QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | ||||||||||||||||
(Address of Principal Executive Offices) | (Zip Code) | ||||||||||||||||
Registrant’s Telephone Number, Including Area Code: |
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | ¨ | ☒ | ||||||||||||||||||
Non-accelerated filer | ¨ | Smaller reporting company | ||||||||||||||||||
Emerging growth company | ||||||||||||||||||||
If an emerging growth company, 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. | o |
Page | ||||||||
Item 1. | ||||||||
Item 2 | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 5. | ||||||||
Item 6. | ||||||||
Term | Definition | ||||
ACL | Allowance for credit losses | ||||
ALL | Allowance for loan losses | ||||
AFS | Available-for-sale | ||||
AOCI | Accumulated other comprehensive income (loss) | ||||
ASC | Accounting Standards Codification | ||||
ASU | Accounting Standards Update | ||||
Bank | Orrstown Bank, the commercial banking subsidiary of Orrstown Financial Services, Inc. | ||||
CDI | Core deposit intangible | ||||
CECL | Current expected credit losses | ||||
CMO | Collateralized mortgage obligation | ||||
EITC | Educational Improvement Tax Credit Program | ||||
ERM | Enterprise Risk Management | ||||
Exchange Act | Securities Exchange Act of 1934, as amended | ||||
FASB | Financial Accounting Standards Board | ||||
FDIC | Federal Deposit Insurance Corporation | ||||
FDM | Financial difficulty modification | ||||
FHLB | Federal Home Loan Bank | ||||
FRB | Board of Governors of the Federal Reserve System | ||||
GAAP | Accounting principles generally accepted in the United States of America | ||||
GDP | Gross Domestic Deposit | ||||
GSE | U.S. government-sponsored enterprise | ||||
IEL | Individually evaluated loan | ||||
IRC | Internal Revenue Code of 1986, as amended | ||||
LHFS | Loans held for sale | ||||
LIBOR | London Interbank Offered Rate | ||||
MBS | Mortgage-backed securities | ||||
MSR | Mortgage servicing right | ||||
OCI | Other comprehensive income | ||||
OREO | Other real estate owned | ||||
OTTI | Other-than-temporary impairment | ||||
2011 Plan | 2011 Orrstown Financial Services, Inc. Incentive Stock Plan | ||||
PCD loans | Purchased credit deteriorated loans | ||||
PCI loans | Purchased credit impaired loans | ||||
PACE | Property Assessed Clean Energy loans | ||||
PPP | Paycheck Protection Program | ||||
ReRemic | Re-securitization of Real Estate Mortgage Investment Conduits | ||||
ROU | Right of use (leases) | ||||
SBA | U.S. Small Business Administration | ||||
SEC | Securities and Exchange Commission | ||||
Securities Act | Securities Act of 1933, as amended | ||||
SOFR | Secured Overnight Financing Rate | ||||
TDR | Troubled debt restructuring | ||||
Unless the context otherwise requires, the terms “Orrstown,” “we,” “us,” “our,” and “Company” refer to Orrstown Financial Services, Inc. and its subsidiaries. | |||||
(Dollars in thousands, except per share amounts) | March 31, 2023 | December 31, 2022 | |||||||||
Assets | |||||||||||
Cash and due from banks | $ | $ | |||||||||
Interest-bearing deposits with banks | |||||||||||
Cash and cash equivalents | |||||||||||
Restricted investments in bank stocks | |||||||||||
Securities available for sale (amortized cost of $ | |||||||||||
Loans held for sale, at fair value | |||||||||||
Loans | |||||||||||
Less: Allowance for credit losses | ( | ( | |||||||||
Net loans | |||||||||||
Premises and equipment, net | |||||||||||
Cash surrender value of life insurance | |||||||||||
Goodwill | |||||||||||
Other intangible assets, net | |||||||||||
Accrued interest receivable | |||||||||||
Deferred tax assets, net | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities | |||||||||||
Deposits: | |||||||||||
Noninterest-bearing | $ | $ | |||||||||
Interest-bearing | |||||||||||
Deposits held for assumption in connection with sale of bank branch | |||||||||||
Total deposits | |||||||||||
Securities sold under agreements to repurchase and federal funds purchased | |||||||||||
FHLB advances and other borrowings | |||||||||||
Subordinated notes | |||||||||||
Other liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies | |||||||||||
Shareholders’ Equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, no par value—$ | |||||||||||
Additional paid - in capital | |||||||||||
Retained earnings | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock— | ( | ( | |||||||||
Total shareholders’ equity | |||||||||||
Total liabilities and shareholders’ equity | $ | $ |
Three Months Ended | |||||||||||
(Dollars in thousands, except per share amounts) | March 31, 2023 | March 31, 2022 | |||||||||
Interest income | |||||||||||
Loans | $ | $ | |||||||||
Investment securities - taxable | |||||||||||
Investment securities - tax-exempt | |||||||||||
Short-term investments | |||||||||||
Total interest income | |||||||||||
Interest expense | |||||||||||
Deposits | |||||||||||
Securities sold under agreements to repurchase and federal funds purchased | |||||||||||
FHLB advances and other borrowings | |||||||||||
Subordinated notes | |||||||||||
Total interest expense | |||||||||||
Net interest income | |||||||||||
Provision for credit losses | |||||||||||
Net interest income after provision for credit losses | |||||||||||
Noninterest income | |||||||||||
Service charges on deposit accounts | |||||||||||
Interchange income | |||||||||||
Other service charges, commissions and fees | |||||||||||
Swap fee income | |||||||||||
Trust and investment management income | |||||||||||
Brokerage income | |||||||||||
Mortgage banking activities | |||||||||||
Income from life insurance | |||||||||||
Investment securities losses | ( | ( | |||||||||
Other income | |||||||||||
Total noninterest income | |||||||||||
Noninterest expenses | |||||||||||
Salaries and employee benefits | |||||||||||
Occupancy | |||||||||||
Furniture and equipment | |||||||||||
Data processing | |||||||||||
Automated teller and interchange fees | |||||||||||
Advertising and bank promotions | |||||||||||
FDIC insurance | |||||||||||
Professional services | |||||||||||
Directors' compensation | |||||||||||
Taxes other than income | |||||||||||
Intangible asset amortization | |||||||||||
Other operating expenses | |||||||||||
Total noninterest expenses | |||||||||||
Income before income tax expense | |||||||||||
Income tax expense | |||||||||||
Net income | $ | $ | |||||||||
Three Months Ended | |||||||||||
March 31, 2023 | March 31, 2022 | ||||||||||
Per share information: | |||||||||||
Basic earnings per share | $ | $ | |||||||||
Diluted earnings per share | |||||||||||
Dividends paid per share |
Three Months Ended | |||||||||||
(Dollars in thousands) | March 31, 2023 | March 31, 2022 | |||||||||
Net income | $ | $ | |||||||||
Other comprehensive income (loss), net of tax: | |||||||||||
Unrealized gains (losses) on securities available for sale arising during the period | ( | ||||||||||
Reclassification adjustment for losses realized in net income | |||||||||||
Net unrealized gains (losses) on securities available for sale | ( | ||||||||||
Tax effect | ( | ||||||||||
Total other comprehensive income (loss), net of tax and reclassification adjustments on securities available for sale | ( | ||||||||||
Unrealized gains on interest rate swaps used in cash flow hedges | |||||||||||
Reclassification adjustment for losses realized in net income | |||||||||||
Net unrealized gains on interest rate swaps used in cash flow hedges | |||||||||||
Tax effect | ( | ||||||||||
Total other comprehensive income, net of tax and reclassification adjustments on interest rate swaps used in cash flow hedges | |||||||||||
Total other comprehensive income (loss), net of tax and reclassification adjustments | ( | ||||||||||
Total comprehensive income (loss) | $ | $ | ( |
Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Treasury Stock | Total Shareholders’ Equity | |||||||||||||||||||||||||||||
Balance, January 1, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
— | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||
Total other comprehensive income, net of taxes | — | — | — | — | |||||||||||||||||||||||||||||||
Cash dividends ($ | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Share-based compensation plans: | |||||||||||||||||||||||||||||||||||
( | — | — | ( | ||||||||||||||||||||||||||||||||
Balance, March 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Shareholders’ Equity | |||||||||||||||||||||||||||||
Balance, January 1, 2022 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||
Total other comprehensive loss, net of taxes | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Cash dividends ($ | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Share-based compensation plans: | |||||||||||||||||||||||||||||||||||
( | ( | — | — | ( | ( | ||||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
Three Months Ended | |||||||||||
(Dollars in thousands) | March 31, 2023 | March 31, 2022 | |||||||||
Cash flows from operating activities | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Net premium amortization | |||||||||||
Depreciation and amortization expense | |||||||||||
Provision for credit losses | |||||||||||
Share-based compensation | |||||||||||
Gains on sales of loans originated for sale | ( | ( | |||||||||
Fair value adjustments on loans held for sale | ( | ||||||||||
Mortgage loans originated for sale | ( | ( | |||||||||
Proceeds from sales of loans originated for sale | |||||||||||
Gains on sale of portfolio loans | ( | ||||||||||
Net (gain) loss on disposal of premises and equipment | ( | ||||||||||
Deferred income tax benefit | |||||||||||
Investment securities losses | |||||||||||
Return on investments in limited partnerships | ( | ||||||||||
Net unrealized losses (gains) on derivatives | ( | ||||||||||
Income from life insurance | ( | ( | |||||||||
Decrease (increase) in accrued interest receivable and other assets | ( | ||||||||||
Decrease in accrued interest payable and other liabilities | ( | ( | |||||||||
Other, net | |||||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities | |||||||||||
Proceeds from sales of AFS securities | |||||||||||
Maturities, repayments and calls of AFS securities | |||||||||||
Purchases of AFS securities | ( | ( | |||||||||
Net (purchases) redemptions of restricted investments in bank stocks | ( | ||||||||||
Net distributions from investments in limited partnerships | |||||||||||
Net (increase) decrease in loans | ( | ||||||||||
Proceeds from sales of portfolio loans | |||||||||||
Purchases of bank premises and equipment | ( | ( | |||||||||
Proceeds from disposal of premises and equipment | |||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities | |||||||||||
Net increase in deposits | |||||||||||
Net increase in borrowings with original maturities less than 90 days | |||||||||||
Proceeds from FHLB advances with original maturities greater than 90 days | |||||||||||
Payments on FHLB advances with original maturities greater than 90 days | ( | ( | |||||||||
Dividends paid | ( | ( | |||||||||
Acquisition of treasury stock | ( | ( | |||||||||
Shares repurchased as treasury stock for employee taxes associated with restricted stock vesting | ( | ( | |||||||||
Proceeds from issuance of employee stock purchase plan shares | |||||||||||
Net cash provided by financing activities | |||||||||||
Net increase in cash and cash equivalents | |||||||||||
Cash and cash equivalents at beginning of period | |||||||||||
Cash and cash equivalents at end of period | $ | $ | |||||||||
Three Months Ended | |||||||||||
March 31, 2023 | March 31, 2022 | ||||||||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid during the period for: | |||||||||||
Interest | $ | $ | |||||||||
Supplemental schedule of noncash activities: | |||||||||||
Loans transferred from LHFS to portfolio loans | |||||||||||
OREO acquired in settlement of loans | |||||||||||
January 1, 2023 | |||||||||||||||||
Reserves under Incurred Loss Model | Reserves under CECL Model | Impact of CECL Adoption | |||||||||||||||
Financial Assets: | |||||||||||||||||
Commercial loans: | |||||||||||||||||
Commercial real estate | $ | $ | $ | ||||||||||||||
Acquisition and development | ( | ||||||||||||||||
Commercial and industrial | |||||||||||||||||
Municipal | |||||||||||||||||
Consumer loans: | |||||||||||||||||
Residential mortgage | ( | ||||||||||||||||
Installment and other | |||||||||||||||||
Unallocated reserve | ( | ||||||||||||||||
Allowance for credit losses on loans | $ | $ | $ | ||||||||||||||
Liabilities: | |||||||||||||||||
Allowance for credit losses on off-balance sheet credit exposures | $ | $ | $ |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Fair Value | |||||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||||||||
U.S. Treasury securities | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
U.S. Government Agencies | |||||||||||||||||||||||||||||
States and political subdivisions | |||||||||||||||||||||||||||||
GSE residential MBSs | |||||||||||||||||||||||||||||
GSE commercial MBSs | |||||||||||||||||||||||||||||
GSE residential CMOs | |||||||||||||||||||||||||||||
Non-agency CMOs | |||||||||||||||||||||||||||||
Asset-backed | |||||||||||||||||||||||||||||
Other | |||||||||||||||||||||||||||||
Totals | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||
U.S. Treasury securities | $ | $ | $ | n/a | $ | ||||||||||||||||||||||||
U.S. Government Agencies | n/a | ||||||||||||||||||||||||||||
States and political subdivisions | n/a | ||||||||||||||||||||||||||||
GSE residential MBSs | n/a | ||||||||||||||||||||||||||||
GSE residential CMOs | n/a | ||||||||||||||||||||||||||||
Non-agency CMOs | n/a | ||||||||||||||||||||||||||||
Asset-backed | n/a | ||||||||||||||||||||||||||||
Other | n/a | ||||||||||||||||||||||||||||
Totals | $ | $ | $ | n/a | $ |
Less Than 12 Months | 12 Months or More | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
# of Securities | Fair Value | Unrealized Losses | # of Securities | Fair Value | Unrealized Losses | # of Securities | Fair Value | Unrealized Losses | |||||||||||||||||||||||||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury securities | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
States and political subdivisions | |||||||||||||||||||||||||||||||||||||||||||||||||||||
GSE residential MBSs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
GSE residential CMOs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-agency CMOs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset-backed | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Totals | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury securities | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
States and political subdivisions | |||||||||||||||||||||||||||||||||||||||||||||||||||||
GSE residential MBSs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
GSE residential CMOs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-agency CMOs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset-backed | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Totals | $ | $ | $ | $ | $ | $ |
Amortized Cost | Fair Value | ||||||||||
Due in one year or less | $ | $ | |||||||||
Due after one year through five years | |||||||||||
Due after five years through ten years | |||||||||||
Due after ten years | |||||||||||
CMOs and MBSs | |||||||||||
Asset-backed | |||||||||||
Totals | $ | $ |
Three months ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Proceeds from sale of investment securities | $ | $ | |||||||||
Gross gains | |||||||||||
Gross losses |
March 31, 2023 | December 31, 2022 | ||||||||||
Commercial real estate: | |||||||||||
Owner occupied | $ | $ | |||||||||
Non-owner occupied | |||||||||||
Multi-family | |||||||||||
Non-owner occupied residential | |||||||||||
Acquisition and development: | |||||||||||
1-4 family residential construction | |||||||||||
Commercial and land development | |||||||||||
Commercial and industrial (1) | |||||||||||
Municipal | |||||||||||
Residential mortgage: | |||||||||||
First lien | |||||||||||
Home equity - term | |||||||||||
Home equity - lines of credit | |||||||||||
Installment and other loans | |||||||||||
Total loans | $ | $ |
Term Loans Amortized Cost Basis by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2023 | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans Amortized Basis | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Owner-occupied: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total owner-occupied loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - owner-occupied | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Non-owner occupied: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total non-owner occupied loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - non-owner occupied | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Multi-family: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total multi-family loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - multi-family | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Non-owner occupied residential: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total non-owner occupied residential loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - non-owner occupied residential | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Term Loans Amortized Cost Basis by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2023 | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans Amortized Basis | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||
Acquisition and development: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
1-4 family residential construction: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total 1-4 family residential construction loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - 1-4 family residential construction | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Commercial and land development: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total commercial and land development loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - commercial and land development | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Commercial and Industrial: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total commercial and industrial loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - commercial and industrial | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Municipal: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Total municipal loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - municipal | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
First lien: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Payment performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Nonperforming | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total first lien loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - first lien | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Term Loans Amortized Cost Basis by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2023 | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans Amortized Basis | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||
Home equity - term: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Payment performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Nonperforming | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total home equity - term loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - home equity - term | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Home equity - lines of credit: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Payment performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Nonperforming | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total residential real estate - home equity - lines of credit loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - home equity - lines of credit | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Installment and other loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Payment performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Nonperforming | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Installment and other loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Current period gross charge offs - installment and other | $ | $ | $ | $ | $ | $ | $ | $ | $ |
Pass | Special Mention | Non-Impaired Substandard | Impaired - Substandard | Doubtful | PCI Loans | Total | |||||||||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
Owner occupied | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Non-owner occupied | |||||||||||||||||||||||||||||||||||||||||
Multi-family | |||||||||||||||||||||||||||||||||||||||||
Non-owner occupied residential | |||||||||||||||||||||||||||||||||||||||||
Acquisition and development: | |||||||||||||||||||||||||||||||||||||||||
1-4 family residential construction | |||||||||||||||||||||||||||||||||||||||||
Commercial and land development | |||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||
Municipal | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||||||||||||||
First lien | |||||||||||||||||||||||||||||||||||||||||
Home equity - term | |||||||||||||||||||||||||||||||||||||||||
Home equity - lines of credit | |||||||||||||||||||||||||||||||||||||||||
Installment and other loans | |||||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||
Nonaccrual loans with a related ACL | Nonaccrual loans with no related ACL | Total nonaccrual loans | Loans Past Due 90+ Accruing | Total nonaccrual loans | |||||||||||||||||||||||||
Commercial real estate: | |||||||||||||||||||||||||||||
Owner-occupied | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Non-owner occupied | |||||||||||||||||||||||||||||
Non-owner occupied residential | |||||||||||||||||||||||||||||
Acquisition and development: | |||||||||||||||||||||||||||||
Commercial and land development | |||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||
First lien | |||||||||||||||||||||||||||||
Home equity – term | |||||||||||||||||||||||||||||
Home equity – lines of credit | |||||||||||||||||||||||||||||
Installment and other loans | |||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ |
Type of Collateral | |||||||||||||||||||||||||||||||||||||||||
Business Assets | Commercial Real Estate | Equipment | Land | Residential Real Estate | Other | Total | |||||||||||||||||||||||||||||||||||
Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
Owner occupied | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Non-owner occupied | |||||||||||||||||||||||||||||||||||||||||
Acquisition and development: | |||||||||||||||||||||||||||||||||||||||||
Commercial and land development | |||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||||||||||||||
First lien | |||||||||||||||||||||||||||||||||||||||||
Home equity - term | |||||||||||||||||||||||||||||||||||||||||
Home equity - lines of credit | |||||||||||||||||||||||||||||||||||||||||
Installment and other loans | |||||||||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ |
Impaired Loans with a Specific Allowance | Impaired Loans with No Specific Allowance | ||||||||||||||||||||||||||||
Recorded Investment (Book Balance) | Unpaid Principal Balance (Legal Balance) | Related Allowance | Recorded Investment (Book Balance) | Unpaid Principal Balance (Legal Balance) | |||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||
Commercial real estate: | |||||||||||||||||||||||||||||
Owner-occupied | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Non-owner occupied residential | |||||||||||||||||||||||||||||
Acquisition and development: | |||||||||||||||||||||||||||||
Commercial and land development | |||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||
First lien | |||||||||||||||||||||||||||||
Home equity—term | |||||||||||||||||||||||||||||
Home equity—lines of credit | |||||||||||||||||||||||||||||
Installment and other loans | |||||||||||||||||||||||||||||
$ | $ | $ | $ | $ |
March 31, 2022 | |||||||||||
Average Impaired Balance | Interest Income Recognized | ||||||||||
Three Months Ended March 31, | |||||||||||
Commercial real estate: | |||||||||||
Owner occupied | $ | $ | |||||||||
Non-owner occupied residential | |||||||||||
Commercial and industrial | |||||||||||
Residential mortgage: | |||||||||||
First lien | |||||||||||
Home equity - term | |||||||||||
Home equity - lines of credit | |||||||||||
Installment and other loans | |||||||||||
$ | $ |
December 31, 2022 | |||||||||||
Number of Contracts | Recorded Investment | ||||||||||
Accruing: | |||||||||||
Residential mortgage: | |||||||||||
First lien | $ | ||||||||||
Nonaccruing: | |||||||||||
Residential mortgage: | |||||||||||
First lien | |||||||||||
Installment and other loans | |||||||||||
$ |
30-59 Days Past Due | 60-89 Days Past Due | 90+ Days Past Due | Total Past Due | Loans Not Past Due | Total Loans | ||||||||||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||||||||||||||
Commercial real estate: | |||||||||||||||||||||||||||||||||||
Owner occupied | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Non-owner occupied | |||||||||||||||||||||||||||||||||||
Multi-family | |||||||||||||||||||||||||||||||||||
Non-owner occupied residential | |||||||||||||||||||||||||||||||||||
Acquisition and development: | |||||||||||||||||||||||||||||||||||
1-4 family residential construction | |||||||||||||||||||||||||||||||||||
Commercial and land development | |||||||||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||||||||
Municipal | |||||||||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||||||||
First lien | |||||||||||||||||||||||||||||||||||
Home equity - term | |||||||||||||||||||||||||||||||||||
Home equity - lines of credit | |||||||||||||||||||||||||||||||||||
Installment and other loans | |||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Days Past Due | |||||||||||||||||||||||||||||||||||||||||
Current | 30-59 | 60-89 | 90+ (still accruing) | Total Past Due | Non- Accrual | Total Loans | |||||||||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
Owner-occupied | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Non-owner occupied | |||||||||||||||||||||||||||||||||||||||||
Multi-family | |||||||||||||||||||||||||||||||||||||||||
Non-owner occupied residential | |||||||||||||||||||||||||||||||||||||||||
Acquisition and development: | |||||||||||||||||||||||||||||||||||||||||
1-4 family residential construction | |||||||||||||||||||||||||||||||||||||||||
Commercial and land development | |||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||
Municipal | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||||||||||||||
First lien | |||||||||||||||||||||||||||||||||||||||||
Home equity – term | |||||||||||||||||||||||||||||||||||||||||
Home equity – lines of credit | |||||||||||||||||||||||||||||||||||||||||
Installment and other loans | |||||||||||||||||||||||||||||||||||||||||
Subtotal | |||||||||||||||||||||||||||||||||||||||||
Loans acquired with credit deterioration: | |||||||||||||||||||||||||||||||||||||||||
Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
Owner-occupied | |||||||||||||||||||||||||||||||||||||||||
Non-owner occupied | |||||||||||||||||||||||||||||||||||||||||
Non-owner occupied residential | |||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||||||||||||||
First lien | |||||||||||||||||||||||||||||||||||||||||
Home equity – term | |||||||||||||||||||||||||||||||||||||||||
Installment and other loans | |||||||||||||||||||||||||||||||||||||||||
Subtotal | |||||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ |
Commercial | Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate | Acquisition and Development | Commercial and Industrial | Municipal | Total | Residential Mortgage | Installment and Other | Total | Unallocated | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance, prior to adoption of CECL | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Impact of adopting CECL | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for credit losses | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recoveries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, end of period | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Provision for loan losses | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charge-offs | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Recoveries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, end of period | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ |
Commercial | Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate | Acquisition and Development | Commercial and Industrial | Municipal | Total | Residential Mortgage | Installment and Other | Total | Unallocated | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans allocated by: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
ALL allocated by: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Operating lease ROU assets | $ | $ | |||||||||
Operating lease ROU liabilities | |||||||||||
Weighted-average remaining lease term (in years) | |||||||||||
Weighted-average discount rate | % | % |
Three Months Ended | |||||||||||
March 31, 2023 | March 31, 2022 | ||||||||||
Cash paid for operating lease liabilities | $ | $ | |||||||||
Operating lease expense |
2023 | $ | ||||
2024 | |||||
2025 | |||||
2026 | |||||
2027 | |||||
Thereafter | |||||
Less: imputed interest | |||||
Total lease liabilities | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Beginning of period | $ | $ | |||||||||
Amortization expense | ( | ( | |||||||||
Balance, end of period | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||
Gross Amount | Accumulated Amortization | Gross Amount | Accumulated Amortization | ||||||||||||||||||||
Amortized intangible assets: | |||||||||||||||||||||||
Core deposit intangibles | $ | $ | $ | $ | |||||||||||||||||||
Other customer relationship intangibles | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
2023 | $ | ||||
2024 | |||||
2025 | |||||
2026 | |||||
2027 | |||||
Thereafter | |||||
$ |
Shares | Weighted Average Grant Date Fair Value | ||||||||||
Nonvested shares, beginning of year | $ | ||||||||||
Granted | |||||||||||
Forfeited | ( | ||||||||||
Vested | ( | ||||||||||
Nonvested shares, at period end | $ |
Three months ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Restricted share award expense | $ | $ | |||||||||
Restricted share award tax benefit | |||||||||||
Fair value of shares vested |
Three months ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Shares purchased | |||||||||||
Weighted average price of shares purchased | $ | $ | |||||||||
Compensation expense recognized | |||||||||||
March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
Notional Amount | Balance Sheet Location | Fair Value | Notional Amount | Balance Sheet Location | Fair Value | ||||||||||||||||||||||||||||||
Derivatives designated as hedging instruments: | |||||||||||||||||||||||||||||||||||
Interest rate swaps - balance sheet hedge | $ | Other liabilities | $ | ( | $ | Other liabilities | $ | ( | |||||||||||||||||||||||||||
Total derivatives designated as hedging instruments | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||||||||||||||||||||
Interest rate swaps | $ | Other assets | $ | $ | Other assets | $ | |||||||||||||||||||||||||||||
Interest rate swaps | Other liabilities | ( | Other liabilities | ( | |||||||||||||||||||||||||||||||
Purchased Options – Rate Cap | Other assets | Other assets | |||||||||||||||||||||||||||||||||
Written Options – Rate Cap | Other liabilities | ( | Other liabilities | ( | |||||||||||||||||||||||||||||||
Risk participations - sold credit protection | Other liabilities | ( | Other liabilities | ( | |||||||||||||||||||||||||||||||
Risk participations - purchased credit protection | Other assets | Other assets | |||||||||||||||||||||||||||||||||
Interest rate lock commitments with customers | Other assets | Other assets | |||||||||||||||||||||||||||||||||
Forward sale commitments | Other assets | Other assets | |||||||||||||||||||||||||||||||||
Total derivatives not designated as hedging instruments | $ | $ |
Amount of Gain Recognized in OCI on Derivative | |||||||||||
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Derivatives in cash flow hedging relationships: | |||||||||||
Interest rate products | $ | $ | |||||||||
Total | $ | $ |
Amount of Loss Reclassified from AOCI into Income | Location of Loss Recognized from AOCI into Income | ||||||||||||||||
Three Months Ended March 31, | |||||||||||||||||
2023 | 2022 | ||||||||||||||||
Derivatives in cash flow hedging relationships: | |||||||||||||||||
Interest rate products | $ | $ | Interest income | ||||||||||||||
Total | $ | $ |
Amount of (Loss) Gain Recognized in Income | Location of Gain (Loss) Recognized in Income | ||||||||||||||||
Three Months Ended March 31, | |||||||||||||||||
2023 | 2022 | ||||||||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||
Interest rate products | $ | ( | $ | Other operating expenses | |||||||||||||
Risk participation agreements | ( | Other operating expenses | |||||||||||||||
Interest rate lock commitments with customers | ( | Mortgage banking activities | |||||||||||||||
Forward sale commitments | ( | Mortgage banking activities | |||||||||||||||
Total | $ | ( | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Weighted average pay rate | % | % | |||||||||
Weighted average receive rate | % | % | |||||||||
Weighted average maturity in years |
March 31, 2023 | December 31, 2022 | ||||||||||
Balance at year-end | $ | $ | |||||||||
Weighted average interest rate at year-end | % | % | |||||||||
Average balance during the year | $ | $ | |||||||||
Average interest rate during the year | % | % | |||||||||
Maximum month-end balance during the year | $ | $ |
Amount | Weighted Average Rate | ||||||||||||||||||||||
March 31, 2023 | December 31, 2022 | March 31, 2023 | December 31, 2022 | ||||||||||||||||||||
FHLB fixed rate advances maturing: | |||||||||||||||||||||||
2025 | $ | $ | % | % | |||||||||||||||||||
2028 | % | % | |||||||||||||||||||||
% | % | ||||||||||||||||||||||
Total FHLB amortizing advance requiring monthly principal and interest payments, maturing: | |||||||||||||||||||||||
2025 | $ | $ | % | % | |||||||||||||||||||
Total FHLB Advances | $ | $ | % | % |
Actual | For Capital Adequacy Purposes (includes applicable capital conservation buffer) | To Be Well Capitalized Under Prompt Corrective Action Provisions | |||||||||||||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||||||||||||||
Total risk-based capital: | |||||||||||||||||||||||||||||||||||
Orrstown Financial Services, Inc. | $ | % | $ | % | n/a | n/a | |||||||||||||||||||||||||||||
Orrstown Bank | % | % | $ | % | |||||||||||||||||||||||||||||||
Tier 1 risk-based capital: | |||||||||||||||||||||||||||||||||||
Orrstown Financial Services, Inc. | % | % | n/a | n/a | |||||||||||||||||||||||||||||||
Orrstown Bank | % | % | % | ||||||||||||||||||||||||||||||||
Tier 1 common equity risk-based capital: | |||||||||||||||||||||||||||||||||||
Orrstown Financial Services, Inc. | % | % | n/a | n/a | |||||||||||||||||||||||||||||||
Orrstown Bank | % | % | % | ||||||||||||||||||||||||||||||||
Tier 1 leverage capital: | |||||||||||||||||||||||||||||||||||
Orrstown Financial Services, Inc. | % | % | n/a | n/a | |||||||||||||||||||||||||||||||
Orrstown Bank | % | % | % | ||||||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||||||||
Total risk-based capital: | |||||||||||||||||||||||||||||||||||
Orrstown Financial Services, Inc. | $ | % | $ | % | n/a | n/a | |||||||||||||||||||||||||||||
Orrstown Bank | % | % | $ | % | |||||||||||||||||||||||||||||||
Tier 1 risk-based capital: | |||||||||||||||||||||||||||||||||||
Orrstown Financial Services, Inc. | % | % | n/a | n/a | |||||||||||||||||||||||||||||||
Orrstown Bank | % | % | % | ||||||||||||||||||||||||||||||||
Tier 1 common equity risk-based capital: | |||||||||||||||||||||||||||||||||||
Orrstown Financial Services, Inc. | % | % | n/a | n/a | |||||||||||||||||||||||||||||||
Orrstown Bank | % | % | % | ||||||||||||||||||||||||||||||||
Tier 1 leverage capital: | |||||||||||||||||||||||||||||||||||
Orrstown Financial Services, Inc. | % | % | n/a | n/a | |||||||||||||||||||||||||||||||
Orrstown Bank | % | % | % |
Three Months Ended March 31, | |||||||||||
(shares presented in the table are in thousands) | 2023 | 2022 | |||||||||
Net income | $ | $ | |||||||||
Weighted average shares outstanding - basic | |||||||||||
Dilutive effect of share-based compensation | |||||||||||
Weighted average shares outstanding - diluted | |||||||||||
Per share information: | |||||||||||
Basic earnings per share | $ | $ | |||||||||
Diluted earnings per share |
Contractual or Notional Amount | |||||||||||
March 31, 2023 | December 31, 2022 | ||||||||||
Commitments to fund: | |||||||||||
Home equity lines of credit | $ | $ | |||||||||
1-4 family residential construction loans | |||||||||||
Commercial real estate, construction and land development loans | |||||||||||
Commercial, industrial and other loans | |||||||||||
Standby letters of credit |
Level 1 | Level 2 | Level 3 | Total Fair Value Measurements | ||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||
Financial Assets | |||||||||||||||||||||||
Investment securities: | |||||||||||||||||||||||
U.S. Treasury securities | $ | $ | $ | $ | |||||||||||||||||||
U.S. Government Agencies | |||||||||||||||||||||||
States and political subdivisions | |||||||||||||||||||||||
GSE residential MBSs | |||||||||||||||||||||||
GSE commercial MBSs | |||||||||||||||||||||||
GSE residential CMOs | |||||||||||||||||||||||
Non-agency CMOs | |||||||||||||||||||||||
Asset-backed | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Loans held for sale | |||||||||||||||||||||||
Derivatives | |||||||||||||||||||||||
Totals | $ | $ | $ | $ | |||||||||||||||||||
Financial Liabilities | |||||||||||||||||||||||
Derivatives | $ | $ | $ | $ | |||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||
Financial Assets | |||||||||||||||||||||||
Investment securities: | |||||||||||||||||||||||
U.S. Treasury securities | $ | $ | $ | $ | |||||||||||||||||||
U.S. Government Agencies | |||||||||||||||||||||||
States and political subdivisions | |||||||||||||||||||||||
GSE residential MBSs | |||||||||||||||||||||||
GSE residential CMOs | |||||||||||||||||||||||
Non-agency CMOs | |||||||||||||||||||||||
Asset-backed | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Loans held for sale | |||||||||||||||||||||||
Derivatives | |||||||||||||||||||||||
Totals | $ | $ | $ | $ | |||||||||||||||||||
Financial Liabilities | |||||||||||||||||||||||
Derivatives | $ | $ | $ | $ | |||||||||||||||||||
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Balance, beginning of period | $ | $ | |||||||||
Unrealized gains (losses) included in OCI | ( | ||||||||||
Purchases | |||||||||||
Net discount accretion | |||||||||||
Principal payments and other | ( | ||||||||||
Sales | ( | ||||||||||
OTTI | ( | ||||||||||
Balance, end of period | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Balance, beginning of period | $ | $ | |||||||||
Total gains (losses) included in earnings | ( | ||||||||||
Balance, end of period | $ | $ |
Level 1 | Level 2 | Level 3 | Total Fair Value Measurements | ||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||
Individually Evaluated Loans | |||||||||||||||||||||||
Commercial real estate: | |||||||||||||||||||||||
Owner occupied | $ | $ | $ | $ | |||||||||||||||||||
Non-owner occupied residential | |||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||
First lien | |||||||||||||||||||||||
Home equity - lines of credit | |||||||||||||||||||||||
Total individually evaluated loans | $ | $ | $ | $ | |||||||||||||||||||
Mortgage servicing rights | $ | $ | $ | $ | |||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||
Impaired Loans | |||||||||||||||||||||||
Commercial real estate: | |||||||||||||||||||||||
Owner occupied | $ | $ | $ | $ | |||||||||||||||||||
Non-owner occupied residential | |||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||
First lien | |||||||||||||||||||||||
Home equity - lines of credit | |||||||||||||||||||||||
Total impaired loans | $ | $ | $ | $ | |||||||||||||||||||
Mortgage servicing rights | $ | $ | $ | $ |
Fair Value Estimate | Valuation Techniques | Unobservable Input | Range | ||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||
Individually evaluated loans | $ | Appraisal of collateral | Management adjustments on appraisals for property type and recent activity | ||||||||||||||||||||
- Management adjustments for liquidation expenses | |||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||
Impaired loans | $ | Appraisal of collateral | Management adjustments on appraisals for property type and recent activity | ||||||||||||||||||||
- Management adjustments for liquidation expenses | |||||||||||||||||||||||
Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||||||||
Financial Assets | |||||||||||||||||||||||||||||
Cash and due from banks | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Interest-bearing deposits with banks | |||||||||||||||||||||||||||||
Restricted investments in bank stock | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||
Investment securities | |||||||||||||||||||||||||||||
Loans held for sale | |||||||||||||||||||||||||||||
Loans, net of allowance for credit losses | |||||||||||||||||||||||||||||
Derivatives | |||||||||||||||||||||||||||||
Accrued interest receivable | |||||||||||||||||||||||||||||
Financial Liabilities | |||||||||||||||||||||||||||||
Deposits | |||||||||||||||||||||||||||||
Deposits held for assumption in connection with sale of bank branches | |||||||||||||||||||||||||||||
Securities sold under agreements to repurchase and federal funds purchased | |||||||||||||||||||||||||||||
FHLB advances and other borrowings | |||||||||||||||||||||||||||||
Subordinated notes | |||||||||||||||||||||||||||||
Derivatives | |||||||||||||||||||||||||||||
Accrued interest payable | |||||||||||||||||||||||||||||
Off-balance sheet instruments | |||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||
Financial Assets | |||||||||||||||||||||||||||||
Cash and due from banks | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Interest-bearing deposits with banks | |||||||||||||||||||||||||||||
Restricted investments in bank stock | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||
Investment securities | |||||||||||||||||||||||||||||
Loans held for sale | |||||||||||||||||||||||||||||
Loans, net of allowance for loan losses | |||||||||||||||||||||||||||||
Derivatives | |||||||||||||||||||||||||||||
Accrued interest receivable | |||||||||||||||||||||||||||||
Financial Liabilities | |||||||||||||||||||||||||||||
Deposits | |||||||||||||||||||||||||||||
Deposits held for assumption in connection with sale of bank branches | |||||||||||||||||||||||||||||
Securities sold under agreements to repurchase | |||||||||||||||||||||||||||||
FHLB advances and other borrowings | |||||||||||||||||||||||||||||
Subordinated notes | |||||||||||||||||||||||||||||
Derivatives | |||||||||||||||||||||||||||||
Accrued interest payable | |||||||||||||||||||||||||||||
Off-balance sheet instruments |
Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||||
Average Balance | Taxable- Equivalent Interest | Taxable- Equivalent Rate | Average Balance | Taxable- Equivalent Interest | Taxable- Equivalent Rate | ||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||
Federal funds sold & interest-bearing bank balances | $ | 29,599 | $ | 298 | 4.08 | % | $ | 199,788 | $ | 101 | 0.20 | % | |||||||||||||||||||||||
Investment securities (1) | 525,685 | 5,465 | 4.18 | 472,195 | 2,512 | 2.13 | |||||||||||||||||||||||||||||
Loans (1)(2)(3) | 2,180,224 | 28,844 | 5.36 | 1,974,804 | 21,429 | 4.39 | |||||||||||||||||||||||||||||
Total interest-earning assets | 2,735,508 | 34,607 | 5.12 | 2,646,787 | 24,042 | 3.67 | |||||||||||||||||||||||||||||
Other assets | 197,620 | 184,300 | |||||||||||||||||||||||||||||||||
Total | $ | 2,933,128 | $ | 2,831,087 | |||||||||||||||||||||||||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||||||||||||
Interest-bearing demand deposits | $ | 1,503,421 | 4,862 | 1.31 | $ | 1,398,182 | 256 | 0.07 | |||||||||||||||||||||||||||
Savings deposits | 219,408 | 133 | 0.25 | 227,676 | 57 | 0.10 | |||||||||||||||||||||||||||||
Time deposits | 275,880 | 1,207 | 1.78 | 298,618 | 372 | 0.51 | |||||||||||||||||||||||||||||
Total interest-bearing deposits | 1,998,709 | 6,202 | 1.26 | 1,924,476 | 685 | 0.14 | |||||||||||||||||||||||||||||
Securities sold under agreements to repurchase and federal funds purchased | 13,868 | 25 | 0.72 | 23,530 | 7 | 0.12 | |||||||||||||||||||||||||||||
FHLB Advances and other borrowings | 106,434 | 1,252 | 4.77 | 1,850 | 22 | 4.74 | |||||||||||||||||||||||||||||
Subordinated notes | 32,033 | 504 | 6.29 | 31,969 | 503 | 6.29 | |||||||||||||||||||||||||||||
Total interest-bearing liabilities | 2,151,044 | 7,983 | 1.50 | 1,981,825 | 1,217 | 0.25 | |||||||||||||||||||||||||||||
Noninterest-bearing demand deposits | 495,562 | 540,139 | |||||||||||||||||||||||||||||||||
Other liabilities | 52,630 | 40,919 | |||||||||||||||||||||||||||||||||
Total liabilities | 2,699,236 | 2,562,883 | |||||||||||||||||||||||||||||||||
Shareholders’ equity | 233,892 | 268,204 | |||||||||||||||||||||||||||||||||
Total | $ | 2,933,128 | $ | 2,831,087 | |||||||||||||||||||||||||||||||
Taxable-equivalent net interest income /net interest spread | 26,624 | 3.62 | % | 22,825 | 3.42 | % | |||||||||||||||||||||||||||||
Taxable-equivalent net interest margin | 3.94 | % | 3.49 | % | |||||||||||||||||||||||||||||||
Taxable-equivalent adjustment | (330) | (252) | |||||||||||||||||||||||||||||||||
Net interest income | $ | 26,294 | $ | 22,573 |
NOTES TO ANALYSIS OF NET INTEREST INCOME: | |||||
(1) | Yields and interest income on tax-exempt assets have been computed on a taxable-equivalent basis assuming a 21% tax rate. | ||||
(2) | Average balances include nonaccrual loans. | ||||
(3) | Interest income on loans includes prepayment and late fees, where applicable. |
Three Months Ended March 31, | $ Change | % Change | |||||||||||||||||||||
2023 | 2022 | 2023-2022 | 2023-2022 | ||||||||||||||||||||
Service charges on deposit accounts | $ | 962 | $ | 920 | $ | 42 | 5 | % | |||||||||||||||
Interchange income | 965 | 981 | (16) | (2) | % | ||||||||||||||||||
Other service charges, commissions and fees | 195 | 153 | 42 | 27 | % | ||||||||||||||||||
Swap fee income | — | 953 | (953) | (100) | % | ||||||||||||||||||
Trust and investment management income | 1,888 | 1,941 | (53) | (3) | % | ||||||||||||||||||
Brokerage income | 859 | 928 | (69) | (7) | % | ||||||||||||||||||
Mortgage banking activities | 478 | 721 | (243) | (34) | % | ||||||||||||||||||
Income from life insurance | 590 | 566 | 24 | 4 | % | ||||||||||||||||||
Other income | 149 | 457 | (308) | (67) | % | ||||||||||||||||||
Investment securities losses | (8) | (146) | 138 | 95 | % | ||||||||||||||||||
Total noninterest income | $ | 6,078 | $ | 7,474 | $ | (1,396) | (19) | % | |||||||||||||||
Three Months Ended March 31, | $ Change | % Change | |||||||||||||||||||||
2023 | 2022 | 2023-2022 | 2023-2022 | ||||||||||||||||||||
Salaries and employee benefits | $ | 12,196 | $ | 11,337 | $ | 859 | 7.6 | % | |||||||||||||||
Occupancy | 1,106 | 1,288 | (182) | (14.1) | % | ||||||||||||||||||
Furniture and equipment | 1,227 | 1,279 | (52) | (4.1) | % | ||||||||||||||||||
Data processing | 1,217 | 1,053 | 164 | 15.6 | % | ||||||||||||||||||
Automated teller machine and interchange fees | 298 | 305 | (7) | (2.3) | % | ||||||||||||||||||
Advertising and bank promotions | 405 | 355 | 50 | 14.1 | % | ||||||||||||||||||
FDIC insurance | 504 | 283 | 221 | 78.1 | % | ||||||||||||||||||
Professional services | 734 | 808 | (74) | (9.2) | % | ||||||||||||||||||
Directors' compensation | 247 | 231 | 16 | 6.9 | % | ||||||||||||||||||
Taxes other than income | 457 | 564 | (107) | (19.0) | % | ||||||||||||||||||
Intangible asset amortization | 250 | 292 | (42) | (14.4) | % | ||||||||||||||||||
Other operating expenses | 1,614 | 1,569 | 45 | 2.9 | % | ||||||||||||||||||
Total noninterest expenses | $ | 20,255 | $ | 19,364 | $ | 891 | 4.6 | % | |||||||||||||||
Sector | Portfolio Mix | Amortized Book Value | Fair Value | Credit Enhancement | AAA | AA | A | BBB | NR | Collateral / Guarantee Type | ||||||||||||||||||||||
Unsecured ABS | 1 | % | $ | 4,610 | $ | 4,055 | 33 | % | — | % | — | % | — | % | — | % | 100 | % | Unsecured Consumer Debt | |||||||||||||
Student Loan ABS | 1 | 6,542 | 6,309 | 27 | — | — | — | — | 100 | Seasoned Student Loans | ||||||||||||||||||||||
Federal Family Education Loan ABS | 19 | 108,157 | 105,437 | 8 | 89 | 11 | — | — | — | Federal Family Education Loan (1) | ||||||||||||||||||||||
PACE Loan ABS | — | 2,633 | 2,402 | 6 | 100 | — | — | — | — | PACE Loans | ||||||||||||||||||||||
Non-Agency CMBS | 4 | 24,299 | 24,390 | 19 | — | — | — | — | 100 | |||||||||||||||||||||||
Non-Agency RMBS | 3 | 16,862 | 13,050 | 14 | 100 | — | — | — | — | Reverse Mortgages (2) | ||||||||||||||||||||||
Municipal - General Obligation | 19 | 104,797 | 95,481 | 4 | 90 | 6 | — | — | ||||||||||||||||||||||||
Municipal - Revenue | 22 | 120,511 | 108,121 | — | 82 | 12 | — | 6 | ||||||||||||||||||||||||
SBA ReRemic | 1 | 4,827 | 4,741 | — | 100 | — | — | — | SBA Guarantee (3) | |||||||||||||||||||||||
Small Business Administration | 2 | 10,043 | 10,708 | — | 100 | — | — | — | SBA Guarantee (3) | |||||||||||||||||||||||
Agency MBS | 24 | 137,290 | 127,475 | — | 100 | — | — | — | Residential Mortgages (3) | |||||||||||||||||||||||
U.S. Treasury securities | 4 | 20,067 | 17,693 | — | 100 | — | — | — | U.S. Government Guarantee (3) | |||||||||||||||||||||||
Bank CDs | — | 249 | 249 | — | — | — | — | 100 | FDIC-Insured CD | |||||||||||||||||||||||
100 | % | $ | 560,887 | $ | 520,111 | 21 | % | 67 | % | 4 | % | — | % | 8 | % | |||||||||||||||||
(1) Minimum of 97% guaranteed by U.S. government | ||||||||||||||||||||||||||||||||
(2) Non-agency reverse mortgages with current structural credit enhancements | ||||||||||||||||||||||||||||||||
(3) Guaranteed by U.S. government or U.S. government agencies | ||||||||||||||||||||||||||||||||
Note : Ratings in table are the lowest of the six rating agencies (Standard & Poor's, Moody's, Fitch, Morningstar, DBRS and Kroll Bond Rating Agency). Standard & Poor's rates U.S. government obligations at AA+. |
March 31, 2023 | December 31, 2022 | ||||||||||
Commercial real estate: | |||||||||||
Owner occupied | $ | 339,371 | $ | 315,770 | |||||||
Non-owner occupied | 603,396 | 608,043 | |||||||||
Multi-family | 144,053 | 138,832 | |||||||||
Non-owner occupied residential | 106,390 | 104,604 | |||||||||
Acquisition and development: | |||||||||||
1-4 family residential construction | 20,941 | 25,068 | |||||||||
Commercial and land development | 174,556 | 158,308 | |||||||||
Commercial and industrial (1) | 380,683 | 357,774 | |||||||||
Municipal | 11,329 | 12,173 | |||||||||
Residential mortgage: | |||||||||||
First lien | 227,031 | 229,849 | |||||||||
Home equity - term | 5,371 | 5,505 | |||||||||
Home equity - lines of credit | 183,340 | 183,241 | |||||||||
Installment and other loans | 11,040 | 12,065 | |||||||||
$ | 2,207,501 | $ | 2,151,232 |
March 31, 2023 | December 31, 2022 | ||||||||||
Nonaccrual loans | $ | 21,246 | $ | 20,583 | |||||||
OREO | 85 | — | |||||||||
Total nonperforming assets | 21,331 | 20,583 | |||||||||
FDMs still accruing / TDRs still accruing | — | 682 | |||||||||
Loans past due 90 days or more and still accruing (1) | 28 | 439 | |||||||||
Total nonperforming and other risk assets ("total risk assets") | $ | 21,359 | $ | 21,704 | |||||||
Loans 30-89 days past due and still accruing | $ | 6,555 | $ | 7,311 | |||||||
Asset quality ratios: | |||||||||||
Total nonperforming loans to total loans | 0.96 | % | 0.96 | % | |||||||
Total nonperforming assets to total assets | 0.71 | % | 0.70 | % | |||||||
Total nonperforming assets to total loans and OREO | 0.97 | % | 0.96 | % | |||||||
Total risk assets to total loans and OREO | 0.97 | % | 1.01 | % | |||||||
Total risk assets to total assets | 0.71 | % | 0.74 | % | |||||||
ACL to total loans | 1.28 | % | 1.17 | % | |||||||
ACL to nonperforming loans | 133.50 | % | 122.32 | % | |||||||
ACL to nonperforming loans and FDMs still accruing / TDRs still accruing | 133.50 | % | 118.40 | % | |||||||
Net (recoveries) charge-offs to total average loans (2) | (0.01) | % | 0.01 | % |
March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||
Nonaccrual loans with a related ACL | Nonaccrual loans with no related ACL | Total nonaccrual loans | Loans Past Due 90+ Accruing | Total nonaccrual | |||||||||||||||||||||||||
Commercial real estate: | |||||||||||||||||||||||||||||
Owner-occupied | $ | — | $ | 2,689 | $ | 2,689 | $ | — | $ | 2,767 | |||||||||||||||||||
Non-owner occupied | — | 276 | 276 | — | — | ||||||||||||||||||||||||
Multi-family | — | — | — | — | — | ||||||||||||||||||||||||
Non-owner occupied residential | — | 243 | 243 | — | 81 | ||||||||||||||||||||||||
Acquisition and development: | |||||||||||||||||||||||||||||
1-4 family residential construction | — | — | — | — | — | ||||||||||||||||||||||||
Commercial and land development | — | 15,151 | 15,151 | — | 15,426 | ||||||||||||||||||||||||
Commercial and industrial | — | 43 | 43 | — | 31 | ||||||||||||||||||||||||
Municipal | — | — | — | — | — | ||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||
First lien | — | 2,155 | 2,155 | 28 | 1,838 | ||||||||||||||||||||||||
Home equity – term | — | 4 | 4 | — | 5 | ||||||||||||||||||||||||
Home equity – lines of credit | — | 661 | 661 | — | 395 | ||||||||||||||||||||||||
Installment and other loans | — | 24 | 24 | — | 40 | ||||||||||||||||||||||||
Total | $ | — | $ | 21,246 | $ | 21,246 | $ | 28 | $ | 20,583 |
December 31, 2022 | |||||||||||||||||
Nonaccrual Loans | Restructured Loans Still Accruing | Total | |||||||||||||||
Commercial real estate: | |||||||||||||||||
Owner occupied | $ | 2,767 | $ | — | $ | 2,767 | |||||||||||
Non-owner occupied residential | 81 | — | 81 | ||||||||||||||
Acquisition and development: | |||||||||||||||||
Commercial and land development | 15,426 | — | 15,426 | ||||||||||||||
Commercial and industrial | 31 | — | 31 | ||||||||||||||
Residential mortgage: | |||||||||||||||||
First lien | 1,838 | 682 | 2,520 | ||||||||||||||
Home equity - term | 5 | — | 5 | ||||||||||||||
Home equity - lines of credit | 395 | — | 395 | ||||||||||||||
Installment and other loans | 40 | — | 40 | ||||||||||||||
$ | 20,583 | $ | 682 | $ | 21,265 |
# of Relationships | Individually Evaluated Loans | Partial Charge-offs to Date | Specific Reserves | ||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||
Relationships greater than $1,000,000 | 2 | $ | 17,442 | $ | — | $ | — | ||||||||||||||||
Relationships greater than $500,000 but less than $1,000,000 | — | — | — | — | |||||||||||||||||||
Relationships greater than $250,000 but less than $500,000 | 1 | 276 | — | — | |||||||||||||||||||
Relationships less than $250,000 | 71 | 3,705 | 545 | 28 | |||||||||||||||||||
74 | $ | 21,423 | $ | 545 | $ | 28 | |||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||
Relationships greater than $1,000,000 | 2 | $ | 17,774 | $ | — | $ | — | ||||||||||||||||
Relationships greater than $500,000 but less than $1,000,000 | — | — | — | — | |||||||||||||||||||
Relationships greater than $250,000 but less than $500,000 | 1 | 260 | — | — | |||||||||||||||||||
Relationships less than $250,000 | 60 | 3,231 | 320 | 28 | |||||||||||||||||||
63 | $ | 21,265 | $ | 320 | $ | 28 |
Term Loans Amortized Cost Basis by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2023 | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans Amortized Basis | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Owner-occupied: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | 25,068 | $ | 107,533 | $ | 69,946 | $ | 29,509 | $ | 22,314 | $ | 74,607 | $ | 2,420 | $ | — | $ | 331,397 | |||||||||||||||||||||||||||||||||||
Special mention | — | — | — | — | — | 2,560 | — | — | 2,560 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | — | — | — | — | — | 2,257 | 468 | — | 2,725 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | — | — | — | — | — | 2,635 | 54 | — | 2,689 | ||||||||||||||||||||||||||||||||||||||||||||
Total owner-occupied loans | $ | 25,068 | $ | 107,533 | $ | 69,946 | $ | 29,509 | $ | 22,314 | $ | 82,059 | $ | 2,942 | $ | — | $ | 339,371 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - owner-occupied | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Term Loans Amortized Cost Basis by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2023 | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans Amortized Basis | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||
Non-owner occupied: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | 13,063 | $ | 94,461 | $ | 194,367 | $ | 85,305 | $ | 66,223 | $ | 143,337 | $ | 631 | $ | 877 | $ | 598,264 | |||||||||||||||||||||||||||||||||||
Special mention | — | — | — | — | — | 2,206 | 400 | — | 2,606 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | — | — | — | 2,170 | — | 80 | — | — | 2,250 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | — | — | — | — | — | 276 | — | — | 276 | ||||||||||||||||||||||||||||||||||||||||||||
Total non-owner occupied loans | $ | 13,063 | $ | 94,461 | $ | 194,367 | $ | 87,475 | $ | 66,223 | $ | 145,899 | $ | 1,031 | $ | 877 | $ | 603,396 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - non-owner occupied | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Multi-family: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | — | $ | 54,897 | $ | 9,008 | $ | 12,888 | $ | 7,971 | $ | 51,500 | $ | 129 | $ | — | $ | 136,393 | |||||||||||||||||||||||||||||||||||
Special mention | — | — | — | — | — | 7,660 | — | — | 7,660 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Total multi-family loans | $ | — | $ | 54,897 | $ | 9,008 | $ | 12,888 | $ | 7,971 | $ | 59,160 | $ | 129 | $ | — | $ | 144,053 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - multi-family | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Non-owner occupied residential: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | 3,207 | $ | 27,191 | $ | 19,814 | $ | 10,893 | $ | 7,067 | $ | 35,158 | $ | 1,572 | $ | — | $ | 104,902 | |||||||||||||||||||||||||||||||||||
Special mention | — | — | — | — | — | 841 | — | — | 841 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | — | — | — | — | — | 405 | — | — | 405 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | — | — | — | — | — | 242 | — | — | 242 | ||||||||||||||||||||||||||||||||||||||||||||
Total non-owner occupied residential loans | $ | 3,207 | $ | 27,191 | $ | 19,814 | $ | 10,893 | $ | 7,067 | $ | 36,646 | $ | 1,572 | $ | — | $ | 106,390 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - non-owner occupied residential | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Acquisition and development: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
1-4 family residential construction: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | 1,552 | $ | 18,437 | $ | 952 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 20,941 | |||||||||||||||||||||||||||||||||||
Special mention | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Total 1-4 family residential construction loans | $ | 1,552 | $ | 18,437 | $ | 952 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 20,941 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - 1-4 family residential construction | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Commercial and land development: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | 8,025 | $ | 50,417 | $ | 81,878 | $ | 12,018 | $ | 122 | $ | 3,043 | $ | 525 | $ | 2,925 | $ | 158,953 | |||||||||||||||||||||||||||||||||||
Special mention | — | — | — | — | — | 452 | — | — | 452 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | — | — | — | 15,151 | — | — | — | — | 15,151 | ||||||||||||||||||||||||||||||||||||||||||||
Total commercial and land development loans | $ | 8,025 | $ | 50,417 | $ | 81,878 | $ | 27,169 | $ | 122 | $ | 3,495 | $ | 525 | $ | 2,925 | $ | 174,556 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - commercial and land development | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Term Loans Amortized Cost Basis by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2023 | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans Amortized Basis | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||
Commercial and Industrial: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | 20,837 | $ | 84,057 | $ | 94,073 | $ | 25,903 | $ | 12,835 | $ | 24,290 | $ | 89,790 | $ | 3,839 | $ | 355,624 | |||||||||||||||||||||||||||||||||||
Special mention | — | 306 | 374 | 6,615 | 1,534 | 913 | 8,349 | — | 18,091 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - Non-IEL | 114 | 176 | 1,196 | 87 | 373 | 1,068 | 3,911 | — | 6,925 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard - IEL | — | — | — | 10 | — | 33 | — | — | 43 | ||||||||||||||||||||||||||||||||||||||||||||
Total commercial and industrial loans | $ | 20,951 | $ | 84,539 | $ | 95,643 | $ | 32,615 | $ | 14,742 | $ | 26,304 | $ | 102,050 | $ | 3,839 | $ | 380,683 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - commercial and industrial | $ | — | $ | — | $ | — | $ | 84 | $ | — | $ | 2 | $ | — | $ | — | $ | 86 | |||||||||||||||||||||||||||||||||||
Municipal: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | — | $ | 18 | $ | 3,643 | $ | 59 | $ | — | $ | 7,609 | $ | — | $ | — | $ | 11,329 | |||||||||||||||||||||||||||||||||||
Total municipal loans | $ | — | $ | 18 | $ | 3,643 | $ | 59 | $ | — | $ | 7,609 | $ | — | $ | — | $ | 11,329 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - municipal | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
First lien: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Payment performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Performing | $ | 4,153 | $ | 60,524 | $ | 35,265 | $ | 8,632 | $ | 7,955 | $ | 107,521 | $ | — | $ | 650 | $ | 224,700 | |||||||||||||||||||||||||||||||||||
Nonperforming | — | — | — | — | 126 | 2,205 | — | — | 2,331 | ||||||||||||||||||||||||||||||||||||||||||||
Total first lien loans | $ | 4,153 | $ | 60,524 | $ | 35,265 | $ | 8,632 | $ | 8,081 | $ | 109,726 | $ | — | $ | 650 | $ | 227,031 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - first lien | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Home equity - term: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Payment performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Performing | $ | 159 | $ | 806 | $ | 151 | $ | 502 | $ | 131 | $ | 3,618 | $ | — | $ | — | $ | 5,367 | |||||||||||||||||||||||||||||||||||
Nonperforming | — | — | — | — | — | 4 | — | — | 4 | ||||||||||||||||||||||||||||||||||||||||||||
Total home equity - term loans | $ | 159 | $ | 806 | $ | 151 | $ | 502 | $ | 131 | $ | 3,622 | $ | — | $ | — | $ | 5,371 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - home equity - term | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Home equity - lines of credit: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Payment performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Performing | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 112,345 | $ | 70,333 | $ | 182,678 | |||||||||||||||||||||||||||||||||||
Nonperforming | — | — | — | — | — | — | 643 | 19 | 662 | ||||||||||||||||||||||||||||||||||||||||||||
Total residential real estate - home equity - lines of credit loans | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 112,988 | $ | 70,352 | $ | 183,340 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - home equity - lines of credit | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Installment and other loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Payment performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Performing | $ | 197 | $ | 561 | $ | 448 | $ | 192 | $ | 1,266 | $ | 2,433 | $ | 5,919 | $ | — | $ | 11,016 | |||||||||||||||||||||||||||||||||||
Nonperforming | — | — | — | — | 22 | 2 | — | — | 24 | ||||||||||||||||||||||||||||||||||||||||||||
Total Installment and other loans | $ | 197 | $ | 561 | $ | 448 | $ | 192 | $ | 1,288 | $ | 2,435 | $ | 5,919 | $ | — | $ | 11,040 | |||||||||||||||||||||||||||||||||||
Current period gross charge offs - installment and other | $ | 31 | $ | 24 | $ | — | $ | — | $ | 1 | $ | — | $ | — | $ | — | $ | 56 |
Pass | Special Mention | Non-Impaired Substandard | Impaired - Substandard | Doubtful | PCI Loans | Total | |||||||||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
Owner occupied | $ | 305,159 | $ | 2,109 | $ | 3,532 | $ | 2,767 | $ | — | $ | 2,203 | $ | 315,770 | |||||||||||||||||||||||||||
Non-owner occupied | 601,244 | 4,243 | 2,273 | — | — | 283 | 608,043 | ||||||||||||||||||||||||||||||||||
Multi-family | 130,851 | 7,739 | 242 | — | — | — | 138,832 | ||||||||||||||||||||||||||||||||||
Non-owner occupied residential | 102,674 | 810 | 482 | 81 | — | 557 | 104,604 | ||||||||||||||||||||||||||||||||||
Acquisition and development: | |||||||||||||||||||||||||||||||||||||||||
1-4 family residential construction | 25,068 | — | — | — | — | — | 25,068 | ||||||||||||||||||||||||||||||||||
Commercial and land development | 142,424 | 458 | — | 15,426 | — | — | 158,308 | ||||||||||||||||||||||||||||||||||
Commercial and industrial | 331,103 | 17,579 | 7,013 | 31 | — | 2,048 | 357,774 | ||||||||||||||||||||||||||||||||||
Municipal | 12,173 | — | — | — | — | — | 12,173 | ||||||||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||||||||||||||
First lien | 222,849 | — | 215 | 2,520 | — | 4,265 | 229,849 | ||||||||||||||||||||||||||||||||||
Home equity - term | 5,485 | — | — | 5 | — | 15 | 5,505 | ||||||||||||||||||||||||||||||||||
Home equity - lines of credit | 182,801 | — | 45 | 395 | — | — | 183,241 | ||||||||||||||||||||||||||||||||||
Installment and other loans | 12,017 | — | — | 40 | — | 8 | 12,065 | ||||||||||||||||||||||||||||||||||
$ | 2,073,848 | $ | 32,938 | $ | 13,802 | $ | 21,265 | $ | — | $ | 9,379 | $ | 2,151,232 |
Commercial | Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate | Acquisition and Development | Commercial and Industrial | Municipal | Total | Residential Mortgage | Installment and Other | Total | Unallocated | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, beginning of period prior to adopting CECL | $ | 13,558 | $ | 3,214 | $ | 4,505 | $ | 24 | $ | 21,301 | $ | 3,444 | $ | 188 | $ | 3,632 | $ | 245 | $ | 25,178 | |||||||||||||||||||||||||||||||||||||||
Impact of adopting CECL | 2,857 | (214) | 928 | 169 | 3,740 | (1,121) | 49 | (1,072) | (245) | 2,423 | |||||||||||||||||||||||||||||||||||||||||||||||||
Provision for credit losses | 262 | 215 | 412 | (16) | 873 | (140) | (4) | (144) | — | 729 | |||||||||||||||||||||||||||||||||||||||||||||||||
Charge-offs | — | — | (86) | — | (86) | — | (56) | (56) | — | (142) | |||||||||||||||||||||||||||||||||||||||||||||||||
Recoveries | 20 | 2 | 28 | — | 50 | 95 | 31 | 126 | — | 176 | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance, end of period | $ | 16,697 | $ | 3,217 | $ | 5,787 | $ | 177 | $ | 25,878 | $ | 2,278 | $ | 208 | $ | 2,486 | $ | — | $ | 28,364 | |||||||||||||||||||||||||||||||||||||||
March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 12,037 | $ | 2,062 | $ | 3,814 | $ | 30 | $ | 17,943 | $ | 2,785 | $ | 215 | $ | 3,000 | $ | 237 | $ | 21,180 | |||||||||||||||||||||||||||||||||||||||
Provision for loan losses | (523) | 258 | 500 | (1) | 234 | 72 | (6) | 66 | — | 300 | |||||||||||||||||||||||||||||||||||||||||||||||||
Charge-offs | — | — | (61) | — | (61) | (10) | (13) | (23) | — | (84) | |||||||||||||||||||||||||||||||||||||||||||||||||
Recoveries | 32 | 1 | 48 | — | 81 | 26 | 5 | 31 | — | 112 | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance, end of period | $ | 11,546 | $ | 2,321 | $ | 4,301 | $ | 29 | $ | 18,197 | $ | 2,873 | $ | 201 | $ | 3,074 | $ | 237 | $ | 21,508 |
Commercial | Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate | Acquisition and Development | Commercial and Industrial | Municipal | Total | Residential Mortgage | Installment and Other | Total | Unallocated | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans allocated by: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 2,848 | $ | 15,426 | $ | 31 | $ | — | $ | 18,305 | $ | 2,920 | $ | 40 | $ | 2,960 | $ | — | $ | 21,265 | |||||||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 1,164,401 | 167,950 | 357,743 | 12,173 | 1,702,267 | 415,675 | 12,025 | 427,700 | — | 2,129,967 | |||||||||||||||||||||||||||||||||||||||||||||||||
$ | 1,167,249 | $ | 183,376 | $ | 357,774 | $ | 12,173 | $ | 1,720,572 | $ | 418,595 | $ | 12,065 | $ | 430,660 | $ | — | $ | 2,151,232 | ||||||||||||||||||||||||||||||||||||||||
ALL allocated by: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 28 | $ | — | $ | 28 | $ | — | $ | 28 | |||||||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 13,558 | 3,214 | 4,505 | 24 | 21,301 | 3,416 | 188 | 3,604 | 245 | 25,150 | |||||||||||||||||||||||||||||||||||||||||||||||||
$ | 13,558 | $ | 3,214 | $ | 4,505 | $ | 24 | $ | 21,301 | $ | 3,444 | $ | 188 | $ | 3,632 | $ | 245 | $ | 25,178 |
(dollars and shares in thousands) | March 31, 2023 | December 31, 2022 | ||||||||||||
Tangible Book Value per Common Share | ||||||||||||||
Shareholders' equity (most directly comparable GAAP-based measure) | $ | 240,161 | $ | 228,896 | ||||||||||
Less: Goodwill | 18,724 | 18,724 | ||||||||||||
Other intangible assets | 2,828 | 3,078 | ||||||||||||
Related tax effect | (594) | (646) | ||||||||||||
Tangible common equity (non-GAAP) | $ | 219,203 | $ | 207,740 | ||||||||||
Common shares outstanding | 10,692 | 10,671 | ||||||||||||
Book value per share (most directly comparable GAAP based measure) | $ | 22.46 | $ | 21.45 | ||||||||||
Intangible assets per share | 1.96 | 1.98 | ||||||||||||
Tangible book value per share (non-GAAP) | $ | 20.50 | $ | 19.47 |
Net Interest Income | Economic Value | |||||||||||||||||||||||||||||||
% Change in Net Interest Income | % Change in Market Value | |||||||||||||||||||||||||||||||
Change in Market Interest Rates (basis points) | March 31, 2023 | December 31, 2022 | Change in Market Interest Rates (basis points) | March 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
(200) | (0.7) | % | 4.7 | % | (200) | (36.0) | % | (27.7) | % | |||||||||||||||||||||||
(100) | 0.7 | % | 4.8 | % | (100) | (13.0) | % | (9.3) | % | |||||||||||||||||||||||
100 | 0.5 | % | (2.6) | % | 100 | 8.0 | % | 3.8 | % | |||||||||||||||||||||||
200 | 0.1 | % | (6.1) | % | 200 | 11.0 | % | 4.0 | % | |||||||||||||||||||||||
(a) | (b) | (c) | (d) | ||||||||||||||||||||
Period | Total number of shares (or units) purchased | Average price paid per share (or unit) | Total number of shares (or units) purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs | |||||||||||||||||||
January 1, 2023 to January 31, 2023 | 9,036 | $ | 23.02 | 9,036 | 150,023 | ||||||||||||||||||
February 1, 2023 to February 28, 2023 | 2,305 | 22.90 | 2,305 | 147,718 | |||||||||||||||||||
March 1, 2023 to March 31, 2023 | 42,921 | 21.30 | 42,921 | 104,797 | |||||||||||||||||||
Total | 54,262 | $ | 21.65 | 54,262 |
3.1 | ||||||||
3.2 | ||||||||
4.1 | ||||||||
31.1 | ||||||||
31.2 | ||||||||
32.1 | ||||||||
32.2 | ||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase | |||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |||||||
101.INS | XBRL Instance Document | |||||||
101.SCH | XBRL Taxonomy Extension Schema | |||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |||||||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
/s/ Thomas R. Quinn, Jr. | |||||
Thomas R. Quinn, Jr. | |||||
President and Chief Executive Officer | |||||
(Principal Executive Officer) | |||||
/s/ Neelesh Kalani | |||||
Neelesh Kalani | |||||
Executive Vice President and Chief Financial Officer | |||||
(Principal Financial Officer) | |||||
Date: May 9, 2023 |
Date: May 9, 2023 | By: | /s/ Thomas R. Quinn, Jr. | |||||||||
Thomas R. Quinn, Jr. | |||||||||||
President and Chief Executive Officer | |||||||||||
(Principal Executive Officer) |
Date: May 9, 2023 | By: | /s/ Neelesh Kalani | |||||||||
Neelesh Kalani | |||||||||||
Executive Vice President and Chief Financial Officer | |||||||||||
(Principal Financial Officer) |
Date: May 9, 2023 | By: | /s/ Thomas R. Quinn, Jr. | ||||||
Thomas R. Quinn, Jr. | ||||||||
President and Chief Executive Officer | ||||||||
(Principal Executive Officer) |
Date: May 9, 2023 | By: | /s/ Neelesh Kalani | ||||||
Neelesh Kalani | ||||||||
Executive Vice President and Chief Financial Officer | ||||||||
(Principal Financial Officer) |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Amortized Cost | $ 561,008 | $ 563,278 |
Preferred stock, par value (usd per share) | $ 1.25 | $ 1.25 |
Preferred stock, shares authorized (in shares) | 500,000 | 500,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, stated value (usd per share) | $ 0.05205 | $ 0.05205 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 11,222,732 | 11,229,242 |
Common stock, shares outstanding (in shares) | 10,691,907 | 10,671,413 |
Treasury stock - (in shares) | 530,825 | 557,829 |
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) - USD ($) $ in Thousands |
Total |
Cumulative Effect, Period of Adoption, Adjustment |
Common Stock |
Additional Paid-In Capital |
Retained Earnings |
Retained Earnings
Cumulative Effect, Period of Adoption, Adjustment
|
Accumulated Other Comprehensive (Loss) Income |
Treasury Stock |
---|---|---|---|---|---|---|---|---|
Beginning balance at Dec. 31, 2021 | $ 271,656 | $ 586 | $ 189,689 | $ 78,700 | $ 4,449 | $ (1,768) | ||
Increase (Decrease) in Shareholders' Equity | ||||||||
Net income | 8,368 | 8,368 | ||||||
Total other comprehensive income (loss) net of taxes | (19,123) | (19,123) | ||||||
Cash dividends | (2,125) | (2,125) | ||||||
Shares-based compensation plans: | ||||||||
Shares issued, shares acquired including compensation expense | (3,972) | (1) | (1,656) | (2,315) | ||||
Ending balance at Mar. 31, 2022 | 254,804 | 585 | 188,033 | 84,943 | (14,674) | (4,083) | ||
Beginning balance at Dec. 31, 2022 | 228,896 | $ (1,984) | 584 | 189,264 | 92,473 | $ (1,984) | (39,913) | (13,512) |
Increase (Decrease) in Shareholders' Equity | ||||||||
Net income | 9,156 | 9,156 | ||||||
Total other comprehensive income (loss) net of taxes | 7,088 | 7,088 | ||||||
Cash dividends | (2,126) | (2,126) | ||||||
Shares-based compensation plans: | ||||||||
Shares issued, shares acquired including compensation expense | (869) | 0 | (1,692) | 823 | ||||
Ending balance at Mar. 31, 2023 | $ 240,161 | $ 584 | $ 187,572 | $ 97,519 | $ (32,825) | $ (12,689) |
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Statement of Stockholders' Equity [Abstract] | ||
Dividends per share (in usd per share) | $ 0.20 | $ 0.19 |
Common shares acquired (in shares) | 6,510 | 10,622 |
Treasury stock, shares acquired (in shares) | 27,004 | 93,438 |
Compensation expense, issuance of stock | $ 619 | $ 338 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES See the Glossary of Defined Terms at the beginning of this Report for terms used throughout the unaudited condensed consolidated financial statements and related notes of this Form 10-Q. Nature of Operations – Orrstown Financial Services, Inc. is a financial holding company that operates Orrstown Bank, a commercial bank providing banking and financial advisory services in Berks, Cumberland, Dauphin, Franklin, Lancaster, Perry and York Counties, Pennsylvania, and in Anne Arundel, Baltimore, Howard and Washington Counties, Maryland. The Company operates in the community banking segment and engages in lending activities, including commercial, residential, commercial mortgages, construction, municipal, and various forms of consumer lending, and deposit services, including checking, savings, time, and money market deposits. The Company’s lending area also includes adjacent counties in Pennsylvania and Maryland, as well as Loudon County, Virginia and Berkeley, Jefferson and Morgan Counties, West Virginia. The Company also provides fiduciary services, investment advisory, insurance and brokerage services. The Company and the Bank are subject to regulation by certain federal and state agencies and undergo periodic examinations by such regulatory authorities. Basis of Presentation – The accompanying unaudited condensed consolidated financial statements include the accounts of Orrstown Financial Services, Inc. and its wholly owned subsidiary, the Bank. The Company has prepared these unaudited condensed consolidated financial statements in accordance with GAAP for interim financial information, SEC rules that permit reduced disclosure for interim periods, and Article 10 of Regulation S-X. In the opinion of management, all adjustments (all of which are of a normal recurring nature) that are necessary for a fair statement are reflected in the unaudited condensed consolidated financial statements. There have been no material changes to the Company's significant accounting policies for the three months ended March 31, 2023, except for the adoption of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces our ALL policy under the incurred loss model, and adoption of ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which replaces our TDR accounting model policy, which are both discussed below in Recently Adopted Accounting Standards. The December 31, 2022 consolidated balance sheet information contained in this Quarterly Report on Form 10-Q was derived from the Company's 2022 audited consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. All significant intercompany transactions and accounts have been eliminated. Certain reclassifications have been made to the prior period amounts to conform with current period classifications. These reclassifications did not have a material impact on the Company's consolidated financial condition, results of operations or statement of consolidated cash flows. The Company's management has evaluated all activity of the Company and concluded that subsequent events are properly reflected in the Company's unaudited condensed consolidated financial statements and notes as required by GAAP. To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. Derivatives - FASB ASC 815, Derivatives and Hedging (“ASC 815”), provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. As required by ASC 815, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company's objectives in using interest rate derivatives are to add stability to interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of fixed amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount. Changes to the fair value of derivatives designated and that qualify as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged transaction affects earnings. The Company discontinues cash flow hedge accounting if it is probable the forecasted hedged transactions will not occur in the initially identified time period due to circumstances, such as the impact of the COVID-19 pandemic. Upon discontinuance, the associated gains and losses deferred in AOCI are reclassified immediately into earnings and subsequent changes in the fair value of the cash flow hedge are recognized in earnings. At March 31, 2023 and December 31, 2022, the Company had two interest rate derivatives designated as hedging instruments with a total notional value of $100.0 million. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps and interest rate caps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps and interest rate caps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. At March 31, 2023 and December 31, 2022, the Company had interest rate swaps not designated as hedges with a total notional value of $269.9 million and $268.8 million, respectively. The Company also may enter into risk participation agreements with a financial institution counterparty for an interest rate derivative contract related to a loan in which the Company may be a participant or the agent bank. The risk participation agreement provides credit protection to the agent bank should the borrower fail to perform on its interest rate derivative contracts with the agent bank. The Company manages its credit risk on risk participation agreements by monitoring the creditworthiness of the borrower, which follows the same credit review process as derivative instruments entered into directly with the borrower. The notional amount of a risk participation agreement reflects the Company's pro-rata share of the derivative instrument, consistent with its share of the related participated loan. Changes in the fair value of the risk participation agreement are recognized directly into earnings. At March 31, 2023 and December 31, 2022, the Company had a risk participation with sold protection with a notional value of $29.2 million and $29.0 million, respectively, and a risk participation with purchased protection with a notional value of $4.9 million at both March 31, 2023 and December 31, 2022. As a part of its normal residential mortgage operations, the Company will enter into an interest rate lock commitment with a potential borrower. The Company may enter into a corresponding commitment with an investor to sell that loan at a specific price shortly after origination. In accordance with FASB ASC 820, adjustments are recorded through earnings to account for the net change in fair value of these held for sale loans. The fair value of held for sale loans can vary based on the interest rate locked with the customer and the current market interest rate at the balance sheet date. At March 31, 2023 and December 31, 2022, the Company had interest rate lock commitments with a notional value of $2.0 million and $1.4 million, respectively, and forward sale loan commitments with a notional value of $1.1 million and $3.5 million, respectively. Leases - The Company evaluates its contracts at inception to determine if an arrangement either is a lease or contains one. Operating lease ROU assets are included in other assets and operating lease liabilities in accrued interest payable and other liabilities in the unaudited condensed consolidated balance sheets. The Company had no finance leases at March 31, 2023 and December 31, 2022. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company's leases do not provide an implicit rate, so the Company's incremental borrowing rate is used, which approximates its fully collateralized borrowing rate, based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is reevaluated upon lease modification. The operating lease ROU asset also includes any initial direct costs and prepaid lease payments made less any lease incentives. In calculating the present value of lease payments, the Company may include options to extend the lease when it is reasonably certain that it will exercise that option. In accordance with ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), the Company keeps leases with an initial term of 12 months or less off of the balance sheet. The Company recognizes these lease payments in the unaudited condensed consolidated statements of income on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components and has elected the practical expedient to account for them as a single lease component. The Company's operating leases relate primarily to bank branches and office space. The difference between the lease asset and lease liabilities primarily consists of deferred rent liabilities reclassified upon adoption to reduce the measurement of the lease assets. The standard does not materially impact the Company's unaudited condensed consolidated statements of income. Recently Adopted Accounting Standards Allowance for Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). On January 1, 2023, the Company adopted ASU 2016-13, the current expected credit losses accounting standard commonly referred to as "CECL," which replaces the incurred loss model with the lifetime expected loss model. The CECL methodology requires an organization to measure all expected credit losses over the contractual term for financial assets measured at amortized cost, including loan receivables and held-to-maturity securities, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The CECL methodology also applies to off-balance sheet credit exposures not accounted for as insurance (e.g., loan commitments, standby letters of credit, financial guarantees and other similar instruments), net investments in leases recognized by a lessor in accordance with ASC Topic 842 on leases and AFS debt securities. To implement the new standard, the Company established a cross-discipline governance structure, which included a dedicated working group and a CECL Committee consisting of members from different functions including Finance, Credit, Risk and Lending, who provided implementation oversight and reviewed policy elections, key assumptions, processes, and model results. The working group was responsible for the implementation process that included developing the loan segmentation, data sourcing and validation, loss driver inputs, qualitative factors, parallel model runs, scenario testing and back testing. The Company utilized a third-party vendor to assist in the implementation process of its new model to calculate credit losses over the estimated life of the applicable financial assets. The Company elected to use the discounted cash flow (“DCF”) methodology for the quantitative analysis for the majority of its loan segments, which applies the probability of default and loss given default factors to future cash flows, and then adjusts to the net present value to derive the required reserve. Reasonable and supportable macroeconomic conditions include unemployment and GDP. Model assumptions include the discount rate, prepayments and curtailments. The development and validation of credit models also included determining the length of the reasonable and supportable forecast and regression period and utilizing national peer group historical loss rates. For the consumer loan segments, the remaining life methodology was selected as a practical expedient and based on the risk characteristics. The implementation also included review of model runs and certain assumptions, documentation of policies, procedures and controls, and engagement of another third-party consultant for model validation. The Company adopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. The adoption of the new CECL standard resulted in a cumulative-effect adjustment that increased the ACL for loans by $2.4 million and increased the off-balance sheet credit exposures reserve by $100 thousand. Retained earnings, net of deferred taxes, decreased by $2.0 million, and deferred tax assets increased by $559 thousand. Results for reporting periods beginning after January 1, 2023 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with the incurred loss model under the previously applicable GAAP. The following table illustrates the impact of the adoption of CECL, and the transition away from the incurred loss method, on January 1, 2023. The impact to the ACL is presented at the loan segment level:
Allowance for Credit Losses on Loans The allowance for credit losses represents the amount that, in management's judgment, appropriately reflects credit losses inherent in the loan portfolio at the balance sheet date. Loans deemed to be uncollectible are charged against the ACL on loans, and subsequent recoveries, if any, are credited to the ACL on loans when received. Changes to the ACL are recorded through the provision for credit losses on loans in the consolidated statement of income. The ACL is maintained at a level considered appropriate to absorb credit losses over the expected life of the loan. The ACL for expected credit losses is determined based on a quantitative assessment of two categories of loans: collectively evaluated loans and individually evaluated loans. In addition, the ACL also includes a qualitative component which adjusts the CECL model results for risk factors that are not considered within the CECL model, but are relevant in assessing the expected credit losses within the loan classes. The ACL on loans is measured on a collective basis when similar risk characteristics exist within the Company's loan segments between commercial and consumer. For purposes of estimating the Company’s ACL, management generally evaluates collectively evaluated loans by federal call code in order to group loans with similar risk characteristics. Each of these loan segments are broken down into multiple loan classes, which are characterized by loan type, collateral type, risk attributions and the manner in which management monitors the performance of the borrower. The risks associated with lending activities differ and are subject to the impact of change in interest rates, market conditions and the impact on the collateral securing the loans, and general economic conditions. The commercial loan segment includes commercial real estate, acquisition and development, commercial and industrial and municipal loan classes. The consumer loan segment includes residential mortgage, installment and other consumer loans. Loans collectively evaluated includes loans on accrual status, except for loans previously restructured that do not share similar risk characteristics, which the ACL is measured using a lifetime expected loss rate model that considers historical loss performance and past events in addition to forecasts of future economic conditions. The Company elected to use the DCF methodology for the quantitative analysis for the majority of its loan segments, which applies the probability of default, using a loss driver model and loss given default factors to future cash flows, and then adjusts to the net present value to derive the required reserve. The probability of default estimates are derived through the application of reasonable and supportable economic forecasts to the regression models, which incorporates the Company's and peer loss-rate data, unemployment rate and GDP. The reasonable and supportable forecasts of the selected economic metrics are then input into the regression model to calculate an expected default rate. The expected default rates are then applied to expected loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The prepayment and curtailment assumptions adjust the contractual terms of the loan to arrive at the expected cash flows. The development and validation of credit models also included determining the length of the reasonable and supportable forecast and regression period and utilizing national peer group historical loss rates. Management selected the national unemployment rate and GDP as the drivers of the quantitative portion of collectively evaluated reserves on loan classes reliant upon the DCF methodology, primarily as a result of high correlation coefficients identified in regression modeling. For the consumer loan segment, the quantitative reserve was calculated using the remaining life methodology where the average historical bank-specific and peer loss rates are applied to expected loan balances over an estimated remaining life of loans. The estimated remaining life is calculated using historical bank-specific loan attrition data. Loans that do not share similar risk characteristics are evaluated on an individual basis, and are excluded from the collective evaluation for the ACL. Loans identified to be individually evaluated under CECL include loans on nonaccrual status and may include accruing loans that do not share similar risk characteristics to other accruing loans collectively evaluated. A specific reserve analysis is applied to the individually evaluated loans, which considers collateral value, an observable market price or the present value of expected future cash flows. A specific reserve may be assigned if the measured value of the loan using one of the before mentioned methods is less than the current carrying value of the loans. A loan is considered collateral-dependent when the Company determines foreclosure is probable or the borrower is experiencing financial difficulty and the Company expects repayment to be provided substantially through the operation or sale of the collateral. Collateral could be in the form of real estate, equipment or business assets. An ACL may result for a collateral-dependent loan if the fair value of the underlying collateral, as of the reporting date, adjusted for expected costs to repair or sell, was less than the amortized cost basis of the loan. If repayment of the loan is instead dependent only on the operation, rather than the sale of the collateral, the measure of the ACL does not incorporate estimated costs to sell. For loans analyzed on the basis of projected future principal and interest cash flows, the Company will discount the expected cash flows at the effective interest rate of the loan, and an ACL would result if the present value of expected cash flows was less than the amortized cost basis of the loan. Based on management's analysis, adjustments may be applied for additional factors impacting the risk of loss in the loan portfolio beyond the quantitatively calculated reserve on collectively evaluated loans. As the quantitative reserve calculation incorporates historical conditions, management may consider an additional or reduced reserve is warranted through qualitative risk factors based on current and expected conditions. These qualitative risk factors considered by management are comparable to legacy factors prior to the adoption of CECL and include significant or unexpected changes in: •Lending policies, procedures, underwriting standards and recovery practices; •Nature and volume of loans; •Concentrations of credit; •Collateral valuation trends; •Delinquency trends; •Experience, ability and depth of management and lending staff; •Quality of loan review system; and •Economic conditions and other external factors. For PCD loans, the nonaccrual status is determined in the same manner as for other loans. Prior to the adoption of CECL, these PCD loans were classified as PCI loans and accounted for under ASC Subtopic 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30"). In accordance with the CECL standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the adoption date. As permitted by CECL, the Company elected to account for its PCD loans under ASC 310-20, Receivables - Nonrefundable Fees and Other Assets ("ASC 310-20"). These loans are initially recorded at fair value, and include credit and interest rate marks associated with acquisition accounting adjustments. Purchase premiums or discounts are subsequently amortized as an adjustment to yield over the estimated contractual lives of the loans. Under ASC 310-20, the acquired loans are analyzed on an individual asset level, and no longer maintained in pools and accounted for as units of accounts, which would permit treating each pool as a single asset. The impact of this election resulted in loans reported as nonaccrual and individually evaluated for credit expected losses under the CECL methodology. For off-balance sheet credit exposures, the Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk from the contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on off-balance sheet credit exposures includes consideration of the utilization rates expected on the loan commitments, and estimates the expected credit losses for the undrawn commitments by the loan segments. The ACL on off-balance sheet credit exposures is recorded in other liabilities on the consolidated balance sheets and is adjusted through the provision for credit losses in the consolidated statements of income. In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 eliminates the TDR accounting model, and requires that the Company evaluate, based on the accounting for loan modifications, whether the borrower is experiencing financial difficulty and the modification results in a more-than-insignificant direct change in the contractual cash flows and represents a new loan or a continuation of an existing loan, which the Company refers to these loans as "financial difficulty modifications" or "FDMs." This change required all loan modifications to be accounted for under the general loan modification guidance in ASC 310-20, Receivables – Nonrefundable Fees and Other Costs, and subject entities to new disclosure requirements on loan modifications to borrowers experiencing financial difficulty. Upon adoption of CECL, the TDRs were evaluated and included in the CECL loan segment pools if the loans shared similar risk characteristics to other loans in the pool or remained with loans individually evaluated for which the ACL was measured using the collateral-dependent or discounted cash flow method. On January 1, 2023, the Company adopted ASU 2022-02 on a modified retrospective basis, which did not have a material impact on the consolidated financial statements. A comprehensive analysis of the ACL is performed by the Company on a quarterly basis. Management evaluates the adequacy of the ACL utilizing a defined methodology to determine if it properly addresses the current and expected risks in the loan portfolio, which considers the performance of borrowers and specific evaluation of individually evaluated loans including historical loss experiences, trends in delinquencies, nonperforming loans and other risk assets, and the qualitative factors. Risk factors are continuously reviewed and adjusted, as needed, by management when conditions support a change. Management believes its approach properly addresses relevant accounting and bank regulatory guidance for loans both collectively and individually evaluated. The results of the comprehensive analysis, including recommended changes, are governed by the Company's Reserve Adequacy Committee, whose members were also a part of the Company's CECL Committee. See Note 3, Loans and Allowance for Credit Losses, to the unaudited condensed consolidated financial statements under Part I, Item 1, "Financial Information," for a description of the Company’s loan classes and differing levels of associated credit risk. Allowance for Credit Losses on AFS Securities Prior to implementation of CECL, unrealized losses on AFS debt securities caused by a credit event would require the direct write-down of the AFS security through the other-than-temporary impairment approach; however, the new standard requires credit losses to be presented as an ACL. The Company is still required to conduct an impairment evaluation on AFS securities to determine whether the Company has the intent to sell the security or it is more likely than not that it will be required to sell the security before recovery. If these situations apply, the guidance continues to require the Company to reduce the security's amortized cost basis down to its fair value through earnings. The Company also evaluates the unrealized losses on AFS securities to determine if a security's decline in fair value below its amortized cost basis is due to credit factors. The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying collateral, if applicable, and the level of credit support in the security structure. Management also evaluates other factors and circumstances that may be indicative of a decline in the fair value of the security due to a credit factor. This includes, but is not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost and near-term prospects of the issuer. If this assessment indicates that a credit loss exists, the present value of the expected cash flows of the security is compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost, an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis under the CECL standard, and declines due to non-credit factors are recorded in AOCI, net of taxes. If a credit loss is recognized in earnings, subsequent improvements to the expectation of collectability will be recognized through the ACL. If the fair value of the security increases above its amortized cost, the unrealized gain will be recorded in AOCI, net of taxes, on the unaudited condensed consolidated statements of financial condition. Accrued interest receivable on AFS securities is excluded from the estimate of credit losses. The Company did not record a cumulative-effect adjustment related to its AFS securities upon adoption of CECL on January 1, 2023. See Note 2, Investment Securities, to the unaudited condensed consolidated financial statements under Part I, Item 1, "Financial Information," for a description of the Company’s investment securities and impairment evaluation. Recent Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 contains optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The optional expedients apply consistently to all contracts or transactions within the scope of this topic, while the optional expedients for hedging relationships can be elected on an individual basis. The Company has a cross-functional working group that is leading the transition from LIBOR to a planned adoption of an alternate index. The Company currently plans to replace LIBOR with the 30-Day Average SOFR or Term SOFR in its loan agreements. The Company implemented fallback language for loans with maturities after 2021. The Company expects to adopt the LIBOR transition relief allowed under this standard, and does not expect a significant impact on its financial statements.
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INVESTMENT SECURITIES |
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INVESTMENT SECURITIES | INVESTMENT SECURITIESAt March 31, 2023 and December 31, 2022, all investment securities were classified as AFS. The following table summarizes amortized cost, fair value and ACL of investment securities, and the corresponding amounts of gross unrealized gains and losses recognized in AOCI, and the allowance for credit losses at March 31, 2023 and December 31, 2022:
The following table summarizes investment securities with unrealized losses, for which an ACL has not been recorded at March 31, 2023 and cumulative OTTI expense was not recognized at December 31, 2022, aggregated by major investment security type and the length of time in a continuous unrealized loss position.
The Company is required to conduct an impairment evaluation on AFS securities to determine whether the Company has the intent to sell the security or it is more likely than not that it will be required to sell the security before recovery. If these situations apply, the guidance requires the Company to reduce the security's amortized cost basis down to its fair value through earnings. The Company also evaluates the unrealized losses on AFS securities to determine if a security's decline in fair value below its amortized cost basis is due to credit factors. The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying collateral, if applicable, and the level of credit support in the security structure. Management also evaluates other factors and circumstances that may be indicative of a decline in the fair value of the security due to a credit factor. This includes, but is not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost and near-term prospects of the issuer. If this assessment indicates that a credit loss exists, the present value of the expected cash flows of the security is compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost, an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis under the CECL standard, and declines due to non-credit factors are recorded in AOCI, net of taxes. If a credit loss is recognized in earnings, subsequent improvements to the expectation of collectability will be recognized through the ACL. If the fair value of the security increases above its amortized cost, the unrealized gain will be recorded in AOCI, net of taxes, on the consolidated statements of financial condition. Prior to implementation of the CECL standard, unrealized losses caused by a credit event would require the direct write-down of the AFS security through the other-than-temporary impairment approach. The Company did not record an ACL on the AFS securities at March 31, 2023 or upon implementation of CECL on January 1, 2023. As of both periods, the Company considers the unrealized losses on the AFS securities to be related to fluctuations in market conditions, primarily interest rates, and not reflective of deterioration in credit. In addition, the Company maintains that it has the intent and ability to hold these AFS securities until the amortized cost is recovered and it is more likely than not that any of AFS securities in an unrealized loss position would not be required to be sold. At March 31, 2023 and December 31, 2022, unrealized losses were higher due to market uncertainty resulting from inflation and rising interest rates from the time of the security purchase. U.S. Treasury Securities. The unrealized losses presented in the table above have been caused by an increase in rates from the time these securities were purchased. Management considers the full faith and credit of the U.S. government in determining whether declines in fair value are due to credit factors. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity. In addition, the unrealized losses are not credit related. Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at March 31, 2023. States and Political Subdivisions. The unrealized losses presented in the table above have been caused by a widening of spreads and/or a rise in interest rates from the time these securities were purchased. Management considers the investment rating, the state of the issuer of the security and other credit support in determining whether declines in fair value are due to credit factors. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity. In addition, the unrealized losses are not credit related. Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at March 31, 2023. GSE Residential CMOs and GSE Residential MBS. The unrealized losses presented in the table above have been caused by a widening of spreads and a rise in interest rates from the time these securities were purchased. The contractual terms of these securities do not permit the issuer to settle the securities at a price less than its par value basis. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity. In addition, the unrealized losses are not credit related. Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at March 31, 2023. Non-Agency CMOs. The unrealized losses presented in the table above were caused by a widening of spreads and a rise in interest rates from the time the securities were purchased. Management considers the investment rating and other credit support in determining whether declines in fair value are due to credit factors. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity. In addition, the unrealized losses are not credit related. Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at March 31, 2023. Asset-backed. The unrealized losses presented in the table above were caused by a widening of spreads and a rise in the interest rates from the time the securities were purchased. Management considers the investment rating and other credit support in determining whether declines in fair value are due to credit factors. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity. In addition, the unrealized losses are not credit related. Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at March 31, 2023. The following table summarizes amortized cost and fair value of investment securities by contractual maturity at March 31, 2023. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
The following table summarizes proceeds from sales of investment securities and gross gains and gross losses for the three months ended March 31, 2023 and 2022:
During the three months ended March 31, 2023, the Company recorded net investment security losses of $8 thousand from mark-to-market losses on an equity security, compared to net gains of $25 thousand for the three months ended March 31, 2022. During the three months ended March 31, 2023, the Company did not sell any investment securities compared to a partial sale of one security with a principal balance of $3.1 million that was sold for proceeds of $3.1 million during the three months ended March 31, 2022 for a gross gain of $22 thousand. The Company recorded a loss of $171 thousand on a call of a non-agency CMO for the three months ended March 31, 2022. Investment securities with a fair value of $428.9 million and $396.8 million at March 31, 2023 and December 31, 2022, respectively, were pledged to secure public funds and for other purposes as required or permitted by law.
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LOANS AND ALLOWANCE FOR CREDIT LOSSES | LOANS AND ALLOWANCE FOR CREDIT LOSSES The Company’s loan portfolio is grouped into segments which are further broken down into classes to allow management to monitor the performance by the borrower and to monitor the yield on the portfolio. The risks associated with lending activities differ among the various loan classes and are subject to the impact of changes in interest rates, market conditions of collateral securing the loans, and general economic conditions. All of these factors may adversely impact both the borrower’s ability to repay its loans and the value of its associated collateral. The Company has various types of commercial real estate loans, which have differing levels of credit risk. Owner occupied commercial real estate loans are generally dependent upon the successful operation of the borrower’s business, with the cash flows generated from the business being the primary source of repayment of the loan. If the business suffers a downturn in sales or profitability, the borrower’s ability to repay the loan could be in jeopardy. Non-owner occupied and multi-family commercial real estate loans and non-owner occupied residential loans present a different credit risk to the Company than owner occupied commercial real estate loans, as the repayment of the loan is dependent upon the borrower’s ability to generate a sufficient level of occupancy to produce rental income that exceeds debt service requirements and operating expenses. Lower occupancy or lease rates may result in a reduction in cash flows, which hinders the ability of the borrower to meet debt service requirements, and may result in lower collateral values. The Company generally recognizes that greater risk is inherent in these credit relationships compared to owner occupied loans mentioned above. Acquisition and development loans consist of 1-4 family residential construction and commercial and land development loans. The risk of loss on these loans is largely dependent on the Company’s ability to assess the property’s value at the completion of the project, which should exceed the property’s construction costs. During the construction phase, a number of factors could potentially negatively impact the collateral value, including cost overruns, delays in completing the project, competition, and real estate market conditions, which may change based on the supply of similar properties in the area. In the event the collateral value at the completion of the project is not sufficient to cover the outstanding loan balance, the Company must rely upon other repayment sources, if any, including the guarantors of the project or other collateral securing the loan. Commercial and industrial loans include advances to local and regional businesses for general commercial purposes and include permanent and short-term working capital, machinery and equipment financing, and may be either in the form of lines of credit or term loans. Although commercial and industrial loans may be unsecured to our highest-rated borrowers, the majority of these loans are secured by the borrower’s accounts receivable, inventory and machinery and equipment. In a significant number of these loans, the collateral also includes the business real estate or the business owner’s personal real estate or assets. Commercial and industrial loans present credit exposure to the Company, as they are more susceptible to risk of loss during a downturn in the economy as borrowers may have greater difficulty in meeting their debt service requirements and the value of the collateral may decline. The Company attempts to mitigate this risk through its underwriting standards, including evaluating the creditworthiness of the borrower and, to the extent available, credit ratings on the business. Additionally, monitoring of the loans through annual renewals and meetings with the borrowers are typical. However, these procedures cannot eliminate the risk of loss associated with commercial and industrial lending. At March 31, 2023 and December 31, 2022, commercial and industrial loans include $10.8 million and $13.8 million, respectively, net of deferred fees and costs, originated through the SBA PPP. At March 31, 2023, the Bank has $181 thousand of net deferred SBA PPP fees remaining to be recognized through net interest income over the remaining life of the loans. The timing of the recognition of these fees is dependent upon the loan forgiveness process established by the SBA. As these loans are 100% guaranteed by the SBA, there is no associated ACL at March 31, 2023. Municipal loans consist of extensions of credit to municipalities and school districts within the Company’s market area. These loans generally present a lower risk than commercial and industrial loans, as they are generally secured by the municipality’s full taxing authority, by revenue obligations, or by its ability to raise assessments on its clients for a specific utility. The Company originates loans to its retail clients, including fixed-rate and adjustable first lien mortgage loans, with the underlying 1-4 family owner occupied residential property securing the loan. The Company’s risk exposure is minimized in these types of loans through the evaluation of the creditworthiness of the borrower, including credit scores and debt-to-income ratios, and underwriting standards, which limit the loan-to-value ratio to generally no more than 80% upon loan origination, unless the borrower obtains private mortgage insurance. Home equity loans, including term loans and lines of credit, present a slightly higher risk to the Company than 1-4 family first liens, as these loans can be first or second liens on 1-4 family owner occupied residential property, but can have loan-to-value ratios of no greater than 85% of the value of the real estate taken as collateral. The creditworthiness of the borrower is also considered, including credit scores and debt-to-income ratios. Installment and other loans’ credit risk is mitigated through prudent underwriting standards, including evaluation of the creditworthiness of the borrower through credit scores and debt-to-income ratios and, if secured, the collateral value of the assets. These loans can be unsecured or secured by assets the value of which may depreciate quickly or may fluctuate, and may present a greater risk to the Company than 1-4 family residential loans. The Company adopted the new current expected credit loss accounting guidance, CECL, and all related amendments as of January 1, 2023. Certain prior period credit quality disclosures related to impaired loans and individually and collectively evaluated loans were superseded with the current CECL guidance and have not been included below as of March 31, 2023. The following table presents the loan portfolio by segment and class, excluding residential LHFS, at March 31, 2023 and December 31, 2022:
(1) This balance includes $10.8 million and $13.8 million of SBA PPP loans, net of deferred fees and costs, at March 31, 2023 and December 31, 2022, respectively. In order to monitor ongoing risk associated with its loan portfolio and specific loans within the segments, management uses an internal grading system. The first several rating categories, representing the lowest risk to the Bank, are combined and given a “Pass” rating. Management generally follows regulatory definitions in assigning criticized ratings to loans, including "Special Mention," "Substandard," "Doubtful" or "Loss." The Special Mention category includes loans that have potential weaknesses that may, if not monitored or corrected, weaken the asset or inadequately protect the Bank's position at some future date. These assets pose elevated risk, but their weakness does not yet justify a more severe, or classified rating. Substandard loans are classified as they have a well-defined weakness, or weaknesses that jeopardize liquidation of the debt. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Substandard loans include loans that management may determine to be either individually evaluated, referred to as "Substandard - Individually Evaluated Loan," or collectively evaluated, referred to as "Substandard Non-Individually Evaluated Loan." A Doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as Loss is deferred. Loss loans are considered uncollectible, as the borrowers are often in bankruptcy, have suspended debt repayments, or have ceased business operations. Once a loan is classified as Loss, there is little prospect of collecting the loan’s principal or interest and it is charged-off. The Company has a loan review policy and program, which is designed to identify and monitor risk in the lending function. The Management ERM Committee, comprised of executive officers, senior officers and loan department personnel, is charged with the oversight of overall credit quality and risk exposure of the Company's loan portfolio. This includes the monitoring of the lending activities of all Company personnel with respect to underwriting and processing new loans and the timely follow-up and corrective action for loans showing signs of deterioration in quality. A loan review program provides the Company with an independent review of the commercial loan portfolio on an ongoing basis. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as extended delinquencies, bankruptcy, repossession or death of the borrower occurs, which heightens awareness as to a possible credit event. Internal loan reviews are completed annually on all commercial relationships with a committed loan balance in excess of $1.0 million, which includes confirmation of risk rating by an independent credit officer. In addition, all commercial relationships greater than $500 thousand rated Substandard, Doubtful or Loss are reviewed quarterly and corresponding risk ratings are reaffirmed by the Company's Problem Loan Committee, with subsequent reporting to the Management ERM Committee and the Board of Directors. The following table presents the amortized cost basis of the loan portfolio, by year of origination, loan class, and credit quality, as of March 31, 2023. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan and payment activity, which residential mortgage and installment and other consumer loans are presented below based on payment performance: performing or nonperforming.
The information presented in the table above is not required for periods prior to the adoption of CECL. The following table summarizes the Company’s loan portfolio ratings based on its internal risk rating system at December 31, 2022, which presents the most comparable required information for the prior period. Prior to the adoption of CECL, PCD loans were classified as PCI loans and accounted for under ASC 310-30. In accordance with the CECL standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the adoption date. At March 31, 2023, the amortized cost of the PCD loans was $9.4 million.
For commercial real estate, acquisition and development, commercial and industrial and municipal segments, a loan is evaluated individually when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. 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 individually evaluated. Generally, loans that are more than 90 days past due will be individually evaluated for a specific reserve. 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 to determine if the loan should be placed on nonaccrual status. Nonaccrual loans are, by definition, deemed to be individually evaluated under CECL. A specific reserve allocation for individually evaluated loans is measured on a loan-by-loan basis for commercial and construction loans by either the present value of the 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. A loan is collateral dependent if the repayment of the loan is expected to be provided solely by the underlying collateral. For loans that are experiencing financial difficulty for extended periods of time, periodic updates on fair values are obtained, which may include updated appraisals. Updated fair values are incorporated into the analysis in the next reporting period. Loan charge-offs, which may include partial charge-offs, are taken on an individually evaluated loan that is collateral dependent if the carrying balance of the loan exceeds the appraised value of the collateral, the loan has been placed on nonaccrual status or identified as uncollectible, and it is deemed to be a confirmed loss. Typically, loans with a charge-off or partial charge-off will continue to be individually evaluated. Generally, an individually evaluated loan with a partial charge-off may continue to have a specific reserve on it after the partial charge-off, if factors warrant. At March 31, 2023, the Company’s individually evaluated loans were measured based on the estimated fair value of the collateral securing the loan, except for purchased auto loans on nonaccrual status and accruing loans accounted for as TDRs prior to the adoption of ASU 2022-02. At December 31, 2022, except for TDRs, the Company's individually evaluated loans were measured based on the estimated fair value of the collateral securing the loan. Prior to the adoption of ASU 2022-02, by definition, TDRs were considered impaired and the related impairment analyses were initially based on discounted cash flows. For real estate loans, collateral generally consists of commercial or residential real estate, but in the case of commercial and industrial loans, it could also consist of accounts receivable, inventory, equipment or other business assets. Commercial and industrial loans may also have real estate collateral. Updated appraisals are generally required every 18 months for classified commercial loans, secured by commercial real estate, in excess of $250 thousand. The “as is" value provided in the appraisal is often used as the fair value of the collateral in determining impairment, unless circumstances, such as subsequent improvements, approvals, or other circumstances, dictate that another value than that provided by the appraiser is more appropriate. Generally, commercial loans secured by real estate that are evaluated individually are measured at fair value using certified real estate appraisals that had been completed within the last 18 months. Appraised values are discounted for estimated costs to sell the property and other selling considerations to arrive at the property’s fair value. In those situations in which it is determined an updated appraisal is not required for loans individually evaluated for credit expected losses, fair values are based on either an existing appraisal or a discounted cash flow analysis as determined by management. The approaches are discussed below: •Existing appraisal – if the existing appraisal provides a strong loan-to-value ratio (generally 70% or lower) and, after consideration of market conditions and knowledge of the property and area, it is determined by the Credit Administration staff that there has not been a significant deterioration in the collateral value, the existing certified appraised value may be used. Discounts to the appraised value, as deemed appropriate for selling costs, are factored into the fair value. •Discounted cash flows – in limited cases, discounted cash flows may be used on projects in which the collateral is liquidated to reduce the borrowings outstanding, and is used to validate collateral values derived from other approaches. Collateral on loans evaluated individually is not limited to real estate, and may consist of accounts receivable, inventory, equipment or other business assets. Estimated fair values are determined based on borrowers’ financial statements, inventory ledgers, accounts receivable aging or appraisals from individuals with knowledge in the business. Stated balances are generally discounted for the age of the financial information or the quality of the assets. In determining fair value, liquidation discounts are applied to this collateral based on existing loan evaluation policies. The Company distinguishes substandard loans for both loans individually and collectively evaluated, as it places less emphasis on a loan’s classification, and increased reliance on whether the loan was performing in accordance with the contractual terms. A substandard classification does not automatically meet the definition of an individually evaluated loan. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual extensions of credit classified as substandard. As a result, the Company’s methodology includes an evaluation of certain accruing commercial real estate, acquisition and development, commercial and industrial and municipal loans rated substandard to be collectively evaluated for credit expected losses. Although the Company believes these loans meet the definition of substandard, they are generally performing and management has concluded that it is likely the Company will be able to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Larger groups of smaller balance homogeneous loans are collectively evaluated for credit expected losses. Generally, the Company does not separately identify individual residential mortgage and installment and other consumer loans for disclosures, unless such loans are the subject of a modified agreement due to financial difficulties of the borrower. The following table presents the amortized cost basis of nonaccrual loans, according to loan class, with and without reserves on individually evaluated loans as of March 31, 2023, as compared to nonaccrual loans at December 31, 2022. The Company did not recognize interest income on nonaccrual loans during the three months ended March 31, 2023.
A loan is considered to be collateral-dependent when the borrower is experiencing financial difficulty and the repayment is expected to be provided substantially through the operation or sale of collateral. At March 31, 2023, substantively all individually evaluated loans were collateral-dependent and consisted primarily of commercial real estate, acquisition and development and residential mortgage loans, which were primarily secured by commercial or residential real estate. All of the Company’s collateral-dependent loans had appraised collateral values which exceeded the amortized cost basis of the related loan as of March 31, 2023. The following table presents the amortized cost basis of collateral-dependent loans by class as of March 31, 2023:
The information presented above in the nonaccrual loan table and the collateral-dependent table are not required for periods prior to the adoption of CECL. The following table, which excludes accruing PCI loans, presents the most comparable required information for the prior period, which summarizes impaired loans by segment and class, segregated by those for which a specific allowance was required and those for which a specific allowance was not required at December 31, 2022. The recorded investment in loans excludes accrued interest receivable. Related allowances established generally pertain to those loans in which loan forbearance agreements were in the process of being negotiated or updated appraisals were pending, and any partial charge-off will be recorded when final information is received.
The following table, which excludes accruing PCI loans, presents the most comparable required information for the prior period and summarizes the average recorded investment in impaired loans and related recognized interest income for the three months ended March 31, 2022:
On January 1, 2023, the Company adopted ASU 2022-02 on a modified retrospective basis. ASU 2022-02 eliminates the TDR accounting model, and requires that the Company evaluate, based on the accounting for loan modifications, whether the borrower is experiencing financial difficulty and the modification results in a more-than-insignificant direct change in the contractual cash flows and represents a new loan or a continuation of an existing loan. This change required all loan modifications to be accounted for under the general loan modification guidance in ASC 310-20, Receivables – Nonrefundable Fees and Other Costs, and subject entities to new disclosure requirements on loan modifications to borrowers experiencing financial difficulty. Upon adoption of CECL, the TDRs were evaluated and included in the CECL loan segment pools if the loans shared similar risk characteristics to other loans in the pool or remained with individually evaluated loans for which the ACL was measured using the collateral-dependent or discounted cash flow method. The Company may modify loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, interest rate reduction or an other-than-insignificant payment delay. When principal forgiveness is provided, the amount of forgiveness is charged off against the ACL. The Company may also provide multiple types of modifications on an individual loan. For three months ended March 31, 2023, the Company did not extend any modifications to borrowers experiencing financial difficulty that had a more-than-insignificant direct change in the contractual cash flows of the loan. The following table presents the most comparable required information for the prior period for impaired loans that were TDRs, with the recorded investment at December 31, 2022:
Management further monitors the performance and credit quality of the loan portfolio by analyzing the length of time a portfolio is past due by aggregating loans based on its delinquencies. The following table presents the classes of the loan portfolio summarized by aging categories at March 31, 2023:
The following table presents the most comparable required information for the prior period, which includes the classes of the loan portfolio summarized by aging categories of performing loans and nonaccrual loans at December 31, 2022:
As disclosed in Note 1, on January 1, 2023 the Company implemented CECL and increased the ACL, previously the ALL, with a cumulative-effect adjustment to the ACL for loans of $2.4 million. The Company’s ACL is calculated quarterly, with any adjustment recorded to the provision for credit losses in the consolidated statement of income. Management calculates the quantitative portion of collectively evaluated loans for all loan categories, with the exception of the consumer loan segment, using DCF methodology. For purposes of calculating the quantitative portion of collectively evaluated reserves on the consumer loan segment, the remaining life methodology is utilized. For purposes of estimating the Company’s ACL, management generally evaluates collectively evaluated loans by federal call code in order to group loans with similar risk characteristics. Loans that do not share similar risk characteristics are evaluated on an individual loan basis, and are excluded from the collective evaluation for the ACL. Loans identified to be individually evaluated under CECL include loans on nonaccrual status and may include accruing loans that do not share similar risk characteristics to other accruing loans that are collectively evaluated on a loan pool basis. A specific reserve analysis may be applied to the individually evaluated loans, which considers collateral value, an observable market price or the present value of expected future cash flows. A specific reserve is assigned if the measured value of the loan using one of the before mentioned methods is less than the current carrying value of the loan. Based on management's analysis, adjustments may be applied for additional factors impacting the risk of loss in the loan portfolio beyond the quantitatively calculated reserve calculated on collectively evaluated loans. As the quantitative reserve calculation incorporates historical conditions, management may consider an additional or reduced reserve is warranted through qualitative risk factors based on current and expected conditions. These qualitative risk factors considered by management are comparable to legacy factors prior to the adoption of CECL and include significant or unexpected changes in: Nature and Volume of Loans – including loan growth in the current and subsequent quarters based on the Company’s targeted growth and strategic plan, coupled with the types of loans booked based on risk management and credit culture; the number of exceptions to loan policy; and supervisory loan to value exceptions. Concentrations of Credit and Changes within Credit Concentrations – including the composition of the Company’s overall portfolio makeup and management's evaluation related to concentration risk management and the inherent risk associated with the concentrations identified. Lending Policies and Procedures, Underwriting Standards and Recovery Practices – including changes to credit policies and procedures, underwriting standards and perceived impact on anticipated losses; trends in the number of exceptions to loan policy; supervisory loan to value exceptions; and administration of loan recovery practices. Delinquency Trends – including delinquency percentages noted in the portfolio relative to economic conditions; severity of the delinquencies; and whether the ratios are trending upwards or downwards. Collateral Valuation Trends – including underlying market conditions and impact on the collateral values securing the loans. Experience, Ability and Depth of Management/Lending staff – including the level of experience of senior and middle management and the lending staff; turnover of the staff; and instances of repeat criticisms. Quality of Loan Review System – including the level of experience of the loan review staff; in-house versus outsourced provider of review; turnover of the staff; and instances of repeat criticisms from independent testing, which includes the evaluation of internal loan ratings of the portfolio. Economic Conditions – including trends in the international, national, regional and local conditions that monitor the interest rate environment, inflationary pressures, the consumer price index, the housing price index, housing statistics, and bankruptcy rates. Other External Factors - including regulatory and legal environment risks and competition. All factors noted above were established upon adoption of CECL and were deemed appropriate at March 31, 2023. For the three months ended March 31, 2023, these factors were unchanged from levels at adoption of CECL. The following table presents the activity in the ACL, including the impact of adopting CECL, for the three months ended March 31, 2023 and the activity in the ALL for the three months ended March 31, 2022:
The information presented in the table below is not required for periods subsequent to the adoption of CECL. The following table summarizes the ALL allocation for loans individually and collectively evaluated for impairment by loan segment at December 31, 2022. Accruing PCI loans are excluded from loans individually evaluated for impairment.
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES | LEASES A lease provides the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. The Company has primarily entered into operating leases for branches and office space. Most of the Company's leases contain renewal options, which the Company is reasonably certain to exercise. Including renewal options, the Company's leases range from 5 to 30 years. Operating lease right-of-use assets and lease liabilities are included in other assets and accrued interest and other liabilities on the Company's unaudited condensed consolidated balance sheets. The Company uses its incremental borrowing rate to determine the present value of the lease payments, as the rate implicit in the Company's leases is not readily determinable. Lease agreements that contain non-lease components are generally accounted for as a single lease component, while variable costs, such as common area maintenance expenses and property taxes, are expensed as incurred. The following table summarizes the Company's operating leases at March 31, 2023 and December 31, 2022:
The following table presents information related to the Company's operating leases for the three months ended March 31, 2023 and 2022:
The following table presents expected future maturities of the Company's lease liabilities as of March 31, 2023:
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GOODWILL AND OTHER INTANGIBLE ASSETS |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | GOODWILL AND OTHER INTANGIBLE ASSETS At March 31, 2023 and 2022, goodwill was $18.7 million. No impairment charges were recorded in the three months ended March 31, 2023 and March 31, 2022. Goodwill is not amortized but is reviewed for potential impairment on at least an annual basis, with testing between annual tests if an event occurs or circumstances change that could potentially reduce the fair value of a reporting unit. The Company conducted its last annual goodwill impairment test as of November 30, 2022 using generally accepted valuation methods. As a result of that impairment test, no goodwill impairment was identified. During the three months ended March 31, 2023, the market was impacted by the economic uncertainty resulting from recent banking industry events, which caused the Company's stock price and market capitalization to decline. The Company performed a qualitative assessment which indicated that it was more likely than not that the fair value exceeded its carrying value, resulting in no impairment charge for the three months ended March 31, 2023. Management will continue to evaluate the economic conditions for any potential applicable changes. The following table presents changes in and components of other intangible assets for the three months ended March 31, 2023 and 2022. No impairment charges were recorded on other intangible assets during the three months ended March 31, 2023 and March 31, 2022.
The following table presents the components of other identifiable intangible assets at March 31, 2023 and December 31, 2022:
The following table presents future estimated aggregate amortization expense for other identifiable intangible assets at March 31, 2023:
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SHARE-BASED COMPENSATION PLANS |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION PLANS | SHARE-BASED COMPENSATION PLANS The Company maintains share-based compensation plans under the shareholder-approved 2011 Plan. The purpose of the share-based compensation plans is to provide officers, employees, and non-employee members of the Board of Directors of the Company with additional incentive to further the success of the Company. At March 31, 2023, 1,281,920 shares of the common stock of the Company were reserved, of which 413,800 shares are available to be issued. The 2011 Plan incentive awards may consist of grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, deferred stock units and performance shares. All employees and members of the Board of Directors of the Company and its subsidiaries are eligible to participate in the 2011 Plan. The 2011 Plan allows for the Compensation Committee of the Board of Directors to determine the type of incentive to be awarded, its term, manner of exercise, vesting and restrictions on shares. Generally, awards are nonqualified under the IRC, unless the awards are deemed to be incentive awards to employees at the Compensation Committee’s discretion. The following table presents a summary of nonvested restricted shares activity for the three months ended March 31, 2023:
The following table presents restricted share compensation expense, with tax benefit information, and fair value of shares vested, for the three months ended March 31, 2023 and 2022:
The unrecognized compensation expense related to the share awards totaled $5.2 million at March 31, 2023 and $4.6 million at December 31, 2022. The unrecognized compensation expense at March 31, 2023 is expected to be recognized over a weighted-average period of 2.3 years. The Company maintains an employee stock purchase plan to provide employees of the Company with an opportunity to purchase Company common stock. Eligible employees may purchase shares in an amount that does not exceed the lesser of the IRS limit of $25,000 or 10% of their annual salary at the lower of 95% of the fair market value of the shares on the semi-annual offering date, or related purchase date. The purchases occur in March and September of each year. The Company reserved 350,000 shares of its common stock to be issued under the employee stock purchase plan. At March 31, 2023, 142,592 shares were available to be issued. The following table presents information for the employee stock purchase plan for the three months ended March 31, 2023 and 2022: The Company issues new shares or treasury shares, depending on market conditions, in its share-based compensation plans.
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DERIVATIVE FINANCIAL INSTRUMENTS |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company's derivative financial instruments are used as risk management tools by the Company to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investment securities and borrowings and are not used for trading or speculative purposes. The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps and interest rate caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of fixed amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company, however, discontinues cash flow hedge accounting if it is probable the forecasted hedged transactions will not occur in the initially identified time period due to circumstances. Upon discontinuance, the associated gains and losses deferred in AOCI are reclassified immediately into earnings and subsequent changes in the fair value of the cash flow hedge are recognized in earnings. At March 31, 2023 and December 31, 2022, the Company had two interest rate swaps designated as hedging instruments with a total notional value of $100.0 million for the purpose of hedging the variable cash flows of selected AFS securities or loans. The Company did not enter into any new interest rate swaps designed as hedging instruments during the three months ended March 31, 2023. The Company enters into interest rate swaps agreements that allow its commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate loan into a fixed-rate loan. In addition, the Company may enter into interest rate caps that allow its commercial loan customers to gain protection against significant interest rate increases and provide a limited on the variable interest rate. The Company then enters into a corresponding swap or cap agreement with a third party in order to economically hedge its exposure through the customer agreement. The interest rate swaps and interest rate caps with both the customers and third parties are not designated as hedges and are marked through earnings. At March 31, 2023, the Company had 25 customer and 25 corresponding third-party broker interest rate derivatives not designated as a hedging instrument with an aggregate notional amount of $269.9 million, compared to $268.8 million in notional amount of such derivative instruments at December 31, 2022. The Company entered into zero new interest rate swaps or interest rate caps with its commercial loan customers and recognized swap fee income of zero during the three months ended March 31, 2023 compared to two new interest rate swaps that resulted in swap fee income of $953 thousand during the three months ended March 31, 2022, which are included in noninterest income in the unaudited condensed consolidated statements of income. At March 31, 2023 and December 31, 2022, the Company had cash collateral of $3.5 million and $5.4 million with the third parties for certain of these derivatives, respectively. At March 31, 2023 and December 31, 2022, the Company received cash collateral of $5.9 million and $8.5 million from a counterparty for these derivatives, respectively. The Company also may enter into risk participation agreements with a financial institution counterparty for an interest rate derivative contract related to a loan in which the Company may be a participant or the agent bank. The risk participation agreement provides credit protection to the agent bank should the borrower fail to perform on its interest rate derivative contracts with the agent bank. The Company manages its credit risk on the risk participation agreement by monitoring the creditworthiness of the borrower, which is based on the same credit review process as though the Company had entered into the derivative instruments directly with the borrower. The notional amount of such risk participation agreement reflects the Company’s pro-rata share of the derivative instrument, consistent with its share of the related participated loan. At March 31, 2023 and December 31, 2022, the Company had risk participation agreements with sold protection with a notional value of $29.2 million and $29.0 million, respectively. In addition the Company had a risk participation with purchased protection with a notional value of $4.9 million at both March 31, 2023 and December 31, 2022. The Company did not enter into any risk participation agreements during the three months ended March 31, 2023 or 2022. As a part of its normal residential mortgage operations, the Company will enter into an interest rate lock commitment with a potential borrower. The Company may enter into a corresponding commitment with an investor to sell that loan at a specific price shortly after origination. In accordance with FASB ASC 820, adjustments are recorded through earnings to account for the net change in fair value of these transactions for the held for sale loans. The fair value of held for sale loans can vary based on the interest rate locked with the customer and the current market interest rate at the balance sheet date. The following table summarizes the fair value of the Company's derivative instruments at March 31, 2023 and December 31, 2022:
The following tables summarize the effect of the Company's derivative financial instruments on OCI and net income for the three months ended March 31, 2023 and 2022:
The following table is a summary of components for interest rate swaps designated as hedging instruments at March 31, 2023 and December 31, 2022. At March 31, 2023 and December 31, 2022, the Company had two interest rate derivatives designated as hedges instruments with a total notional value of $100.0 million.
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SHORT-TERM BORROWINGS |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHORT-TERM BORROWINGS | SHORT-TERM BORROWINGS The Company has short-term borrowing capability from the FHLB, federal funds purchased and the FRB discount window. The following table summarizes these short-term borrowings at March 31, 2023 and December 31, 2022:
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LONG-TERM DEBT |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG-TERM DEBT | LONG-TERM DEBT The following table presents components of the Company’s long-term debt at March 31, 2023 and December 31, 2022:
The Bank is a member of the FHLB of Pittsburgh and has access to the FHLB program of overnight and term advances. Under terms of a blanket collateral agreement for advances, lines and letters of credit from the FHLB, collateral for all outstanding advances, lines and letters of credit consisted of 1-4 family mortgage loans and other real estate secured loans totaling $1.1 billion at March 31, 2023. The Bank had additional availability of $903.5 million at the FHLB on March 31, 2023 based on its qualifying collateral, net of short-term borrowings and long-term debt detailed above, deposit letters of credit totaling $1.0 million and non-deposit letters of credit totaling $440 thousand at March 31, 2023. At March 31, 2023 and December 31, 2022, the Company had availability under FHLB lines totaling $53.2 million and $45.3 million, respectively. The Bank has available unsecured lines of credit, with interest based on the daily Federal Funds rate, with two correspondent banks totaling $30.0 million, at March 31, 2023 and December 31, 2022. There were no borrowings under these lines of credit at March 31, 2023and December 31, 2022.
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDERS’ EQUITY AND REGULATORY CAPITAL | SHAREHOLDERS’ EQUITY AND REGULATORY CAPITAL Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Under the Basel Committee on Banking Supervision's capital guidelines for U.S. Banks ("Basel III rules"), an entity must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The Company and the Bank have elected not to include net unrealized gains or losses included in AOCI in computing regulatory capital. On January 1, 2023, the Company adopted ASU No. 2016-13, which replaced the existing incurred loss model for recognizing credit losses with an expected loss model referred to as the CECL model, and resulted in a reduction to opening retained earnings, net of income tax, and an increase to the allowance for credit losses for loans of approximately $2.4 million and allowance for credit losses for off-balance sheet exposures of $100 thousand, which combined totals $2.5 million. The federal bank regulatory agencies issued a rule, which provided for the option to elect a three-year transition provision of the day-one impact of the CECL model beginning with regulatory capital at March 31, 2023. The Company elected the transition relief and application of the three-year phase in option. The consolidated asset limit on small bank holding companies is $3.0 billion and a company with assets under that limit is not subject to the FRB consolidated capital rules, but may file reports that include capital amounts and ratios. The Company has elected to file those reports prior to exceeding the asset threshold. Management believes that the Company and the Bank met all capital adequacy requirements to which they are subject at March 31, 2023 and December 31, 2022. Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2023, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank's classification. The following table presents capital amounts and ratios at March 31, 2023 and December 31, 2022:
The Company maintains a stockholder dividend reinvestment and stock purchase plan. Under the plan, shareholders may purchase additional shares of the Company’s common stock at the prevailing market prices with reinvested dividends and voluntary cash payments. The Company reserved 1,045,000 shares of its common stock to be issued under the dividend reinvestment and stock purchase plan. At March 31, 2023, approximately 665,000 shares were available to be issued under the plan. In September 2015, the Board of Directors of the Company authorized a share repurchase program pursuant to which the Company could repurchase up to 416,000 shares of the Company's outstanding shares of common stock, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act, as amended. On April 19, 2021, the Board of Directors authorized the additional repurchase of up to 562,000 shares of its outstanding common stock for a total of 978,000 shares. When and if appropriate, repurchases may be made in the open market or privately negotiated transactions, depending on market conditions, regulatory requirements and other corporate considerations, as determined by management. Share repurchases may not occur and may be discontinued at any time. For the three months ended March 31, 2023, the Company repurchased 54,262 shares of its common stock at an average price of $21.65 per share. At March 31, 2023, 873,203 shares had been repurchased at a total cost of $19.8 million, or $22.71 per share. Common stock available for future repurchase totals 104,797 shares, or 1%, of the Company's outstanding common stock at March 31, 2023. On April 25, 2023, the Board of Directors declared a cash dividend of $0.20 per common share, which will be paid on May 16, 2023 to shareholders of record at May 9, 2023.
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EARNINGS PER SHARE |
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EARNINGS PER SHARE | EARNINGS PER SHARE The following table presents earnings per share for the three months ended March 31, 2023 and 2022:
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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK | FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its clients. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the unaudited condensed consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit and financial guarantees written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The following table presents these contractual, or notional, amounts at March 31, 2023 and December 31, 2022.
Commitments to extend credit are agreements to lend to a client 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 the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each client’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the client. Collateral varies but may include accounts receivable, inventory, equipment, residential real estate, and income-producing commercial properties. Standby letters of credit and financial guarantees written are conditional commitments issued by the Company to guarantee the performance of a client to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to clients. The Company holds collateral supporting those commitments when deemed necessary by management. The liability at March 31, 2023 and December 31, 2022 for guarantees under standby letters of credit issued was not considered to be material.The Company maintains a reserve on its off-balance sheet credit exposures, which totaled approximately $1.7 million and $1.6 million at March 31, 2023 and December 31, 2022, respectively, and is recorded in other liabilities on the unaudited condensed consolidated balance sheets. On January 1, 2023, the Company adopted CECL and recorded a day-one adjustment, which increased the allowance for credit losses for off-balance sheet credit exposures by $100 thousand. The reserve is based on management's estimate of expected losses in its off-balance sheet credit exposures. The reserve specific to unfunded loan commitments is determined by applying utilization assumptions based on historical experience and applying the expected loss rates by loan class. Following adoption of CECL, the change in the reserve for off-balance sheet credit exposures is recorded as a provision or reduction to expense through the provision for credit losses in the consolidated statements of income. The Company did not record expense or a reduction to provision for credit losses for the three months ended March 31, 2023. Prior to January 1, 2023, the Company maintained the reserve based on historical loss experience of the related loan class and utilization assumptions, for off-balance sheet credit exposures that currently are not funded. For the three months ended March 31, 2022, the Company recorded provision expense of $28 thousand to other non-interest expense in the unaudited condensed consolidated statements of income associated with its reserve for off-balance sheet credit exposures.
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE | FAIR VALUE Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Certain financial instruments and all non-financial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are: Level 1 – quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access at the measurement date. Level 2 – significant other observable inputs other than Level 1 prices such as prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 – at least one significant unobservable input that reflects a company's own assumptions about the assumptions that market participants would use in pricing an asset or liability. In instances in which multiple levels of inputs are used to measure fair value, hierarchy classification is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The Company used the following methods and significant assumptions to estimate fair value for instruments measured on a recurring basis: Where quoted prices are available in an active market, investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, investment securities are classified within Level 2 and fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flow. Level 2 investment securities include U.S. agency securities, MBS, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy. The Company’s investment securities are classified as available-for-sale. The fair values of interest rate swaps and risk participation derivatives are determined using models that incorporate readily observable market data into a market standard methodology. This methodology nets the discounted future cash receipts and the discounted expected cash payments. The discounted variable cash receipts and payments are based on expectations of future interest rates derived from observable market interest rate curves. In addition, fair value is adjusted for the effect of nonperformance risk by incorporating credit valuation adjustments for the Company and its counterparties. These assets and liabilities are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements. The following table summarizes assets and liabilities measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022:
The Company had one municipal bond and three CMOs measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at both March 31, 2023 and December 31, 2022 compared to one municipal bond and one CMO at March 31, 2022. The Level 3 valuation is based on a non-executable broker quote, which is considered a significant unobservable input. Such quotes are updated as available and may remain constant for a period of time for certain broker-quoted securities that do not move with the market or that are not interest rate sensitive as a result of their structure or overall attributes. The Company’s residential mortgage LHFS are recorded at fair value utilizing Level 2 measurements. This fair value measurement is determined based upon third party quotes obtained on similar loans. For loans held-for-sale, for which the fair value option has been elected, the aggregate fair value declined below the aggregate principal balance by $867 thousand and $1.2 million as of March 31, 2023, and December 31, 2022, respectively. The determination of the fair value of interest rate lock commitments on residential mortgages is based on agreed upon pricing with the respective investor on each loan and includes a pull through percentage. The pull through percentage represents an estimate of loans in the pipeline to be delivered to an investor versus the total loans committed for delivery. Significant changes in this input could result in a significantly higher or lower fair value measurement. As the pull through percentage is a significant unobservable input, this is deemed a Level 3 valuation input. The average pull through percentage, which is based upon historical experience, was 92% as of March 31, 2023. An increase or decrease of 5% in the pull through assumption would result in a positive or negative change of $4 thousand in the fair value of interest rate lock commitments at March 31, 2023. The following provides details of the Level 3 fair value measurement activity for the periods ended March 31, 2023 and 2022: Investment securities:
Interest rate lock commitments on residential mortgages:
Certain financial assets are measured at fair value on a nonrecurring basis. Adjustments to the fair value of these assets usually results from the application of lower of cost or market accounting or write-downs of individual assets. The Company used the following methods and significant assumptions to estimate fair value for these financial assets. Individually Evaluated Loans Upon adoption of CECL, loans individually evaluated for credit expected losses included nonaccrual loans and other loans that do not share similar risk characteristics to loans in the CECL loan pools, which have been classified as Level 3. Individually evaluated loans with an allocation to the ACL are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for credit losses on the unaudited condensed consolidated statements of income. Prior to the adoption of CECL and ASU No. 2022-02, which eliminated the TDR accounting model, loans were designated as impaired when, in the judgment of management and based on current information and events, it is probable that all amounts due, according to the contractual terms of the loan agreement, will not be collected. The measurement of loss associated with loans evaluated individually for all loan classes was based on either the observable market price of the loan, the fair value of the collateral, or discounted cash flows. For collateral-dependent loans, fair value was measured based on the value of the collateral securing the loan, less estimated costs to sell. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The value of the real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral is a house or building in the process of construction, or if management adjusts the appraisal value, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal, if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivable collateral are based on financial statement balances or aging reports (Level 3). Changes in the fair value of individually evaluated loans still held and considered in the determination of the provision for credit losses were $225 thousand and $(40) thousand for the three months ended March 31, 2023 and 2022, respectively. Foreclosed Real Estate OREO property acquired through foreclosure is initially recorded at the fair value of the property at the transfer date less estimated selling cost. Subsequently, OREO is carried at the lower of its carrying value or the fair value less estimated selling cost. Fair value is usually determined based upon an independent third-party appraisal of the property or occasionally upon a recent sales offer. Subsequent declines in the fair value are recorded through a valuation allowance with a charge to the consolidated statement of income. An increase in the fair value of the property may be recognized up to the cost basis of the OREO. The Company had $85 thousand in OREO balances at March 31, 2023 for which there were no adjustments to the fair value. The Company had no OREO at December 31, 2022. Mortgage Servicing Rights MSRs are evaluated for impairment by comparing the carrying value to the fair value, which is determined through a discounted cash flow valuation. To the extent the amortized cost of the MSRs exceeds their estimated fair values, a valuation allowance is established for such impairment. Fair value adjustments on the MSRs only occurs if there is an impairment charge. At March 31, 2023 and December 31, 2022, the MSR impairment reserve was zero for both periods. For the three months ended March 31, 2023 and 2022, impairment valuation allowance reversals of zero and $32 thousand were included, respectively, in mortgage banking activities on the unaudited condensed consolidated statements of income. The reversal in the three months ended March 31, 2022 was due to increases in market rates, which increased the MSR fair value. The following table summarizes assets measured at fair value on a nonrecurring basis at March 31, 2023 and December 31, 2022:
The following table presents additional qualitative information about assets measured on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:
Fair values of financial instruments GAAP requires disclosure of the fair value of financial assets and liabilities, including those that are not measured and reported at fair value on a recurring or nonrecurring basis. The following table presents carrying amounts and estimated fair values of the financial assets and liabilities at March 31, 2023 and December 31, 2022:
In accordance with the Company's adoption of ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, the methods utilized to measure the fair value of financial instruments at March 31, 2023 and December 31, 2022 represent an approximation of exit price; however, an actual exit price may differ. For deposits held for assumption in connection with the sale of bank branches, the Company announced on December 23, 2022 that it had entered into a Purchase and Assumption Agreement providing for the sale of a branch and associated deposit liabilities at an agreed upon premium of 6.0% of the financial deposit balance transferred.
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CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENCIES | CONTINGENCIES The nature of the Company’s business generates a certain amount of litigation involving matters arising out of the ordinary course of business. Except as described below, in the opinion of management, there are no legal proceedings that might have a material effect on the results of operations, liquidity, or the financial position of the Company at this time. On May 25, 2012, the Southeastern Pennsylvania Transportation Authority (“SEPTA”) filed a putative class action complaint in the U.S. District Court for the Middle District of Pennsylvania against the Company, the Bank and nine independent current and former directors and three current and former officers of the Company and the Bank. The complaint asserted claims under Sections 11, 12(a) and 15 of the Securities Act, Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, and sought class certification, unspecified money damages, interest, costs, fees and equitable or injunctive relief. Under the Private Securities Litigation Reform Act of 1995, the Court appointed SEPTA Lead Plaintiff on August 20, 2012. On March 4, 2013, SEPTA filed an amended complaint. The amended complaint expanded the list of defendants in the action to include the Company’s former independent registered public accounting firm and the underwriters of the Company’s March 2010 public offering of common stock. In addition, among other things, the amended complaint extended the purported Exchange Act class period from March 15, 2010 through April 5, 2012. After years of litigation, on November 7, 2022, the Company, in order to avoid the cost, risks and distraction of continued litigation, entered into a Memorandum of Understanding (the “MOU”) to settle and resolve the lawsuit. The MOU memorialized the parties’ agreement to execute and submit a formal, binding settlement agreement for the Court’s approval, setting forth all of the material terms of the settlement reached by the plaintiffs and defendants. On December 7, 2022, the Company entered into a Stipulation and Agreement of Settlement (the “Stipulation”) providing for a payment to the plaintiffs of $15.0 million, to which the Company agreed to contribute and has funded $13.0 million in escrow, a mutual release of claims against all parties, and a stipulation that the lawsuit will be dismissed with prejudice. The Stipulation does not include any admission of wrongdoing by any party. The Stipulation provides that the defendants have the option to terminate the settlement if class members who in the aggregate purchased more than a certain number of shares of the Company’s common stock during the class period, timely and validly exclude themselves from the class. The Stipulation was filed with the Court on December 8, 2022. On February 1, 2023, the Court issued an order which, among other things, preliminarily approved the Stipulation. The Stipulation is subject to final Court approval. On March 25, 2022, a customer of the Bank filed a putative class action complaint against the Bank in the Court of Common Pleas of Cumberland County, Pennsylvania, in a case captioned Alleman, on behalf of himself and all others similarly situated, v. Orrstown Bank. The complaint alleges, among other things, that the Bank breached its account agreements by charging certain overdraft fees. The complaint seeks a refund of all allegedly improper fees, damages in an amount to be proven at trial, attorneys’ fees and costs, and an injunction against the Bank’s allegedly improper overdraft practices. This lawsuit is similar to lawsuits recently filed against other financial institutions pertaining to overdraft fee disclosures. The Bank believes that the allegations and claims against the Bank are without merit.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Operations | Nature of Operations – Orrstown Financial Services, Inc. is a financial holding company that operates Orrstown Bank, a commercial bank providing banking and financial advisory services in Berks, Cumberland, Dauphin, Franklin, Lancaster, Perry and York Counties, Pennsylvania, and in Anne Arundel, Baltimore, Howard and Washington Counties, Maryland. The Company operates in the community banking segment and engages in lending activities, including commercial, residential, commercial mortgages, construction, municipal, and various forms of consumer lending, and deposit services, including checking, savings, time, and money market deposits. The Company’s lending area also includes adjacent counties in Pennsylvania and Maryland, as well as Loudon County, Virginia and Berkeley, Jefferson and Morgan Counties, West Virginia. The Company also provides fiduciary services, investment advisory, insurance and brokerage services. The Company and the Bank are subject to regulation by certain federal and state agencies and undergo periodic examinations by such regulatory authorities. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation – The accompanying unaudited condensed consolidated financial statements include the accounts of Orrstown Financial Services, Inc. and its wholly owned subsidiary, the Bank. The Company has prepared these unaudited condensed consolidated financial statements in accordance with GAAP for interim financial information, SEC rules that permit reduced disclosure for interim periods, and Article 10 of Regulation S-X. In the opinion of management, all adjustments (all of which are of a normal recurring nature) that are necessary for a fair statement are reflected in the unaudited condensed consolidated financial statements. There have been no material changes to the Company's significant accounting policies for the three months ended March 31, 2023, except for the adoption of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces our ALL policy under the incurred loss model, and adoption of ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which replaces our TDR accounting model policy, which are both discussed below in Recently Adopted Accounting Standards. The December 31, 2022 consolidated balance sheet information contained in this Quarterly Report on Form 10-Q was derived from the Company's 2022 audited consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. All significant intercompany transactions and accounts have been eliminated. Certain reclassifications have been made to the prior period amounts to conform with current period classifications. These reclassifications did not have a material impact on the Company's consolidated financial condition, results of operations or statement of consolidated cash flows. The Company's management has evaluated all activity of the Company and concluded that subsequent events are properly reflected in the Company's unaudited condensed consolidated financial statements and notes as required by GAAP. To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.
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Derivatives | Derivatives - FASB ASC 815, Derivatives and Hedging (“ASC 815”), provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. As required by ASC 815, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company's objectives in using interest rate derivatives are to add stability to interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of fixed amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount. Changes to the fair value of derivatives designated and that qualify as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged transaction affects earnings. The Company discontinues cash flow hedge accounting if it is probable the forecasted hedged transactions will not occur in the initially identified time period due to circumstances, such as the impact of the COVID-19 pandemic. Upon discontinuance, the associated gains and losses deferred in AOCI are reclassified immediately into earnings and subsequent changes in the fair value of the cash flow hedge are recognized in earnings. At March 31, 2023 and December 31, 2022, the Company had two interest rate derivatives designated as hedging instruments with a total notional value of $100.0 million. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps and interest rate caps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps and interest rate caps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. At March 31, 2023 and December 31, 2022, the Company had interest rate swaps not designated as hedges with a total notional value of $269.9 million and $268.8 million, respectively. The Company also may enter into risk participation agreements with a financial institution counterparty for an interest rate derivative contract related to a loan in which the Company may be a participant or the agent bank. The risk participation agreement provides credit protection to the agent bank should the borrower fail to perform on its interest rate derivative contracts with the agent bank. The Company manages its credit risk on risk participation agreements by monitoring the creditworthiness of the borrower, which follows the same credit review process as derivative instruments entered into directly with the borrower. The notional amount of a risk participation agreement reflects the Company's pro-rata share of the derivative instrument, consistent with its share of the related participated loan. Changes in the fair value of the risk participation agreement are recognized directly into earnings. At March 31, 2023 and December 31, 2022, the Company had a risk participation with sold protection with a notional value of $29.2 million and $29.0 million, respectively, and a risk participation with purchased protection with a notional value of $4.9 million at both March 31, 2023 and December 31, 2022. As a part of its normal residential mortgage operations, the Company will enter into an interest rate lock commitment with a potential borrower. The Company may enter into a corresponding commitment with an investor to sell that loan at a specific price shortly after origination. In accordance with FASB ASC 820, adjustments are recorded through earnings to account for the net change in fair value of these held for sale loans. The fair value of held for sale loans can vary based on the interest rate locked with the customer and the current market interest rate at the balance sheet date. At March 31, 2023 and December 31, 2022, the Company had interest rate lock commitments with a notional value of $2.0 million and $1.4 million, respectively, and forward sale loan commitments with a notional value of $1.1 million and $3.5 million, respectively.
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Leases | Leases - The Company evaluates its contracts at inception to determine if an arrangement either is a lease or contains one. Operating lease ROU assets are included in other assets and operating lease liabilities in accrued interest payable and other liabilities in the unaudited condensed consolidated balance sheets. The Company had no finance leases at March 31, 2023 and December 31, 2022. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company's leases do not provide an implicit rate, so the Company's incremental borrowing rate is used, which approximates its fully collateralized borrowing rate, based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is reevaluated upon lease modification. The operating lease ROU asset also includes any initial direct costs and prepaid lease payments made less any lease incentives. In calculating the present value of lease payments, the Company may include options to extend the lease when it is reasonably certain that it will exercise that option. In accordance with ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), the Company keeps leases with an initial term of 12 months or less off of the balance sheet. The Company recognizes these lease payments in the unaudited condensed consolidated statements of income on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components and has elected the practical expedient to account for them as a single lease component. The Company's operating leases relate primarily to bank branches and office space. The difference between the lease asset and lease liabilities primarily consists of deferred rent liabilities reclassified upon adoption to reduce the measurement of the lease assets. The standard does not materially impact the Company's unaudited condensed consolidated statements of income.
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Recent Accounting Pronouncements | Recently Adopted Accounting Standards Allowance for Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). On January 1, 2023, the Company adopted ASU 2016-13, the current expected credit losses accounting standard commonly referred to as "CECL," which replaces the incurred loss model with the lifetime expected loss model. The CECL methodology requires an organization to measure all expected credit losses over the contractual term for financial assets measured at amortized cost, including loan receivables and held-to-maturity securities, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The CECL methodology also applies to off-balance sheet credit exposures not accounted for as insurance (e.g., loan commitments, standby letters of credit, financial guarantees and other similar instruments), net investments in leases recognized by a lessor in accordance with ASC Topic 842 on leases and AFS debt securities. To implement the new standard, the Company established a cross-discipline governance structure, which included a dedicated working group and a CECL Committee consisting of members from different functions including Finance, Credit, Risk and Lending, who provided implementation oversight and reviewed policy elections, key assumptions, processes, and model results. The working group was responsible for the implementation process that included developing the loan segmentation, data sourcing and validation, loss driver inputs, qualitative factors, parallel model runs, scenario testing and back testing. The Company utilized a third-party vendor to assist in the implementation process of its new model to calculate credit losses over the estimated life of the applicable financial assets. The Company elected to use the discounted cash flow (“DCF”) methodology for the quantitative analysis for the majority of its loan segments, which applies the probability of default and loss given default factors to future cash flows, and then adjusts to the net present value to derive the required reserve. Reasonable and supportable macroeconomic conditions include unemployment and GDP. Model assumptions include the discount rate, prepayments and curtailments. The development and validation of credit models also included determining the length of the reasonable and supportable forecast and regression period and utilizing national peer group historical loss rates. For the consumer loan segments, the remaining life methodology was selected as a practical expedient and based on the risk characteristics. The implementation also included review of model runs and certain assumptions, documentation of policies, procedures and controls, and engagement of another third-party consultant for model validation. The Company adopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. The adoption of the new CECL standard resulted in a cumulative-effect adjustment that increased the ACL for loans by $2.4 million and increased the off-balance sheet credit exposures reserve by $100 thousand. Retained earnings, net of deferred taxes, decreased by $2.0 million, and deferred tax assets increased by $559 thousand. Results for reporting periods beginning after January 1, 2023 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with the incurred loss model under the previously applicable GAAP. The following table illustrates the impact of the adoption of CECL, and the transition away from the incurred loss method, on January 1, 2023. The impact to the ACL is presented at the loan segment level:
Recent Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 contains optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The optional expedients apply consistently to all contracts or transactions within the scope of this topic, while the optional expedients for hedging relationships can be elected on an individual basis. The Company has a cross-functional working group that is leading the transition from LIBOR to a planned adoption of an alternate index. The Company currently plans to replace LIBOR with the 30-Day Average SOFR or Term SOFR in its loan agreements. The Company implemented fallback language for loans with maturities after 2021. The Company expects to adopt the LIBOR transition relief allowed under this standard, and does not expect a significant impact on its financial statements.
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Allowance for Credit Losses on Loans | Allowance for Credit Losses on Loans The allowance for credit losses represents the amount that, in management's judgment, appropriately reflects credit losses inherent in the loan portfolio at the balance sheet date. Loans deemed to be uncollectible are charged against the ACL on loans, and subsequent recoveries, if any, are credited to the ACL on loans when received. Changes to the ACL are recorded through the provision for credit losses on loans in the consolidated statement of income. The ACL is maintained at a level considered appropriate to absorb credit losses over the expected life of the loan. The ACL for expected credit losses is determined based on a quantitative assessment of two categories of loans: collectively evaluated loans and individually evaluated loans. In addition, the ACL also includes a qualitative component which adjusts the CECL model results for risk factors that are not considered within the CECL model, but are relevant in assessing the expected credit losses within the loan classes. The ACL on loans is measured on a collective basis when similar risk characteristics exist within the Company's loan segments between commercial and consumer. For purposes of estimating the Company’s ACL, management generally evaluates collectively evaluated loans by federal call code in order to group loans with similar risk characteristics. Each of these loan segments are broken down into multiple loan classes, which are characterized by loan type, collateral type, risk attributions and the manner in which management monitors the performance of the borrower. The risks associated with lending activities differ and are subject to the impact of change in interest rates, market conditions and the impact on the collateral securing the loans, and general economic conditions. The commercial loan segment includes commercial real estate, acquisition and development, commercial and industrial and municipal loan classes. The consumer loan segment includes residential mortgage, installment and other consumer loans. Loans collectively evaluated includes loans on accrual status, except for loans previously restructured that do not share similar risk characteristics, which the ACL is measured using a lifetime expected loss rate model that considers historical loss performance and past events in addition to forecasts of future economic conditions. The Company elected to use the DCF methodology for the quantitative analysis for the majority of its loan segments, which applies the probability of default, using a loss driver model and loss given default factors to future cash flows, and then adjusts to the net present value to derive the required reserve. The probability of default estimates are derived through the application of reasonable and supportable economic forecasts to the regression models, which incorporates the Company's and peer loss-rate data, unemployment rate and GDP. The reasonable and supportable forecasts of the selected economic metrics are then input into the regression model to calculate an expected default rate. The expected default rates are then applied to expected loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The prepayment and curtailment assumptions adjust the contractual terms of the loan to arrive at the expected cash flows. The development and validation of credit models also included determining the length of the reasonable and supportable forecast and regression period and utilizing national peer group historical loss rates. Management selected the national unemployment rate and GDP as the drivers of the quantitative portion of collectively evaluated reserves on loan classes reliant upon the DCF methodology, primarily as a result of high correlation coefficients identified in regression modeling. For the consumer loan segment, the quantitative reserve was calculated using the remaining life methodology where the average historical bank-specific and peer loss rates are applied to expected loan balances over an estimated remaining life of loans. The estimated remaining life is calculated using historical bank-specific loan attrition data. Loans that do not share similar risk characteristics are evaluated on an individual basis, and are excluded from the collective evaluation for the ACL. Loans identified to be individually evaluated under CECL include loans on nonaccrual status and may include accruing loans that do not share similar risk characteristics to other accruing loans collectively evaluated. A specific reserve analysis is applied to the individually evaluated loans, which considers collateral value, an observable market price or the present value of expected future cash flows. A specific reserve may be assigned if the measured value of the loan using one of the before mentioned methods is less than the current carrying value of the loans. A loan is considered collateral-dependent when the Company determines foreclosure is probable or the borrower is experiencing financial difficulty and the Company expects repayment to be provided substantially through the operation or sale of the collateral. Collateral could be in the form of real estate, equipment or business assets. An ACL may result for a collateral-dependent loan if the fair value of the underlying collateral, as of the reporting date, adjusted for expected costs to repair or sell, was less than the amortized cost basis of the loan. If repayment of the loan is instead dependent only on the operation, rather than the sale of the collateral, the measure of the ACL does not incorporate estimated costs to sell. For loans analyzed on the basis of projected future principal and interest cash flows, the Company will discount the expected cash flows at the effective interest rate of the loan, and an ACL would result if the present value of expected cash flows was less than the amortized cost basis of the loan. Based on management's analysis, adjustments may be applied for additional factors impacting the risk of loss in the loan portfolio beyond the quantitatively calculated reserve on collectively evaluated loans. As the quantitative reserve calculation incorporates historical conditions, management may consider an additional or reduced reserve is warranted through qualitative risk factors based on current and expected conditions. These qualitative risk factors considered by management are comparable to legacy factors prior to the adoption of CECL and include significant or unexpected changes in: •Lending policies, procedures, underwriting standards and recovery practices; •Nature and volume of loans; •Concentrations of credit; •Collateral valuation trends; •Delinquency trends; •Experience, ability and depth of management and lending staff; •Quality of loan review system; and •Economic conditions and other external factors. For PCD loans, the nonaccrual status is determined in the same manner as for other loans. Prior to the adoption of CECL, these PCD loans were classified as PCI loans and accounted for under ASC Subtopic 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30"). In accordance with the CECL standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the adoption date. As permitted by CECL, the Company elected to account for its PCD loans under ASC 310-20, Receivables - Nonrefundable Fees and Other Assets ("ASC 310-20"). These loans are initially recorded at fair value, and include credit and interest rate marks associated with acquisition accounting adjustments. Purchase premiums or discounts are subsequently amortized as an adjustment to yield over the estimated contractual lives of the loans. Under ASC 310-20, the acquired loans are analyzed on an individual asset level, and no longer maintained in pools and accounted for as units of accounts, which would permit treating each pool as a single asset. The impact of this election resulted in loans reported as nonaccrual and individually evaluated for credit expected losses under the CECL methodology. For off-balance sheet credit exposures, the Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk from the contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on off-balance sheet credit exposures includes consideration of the utilization rates expected on the loan commitments, and estimates the expected credit losses for the undrawn commitments by the loan segments. The ACL on off-balance sheet credit exposures is recorded in other liabilities on the consolidated balance sheets and is adjusted through the provision for credit losses in the consolidated statements of income. In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 eliminates the TDR accounting model, and requires that the Company evaluate, based on the accounting for loan modifications, whether the borrower is experiencing financial difficulty and the modification results in a more-than-insignificant direct change in the contractual cash flows and represents a new loan or a continuation of an existing loan, which the Company refers to these loans as "financial difficulty modifications" or "FDMs." This change required all loan modifications to be accounted for under the general loan modification guidance in ASC 310-20, Receivables – Nonrefundable Fees and Other Costs, and subject entities to new disclosure requirements on loan modifications to borrowers experiencing financial difficulty. Upon adoption of CECL, the TDRs were evaluated and included in the CECL loan segment pools if the loans shared similar risk characteristics to other loans in the pool or remained with loans individually evaluated for which the ACL was measured using the collateral-dependent or discounted cash flow method. On January 1, 2023, the Company adopted ASU 2022-02 on a modified retrospective basis, which did not have a material impact on the consolidated financial statements. A comprehensive analysis of the ACL is performed by the Company on a quarterly basis. Management evaluates the adequacy of the ACL utilizing a defined methodology to determine if it properly addresses the current and expected risks in the loan portfolio, which considers the performance of borrowers and specific evaluation of individually evaluated loans including historical loss experiences, trends in delinquencies, nonperforming loans and other risk assets, and the qualitative factors. Risk factors are continuously reviewed and adjusted, as needed, by management when conditions support a change. Management believes its approach properly addresses relevant accounting and bank regulatory guidance for loans both collectively and individually evaluated. The results of the comprehensive analysis, including recommended changes, are governed by the Company's Reserve Adequacy Committee, whose members were also a part of the Company's CECL Committee.
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Allowance for Credit Losses on AFS Securities | Allowance for Credit Losses on AFS Securities Prior to implementation of CECL, unrealized losses on AFS debt securities caused by a credit event would require the direct write-down of the AFS security through the other-than-temporary impairment approach; however, the new standard requires credit losses to be presented as an ACL. The Company is still required to conduct an impairment evaluation on AFS securities to determine whether the Company has the intent to sell the security or it is more likely than not that it will be required to sell the security before recovery. If these situations apply, the guidance continues to require the Company to reduce the security's amortized cost basis down to its fair value through earnings. The Company also evaluates the unrealized losses on AFS securities to determine if a security's decline in fair value below its amortized cost basis is due to credit factors. The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying collateral, if applicable, and the level of credit support in the security structure. Management also evaluates other factors and circumstances that may be indicative of a decline in the fair value of the security due to a credit factor. This includes, but is not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost and near-term prospects of the issuer. If this assessment indicates that a credit loss exists, the present value of the expected cash flows of the security is compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost, an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis under the CECL standard, and declines due to non-credit factors are recorded in AOCI, net of taxes. If a credit loss is recognized in earnings, subsequent improvements to the expectation of collectability will be recognized through the ACL. If the fair value of the security increases above its amortized cost, the unrealized gain will be recorded in AOCI, net of taxes, on the unaudited condensed consolidated statements of financial condition. Accrued interest receivable on AFS securities is excluded from the estimate of credit losses. The Company did not record a cumulative-effect adjustment related to its AFS securities upon adoption of CECL on January 1, 2023.
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Schedule of the Impact of the Adoption of CECL and the Transition Away from the Incurred Loss Method | The following table illustrates the impact of the adoption of CECL, and the transition away from the incurred loss method, on January 1, 2023. The impact to the ACL is presented at the loan segment level:
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Amortized Cost and Fair Values of AFS Securities | At March 31, 2023 and December 31, 2022, all investment securities were classified as AFS. The following table summarizes amortized cost, fair value and ACL of investment securities, and the corresponding amounts of gross unrealized gains and losses recognized in AOCI, and the allowance for credit losses at March 31, 2023 and December 31, 2022:
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Summary of Investment Securities with Unrealized Losses | The following table summarizes investment securities with unrealized losses, for which an ACL has not been recorded at March 31, 2023 and cumulative OTTI expense was not recognized at December 31, 2022, aggregated by major investment security type and the length of time in a continuous unrealized loss position.
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Schedule of Amortized Cost and Fair Values of AFS Securities by Contractual Maturity | The following table summarizes amortized cost and fair value of investment securities by contractual maturity at March 31, 2023. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
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Proceeds From Sale of AFS Securities and Gross Gains and Gross Losses | The following table summarizes proceeds from sales of investment securities and gross gains and gross losses for the three months ended March 31, 2023 and 2022:
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LOANS AND ALLOWANCE FOR CREDIT LOSSES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Loan Portfolio, Excluding Residential Loans Held for Sale, Broken Out by Classes | The following table presents the loan portfolio by segment and class, excluding residential LHFS, at March 31, 2023 and December 31, 2022:
(1) This balance includes $10.8 million and $13.8 million of SBA PPP loans, net of deferred fees and costs, at March 31, 2023 and December 31, 2022, respectively.
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Amortized Cost of the Loan Portfolio, By Year of Origination, Loan Class, And Credit Quality | The following table presents the amortized cost basis of the loan portfolio, by year of origination, loan class, and credit quality, as of March 31, 2023. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan and payment activity, which residential mortgage and installment and other consumer loans are presented below based on payment performance: performing or nonperforming.
The information presented in the table above is not required for periods prior to the adoption of CECL. The following table summarizes the Company’s loan portfolio ratings based on its internal risk rating system at December 31, 2022, which presents the most comparable required information for the prior period. Prior to the adoption of CECL, PCD loans were classified as PCI loans and accounted for under ASC 310-30. In accordance with the CECL standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the adoption date. At March 31, 2023, the amortized cost of the PCD loans was $9.4 million.
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Schedule Of Amortized Cost Of Nonaccrual Loans By Class, With And Without Loan Reserves | The following table presents the amortized cost basis of nonaccrual loans, according to loan class, with and without reserves on individually evaluated loans as of March 31, 2023, as compared to nonaccrual loans at December 31, 2022. The Company did not recognize interest income on nonaccrual loans during the three months ended March 31, 2023.
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Schedule Of Amortized Cost Basis Of Collateral-Dependent Loans | The following table presents the amortized cost basis of collateral-dependent loans by class as of March 31, 2023:
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Impaired Loans by Segment and Class | The following table, which excludes accruing PCI loans, presents the most comparable required information for the prior period, which summarizes impaired loans by segment and class, segregated by those for which a specific allowance was required and those for which a specific allowance was not required at December 31, 2022. The recorded investment in loans excludes accrued interest receivable. Related allowances established generally pertain to those loans in which loan forbearance agreements were in the process of being negotiated or updated appraisals were pending, and any partial charge-off will be recorded when final information is received.
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Average Recorded Investment in Impaired Loans and Related Interest Income | The following table, which excludes accruing PCI loans, presents the most comparable required information for the prior period and summarizes the average recorded investment in impaired loans and related recognized interest income for the three months ended March 31, 2022:
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Troubled Debt Restructurings | The following table presents the most comparable required information for the prior period for impaired loans that were TDRs, with the recorded investment at December 31, 2022:
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Loan Portfolio Summarized by Aging Categories of Performing Loans and Nonaccrual Loans | The following table presents the classes of the loan portfolio summarized by aging categories at March 31, 2023:
The following table presents the most comparable required information for the prior period, which includes the classes of the loan portfolio summarized by aging categories of performing loans and nonaccrual loans at December 31, 2022:
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Summary of Activity in the ALL and Ending Loan Balances Individually Evaluated for Impairment Based on Loan Segment | The following table presents the activity in the ACL, including the impact of adopting CECL, for the three months ended March 31, 2023 and the activity in the ALL for the three months ended March 31, 2022:
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LEASES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of ROU Assets and Related Lease Liabilities | The following table summarizes the Company's operating leases at March 31, 2023 and December 31, 2022:
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Information Related to Operating Leases | The following table presents information related to the Company's operating leases for the three months ended March 31, 2023 and 2022:
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Schedule of Maturities of Lease Liabilities | The following table presents expected future maturities of the Company's lease liabilities as of March 31, 2023:
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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Other Intangible Assets | The following table presents changes in and components of other intangible assets for the three months ended March 31, 2023 and 2022. No impairment charges were recorded on other intangible assets during the three months ended March 31, 2023 and March 31, 2022.
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Schedule of Components of Other Intangible Assets | The following table presents the components of other identifiable intangible assets at March 31, 2023 and December 31, 2022:
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Schedule of Estimated Aggregated Amortization Expense | The following table presents future estimated aggregate amortization expense for other identifiable intangible assets at March 31, 2023:
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SHARE-BASED COMPENSATION PLANS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Nonvested Restricted Shares Activity | The following table presents a summary of nonvested restricted shares activity for the three months ended March 31, 2023:
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Schedule of Restricted Shares Compensation Expense | The following table presents restricted share compensation expense, with tax benefit information, and fair value of shares vested, for the three months ended March 31, 2023 and 2022:
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Schedule of Employee Stock Purchase Plan | The following table presents information for the employee stock purchase plan for the three months ended March 31, 2023 and 2022:
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DERIVATIVE FINANCIAL INSTRUMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Derivative Instruments | The following table summarizes the fair value of the Company's derivative instruments at March 31, 2023 and December 31, 2022:
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Effect of Derivative Financial Instruments on OCI and Net Income | The following tables summarize the effect of the Company's derivative financial instruments on OCI and net income for the three months ended March 31, 2023 and 2022:
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Summary of Interest Rate Swap Components | The following table is a summary of components for interest rate swaps designated as hedging instruments at March 31, 2023 and December 31, 2022. At March 31, 2023 and December 31, 2022, the Company had two interest rate derivatives designated as hedges instruments with a total notional value of $100.0 million.
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SHORT-TERM BORROWINGS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the Use of Short-Term Borrowings | The Company has short-term borrowing capability from the FHLB, federal funds purchased and the FRB discount window. The following table summarizes these short-term borrowings at March 31, 2023 and December 31, 2022:
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LONG-TERM DEBT (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-Term Debt | The following table presents components of the Company’s long-term debt at March 31, 2023 and December 31, 2022:
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SHAREHOLDERS' EQUITY AND REGULATORY CAPITAL (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Amounts and Ratios | The following table presents capital amounts and ratios at March 31, 2023 and December 31, 2022:
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EARNINGS PER SHARE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | The following table presents earnings per share for the three months ended March 31, 2023 and 2022:
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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contractual or Notional Amounts, Commitments to Fund | The following table presents these contractual, or notional, amounts at March 31, 2023 and December 31, 2022.
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FAIR VALUE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Assets Measured at Fair Value on Recurring Basis | The following table summarizes assets and liabilities measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022:
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Level 3 Fair Value Measurement Activity | The following provides details of the Level 3 fair value measurement activity for the periods ended March 31, 2023 and 2022: Investment securities:
Interest rate lock commitments on residential mortgages:
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Summary of Assets Measured at Fair Value on Nonrecurring Basis | The following table summarizes assets measured at fair value on a nonrecurring basis at March 31, 2023 and December 31, 2022:
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Summary of Additional Qualitative Information | The following table presents additional qualitative information about assets measured on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:
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Carrying Amounts and Estimated Fair Values of Financial Instruments | The following table presents carrying amounts and estimated fair values of the financial assets and liabilities at March 31, 2023 and December 31, 2022:
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Leases (Details) - lease |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Accounting Policies [Abstract] | ||
Finance leases | 0 | 0 |
INVESTMENT SECURITIES - Schedule of Amortized Cost and Fair Values of AFS Securities by Contractual Maturity (Details) $ in Thousands |
Mar. 31, 2023
USD ($)
|
---|---|
Amortized Cost | |
Due in one year or less | $ 249 |
Due after one year through five years | 21,464 |
Due after five years through ten years | 68,052 |
Due after ten years | 160,735 |
CMOs and MBSs | 187,732 |
Asset-backed | 122,776 |
Amortized Cost | 561,008 |
Fair Value | |
Due in one year or less | 249 |
Due after one year through five years | 19,415 |
Due after five years through ten years | 61,125 |
Due after ten years | 145,848 |
CMOs and MBSs | 174,103 |
Asset-backed | 119,492 |
Total Fair Value | $ 520,232 |
INVESTMENT SECURITIES - Proceeds from Sales of AFS Securities and Gross Gains and Gross Losses (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Investments, Debt and Equity Securities [Abstract] | ||
Proceeds from sale of investment securities | $ 0 | $ 3,075 |
Gross gains | 0 | 25 |
Gross losses | $ 8 | $ 0 |
INVESTMENT SECURITIES - Narrative (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023
USD ($)
|
Mar. 31, 2022
USD ($)
security
|
Dec. 31, 2022
USD ($)
|
|
Debt Securities, Available-for-sale [Line Items] | |||
Investment securities | $ 520,232 | $ 513,728 | |
Number of investments securities, partially sold | security | 1 | ||
Proceeds from sale of investment securities | 0 | $ 3,075 | |
Collateral Pledged | |||
Debt Securities, Available-for-sale [Line Items] | |||
Investment securities pledged to secure public funds, fair value | 428,900 | 396,800 | |
Equity Securities | |||
Debt Securities, Available-for-sale [Line Items] | |||
(Losses) gain on investments | (8) | 25 | |
Debt Securities | |||
Debt Securities, Available-for-sale [Line Items] | |||
(Losses) gain on investments | 22 | ||
Investment securities | 3,100 | ||
Proceeds from sale of investment securities | 3,100 | ||
Non-agency CMOs | |||
Debt Securities, Available-for-sale [Line Items] | |||
(Losses) gain on investments | $ 171 | ||
Investment securities | $ 40,891 | $ 39,758 |
LOANS AND ALLOWANCE FOR CREDIT LOSSES - Troubled Debt Restructurings (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2022
USD ($)
contract
bank
| |
Financing Receivable, Modifications [Line Items] | |
Number of Contracts | bank | 13 |
Recorded Investment | $ 896 |
Accruing | Residential mortgage | First lien | |
Financing Receivable, Modifications [Line Items] | |
Number of Contracts | contract | 8 |
Recorded Investment | $ 682 |
Nonaccruing | |
Financing Receivable, Modifications [Line Items] | |
Number of Contracts | bank | 5 |
Recorded Investment | $ 214 |
Nonaccruing | Residential mortgage | First lien | |
Financing Receivable, Modifications [Line Items] | |
Number of Contracts | bank | 4 |
Recorded Investment | $ 212 |
Nonaccruing | Installment and other loans | |
Financing Receivable, Modifications [Line Items] | |
Number of Contracts | bank | 1 |
Recorded Investment | $ 2 |
LEASES - Narrative (Details) |
Mar. 31, 2023 |
---|---|
Minimum | |
Lessee, Lease, Description [Line Items] | |
Lease terms | 5 years |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Lease terms | 30 years |
LEASES - Summary of Information Related to Operating Leases (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Leases [Abstract] | |||
Operating lease ROU assets | $ 9,065 | $ 9,270 | |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Other assets | Other assets | |
Operating lease ROU liabilities | $ 9,794 | $ 9,976 | |
Operating Lease, Liability, Statement of Financial Position [Extensible List] | Other Liabilities | Other Liabilities | |
Weighted-average remaining lease term (in years) | 14 years 2 months 12 days | 14 years 3 months 18 days | |
Weighted-average discount rate | 4.10% | 4.10% | |
Cash paid for operating lease liabilities | $ 284 | $ 294 | |
Operating lease expense | $ 309 | $ 394 |
LEASES - Schedule of Maturities of Leases Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Leases [Abstract] | ||
2023 | $ 870 | |
2024 | 1,179 | |
2025 | 1,201 | |
2026 | 1,233 | |
2027 | 1,267 | |
Thereafter | 8,187 | |
Total | 13,937 | |
Less: imputed interest | 4,143 | |
Total lease liabilities | $ 9,794 | $ 9,976 |
GOODWILL AND OTHER INTANGIBLE ASSETS - Narrative (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Nov. 30, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Goodwill | $ 18,724,000 | $ 18,700,000 | $ 18,724,000 | |
Impairments | $ 0 | 0 | 0 | |
Impairment of intangibles | $ 0 | $ 0 |
GOODWILL AND OTHER INTANGIBLE ASSETS - Changes in Other Intangible Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Finite-lived Intangible Assets [Roll Forward] | ||
Beginning of period | $ 3,078 | $ 4,183 |
Amortization expense | (250) | (292) |
Balance, end of period | $ 2,828 | $ 3,891 |
GOODWILL AND OTHER INTANGIBLE ASSETS - Components of Other Identifiable Intangible Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | $ 8,390 | $ 8,415 |
Accumulated Amortization | 5,562 | 5,337 |
Core deposit intangibles | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 8,390 | 8,390 |
Accumulated Amortization | 5,562 | 5,312 |
Other customer relationship intangibles | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 0 | 25 |
Accumulated Amortization | $ 0 | $ 25 |
GOODWILL AND OTHER INTANGIBLE ASSETS - Schedule of Estimated Aggregate Amortization Expense for Other Identifiable Intangible Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|---|---|
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract] | ||||
2023 | $ 685 | |||
2024 | 766 | |||
2025 | 596 | |||
2026 | 427 | |||
2027 | 258 | |||
Thereafter | 96 | |||
Total | $ 2,828 | $ 3,078 | $ 3,891 | $ 4,183 |
SHARE-BASED COMPENSATION PLANS - Summary of Nonvested Restricted Shares Activity (Details) - Orrstown 2011 Incentive Stock Plan - Restricted Stock |
3 Months Ended |
---|---|
Mar. 31, 2023
$ / shares
shares
| |
Shares | |
Nonvested shares, beginning of year (in shares) | shares | 284,909 |
Granted (in shares) | shares | 138,001 |
Forfeited (in shares) | shares | (14,774) |
Vested (in usd per share) | shares | (85,321) |
Nonvested shares, at period end (in shares) | shares | 322,815 |
Weighted Average Grant Date Fair Value | |
Nonvested shares, beginning of year (in usd per share) | $ / shares | $ 22.35 |
Granted (in usd per share) | $ / shares | 23.92 |
Forfeited (in usd per share) | $ / shares | 21.68 |
Vested (in usd per share) | $ / shares | 22.10 |
Nonvested shares, at period end (in usd per share) | $ / shares | $ 23.11 |
SHARE-BASED COMPENSATION PLANS - Schedule of Restricted Shares Compensation Expense (Details) - Orrstown 2011 Incentive Stock Plan - Restricted Stock - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Restricted share award expense | $ 616 | $ 330 |
Restricted share award tax benefit | 129 | 69 |
Fair value of shares vested | $ 2,037 | $ 1,324 |
SHARE-BASED COMPENSATION PLANS - Schedule of Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items] | ||
Shares purchased (in shares) | 3,003 | 3,953 |
Weighted average price of shares purchased (in usd per share) | $ 21.85 | $ 22.46 |
Compensation expense recognized | $ 3 | $ 8 |
DERIVATIVE FINANCIAL INSTRUMENTS - Summary of Components for Interest Rate Swaps Designated as Cash Flow Hedges (Details) - Interest rate swap |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Derivative [Line Items] | ||
Weighted average pay rate | 4.56% | 3.81% |
Weighted average receive rate | 3.81% | 3.81% |
Weighted average maturity in years | 1 year | 1 year 2 months 12 days |
SHORT-TERM BORROWINGS - Summary of the Use of Short-Term Borrowings (Detail) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Debt Disclosure [Abstract] | ||
Balance at year-end | $ 120,984 | $ 104,684 |
Weighted average interest rate at year-end | 5.12% | 4.45% |
Average balance during the year | $ 83,919 | $ 13,846 |
Average interest rate during the year | 4.94% | 3.97% |
Maximum month-end balance during the year | $ 120,984 | $ 104,684 |
LONG-TERM DEBT - Schedule of Long-Term Debt (Detail) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Amount | ||
Advance from Federal Home Loan Bank, Total | $ 41,341 | $ 1,455 |
Weighted Average Rate | ||
Weighted Average Rate | 4.22% | 4.74% |
FHLB Fixed Rate Advances Maturing | ||
Amount | ||
2025 | $ 15,000 | $ 0 |
2028 | 25,000 | 0 |
Total FHLB fixed rate advances maturing | $ 40,000 | $ 0 |
Weighted Average Rate | ||
2025 | 4.57% | 0.00% |
2028 | 3.98% | 0.00% |
Weighted Average Rate | 4.20% | 0.00% |
FHLB amortizing advance requiring monthly principal and interest payments, maturing | ||
Amount | ||
2025 | $ 1,341 | $ 1,455 |
Weighted Average Rate | ||
2025 | 4.74% | 4.74% |
LONG-TERM DEBT - Narrative (Detail) |
Mar. 31, 2023
USD ($)
bank
|
Dec. 31, 2022
USD ($)
bank
|
---|---|---|
Line of Credit Facility [Line Items] | ||
Collateral for all outstanding loans | $ 1,100,000,000 | |
Additional availability at the FHLB based on qualifying collateral | 903,500,000 | |
Letters of credit | 1,000,000 | |
Letters of credit non-deposit | 440,000 | |
Available unsecured lines of credit | $ 30,000,000 | $ 30,000,000 |
Number of correspondent banks | bank | 2 | 2 |
Borrowings under lines of credit | $ 0 | $ 0 |
Line of Credit | Federal Home Loan Bank Program | ||
Line of Credit Facility [Line Items] | ||
Available unsecured lines of credit | $ 53,200,000 | $ 45,300,000 |
EARNINGS PER SHARE - Calculation of Basic and Diluted Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Earnings Per Share [Abstract] | ||
Net income | $ 9,156 | $ 8,368 |
Weighted average shares outstanding - basic (in shares) | 10,385 | 10,860 |
Dilutive effect of share-based compensation (in shares) | 111 | 147 |
Weighted average shares outstanding - diluted (in shares) | 10,496 | 11,007 |
Per share information: | ||
Basic (loss) earnings per share (in usd per share) | $ 0.88 | $ 0.77 |
Diluted (loss) earnings per share (in usd per share) | $ 0.87 | $ 0.76 |
EARNINGS PER SHARE - Narrative (Details) - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Earnings Per Share [Abstract] | ||
Average outstanding options excluded from diluted earnings per share (in shares) | 5,513 | 112,223 |
FAIR VALUE - Level 3 Fair Value Measurement Activity (Details) - Level 3 - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Interest rate lock commitments on residential mortgages | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance, beginning of period | $ 35 | $ 353 |
Total gains (losses) included in earnings | 22 | (53) |
Balance, end of period | 57 | 300 |
Collateralized Mortgage Obligations | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance, beginning of period | 27,193 | 23,147 |
Unrealized gains (losses) included in OCI | 220 | (1,360) |
Purchases | 871 | 0 |
Net discount accretion | 13 | 71 |
Principal payments and other | (107) | 0 |
Sales | 0 | (3,053) |
OTTI | 0 | (171) |
Balance, end of period | $ 28,190 | $ 18,634 |
CONTINGENCIES (Details) - SEPTA Class Action $ in Millions |
Nov. 07, 2022
USD ($)
|
May 25, 2012
bank
|
---|---|---|
Settled Litigation | ||
Loss Contingencies [Line Items] | ||
Litigation settlement amount awarded to plaintiffs | $ | $ 15.0 | |
Litigation settlement | $ | $ 13.0 | |
Independent Current and Former Directors | ||
Loss Contingencies [Line Items] | ||
Number of defendants | bank | 9 | |
Current and Former Officers | ||
Loss Contingencies [Line Items] | ||
Number of defendants | bank | 3 |
Label | Element | Value |
---|---|---|
Accounting Standards Update [Extensible Enumeration] | us-gaap_AccountingStandardsUpdateExtensibleList | Accounting Standards Update 2016-13 [Member] |
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