equity |
|
|
|
|
|
|
|
|
Automobile |
|
|
|
|
|
|
|
|
Other consumer |
|
|
|
|
|
|
|
|
Total pass loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention: |
|
|
|
|
|
|
|
|
Commercial & industrial |
|
|
|
|
|
|
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
- |
|
|
|
- |
|
Total special mention loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard: |
|
|
|
|
|
|
|
|
Commercial & industrial |
|
|
|
|
|
|
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
|
|
|
|
|
|
Other consumer |
|
|
- |
|
|
|
|
|
Total substandard loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formula Classified: |
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
|
|
|
|
|
|
Automobile |
|
|
|
|
|
|
|
|
Other consumer |
|
|
|
|
|
|
|
|
Total formula classified loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doubtful: |
|
|
|
|
|
|
|
|
Commercial & industrial |
|
|
|
|
|
|
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
Total doubtful loans |
|
|
|
|
|
|
|
|
Total outstanding loans, gross |
|
$ |
|
|
|
$ |
|
|
Impaired Loans
A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the original contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
Impaired loans include loans that are in non-accrual status and other loans that have been modified in Troubled Debt Restructurings (TDRs), where economic concessions have been granted to borrowers experiencing financial difficulties. These concessions typically result from the Bank’s loss mitigation actions, and could include reductions in the interest rate, payment extensions, forbearance, or other actions taken with the intention of maximizing collections.
Impairment is measured on a loan-by-loan basis for commercial and real estate loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral (if the loan is collateral-dependent). Large groups of smaller-balance homogeneous loans, such as consumer loans, are collectively evaluated for impairment. Impairment reserves for these groups of consumer loans are determined using historical loss given default rates for similar loans.
21
The following table sets forth information regarding non-accrual loans and restructured loans at June 30, 2022 and December 31, 2021:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
(Dollars in thousands) |
|
|||||
Impaired loans: |
|
|
|
|
|
|
|
|
Restructured loans: |
|
|
|
|
|
|
|
|
Non-accruing restructured loans |
|
$ |
|
|
|
$ |
|
|
Accruing restructured loans |
|
|
|
|
|
|
|
|
Total restructured loans |
|
|
|
|
|
|
|
|
Other impaired loans |
|
|
|
|
|
|
|
|
Total impaired loans |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Impaired loans less than 90 days delinquent and included in total impaired loans |
|
$ |
|
|
|
$ |
|
|
The table below contains additional information with respect to impaired loans, by portfolio type, at June 30, 2022 and December 31, 2021:
|
|
Recorded Investment |
|
|
Unpaid Principal Balance |
|
|
Average Recorded Investment |
|
|
Interest Income Recognized |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
June 30, 2022, with no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total impaired loans with no related allowance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2022, with a related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans with a related allowance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021, with no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Other consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Total impaired loans with no related allowance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021, with a related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Residential mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans with a related allowance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
22
Troubled Debt Restructurings
In accordance with FASB’s Accounting Standards Update No. 2011-02, “A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring” (ASU No. 2011-02), the Bank had $
Additional information regarding performing and nonperforming TDRs at June 30, 2022 and December 31, 2021 is set forth in the following table:
|
|
Number of |
|
|
Pre- Modification Outstanding Recorded |
|
|
Principal |
|
|
Post- Modification Outstanding Recorded |
|
|
Outstanding Balance |
|
|||||||||
|
|
Loans |
|
|
Investment |
|
|
Modifications |
|
|
Investment |
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Commercial & industrial |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total performing |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total nonperforming |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Troubled Debt Restructurings |
|
|
|
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Principal modification includes principal forgiveness at the time of modification, contingent principal forgiveness granted over the life of the loan based on borrower performance.
In an effort to constructively work with borrowers affected by the COVID-19 pandemic, the Bank initiated a temporary program in March 2020 to allow for
There were no defaults on troubled debt restructurings following the modification during the six months ended June 30, 2022 and 2021.
The Bank has
Note 6 – Commitments and Contingencies
The Bank is involved in certain legal actions and claims that arise in the ordinary course of business. Management believes that, as a result of its legal defenses and insurance arrangements, none of these matters is expected to have a material adverse effect on the Bank’s, BGIS’s or the Company’s financial condition, results of operations or cash flows.
23
Note 7 – Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered by the United States federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s, BGIS’s and the Company’s condensed consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items, as calculated under regulatory accounting practices.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of Total and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). As of June 30, 2022, and December 31, 2021, the Bank met all capital adequacy requirements to which it is subject.
As of June 30, 2022, the Bank’s capital ratios each exceeded the Federal Deposit Insurance Corporation’s well capitalized standards under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum Total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since the Bank’s last regulatory examination that management believes have changed the Bank’s category.
The Company’s actual capital amounts and ratios as of June 30, 2022 and December 31, 2021 are presented in the table below.
|
|
Actual |
|
|
For Capital Adequacy Purposes |
|
|
To Be Well Capitalized Under Prompt Corrective Action Provisions |
|
|||||||||||||||
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
||||||
At June 30, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to Risk Weighted Assets) |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Tier 1 Capital (to Risk Weighted Assets) |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Tier 1 Capital (to Average Assets) |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Common Equity Tier 1 Capital (to Risk Weighted Assets) |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to Risk Weighted Assets) |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Tier 1 Capital (to Risk Weighted Assets) |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Tier 1 Capital (to Average Assets) |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Common Equity Tier 1 Capital (to Risk Weighted Assets) |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Note 8 – Off-Balance-Sheet Activities
The Bank is a party to credit-related financial instruments with off-balance-sheet risk to meet the financing needs of its customers in the normal course of business. These financial instruments include commitments to extend credit, standby letters of credit, and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in addition to the amount reflected in the condensed consolidated financial statements.
24
The Bank’s exposure to credit loss, in the event of nonperformance by the other parties to financial instruments for loan commitments and letters of credit, is represented by the contractual amount of these instruments. The Bank follows the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
A summary of financial instruments with off-balance-sheet risk at June 30, 2022 and December 31, 2021 is as follows:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
Commitments to extend credit |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Letters of credit: |
|
|
|
|
|
|
|
|
Standby letters of credit |
|
$ |
|
|
|
$ |
|
|
Commercial letters of credit |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for some lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer.
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party or the shipment of merchandise from a third party. These letters of credit are primarily issued to support public and private borrowing arrangements. The majority of all letters of credit issued have expiration dates within
The Bank considers its standby and other letters of credit to be payment guarantees. At June 30, 2022, the maximum undiscounted future payments that the Bank could be required to make for all outstanding letters of credit were $
Note 9 – Income Taxes
We record an amount equal to the tax credits, tax loss carry-forwards and tax deductions (“tax benefits”) that we believe will be available to offset or reduce the amounts of income taxes in future periods as a deferred tax asset on our condensed consolidated statements of financial condition. Under applicable federal and state income tax laws and regulations in the United States, such tax benefits will expire if not used within specified periods of time. Accordingly, the ability to fully use the deferred tax asset depends on the amount of taxable income that we generate during those time periods. At least once each year, or more frequently if warranted, we make an estimates of future taxable income that we believe we are likely to generate during those future periods. If we conclude, on the basis of those estimates and the amount of the tax benefits available to us, that it is more likely than not that we will be able to fully utilize those tax benefits prior to their expiration, we recognize the deferred tax asset in full on our balance sheet. On the other hand, if we conclude on the basis of those estimates and the amount of the tax benefits available to us that it has become more likely than not that we will be unable to utilize those tax benefits in full prior to their expiration, then we would establish a (or increase any existing) valuation allowance to reduce the deferred tax asset on our balance sheet to the amount which we believe we are more likely than not to be able to utilize. Such a reduction is implemented by recognizing a non-cash charge that would have the effect of increasing the provision, or reducing any credit, for income taxes that we would otherwise have recorded in our condensed consolidated statements of income. The determination of whether and the extent to which we will be able to utilize our deferred tax asset involves significant management judgments and assumptions that are subject to period-to-period changes as a result of changes in tax laws, changes in the market, or economic conditions that could affect our operating results or variances between our actual operating results and our projected operating results, as well as other factors.
There was
The difference between the effective income tax expense and the income tax expense computed at the Guam statutory rate of
In addition to filing a federal income tax return in Guam, the Bank files income tax returns in the CNMI and the State of California. The Bank is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2012.
25
Note 10 – Fair Value Measurements
The Bank uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with ASC Topic 820 “Fair Value Measurements and Disclosures”, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances there are no quoted market prices for the Bank’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance of ASC Topic 820 provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under then-current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under then-current market conditions depends on the facts and circumstances, and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under then-current market conditions.
Fair Value Hierarchy
In accordance with the guidance of ASC Topic 820, the Bank groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
Level 1: |
Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market, as well as certain U.S. Treasury securities that are highly liquid and are actively traded in over-the-counter markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. |
Level 2: |
Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on 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 for substantially the full term of the asset or liability. |
Level 3: |
Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation. |
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
26
Financial assets measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 are as follows:
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
|
Total |
|
||||
At June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury notes and bonds |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
U.S. government agency pool securities |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
U.S. government agency or GSE |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
Total fair value of available-for-sale securities |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSRs |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Total fair value |
|
$ |
- |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury notes and bonds |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
U.S. government agency pool securities |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
U.S. government agency or GSE |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
Total fair value of available-for-sale securities |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSRs |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Total fair value |
|
$ |
- |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
There were
As of June 30, 2022 and December 31, 2021, the changes in Level 3 assets measured at fair value on a recurring basis are as follows:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
Beginning balance |
|
$ |
|
|
|
$ |
|
|
Realized and unrealized net losses: |
|
|
|
|
|
|
|
|
Included in net income |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
|
$ |
|
|
The valuation technique used for Level 3 mortgage servicing rights is their discounted cash flow. Inputs considered in determining Level 3 pricing include the anticipated prepayment rates, discount rates, and cost to service. Significant increases or decreases in any of those inputs in isolation would result in a significantly lower or higher fair value measurement.
27
The following table presents quantitative information about the valuation technique and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring basis:
|
|
Estimated Fair Value |
|
|
Valuation Technique |
|
Unobservable Inputs |
|
Range of Inputs |
|
|
Weighted Average Rate |
|
|||
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instrument: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSRs |
|
$ |
|
|
|
Discounted Cash Flow |
|
Discount Rate |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Weighted Average Prepayment Rate (Public Securities Association) |
|
100% |
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instrument: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSRs |
|
$ |
|
|
|
Discounted Cash Flow |
|
Discount Rate |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Weighted Average Prepayment Rate (Public Securities Association) |
|
125% |
|
|
|
|
|
There were
Nonrecurring Fair Value Measurements
Under certain circumstances, the Bank makes adjustments to fair value for assets and liabilities even though they are not measured at fair value on an ongoing basis. The Bank did not have any financial instruments carried on the consolidated statements of financial condition by caption and by level in fair value hierarchy for a nonrecurring change in fair value at June 30, 2022 and December 31, 2021, respectively.
The fair value of loans subject to write downs is estimated using the appraised value of the underlying collateral, discounted as necessary due to management’s estimates of changes in economic conditions.
Additionally, the Bank makes adjustments to nonfinancial assets and liabilities even though they are not measured at fair value on an ongoing basis. The Bank does not have nonfinancial assets or liabilities for which a nonrecurring change in fair value has been recorded during the periods ended June 30, 2022 and December 31, 2021.
The following methods and assumptions were used by the Bank in estimating fair value disclosures for financial instruments:
Cash and Cash Equivalents
The carrying amount of cash and short-term instruments approximates fair value based on the short-term nature of the assets.
Interest-Bearing Deposits in Banks
Fair values for other interest-bearing deposits are estimated using discounted cash flow analyses based on current interest rates or yields for similar types of deposits.
Federal Home Loan Bank Stock
The Bank is a member of the FHLB of Des Moines. As a member, we are required to own stock of the FHLB, the amount of which is based primarily on the level of our borrowings from that institution. We also have the right to acquire additional shares of stock in the FHLB; however, to date, we have not done so. It is not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability.
28
Investment Securities
When quoted prices are available in an active market, the Bank classifies the securities within Level 1 of the valuation hierarchy. Level 1 securities include U.S. Treasury notes and bonds. At June 30, 2022, the Company classified trading securities in Level 1.
If quoted market prices are not available, the Bank estimates fair values using pricing models and discounted cash flows that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, and credit spreads. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, include U.S. GSE obligations, U.S. government agency pool securities, and other securities. Mortgage-backed securities are included in Level 2 if observable inputs are available. In certain cases where there is limited activity or less transparency around inputs to the valuation, the Bank would classify those securities in Level 3. At June 30, 2022 and December 31, 2021, the Bank did not have any Level 3 investment securities.
Loans
For variable-rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, based upon interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable. Loans are classified in Level 3.
Mortgage Servicing Rights
The fair value of MSRs is determined using models which depend on estimates of prepayment rates, discount rates and costs to service. MSRs are classified in Level 3.
Deposit Liabilities
The fair values disclosed for demand deposits (for example, interest and non-interest checking, passbook savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies current market interest rates on comparable instruments to a schedule of aggregated expected monthly maturities on time deposits. Deposit liabilities are classified in Level 3.
Short-Term Borrowings
The carrying amounts of federal funds purchased and FHLB advances maturing within
Long-Term Borrowings
The fair value of FHLB advances maturing after
Accrued Interest
The carrying amount of accrued interest approximates fair value.
Off-Balance Sheet Commitments and Contingent Liabilities
Management does not believe it is practicable to provide an estimate of fair value for off-balance sheet commitments or contingent liabilities because of the uncertainty involved in attempting to assess the likelihood and timing of a commitment being drawn upon, coupled with a lack of an established market for these instruments and the wide diversity of fee structures.
29
Fair Value of Other Financial Instruments
The estimated fair values of the Bank’s financial instruments, excluding those assets recorded at fair value on a recurring basis on the Bank’s condensed consolidated statements of financial condition, are as follows:
|
|
|
|
|
|
Estimated Fair Value |
|
|||||||||
|
|
Carrying Amount |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
- |
|
Restricted cash |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
Federal Home Loan Bank stock |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
Investment securities held-to-maturity |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
Loans, net |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
- |
|
Restricted cash |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
Federal Home Loan Bank stock |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
Investment securities held-to-maturity |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
Loans, net |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
Note 11 – Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
Net unrealized (loss) gain on available-for-sale securities |
|
$ |
( |
) |
|
$ |
( |
) |
Amounts reclassified from AOCI for (gain) on sale of investment securities available-for-sale included in net income |
|
|
- |
|
|
|
( |
) |
Tax effect |
|
|
|
|
|
|
|
|
Unrealized holding (loss) gain on available-for-sale securities, net of tax |
|
|
( |
) |
|
|
( |
) |
Gross unrealized holding loss on held-to-maturity securities |
|
|
( |
) |
|
|
( |
) |
Amortization of unrealized holding loss on held-to-maturity during the period |
|
|
|
|
|
|
|
|
Unrealized holding loss on held-to-maturity securities |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
( |
) |
Note 12 – Leases
The Bank leases certain land, office spaces, and storage spaces. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Instead, the Bank recognizes lease expense for these leases on a straight-line basis over the lease term.
30
Certain of our lease agreements include rental payments based on a percentage of the prevailing market value of the lease and the average of the Treasury Bill Rate and the Guam Consumer Price Index figure, and others include rental payments adjusted periodically for inflation. The Bank's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Bank leases certain facilities from two separate entities in which two of its directors have separate ownership interests. Lease payments made to these entities during the six months ended June 30, 2022 and 2021 approximated $
Additionally, the Bank leases office space to third parties, with original lease terms ranging from 1 to
The cash flow from operating leases included in the measurement of lease liabilities during the six months ended June 30, 2022 and 2021 were $
The following table summarizes the lease-related assets and liabilities recorded as part of other assets and other liabilities, respectively, in our condensed consolidated statements of financial condition at June 30, 2022 and December 31, 2021:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
Assets |
|
|
|
|
|
|
|
|
Operating lease right-of-use assets |
|
$ |
|
|
|
$ |
|
|
Total lease assets |
|
$ |
|
|
|
$ |
|
|
Liabilities |
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
Operating |
|
$ |
|
|
|
$ |
|
|
Noncurrent |
|
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
|
|
Total lease liabilities |
|
$ |
|
|
|
$ |
|
|
The operating lease costs and variable lease costs were $
The following table provides the maturities of lease liabilities at June 30, 2022:
|
|
Operating Leases (a) |
|
|
Total |
|
||
2022 |
|
$ |
|
|
|
$ |
|
|
2023 |
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
2026 |
|
|
|
|
|
|
|
|
After 2026 |
|
|
|
|
|
|
|
|
Total lease payments |
|
|
|
|
|
|
|
|
Less: Interest (b) |
|
|
|
|
|
|
|
|
Present value of lease liabilities (c) |
|
$ |
|
|
|
$ |
|
|
Note: For leases commencing prior to 2019, minimum lease payments exclude payments to landlords for real estate taxes and common area maintenance.
|
(a) |
Operating lease payments include $ |
|
(b) |
Calculated using the incremental borrowing rate based on the lease term for each lease. |
|
(c) |
Includes the current portion of $ |
31
The following table provides the weighted-average lease term and discount rate at June 30, 2022:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
Weighted-average remaining lease term (years) |
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
|
|
Weighted-average discount rate |
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
% |
|
|
|
% |
Note 13 – Subordinated Debt
On June 29, 2021, the Company issued $
The 2031 Notes have a
On June 27, 2019, the Company issued $
The 2029 Notes have
Both notes are unsecured, subordinated obligations of the Company only and are not obligations of, and are not guaranteed by, any subsidiary of the Company. The Notes rank junior in right to payment to the Company’s current and future senior indebtedness.
Note 14 – Subsequent Events
On July 25, 2022, the Company held its annual shareholders meeting and the shareholders approved a
reverse stock split. The Company expects to complete the transaction in the fourth quarter of 2022, subject to the receipt of all regulatory approvals.Management has reviewed the events occurring through the date of this report, and there were no subsequent events that require additional disclosure to the accompanying financial statements.
32
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources of the Company and its wholly-owned subsidiaries, the Bank and BGIS. This information is intended to facilitate the understanding and assessment of significant changes and trends related to our financial condition and the results of operations. This discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the accompanying notes presented elsewhere in this Quarterly Report.
Overview
BankGuam Holding Company (the “Company”) is a Guam corporation organized on October 29, 2010, to act as a holding company of Bank of Guam (the “Bank”), a 17-branch bank serving the communities in Guam, the Commonwealth of the Northern Mariana Islands (“CNMI”), the Federated States of Micronesia (“FSM”), the Republic of the Marshall Islands (“RMI”), the Republic of Palau (“ROP”), and San Francisco, California. On August 15, 2011, the Company acquired all of the outstanding common stock of the Bank in a holding company formation transaction.
In August 2015, the Company chartered a second subsidiary, BankGuam Investment Services (“BGIS”), in an effort to enhance the options and opportunities of our customers to build future income and wealth. BGIS is a registered investment company, primarily involved in providing investment advisory services and trading securities for its customers.
In May 2016, the Company entered into a Stock Purchase Agreement (the “Agreement”) to acquire up to 70% of ASC Trust LLC, formerly ASC Trust Corporation, a Guam trust company. In July 2016, subsequent to the approval of the Federal Reserve Bank of San Francisco in June 2016, the first purchase of 25% of ASC Trust LLC was completed. In July 2019, the Company completed the second purchase of an additional 20% of ASC Trust LLC, bringing its ownership to 45%. As stated in Note 4 – Investment Securities, and with the approval of the Federal Reserve Bank of San Francisco, an additional 25% of ASC Trust LLC was purchased by the Company in July 2021. This transaction brought the Company’s ownership of ASC Trust LLC to 70%, and completes the transactions contemplated by the Agreement. The Company evaluated its ownership in ASC Trust LLC after the last transaction in accordance to ASC 810 – Consolidation, and determined that the Company has control over ASC Trust LLC requiring consolidation. ASC Trust LLC is primarily involved in administering 401(k) retirement plans and other employee benefit programs for its customers.
Other than holding the shares of the Bank, BGIS and ASC Trust LLC, the Company conducts no significant activities, although it is authorized, with the prior approval of its principal regulator, the Board of Governors of the Federal Reserve System, to engage in a variety of activities related to the business of banking. Currently, substantially all of the Company’s operations are conducted and substantially all of its assets are owned by the Bank, which accounts for substantially all of our consolidated revenues, expenses and operating income. The Bank’s headquarters is located in Hagåtña, Guam, and the Bank provides a variety of financial services to individuals, businesses and government entities through its branch network. The Bank’s primary deposit products are demand deposits, savings and time certificates of deposit, and its primary lending products are consumer, commercial and real estate loans. The Bank also provides many other financial services to its customers. In 2021, the Bank permanently closed the Dededo, Harmon and Chalan Piao branches. The Bank has been adding digital channels to its product delivery system for several years. The COVID-19 pandemic accelerated the adoption of those digital channels by our customers, which was considered in our decision to close those branches.
The COVID-19 pandemic and resulting governmental responses impacted our operations in 2022 and 2021.See “Note 2 – Summary of Significant Accounting Policies – COVID-19” for discussion.
33
Summary of Operating Results
The following table provides unaudited comparative information with respect to our results of operations for the three and six months ended June 30, 2022 and 2021, respectively:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
|
|
2022 Amount |
|
|
2021 Amount |
|
|
% Change |
|
|
2022 Amount |
|
|
2021 Amount |
|
|
% Change |
|
||||||
Interest income |
|
$ |
21,850 |
|
|
$ |
20,193 |
|
|
|
8.2 |
% |
|
$ |
42,839 |
|
|
$ |
40,706 |
|
|
|
5.2 |
% |
Interest expense |
|
|
518 |
|
|
|
358 |
|
|
|
44.7 |
% |
|
|
1,026 |
|
|
|
710 |
|
|
|
44.5 |
% |
Net interest income, before provision for loan losses |
|
|
21,332 |
|
|
|
19,835 |
|
|
|
7.5 |
% |
|
|
41,813 |
|
|
|
39,996 |
|
|
|
4.5 |
% |
Provision for loan losses |
|
|
1,425 |
|
|
|
475 |
|
|
|
200.0 |
% |
|
|
2,850 |
|
|
|
2,950 |
|
|
|
-3.4 |
% |
Net interest income, after provision for loan losses |
|
|
19,907 |
|
|
|
19,360 |
|
|
|
2.8 |
% |
|
|
38,963 |
|
|
|
37,046 |
|
|
|
5.2 |
% |
Non-interest income |
|
|
8,526 |
|
|
|
5,475 |
|
|
|
55.7 |
% |
|
|
15,919 |
|
|
|
9,685 |
|
|
|
64.4 |
% |
Non-interest expense |
|
|
23,306 |
|
|
|
17,389 |
|
|
|
34.0 |
% |
|
|
45,426 |
|
|
|
35,261 |
|
|
|
28.8 |
% |
Income before income taxes |
|
|
5,127 |
|
|
|
7,446 |
|
|
|
-31.1 |
% |
|
|
9,456 |
|
|
|
11,470 |
|
|
|
-17.6 |
% |
Income tax expense |
|
|
998 |
|
|
|
1,536 |
|
|
|
-35.0 |
% |
|
|
1,813 |
|
|
|
2,265 |
|
|
|
-20.0 |
% |
Net income |
|
$ |
4,129 |
|
|
$ |
5,910 |
|
|
|
-30.1 |
% |
|
$ |
7,643 |
|
|
$ |
9,205 |
|
|
|
-17.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share (EPS): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted EPS |
|
$ |
0.39 |
|
|
$ |
0.59 |
|
|
|
|
|
|
$ |
0.71 |
|
|
$ |
0.92 |
|
|
|
|
|
As the above table indicates, our net income decreased in the three and six months ended June 30, 2022, as compared to the corresponding periods in 2021. In the three months ended June 30, 2022, we recorded net income after taxes of $4.1 million, a decrease of $1.8 million (or 30.1%) as compared to the same period in 2021. The primary reasons for the decrease were the $5.9 million increase in non-interest expense, partially offset by a $3.1 million increase in non-interest income, a $547 thousand increase in net interest income, and a $538 thousand decrease in income tax expense. The increase in non-interest expense is largely due to the increase of $2.3 million in technology, equipment, and depreciation, a $1.6 million increase in salaries and employee benefits, and a $1.6 million increase in general and administrative expenses to include $358 thousand related to ASC Trust LLC.
The increase in non-interest income is largely due to the $3.2 million increase in service charges and fees, primarily due to the fee income from ASC Trust LLC, and the $580 thousand increase in trustee fees, partially offset by the $919 thousand decrease in other income.
In the six months ended June 30, 2022, we recorded $7.6 million in net income, a decrease of $1.6 million (or 17.0%) from $9.2 million during the same period in 2021. The primary reasons for the decrease were an increase of $10.2 million in non-interest expense, partially offset by the $6.2 million increase to non-interest income and the $1.9 million increase to net interest income. The increase in non-interest expense is largely due to the increase of $4.6 million in technology, equipment, and depreciation, the $2.1 million increase in salaries and employee benefits, the $2.5 million increase in general and administrative expenses to include $727 thousand related to ASC Trust LLC, the $483 thousand increase to training and education, and the $414 thousand increase to professional services.
The increase in non-interest income is primarily due to the $7.0 million increase service charges and fees, primarily due to the fee income from ASC Trust LLC, the $430 thousand increase in cardholder and merchant net income, and the $514 thousand increase in trustee fees, partially offset by the $1.5 million decrease in other income.
The following table shows the increase in our net interest margin in the three and six months ended June 30, 2022, and it also indicates the impact that the increase in our net income had on our annualized returns on average assets and average equity. During the three and six months ended June 30, 2022, our return on average equity decreased by 3.93% and increased by 2.42%, respectively as compared to the corresponding period in 2021, and our return on average assets decreased by 21 basis points and increased by 9 basis points, respectively, during the same comparative period.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net interest margin |
|
|
3.39 |
% |
|
|
2.86 |
% |
|
|
3.27 |
% |
|
|
3.15 |
% |
Return on average assets |
|
|
0.61 |
% |
|
|
0.82 |
% |
|
|
0.78 |
% |
|
|
0.69 |
% |
Return on average equity |
|
|
10.54 |
% |
|
|
14.45 |
% |
|
|
13.40 |
% |
|
|
10.98 |
% |
Critical Accounting Policies
The Company’s significant accounting policies are set forth in Note 2 in the Notes to the Company’s Annual Report on Form 10-K for 2021 filed with the SEC on March 28, 2022, and Note 2 of Item 1 in this report. Our unaudited condensed consolidated financial
34
statements are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and general practices in the banking industry. Certain of those accounting policies are considered critical accounting policies because they require us to make assumptions and judgments regarding circumstances or trends that could affect the carrying values of our material assets, such as assumptions regarding economic conditions or trends that could impact our ability to fully collect our outstanding loans or ultimately realize the carrying values of certain of our other assets, such as securities that are available for sale. If adverse changes were to occur in the events, trends or other circumstances on which our assumptions or judgments have been based, or other unanticipated events were to happen that might affect our operating results, it could become necessary under GAAP for us to reduce the carrying values of the affected assets in our condensed consolidated statements of financial condition. In addition, because reductions in the carrying values of assets are sometimes effectuated by or require charges to income, such reductions also may have the effect of reducing our income.
Results of Operations
Net Interest Income
Net interest income, the primary component of the Bank’s income, refers to the difference between the interest earned on loans, investment securities and other interest-earning assets, and the interest paid on deposits and other borrowed funds. Our interest income and interest expense are affected by a number of factors, some of which are outside of our control, including national and local economic conditions, the monetary policies of the Federal Reserve’s Open Market Committee which affect interest rates, competition in the marketplace for loans and deposits, the demand for loans and the ability of borrowers to meet their payment obligations. Net interest income, when expressed as a percentage of average earning assets, is a banking organization’s “net interest margin.”
The following table sets forth our interest income, interest expense and net interest income, and our annualized net interest margin for the three and six months ended June 30, 2022 and 2021, respectively:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Interest income |
|
|
21,850 |
|
|
$ |
20,193 |
|
|
|
8.21 |
% |
|
$ |
42,839 |
|
|
$ |
40,706 |
|
|
|
5.24 |
% |
Interest expense |
|
|
518 |
|
|
|
358 |
|
|
|
44.69 |
% |
|
|
1,026 |
|
|
|
710 |
|
|
|
44.51 |
% |
Net interest income |
|
|
21,332 |
|
|
$ |
19,835 |
|
|
|
7.55 |
% |
|
$ |
41,813 |
|
|
$ |
39,996 |
|
|
|
4.54 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
3.39 |
% |
|
|
2.86 |
% |
|
|
0.53 |
% |
|
|
3.27 |
% |
|
|
3.15 |
% |
|
|
0.12 |
% |
Net interest income increased by 7.55% and 4.54%, respectively for the three and six months ended June 30, 2022 as compared to the corresponding period in 2021.
For the three months ended June 30, 2022, net interest income increased by $1.5 million and $1.8 million, respectively, as compared to the same period in 2021. Total interest income increased by $1.7 million due to increases of $1.0 million in earnings on investment securities and $562 thousand from short term investments during the three months ended June 30, 2022, compared to the previous year. The increase in our net interest margin was the result of an increase of 0.56% in the yield on our average earning assets in the three months ended June 30, 2022, as compared to the corresponding period of 2021, the effect of which was partially offset by an increase in the yield on our average earning liabilities by 0.04%, compared to the same comparative period.
Total interest income increased by $2.1 million in the six months ended June 30, 2022, compared to the previous year due to increases of $2.0 million in earnings on investment securities and $674 thousand from short term investments, partially offset by $525 thousand decrease in interest income from loans during the six months ended June 30, 2022, compared to the same comparative period in the previous year.
On March 3, 2020, the Federal Open Market Committee (FOMC) reduced the target range for federal funds by 50 basis points to 1.00% - 1.25%. This rate was further reduced to a target range of 0% - 0.25% on March 16, 2020. Improvements in econcomic conditions as well as accelerating inflation resulted in the FOMC increasing the target range by 25bps to 0.25% - 0.50% on March 16, 2022, 50bps to 0.75% - 1.00% on May 4, 2022, 75bps to 1.50% - 1.75% on June 15, 2022, and by 75bps 2.25% to 2.50% on July 27, 2022. The increase in interest rates is expected to have a positive impact to the Company’s net interest income as loans and securities reprice.
35
Average Balances
Distribution, Rate and Yield
The following table sets forth information regarding our average balance sheet, annualized yields on interest-earning assets and interest rates on interest-bearing liabilities, the interest rate spread and the interest rate margin for the three and six months ended June 30, 2022 and 2021:
|
|
Three Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||
|
|
Average Balance |
|
|
Interest Earned/Paid |
|
|
Average Yield/Rate |
|
|
Average Balance |
|
|
Interest Earned/Paid |
|
|
Average Yield/Rate |
|
||||||
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term investments1 |
|
$ |
336,285 |
|
|
$ |
710 |
|
|
|
0.84 |
% |
|
$ |
733,908 |
|
|
$ |
148 |
|
|
|
0.08 |
% |
Investment Securities² |
|
|
874,713 |
|
|
|
3,408 |
|
|
|
1.56 |
% |
|
|
627,809 |
|
|
|
2,400 |
|
|
|
1.53 |
% |
Loans³ |
|
|
1,302,894 |
|
|
|
17,732 |
|
|
|
5.44 |
% |
|
|
1,407,787 |
|
|
|
17,645 |
|
|
|
5.01 |
% |
Total earning assets |
|
|
2,513,892 |
|
|
|
21,850 |
|
|
|
3.48 |
% |
|
|
2,769,504 |
|
|
|
20,193 |
|
|
|
2.92 |
% |
Noninterest earning assets |
|
|
189,359 |
|
|
|
|
|
|
|
|
|
|
|
121,873 |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,703,251 |
|
|
|
|
|
|
|
|
|
|
$ |
2,891,377 |
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts |
|
$ |
370,809 |
|
|
$ |
9 |
|
|
|
0.01 |
% |
|
$ |
346,348 |
|
|
$ |
26 |
|
|
|
0.03 |
% |
Savings accounts |
|
|
1,147,453 |
|
|
|
29 |
|
|
|
0.01 |
% |
|
|
1,140,536 |
|
|
|
86 |
|
|
|
0.03 |
% |
Certificates of deposit |
|
|
26,263 |
|
|
|
4 |
|
|
|
0.06 |
% |
|
|
28,653 |
|
|
|
8 |
|
|
|
0.11 |
% |
Subordinated debt |
|
|
35,000 |
|
|
|
476 |
|
|
|
5.44 |
% |
|
|
21,667 |
|
|
|
238 |
|
|
|
4.39 |
% |
Total interest-bearing liabilities |
|
|
1,579,525 |
|
|
|
518 |
|
|
|
0.13 |
% |
|
|
1,537,204 |
|
|
|
358 |
|
|
|
0.09 |
% |
Non-interest bearing liabilities |
|
|
967,025 |
|
|
|
|
|
|
|
|
|
|
|
1,190,614 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,546,550 |
|
|
|
|
|
|
|
|
|
|
|
2,727,818 |
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
156,701 |
|
|
|
|
|
|
|
|
|
|
|
163,559 |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
2,703,251 |
|
|
|
|
|
|
|
|
|
|
$ |
2,891,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
21,332 |
|
|
|
|
|
|
|
|
|
|
$ |
19,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread |
|
|
|
|
|
|
|
|
|
|
3.35 |
% |
|
|
|
|
|
|
|
|
|
|
2.82 |
% |
Net interest margin |
|
|
|
|
|
|
|
|
|
|
3.39 |
% |
|
|
|
|
|
|
|
|
|
|
2.86 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||
|
|
Average Balance |
|
|
Interest Earned/Paid |
|
|
Average Yield/Rate |
|
|
Average Balance |
|
|
Interest Earned/Paid |
|
|
Average Yield/Rate |
|
||||||
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term investments1 |
|
$ |
398,751 |
|
|
$ |
889 |
|
|
|
0.45 |
% |
|
$ |
533,633 |
|
|
$ |
215 |
|
|
|
0.08 |
% |
Investment securities² |
|
|
862,605 |
|
|
|
6,583 |
|
|
|
1.53 |
% |
|
|
592,848 |
|
|
|
4,599 |
|
|
|
1.55 |
% |
Loans³ |
|
|
1,293,868 |
|
|
|
35,367 |
|
|
|
5.47 |
% |
|
|
1,416,142 |
|
|
|
35,892 |
|
|
|
5.07 |
% |
Total earning assets |
|
|
2,555,224 |
|
|
|
42,839 |
|
|
|
3.35 |
% |
|
|
2,542,623 |
|
|
|
40,706 |
|
|
|
3.20 |
% |
Noninterest earning assets |
|
|
172,785 |
|
|
|
|
|
|
|
|
|
|
|
127,742 |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,728,009 |
|
|
|
|
|
|
|
|
|
|
$ |
2,670,365 |
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts |
|
$ |
386,141 |
|
|
$ |
19 |
|
|
|
0.01 |
% |
|
$ |
334,843 |
|
|
$ |
50 |
|
|
|
0.03 |
% |
Savings accounts |
|
|
1,170,084 |
|
|
|
58 |
|
|
|
0.01 |
% |
|
|
1,110,466 |
|
|
|
164 |
|
|
|
0.03 |
% |
Certificates of deposit |
|
|
27,627 |
|
|
|
8 |
|
|
|
0.06 |
% |
|
|
28,757 |
|
|
|
20 |
|
|
|
0.14 |
% |
Subordinated debt |
|
|
17,500 |
|
|
|
941 |
|
|
|
10.75 |
% |
|
|
18,333 |
|
|
|
476 |
|
|
|
5.19 |
% |
Total interest-bearing liabilities |
|
|
1,601,352 |
|
|
|
1,026 |
|
|
|
0.13 |
% |
|
|
1,492,399 |
|
|
|
710 |
|
|
|
0.10 |
% |
Non-interest bearing liabilities |
|
|
961,283 |
|
|
|
|
|
|
|
|
|
|
|
1,010,358 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,562,635 |
|
|
|
|
|
|
|
|
|
|
|
2,502,757 |
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
165,374 |
|
|
|
|
|
|
|
|
|
|
|
167,608 |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
2,728,009 |
|
|
|
|
|
|
|
|
|
|
$ |
2,670,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
41,813 |
|
|
|
|
|
|
|
|
|
|
$ |
39,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread |
|
|
|
|
|
|
|
|
|
|
3.22 |
% |
|
|
|
|
|
|
|
|
|
|
3.11 |
% |
Net interest margin |
|
|
|
|
|
|
|
|
|
|
3.27 |
% |
|
|
|
|
|
|
|
|
|
|
3.15 |
% |
|
1 |
Short term investments consist of interest-bearing deposits that we maintain with other financial institutions. |
36
|
2 |
Includes all investment securities in the Available-for-Sale and the Held-to-Maturity classifications. The Bank did not own any tax exempt securities during 2022 and 2021. |
|
3 |
Loans include the average balance of non-accrual loans. Loan interest income includes loan fees of $621 thousand and $1.2 million in the three and six months ended June 30, 2022, respectively, and $1.0 million and $2.2 million in the three and six months ended June 30, 2021, respectively. |
For the three and six months ended June 30, 2022, our total average earning assets decreased by $255.6 million and increased by $12.6 million, respectively, as compared to the same period in 2021. The decrease during the three months ended June 30, 2022, compared to the same period in 2021, is attributed to the $397.6 million decrease in our average short term investments and a $104.9 million decrease in our average loan portfolio, partially offset by a $246.9 million increase in our average investment securities. Average noninterest earning assets increased by $67.5 million. In the three and six months ended June 30, 2022, average total interest-bearing liabilities increased by $42.3 million and $109.0 million, respectively, in comparison to the same period in 2021. In the three months ended June 30, 2022, the increase was comprised of the $6.9 million increase in average savings accounts, an $24.5 million increase in average interest-bearing checking accounts, and a $13.3 million increase in subordinated debt, partially offset by a $2.4 million decrease in average certificate of deposit accounts. During the three months ended June 30, 2022, average stockholders’ equity decreased by $6.1 million (3.6%) in comparison to the year-earlier period due to decrease in accumulated other comprehensive loss, due to the increase in market rates.
Our interest rate spread increased by 12 basis points (3.80%), and our net interest margin also increased by 13 basis points (4.03%) in the six months ended June 30, 2022, as compared to the same period in 2021. During the six months ended June 30, 2022, the increase in our interest rate spread is attributed to the 15 basis points (4.72%) increase in the average yield on our interest earning assets, from 3.20% to 3.35%, and the increase in the average rate on our interest-bearing liabilities by 3 basis points from 0.10% to 0.13%. The increase in our interest income is primarily due to the 25 bps rate hike in March 2022, 50bps in May 2022, and 75 bps in June 2022 by the Federal Open Market Committee. This impacted our loan portfolio, investment securities, and short term deposits in other banks, including the Federal Reserve Bank of San Francisco.
37
The following table provides information regarding the changes in interest income and interest expense, attributable to changes in rates and changes in volumes, that contributed to the total change in net interest income for the three and six months ended June 30, 2022, in comparison to the three and six months ended June 30, 2021:
|
|
Three Months Ended June 30, 2022 vs. 2021 |
|
|||||||||
|
|
(In thousands) |
|
|||||||||
|
|
Net Change in |
|
|
Attributable to: |
|
||||||
|
|
Interest Income/Expense |
|
|
Change in Rate |
|
|
Change in Volume |
|
|||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Short term investments |
|
$ |
562 |
|
|
$ |
5,606 |
|
|
$ |
(5,044 |
) |
Investment securities |
|
|
1,008 |
|
|
|
184 |
|
|
|
824 |
|
Loans |
|
|
87 |
|
|
|
6,058 |
|
|
|
(5,971 |
) |
Total interest income |
|
|
1,657 |
|
|
|
11,848 |
|
|
|
(10,191 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts |
|
|
(17 |
) |
|
|
(70 |
) |
|
|
53 |
|
Savings accounts |
|
|
(57 |
) |
|
|
(229 |
) |
|
|
172 |
|
Certificates of deposit |
|
|
(4 |
) |
|
|
(15 |
) |
|
|
11 |
|
Other borrowings |
|
|
238 |
|
|
|
227 |
|
|
|
11 |
|
Total interest expense |
|
|
160 |
|
|
|
(87 |
) |
|
|
247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
1,497 |
|
|
$ |
11,935 |
|
|
$ |
(10,438 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2022 vs. 2021 |
|
|||||||||
|
|
(In thousands) |
|
|||||||||
|
|
Net Change in |
|
|
Attributable to: |
|
||||||
|
|
Interest Income/Expense |
|
|
Change in Rate |
|
|
Change in Volume |
|
|||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Short term investments |
|
$ |
674 |
|
|
$ |
1,949 |
|
|
$ |
(1,275 |
) |
Investment securities |
|
|
1,984 |
|
|
|
(149 |
) |
|
|
2,133 |
|
Loans |
|
|
(525 |
) |
|
|
5,635 |
|
|
|
(6,160 |
) |
Total interest income |
|
|
2,133 |
|
|
|
7,435 |
|
|
|
(5,302 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts |
|
|
(31 |
) |
|
|
(67 |
) |
|
|
36 |
|
Savings accounts |
|
|
(106 |
) |
|
|
(218 |
) |
|
|
112 |
|
Certificates of deposit |
|
|
(12 |
) |
|
|
(23 |
) |
|
|
11 |
|
Other borrowings |
|
|
465 |
|
|
|
1,020 |
|
|
|
(555 |
) |
Total interest expense |
|
|
316 |
|
|
|
712 |
|
|
|
(396 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
1,817 |
|
|
$ |
6,723 |
|
|
$ |
(4,906 |
) |
Provision for Loan Losses
We maintain allowances for probable loan losses that are incurred as a normal part of the banking business. As more fully discussed in Note 5 of the notes to the unaudited condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q, an allowance for loan losses has been established by management in order to provide for those loans which, for a variety of reasons, may not be repaid in their entirety. The allowance is maintained at a level considered by management to be adequate to provide for probable losses that are accrued as of the balance sheet date and based on methodologies applied on a consistent basis with the prior year. Management’s review of the adequacy of the allowance includes, among other things, loan growth, changes in the composition of the loan portfolio, an analysis of past loan loss experience and management’s evaluation of the loan portfolio under current economic conditions.
38
The allowance for loan losses is based on estimates, and ultimate losses will vary from current estimates. The Bank recognizes that credit losses will be experienced and the risk of loss will vary with, among other things: general economic conditions; the type of loan being made; the credit worthiness of the borrower over the term of the loan; and, in the case of a collateralized loan, the quality and valuation of the collateral for such loan. The allowance for loan losses represents the Bank’s best estimate of the allowance necessary to provide for probable losses in the portfolio as of the balance sheet date.
If management determines that it is necessary to increase the allowance for loan losses, a provision for loan losses is recorded. For the three months ended June 30, 2022, the Bank’s provision for loan losses was $1.4 million, which was $950 thousand higher than the corresponding period of 2021. The increase is primarily due to the $2.0 million reversal in the year-earlier period and the reduction in the monthly provision for loan losses from $825 thousand to $475 thousand, which were due to the declining risk in the loan portfolio resulting from the decrease in net charge offs, the decrease in the delinquency ratio, and the decrease in non-accrual loans.
For the six months ended June 30, 2022, the Bank’s provision for loan losses was $2.9 million, which was $100 thousand lower than during the corresponding period of 2021. The decrease is mainly due to the reduction in the monthly provision for loan losses from $825 thousand to $475 thousand. In the three and six months ended June 30, 2022, management adjusted the economic risk factors to incorporate the current economic conditions, which includes fluctuations in tourism, unemployment due to the COVID-19 pandemic and inflationary concerns.
Management believes that the provision recorded was sufficient to offset the incremental risk of loss inherent in the gross loan portfolio of $1.36 billion at June 30, 2022, an increase of $38.9 million from December 31, 2021. The allowance for loan losses at June 30, 2022, was at $35.7 million or 2.63% of total gross loans outstanding as of the balance sheet date, an increase of $1.3 million from December 31, 2021. We recorded net loan charge-offs of $778 thousand and $1.5 million for the three and six months ended June 30, 2022, respectively. See “Analysis of Allowance for Loan Losses” in the Financial Condition Section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for more detailed information.
Non-Interest Income
The table below represents the major components of non-interest income and the changes therein for the three and six months ended June 30, 2022 and 2021:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||||||||||
|
|
2022 Amount |
|
|
2021 Amount |
|
|
Amount Change |
|
|
Percent Change |
|
|
2022 Amount |
|
|
2021 Amount |
|
|
Amount Change |
|
|
Percent Change |
|
||||||||
Non-interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges and fees |
|
$ |
5,099 |
|
|
$ |
1,836 |
|
|
$ |
3,263 |
|
|
|
177.7 |
% |
|
$ |
10,552 |
|
|
$ |
3,506 |
|
|
$ |
7,046 |
|
|
|
201.0 |
% |
Gain on sale of investment securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.0 |
% |
|
|
- |
|
|
|
272 |
|
|
|
(272 |
) |
|
|
-100.0 |
% |
Income from merchant services, net |
|
|
891 |
|
|
|
758 |
|
|
|
133 |
|
|
|
17.5 |
% |
|
|
1,543 |
|
|
|
1,406 |
|
|
|
137 |
|
|
|
9.7 |
% |
Income from cardholders, net |
|
|
985 |
|
|
|
991 |
|
|
|
(6 |
) |
|
|
-0.6 |
% |
|
|
1,538 |
|
|
|
1,245 |
|
|
|
293 |
|
|
|
23.5 |
% |
Trustee fees |
|
|
729 |
|
|
|
149 |
|
|
|
580 |
|
|
|
389.3 |
% |
|
|
815 |
|
|
|
301 |
|
|
|
514 |
|
|
|
170.8 |
% |
Other income |
|
|
822 |
|
|
|
1,741 |
|
|
|
(919 |
) |
|
|
-52.8 |
% |
|
|
1,471 |
|
|
|
2,955 |
|
|
|
(1,484 |
) |
|
|
-50.2 |
% |
Total non-interest income |
|
$ |
8,526 |
|
|
$ |
5,475 |
|
|
$ |
3,051 |
|
|
|
55.7 |
% |
|
$ |
15,919 |
|
|
$ |
9,685 |
|
|
$ |
6,234 |
|
|
|
64.4 |
% |
For the three months ended June 30, 2022, non-interest income totaled $8.5 million, which represented an increase of $3.1 million (55.7%) as compared to the three months ended June 30, 2021. The increase during the three months ended June 30, 2022, is primarily attributed to the increases in income of $3.3 million from service charges and fees, $580 thousand in trustee fees, and $133 thousand in net income from merchants, partially offset by a $919 thousand decrease in other income. The increase in service charges and fees is primarily due to the $2.6 million in fees generated by ASC Trust activities and an increase in the Bank’s service charges and fee income of $613 thousand.
For the six months ended June 30, 2022, non-interest income totaled $15.9 million, which was an increase of $6.2 million (64.4%) as compared to the six months ended June 30, 2021. The increase during the six months ended June 30, 2022, is primarily attributed the $7.0 million from service charges and fees, of which $5.3 million is from income from ASC Trust LLC, and increases of $514 thousand in trustee fees, $293 thousand net income from cardholders, and $137 thousand in net income from merchant services. This is partially offset by decreases of $272 thousand from gain on sale of investment securities and $1.5 million in other income.
39
Non-interest Expense
The table below represents the major components of non-interest expense and the changes for the three and six months ended June 30, 2022 and 2021:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||||||||||
|
|
2022 Amount |
|
|
2021 Amount |
|
|
Amount Change |
|
|
Percent Change |
|
|
2022 Amount |
|
|
2021 Amount |
|
|
Amount Change |
|
|
Percent Change |
|
||||||||
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
$ |
9,616 |
|
|
$ |
8,004 |
|
|
$ |
1,612 |
|
|
|
20.1 |
% |
|
$ |
18,841 |
|
|
$ |
16,700 |
|
|
$ |
2,141 |
|
|
|
12.8 |
% |
Occupancy |
|
|
2,443 |
|
|
|
2,132 |
|
|
|
311 |
|
|
|
14.6 |
% |
|
|
4,663 |
|
|
|
4,261 |
|
|
|
402 |
|
|
|
9.4 |
% |
Technology, equipment and depreciation |
|
|
5,347 |
|
|
|
3,083 |
|
|
|
2,264 |
|
|
|
73.4 |
% |
|
|
10,668 |
|
|
|
6,024 |
|
|
|
4,644 |
|
|
|
77.1 |
% |
Insurance |
|
|
466 |
|
|
|
515 |
|
|
|
(49 |
) |
|
|
-9.5 |
% |
|
|
923 |
|
|
|
1,005 |
|
|
|
(82 |
) |
|
|
-8.2 |
% |
Telecommunications |
|
|
405 |
|
|
|
389 |
|
|
|
16 |
|
|
|
4.1 |
% |
|
|
855 |
|
|
|
756 |
|
|
|
99 |
|
|
|
13.1 |
% |
FDIC insurance assessment |
|
|
296 |
|
|
|
516 |
|
|
|
(220 |
) |
|
|
-42.6 |
% |
|
|
618 |
|
|
|
860 |
|
|
|
(242 |
) |
|
|
-28.1 |
% |
Professional services |
|
|
804 |
|
|
|
627 |
|
|
|
177 |
|
|
|
28.2 |
% |
|
|
1,607 |
|
|
|
1,192 |
|
|
|
415 |
|
|
|
34.8 |
% |
Contract services |
|
|
471 |
|
|
|
719 |
|
|
|
(248 |
) |
|
|
-34.5 |
% |
|
|
919 |
|
|
|
1,340 |
|
|
|
(421 |
) |
|
|
-31.4 |
% |
Other real estate owned |
|
|
13 |
|
|
|
13 |
|
|
|
- |
|
|
|
0.0 |
% |
|
|
25 |
|
|
|
27 |
|
|
|
(2 |
) |
|
|
-7.4 |
% |
Stationery and supplies |
|
|
161 |
|
|
|
(48 |
) |
|
|
209 |
|
|
|
-435.4 |
% |
|
|
330 |
|
|
|
73 |
|
|
|
257 |
|
|
|
352.1 |
% |
Training and education |
|
|
307 |
|
|
|
40 |
|
|
|
267 |
|
|
|
667.5 |
% |
|
|
567 |
|
|
|
84 |
|
|
|
483 |
|
|
|
575.0 |
% |
General, administrative and other |
|
|
2,978 |
|
|
|
1,399 |
|
|
|
1,579 |
|
|
|
112.9 |
% |
|
|
5,409 |
|
|
|
2,939 |
|
|
|
2,470 |
|
|
|
84.0 |
% |
Total non-interest expense |
|
$ |
23,307 |
|
|
$ |
17,389 |
|
|
$ |
5,918 |
|
|
|
34.0 |
% |
|
$ |
45,425 |
|
|
$ |
35,261 |
|
|
$ |
10,164 |
|
|
|
28.8 |
% |
For the three months ended June 30, 2022, non-interest expense totaled $23.3 million, which was an increase of $5.9 million (34.0%) as compared to the same period in 2021. The increase is attributed to the increases of $2.3 million in technology, equipment and depreciation, $1.6 million in salaries and employee benefits, $311 thousand in occupancy, $177 thousand in professional services, $267 thousand in training and education, $209 thousand in stationery and supplies and $1.6 million in general, administrative and other, partially offset by decreases of $248 thousand in contract services and $220 thousand in FDIC insurance assessment.
For the six months ended June 30, 2022, non-interest expense totaled $45.4 million, which represented an increase of $10.2 million (28.8%) as compared to the same period in 2021. The increases are primarily attributed to the $4.6 million increase in technology, equipment, and depreciation, $2.5 million increase in general, administrative and other expense, $2.1 million increase in salaries and employee benefits, $483 thousand increase in training and education, $415 thousand increase in professional services, and $402 thousand increase in occupancy. These expenses were offset by decreases of $421 thousand in contract services and $242 thousand in the FDIC insurance assessment. The increase in general, administrative and other expenses is due to $728 thousand in ASC Trust LLC related expenses, and increases in sundry losses of $884 thousand, advertising expense of $265 thousand, public relations expense of $139 thousand, and donation expense of $100 thousand.
Income Tax Expense
For the three and six months ended June 30, 2022, the Bank recorded income tax expenses of $998 thousand and $1.8 million, respectively. The expense for the three and six months ended June 30, 2022, was $538 thousand and $452 thousand less, respectively, than the income tax expense recorded for the corresponding periods in 2021.
40
Financial Condition
Assets
As of June 30, 2022, total assets were $2.67 billion, a decrease of 4.18% from $2.79 billion at December 31, 2021. This $116.7 million decrease was comprised largely of the $233.8 million decrease in interest bearing deposits in banks, partially offset by the $41.2 million increase in our net investment securities portfolio, a $29.9 million increase in other assets, a rise of $37.8 million in net loans, and a $1.9 million increase in cash and due from banks. The increases in other assets is primarily due to the increase in deferred tax assets of $15.2 million, bank owned life insurance of $10.3 million and right of use lease asset of $5.1 million. The reduction in assets was associated with the $85.4 million decrease in total deposits and a $41.5 million decrease in accumulated other comprehensive loss, due to the increase in market rates, partially offset by a $5.0 million increase in retained earnings and a $5.2 million increase in other liabilities.
Interest-Earning Assets
The following table sets forth the composition of our interest-earning assets at June 30, 2022 as compared to December 31, 2021:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
|
Variance |
|
|||
Interest-earning deposits with financial institutions (including restricted cash) |
|
$ |
287,061 |
|
|
$ |
520,893 |
|
|
$ |
(233,832 |
) |
Federal Home Loan Bank stock, at cost |
|
|
3,318 |
|
|
|
2,814 |
|
|
|
504 |
|
Investment securities available-for-sale |
|
|
540,595 |
|
|
|
499,366 |
|
|
|
41,229 |
|
Investment securities held-to-maturity |
|
|
318,726 |
|
|
|
312,294 |
|
|
|
6,432 |
|
Loans, gross |
|
|
1,360,212 |
|
|
|
1,321,321 |
|
|
|
38,891 |
|
Total interest-earning assets |
|
$ |
2,509,912 |
|
|
$ |
2,656,688 |
|
|
$ |
(146,776 |
) |
Loans
Commercial & industrial loans are loans to businesses to finance capital purchases and improvements, or to provide cash flow for operations. Commercial mortgage loans include loans secured by real property for purposes such as the purchase or improvement of that property, wherein repayment is derived from the income generated by the real property or from business operations. Residential mortgage loans are loans to consumers to finance the purchase, improvement, or refinance of real property secured by 1-4 family housing units. Consumer loans include loans to individuals to finance personal needs and are either closed- or open-ended loans. Automobile loans fall under the consumer loan category, but the bulk of consumer loans is typically unsecured extensions of credit such as credit card debt and personal signature loans.
A summary of loan balances at June 30, 2022 and December 31, 2021 is as follows:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
$ |
273,389 |
|
|
|
20.1 |
% |
|
$ |
295,835 |
|
|
|
22.4 |
% |
Commercial mortgage |
|
|
761,383 |
|
|
|
56.0 |
% |
|
|
699,269 |
|
|
|
52.9 |
% |
Commercial construction |
|
|
8,391 |
|
|
|
0.6 |
% |
|
|
23,588 |
|
|
|
1.8 |
% |
Commercial agriculture |
|
|
572 |
|
|
|
0.0 |
% |
|
|
592 |
|
|
|
0.0 |
% |
Total commercial |
|
|
1,043,735 |
|
|
|
76.7 |
% |
|
|
1,019,284 |
|
|
|
77.1 |
% |
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
144,519 |
|
|
|
10.6 |
% |
|
|
135,377 |
|
|
|
10.2 |
% |
Home equity |
|
|
2,537 |
|
|
|
0.2 |
% |
|
|
2,232 |
|
|
|
0.2 |
% |
Automobile |
|
|
17,759 |
|
|
|
1.3 |
% |
|
|
18,220 |
|
|
|
1.4 |
% |
Other consumer loans1 |
|
|
151,662 |
|
|
|
11.1 |
% |
|
|
146,208 |
|
|
|
11.1 |
% |
Total consumer |
|
|
316,477 |
|
|
|
23.3 |
% |
|
|
302,037 |
|
|
|
22.9 |
% |
Gross loans |
|
|
1,360,212 |
|
|
|
100.0 |
% |
|
|
1,321,321 |
|
|
|
100.0 |
% |
Deferred loan (fees) costs, net |
|
|
(2,976 |
) |
|
|
|
|
|
|
(3,223 |
) |
|
|
|
|
Allowance for loan losses |
|
|
(35,732 |
) |
|
|
|
|
|
|
(34,408 |
) |
|
|
|
|
Loans, net |
|
$ |
1,321,504 |
|
|
|
|
|
|
$ |
1,283,690 |
|
|
|
|
|
|
1 |
Comprised of other revolving credit, installment loans, and overdrafts. |
41
At June 30, 2022, total gross loans increased by $38.9 million, to $1.36 billion, from $1.32 billion at December 31, 2021. The increase in loans was attributed to a $24.5 million increase in commercial loans to $1.04 billion at June 30, 2022 from $1.02 billion at December 31, 2021 and a $14.4 million increase in consumer loans to $316.5 million at June 30, 2022, from $302.0 million at December 31, 2021. The underlying increase in commercial loans was attributed to a $62.1 million increase in commercial mortgage, partially offset by decreases in commercial & industrial by $22.4 million and commercial construction by $15.2 million. The underlying increase in consumer loans was primarily due to the increases of $9.1 million in residential mortgage loans and $5.5 million in other consumer loans, partially offset by the decrease of $461 thousand in automobile.
With the passage of the Paycheck Protection Program, administered by the Small Business Administration, the Bank actively participated in assisting its customers with applications for resources through the program. PPP loans have either a two-year or a five-year term and earn interest at 1%. The Bank believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. The Bank approved and funded over $149 million in PPP loans. At June 30, 2022, the outstanding principal balance of PPP loans was at $5.3 million. It is the Bank’s understanding that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, the Bank could be required to establish an additional allowance for loan loss through additional credit loss expense charged to earnings.
At June 30, 2022, loans outstanding were comprised of approximately 71.74% in variable rate loans and 28.26% in fixed rate loans.
Since it first opened in 1972, the Bank has expanded its operations and its branch network, first in Guam, then in the other islands of our region and in San Francisco, California. In the interests of enhancing performance and stability through market and industry diversification, the Bank has increased its focus on growth in the San Francisco area in recent years, adding personnel with experience and expertise in the Bay Area. The following table provides figures for gross loans in the Bank’s administrative regions for June 30, 2022 and December 31, 2021:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
Guam |
|
$ |
677,134 |
|
|
$ |
684,435 |
|
Commonwealth of the Northern Mariana Islands |
|
|
136,251 |
|
|
|
135,165 |
|
The Freely Associated States of Micronesia * |
|
|
90,510 |
|
|
|
89,523 |
|
California |
|
|
456,317 |
|
|
|
412,198 |
|
Total |
|
$ |
1,360,212 |
|
|
$ |
1,321,321 |
|
|
* |
The Freely Associated States (FAS) are comprised of the Federated States of Micronesia (Chuuk, Kosrae, Pohnpei and Yap), the Republic of the Marshall Islands and the Republic of Palau. |
As the table indicates, the Bank’s total gross loans increased by 2.94% during the six months ended June 30, 2022. By way of comparison, loans in the California region increased by $44.1 million, or 10.7%, during the six months ended June 30, 2022. Loans in the Commonwealth of the Northern Mariana Islands increased by $1.1 million or 0.8%, and the Freely Associated States of Micronesia increased by $987 thousand, or 1.1%, during the same period. In the Guam region loans decreased by $7.3 million, or 1.07%, during the six months ended June 30, 2022.
Interest-Earning Deposits and Investment Securities
In the current lending and interest rate environment, and in order to maintain sufficient liquidity in the ordinary course of business, and to account for disbursement of the funds received from the CARES Act, the Bank held $286.9 million in unrestricted interest-earning deposits with financial institutions at June 30, 2022, a decrease of $233.8 million, or 44.9%, from the $520.7 million in such deposits at December 31, 2021. This significant decrease is the result of the disbursement of various funds received from the CARES Act, which were held in cash balances with the Federal Reserve Bank at the end of the reporting period. From December 31, 2021 to June 30, 2022, the Bank’s combined investment portfolio increased by $47.7 million, or 5.9%, from $811.7 million to $859.3 million. The growth in the investment portfolio was comprised of a $41.2 million increase in available-for-sale securities, which increased by 8.26%, from $499.4 million to $540.6 million, and a $6.4 million increase in our holdings of held-to-maturity securities, which increased by 2.6%, from $312.3 million to $318.7 million. Management believes that the Bank maintains an adequate level of liquidity.
42
Nonperforming Loans and Other Nonperforming Assets
Nonperforming loans consist of (i) loans on non-accrual status because we have ceased accruing interest on these loans; (ii) loans 90 days or more past due and still accruing interest; and (iii) restructured loans. Other nonperforming assets consist of real estate properties (OREO) that have been acquired through foreclosure or similar means and which management intends to offer for sale. Loans are placed on non-accrual status when, in the opinion of management, the full and timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payment becomes 90 days past due, unless the loan is adequately collateralized and the loan is in the process of collection. When a loan is placed in non-accrual status, accrued but unpaid interest is reversed against current income. Subsequently, when payments are received on such loans, the amounts are applied to reduce principal, except when the ultimate collectability of principal is probable, in which case accrued loans may be restored to accrual status when principal and interest becomes current and full repayment is expected. Interest income is recognized on an accrual basis for impaired loans not meeting the non-accrual criteria.
The following table contains information regarding our nonperforming assets as well as restructured loans as of June 30, 2022 and December 31, 2021:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
Non-accrual loans: |
|
|
|
|
|
|
|
|
Commercial & industrial |
|
$ |
7,229 |
|
|
$ |
7,610 |
|
Commercial mortgage |
|
|
7,071 |
|
|
|
8,148 |
|
Residential mortgage |
|
|
1,760 |
|
|
|
1,660 |
|
Other consumer 1 |
|
|
142 |
|
|
|
152 |
|
Total non-accrual loans |
|
|
16,202 |
|
|
|
17,570 |
|
|
|
|
|
|
|
|
|
|
Loans past due 90 days and still accruing: |
|
|
|
|
|
|
|
|
Commercial & industrial |
|
|
106 |
|
|
|
106 |
|
Commercial mortgage |
|
|
- |
|
|
|
- |
|
Residential mortgage |
|
|
4 |
|
|
|
77 |
|
Automobile |
|
|
55 |
|
|
|
41 |
|
Other consumer1 |
|
|
832 |
|
|
|
866 |
|
Total loans past due 90 days and still accruing |
|
|
997 |
|
|
|
1,090 |
|
Total nonperforming loans |
|
|
17,199 |
|
|
|
18,660 |
|
|
|
|
|
|
|
|
|
|
Restructured loans: |
|
|
|
|
|
|
|
|
Accruing loans |
|
$ |
33,888 |
|
|
$ |
32,595 |
|
Non-accruing loans (included in nonaccrual loans above) |
|
|
4,497 |
|
|
|
6,083 |
|
Total restructured loans |
|
$ |
38,385 |
|
|
$ |
38,678 |
|
|
1 |
Comprised of other revolving credit, installment loans, and overdrafts. |
The above table indicates that nonperforming loans decreased by $1.5 million during the six months ended June 30, 2022, which resulted from the decrease in total non-accrual loans by $1.4 million, from $16.2 million to $17.6 million. The decrease in total non-accrual loans were due to the decreases of $1.1 million in commercial mortgage and $381 thousand in commercial & industrial loans, partially offset by an increase of $100 thousand in residential mortgage loans.
At June 30, 2022, the Bank’s largest nonperforming loans are six commercial mortgage loans totaling $6.2 million from six relationships of $3.22 million, $749 thousand, $682 thousand, $642 thousand, $497 thousand and $456 thousand, respectively, and one commercial & industrial loan relationship totaling $6.6 million. These loans were placed on non-accrual due to deficiencies in the underlying cash flow to service the monthly loan payments and meet operating expenses. At this time, management believes that the collateral and the allocated allowance for loan losses is adequate to cover these loans; however, should property values deteriorate, additional write-downs or additional provisions may be necessary.
43
Analysis of Allowance for Loan Losses
The allowance for loan losses was $35.7 million, or 2.63% of outstanding gross loans, as of June 30, 2022, as compared to $34.4 million, or 2.60% of outstanding gross loans, at December 31, 2021.
Management maintains an allowance for loan losses to absorb estimated credit losses associated with the loan portfolio. The adequacy of the allowance is determined by management through ongoing quarterly loan quality assessments.
Management assesses the estimated credit losses inherent in the non-classified and classified portions of our loan portfolio by considering a number of factors or elements including:
|
• |
Management’s evaluation of the collectability of the loan portfolio; |
|
• |
Historical loss experience in the loan portfolio; |
|
• |
Levels of and trends in delinquency, classified assets, non-performing and impaired loans; |
|
• |
Effects of changes in underwriting standards and other changes in lending policies, procedures and practices; |
|
• |
Experience, ability, and depth of lending management and other relevant staff; |
|
• |
Local, regional, and national trends and conditions, including industry-specific conditions; |
|
• |
The effect of changes in credit concentration; and |
|
• |
External factors such as competition, legal and regulatory conditions, as well as typhoons, pandemics such as COVID-19 and other natural disasters. |
Management determines the allowance for the classified loan portfolio and for non-classified loans by applying a percentage loss estimate that is calculated based on the above noted factors and trends. Management normally writes down impaired loans after determining the loan collateral fair value versus the outstanding loan balance. Our analysis of the adequacy of the allowance incorporates the provisions made for our non-classified loans and classified loans.
While management believes it uses the best information available for calculating the allowance, the results of operation could be significantly affected if circumstances differ substantially from the assumptions used in determining the allowance. The current qualitative and quantitative factors used to calculate the allowance are inherently subjective. The estimates and assumptions are subject to changes in economic prospects and regulatory guidelines, and other circumstances over which management has no control. The allowance may prove in the future to be insufficient to cover all of the losses the Bank may incur and it may be necessary to increase the allowance from time to time as a result of monitoring its adequacy.
44
The following table summarizes the changes in our allowance for loan losses:
|
|
Commercial |
|
|
Residential Mortgages |
|
|
Consumer |
|
|
Total |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
Six Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
22,860 |
|
|
$ |
2,304 |
|
|
$ |
9,244 |
|
|
$ |
34,408 |
|
Charge-offs |
|
|
(449 |
) |
|
|
- |
|
|
|
(2,199 |
) |
|
|
(2,648 |
) |
Recoveries |
|
|
143 |
|
|
|
2 |
|
|
|
977 |
|
|
|
1,122 |
|
Provision |
|
|
877 |
|
|
|
137 |
|
|
|
1,836 |
|
|
|
2,850 |
|
Ending balance |
|
$ |
23,431 |
|
|
$ |
2,443 |
|
|
$ |
9,858 |
|
|
$ |
35,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance balance at end of period related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
3,513 |
|
|
$ |
33 |
|
|
$ |
907 |
|
|
$ |
4,453 |
|
Loans collectively evaluated for impairment |
|
|
19,918 |
|
|
|
2,410 |
|
|
|
8,951 |
|
|
|
31,279 |
|
Ending balance |
|
$ |
23,431 |
|
|
$ |
2,443 |
|
|
$ |
9,858 |
|
|
$ |
35,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balances at end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
12,260 |
|
|
$ |
38,255 |
|
|
$ |
1,093 |
|
|
$ |
51,608 |
|
Loans collectively evaluated for impairment |
|
|
1,031,475 |
|
|
|
108,801 |
|
|
|
168,328 |
|
|
|
1,308,604 |
|
Ending balance |
|
$ |
1,043,735 |
|
|
$ |
147,056 |
|
|
$ |
169,421 |
|
|
$ |
1,360,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
21,213 |
|
|
$ |
1,990 |
|
|
$ |
11,602 |
|
|
$ |
34,805 |
|
Charge-offs |
|
|
(77 |
) |
|
|
(4 |
) |
|
|
(2,675 |
) |
|
|
(2,756 |
) |
Recoveries |
|
|
156 |
|
|
|
- |
|
|
|
938 |
|
|
|
1,094 |
|
Provision |
|
|
2,134 |
|
|
|
367 |
|
|
|
449 |
|
|
|
2,950 |
|
Ending balance |
|
$ |
23,426 |
|
|
$ |
2,353 |
|
|
$ |
10,314 |
|
|
$ |
36,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance balance at end of period related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
3,503 |
|
|
$ |
- |
|
|
$ |
1,041 |
|
|
$ |
4,544 |
|
Loans collectively evaluated for impairment |
|
|
19,923 |
|
|
|
2,353 |
|
|
|
9,273 |
|
|
|
31,549 |
|
Ending balance |
|
$ |
23,426 |
|
|
$ |
2,353 |
|
|
$ |
10,314 |
|
|
$ |
36,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balances at end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
61,338 |
|
|
$ |
2,141 |
|
|
$ |
1,162 |
|
|
$ |
64,641 |
|
Loans collectively evaluated for impairment |
|
|
1,027,531 |
|
|
|
130,059 |
|
|
|
175,443 |
|
|
|
1,333,033 |
|
Ending balance |
|
$ |
1,088,869 |
|
|
$ |
132,200 |
|
|
$ |
176,605 |
|
|
$ |
1,397,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
$ |
21,213 |
|
|
$ |
1,990 |
|
|
$ |
11,602 |
|
|
$ |
34,805 |
|
Charge-offs |
|
|
(115 |
) |
|
|
(99 |
) |
|
|
(4,736 |
) |
|
|
(4,950 |
) |
Recoveries |
|
|
578 |
|
|
|
1 |
|
|
|
1,824 |
|
|
|
2,403 |
|
Provision |
|
|
1,184 |
|
|
|
412 |
|
|
|
554 |
|
|
|
2,150 |
|
Ending balance |
|
$ |
22,860 |
|
|
$ |
2,304 |
|
|
$ |
9,244 |
|
|
$ |
34,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance balance at end of year related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
3,510 |
|
|
$ |
50 |
|
|
$ |
941 |
|
|
$ |
4,501 |
|
Loans collectively evaluated for impairment |
|
|
19,350 |
|
|
|
2,254 |
|
|
|
8,303 |
|
|
|
29,907 |
|
Ending balance |
|
$ |
22,860 |
|
|
$ |
2,304 |
|
|
$ |
9,244 |
|
|
$ |
34,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balances at end of year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
48,459 |
|
|
$ |
2,265 |
|
|
$ |
1,059 |
|
|
$ |
51,783 |
|
Loans collectively evaluated for impairment |
|
|
970,825 |
|
|
|
135,343 |
|
|
|
163,370 |
|
|
|
1,269,538 |
|
Ending balance |
|
$ |
1,019,284 |
|
|
$ |
137,608 |
|
|
$ |
164,429 |
|
|
$ |
1,321,321 |
|
Management evaluates all impaired loans not less frequently than quarterly in conjunction with our calculation and determination of the adequacy of the allowance for loan losses.
45
The Bank has two significant borrowing relationships in bankruptcy totaling $9.8 million at June 30, 2022. The Bank has calculated a specific reserve within the allowance for one of the borrowing relationships in bankruptcy in the amount of $3.5 million. In March 2022, a court ruling increased the availability of assets for one of the borrowing relationships in bankruptcy to satisfy its outstanding liabilities. The Bank believes it has sufficient collateral coverage to protect its current exposure in these matters, however due to the complexities of the bankruptcy cases and uncertainties surrounding ongoing negotiations, the ultimate outcomes may result in losses.
Total Cash and Cash Equivalents
Total cash and cash equivalents were $325.4 million and $557.4 million at June 30, 2022 and December 31, 2021, respectively. The decrease is the result of the disbursement of various funds received from the CARES Act. This balance, which is comprised of cash and due from bank balances and interest-bearing deposits that we maintain at other financial institutions (including the Federal Reserve Bank of San Francisco, but excepting restricted cash), will vary depending on daily cash settlement activities, the amount of highly liquid assets needed based on known events such as the repayment of borrowings and scheduled withdrawals, and actual cash on hand in the Bank’s branches.
The following table sets forth the composition of our cash and cash equivalent balances at June 30, 2022 and December 31, 2021:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
|
Variance |
|
|||
Cash and due from banks |
|
$ |
38,529 |
|
|
$ |
36,660 |
|
|
$ |
1,869 |
|
Interest-bearing deposits with financial institutions |
|
|
286,911 |
|
|
|
520,743 |
|
|
|
(233,832 |
) |
Total cash and cash equivalents |
|
$ |
325,440 |
|
|
$ |
557,403 |
|
|
$ |
(231,963 |
) |
Investment Securities
The Bank manages its securities portfolio to provide a source of both liquidity and earnings. The Bank has an Asset/Liability Committee (“ALCO”) that develops and recommends current investment policies to the Board of Directors based on its operating needs and market circumstances. The Bank’s overall investment policy is formally reviewed and approved annually by the Board of Directors, and the Asset/Liability Committee is responsible for monitoring and reporting compliance with the investment policy. Investment portfolio reports are provided to the Board of Directors on a monthly basis.
46
At June 30, 2022, the carrying value of the investment securities portfolio (excluding ASC Trust LLC stock and Federal Home Loan Bank stock) totaled $859.3 million, which represents a $47.6 million increase from the portfolio balance of $811.7 million at December 31, 2021. The table below sets forth the amortized cost and fair value of our investment securities portfolio, with gross unrealized gains and losses, at June 30, 2022 and December 31, 2021:
|
|
June 30, 2022 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
Securities Available-for-Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
114,971 |
|
|
$ |
- |
|
|
$ |
(16,550 |
) |
|
$ |
98,421 |
|
U.S. government agency pool securities |
|
|
66,784 |
|
|
|
12 |
|
|
|
(463 |
) |
|
|
66,333 |
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
419,079 |
|
|
|
- |
|
|
|
(43,238 |
) |
|
|
375,841 |
|
Total |
|
$ |
600,834 |
|
|
$ |
12 |
|
|
$ |
(60,251 |
) |
|
$ |
540,595 |
|
Securities Held-to-Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
276,748 |
|
|
$ |
- |
|
|
$ |
(52,572 |
) |
|
$ |
224,176 |
|
U.S. government agency pool securities |
|
|
2,143 |
|
|
|
2 |
|
|
|
(44 |
) |
|
|
2,101 |
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
39,835 |
|
|
|
- |
|
|
|
(4,418 |
) |
|
|
35,417 |
|
Total |
|
$ |
318,726 |
|
|
$ |
2 |
|
|
$ |
(57,034 |
) |
|
$ |
261,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
Securities Available-for-Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
114,969 |
|
|
$ |
- |
|
|
$ |
(4,007 |
) |
|
$ |
110,962 |
|
U.S. government agency pool securities |
|
|
21,106 |
|
|
|
2 |
|
|
|
(247 |
) |
|
|
20,861 |
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
369,419 |
|
|
|
1,957 |
|
|
|
(3,833 |
) |
|
|
367,543 |
|
Total |
|
$ |
505,494 |
|
|
$ |
1,959 |
|
|
$ |
(8,087 |
) |
|
$ |
499,366 |
|
Securities Held-to-Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
276,188 |
|
|
$ |
- |
|
|
$ |
(1,621 |
) |
|
$ |
274,567 |
|
U.S. government agency pool securities |
|
|
3,028 |
|
|
|
8 |
|
|
|
(45 |
) |
|
|
2,991 |
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
33,078 |
|
|
|
105 |
|
|
|
(369 |
) |
|
|
32,814 |
|
Total |
|
$ |
312,294 |
|
|
$ |
113 |
|
|
$ |
(2,035 |
) |
|
$ |
310,372 |
|
At June 30, 2022 and December 31, 2021, investment securities with a carrying value of $677.2 million and $558.8 million, respectively, were pledged to secure various government deposits and other public requirements.
47
The amortized cost and fair value of investment securities by contractual maturity at June 30, 2022 and December 31, 2021, follows:
|
|
June 30, 2022 |
|
|||||||||||||
|
|
Available-for-Sale |
|
|
Held-to-Maturity |
|
||||||||||
|
|
Amortized Cost |
|
|
Estimated Fair Value |
|
|
Amortized Cost |
|
|
Estimated Fair Value |
|
||||
Due within one year |
|
$ |
8 |
|
|
$ |
8 |
|
|
$ |
- |
|
|
$ |
- |
|
Due after one but within five years |
|
|
6,312 |
|
|
|
6,184 |
|
|
|
2,864 |
|
|
|
2,759 |
|
Due after five but within ten years |
|
|
160,317 |
|
|
|
141,832 |
|
|
|
60,235 |
|
|
|
51,913 |
|
Due after ten years |
|
|
434,197 |
|
|
|
392,571 |
|
|
|
255,627 |
|
|
|
207,022 |
|
Total |
|
$ |
600,834 |
|
|
$ |
540,595 |
|
|
$ |
318,726 |
|
|
$ |
261,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|||||||||||||
|
|
Available-for-Sale |
|
|
Held-to-Maturity |
|
||||||||||
|
|
Amortized Cost |
|
|
Estimated Fair Value |
|
|
Amortized Cost |
|
|
Estimated Fair Value |
|
||||
Due within one year |
|
$ |
105 |
|
|
$ |
105 |
|
|
$ |
- |
|
|
$ |
- |
|
Due after one but within five years |
|
|
8,331 |
|
|
|
8,377 |
|
|
|
1,228 |
|
|
|
1,246 |
|
Due after five but within ten years |
|
|
151,682 |
|
|
|
148,389 |
|
|
|
62,925 |
|
|
|
62,257 |
|
Due after ten years |
|
|
345,376 |
|
|
|
342,495 |
|
|
|
248,141 |
|
|
|
246,869 |
|
Total |
|
$ |
505,494 |
|
|
$ |
499,366 |
|
|
$ |
312,294 |
|
|
$ |
310,372 |
|
48
Temporarily Impaired Securities
The following table shows the gross unrealized losses and fair value of investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position at June 30, 2022 and December 31, 2021:
|
|
June 30, 2022 |
|
|||||||||||||||||||||
|
|
Less Than Twelve Months |
|
|
More Than Twelve Months |
|
|
Total |
|
|||||||||||||||
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
||||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(16,550 |
) |
|
$ |
98,421 |
|
|
$ |
(16,550 |
) |
|
$ |
98,421 |
|
U.S. government agency pool securities |
|
|
(393 |
) |
|
|
55,607 |
|
|
|
(70 |
) |
|
|
1,465 |
|
|
|
(463 |
) |
|
|
57,072 |
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
(42,188 |
) |
|
|
369,705 |
|
|
|
(1,050 |
) |
|
|
6,136 |
|
|
|
(43,238 |
) |
|
|
375,841 |
|
Total |
|
$ |
(42,581 |
) |
|
$ |
425,312 |
|
|
$ |
(17,670 |
) |
|
$ |
106,022 |
|
|
$ |
(60,251 |
) |
|
$ |
531,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US government agency and sponsored Agencies (GSE) debt securities |
|
$ |
(27,604 |
) |
|
$ |
94,701 |
|
|
$ |
(24,968 |
) |
|
$ |
129,476 |
|
|
$ |
(52,572 |
) |
|
$ |
224,177 |
|
U.S. government agency pool securities |
|
|
(40 |
) |
|
|
1,092 |
|
|
|
(4 |
) |
|
|
46 |
|
|
|
(44 |
) |
|
|
1,138 |
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
(4,376 |
) |
|
|
35,152 |
|
|
|
(42 |
) |
|
|
265,069 |
|
|
|
(4,418 |
) |
|
|
300,221 |
|
Total |
|
$ |
(32,020 |
) |
|
$ |
130,945 |
|
|
$ |
(25,014 |
) |
|
$ |
394,591 |
|
|
$ |
(57,034 |
) |
|
$ |
525,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|||||||||||||||||||||
|
|
Less Than Twelve Months |
|
|
More Than Twelve Months |
|
|
Total |
|
|||||||||||||||
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
||||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
(2,824 |
) |
|
$ |
82,145 |
|
|
$ |
(1,183 |
) |
|
$ |
28,817 |
|
|
$ |
(4,007 |
) |
|
$ |
110,962 |
|
U.S. government agency pool securities |
|
|
(71 |
) |
|
|
5,127 |
|
|
|
(176 |
) |
|
|
14,743 |
|
|
|
(247 |
) |
|
|
19,870 |
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
(3,833 |
) |
|
|
290,573 |
|
|
|
- |
|
|
|
- |
|
|
|
(3,833 |
) |
|
|
290,573 |
|
Total |
|
$ |
(6,728 |
) |
|
$ |
377,845 |
|
|
$ |
(1,359 |
) |
|
$ |
43,560 |
|
|
$ |
(8,087 |
) |
|
$ |
421,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency and government sponsored enterprise (GSE) debt securities |
|
$ |
(1,395 |
) |
|
$ |
159,840 |
|
|
$ |
(226 |
) |
|
$ |
114,726 |
|
|
$ |
(1,621 |
) |
|
$ |
274,566 |
|
U.S. government agency pool securities |
|
|
(37 |
) |
|
|
1,507 |
|
|
|
(8 |
) |
|
|
403 |
|
|
|
(45 |
) |
|
|
1,910 |
|
U.S. government agency or GSE residential mortgage-backed securities |
|
|
(362 |
) |
|
|
28,498 |
|
|
|
(7 |
) |
|
|
529 |
|
|
|
(369 |
) |
|
|
29,027 |
|
Total |
|
$ |
(1,794 |
) |
|
$ |
189,845 |
|
|
$ |
(241 |
) |
|
$ |
115,658 |
|
|
$ |
(2,035 |
) |
|
$ |
305,503 |
|
The Company does not believe that any of the investment securities that were in an unrealized loss position as of June 30, 2022, which included a total of 232 securities, were other-than-temporarily impaired. Specifically, the 232 securities were comprised of 39 Small Business Administration Pool securities, 26 agency securities issued by Federal Home Loan Bank (FHLB), 34 mortgaged-backed securities and 19 agency securities issued by Federal Home Loan Mortgage Corporation (FHLMC), 75 mortgaged-backed securities and 1 agency security issued by Federal National Mortgage Association (FNMA), 20 mortgaged-backed securities issued by Government National Mortgage Association (GNMA) and 18 agency securities issued by Federal Farm Credit Banks (FFCB).
Total gross unrealized losses were primarily attributable to changes in interest rates relative to when the investment securities were purchased, and not due to changes in the credit quality of the investment securities. The Bank does not intend to sell the investment
49
securities that are in an unrealized loss position and it is not likely that, except as needed to fund our liquidity position, the Bank will be required to sell the investment securities before recovery of their amortized cost bases, which may be at maturity.
Deposits
At June 30, 2022, total deposit liabilities decreased by $85.4 million from $2.53 billion at December 31, 2021. Non-interest bearing deposits decreased by $60.3 million, to $921.3 million at June 30, 2022, compared to $981.5 million at December 31, 2021, and interest bearing deposits decreased by $25.2 million, to $1.53 billion at June 30, 2022, from $1.55 billion at December 31, 2021. The 3.37% decrease in total deposits was primarily due to the disbursement of funds from various COVID-19 federal relief programs.
The following table sets forth the composition of our interest-bearing deposit portfolio with the balances and average interest rates at June 30, 2022 and December 31, 2021, respectively:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
|
Balance |
|
|
Average rate |
|
|
Balance |
|
|
Average rate |
|
||||
Interest-bearing checking accounts |
|
$ |
368,616 |
|
|
|
0.01 |
% |
|
$ |
401,753 |
|
|
|
0.03 |
% |
Savings accounts |
|
|
1,131,747 |
|
|
|
0.01 |
% |
|
|
1,123,499 |
|
|
|
0.03 |
% |
Certificates of deposit |
|
|
26,179 |
|
|
|
0.06 |
% |
|
|
26,442 |
|
|
|
0.12 |
% |
Total interest-bearing deposits |
|
$ |
1,526,542 |
|
|
|
0.01 |
% |
|
$ |
1,551,694 |
|
|
|
0.03 |
% |
As mentioned earlier, the Bank has expanded its operations and its branch network since it first opened in 1972, first in Guam, then in the other islands of our region and in San Francisco, California. As time has passed, the Bank has gathered market share in each of the islands. In recent years, in order to diversify its geographic market, the Bank has increased its focus on growth in the California region. The following table provides figures for deposits in the Bank’s administrative regions at June 30, 2022 and December 31, 2021:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
Guam |
|
$ |
1,399,099 |
|
|
$ |
1,386,314 |
|
Commonwealth of the Northern Mariana Islands |
|
|
462,913 |
|
|
|
529,750 |
|
The Freely Associated States of Micronesia |
|
|
524,943 |
|
|
|
557,444 |
|
California |
|
|
60,851 |
|
|
|
59,723 |
|
Total |
|
$ |
2,447,806 |
|
|
$ |
2,533,231 |
|
During the six months ended June 30, 2022, the Bank’s deposits decreased by $85.4 million (3.37%) to $2.45 billion compared to December 31, 2021. During this period the decrease in our deposits were in our CNMI branches by $66.8 million and FAS branches by $32.5 million. These decreases were partially offset by increases in our Guam branches by $12.8 million and California region of $1.1 million.
Borrowed Funds
The Bank has a variety of sources from which it may obtain secondary funding. These sources include, among others, the Federal Reserve Bank of San Francisco, the Federal Home Loan Bank of Des Moines, and credit lines established with our correspondent banks. Borrowings are obtained for a variety of reasons, which include, but are not limited to, funding loan growth, the purchase of investments in the absence of core deposits, and to provide additional liquidity to meet the demands of depositors.
On June 29, 2021, the Company issued $20.0 million of its 4.75% Fixed-to-Floating Rate Subordinated Notes, due July 1, 2031 (the “2031 Notes”). The 2031 Notes are intended to qualify as Tier 2 capital for regulatory capital purposes for the Company. The 2031 Notes have a ten-year term and initially bear interest at a fixed annual rate of 4.75%. Beginning July 1 2026, the interest rate will reset quarterly to the then-current three-month SOFR plus 413 basis points. On July 6, 2021, with the approval of the Federal Reserve Bank of San Francisco, the Company used $6.2 million of the proceeds from the 2031 Notes to acquire an additional 25% of the stock of ASC Trust LLC at the third and final closing pursuant to the 2016 Stock Purchase Agreement between the Company and David J. John. The Company intends to use the remainder of the proceeds from the 2031 Notes for general corporate purposes.
On June 27, 2019, the Company issued $15.0 million of its 6.35% Fixed-to-Floating Rate Subordinated Notes, due June 30, 2029 (the “2029 Notes”). The 2029 Notes are intended to qualify as Tier 2 capital for regulatory capital purposes for the Company. The 2029 Notes have a ten-year term and initially bear interest at a fixed annual rate of 6.35%. Beginning June 30, 2024, the interest rate will reset quarterly to the then-current three-month LIBOR plus 466 basis points. On July 1, 2019, with the approval of the Federal Reserve Bank of San Francisco, the Company used $4.1 million of the proceeds from the 2029 Notes to acquire an additional 20% of the stock of ASC Trust LLC at the second closing pursuant to the 2016 Stock Purchase Agreement between the Company and David J. John. On July 5, 2019, $10.0 million of the balance of the proceeds from the 2029 Notes was also used to purchase ten (10) shares of Series B Common Stock from the Bank, with a par value of $1.0 million per share, to support the Bank’s strategic growth.
50
At June 30, 2022 and at December 31, 2021, the Company had no short-term borrowings.
Liquidity
We actively manage our liquidity to ensure that sufficient funds are available to meet our needs for cash, including cash needed to fund new loans and to accommodate deposit withdrawals and other transactions by our customers. We project future sources and uses of funds, and maintain additional liquid funds for unanticipated events. Our primary sources of cash include cash we have in deposits at other financial institutions, the repayment of loans, proceeds from the sale or maturity of investment securities, and increases in deposits. The primary uses of cash include funding new loans and making advances on existing lines of credit, purchasing investments, funding new residential mortgage loans, funding deposit withdrawals, and paying operating expenses. From time to time, we may maintain funds in overnight Federal Funds and other short-term investments to provide for short-term liquidity needs. We also have established, for contingency funding purposes, credit lines with the Federal Reserve Bank of San Francisco, the Federal Home Loan Bank-Seattle, and correspondent commercial banks in the U.S. We believe that our liquid assets, together with our available credit lines, will be sufficient to meet normal operating requirements for at least the next twelve months, including to enable us to meet any increase in withdrawals from depository accounts that might occur in the foreseeable future.
At June 30, 2022, our liquid assets, which include cash and due from banks, interest-earning deposits with financial institutions (excluding restricted cash), and investment securities available-for-sale totaled $866.0 million, down $190.7 million from $1.06 billion at December 31, 2021. This decrease is comprised of a $233.8 million decrease in interest bearing deposits in banks, partially offset by a $41.2 million increase in investment securities available-for-sale, and a $1.9 million increase in cash and due from banks.
Management believes we have sufficient cash to meet the demands of the distribution of funds under the CARES Act. However, we will monitor our vault cash on a daily basis, and if the need arises, we will acquire additional cash by drawing down our deposits with other financial institutions, including the Federal Bank of San Francisco.
Contractual Obligations
The Bank utilizes facilities, equipment and land under various operating leases with terms, including renewal options, ranging from 1 to 99 years.
The following table provides the maturities of lease liabilities at June 30, 2022:
|
|
Operating Leases (a) |
|
|
Total |
|
||
2022 |
|
$ |
1,521 |
|
|
$ |
1,521 |
|
2023 |
|
|
2,895 |
|
|
|
2,895 |
|
2024 |
|
|
2,881 |
|
|
|
2,881 |
|
2025 |
|
|
2,825 |
|
|
|
2,825 |
|
2026 |
|
|
2,615 |
|
|
|
2,615 |
|
After 2026 |
|
|
41,882 |
|
|
|
41,882 |
|
Total lease payments |
|
|
54,619 |
|
|
|
54,619 |
|
Less: Interest (b) |
|
|
25,318 |
|
|
|
25,318 |
|
Present value of lease liabilities (c) |
|
$ |
29,301 |
|
|
$ |
29,301 |
|
Note: For leases commencing prior to 2019, minimum lease payments exclude payments to landlords for real estate taxes and common area maintenance.
|
(a) |
Operating lease payments include $19.1 million related to options to extend lease terms that are reasonably certain of being exercised. |
|
(b) |
Calculated using the incremental borrowing rate based on the lease term for each lease. |
|
(c) |
Includes the current portion of $1.9 million for operating leases. |
The Bank leases certain facilities from two separate entities in which two of its directors have separate ownership interests. Lease payments made to these entities during the six months ended June 30, 2022 and 2021, approximated $161 thousand and $205 thousand, respectively. During the three months ended June 30, 2022 and 2021, lease payments made to these entities approximated $97 thousand and $143 thousand, respectively
Additionally, the Bank leases office space to third parties, with original lease terms ranging from 1 to 3 years with option periods ranging up to 12 years. At June 30, 2022, minimum future rents to be received under non-cancelable operating sublease agreements were $18 thousand and $26 thousand for the periods ending December 31, 2022 and 2024, respectively.
51
A summary of rental activities for the three and six months ended June 30, 2022, respectively, is as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Rent expense |
|
$ |
1,065 |
|
|
$ |
1,015 |
|
|
$ |
2,033 |
|
|
$ |
2,040 |
|
Total rent expense |
|
$ |
1,065 |
|
|
$ |
1,015 |
|
|
$ |
2,033 |
|
|
$ |
2,040 |
|
Off Balance Sheet Arrangements
The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount reflected in our condensed consolidated financial statements.
The Bank’s exposure to credit loss, in the event of nonperformance by the other parties to financial instruments for loan commitments and letters of credit, is represented by the contractual amount of these instruments. The Bank follows essentially the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
A summary of financial instruments with off-balance-sheet risk at June 30, 2022 and December 31, 2021, is as follows:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
Commitments to extend credit |
|
$ |
148,060 |
|
|
$ |
162,569 |
|
|
|
|
|
|
|
|
|
|
Letters of credit: |
|
|
|
|
|
|
|
|
Standby letters of credit |
|
$ |
47,707 |
|
|
$ |
43,239 |
|
Commercial letters of credit |
|
|
2,132 |
|
|
|
2,366 |
|
Total |
|
$ |
49,839 |
|
|
$ |
45,605 |
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses, and may require payment of a fee. The commitments for certain lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer.
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party or the shipment of merchandise from a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Almost all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is effectively the same as that involved in extending loan facilities to customers. The Bank generally holds collateral supporting those commitments.
The Bank considers its standby and commercial letters of credit to be guarantees. At June 30, 2022, the maximum undiscounted future payments that the Bank could be required to make was $49.8 million. Almost all of these arrangements mature within one year. The Bank generally has recourse to recover from the customer any amounts paid under these guarantees. Most of the guarantees are fully collateralized; however, several that are extended to the Bank’s most creditworthy customers are unsecured. The Bank has recorded $51 thousand in reserve liabilities associated with commitments to extend credit and letters of credit at June 30, 2022.
Mortgage loans serviced for others are not included in the accompanying condensed consolidated statements of financial condition. The unpaid principal balances of mortgage loans serviced for others were $174.7 million and $181.1 million at June 30, 2022 and December 31, 2021, respectively. At June 30, 2022 and December 31, 2021, the Bank’s mortgage servicing rights each totaled $1.6 million, respectively.
Capital Resources
The Company and the Bank are subject to various regulatory capital requirements administered by the United States federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s condensed consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet or exceed specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices.
52
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital and Common Equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). As of June 30, 2022 and December 31, 2021, the Bank met all capital adequacy requirements to which it is subject.
As of June 30, 2022, the Bank’s capital ratios each exceeded the Federal Deposit Insurance Corporation’s well capitalized standards under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There have been no conditions or events since the most recent FDIC notification that management believes have changed the Bank’s category.
The Company’s required and actual capital amounts and ratios as of June 30, 2022 and December 31, 2021, were as follows:
|
|
Actual |
|
|
For Capital Adequacy Purposes |
|
|
To Be Well Capitalized Under Prompt Corrective Action Provisions |
|
|||||||||||||||
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
||||||
At June 30, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to Risk Weighted Assets) |
|
$ |
229,097 |
|
|
|
14.705 |
% |
|
$ |
124,637 |
|
|
|
8.000 |
% |
|
$ |
155,796 |
|
|
|
10.000 |
% |
Tier 1 Capital (to Risk Weighted Assets) |
|
$ |
175,227 |
|
|
|
11.247 |
% |
|
$ |
93,477 |
|
|
|
6.000 |
% |
|
$ |
124,637 |
|
|
|
8.000 |
% |
Tier 1 Capital (to Average Assets) |
|
$ |
175,227 |
|
|
|
6.397 |
% |
|
$ |
109,566 |
|
|
|
4.000 |
% |
|
$ |
136,958 |
|
|
|
5.000 |
% |
Common Equity Tier 1 Capital (to Risk Weighted Assets) |
|
$ |
165,444 |
|
|
|
10.619 |
% |
|
$ |
70,108 |
|
|
|
4.500 |
% |
|
$ |
101,267 |
|
|
|
6.500 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to Risk Weighted Assets) |
|
$ |
222,493 |
|
|
|
15.161 |
% |
|
$ |
117,403 |
|
|
|
8.000 |
% |
|
$ |
146,753 |
|
|
|
10.000 |
% |
Tier 1 Capital (to Risk Weighted Assets) |
|
$ |
168,623 |
|
|
|
11.490 |
% |
|
$ |
88,052 |
|
|
|
6.000 |
% |
|
$ |
117,403 |
|
|
|
8.000 |
% |
Tier 1 Capital (to Average Assets) |
|
$ |
168,623 |
|
|
|
5.792 |
% |
|
$ |
116,461 |
|
|
|
4.000 |
% |
|
$ |
145,577 |
|
|
|
5.000 |
% |
Common Equity Tier 1 Capital (to Risk Weighted Assets) |
|
$ |
158,840 |
|
|
|
10.824 |
% |
|
$ |
66,039 |
|
|
|
4.500 |
% |
|
$ |
95,390 |
|
|
|
6.500 |
% |
Since the formation of BankGuam Holding Company in 2011, our assets have grown by 142.5% ($1.57 billion), while our stockholders’ equity has increased by 62.6% ($55.5 million, including $86.7 million in retained earnings). The growth in equity has contributed to help keep the capital ratios to be well above the well capitalized standards.
The Bank received a large influx of deposits from the federal relief programs due to the COVID-19 pandemic, resulting in the growth of its balance sheet as compared to 2020. As of June 30, 2022, approximately $137.5 million in COVID related funds have yet to be disbursed. Although the Bank’s average assets decreased at June 30, 2022 to $2.70 billion from $2.91 billion in December 31, 2021, the growth resulting from the receipt of COVID funds has put pressure on its ratio of Tier 1 capital to average assets. Management believes that the Bank has the capacity to absorb the growth in total assets, and the tools needed to move deposits off its balance through its Trust services to continue to be above the well capitalized standards under the regulatory framework for prompt corrective action.
Reverse Stock Split
On April 12, 2022, the Company’s Board of Directors approved a 1-for-500 reverse stock split of the Company’s common stock. Subsequently on July 25, 2022, the Company held its annual shareholders meeting and the shareholders approved the reverse stock split. The Company expects to complete the transaction in the fourth quarter of 2022, subject to the receipt of all regulatory approvals. If the reverse stock split is effected, shareholders of the Company who own fewer than 500 shares of the Company’s common stock will receive a cash payment in lieu of a fraction of a share, and will no longer be shareholders of the Company. Shareholders holding 500 or more shares of the Company’s common stock will remain shareholders after the reverse stock split, and will also be entitled to receive a cash payment in lieu of receiving a fraction of a share. The Board of Directors determined that $14.75 per share outstanding prior to the reverse stock split would be a fair price to pay for shares that will be canceled in lieu of issuing a fraction of a share in connection with the reverse stock split. The Board of Directors has reserved the right to abandon the reverse stock split at any time if it believes the reverse stock split is no longer in the Company’s best interests. If effected, the Company estimates that the aggregate
53
amount of cash that would be payable to shareholders in lieu of fractional shares as a result of the reverse stock split would be approximately $8.8 million, which would be paid by the Company out of cash on hand.
Stock Purchase Plan
The Company’s 2011 Employee Stock Purchase Plan (the “2011 Plan”) was adopted by the Company’s Board of Directors and approved by the Company’s Stockholders on May 2, 2011, to replace the Company’s 2001 Non-Statutory Stock Option Plan. This plan was subsequently adopted by the Company after the reorganization. The 2011 Plan is open to all employees of the Company and its subsidiaries who have met certain eligibility requirements.
Under the 2011 Plan, as amended and restated as of July 1, 2012, eligible employees can purchase, through payroll deductions, shares of common stock at a discount. The right to purchase stock is granted to eligible employees during a quarterly offer period that is established from time to time by the Board of Directors of the Company. Eligible employees cannot accrue the right to purchase more than $25 thousand worth of stock at the fair market value at the beginning of each offer period. Eligible employees also may not purchase more than one thousand five hundred (1,500) shares of stock in any one offer period. The shares are purchased at 85% of the fair market price of the stock on the enrollment date.
In April 2022, the Company suspended the Employee Stock Purchase Plan in connection with the Company’s plans to implement a 1-for-500 reverse stock split, which remains subject to the approval of stockholders and the receipt of regulatory approvals.
Contingency Planning and Cybersecurity
The Bank has developed a comprehensive business continuity plan to manage disruptions that affect customers or internal processes, whether caused by man-made or natural events. In modern banking, technology has taken on an increasingly important role, and the Bank also has a technology recovery component incorporated into the business continuity plan that provides procedures for recovering from a technology failure. The technology recovery procedures are tested and implemented from time to time. The recovery time objectives for the Bank’s major technological processes range from eight hours to 80 hours, with the goal of enabling the Bank to maintain or resume operations with a minimum impact on its customers. As the results of testing are analyzed and as technology continues to advance, improvements are made in the Bank’s processes and procedures as the plan evolves, although there can be no assurance that business disruption or operational losses will not occur.
The rapid advances in computing and telecommunications technology over the past several decades have brought with them increasingly sophisticated methods of delivering financial services through electronic channels. Along with these advances, though, have come risks regarding the integrity and privacy of data, and these risks apply to banking, falling into the general classification of cybersecurity. The Bank has made substantial investments in multiple systems to ensure both the integrity of its data and the protection of the privacy of its customers’ personal financial and identity information. While it is not possible for anyone to give an absolute guarantee that data will not be compromised, the Bank strives to provide a reasonable assurance that the financial and personal data that it holds are secure.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, in connection with the filing of this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2022. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2022, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s Rules and forms and is accumulated and communicated to management, including our Chief Executive and Chief Financial Officers, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
54
PART II. OTHER INFORMATION
Item 6. Exhibits
Exhibit No. |
|
Exhibit |
|
|
|
10.01*
10.02*
31.01 |
|
Employment Agreement dated June 25, 2022 between Bank of Guam and Joaquin P.L.G. Cook
Employment Agreement dated June 25, 2022 between Maria Eugenia H. Leon Guerrero
Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.02 |
|
Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.01 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Management contract or compensatory plan or arrangement.
55
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, BankGuam Holding Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
BANKGUAM HOLDING COMPANY |
|
|
|
|
Date: August 11, 2022 |
By: |
/s/ JOAQUIN P.L.G. COOK |
|
|
Joaquin P.L.G. Cook, President and Chief Executive Officer |
|
|
|
Date: August 11, 2022 |
By: |
/s/ SYMON A. MADRAZO |
|
|
Symon A. Madrazo, Senior Vice President and Chief Financial Officer |
56
Exhibit 10.01
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of the 25th day of June 2022 by and between BANK OF GUAM, a Guam corporation (herein called the "Bank") and JOAQUIN P. L.G. COOK, (herein called the "President") (herein called “Agreement”).
NOW, THEREFORE, in consideration of the mutual promises of the parties to the Agreement, it is hereby agreed as follows:
1.Employment. Bank hereby designates and employs President, and President hereby accepts employment with Bank, as its President and Chief Executive Officer.
2.Term. This Agreement shall be for a term commencing from April 1, 2022, and terminating on March 31, 2027.
3.Duties. President shall be the Chief Executive Officer of the Bank, and shall, subject to the control of the Board of Directors of said Bank, have general supervision, direction and control of the business and affairs of the Bank. President shall have the general powers and duties of management usually vested in the office of the President of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors of the Bank, or the By-Laws. In connection therewith, upon direction of the Board of Directors, President shall make necessary and reasonable business trips for which he will be reimbursed or expenses will be provided in accordance with such regulations as may be established by the Board of Directors. Included herewith shall be trips to visit with officials of correspondent banks and leadership technical seminars as may be available.
4.Extent of Services. President shall devote his full time, attention and energy to the business of Bank and shall not, during the term of this Agreement, be engaged in any other business activities, unless such activities are reasonably determined by the Board of Directors of Bank not to be in competition or in conflict with the commercial banking business of Bank.
5.Termination of Employment. President’s employment hereunder may be terminated by either the Bank or the President at any time and for any reason; provided that, unless otherwise provided herein, either party shall be required to give the other party at least 60 days advance written notice of any termination of the President’s employment. Upon termination of the President’s employment during the term of this Agreement, the President shall be entitled to the compensation and benefits described below and shall have no further rights to any compensation or any other benefits from the Bank or any of its affiliates.
(a)If the President’s employment is terminated by the Bank for Cause, by the President without Good Reason or upon the President’s death, the President shall be entitled to receive (i) accrued but unpaid Base Compensation which shall be paid on the pay date immediately following the termination date in accordance with the Bank’s customary payroll procedures, (ii) reimbursement for unreimbursed business expenses properly incurred by the President and (iii) such employee benefits, if any, as to which the President may be entitled under the Bank’s employee benefit plans, including the Survivor Income Plan and the SERP (items (i) through (iii) are referred to collectively as the "Accrued Amounts").
(b)If the President’s employment is terminated by the Bank without Cause or by the President for Good Reason, the President shall be entitled to receive (i) the Accrued Amounts and (ii) the Adjusted Base Compensation, together with all Incentive Bonuses, for the remainder of the term of this Agreement.
(c)For purposes of this Agreement, "Cause" shall mean: (i) the President’s willful failure to perform his duties (other than any such failure resulting from incapacity due to physical or mental illness); (ii) the President’s willful failure to comply with any valid and legal directive of the Board of Directors or any material policy of the Bank; (iii) the President’s willful engagement in dishonesty, illegal conduct, or gross misconduct which is, in each case, injurious to the Bank or its affiliates; (iv) the President’s embezzlement, misappropriation, or fraud, whether or not related to the Executive's employment with the Company; (v) the President’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent); or (vi) the President’s material breach of any material obligation under this Agreement or any other written agreement between the President and the Bank or its affiliates.
(d)For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following during the term of this Agreement, in each case without the President’s written consent: (i) a material reduction in the President’s Base Compensation; (ii) a material reduction in the President’s Incentive Bonus opportunity; (iii) a relocation of the President’s principal place of employment by more than 100 miles; (iv) a material breach by the Bank of any material provision of this Agreement or any material provision of any other agreement between the President and the Bank or its affiliates; or (vii) a material, adverse change in the President’s title or authority (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law). The President cannot terminate his employment for Good Reason unless he has provided written notice to the Bank of the existence of the circumstances providing grounds for termination for Good Reason within 30 days of the initial existence of such grounds and the Bank has had at least 30 days from the date on which such notice is provided to cure such circumstances.
6.Base Compensation. As regular compensation for President's services hereunder, Bank shall pay President an annual base salary of Three Hundred Seventy-Five Thousand Dollars and 00/100 ($375,000.00) during each year of the term hereof, payable in equal installments not less frequently than bi-weekly (herein called "Base Compensation").
7.Adjustments to Base Compensation. The Base Compensation shall be adjusted annually to reflect the increase, if any, in the cost-of-living by adding thereto an amount obtained by multiplying the Base Compensation by the percentage of which the level of the Consumer Price Index for the United States has increased over its level as of the date of commencement of the term of Agreement (herein called, together with Base Compensation, the "Adjusted Base Compensation").
Following the end of each year of this Agreement and within thirty (30) days after the release of the United States Bureau of Labor Statistics of the figures for such year, Bank shall pay to the President the amount of any additional compensation to which he is entitled as a result of
- 2 -
such cost-of-living adjustment.
8.Incentive Bonus. As an incentive to President for his continuing services and contributions to the growth and profitability of Bank, President shall be paid, in addition to his Adjusted Base Compensation, an Incentive Bonus as follows:
(a)Subject to the quarterly adjustments at Section 9 below, an amount equal to two hundred basis points (2%) of current net profits of the Bank after taxes or Four Hundred Thousand Dollars ($400,000.00), whichever is less, payable in cash. The maximum amount and the incentive parameters shall be subject to review by the Board of Directors of Bank every other year and appropriate adjustments shall then be made.
(b)The incentive bonus shall be computed quarterly within five (5) business days following the completion of the Bank’s audited financial statements except that each of the first quarterly payments of the Incentive Bonus shall be subject to adjustment, either increase or decrease, depending on the Bank’s final audited financial statements of the preceding year by the Bank’s independent accountants.
9.Computation to Bonus. The Incentive Bonus of the President shall be awarded as follows:
(a)If the then current Return on Equity (ROE) of the Bank is below eleven percent (11%), then the Incentive Bonus shall be reduced by ten percent (10%);
(b)If the then current Return on Assets (ROA) of the Bank is less than 70 basis points (.70%), then the Incentive Bonus shall be reduced by ten percent (10%);
(c)If the then current Total Adversely Classified Items to Tier 1 Capital of the Bank plus the Allowance for Loan and Lease Losses is greater than twenty-five percent (25%), then the Incentive Bonus shall be reduced by fifteen percent (15%);
(d)If the Efficiency Ratio of the Bank does not meet seventy-four percent (74%), the Incentive Bonus shall be reduced by fifteen percent (15%);
For purposes of this Section 9, the ROA, ROE, Total Adversely Classified Items to Tier 1 Capital, Allowance for Loan and Lease Losses and Efficiency Ratio shall all be derived from any report of management submitted to the Board of Directors at the Board Meeting immediately preceding the date of any adjustment. If any dispute arises as to the calculations of any of such figures, the Compensation Committee, subject to Board approval, shall make the sole determination of such figures using whatever resources the Committee shall deem reasonably necessary. Attached to this Agreement and made a part hereof by this reference as Exhibit A, is a worksheet, which shall be used by the Bank to calculate the Incentive Bonus of the President.
10.Other Compensation or Benefits. In addition to the Adjusted Based Compensation and Incentive Bonus and any other compensation provided hereunder, Bank shall provide President with the following:
(a)A five-week vacation, at full pay;
- 3 -
(b)A health insurance, an accident insurance and disability insurance of a type and in an amount generally made available by Bank to its executive employees, at Bank's sole cost and expense;
(c)A group term life insurance that is generally available to Bank's executive employees, at Bank's sole expense and cost;
(d)A motor vehicle, at Bank's sole cost and expense, together with comprehensive insurance including public liability, in amounts not less than the amount required by law. All reasonable operating expenses shall be paid by Bank; and
(e)A Survivor Income Plan with a death benefit of $1,060,606.00 that is or will be made generally available to Bank's executive employees, at Bank's sole expense and cost.
11.Business Expenses. Bank shall pay or reimburse President upon submission of an itemized account by him for all reasonable business expenses incurred by President in promoting, pursuing or otherwise furthering the business of Bank, including, but not limited to expenses for travel, meals, hotel accommodations, entertainment, gifts and the like.
12.Payments Following Disability. Upon the permanent disability of the President, Bank shall pay to the President, or his assigns, the Adjusted Base Compensation, together with all Incentive Bonuses, for the remainder of the term of this Contract.
13.Successors and Assigns. This Agreement and all the terms and conditions hereof shall be binding upon and inure to the benefit of the Bank, including any successor entity to Bank by liquidation, merger, consolidation, reorganization, sale of assets or otherwise, and to the President, and when applicable, to his heirs, successors and assigns.
14.Retirement Plans. Employee may participate in any retirement plan of Bank and to receive payments thereunder which includes a Supplemental Executive Retirement Plan (“SERP”) which pays out for a period of 15 years the amount of $150,000 per annum after 10 years from the date of SERP contract, at the Bank’s sole expense and cost, which benefit is generally made available to the Bank’s executive employees, as described in the SERP agreement.
15.Non-Assumption. The services to be performed by President under this Agreement are personal to him, and may not be assumed by any other party except with Bank's prior written consent.
16.Entire Agreement. The making and execution of this Agreement by the parties hereto have been induced by no representations, statements, warranties or agreements other than those expressed herein. This Agreement embodies the entire understanding of the parties, and there are no further or other agreements or understandings, written or oral, in effect between the parties relating to the subject matter hereof, unless specifically referred to herein by reference.
17.Amendments. This Agreement and any term hereof may be changed, waived, discharged, or terminated only by an instrument in writing signed by the party against whom enforcement of such change, waiver, discharge or termination is or would be sought and without the necessity of additional consideration.
- 4 -
18.Notices. All communications and notices hereunder shall be deemed to have been properly given or served for all purposes when personally delivered to the party to whom it is directed, or in lieu of such personal service, if received by certified or registered United States mail, postage prepaid, at the following addresses:
If to Bank at: |
|
P.O. Box BW |
|
|
Hagatna, Guam 96910 |
|
|
|
If to President at: |
|
210 Archbishop Flores Street |
|
|
Hagatna, Guam 96910 |
Either party may change the address provided above by giving written notice of such change to the other party as herein provided.
19.Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited or invalid under such law, such provision shall be ineffective to the extent of the prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.
20.Law. This Agreement shall be governed under and construed in accordance with the law of Guam.
21.Attorney's Fees. In the event of any action, suit or proceeding brought under or in connection with this Agreement, the prevailing party therein shall be entitled to recover, and the other party thereto agrees to pay, costs and expenses in connection therewith including reasonable attorney's fees, disbursements and expenses.
22.Headings. The headings of the sections of this Agreement have been included for convenience of reference only and shall in no way restrict or modify any of the terms or provisions thereof.
23.Compliance with Section 409A. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (“Section 409A”), to the extent applicable, and this Agreement be interpreted and administered to be in compliance with Section 409A. Notwithstanding anything in this Agreement to the contrary, the President shall not be considered to have terminated employment with the Bank for purposes of any payments under this Agreement which are subject to Section 409A until the President would be considered to have a “separation from service” from the Bank within the meaning of Section 409A. Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separate and distinct payment for purposes of Section 409A. To the extent required to avoid accelerated taxation and/or tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement or any other arrangement between the President and the Bank during the six (6) month period immediately following the President’s separation from service shall instead be paid on the first business day after the date that is six (6) months following the President’s separation from service. The Bank makes no representation that any or all of the payments described in this Agreement will be exempt from or comply with Section
- 5 -
409A. The President shall be solely responsible for the payment of any taxes, penalties, interest or other expenses incurred by the President on account of non-compliance with Section 409A.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above mentioned.
|
BANK OF GUAM, a Guam corporation |
|
|
(herein called the "Bank") |
|
|
|
|
|
By: |
/s/ Roger P. Crouthamel |
|
|
ROGER P. CROUTHAMEL |
|
|
Its Authorized Representative |
|
|
|
|
|
|
|
|
/s/ Joaquin P.L.G. Cook |
|
|
JOAQUIN P. L.G COOK |
|
|
(herein called the "President") |
- 6 -
EXECUTIVE |
|
|
|
|
|
|
|
|
Period Calculated: |
|
|
|
|
|
|
|
|
Process Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXECUTIVE |
|
|
|
|
|
|
Bonus |
|
Incentive Parameters |
Reduce Total Incentive by: |
|
Net Income |
|
|
|
- |
|
ROE less than: |
11.00% |
10% |
(Bonus =2.00% of Net Income) |
|
|
|
- |
|
ROA less than: |
0.70% |
10% |
|
|
|
|
|
|
Total Adversely Classified Items/Tier 1 Capital + ALLL greater than: |
25.00% |
15% |
|
|
|
|
|
|
Efficiency Ratio greater than: |
74.00% |
15% |
Parameters: |
Actual |
Variance |
% Reduction/Increase |
$ Reduction/Increase |
|
|
|
|
ROE |
0.00% |
0.00% |
0.00% |
- |
|
Net Profit |
|
|
ROA |
0.00% |
0.00% |
0.00% |
- |
|
1st Quarter |
- |
|
TACI/T1C+ALLL |
0.00% |
0.00% |
0.00% |
- |
|
2nd Quarter |
- |
|
Efficiency Ratio |
0.00% |
0.00% |
0.00% |
- |
|
3rd Quarter |
- |
|
|
|
|
|
|
|
4th Quarter |
- |
|
Total Reductions |
|
|
|
- |
|
Total Full Year |
- |
|
Total Bonus |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid Y-T-D |
|
|
|
|
|
|
|
|
2022 1st Quarter Bonus |
|
|
|
|
|
|
|
|
2022 2nd Quarter Bonus |
|
|
|
|
|
|
|
|
2022 3rd Quarter Bonus |
|
|
|
|
|
|
|
|
2022 4th Quarter Bonus |
|
|
|
- |
|
|
|
|
Total YTD |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonus Minimum |
$0 |
quarterly |
|
$0 |
|
|
|
|
Bonus Maximum |
|
|
|
$400,000 |
|
|
|
|
Exhibit 10.02
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of the 25th day of June 2022 by and between BANK OF GUAM, a Guam corporation (herein called the "Bank") and MARIA EUGENIA H. LEON GUERRERO, (herein called the "Executive Vice President") (herein called “Agreement”).
NOW, THEREFORE, in consideration of the mutual promises of the parties to the Agreement, it is hereby agreed as follows:
1.Employment. Bank hereby designates and employs Executive Vice President, and Executive Vice President hereby accepts employment with Bank, as its Executive Vice President and Chief Operating Officer.
2.Term. This Agreement shall be for a term commencing from April 1, 2022, and terminating on March 31, 2027.
3.Duties. Executive Vice President shall be the Chief Operating Officer of the Bank, and shall, subject to the control of the Board of Directors of said Bank, have general supervision, direction and control of the business and affairs of the Bank. Executive Vice President shall have the general powers and duties of management usually vested in the office of the Executive Vice President of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors of the Bank, or the By-Laws. In connection therewith, upon direction of the Board of Directors, Executive Vice President shall make necessary and reasonable business trips for which she will be reimbursed or expenses will be provided in accordance with such regulations as may be established by the Board of Directors. Included herewith shall be trips to visit with officials of correspondent banks and leadership and technical seminars as may be available.
4.Extent of Services. Executive Vice President shall devote her full time, attention and energy to the business of Bank and shall not, during the term of this Agreement, be engaged in any other business activities, unless such activities are reasonably determined by the Board of Directors of Bank not to be in competition or in conflict with the commercial banking business of Bank.
5.Termination of Employment. Executive Vice President’s employment hereunder may be terminated by either the Bank or the Executive Vice President at any time and for any reason; provided that, unless otherwise provided herein, either party shall be required to give the other party at least 60 days advance written notice of any termination of the Executive Vice President’s employment. Upon termination of the Executive Vice President’s employment during the term of this Agreement, the Executive Vice President shall be entitled to the compensation and benefits described below and shall have no further rights to any compensation or any other benefits from the Bank or any of its affiliates.
(a)If the Executive Vice President’s employment is terminated by the Bank for Cause, by the Executive Vice President without Good Reason or upon the Executive Vice President’s death, the Executive Vice President shall be entitled to receive (i) accrued but unpaid Base Compensation which shall be paid on the pay date immediately following the termination date in accordance with the Bank’s customary payroll procedures, (ii) reimbursement for unreimbursed business expenses properly incurred by the Executive Vice President and (iii) such employee benefits, if any, as to which the Executive Vice President may be entitled under the
Bank’s employee benefit plans, including the Survivor Income Plan and the SERP (items (i) through (iii) are referred to collectively as the "Accrued Amounts").
(b)If the Executive Vice President’s employment is terminated by the Bank without Cause or by the Executive Vice President for Good Reason, the Executive Vice President shall be entitled to receive (i) the Accrued Amounts and (ii) the Adjusted Base Compensation, together with all Incentive Bonuses, for the remainder of the term of this Agreement.
(c)For purposes of this Agreement, "Cause" shall mean: (i) the Executive Vice President’s willful failure to perform his duties (other than any such failure resulting from incapacity due to physical or mental illness); (ii) the Executive Vice President’s willful failure to comply with any valid and legal directive of the Board of Directors or any material policy of the Bank; (iii) the Executive Vice President’s willful engagement in dishonesty, illegal conduct, or gross misconduct which is, in each case, injurious to the Bank or its affiliates; (iv) the Executive Vice President’s embezzlement, misappropriation, or fraud, whether or not related to the Executive Vice Executive's employment with the Bank; (v) the Executive Vice President’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent); or (vi) the Executive Vice President’s material breach of any material obligation under this Agreement or any other written agreement between the Executive Vice President and the Bank or its affiliates.
(d)For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following during the term of this Agreement, in each case without the Executive Vice President’s written consent: (i) a material reduction in the Executive Vice President’s Base Compensation; (ii) a material reduction in the Executive Vice President’s Incentive Bonus opportunity; (iii) a relocation of the Executive Vice President’s principal place of employment by more than 100 miles; (iv) a material breach by the Bank of any material provision of this Agreement or any material provision of any other agreement between the Executive Vice President and the Bank or its affiliates; or (vii) a material, adverse change in the Executive Vice President’s title or authority (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law). The Executive Vice President cannot terminate his employment for Good Reason unless he has provided written notice to the Bank of the existence of the circumstances providing grounds for termination for Good Reason within 30 days of the initial existence of such grounds and the Bank has had at least 30 days from the date on which such notice is provided to cure such circumstances.
6.Base Compensation. As regular compensation for Executive Vice President's services hereunder, Bank shall pay Executive Vice President an annual base salary of Three Hundred Sixty Five Thousand Dollars and 00/100 ($365,000.00) during each year of the term hereof, payable in equal installments not less frequently than bi-weekly (herein called "Base Compensation").
7.Adjustments to Base Compensation. The Base Compensation shall be adjusted annually to reflect the increase, if any, in the cost-of-living by adding thereto an amount obtained by multiplying the Base Compensation by the percentage of which the level of the Consumer Price Index for the United States has increased over its level as of the date of commencement of the term of Agreement (herein called, together with Base Compensation, the "Adjusted Base Compensation").
2
Following the end of each year of this Agreement and within thirty (30) days after the release of the United States Bureau of Labor Statistics of the figures for such year, Bank shall pay to the Executive Vice President the amount of any additional compensation to which she is entitled as a result of such cost-of-living adjustment.
8.Incentive Bonus. As an incentive to Executive Vice President for her continuing services and contributions to the growth and profitability of Bank, Executive Vice President shall be paid, in addition to her Adjusted Base Compensation, an Incentive Bonus as follows:
(a)Subject to the quarterly adjustments at Section 9 below, an amount equal to two hundred basis points (2%) of current net profits of the Bank after taxes or Four Hundred Thousand Dollars ($400,000.00), whichever is less, payable in cash. The maximum amount and the incentive parameters shall be subject to review by the Board of Directors of Bank every other year and appropriate adjustments shall then be made.
(b) The incentive bonus shall be computed annually within five (5) business days following the completion of the Bank’s audited financial statements by the Bank’s independent accountants.
9.Computation to Bonus. The Incentive Bonus of the Executive Vice President shall be awarded as follows:
(a)If the then current Return on Equity (ROE) of the Bank is below eleven percent (11%), then the Incentive Bonus shall be reduced by ten percent (10%);
(b)If the then current Return on Assets (ROA) of the Bank is less than 70 basis points (.70%), then the Incentive Bonus shall be reduced by ten percent (10%);
(c)If the then current Total Adversely Classified Items to Tier 1 Capital of the Bank plus the Allowance for Loan and Lease Losses is greater than twenty-five percent (25%), then the Incentive Bonus shall be reduced by fifteen percent (15%);
(d)If the Efficiency Ratio of the Bank is greater than seventy-four percent (74%), the Incentive Bonus shall be reduced by fifteen percent (15%);
For purposes of this Section 9, the ROA, ROE, Total Adversely Classified Items to Tier 1 Capital, Allowance for Loan and Lease Losses and Efficiency Ratio shall all be derived from any report of management submitted to the Board of Directors at the Board Meeting immediately preceding the date of any adjustment. If any dispute arises as to the calculations of any of such figures, the Compensation Committee, subject to Board approval, shall make the sole determination of such figures using whatever resources the Committee shall deem reasonably necessary. Attached to this Agreement and made a part hereof by this reference as Exhibit A, is a worksheet, which shall be used by the Bank to calculate the Incentive Bonus of the Executive Vice President.
10.Other Compensation or Benefits. In addition to the Adjusted Base Compensation and Incentive Bonus and any other compensation provided hereunder, Bank shall provide Executive Vice President with the following:
3
(a)A five-week vacation, at full pay;
(b)A health insurance, an accident insurance and disability insurance of a type and in an amount generally made available by Bank to its executive employees, at Bank's sole cost and expense;
(c)A group term life insurance that is generally available to Bank's executive employees, at Bank's sole expense and cost;
(d)A motor vehicle, at Bank's sole cost and expense, together with comprehensive insurance including public liability, in amounts not less than the amount required by law. All reasonable operating expenses shall be paid by Bank; and
(e)A Survivor Income Plan with a death benefit of $1,060,606.00 that is or will be made generally available to Bank's executive employees, at Bank's sole expense and cost.
11.Business Expenses. Bank shall pay or reimburse Executive Vice President upon submission of an itemized account by her for all reasonable business expenses incurred by Executive Vice President in promoting, pursuing or otherwise furthering the business of Bank, including, but not limited to expenses for travel, meals, hotel accommodations, entertainment, gifts and the like.
12.Payments Following Disability. Upon the permanent disability of the Executive Vice President, Bank shall pay to the Executive Vice President, or her assigns, the Adjusted Base Compensation, together with all Incentive Bonuses, for the remainder of the term of this Contract.
13.Successors and Assigns. This Agreement and all the terms and conditions hereof shall be binding upon and inure to the benefit of the Bank, including any successor entity to Bank by liquidation, merger, consolidation, reorganization, sale of assets or otherwise, and to the Executive Vice President, and when applicable, to her heirs, successors and assigns.
14.Retirement Plans. Employee may participate in any retirement plan of Bank and to receive payments thereunder which includes a Supplemental Executive Retirement Plan (“SERP”) which pays out for a period of 15 years the amount of $150,000 per annum after 10 years from the date of SERP contract, at the Bank’s sole expense and cost, which benefit is generally made available to the Bank’s executive employees, as described in the SERP agreement.
15.Non-Assumption. The services to be performed by Executive Vice President under this Agreement are personal to her, and may not be assumed by any other party except with Bank's prior written consent.
4
16.Entire Agreement. The making and execution of this Agreement by the parties hereto have been induced by no representations, statements, warranties or agreements other than those expressed herein. This Agreement embodies the entire understanding of the parties, and there are no further or other agreements or understandings, written or oral, in effect between the parties relating to the subject matter hereof, unless specifically referred to herein by reference.
17.Amendments. This Agreement and any term hereof may be changed, waived, discharged, or terminated only by an instrument in writing signed by the party against whom enforcement of such change, waiver, discharge or termination is or would be sought and without the necessity of additional consideration.
18.Notices. All communications and notices hereunder shall be deemed to have been properly given or served for all purposes when personally delivered to the party to whom it is directed, or in lieu of such personal service, if received by certified or registered United States mail, postage prepaid, at the following addresses:
If to Bank at: |
P.O. Box BW |
|
Hagatna, Guam 96910 |
|
|
If to Executive Vice President at: |
181 Jose Q. Pangelinan St. |
|
Yona, Guam 96915 |
Either party may change the address provided above by giving written notice of such change to the other party as herein provided.
19.Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited or invalid under such law, such provision shall be ineffective to the extent of the prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.
20.Law. This Agreement shall be governed under and construed in accordance with the law of Guam.
21.Attorney's Fees. In the event of any action, suit or proceeding brought under or in connection with this Agreement, the prevailing party therein shall be entitled to recover, and the other party thereto agrees to pay, costs and expenses in connection therewith including reasonable attorney's fees, disbursements and expenses.
22.Headings. The headings of the sections of this Agreement have been included for convenience of reference only and shall in no way restrict or modify any of the terms or provisions thereof.
5
23.Compliance with Section 409A. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (“Section 409A”), to the extent applicable, and this Agreement be interpreted and administered to be in compliance with Section 409A. Notwithstanding anything in this Agreement to the contrary, the Executive Vice President shall not be considered to have terminated employment with the Bank for purposes of any payments under this Agreement which are subject to Section 409A until the Executive Vice President would be considered to have a “separation from service” from the Bank within the meaning of Section 409A. Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separate and distinct payment for purposes of Section 409A. To the extent required to avoid accelerated taxation and/or tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement or any other arrangement between the Executive Vice and the Bank during the six (6) month period immediately following the Executive Vice President’s separation from service shall instead be paid on the first business day after the date that is six (6) months following the Executive Vice President’s separation from service. The Bank makes no representation that any or all of the payments described in this Agreement will be exempt from or comply with Section 409A. The Executive Vice President shall be solely responsible for the payment of any taxes, penalties, interest or other expenses incurred by the Executive Vice President on account of non-compliance with Section 409A.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above mentioned.
|
BANK OF GUAM, a Guam corporation |
|
(herein called the "Bank") |
|
|
By: |
/s/ Roger P. Crouthamel |
|
ROGER P. CROUTHAMEL |
|
Its Authorized Representative |
|
|
|
/s/ Maria E. H. Leon Guerrero |
|
MARIA E. H. LEON GUERRERO |
|
(herein called the "Executive Vice President") |
6
Exhibit A
|
|
|
|
|
|
|
|
|
Period Calculated: |
|
|
|
|
|
|
|
|
Process Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXECUTIVE |
|
|
|
|
|
|
Bonus |
|
Incentive Parameters |
Reduce Total Incentive by: |
|
Net Income |
|
|
|
- |
|
ROE less than: |
11.00% |
10% |
(Bonus =2.00% of Net Income) |
|
|
|
- |
|
ROA less than: |
0.70% |
10% |
|
|
|
|
|
|
Total Adversely Classified Items/Tier 1 Capital + ALLL greater than: |
25.00% |
15% |
|
|
|
|
|
|
Efficiency Ratio greater than: |
74.00% |
15% |
Parameters: |
Actual |
Variance |
% Reduction/Increase |
$ Reduction/Increase |
|
|
|
|
ROE |
0.00% |
0.00% |
0.00% |
- |
|
Net Profit |
|
|
ROA |
0.00% |
0.00% |
0.00% |
- |
|
1st Quarter |
- |
|
TACI/T1C+ALLL |
0.00% |
0.00% |
0.00% |
- |
|
2nd Quarter |
- |
|
Efficiency Ratio |
0.00% |
0.00% |
0.00% |
- |
|
3rd Quarter |
- |
|
|
|
|
|
|
|
4th Quarter |
- |
|
Total Reductions |
|
|
|
- |
|
Total Full Year |
- |
|
Total Bonus |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid Y-T-D |
|
|
|
|
|
|
|
|
2022 1st Quarter Bonus |
|
|
|
|
|
|
|
|
2022 2nd Quarter Bonus |
|
|
|
|
|
|
|
|
2022 3rd Quarter Bonus |
|
|
|
|
|
|
|
|
2022 4th Quarter Bonus |
|
|
|
- |
|
|
|
|
Total YTD |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonus Minimum |
$0 |
quarterly |
|
$0 |
|
|
|
|
Bonus Maximum |
|
|
|
$400,000 |
|
|
|
|
Exhibit 31.01
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joaquin P.L.G. Cook, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of BankGuam Holding Company; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
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. |
Dated: August 11, 2022 |
/s/ JOAQUIN P.L.G. COOK |
|
Joaquin P.L.G. Cook |
|
President and Chief Executive Officer |
|
(Principal Executive Officer) |
Exhibit 31.02
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Symon A. Madrazo, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of BankGuam Holding Company; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
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. |
Dated: August 11, 2022 |
/s/ SYMON A. MADRAZO |
|
Symon A. Madrazo |
|
Senior Vice President and Chief Financial Officer |
|
(Principal Financial Officer) |
Exhibit 32.01
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
The certification set forth below is being submitted in connection with the report on Form 10-Q of BankGuam Holding Company for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code.
Joaquin P.L.G. Cook, the President and Chief Executive Officer of BankGuam Holding Company, and Symon A. Madrazo, the Senior Vice President and Chief Financial Officer of BankGuam Holding Company, each certifies that, to the best of their knowledge:
|
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 BankGuam Holding Company. |
Date: August 11, 2022 |
By: |
/s/ JOAQUIN P.L.G. COOK |
|
|
Joaquin P.L.G. Cook President and Chief Executive Officer |
|
|
|
Date: August 11, 2022 |
By: |
/s/ SYMON A. MADRAZO |
|
|
Symon A. Madrazo Senior Vice President and Chief Financial Officer |
Condensed Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Statement Of Financial Position [Abstract] | ||
Investment securities held-to-maturity, Fair Value | $ 261,694 | $ 310,372 |
Loans, net of allowance for loan losses | $ 35,732 | $ 34,408 |
Common stock, par value | $ 0.2083 | $ 0.2083 |
Common stock, shares authorized | 48,000,000 | 48,000,000 |
Common stock, shares issued | 9,777,000 | 9,770,000 |
Common stock, shares outstanding | 9,728,000 | 9,721,000 |
Preferred stock, par value | $ 100 | $ 100 |
Preferred stock, shares authorized | 300,000 | 300,000 |
Preferred stock, shares issued | 9,800 | 9,800 |
Preferred stock, shares outstanding | 9,800 | 9,800 |
Common stock in treasury, shares | 32,000 | 32,000 |
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Statement Of Income And Comprehensive Income [Abstract] | ||||
Net income | $ 4,129 | $ 5,910 | $ 7,643 | $ 9,205 |
Other comprehensive income (loss): | ||||
Unrealized holding gain (loss) on available-for-sale securities arising during the period, net of tax | (16,381) | 4,898 | (41,926) | (15,590) |
Reclassification for (gain) realized on available-for- sale securities | (272) | |||
Amortization of post-transfer unrealized holding loss on held-to-maturity securities during the period, net of tax | 215 | 88 | 430 | 113 |
Total other comprehensive income (loss) | (16,166) | 4,986 | (41,496) | (15,749) |
Total comprehensive income (loss) | $ (12,037) | $ 10,896 | $ (33,853) | $ (6,544) |
Nature of Business |
6 Months Ended |
---|---|
Jun. 30, 2022 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Nature of Business |
Note 1 – Nature of Business Organization The accompanying condensed consolidated financial statements include the accounts of BankGuam Holding Company (“Company”) and its wholly-owned subsidiaries, Bank of Guam (“Bank”) and BankGuam Investment Services (“BGIS”). The Company is a Guam corporation organized on October 29, 2010, to act as the holding company of the Bank, a Guam banking corporation, a 17-branch bank serving the communities in Guam, the Commonwealth of the Northern Mariana Islands (“CNMI”), the Federated States of Micronesia (“FSM”), the Republic of the Marshall Islands (“RMI”), the Republic of Palau (“ROP”), and San Francisco, California. BGIS was incorporated in Guam in 2015 and initially capitalized during the first quarter of 2016. During July 2016, the Company executed an agreement to purchase up to 70% of ASC Trust LLC, formerly ASC Trust Corporation. On July 6, 2021, the Company completed its final purchase of 25% of the voting common stock of ASC Trust LLC under the agreement, as amended to date, bringing the Company’s ownership of ASC Trust LLC to 70%. See Note 4 under “Investment in AST Trust LLC” for additional details. Other than holding the shares of the Bank, BGIS and ASC Trust LLC, the Company conducts no significant activities, although it is authorized, with the prior approval of its principal regulator, the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), to engage in a variety of activities related to the business of banking. Currently, substantially all of the Company’s operations are conducted and substantially all of the assets are owned by the Bank, which accounts for substantially all of our consolidated revenues, expenses and operating income. The Bank provides a variety of financial services to individuals, businesses and governments through its branches. The Bank’s headquarters is located in Hagåtña, Guam. The Bank currently has seven branches in Guam, three in the CNMI, four in the FSM, one in the RMI, one in the ROP, and one in San Francisco, California. The Bank’s primary deposit products are demand deposits, savings and time certificate accounts, and its primary lending products are consumer, commercial and real estate loans. In 2021 the Bank permanently closed the Dededo, Harmon and Chalan Piao branches. For ease of reference we will sometimes refer to the Company and the Bank as “we”, “us” or “our”.
|
Summary of Significant Accounting Policies and Recent Accounting Pronouncements |
6 Months Ended |
---|---|
Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies and Recent Accounting Pronouncements |
Note 2 – Summary of Significant Accounting Policies and Recent Accounting Pronouncements The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all footnotes that would be required for a full presentation of financial condition, results of operations, changes in cash flows and comprehensive income in accordance with generally accepted accounting principles in the United States (“GAAP”). However, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments and accruals) which, in the opinion of our management, are necessary for a fair presentation of our financial condition, results of operations and cash flows for the interim periods presented. These unaudited condensed consolidated financial statements have been prepared on a basis consistent with prior periods, and should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2021, and the notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission (“SEC”) under the Exchange Act on March 28, 2022. Certain prior period amounts have been reclassified to conform to the current period presentation. Our condensed consolidated financial condition at June 30, 2022, and the condensed consolidated results of operations for the three and six months ended June 30, 2022, are not necessarily indicative of what our financial condition will be at December 31, 2022, or of the results of our operations that may be expected for the full year ending December 31, 2022. Use of Estimates The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of income and expenses during the periods presented. Actual results could differ from those estimates. Restricted Cash Interest-bearing deposits in banks that mature within one year are carried at cost. $150 thousand of these deposits are held by the Bank jointly under the names of Bank of Guam and the Guam Insurance Commissioner, and serve as a bond for the Bank of Guam Trust Department. COVID-19 The outbreak of a novel coronavirus (“COVID-19”) in 2020 and subsequent impact on public commerce and related business activities continues to impact the Company as well as a broad range of industries in which the Company’s customers operate and, in some instances, impaired their ability to fulfill their financial obligations to the Company. On March 3, 2020, the Federal Open Market Committee (FOMC) reduced the target range for federal funds by 50 basis points to 1.00% - 1.25%. This rate was further reduced to a target range of 0% - 0.25% on March 16, 2020. Improvements in economic conditions as well as accelerating inflations resulted in the FOMC increasing the target range by 25bps to 0.25% - 0.50% on March 16, 2022, 50bps to 0.75% - 1.00% on May 4, 2022, 75bps to 1.50% - 1.75% on June 15, 2022, and by 75bps 2.25% to 2.50% on July 27, 2022. In the United States, the government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020. The CARES Act, among other things, created a $670 billion loan program (the “Paycheck Protection Program” or the “PPP”) for fully guaranteed loans (which may be forgiven) to small businesses for certain qualifying expenses. The PPP was modified and extended multiple times prior to its expiration on May 31, 2021. Currently one branch in Guam remains closed due to renovations, and will reopen upon completion. The Bank continues to provide a secure telecommuting program for those personnel who are able to perform their responsibilities remotely, the computer hardware and software needed to support those tasks, and established teleconferencing capabilities to reduce the number of people in attendance at all of its larger group meetings. The Company has not materially changed its accounting policies or procedures due to COVID-19. Russia/Ukraine Conflict The current Russia and Ukraine conflict has raised economic and financial market concerns causing uncertainty and disruption in financial markets globally and further straining an already struggling global supply chain. Furthermore, such events have the potential to adversely impact the availability of commodities, commodity prices, and create global inflationary pressures. These and other effects of the conflict could have a negative impact on the ability of borrowers to repay their obligations to the Bank, which could impact our reserves for loan losses and have an adverse effect on our results of operations.
Recently Adopted Accounting Pronouncements
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," which provides temporary optional expedients to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (LIBOR) to an alternative reference rate such as Secured Overnight Financing Rate (SOFR). The guidance was effective upon issuance and generally can be applied through December 31, 2022. In , the Company adopted SOFR as a replacement to LIBOR. The Company did not originate loans in 2022 indexed to LIBOR nor enter into modifications which create new LIBOR exposure. The Company believes the adoption of this guidance will not have a material impact on the consolidated financial statements.
Recently Issued but Not Yet Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)”, to amend the standards for the measurement of credit losses on financial instruments by replacing the historical incurred loss impairment methodology of determining the level of the allowance for loan and lease losses (“ALLL”), including losses associated with available-for-sale securities, with a more decision-useful methodology that reflects expected credit losses over the life of a financial instrument based upon historical experience, current conditions, and reasonable and supportable forecasts in determining the ALLL level, as well as the reserve for off-balance-sheet credit exposures. The Company was preparing to implement ASU 2016-13 when it was scheduled to become effective January 1, 2020, but the FASB announced on October 16, 2019, a delay of the effective date for smaller reporting companies until January 1, 2023. The Company continues to evaluate the impact the new guidance will have on its financial position, results of operations and regulatory risk-based capital. The Company’s current planned approach for estimating lifetime credit losses for its loan portfolio includes the following key components: • An economic forecast period of two years based on the relation of losses with key economic variables for each portfolio segment; • Segmentation of loans into pools that share common risk characteristics; and • Used the discounted cash flow (DCF) method to measure credit impairment on most of our loan portfolios and estimate lifetime credit losses using the conceptual components described above. Management will recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the first reporting period in which the new standard is effective, but cannot yet estimate the magnitude of the adjustment or the overall impact of the new guidance on the Company’s financial position, results of operations or cash flows.
The Company classifies its investment securities as available-for-sale or held-to-maturity. The Company’s investment security portfolio consists of U.S. government-sponsored agencies securities, which has an explicit or implicit guarantee from the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. Accordingly, the Company does not anticipate to apply a loss assumption for its investment securities.
|
Earnings Per Common Share |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share Pro Forma [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Common Share |
Note 3 – Earnings Per Common Share Basic earnings per common share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Potential common shares that may be issued by the Company relate to shares subscribed but not yet issued in 2022 and 2021 under the Employee Stock Purchase Plan, and are reported as dilutive options. No shares were subscribed but not issued at June 30, 2022 and 2021. In April 2022, the Company suspended the Employee Stock Purchase Plan indefinitely in connection with the Company’s plans to implement a reverse stock split. On July 25, 2022, the Company held its annual shareholders meeting and the shareholders approved the reverse stock split. The Company expects to complete the transaction in the fourth quarter of 2022, subject to the receipt of all regulatory approvals.Earnings per common share are computed based on reported net income, preferred stock dividends and the following common share data:
|
Investment Securities |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments Debt And Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities |
Note 4 – Investment Securities The amortized cost and fair value of investment securities, with gross unrealized gains and losses, is presented as follows:
At June 30, 2022 and December 31, 2021, investment securities with a carrying value of $677.2 million and $558.8 million, respectively, were pledged to secure various government deposits and to meet other public requirements.
Proceeds and gross realized gains from the sales of available-for-sale investment securities for the six months ended June 30, 2022 and 2021 are shown below. There were no sales of investment securities for the three months ended June 30, 2022 and 2021.
The amortized cost and estimated fair value of investment securities by contractual maturity at June 30, 2022 and December 31, 2021 are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or borrowers the right to prepay obligations with or without call or prepayment penalties. At June 30, 2022, obligations of U.S. government corporations and agencies with amortized costs totaling $919.6 million consisted of residential mortgage-backed securities totaling $458.9 million and Small Business Administration agency pool securities totaling $68.9 million whose contractual maturity, or principal repayment, will follow the repayment of the underlying small business loans or mortgages. For purposes of the following table, the entire outstanding balance of these mortgage-backed securities issued by U.S. government corporations and agencies and SBA pools is categorized based on final maturity date. At June 30, 2022, the Bank estimates the average remaining life of these mortgage-backed securities and SBA pools to be approximately 5.6 years and 5.4 years, respectively.
Temporarily Impaired Securities The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2022 and December 31, 2021.
The investment securities that were in an unrealized loss position as of June 30, 2022, which comprised a total of 232 securities, were not other-than-temporarily impaired. Specifically, the 232 securities are comprised of the following: 39 Small Business Administration Pool securities, 26 agency securities issued by Federal Home Loan Bank (“FHLB”), 34 mortgaged-backed securities and 19 agency securities issued by Federal Home Loan Mortgage Corporation (“FHLMC”), 75 mortgaged-backed securities and 1 agency security issued by Federal National Mortgage Association (“FNMA”), 20 mortgaged-backed securities issued by Government National Mortgage Association (“GNMA”) and 18 agency securities issued by Federal Farm Credit Banks (“FFCB”). Total gross unrealized losses were primarily attributable to changes in market interest rates, relative to when the investment securities were purchased, and not due to any change in the credit quality of the investment securities. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is not likely that the Company will be required to sell the investment securities before recovery of their amortized cost, which may be at maturity. However, the Company may elect to sell certain investment securities with an unrealized loss position in its “available for sale” portfolio as needed to replenish its liquidity. Investment in ASC Trust LLC On July 6, 2021, with the approval of the Federal Reserve Bank of San Francisco, the Company used $6.2 million of the proceeds from the subordinated notes totaling $20 million that were issued on June 29, 2021 to acquire an additional 25% of the voting common stock of ASC Trust LLC at the third and final closing, pursuant to the Stock Purchase Agreement (the “Agreement”) dated May 27, 2016, between the Company and David J. John, as amended to date. This transaction brought the Company’s interest in ASC Trust LLC to 70%. The Company evaluated its ownership in ASC Trust LLC after the last transaction in accordance to ASC 810 – Consolidation, and determined that the Company has control over ASC Trust LLC, requiring consolidation. The Company’s Chief Executive Officer serves on the Board of Directors of ASC Trust LLC. Another of the Company’s Board members also serves as a non-minority voting member of an entity that owns 5% of the common stock of ASC Trust LLC. The Agreement contains customary warranties, representations and indemnification provisions.
|
Loans Held for Sale, Loans and Allowance for Loan Losses |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans Held for Sale, Loans and Allowance for Loan Losses |
Note 5 – Loans Held for Sale, Loans and Allowance for Loan Losses Loans Held for Sale In its normal course of business, the Bank originates mortgage loans held for sale to the FHLMC. The Bank has elected to measure its residential mortgage loans held for sale at lower of cost or market. Origination fees and costs are recognized in earnings at the time of origination. Loans are sold to FHLMC at par. During the six months ended June 30, 2022, the Bank originated and sold $4.9 million in FHLMC mortgage loans. During the six months ended June 30, 2021, the Bank originated and sold $17.9 million in FHLMC loans. Mortgage loans serviced for others are not included in the accompanying condensed consolidated statements of financial condition. The unpaid principal balances of mortgage loans serviced for others were $174.7 million at June 30, 2022 and $181.1 million at December 31, 2021. The decrease of $6.4 million (3.52%) during the six months ended June 30, 2022 was due to principal paydowns and payoffs during the period, which offset new loans. We retain mortgage servicing rights on mortgage loans that we sell. Such rights represent the net positive cash flows generated from the servicing of such mortgage loans and we recognize such rights as assets on our statements of financial condition based on their estimated fair values. We receive servicing fees, less any subservicing costs, on the unpaid principal balances of such mortgage loans. Those fees are collected from the monthly payments made by the mortgagors or from the proceeds of the sale or foreclosure and liquidation of the underlying real property collateralizing the loans. At June 30, 2022 and December 31, 2021, mortgage servicing rights totaled $1.6 million each, respectively, and are included in other assets in the accompanying condensed consolidated statements of financial condition. The Bank accounts for mortgage servicing rights at fair value with changes in fair value recorded as a part of service fees and charges in the condensed consolidated statements of income. Loans Outstanding loan balances are presented net of unearned income, deferred loan fees, and unamortized discount and premium totaling $3.0 million at June 30, 2022, and $3.2 million at December 31, 2021. As of June 30, 2022 and December 31, 2021, our 10 largest borrowing relationships in aggregate totaled $342.9 million, respectively, in commitments, or approximately 25.9% of our total gross loans . The loan portfolio consisted of the following at:
Paycheck Protection Program With the passage of the Paycheck Protection Program, or PPP, administered by the Small Business Administration, the Bank actively participated in assisting its customers with applications for resources through the program. PPP loans have either a 1%. The Bank believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. The Bank approved and funded over $149 million in gross PPP loans. At June 30, 2022, the outstanding gross principal balance of PPP loans was $5.3 million with $87 thousand in unearned fees remaining. At loan origination, the Company was paid a fee from the SBA ranging from 1% to 5% based on the loan size. The unearned fees are being accreted to interest income based on the contractual maturity. It is the Bank’s understanding that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, the Bank could be required to establish an additional allowance for loan loss through additional credit loss expense charged to earnings. or a term and earn interest atOn June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”) was signed into law which changed key provisions of the PPP, including provisions relating to the maturity of PPP loans, the deferral of PPP loan payments, and the forgiveness of PPP loans. Under the Flexibility Act, as clarified by the SBA in an October 7, 2020 update, the maturity date for PPP loans funded before June 5, 2020 remained at two years from funding while the maturity date for PPP loans funded after June 5, 2020 was five years from funding. In addition, the Flexibility Act increased the period during which PPP loan proceeds are to be used for purposes that would qualify the loan for forgiveness (the “covered period”) from 8 weeks to 24 weeks, at the borrower’s election, for PPP loans made prior to June 5, 2020, and set the covered period for loans made after June 5, 2020 at 24 weeks from funding. Under the Flexibility Act, PPP borrowers are not required to make any payments of principal or interest before the date on which SBA remits the loan forgiveness amount to the Company (or notifies the Company that no loan forgiveness is allowed) and, although PPP borrowers may submit an application for loan forgiveness at any time prior to the maturity date, if PPP borrowers do not submit a loan forgiveness application within 10 months after the end of their covered period, such borrowers will be required to begin paying principal and interest after that period. For loans originated under the SBA's PPP loan program, interest and principal payment on these loans were originally deferred for six months following the funding date, during which time interest would continue to accrue. The Flexibility Act extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans to the date that the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, ten months after the end of the borrower’s loan forgiveness covered period). The extension of the deferral period under the Flexibility Act automatically applied to all PPP loans. Allowance for Loan Losses The allowance for loan losses is evaluated on a quarterly basis by Bank management, and is based upon management’s periodic review of the collectability of loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available or conditions change. The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. ASC 310-10 defines an impaired loan as one for which there is uncertainty concerning collection of all principal and interest per the original contractual terms of the loan. For those loans that are classified as impaired, an allowance is established when the discounted cash flow (or the collateral value or the observable market price) of the impaired loan is lower than the carrying value of the loan. The general component covers unimpaired loans, and is estimated using a loss migration analysis based on historical charge-off experience and expected loss, given the default probability derived from the Bank’s internal risk rating process. The loss migration analysis tracks twelve rolling quarters of loan loss history and industry loss factors to determine historical losses by classification category for each loan type, except certain consumer loans. These calculated loss factors are then applied to outstanding loan balances for all non-impaired loans. Additionally, the allowance consist of internally developed qualitative factors based on interagency guidance which are used to supplement the risks that are not captured by the historical loss migration analysis. These qualitative factors that are determined utilizing external economic factors and internal assessments is applied to each homogeneous loan pool. We also conduct individual loan review analyses, as part of the allowance for loan loss allocation process, applying specific monitoring policies and procedures in analyzing the existing loan portfolio. Beginning in 2020, management increased the loss attributes in a number of the qualitative factors to more appropriately capture the risks stemming from economic deterioration from COVID-19. The Company continually evaluates these factors and makes adjustments each quarter. During the three and six months ended June 30, 2022, management adjusted the economic risk factors to incorporate the current economic implications, which include fluctuations in tourism, unemployment due to the COVID-19 pandemic and inflationary concerns. Set forth below is a summary of the Bank’s activity in the allowance for loan losses during the three and six months ended June 30, 2022, and 2021, and the year ended December 31, 2021:
Set forth below is information regarding loan balances and the related allowance for loan losses, by portfolio type, for the three and six months ended June 30, 2022 and 2021, and the year ended December 31, 2021, respectively.
Credit Quality The following table provides a summary of the delinquency status of the Bank’s loans by portfolio type:
Generally, the accrual of interest on a loan is discontinued when principal or interest payments become more than 90 days past due, unless management believes the loan is adequately collateralized and is in the process of collection, with the exception of automobile and other consumer loans which, rather than being placed on non-accrual status, are charged off once they become 120 days delinquent. When a loan is placed on non-accrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Non-accrual loans may be restored to accrual status when in receipt of six consecutive payments, and principal and interest become current and full repayment is expected. The following table provides information as of June 30, 2022 and December 31, 2021, with respect to loans on non-accrual status, by portfolio type:
Credit Quality Indicators The Bank uses several credit quality indicators to manage credit risk, including an internal credit risk rating system that categorizes loans into pass, special mention, substandard, formula classified, doubtful or loss categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics and that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk-rated and monitored collectively. These are typically loans to individuals in the classes which comprise the consumer portfolio segment. The following are the definitions of the Bank’s credit quality indicators: Pass (A): Exceptional: Essentially risk-free credit. These are loans of the highest quality that pose virtually no risk of loss to the Bank. This includes loans fully collateralized by means of a savings account(s) and time certificate(s) of deposit, and by at least 110% of the loan amount. Borrowers should have strong financial statements, good liquidity and excellent credit. Pass (B): Standard: Multiple, strong sources of repayment. These are loans to borrowers with a demonstrated history of financial and managerial performance. The risk of loss is considered to be low. Loans are well-structured, with clearly identified primary and readily available secondary sources of repayment. These loans may be secured by an equal amount of funds in a savings account or time certificate of deposit. These loans may also be secured by marketable collateral whose value can be reasonably determined through outside appraisals. The borrower characteristically has well supported cash flows and low leverage. Pass (C): Acceptable: Good primary and secondary sources of repayment. These are loans to borrowers of average financial condition, stability and management expertise. The borrower should be a well-established individual or company with adequate financial resources to withstand short-term fluctuations in the marketplace. The borrower’s financial ratios and trends are favorable. The loans may be unsecured or supported by non-real estate collateral for which the value is more difficult to determine, represent a reasonable credit risk and require an average amount of account officer attention. The borrower’s ability to repay unsecured credit is to be of unquestionable strength. Pass (D): Monitor: Sufficient primary sources of repayment and an acceptable secondary source of repayment. Acceptable business or individual credit, but the borrower’s operations, cash flows or financial conditions carry average levels of risk. These loans are considered to be collectable in full, but may require a greater-than-average amount of loan officer monitoring. Borrowers are capable of absorbing normal setbacks without failing to meet the terms of the loan agreement. Special Mention: A Special Mention asset has potential weaknesses that deserve a heightened degree of monitoring. These potential weaknesses may result in a deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. The Special Mention classification should neither be a compromise between a pass grade and substandard, nor should it be a “catch all” grade to identify any loan that has a policy exception. Substandard: A Substandard asset is inadequately protected by the current sound worth and payment capacity of the obligor or the collateral pledged. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Assets classified as substandard are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Formula Classified: Formula Classified loans are all loans and credit cards delinquent 90 days and over which have yet to be formally classified Special Mention, Substandard or Doubtful by the Bank’s Loan Committee. In most instances, the monthly formula total is comprised primarily of residential real estate loans, consumer loans, credit cards and commercial loans under $250 thousand. However, commercial loans are typically formally classified by the Loan Committee no later than their 90-day delinquency, and those do not become part of the formula classification. Real estate loans 90-days delinquent that are in the foreclosure process, which is typically completed within another 60 days, are not formally classified during this period. Doubtful: A loan with weaknesses well enough defined that eventual repayment in full, on the basis of currently existing facts, conditions and values, is highly questionable, even though certain factors may be present which could improve the status of the loan. The probability of some loss is extremely high, but because of certain known factors that may work to the advantage of strengthening of the assets (i.e. capital injection, perfecting liens on additional collateral, refinancing plans, etc.), its classification as an estimated loss is deferred until its more exact status can be determined. Loss: Loans classified as “Loss” are considered uncollectible, and are either unsecured or are supported by collateral that is of little to no value. As such, their continuance as recorded assets is not warranted. While this classification does not mandate that a loan has no ultimate recovery value, losses should be taken in the period during which these loans are deemed to be uncollectible. Loans identified as loss are immediately approved for charge-off. The Bank may refer loans to outside collection agencies, attorneys, or its internal collection division to continue collection efforts. Any subsequent recoveries are credited to the Allowance for Loan Losses. The Bank classifies its loan portfolios using internal credit quality ratings, as discussed above under Allowance for Loan Losses. The following table provides a summary of loans by portfolio type and the Bank’s internal credit quality ratings as of June 30, 2022, and December 31, 2021:
Impaired Loans A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the original contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impaired loans include loans that are in non-accrual status and other loans that have been modified in Troubled Debt Restructurings (TDRs), where economic concessions have been granted to borrowers experiencing financial difficulties. These concessions typically result from the Bank’s loss mitigation actions, and could include reductions in the interest rate, payment extensions, forbearance, or other actions taken with the intention of maximizing collections. Impairment is measured on a loan-by-loan basis for commercial and real estate loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral (if the loan is collateral-dependent). Large groups of smaller-balance homogeneous loans, such as consumer loans, are collectively evaluated for impairment. Impairment reserves for these groups of consumer loans are determined using historical loss given default rates for similar loans. The following table sets forth information regarding non-accrual loans and restructured loans at June 30, 2022 and December 31, 2021:
The table below contains additional information with respect to impaired loans, by portfolio type, at June 30, 2022 and December 31, 2021:
Troubled Debt Restructurings In accordance with FASB’s Accounting Standards Update No. 2011-02, “A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring” (ASU No. 2011-02), the Bank had $38.4 million of troubled debt restructurings (“TDRs”) as of June 30, 2022, down by $293 thousand from $38.7 million at December 31, 2021, primarily in commercial mortgage loans. The restructured loans recorded with the Bank have been modified for the purpose of alleviating temporary impairments to the borrower’s financial condition. The modifications that the Bank has extended to borrowers have come in the form of a change in the repayment terms. The restructuring plan between the borrower and the Bank is designed to provide a bridge for cash flow shortfalls in the near term. As the borrower works through the near-term issues, in most cases, the original contractual terms will be reinstated. Additional information regarding performing and nonperforming TDRs at June 30, 2022 and December 31, 2021 is set forth in the following table:
Principal modification includes principal forgiveness at the time of modification, contingent principal forgiveness granted over the life of the loan based on borrower performance.
In an effort to constructively work with borrowers affected by the COVID-19 pandemic, the Bank initiated a temporary program in March 2020 to allow for 90-day deferrals for residential mortgage and commercial loans upon request from the borrower, and a 90-day deferral for all consumer and automobile loans. The Bank did not identify these loans that were deferred and were over 30 days delinquent as TDRs. The Bank identified a specific reserve for consumer loans totaling $3.8 million at June 30, 2022. The Bank also increased its environmental factors for the reserve to account for the effects of the COVID-19 pandemic. The Bank continues to process commercial and consumer deferral requests on a case-by-case basis. There were no defaults on troubled debt restructurings following the modification during the six months ended June 30, 2022 and 2021. The Bank has two significant borrowing relationships in bankruptcy totaling $9.8 million at June 30, 2022. The Bank has calculated a specific reserve within the allowance for one of the borrowing relationships in bankruptcy in the amount of $3.5 million. In March 2022, a court ruling increased the availability of assets for one of the borrowing relationships in bankruptcy to satisfy its outstanding liabilities. The Bank believes it has sufficient collateral coverage to protect its current exposure in these matters, however due to the complexities of the bankruptcy cases and uncertainties surrounding ongoing negotiations, the ultimate outcomes may result in losses. |
Commitments and Contingencies |
6 Months Ended |
---|---|
Jun. 30, 2022 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies |
Note 6 – Commitments and Contingencies The Bank is involved in certain legal actions and claims that arise in the ordinary course of business. Management believes that, as a result of its legal defenses and insurance arrangements, none of these matters is expected to have a material adverse effect on the Bank’s, BGIS’s or the Company’s financial condition, results of operations or cash flows.
|
Regulatory Capital Requirements |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Banking Regulation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Regulatory Capital Requirements |
Note 7 – Regulatory Capital Requirements The Bank is subject to various regulatory capital requirements administered by the United States federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s, BGIS’s and the Company’s condensed consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items, as calculated under regulatory accounting practices. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of Total and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). As of June 30, 2022, and December 31, 2021, the Bank met all capital adequacy requirements to which it is subject. As of June 30, 2022, the Bank’s capital ratios each exceeded the Federal Deposit Insurance Corporation’s well capitalized standards under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum Total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since the Bank’s last regulatory examination that management believes have changed the Bank’s category.
The Company’s actual capital amounts and ratios as of June 30, 2022 and December 31, 2021 are presented in the table below.
|
Off-Balance-Sheet Activities |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Off Balance Sheet Activities |
Note 8 – Off-Balance-Sheet Activities The Bank is a party to credit-related financial instruments with off-balance-sheet risk to meet the financing needs of its customers in the normal course of business. These financial instruments include commitments to extend credit, standby letters of credit, and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in addition to the amount reflected in the condensed consolidated financial statements. The Bank’s exposure to credit loss, in the event of nonperformance by the other parties to financial instruments for loan commitments and letters of credit, is represented by the contractual amount of these instruments. The Bank follows the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. A summary of financial instruments with off-balance-sheet risk at June 30, 2022 and December 31, 2021 is as follows:
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for some lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer. Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party or the shipment of merchandise from a third party. These letters of credit are primarily issued to support public and private borrowing arrangements. The majority of all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers, and similar credit underwriting standards are applied. The Bank generally holds collateral supporting those commitments. The Bank considers its standby and other letters of credit to be payment guarantees. At June 30, 2022, the maximum undiscounted future payments that the Bank could be required to make for all outstanding letters of credit were $49.8 million. All of these arrangements mature within one year. The Bank has recourse to recover from the customer any amounts paid under these guarantees. Most of the guarantees are fully collateralized; however, several are unsecured. The Bank had recorded $51 thousand in reserve liabilities associated with these guarantees at June 30, 2022.
|
Income Taxes |
6 Months Ended |
---|---|
Jun. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes |
Note 9 – Income Taxes We record an amount equal to the tax credits, tax loss carry-forwards and tax deductions (“tax benefits”) that we believe will be available to offset or reduce the amounts of income taxes in future periods as a deferred tax asset on our condensed consolidated statements of financial condition. Under applicable federal and state income tax laws and regulations in the United States, such tax benefits will expire if not used within specified periods of time. Accordingly, the ability to fully use the deferred tax asset depends on the amount of taxable income that we generate during those time periods. At least once each year, or more frequently if warranted, we make an estimates of future taxable income that we believe we are likely to generate during those future periods. If we conclude, on the basis of those estimates and the amount of the tax benefits available to us, that it is more likely than not that we will be able to fully utilize those tax benefits prior to their expiration, we recognize the deferred tax asset in full on our balance sheet. On the other hand, if we conclude on the basis of those estimates and the amount of the tax benefits available to us that it has become more likely than not that we will be unable to utilize those tax benefits in full prior to their expiration, then we would establish a (or increase any existing) valuation allowance to reduce the deferred tax asset on our balance sheet to the amount which we believe we are more likely than not to be able to utilize. Such a reduction is implemented by recognizing a non-cash charge that would have the effect of increasing the provision, or reducing any credit, for income taxes that we would otherwise have recorded in our condensed consolidated statements of income. The determination of whether and the extent to which we will be able to utilize our deferred tax asset involves significant management judgments and assumptions that are subject to period-to-period changes as a result of changes in tax laws, changes in the market, or economic conditions that could affect our operating results or variances between our actual operating results and our projected operating results, as well as other factors. There was no valuation allowance at June 30, 2022 and December 31, 2021, respectively, because, in management’s opinion, it is more likely than not that the total deferred tax asset of $27.0 million and $14.0 million, respectively, will be realized. The difference between the effective income tax expense and the income tax expense computed at the Guam statutory rate of 21% was due to nontaxable interest income earned on loans to the Government of Guam. In addition to filing a federal income tax return in Guam, the Bank files income tax returns in the CNMI and the State of California. The Bank is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2012.
|
Fair Value Measurements |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
Note 10 – Fair Value Measurements The Bank uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with ASC Topic 820 “Fair Value Measurements and Disclosures”, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances there are no quoted market prices for the Bank’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance of ASC Topic 820 provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under then-current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under then-current market conditions depends on the facts and circumstances, and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under then-current market conditions. Fair Value Hierarchy In accordance with the guidance of ASC Topic 820, the Bank groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Financial assets measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 are as follows:
There were no liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. As of June 30, 2022 and December 31, 2021, the changes in Level 3 assets measured at fair value on a recurring basis are as follows:
The valuation technique used for Level 3 mortgage servicing rights is their discounted cash flow. Inputs considered in determining Level 3 pricing include the anticipated prepayment rates, discount rates, and cost to service. Significant increases or decreases in any of those inputs in isolation would result in a significantly lower or higher fair value measurement. The following table presents quantitative information about the valuation technique and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring basis:
There were no transfers into or out of the Bank’s Level 3 financial instruments for the periods ended June 30, 2022 and December 31, 2021. Nonrecurring Fair Value Measurements Under certain circumstances, the Bank makes adjustments to fair value for assets and liabilities even though they are not measured at fair value on an ongoing basis. The Bank did not have any financial instruments carried on the consolidated statements of financial condition by caption and by level in fair value hierarchy for a nonrecurring change in fair value at June 30, 2022 and December 31, 2021, respectively.
The fair value of loans subject to write downs is estimated using the appraised value of the underlying collateral, discounted as necessary due to management’s estimates of changes in economic conditions. Additionally, the Bank makes adjustments to nonfinancial assets and liabilities even though they are not measured at fair value on an ongoing basis. The Bank does not have nonfinancial assets or liabilities for which a nonrecurring change in fair value has been recorded during the periods ended June 30, 2022 and December 31, 2021. The following methods and assumptions were used by the Bank in estimating fair value disclosures for financial instruments: Cash and Cash Equivalents The carrying amount of cash and short-term instruments approximates fair value based on the short-term nature of the assets. Interest-Bearing Deposits in Banks Fair values for other interest-bearing deposits are estimated using discounted cash flow analyses based on current interest rates or yields for similar types of deposits. Federal Home Loan Bank Stock The Bank is a member of the FHLB of Des Moines. As a member, we are required to own stock of the FHLB, the amount of which is based primarily on the level of our borrowings from that institution. We also have the right to acquire additional shares of stock in the FHLB; however, to date, we have not done so. It is not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability. Investment Securities When quoted prices are available in an active market, the Bank classifies the securities within Level 1 of the valuation hierarchy. Level 1 securities include U.S. Treasury notes and bonds. At June 30, 2022, the Company classified trading securities in Level 1. If quoted market prices are not available, the Bank estimates fair values using pricing models and discounted cash flows that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, and credit spreads. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, include U.S. GSE obligations, U.S. government agency pool securities, and other securities. Mortgage-backed securities are included in Level 2 if observable inputs are available. In certain cases where there is limited activity or less transparency around inputs to the valuation, the Bank would classify those securities in Level 3. At June 30, 2022 and December 31, 2021, the Bank did not have any Level 3 investment securities. Loans For variable-rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, based upon interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable. Loans are classified in Level 3. Mortgage Servicing Rights The fair value of MSRs is determined using models which depend on estimates of prepayment rates, discount rates and costs to service. MSRs are classified in Level 3. Deposit Liabilities The fair values disclosed for demand deposits (for example, interest and non-interest checking, passbook savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies current market interest rates on comparable instruments to a schedule of aggregated expected monthly maturities on time deposits. Deposit liabilities are classified in Level 3. Short-Term Borrowings The carrying amounts of federal funds purchased and FHLB advances maturing within ninety days approximate their fair values. We had no outstanding short-term borrowings at June 30, 2022 and December 31, 2021. Long-Term Borrowings The fair value of FHLB advances maturing after ninety days is determined based on expected present value techniques using current market interest rates for advances with similar terms and remaining maturities. We had no outstanding long-term borrowings at June 30, 2022 and December 31, 2021. Accrued Interest The carrying amount of accrued interest approximates fair value. Off-Balance Sheet Commitments and Contingent Liabilities Management does not believe it is practicable to provide an estimate of fair value for off-balance sheet commitments or contingent liabilities because of the uncertainty involved in attempting to assess the likelihood and timing of a commitment being drawn upon, coupled with a lack of an established market for these instruments and the wide diversity of fee structures. Fair Value of Other Financial Instruments The estimated fair values of the Bank’s financial instruments, excluding those assets recorded at fair value on a recurring basis on the Bank’s condensed consolidated statements of financial condition, are as follows:
|
Comprehensive Income (Loss) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income Net Of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income (Loss) |
Note 11 – Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:
|
Leases |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases |
Note 12 – Leases
The Bank leases certain land, office spaces, and storage spaces. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Instead, the Bank recognizes lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 50 years or more. The exercise of lease renewal options is at our sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease terms, unless there is a transfer of title or purchase option reasonably certain of exercise. Certain of our lease agreements include rental payments based on a percentage of the prevailing market value of the lease and the average of the Treasury Bill Rate and the Guam Consumer Price Index figure, and others include rental payments adjusted periodically for inflation. The Bank's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Bank leases certain facilities from two separate entities in which two of its directors have separate ownership interests. Lease payments made to these entities during the six months ended June 30, 2022 and 2021 approximated $161 thousand and $205 thousand, respectively. During the three months ended June 30, 2022 and 2021, lease payments made to these entities approximated $97 thousand and $143 thousand, respectively. Additionally, the Bank leases office space to third parties, with original lease terms ranging from 1 to 3 years with option periods ranging up to 12 years. At June 30, 2022, minimum future rents to be received under non-cancelable operating sublease agreements were $18 thousand and $26 thousand for the years ending December 31, 2022 and 2023, respectively. The cash flow from operating leases included in the measurement of lease liabilities during the six months ended June 30, 2022 and 2021 were $1.4 million and $1.8 million, respectively. The following table summarizes the lease-related assets and liabilities recorded as part of other assets and other liabilities, respectively, in our condensed consolidated statements of financial condition at June 30, 2022 and December 31, 2021:
The operating lease costs and variable lease costs were $772 thousand and $1.6 million during the three and six months ended June 30, 2022, respectively, and $959 thousand and $1.9 million during the three and six months ended June 30, 2021, respectively.
The following table provides the maturities of lease liabilities at June 30, 2022:
Note: For leases commencing prior to 2019, minimum lease payments exclude payments to landlords for real estate taxes and common area maintenance.
The following table provides the weighted-average lease term and discount rate at June 30, 2022:
|
Subordinated Debt |
6 Months Ended |
---|---|
Jun. 30, 2022 | |
Subordinated Borrowings [Abstract] | |
Subordinated Debt |
Note 13 – Subordinated Debt On June 29, 2021, the Company issued $20.0 million in aggregate principal amount of its 4.75% Fixed-to-Floating Rate Subordinated Notes due July 1, 2031 (the “2031 Notes”). The 2031 Notes have a term and initially bear interest at a fixed annual rate of 4.75%. Beginning July 1, 2026, the interest rate will reset quarterly to the then-current three-month Secured Overnight Financing Rate (“SOFR”) plus 413 basis points. The Company is required to pay interest semi-annually during the fixed period, and quarterly during the floating rate period. The principal sum of the 2031 Notes plus any unpaid interest are due on the maturity date.On June 27, 2019, the Company issued $15.0 million in aggregate principal amount of its 6.35% Fixed-to-Floating Rate Subordinated Notes due June 30, 2029 (the “2029 Notes” and together with the 2031 Notes, the “Notes”). The 2029 Notes have term and initially bear interest at a fixed annual rate of 6.35%. Beginning June 30, 2024, the interest rate will reset quarterly to the then-current three-month LIBOR plus 466 basis points. The Company is required to pay interest only semi-annually during the fixed period, and quarterly during the floating rate period. The principal sum of the 2029 Notes plus any unpaid interest are due on the maturity date.Both notes are unsecured, subordinated obligations of the Company only and are not obligations of, and are not guaranteed by, any subsidiary of the Company. The Notes rank junior in right to payment to the Company’s current and future senior indebtedness. |
Subsequent Events |
6 Months Ended |
---|---|
Jun. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events |
Note 14 – Subsequent Events On July 25, 2022, the Company held its annual shareholders meeting and the shareholders approved a reverse stock split. The Company expects to complete the transaction in the fourth quarter of 2022, subject to the receipt of all regulatory approvals.Management has reviewed the events occurring through the date of this report, and there were no subsequent events that require additional disclosure to the accompanying financial statements. |
Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Policies) |
6 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||
Accounting Policies [Abstract] | |||||||
Use of Estimates |
Use of Estimates The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of income and expenses during the periods presented. Actual results could differ from those estimates. |
||||||
Restricted Cash |
Restricted Cash Interest-bearing deposits in banks that mature within one year are carried at cost. $150 thousand of these deposits are held by the Bank jointly under the names of Bank of Guam and the Guam Insurance Commissioner, and serve as a bond for the Bank of Guam Trust Department. |
||||||
COVID-19 |
COVID-19 The outbreak of a novel coronavirus (“COVID-19”) in 2020 and subsequent impact on public commerce and related business activities continues to impact the Company as well as a broad range of industries in which the Company’s customers operate and, in some instances, impaired their ability to fulfill their financial obligations to the Company. On March 3, 2020, the Federal Open Market Committee (FOMC) reduced the target range for federal funds by 50 basis points to 1.00% - 1.25%. This rate was further reduced to a target range of 0% - 0.25% on March 16, 2020. Improvements in economic conditions as well as accelerating inflations resulted in the FOMC increasing the target range by 25bps to 0.25% - 0.50% on March 16, 2022, 50bps to 0.75% - 1.00% on May 4, 2022, 75bps to 1.50% - 1.75% on June 15, 2022, and by 75bps 2.25% to 2.50% on July 27, 2022. In the United States, the government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020. The CARES Act, among other things, created a $670 billion loan program (the “Paycheck Protection Program” or the “PPP”) for fully guaranteed loans (which may be forgiven) to small businesses for certain qualifying expenses. The PPP was modified and extended multiple times prior to its expiration on May 31, 2021. Currently one branch in Guam remains closed due to renovations, and will reopen upon completion. The Bank continues to provide a secure telecommuting program for those personnel who are able to perform their responsibilities remotely, the computer hardware and software needed to support those tasks, and established teleconferencing capabilities to reduce the number of people in attendance at all of its larger group meetings. The Company has not materially changed its accounting policies or procedures due to COVID-19. |
||||||
Russia/Ukraine Conflict |
Russia/Ukraine Conflict The current Russia and Ukraine conflict has raised economic and financial market concerns causing uncertainty and disruption in financial markets globally and further straining an already struggling global supply chain. Furthermore, such events have the potential to adversely impact the availability of commodities, commodity prices, and create global inflationary pressures. These and other effects of the conflict could have a negative impact on the ability of borrowers to repay their obligations to the Bank, which could impact our reserves for loan losses and have an adverse effect on our results of operations. |
||||||
Recently Adopted Accounting Pronouncements |
Recently Adopted Accounting Pronouncements
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," which provides temporary optional expedients to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (LIBOR) to an alternative reference rate such as Secured Overnight Financing Rate (SOFR). The guidance was effective upon issuance and generally can be applied through December 31, 2022. In , the Company adopted SOFR as a replacement to LIBOR. The Company did not originate loans in 2022 indexed to LIBOR nor enter into modifications which create new LIBOR exposure. The Company believes the adoption of this guidance will not have a material impact on the consolidated financial statements.
|
||||||
Recently Issued but Not Yet Adopted Accounting Pronouncements |
Recently Issued but Not Yet Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)”, to amend the standards for the measurement of credit losses on financial instruments by replacing the historical incurred loss impairment methodology of determining the level of the allowance for loan and lease losses (“ALLL”), including losses associated with available-for-sale securities, with a more decision-useful methodology that reflects expected credit losses over the life of a financial instrument based upon historical experience, current conditions, and reasonable and supportable forecasts in determining the ALLL level, as well as the reserve for off-balance-sheet credit exposures. The Company was preparing to implement ASU 2016-13 when it was scheduled to become effective January 1, 2020, but the FASB announced on October 16, 2019, a delay of the effective date for smaller reporting companies until January 1, 2023. The Company continues to evaluate the impact the new guidance will have on its financial position, results of operations and regulatory risk-based capital. The Company’s current planned approach for estimating lifetime credit losses for its loan portfolio includes the following key components: • An economic forecast period of two years based on the relation of losses with key economic variables for each portfolio segment; • Segmentation of loans into pools that share common risk characteristics; and • Used the discounted cash flow (DCF) method to measure credit impairment on most of our loan portfolios and estimate lifetime credit losses using the conceptual components described above. Management will recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the first reporting period in which the new standard is effective, but cannot yet estimate the magnitude of the adjustment or the overall impact of the new guidance on the Company’s financial position, results of operations or cash flows.
The Company classifies its investment securities as available-for-sale or held-to-maturity. The Company’s investment security portfolio consists of U.S. government-sponsored agencies securities, which has an explicit or implicit guarantee from the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. Accordingly, the Company does not anticipate to apply a loss assumption for its investment securities.
|
||||||
Fair Value Measurement Policy Policy [Text Block] |
The Bank uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with ASC Topic 820 “Fair Value Measurements and Disclosures”, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances there are no quoted market prices for the Bank’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance of ASC Topic 820 provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under then-current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under then-current market conditions depends on the facts and circumstances, and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under then-current market conditions. Fair Value Hierarchy In accordance with the guidance of ASC Topic 820, the Bank groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. |
Earnings Per Common Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share Pro Forma [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Earnings Per Common Share |
Earnings per common share are computed based on reported net income, preferred stock dividends and the following common share data:
|
Investment Securities (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments Debt And Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Amortized Cost and Fair Value of Investment Securities, with Gross Unrealized Gains and Losses |
The amortized cost and fair value of investment securities, with gross unrealized gains and losses, is presented as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Proceeds and Gross Realized Gains from Sales of Available-for-sale Investment Securities |
Proceeds and gross realized gains from the sales of available-for-sale investment securities for the six months ended June 30, 2022 and 2021 are shown below. There were no sales of investment securities for the three months ended June 30, 2022 and 2021.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Amortized Cost and Estimated Fair Value of Investment Securities by Contractual Maturity |
The amortized cost and estimated fair value of investment securities by contractual maturity at June 30, 2022 and December 31, 2021 are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or borrowers the right to prepay obligations with or without call or prepayment penalties. At June 30, 2022, obligations of U.S. government corporations and agencies with amortized costs totaling $919.6 million consisted of residential mortgage-backed securities totaling $458.9 million and Small Business Administration agency pool securities totaling $68.9 million whose contractual maturity, or principal repayment, will follow the repayment of the underlying small business loans or mortgages. For purposes of the following table, the entire outstanding balance of these mortgage-backed securities issued by U.S. government corporations and agencies and SBA pools is categorized based on final maturity date. At June 30, 2022, the Bank estimates the average remaining life of these mortgage-backed securities and SBA pools to be approximately 5.6 years and 5.4 years, respectively.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Gross Unrealized Losses and Fair Value of Investments, with Unrealized Losses of Temporarily Impaired Securities |
The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2022 and December 31, 2021.
|
Loans Held for Sale, Loans and Allowance for Loan Losses (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loan Portfolio |
The loan portfolio consisted of the following at:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity of Allowance for Loan Losses |
Set forth below is a summary of the Bank’s activity in the allowance for loan losses during the three and six months ended June 30, 2022, and 2021, and the year ended December 31, 2021:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Credit Loss Related To Financing Receivables Current And Noncurrent Table [Text Block] |
Set forth below is information regarding loan balances and the related allowance for loan losses, by portfolio type, for the three and six months ended June 30, 2022 and 2021, and the year ended December 31, 2021, respectively.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Delinquency Status of Loans |
The following table provides a summary of the delinquency status of the Bank’s loans by portfolio type:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans on Non-Accrual Status, by Portfolio |
The following table provides information as of June 30, 2022 and December 31, 2021, with respect to loans on non-accrual status, by portfolio type:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Loans by Portfolio Type and Internal Credit Quality Ratings | The following table provides a summary of loans by portfolio type and the Bank’s internal credit quality ratings as of June 30, 2022, and December 31, 2021:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Non Accrual Loans And Restructured Loans |
The following table sets forth information regarding non-accrual loans and restructured loans at June 30, 2022 and December 31, 2021:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information Related to Impaired Loans |
The table below contains additional information with respect to impaired loans, by portfolio type, at June 30, 2022 and December 31, 2021:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Troubled Debt Restructurings |
Additional information regarding performing and nonperforming TDRs at June 30, 2022 and December 31, 2021 is set forth in the following table:
|
Regulatory Capital Requirements (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Banking Regulation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Actual Capital Amounts and Ratios |
The Company’s actual capital amounts and ratios as of June 30, 2022 and December 31, 2021 are presented in the table below.
|
Off-Balance-Sheet Activities (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Financial Instruments with Off-Balance-Sheet Risk |
A summary of financial instruments with off-balance-sheet risk at June 30, 2022 and December 31, 2021 is as follows:
|
Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Assets Measured on Recurring Basis |
Financial assets measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets Measured at Fair Value on Recurring Basis |
As of June 30, 2022 and December 31, 2021, the changes in Level 3 assets measured at fair value on a recurring basis are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Valuation Techniques and Unobservable Inputs |
The following table presents quantitative information about the valuation technique and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring basis:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Other Financial Instruments |
The estimated fair values of the Bank’s financial instruments, excluding those assets recorded at fair value on a recurring basis on the Bank’s condensed consolidated statements of financial condition, are as follows:
|
Comprehensive Income (Loss) (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income Net Of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accumulated Other Comprehensive Income (Loss) Included in Stockholder's Equity |
The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:
|
Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Lease Related Assets and Liabilities Recorded in Unaudited Condensed Consolidated Statements of Financial Condition |
The following table summarizes the lease-related assets and liabilities recorded as part of other assets and other liabilities, respectively, in our condensed consolidated statements of financial condition at June 30, 2022 and December 31, 2021:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Maturities of Lease Liabilities Under Operating Leases |
The following table provides the maturities of lease liabilities at June 30, 2022:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Weighted Average Lease Term And Discount Rate |
The following table provides the weighted-average lease term and discount rate at June 30, 2022:
|
Earnings Per Common Share - Additional Information (Detail) shares in Thousands |
1 Months Ended | ||
---|---|---|---|
Apr. 30, 2022 |
Jun. 30, 2022
shares
|
Jun. 30, 2021
shares
|
|
Earnings Per Share [Abstract] | |||
Shares subscribed and not issued | 0 | 0 | |
Reverse stock split ratio | 0.002 |
Earnings Per Common Share - Summary of Earnings Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Earnings Per Share [Abstract] | ||||
Net income available to BankGuam Holding Company | $ 3,909 | $ 5,910 | $ 7,176 | $ 9,205 |
Preferred stock dividend | (123) | (136) | (245) | (271) |
Net income attributable to common stockholders | $ 3,786 | $ 5,774 | $ 6,931 | $ 8,934 |
Weighted average number of common shares outstanding - used to calculate basic and diluted earnings per common share | 9,728 | 9,715 | 9,724 | 9,710 |
Earnings per common share (EPS): | ||||
Basic EPS | $ 0.39 | $ 0.59 | $ 0.71 | $ 0.92 |
Earnings per common share (EPS): | ||||
Diluted EPS | $ 0.39 | $ 0.59 | $ 0.71 | $ 0.92 |
Investment Securities - Summary of Proceeds and Gross Realized Gains from Sales of Available-for-sale Investment Securities (Detail) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2021
USD ($)
| |
Investments Debt And Equity Securities [Abstract] | |
Proceeds from sales of available-for-sale securities | $ 46,993 |
Gross realized gains from sales | $ 272 |
Loans Held for Sale, Loans and Allowance for Loan Losses - Activity of Allowance for Loan Losses (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2021 |
|
Receivables [Abstract] | |||||
Balance, beginning of period | $ 35,085 | $ 36,283 | $ 34,408 | $ 34,805 | $ 34,805 |
Charged off loans | (1,299) | (1,160) | (2,648) | (2,756) | (4,950) |
Recoveries on loans previously charged off | 521 | 495 | 1,122 | 1,094 | 2,403 |
Provision for loan losses | 1,425 | 475 | 2,850 | 2,950 | 2,150 |
Balance, end of period | $ 35,732 | $ 36,093 | $ 35,732 | $ 36,093 | $ 34,408 |
Loans Held for Sale, Loans and Allowance for Loan Losses - Loan Balances and Related Allowance for Loan Losses, by Portfolio Type (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2021 |
|
Allowance for loan losses: | |||||
Balance, beginning of period | $ 35,085 | $ 36,283 | $ 34,408 | $ 34,805 | $ 34,805 |
Charge-offs | (1,299) | (1,160) | (2,648) | (2,756) | (4,950) |
Recoveries | 521 | 495 | 1,122 | 1,094 | 2,403 |
Provision | 1,425 | 475 | 2,850 | 2,950 | 2,150 |
Balance, end of period | 35,732 | 36,093 | 35,732 | 36,093 | 34,408 |
Allowance balance at end of period related to: | |||||
Loans individually evaluated for impairment | 4,453 | 4,544 | 4,453 | 4,544 | 4,501 |
Loans collectively evaluated for impairment | 31,279 | 31,549 | 31,279 | 31,549 | 29,907 |
Balance, end of period | 35,732 | 36,093 | 35,732 | 36,093 | 34,408 |
Loan balances at end of period: | |||||
Loans individually evaluated for impairment | 51,608 | 64,641 | 51,608 | 64,641 | 51,783 |
Loans collectively evaluated for impairment | 1,308,604 | 1,333,033 | 1,308,604 | 1,333,033 | 1,269,538 |
Ending balance | 1,360,212 | 1,397,674 | 1,360,212 | 1,397,674 | 1,321,321 |
Commercial [Member] | |||||
Allowance for loan losses: | |||||
Balance, beginning of period | 22,860 | 21,213 | 21,213 | ||
Charge-offs | (449) | (77) | (115) | ||
Recoveries | 143 | 156 | 578 | ||
Provision | 877 | 2,134 | 1,184 | ||
Balance, end of period | 23,431 | 23,426 | 23,431 | 23,426 | 22,860 |
Allowance balance at end of period related to: | |||||
Loans individually evaluated for impairment | 3,513 | 3,503 | 3,513 | 3,503 | 3,510 |
Loans collectively evaluated for impairment | 19,918 | 19,923 | 19,918 | 19,923 | 19,350 |
Balance, end of period | 23,431 | 23,426 | 23,431 | 23,426 | 22,860 |
Loan balances at end of period: | |||||
Loans individually evaluated for impairment | 12,260 | 61,338 | 12,260 | 61,338 | 48,459 |
Loans collectively evaluated for impairment | 1,031,475 | 1,027,531 | 1,031,475 | 1,027,531 | 970,825 |
Ending balance | 1,043,735 | 1,088,869 | 1,043,735 | 1,088,869 | 1,019,284 |
Residential Mortgage And Home Equity [Member] | |||||
Allowance for loan losses: | |||||
Balance, beginning of period | 2,304 | 1,990 | 1,990 | ||
Charge-offs | (4) | (99) | |||
Recoveries | 2 | 1 | |||
Provision | 137 | 367 | 412 | ||
Balance, end of period | 2,443 | 2,353 | 2,443 | 2,353 | 2,304 |
Allowance balance at end of period related to: | |||||
Loans individually evaluated for impairment | 33 | 33 | 50 | ||
Loans collectively evaluated for impairment | 2,410 | 2,353 | 2,410 | 2,353 | 2,254 |
Balance, end of period | 2,443 | 2,353 | 2,443 | 2,353 | 2,304 |
Loan balances at end of period: | |||||
Loans individually evaluated for impairment | 38,255 | 2,141 | 38,255 | 2,141 | 2,265 |
Loans collectively evaluated for impairment | 108,801 | 130,059 | 108,801 | 130,059 | 135,343 |
Ending balance | 147,056 | 132,200 | 147,056 | 132,200 | 137,608 |
Consumer [Member] | |||||
Allowance for loan losses: | |||||
Balance, beginning of period | 9,244 | 11,602 | 11,602 | ||
Charge-offs | (2,199) | (2,675) | (4,736) | ||
Recoveries | 977 | 938 | 1,824 | ||
Provision | 1,836 | 449 | 554 | ||
Balance, end of period | 9,858 | 10,314 | 9,858 | 10,314 | 9,244 |
Allowance balance at end of period related to: | |||||
Loans individually evaluated for impairment | 907 | 1,041 | 907 | 1,041 | 941 |
Loans collectively evaluated for impairment | 8,951 | 9,273 | 8,951 | 9,273 | 8,303 |
Balance, end of period | 9,858 | 10,314 | 9,858 | 10,314 | 9,244 |
Loan balances at end of period: | |||||
Loans individually evaluated for impairment | 1,093 | 1,162 | 1,093 | 1,162 | 1,059 |
Loans collectively evaluated for impairment | 168,328 | 175,443 | 168,328 | 175,443 | 163,370 |
Ending balance | $ 169,421 | $ 176,605 | $ 169,421 | $ 176,605 | $ 164,429 |
Loans Held for Sale, Loans and Allowance for Loan Losses - Summary of Delinquency Status of Loans (Detail) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
Jun. 30, 2021 |
||
---|---|---|---|---|---|
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | $ 24,900 | $ 23,461 | |||
Total Loans Outstanding | 1,360,212 | 1,321,321 | $ 1,397,674 | ||
Automobile [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 465 | 610 | |||
Total Loans Outstanding | 17,759 | 18,220 | |||
Residential Mortgage Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 5,491 | 3,774 | |||
Total Loans Outstanding | 144,519 | 135,377 | |||
Home Equity [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Loans Outstanding | 2,537 | 2,232 | |||
Commercial & Industrial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 9,117 | 7,702 | |||
Total Loans Outstanding | 273,389 | 295,835 | |||
Commercial Mortgage [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 5,842 | 7,379 | |||
Total Loans Outstanding | 761,383 | 699,269 | |||
Commercial Construction Loan [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Loans Outstanding | 8,391 | 23,588 | |||
Commercial Agriculture [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Loans Outstanding | 572 | 592 | |||
Other Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | [1] | 3,985 | 3,996 | ||
Total Loans Outstanding | [1] | 151,662 | 146,208 | ||
Commercial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 14,959 | 15,081 | |||
Total Loans Outstanding | 1,043,735 | 1,019,284 | $ 1,088,869 | ||
Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 9,941 | 8,380 | |||
Total Loans Outstanding | 316,477 | 302,037 | |||
30-59 Days Past Due [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 6,770 | 7,234 | |||
30-59 Days Past Due [Member] | Automobile [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 278 | 407 | |||
30-59 Days Past Due [Member] | Residential Mortgage Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 2,432 | 2,194 | |||
30-59 Days Past Due [Member] | Commercial & Industrial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 1,898 | 56 | |||
30-59 Days Past Due [Member] | Commercial Mortgage [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 2,540 | ||||
30-59 Days Past Due [Member] | Other Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | [1] | 2,162 | 2,037 | ||
30-59 Days Past Due [Member] | Commercial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 1,898 | 2,596 | |||
30-59 Days Past Due [Member] | Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 4,872 | 4,638 | |||
60-89 Days Past Due [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 3,668 | 2,841 | |||
60-89 Days Past Due [Member] | Automobile [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 132 | 162 | |||
60-89 Days Past Due [Member] | Residential Mortgage Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 2,403 | 1,236 | |||
60-89 Days Past Due [Member] | Commercial & Industrial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 210 | 202 | |||
60-89 Days Past Due [Member] | Commercial Mortgage [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 217 | ||||
60-89 Days Past Due [Member] | Other Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | [1] | 923 | 1,024 | ||
60-89 Days Past Due [Member] | Commercial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 210 | 419 | |||
60-89 Days Past Due [Member] | Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 3,458 | 2,422 | |||
90 Days and Greater Non-Accrual [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 13,465 | 12,296 | |||
90 Days and Greater Non-Accrual [Member] | Residential Mortgage Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 652 | 267 | |||
90 Days and Greater Non-Accrual [Member] | Commercial & Industrial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 6,903 | 7,338 | |||
90 Days and Greater Non-Accrual [Member] | Commercial Mortgage [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 5,842 | 4,622 | |||
90 Days and Greater Non-Accrual [Member] | Other Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | [1] | 68 | 69 | ||
90 Days and Greater Non-Accrual [Member] | Commercial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 12,745 | 11,960 | |||
90 Days and Greater Non-Accrual [Member] | Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 720 | 336 | |||
90 Days and Greater Still Accruing [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 997 | 1,090 | |||
90 Days and Greater Still Accruing [Member] | Automobile [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 55 | 41 | |||
90 Days and Greater Still Accruing [Member] | Residential Mortgage Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 4 | 77 | |||
90 Days and Greater Still Accruing [Member] | Commercial & Industrial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 106 | 106 | |||
90 Days and Greater Still Accruing [Member] | Other Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | [1] | 832 | 866 | ||
90 Days and Greater Still Accruing [Member] | Commercial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 106 | 106 | |||
90 Days and Greater Still Accruing [Member] | Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 891 | 984 | |||
Current [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 1,335,312 | 1,297,860 | |||
Current [Member] | Automobile [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 17,294 | 17,610 | |||
Current [Member] | Residential Mortgage Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 139,028 | 131,603 | |||
Current [Member] | Home Equity [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 2,537 | 2,232 | |||
Current [Member] | Commercial & Industrial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 264,272 | 288,133 | |||
Current [Member] | Commercial Mortgage [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 755,541 | 691,890 | |||
Current [Member] | Commercial Construction Loan [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 8,391 | 23,588 | |||
Current [Member] | Commercial Agriculture [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 572 | 592 | |||
Current [Member] | Other Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | [1] | 147,677 | 142,212 | ||
Current [Member] | Commercial [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | 1,028,776 | 1,004,203 | |||
Current [Member] | Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment Past Due [Line Items] | |||||
Total Past Due | $ 306,536 | $ 293,657 | |||
|
Loans Held for Sale, Loans and Allowance for Loan Losses - Loans on Non-Accrual Status, by Portfolio (Detail) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
||
---|---|---|---|---|
Financing Receivable Recorded Investment Past Due [Line Items] | ||||
Non-accrual loans | $ 16,202 | $ 17,570 | ||
Residential Mortgage Loans [Member] | ||||
Financing Receivable Recorded Investment Past Due [Line Items] | ||||
Non-accrual loans | 1,760 | 1,660 | ||
Commercial & Industrial [Member] | ||||
Financing Receivable Recorded Investment Past Due [Line Items] | ||||
Non-accrual loans | 7,229 | 7,610 | ||
Commercial Mortgage [Member] | ||||
Financing Receivable Recorded Investment Past Due [Line Items] | ||||
Non-accrual loans | 7,071 | 8,148 | ||
Other Consumer Loans [Member] | ||||
Financing Receivable Recorded Investment Past Due [Line Items] | ||||
Non-accrual loans | [1] | 142 | 152 | |
Commercial [Member] | ||||
Financing Receivable Recorded Investment Past Due [Line Items] | ||||
Non-accrual loans | 14,300 | 15,758 | ||
Consumer Loans [Member] | ||||
Financing Receivable Recorded Investment Past Due [Line Items] | ||||
Non-accrual loans | $ 1,902 | $ 1,812 | ||
|
Loans Held for Sale, Loans and Allowance for Loan Losses - Summary of Loans by Portfolio Type and Internal Credit Quality Ratings (Detail) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
Jun. 30, 2021 |
||
---|---|---|---|---|---|
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | $ 1,360,212 | $ 1,321,321 | $ 1,397,674 | ||
Pass [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 1,260,095 | 1,232,092 | |||
Special Mention [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 35,182 | 20,811 | |||
Substandard [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 55,505 | 57,921 | |||
Formula Classified [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 2,162 | 2,645 | |||
Doubtful [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 7,268 | 7,852 | |||
Automobile [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 17,759 | 18,220 | |||
Automobile [Member] | Pass [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 17,704 | 18,179 | |||
Automobile [Member] | Formula Classified [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 55 | 41 | |||
Residential Mortgage Loans [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 144,519 | 135,377 | |||
Residential Mortgage Loans [Member] | Pass [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 142,294 | 133,176 | |||
Residential Mortgage Loans [Member] | Substandard [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 1,093 | 613 | |||
Residential Mortgage Loans [Member] | Formula Classified [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 1,132 | 1,588 | |||
Home Equity [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 2,537 | 2,232 | |||
Home Equity [Member] | Pass [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 2,537 | 2,232 | |||
Commercial & Industrial [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 273,389 | 295,835 | |||
Commercial & Industrial [Member] | Pass [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 242,023 | 266,300 | |||
Commercial & Industrial [Member] | Special Mention [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 13,915 | 9,760 | |||
Commercial & Industrial [Member] | Substandard [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 10,825 | 12,645 | |||
Commercial & Industrial [Member] | Doubtful [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 6,626 | 7,130 | |||
Commercial Mortgage [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 761,383 | 699,269 | |||
Commercial Mortgage [Member] | Pass [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 695,887 | 642,835 | |||
Commercial Mortgage [Member] | Special Mention [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 21,267 | 11,051 | |||
Commercial Mortgage [Member] | Substandard [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 43,587 | 44,661 | |||
Commercial Mortgage [Member] | Doubtful [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 642 | 722 | |||
Commercial Construction Loan [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 8,391 | 23,588 | |||
Commercial Construction Loan [Member] | Pass [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 8,391 | 23,588 | |||
Commercial Agriculture [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 572 | 592 | |||
Commercial Agriculture [Member] | Pass [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 572 | 592 | |||
Other Consumer Loans [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | [1] | 151,662 | 146,208 | ||
Other Consumer Loans [Member] | Pass [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 150,687 | 145,190 | |||
Other Consumer Loans [Member] | Substandard [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | 2 | ||||
Other Consumer Loans [Member] | Formula Classified [Member] | |||||
Financing Receivable Recorded Investment [Line Items] | |||||
Gross loans, total amount | $ 975 | $ 1,016 | |||
|
Loans Held for Sale, Loans and Allowance for Loan Losses - Non-Accrual Loans and Restructured Loans (Detail) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Restructured loans: | ||
Non-accruing restructured loans | $ 4,497 | $ 6,083 |
Accruing restructured loans | 33,888 | 32,595 |
Total restructured loans | 38,385 | 38,678 |
Other impaired loans | 13,223 | 13,105 |
Total impaired loans | 51,608 | 51,783 |
Impaired loans less than 90 days delinquent and included in total impaired loans | $ 37,146 | $ 38,398 |
Loans Held for Sale, Loans and Allowance for Loan Losses - Information Related to Impaired Loans (Detail) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
|
Financing Receivable Impaired [Line Items] | ||
Total impaired loans with no related allowance, Recorded Investment | $ 49,231 | $ 48,699 |
Total impaired loans with no related allowance, Unpaid Principal Balance | 49,798 | 48,946 |
Total impaired loans with no related allowance, Average Recorded Investment | 96,949 | 114,493 |
Total impaired loans with no related allowance, Interest Income Recognized | 186 | 205 |
Total impaired loans with a related allowance recorded, Recorded Investment | 2,377 | 3,084 |
Total impaired loans with a related allowance recorded, Unpaid Principal Balance | 2,392 | 3,109 |
Total impaired loans with a related allowance recorded, Average Recorded Investment | 3,028 | 3,394 |
Total impaired loans with a related allowance recorded, Interest Income Recognized | 159 | 12 |
Automobile [Member] | ||
Financing Receivable Impaired [Line Items] | ||
Total impaired loans with a related allowance recorded, Recorded Investment | 55 | 41 |
Total impaired loans with a related allowance recorded, Unpaid Principal Balance | 55 | 41 |
Total impaired loans with a related allowance recorded, Average Recorded Investment | 88 | 29 |
Total impaired loans with a related allowance recorded, Interest Income Recognized | 1 | 1 |
Residential Mortgage Loans [Member] | ||
Financing Receivable Impaired [Line Items] | ||
Total impaired loans with no related allowance, Recorded Investment | 1,385 | 612 |
Total impaired loans with no related allowance, Unpaid Principal Balance | 1,385 | 612 |
Total impaired loans with no related allowance, Average Recorded Investment | 2,288 | 221 |
Total impaired loans with no related allowance, Interest Income Recognized | 1 | |
Total impaired loans with a related allowance recorded, Recorded Investment | 900 | 1,653 |
Total impaired loans with a related allowance recorded, Unpaid Principal Balance | 900 | 1,663 |
Total impaired loans with a related allowance recorded, Average Recorded Investment | 1,172 | 1,921 |
Total impaired loans with a related allowance recorded, Interest Income Recognized | 1 | |
Commercial & Industrial [Member] | ||
Financing Receivable Impaired [Line Items] | ||
Total impaired loans with no related allowance, Recorded Investment | 12,054 | 11,150 |
Total impaired loans with no related allowance, Unpaid Principal Balance | 12,054 | 11,150 |
Total impaired loans with no related allowance, Average Recorded Investment | 22,766 | 75,812 |
Total impaired loans with no related allowance, Interest Income Recognized | 37 | 56 |
Total impaired loans with a related allowance recorded, Recorded Investment | 269 | 262 |
Total impaired loans with a related allowance recorded, Unpaid Principal Balance | 269 | 262 |
Total impaired loans with a related allowance recorded, Average Recorded Investment | 325 | 116 |
Total impaired loans with a related allowance recorded, Interest Income Recognized | 2 | 2 |
Commercial Mortgage [Member] | ||
Financing Receivable Impaired [Line Items] | ||
Total impaired loans with no related allowance, Recorded Investment | 35,792 | 36,935 |
Total impaired loans with no related allowance, Unpaid Principal Balance | 36,359 | 37,182 |
Total impaired loans with no related allowance, Average Recorded Investment | 71,895 | 38,456 |
Total impaired loans with no related allowance, Interest Income Recognized | 148 | 149 |
Total impaired loans with a related allowance recorded, Recorded Investment | 178 | 112 |
Total impaired loans with a related allowance recorded, Unpaid Principal Balance | 193 | 127 |
Total impaired loans with a related allowance recorded, Average Recorded Investment | 107 | 75 |
Total impaired loans with a related allowance recorded, Interest Income Recognized | 148 | |
Other Consumer Loans [Member] | ||
Financing Receivable Impaired [Line Items] | ||
Total impaired loans with no related allowance, Recorded Investment | 2 | |
Total impaired loans with no related allowance, Unpaid Principal Balance | 2 | |
Total impaired loans with no related allowance, Average Recorded Investment | 4 | |
Total impaired loans with a related allowance recorded, Recorded Investment | 975 | 1,016 |
Total impaired loans with a related allowance recorded, Unpaid Principal Balance | 975 | 1,016 |
Total impaired loans with a related allowance recorded, Average Recorded Investment | 1,336 | 1,253 |
Total impaired loans with a related allowance recorded, Interest Income Recognized | $ 8 | $ 8 |
Loans Held for Sale, Loans and Allowance for Loan Losses - Troubled Debt Restructurings (Detail) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2022
USD ($)
SecurityLoan
|
Dec. 31, 2021
USD ($)
|
|
Financing Receivable Modifications [Line Items] | ||
Number of Loans | SecurityLoan | 18 | |
Pre-Modification Outstanding Recorded Investment | $ 41,167 | |
Post-Modification Outstanding Recorded Investment | 41,167 | |
Outstanding Balance | $ 38,385 | $ 38,678 |
Performing [Member] | ||
Financing Receivable Modifications [Line Items] | ||
Number of Loans | SecurityLoan | 10 | |
Pre-Modification Outstanding Recorded Investment | $ 34,938 | |
Post-Modification Outstanding Recorded Investment | 34,938 | |
Outstanding Balance | $ 33,888 | 32,595 |
Performing [Member] | Commercial & Industrial [Member] | ||
Financing Receivable Modifications [Line Items] | ||
Number of Loans | SecurityLoan | 9 | |
Pre-Modification Outstanding Recorded Investment | $ 6,039 | |
Post-Modification Outstanding Recorded Investment | 6,039 | |
Outstanding Balance | $ 4,989 | 3,696 |
Performing [Member] | Commercial Mortgage [Member] | ||
Financing Receivable Modifications [Line Items] | ||
Number of Loans | SecurityLoan | 1 | |
Pre-Modification Outstanding Recorded Investment | $ 28,899 | |
Post-Modification Outstanding Recorded Investment | 28,899 | |
Outstanding Balance | $ 28,899 | 28,899 |
Nonperforming [Member] | ||
Financing Receivable Modifications [Line Items] | ||
Number of Loans | SecurityLoan | 8 | |
Pre-Modification Outstanding Recorded Investment | $ 6,229 | |
Post-Modification Outstanding Recorded Investment | 6,229 | |
Outstanding Balance | $ 4,497 | 6,083 |
Nonperforming [Member] | Commercial & Industrial [Member] | ||
Financing Receivable Modifications [Line Items] | ||
Number of Loans | SecurityLoan | 2 | |
Pre-Modification Outstanding Recorded Investment | $ 275 | |
Post-Modification Outstanding Recorded Investment | 275 | |
Outstanding Balance | $ 116 | 142 |
Nonperforming [Member] | Commercial Mortgage [Member] | ||
Financing Receivable Modifications [Line Items] | ||
Number of Loans | SecurityLoan | 6 | |
Pre-Modification Outstanding Recorded Investment | $ 5,954 | |
Post-Modification Outstanding Recorded Investment | 5,954 | |
Outstanding Balance | $ 4,381 | $ 5,941 |
Regulatory Capital Requirements - Summary of Company's Actual Capital Amounts and Ratios (Detail) $ in Thousands |
Jun. 30, 2022
USD ($)
|
Dec. 31, 2021
USD ($)
|
---|---|---|
Banking Regulation [Abstract] | ||
Total Capital (to Risk Weighted Assets), Actual, Amount | $ 229,097 | $ 222,493 |
Tier 1 Capital (to Risk Weighted Assets), Actual, Amount | 175,227 | 168,623 |
Tier 1 Capital (to Average Assets), Actual, Amount | 175,227 | 168,623 |
Common Equity Tier 1 Capital (to Risk Weighted Assets), Actual, Amount | $ 165,444 | $ 158,840 |
Total Capital (to Risk Weighted Assets), Actual, Ratio | 0.14705 | 0.15161 |
Tier 1 Capital (to Risk Weighted Assets), Actual, Ratio | 0.11247 | 0.11490 |
Tier 1 Capital (to Average Assets), Actual, Ratio | 0.06397 | 0.05792 |
Common Equity Tier 1 Capital (to Risk Weighted Assets), Actual, Ratio | 0.10619 | 0.10824 |
Total Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Amount | $ 124,637 | $ 117,403 |
Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Amount | 93,477 | 88,052 |
Tier 1 Capital (to Average Assets), For Capital Adequacy Purposes, Amount | 109,566 | 116,461 |
Common Equity Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Amount | $ 70,108 | $ 66,039 |
Total Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Ratio | 0.08000 | 0.08000 |
Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Ratio | 0.06000 | 0.06000 |
Tier 1 Capital (to Average Assets), For Capital Adequacy Purposes, Ratio | 0.04000 | 0.04000 |
Common Equity Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Ratio | 4.50% | 4.50% |
Total Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount | $ 155,796 | $ 146,753 |
Tier 1 Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount | 124,637 | 117,403 |
Tier 1 Capital (to Average Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount | 136,958 | 145,577 |
Common Equity Tier 1 Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount | $ 101,267 | $ 95,390 |
Total Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio | 0.10000 | 0.10000 |
Tier 1 Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio | 0.08000 | 0.08000 |
Tier 1 Capital (to Average Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio | 0.05000 | 0.05000 |
Common Equity Tier 1 Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio | 6.50% | 6.50% |
Off-Balance-Sheet Activities - Summary of Financial Instruments with Off-Balance-Sheet Risk (Detail) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Commitments to Extend Credit [Member] | ||
Loss Contingencies [Line Items] | ||
Financial Instrument with off-balance-sheet risk | $ 148,060 | $ 162,569 |
Letters of Credit [Member] | ||
Loss Contingencies [Line Items] | ||
Financial Instrument with off-balance-sheet risk | 49,839 | 45,605 |
Letters of Credit [Member] | Standby Letters of Credit [Member] | ||
Loss Contingencies [Line Items] | ||
Financial Instrument with off-balance-sheet risk | 47,707 | 43,239 |
Letters of Credit [Member] | Commercial Letters Of Credit [Member] | ||
Loss Contingencies [Line Items] | ||
Financial Instrument with off-balance-sheet risk | $ 2,132 | $ 2,366 |
Off-Balance-Sheet Activities - Additional Information (Detail) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2022
USD ($)
| |
Fair Value Disclosures [Abstract] | |
Letters of credit expiration date maximum | 1 year |
Maximum undiscounted future payments | $ 49,800 |
Guarantee maturity maximum | 1 year |
Reserve liabilities associated with guarantees | $ 51 |
Income Taxes - Additional Information (Detail) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
|
Income Tax Disclosure [Abstract] | ||
Valuation allowance | $ 0 | $ 0 |
Total deferred tax asset, net | $ 27,000,000.0 | $ 14,000,000.0 |
Guam income tax statutory rate | 21.00% |
Fair Value Measurements - Summary of Financial Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Investment securities available-for-sale, at fair value | $ 540,595 | $ 499,366 |
Mortgage servicing rights at their fair value | 1,600 | 1,600 |
U.S. Government Agency Pool Securities [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Investment securities available-for-sale, at fair value | 66,333 | 20,861 |
U.S. Government Agency or GSE Residential Mortgage-Backed Securities [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Investment securities available-for-sale, at fair value | 375,841 | 367,543 |
Fair Value on Recurring Basis [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Investment securities available-for-sale, at fair value | 540,595 | 499,366 |
Mortgage servicing rights at their fair value | 1,551 | 1,581 |
Total fair value | 542,146 | 500,947 |
Fair Value on Recurring Basis [Member] | U.S. Government Agency and Sponsored Enterprise (GSE) Debt Securities [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Investment securities available-for-sale, at fair value | 98,421 | 110,962 |
Fair Value on Recurring Basis [Member] | U.S. Government Agency Pool Securities [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Investment securities available-for-sale, at fair value | 66,333 | 20,861 |
Fair Value on Recurring Basis [Member] | U.S. Government Agency or GSE Residential Mortgage-Backed Securities [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Investment securities available-for-sale, at fair value | 375,841 | 367,543 |
Fair Value on Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Investment securities available-for-sale, at fair value | 540,595 | 499,366 |
Total fair value | 540,595 | 499,366 |
Fair Value on Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Government Agency and Sponsored Enterprise (GSE) Debt Securities [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Investment securities available-for-sale, at fair value | 98,421 | 110,962 |
Fair Value on Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Government Agency Pool Securities [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Investment securities available-for-sale, at fair value | 66,333 | 20,861 |
Fair Value on Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Government Agency or GSE Residential Mortgage-Backed Securities [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Investment securities available-for-sale, at fair value | 375,841 | 367,543 |
Fair Value on Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Mortgage servicing rights at their fair value | 1,551 | 1,581 |
Total fair value | $ 1,551 | $ 1,581 |
Fair Value Measurements - Additional Information (Detail) - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
|
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Transfers in or out of the Bank's Level 3 financial instruments | $ 0 | $ 0 |
Nonfinancial assets or liabilities for which a nonrecurring change in fair value | $ 0 | 0 |
Number of days to maturity federal funds purchased and FHLB advances to be treated as short-term borrowings | 90 days | |
Short-term borrowings outstanding | $ 0 | 0 |
Long-term borrowings outstanding | $ 0 | 0 |
Minimum [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Fair value of FHLB advances maturing after ninety days | 90 days | |
Fair Value on Recurring Basis [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Liabilities measured at fair value on a recurring basis | $ 0 | $ 0 |
Fair Value Measurements - Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
|
Fair Value Disclosures [Abstract] | ||
Beginning balance | $ 1,581 | $ 1,683 |
Realized and unrealized net losses: | ||
Included in net income | (30) | (102) |
Ending balance | $ 1,551 | $ 1,581 |
Fair Value Measurements - Summary of Valuation Techniques and Unobservable Inputs (Detail) $ in Thousands |
Jun. 30, 2022
USD ($)
|
Dec. 31, 2021
USD ($)
|
---|---|---|
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items] | ||
Mortgage Servicing Rights, Estimated Fair Value | $ 1,600 | $ 1,600 |
Fair Value on Recurring Basis [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items] | ||
Mortgage Servicing Rights, Estimated Fair Value | 1,551 | 1,581 |
Fair Value on Recurring Basis [Member] | Discount Rate [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items] | ||
Mortgage Servicing Rights, Estimated Fair Value | $ 1,551 | $ 1,581 |
Mortgage Servicing Rights, Valuation Technique [Extensible List] | us-gaap:ValuationTechniqueDiscountedCashFlowMember | us-gaap:ValuationTechniqueDiscountedCashFlowMember |
Fair Value on Recurring Basis [Member] | Discount Rate [Member] | Minimum [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items] | ||
Mortgage Servicing Rights, Range of Inputs | 0.0602 | 0.0602 |
Fair Value on Recurring Basis [Member] | Discount Rate [Member] | Maximum [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items] | ||
Mortgage Servicing Rights, Range of Inputs | 0.0793 | 0.0793 |
Fair Value on Recurring Basis [Member] | Discount Rate [Member] | Weighted Average [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items] | ||
Mortgage Servicing Rights, Range of Inputs | 0.0720 | 0.0720 |
Fair Value on Recurring Basis [Member] | Weighted Average Prepayment Rate [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items] | ||
Mortgage Servicing Rights, Range of Inputs | 1.00 | 1.25 |
Fair Value Measurements - Fair Value of Other Financial Instruments (Detail) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Financial assets: | ||
Investment securities held-to-maturity | $ 261,694 | $ 310,372 |
Carrying Amount [Member] | ||
Financial assets: | ||
Cash and cash equivalents | 325,440 | 557,403 |
Restricted cash | 150 | 150 |
Federal Home Loan Bank stock | 3,318 | 2,814 |
Investment securities held-to-maturity | 318,726 | 312,294 |
Loans, net | 1,321,504 | 1,283,690 |
Total fair value | 1,969,138 | 2,156,351 |
Financial liabilities: | ||
Deposits | 2,447,806 | 2,533,231 |
Total | 2,447,806 | 2,533,231 |
Fair Value on Nonrecurring Basis [Member] | Estimated Fair Value [Member] | Level 1 [Member] | ||
Financial assets: | ||
Cash and cash equivalents | 325,440 | 557,403 |
Restricted cash | 150 | 150 |
Total fair value | 325,590 | 557,553 |
Fair Value on Nonrecurring Basis [Member] | Estimated Fair Value [Member] | Level 2 [Member] | ||
Financial assets: | ||
Federal Home Loan Bank stock | 3,318 | 2,814 |
Investment securities held-to-maturity | 261,694 | 310,372 |
Total fair value | 265,012 | 313,186 |
Fair Value on Nonrecurring Basis [Member] | Estimated Fair Value [Member] | Level 3 [Member] | ||
Financial assets: | ||
Loans, net | 1,368,157 | 1,330,529 |
Total fair value | 1,368,157 | 1,330,529 |
Financial liabilities: | ||
Deposits | 2,449,540 | 2,527,806 |
Total | $ 2,449,540 | $ 2,527,806 |
Comprehensive Income (Loss) - Components of Accumulated Other Comprehensive Income (Loss) Included in Stockholder's Equity (Detail) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2021 |
|
Comprehensive Income Net Of Tax [Abstract] | |||
Net unrealized (loss) gain on available-for-sale securities | $ (60,238) | $ (5,857) | |
Amounts reclassified from AOCI for (gain) on sale of investment securities available-for-sale included in net income | $ (272) | (272) | |
Tax effect | 13,563 | 1,380 | |
Unrealized holding (loss) gain on available-for-sale securities, net of tax | (46,675) | (4,749) | |
Gross unrealized holding loss on held-to-maturity securities | (11,972) | (15,864) | |
Amortization of unrealized holding loss on held-to-maturity during the period | 430 | 3,892 | |
Unrealized holding loss on held-to-maturity securities | (11,542) | (11,972) | |
Accumulated other comprehensive (loss) income | $ (58,217) | $ (16,721) |
Leases - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Lease [Line Items] | ||||
Operating lease option to extend description | Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 50 years or more. | |||
Operating lease option to extend | true | |||
Operating lease payments | $ 1,400 | $ 1,800 | ||
Minimum future rents to be received under non-cancelable operating sublease agreements, 2022 | $ 18 | 18 | ||
Minimum future rents to be received under non-cancelable operating sublease agreements, 2023 | 26 | 26 | ||
Operating lease costs | 772 | $ 959 | 1,600 | 1,900 |
Variable lease cost | 772 | 959 | 1,600 | 1,900 |
Bank Facility Lease [Member] | ||||
Lease [Line Items] | ||||
Operating lease payments | $ 97 | $ 143 | $ 161 | $ 205 |
Minimum [Member] | ||||
Lease [Line Items] | ||||
Operating lease option to extend | 1 year | 1 year | ||
Original operating lease term | 1 year | 1 year | ||
Maximum [Member] | ||||
Lease [Line Items] | ||||
Operating lease option to extend | 50 years | 50 years | ||
Original operating lease term | 3 years | 3 years | ||
Operating lease renewal term | 12 years | 12 years |
Leases - Summary of Lease Related Assets and Liabilities Recorded in Unaudited Condensed Consolidated Statements of Financial Condition (Detail) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Leases [Abstract] | ||
Operating lease right-of-use assets | $ 28,437 | $ 23,379 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Other assets | Other assets |
Total lease assets | $ 28,437 | $ 23,379 |
Operating | $ 1,947 | $ 1,926 |
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration] | Other liabilities | Other liabilities |
Operating | $ 27,354 | $ 22,186 |
Total lease liabilities | $ 29,301 | $ 24,112 |
Leases - Schedule of Maturities of Lease Liabilities Under Operating Leases (Detail) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Operating Leases | ||
Operating Leases, 2022 | $ 1,521 | |
Operating Leases, 2023 | 2,895 | |
Operating Leases, 2024 | 2,881 | |
Operating Leases, 2025 | 2,825 | |
Operating Leases, 2026 | 2,615 | |
Operating Leases, After 2026 | 41,882 | |
Operating Leases, Total lease payments | 54,619 | |
Operating Leases, Less: Interest | 25,318 | |
Operating Leases, Present value of lease liabilities | $ 29,301 | |
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration] | Other liabilities | Other liabilities |
Total | ||
Lease liability, 2022 | $ 1,521 | |
Lease liability, 2023 | 2,895 | |
Lease liability, 2024 | 2,881 | |
Lease liability, 2025 | 2,825 | |
Lease liability, 2026 | 2,615 | |
Lease liability, After 2026 | 41,882 | |
Lease liability, Total lease payments | 54,619 | |
Lease liability, Less: Interest | 25,318 | |
Lease liability, Present value of lease liabilities | $ 29,301 | $ 24,112 |
Leases - Schedule of Maturities of Lease Liabilities Under Operating Leases (Parenthetical) (Detail) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
|
Leases [Abstract] | ||
Operating lease payments related to option to extend lease | $ 19,100 | |
Current portion of operating lease liability | $ 1,947 | $ 1,926 |
Leases - Summary of Weighted-Average Lease Term and Discount Rate (Detail) |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Leases [Abstract] | ||
Operating leases, weighted-average remaining lease term (years) | 25 years 9 months 18 days | 25 years 7 months 6 days |
Operating leases, weighted-average discount rate | 4.01% | 4.15% |
Subordinated Debt - Additional Information (Detail) - USD ($) |
6 Months Ended | |||
---|---|---|---|---|
Jun. 29, 2021 |
Jun. 27, 2019 |
Jun. 30, 2022 |
Dec. 31, 2021 |
|
Debt Instrument [Line Items] | ||||
Notes, aggregate principal amount | $ 34,434,000 | $ 34,400,000 | ||
Subordinated Notes [Member] | 2029 Notes [Member] | ||||
Debt Instrument [Line Items] | ||||
Notes, aggregate principal amount | $ 15,000,000.0 | |||
Notes, interest rate | 6.35% | |||
Notes, maturity date | Jun. 30, 2029 | |||
Notes, term | 10 years | |||
Notes, interest payment terms | The Company is required to pay interest only semi-annually during the fixed period, and quarterly during the floating rate period. | |||
Subordinated Notes [Member] | 2029 Notes [Member] | Three-month LIBOR [Member] | ||||
Debt Instrument [Line Items] | ||||
Notes, basis points payable | 4.66% | |||
Subordinated Notes [Member] | 2031 Notes [Member] | ||||
Debt Instrument [Line Items] | ||||
Notes, aggregate principal amount | $ 20,000,000.0 | |||
Notes, interest rate | 4.75% | |||
Notes, maturity date | Jul. 01, 2031 | |||
Notes, term | 10 years | |||
Notes, interest payment terms | The Company is required to pay interest semi-annually during the fixed period, and quarterly during the floating rate period. | |||
Subordinated Notes [Member] | 2031 Notes [Member] | Three-month SOFR [Member] | ||||
Debt Instrument [Line Items] | ||||
Notes, basis points payable | 4.13% |
Subsequent Events - Additional Information (Detail) |
1 Months Ended | |
---|---|---|
Jul. 25, 2022 |
Apr. 30, 2022 |
|
Subsequent Event [Line Items] | ||
Reverse stock split ratio | 0.002 | |
Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Reverse stock split ratio | 0.002 |
[:FX37-//43T<>OLX^+AY &PO=V]R:W-H965T 1 =M0_S>(@GIG=B;
M)Y,I/9*D:1 EJ3 HF*4RJY
MQV9^: J@8 $<0 9 >&PO=V]R:W-H965T _,- @
M -L> 9 >&PO=V]R:W-H965T 5@8"U]X&IIKO:D\NR=J'6HWW
ML#TFO"?IO2>9ACGHZWQ5&O^76_^"W98]QO]@RIP2W'7M?U]4$)36:)CP+U:(
M0?#K Q6,GL$*$YD5N]-K*CZ"WR1.B%LWR:R?Q,EB2:ZUP66]NNEN5^6TW1*0O 1!
M7:@#WD"[$+G6?N[&=-,A6X#C@C/T4;K>[*?6\?..SH.W2.[S]L4BW/R6)7SV
MH0^2WWJ+Z((KG>A@!=AO5W3.?'"?_,0T8^&S-5WK#G?&SW3V^<2]B&D9D*V(O,<.
M'&.W$7F-Z2W!?L["OM@2E8(.'?OC383KD79NZ>OZ?=UG6UV_- B"W7U>^3KT
MYU0VZ.L8'1NZJ&;EBFJ19+7Q*12<)$KLH8+24X>58O K+#$)J?<#S'SH"WQ^
M+_UAJ$Z/2U"U +5'CH@D75X0RN;(T)B-%!S,OAW[9GFN(7K2)Y\EH(HH-29D +)H
M8/@-4)9
6=&NA1/"@MH=X!,STZ4NU.
M";1?X;9(FSIXQN1'<_2>^\8JE.9#:0&4%I[5NA'49PRE)2B:&-.=MF>_Z+9(
M1H8T)8RY$UG*FMFDL"#21HJK!'';4YX-)LP(88^LO^/)-Z-%A-W09F-'
M%O8H.U78(ZQU6*/8H6?!&9<[NTUO-"_3Z
M>5 T,-!)B!
4@UO*%COK\J7<;Y6DUI-$'
M-I5W0SE;4U!NHL=3BWWQ_$:"H=Q*W=AU;5
:UX4TA=K6T(IR[;.L
MLX!O<"VW=KYN<;V:*%W*VK5.<("MG1KEB 9!QYU\X*K:%YAHU.Q5R>$+YQRD
M;%Z6LDD64?K]FOZ=LH08!6$!>&-5X4395DWC>9BC=>D'3;>(*F T <4<&;%
M:V=^.GCKT'QHPI"-,16ZW3\[I:>-5=N[;68JG<@W<*8H)Q$PPL#_[+UH0GZM
M3#?2<8R+[.<^^UG-ZX#,SQ=^[PX>_&+LXQP1A*)5&^Y?H9EHM7([WH.#<9-S
M]OP"^/+!]]O!+VC(=MR2@ZG[6F@SE\M]X&:3 -"*XU:7&TH"10%3N\4BJ!#D
M,!RT[S%<41]6R=+EB1 ?UU]." _W4J
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MO"P@9?3G;5:1V?V!'"\G'DSXN7Y?*;MAG-">$3]/$3VK(C_G*S'S'/\2 W-3[^0&E(B
M8%A%$:V1Q!]A("(V(,WQQ4N]1/)8YI>N;;8DK97R7%&B!3W_38)^L?PR=98N
MIK2_
SVT#AF'BE*!J:
M6^JR-
M7[KGMTQ/ GYLY1#&R0#2)$U/X(U[O6./-_X'O8N_]<(--[E0IM4(WQ=K8S5]
M-#^.=2$4F1POXB[2E6E8CO.(;HI!O<4H.S\;39/K$Q(FO83)*?3_?V4GX8Z3
M_:0LPA3.SR[3T>@:3I:$SQ7"DLDGX :XW"JQQ8(FD*.V9 L@<,.$OW]*AOQ<
M,%X;L!6SP#0WZ,(MP2A=<$GF +EJ-6VK$M:M(<;.&.2?()QP+6*#AN,4 ,
M@!$L682AJ^A2.-$,1>E^DH%@J,HEO5DF
797GEV"OVYYW02[+C4]]( B6/RZL4TB>,K
UZB#P%5VCGL!;O'NPPTYW=H=X)^370]B 9:/0&_+//'T?5H,";L<4MF
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M$*W7>A,OGHF[()_?Y;W;K]:XFX_QV\0/?^PZ$5 %K.+.ML7]XG#DS!NP>'
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MD.)L=