March 31, 2022
|
|
| ||||||
For the quarterly period ended | Commission file | |||||||
|
| number 001-39215 |
Professional Holding Corp.
|
|
|
|
| |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FL |
| |||||||||||
(State or other jurisdiction of |
|
|
|
| |||||||||
|
|
| (I.R.S. Employer |
Title of each class: | Trading Symbol | Name of each exchange on which registered: | ||||||||||||
Class A Common Stock | PFHD | NASDAQ Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes☐x Yes oNo
|
|
|
| ||||||||
Large accelerated filer |
| 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
May 6, 2022: 13,746,458
|
| ||||||||
| |||||||||
|
|
| |||||||
|
|
|
| ||||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| ||||||||
|
|
|
| ||||||
| |||||||||
|
|
|
| ||||||
| |||||||||
|
|
|
| ||||||
| |||||||||
|
|
|
| ||||||
| |||||||||
|
|
|
| ||||||
| |||||||||
|
|
|
| ||||||
| |||||||||
|
|
|
| ||||||
| |||||||||
|
|
|
| ||||||
| |||||||||
|
|
|
| ||||||
| |||||||||
|
|
|
| ||||||
| |||||||||
|
|
|
|
| | | | | | |
|
| June 30, |
| December 31, | ||
| | 2021 | | 2020 | ||
ASSETS |
| |
|
| |
|
Cash and due from banks | | $ | 29,803 | | $ | 62,305 |
Interest-bearing deposits | |
| 586,377 | |
| 129,291 |
Federal funds sold | |
| 36,156 | |
| 25,376 |
Cash and cash equivalents | |
| 652,336 | |
| 216,972 |
Securities available for sale, at fair value - taxable | |
| 100,735 | |
| 65,110 |
Securities available for sale, at fair value - tax exempt | | | 19,761 | | | 22,398 |
Securities held to maturity (fair value June 30, 2021 – $1,296, December 31, 2020 – $1,561) | |
| 1,285 | |
| 1,547 |
Equity securities | |
| 5,942 | |
| 6,005 |
Loans, net of allowance of $10,418 and $16,259 as of June 30, 2021 and December 31, 2020, respectively | |
| 1,680,168 | |
| 1,643,373 |
Loans held for sale | | | 2,039 | | | 1,270 |
Federal Home Loan Bank stock, at cost | |
| 2,341 | |
| 3,229 |
Federal Reserve Bank stock, at cost | |
| 4,954 | |
| 4,762 |
Accrued interest receivable | |
| 5,449 | |
| 6,666 |
Premises and equipment, net | |
| 4,000 | |
| 4,370 |
Bank owned life insurance | |
| 37,923 | |
| 37,360 |
Deferred tax asset | | | 9,446 | | | 10,525 |
Goodwill | | | 24,621 | | | 24,621 |
Core deposit intangibles | | | 1,280 | | | 1,422 |
Other assets | |
| 8,738 | |
| 7,640 |
Total assets | | $ | 2,561,018 | | $ | 2,057,270 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | |
| |
Deposits | |
| | |
| |
Demand – non-interest bearing | | $ | 854,673 | | $ | 475,598 |
Demand – interest bearing | |
| 286,173 | |
| 232,367 |
Money market and savings | | | 874,637 | | | 715,003 |
Time deposits | |
| 261,680 | |
| 236,575 |
Total deposits | |
| 2,277,163 | |
| 1,659,543 |
Official checks | |
| 3,289 | |
| 4,447 |
Federal Home Loan Bank advances | |
| 35,000 | |
| 40,000 |
Other borrowings | | | — | | | 114,573 |
Subordinated debt | | | 10,062 | | | 10,153 |
Accrued interest and other liabilities | |
| 12,476 | |
| 12,989 |
Total liabilities | |
| 2,337,990 | |
| 1,841,705 |
Stockholders’ equity | |
| | |
| |
Preferred stock, 10,000,000 shares authorized, NaN issued | |
| — | |
| — |
Class A Voting Common stock, $0.01 par value; authorized 50,000,000 shares, issued 14,289,480 and outstanding 13,475,781 shares as of June 30, 2021, and authorized 50,000,000 shares, issued 14,100,760 and outstanding 13,534,829 shares at December 31, 2020 | |
| 143 | |
| 141 |
Class B Non-Voting Common stock, $0.01 par value; 10,000,000 shares authorized, NaN issued and outstanding at June 30, 2021 and December 31, 2020 | |
| — | |
| — |
Treasury stock, at cost | |
| (13,544) | |
| (9,209) |
Additional paid-in capital | |
| 210,274 | |
| 208,995 |
Retained earnings | |
| 25,872 | |
| 14,756 |
Accumulated other comprehensive income (loss) | |
| 283 | |
| 882 |
Total stockholders’ equity | |
| 223,028 | |
| 215,565 |
Total liabilities and stockholders' equity | | $ | 2,561,018 | | $ | 2,057,270 |
March 31,
2022December 31,
2021ASSETS Cash and due from banks $ 45,792 $ 38,469 Interest earning deposits 671,845 545,521 Federal funds sold 24,089 13,477 Cash and cash equivalents 741,726 597,467 Securities available for sale, at fair value - taxable 175,758 175,536 Securities available for sale, at fair value - tax-exempt 30,446 18,765 Securities held to maturity (fair value March 31, 2022 – $214, December 31, 2021 – $242) 218 236 Equity securities 6,439 6,638 Loans, net of allowance of $13,555 and $12,704 as of March 31, 2022 and December 31, 2021, respectively 1,809,161 1,764,460 Loans held for sale 988 165 Premises and equipment, net 8,499 9,020 Bank owned life insurance 38,758 38,485 Goodwill and intangibles 25,698 25,766 Other assets 29,534 27,573 Total assets $ 2,867,225 $ 2,664,111 LIABILITIES AND STOCKHOLDERS’ EQUITY Deposits Demand – non-interest bearing $ 871,357 $ 674,003 Demand – interest bearing 356,600 310,362 Money market and savings 1,103,472 1,121,330 Time deposits 255,848 265,693 Total deposits 2,587,277 2,371,388 Federal Home Loan Bank advances 5,000 35,000 Official checks 6,144 4,125 Other borrowings — 10,000 Subordinated debt 24,409 — Accrued interest and other liabilities 14,622 12,074 Total liabilities 2,637,452 2,432,587 Stockholders’ equity Preferred stock, 10,000,000 shares authorized, none issued — — Class A Voting Common stock, $0.01 par value; authorized 50,000,000 shares, issued 14,623,395 and outstanding 13,665,801 shares as of March 31, 2022, and authorized 50,000,000 shares, issued 14,393,750 and outstanding 13,446,400 shares at December 31, 2021 146 144 Class B Non-Voting Common stock, $0.01par value; 10,000,000 shares authorized, none issued and outstanding on March 31, 2022 and December 31, 2021 — — Treasury stock, at cost (16,201) (16,003) Additional paid-in capital 214,351 212,012 Retained earnings 38,539 36,120 Accumulated other comprehensive income (loss) (7,062) (749) Total stockholders’ equity 229,773 231,524 Total liabilities and stockholders' equity $ 2,867,225 $ 2,664,111
| | | | | | | | | | | | | |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | ||||||||
|
| 2021 |
| 2020 |
|
| 2021 |
| 2020 | ||||
Interest income | | | | | | | | | | | | | |
Loans, including fees | | $ | 18,311 | | $ | 17,897 | | | $ | 37,544 | | $ | 27,912 |
Investment securities - taxable | |
| 161 | |
| 232 | | |
| 340 | |
| 434 |
Investment securities - tax exempt | | | 189 | | | 206 | | | | 392 | | | 226 |
Dividend income on restricted stock | |
| 99 | |
| 131 | | |
| 194 | |
| 210 |
Other | |
| 202 | |
| 56 | | |
| 264 | |
| 760 |
Total interest income | |
| 18,962 | |
| 18,522 | | |
| 38,734 | |
| 29,542 |
| | | | | | | | | | | | | |
Interest expense | |
| | |
|
| | |
| | |
|
|
Deposits | |
| 1,430 | |
| 1,617 | | |
| 2,747 | |
| 4,243 |
Federal Home Loan Bank advances | |
| 190 | |
| 287 | | |
| 386 | |
| 565 |
Subordinated debt | | | 77 | | | 59 | | | | 207 | | | 189 |
Other borrowings | | | 63 | | | 268 | | | | 313 | | | 193 |
Total interest expense | |
| 1,760 | |
| 2,231 | | |
| 3,653 | |
| 5,190 |
| | | | | | | | | | | | | |
Net interest income | |
| 17,202 | |
| 16,291 | | |
| 35,081 | |
| 24,352 |
Provision for loan losses | |
| 762 | |
| 1,750 | | |
| 1,800 | |
| 2,595 |
Net interest income after provision for loan losses | |
| 16,440 | |
| 14,541 | | |
| 33,281 | |
| 21,757 |
| | | | | | | | | | | | | |
Non-interest income | |
| | |
|
| | |
| | |
|
|
Service charges on deposit accounts | |
| 1,199 | |
| 307 | | |
| 1,594 | |
| 529 |
Income from Bank owned life insurance | |
| 281 | |
| 126 | | |
| 563 | |
| 255 |
SBA origination fees | | | — | | | 84 | | | | 145 | | | 114 |
SWAP fees | | | 364 | | | 210 | | | | 573 | | | 473 |
Third party loan sales | | | 226 | | | 157 | | | | 301 | | | 267 |
Gain on sale and call of securities | | | 21 | | | 11 | | | | 22 | | | 15 |
Other | |
| 211 | |
| 73 | | |
| 223 | |
| 171 |
Total non-interest income | |
| 2,302 | |
| 968 | | |
| 3,421 | |
| 1,824 |
| | | | | | | | | | | | | |
Non-interest expense | |
| | |
|
| | |
| | |
| |
Salaries and employee benefits | |
| 7,099 | |
| 6,912 | | |
| 13,883 | |
| 12,175 |
Occupancy and equipment | |
| 905 | |
| 1,081 | | |
| 2,007 | |
| 1,855 |
Data processing | |
| 276 | |
| 421 | | |
| 566 | |
| 597 |
Marketing | |
| 165 | |
| 151 | | |
| 318 | |
| 288 |
Professional fees | |
| 770 | |
| 806 | | |
| 1,398 | |
| 1,161 |
Acquisition expenses | | | — | | | 560 | | | | 684 | | | 2,223 |
Regulatory assessments | |
| 418 | |
| 300 | | |
| 767 | |
| 514 |
Other | |
| 1,321 | |
| 1,317 | | |
| 3,119 | |
| 2,221 |
Total non-interest expense | |
| 10,954 | |
| 11,548 | | |
| 22,742 | |
| 21,034 |
| | | | | | | | | | | | | |
Income before income taxes | |
| 7,788 | |
| 3,961 | | |
| 13,960 | |
| 2,547 |
Income tax provision | |
| 1,457 | |
| 830 | | |
| 2,844 | |
| 733 |
Net income | |
| 6,331 | |
| 3,131 | | |
| 11,116 | |
| 1,814 |
| | | | | | | | | | | | | |
Earnings per share: | |
| | |
|
| | |
| | |
|
|
Basic | | $ | 0.47 | | $ | 0.23 | | | $ | 0.83 | | $ | 0.16 |
Diluted | | $ | 0.45 | | $ | 0.22 | | | $ | 0.80 | | $ | 0.15 |
| | | | | | | | | | | | | |
Other comprehensive income: | |
| | |
|
| | |
| | |
|
|
Unrealized holding gain (loss) on securities available for sale | |
| (505) | |
| 743 | | |
| (794) | |
| 1,068 |
Tax effect | |
| 124 | |
| (188) | | |
| 195 | |
| (271) |
Other comprehensive gain (loss), net of tax | |
| (381) | |
| 555 | | |
| (599) | |
| 797 |
Comprehensive income | | $ | 5,950 | | $ | 3,686 | | | $ | 10,517 | | $ | 2,611 |
See accompanying notes to consolidated financial statements.Three Months Ended 2022 2021 Interest income Loans, including fees $ 19,780 $ 19,233 Investment securities - taxable 638 179 Investment securities - tax-exempt 213 203 Dividend income on restricted stock 97 95 Other 294 62 Total interest income 21,022 19,772 Interest expense Deposits 1,586 1,317 Federal Home Loan Bank advances 134 196 Subordinated debt 232 130 Other borrowings 23 250 Total interest expense 1,975 1,893 Net interest income 19,047 17,879 Provision for loan losses 851 1,038 Net interest income after provision for loan losses 18,196 16,841 Non-interest income Service charges on deposit accounts 517 395 Income from bank owned life insurance 273 282 SBA origination fees — 145 Swap fee income 112 209 Loans held for sale income 71 75 Gain on sale and call of securities — 1 Other 300 12 Total non-interest income 1,273 1,119 Non-interest expense Salaries and employee benefits 11,220 6,784 Occupancy and equipment 1,002 1,102 Data processing 314 290 Marketing 196 153 Professional fees 919 628 Acquisition expenses — 684 Regulatory assessments 549 349 Other 2,295 1,798 Total non-interest expense 16,495 11,788 Income before income taxes 2,974 6,172 Income tax provision 555 1,387 Net income $ 2,419 $ 4,785 Earnings per share: Basic $ 0.18 $ 0.36 Diluted $ 0.17 $ 0.34 Other comprehensive income: Unrealized holding gain (loss) on securities available for sale $ (8,468) $ (289) Tax effect 2,155 71 Other comprehensive gain (loss), net of tax (6,313) (218) Comprehensive income (loss) $ (3,894) $ 4,567
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Accumulated | | | | |
| | | | | | | | | | Additional | | | | | Other | | | | ||
| | Common Stock | | Treasury | | Paid-in | | Retained | | Comprehensive | | | | |||||||
| | Shares | | Amount | | Stock | | Capital | | Earnings |
| Income (Loss) | | Total | ||||||
Balance at April 1, 2020 | | 13,537,565 | | $ | 138 | | $ | (6,257) | | $ | 201,670 | | $ | 5,134 | | $ | 169 | | $ | 200,854 |
Issuance of common stock, net of issuance cost |
| 89,167 | |
| 1 |
| | — |
| | 450 |
| | — |
| | — |
| | 451 |
Employee stock purchase plan |
| — | |
| — |
| | — |
| | 27 |
| | — |
| | — |
| | 27 |
Stock based compensation |
| — | |
| — |
| | — |
| | 296 |
| | — |
| | — |
| | 296 |
Treasury stock |
| (182,097) | |
| — |
| | (2,875) |
| | (5) |
| | — |
| | — |
| | (2,880) |
Net loss |
| — | |
| — |
| | — |
| | — |
| | 3,131 |
| | — |
| | 3,131 |
Other comprehensive income |
| — | |
| — |
| | — |
| | — |
| | — |
| | 555 |
| | 555 |
Balance at June 30, 2020 |
| 13,444,635 | | $ | 139 | | $ | (9,132) | | $ | 202,438 | | $ | 8,265 | | $ | 724 | | $ | 202,434 |
| | | | | | | | | | | | | | | | | | | | |
Balance at April 1, 2021 | | 13,661,567 | | $ | 143 | | $ | (10,087) | | $ | 209,770 | | $ | 19,541 | | $ | 664 | | $ | 220,031 |
Issuance of common stock, net of issuance cost |
| 8,359 | |
| — |
| | — |
| | 107 |
| | — |
| | — |
| | 107 |
Employee stock purchase plan |
| 978 | |
| — |
| | — |
| | 18 |
| | — |
| | — |
| | 18 |
Stock based compensation |
| (1,834) | |
| — |
| | — |
| | 385 |
| | — |
| | — |
| | 385 |
Treasury stock |
| (193,289) | |
| — |
| | (3,457) |
| | (6) |
| | — |
| | — |
| | (3,463) |
Net income |
| — | |
| — |
| | — |
| | — |
| | 6,331 |
| | — |
| | 6,331 |
Other comprehensive income |
| — | |
| — |
| | — |
| | — |
| | — |
| | (381) |
| | (381) |
Balance at June 30, 2021 |
| 13,475,781 | | $ | 143 | | $ | (13,544) | | $ | 210,274 | | $ | 25,872 | | $ | 283 | | $ | 223,028 |
| | | | | | | | | | | | | | | | | | | | |
Balance at January 1, 2020 | | 5,867,446 | | $ | 60 | | $ | (4,155) | | $ | 77,019 | | $ | 6,451 | | $ | (73) | | $ | 79,302 |
Issuance of common stock, net of issuance cost |
| 3,664,667 | |
| 37 |
| | — |
| | 60,221 |
| | — |
| | — |
| | 60,258 |
Marquis Bancorp (MBI) acquisition | | 4,227,816 | | | 42 | | | — | | | 64,657 | | | — | | | — | | | 64,699 |
Employee stock purchase plan |
| — | |
| — |
| | — |
| | 58 |
| | — |
| | — |
| | 58 |
Stock based compensation |
| — | |
| — |
| | — |
| | 492 |
| | — |
| | — |
| | 492 |
Treasury stock |
| (315,294) | |
| — |
| | (4,977) |
| | (9) |
| | — |
| | — |
| | (4,986) |
Net loss |
| — | |
| — |
| | — |
| | — |
| | 1,814 |
| | — |
| | 1,814 |
Other comprehensive income |
| — | |
| — |
| | — |
| | — |
| | — |
| | 797 |
| | 797 |
Balance at June 30, 2020 |
| 13,444,635 | | $ | 139 | | $ | (9,132) | | $ | 202,438 | | $ | 8,265 | | $ | 724 | | $ | 202,434 |
| | | | | | | | | | | | | | | | | | | | |
Balance at January 1, 2021 |
| 13,534,829 | | $ | 141 | | $ | (9,209) | | $ | 208,995 | | $ | 14,756 | | $ | 882 | | $ | 215,565 |
Issuance of common stock, net of issuance cost |
| 61,204 | |
| 1 |
| | — |
| | 543 |
| | — |
| | — |
| | 544 |
Employee stock purchase plan |
| 1,851 | |
| — |
| | — |
| | 34 |
| | — |
| | — |
| | 34 |
Stock based compensation |
| 125,665 | |
| 1 |
| | — |
| | 709 |
| | — |
| | — |
| | 710 |
Treasury stock |
| (247,768) | |
| — |
| | (4,335) |
| | (7) |
| | — |
| | — |
| | (4,342) |
Net income |
| — | |
| — |
| | — |
| | — |
| | 11,116 |
| | — |
| | 11,116 |
Other comprehensive income |
| — | |
| — |
| | — |
| | — |
| | — |
| | (599) |
| | (599) |
Balance at June 30, 2021 |
| 13,475,781 | | $ | 143 |
| $ | (13,544) |
| $ | 210,274 |
| $ | 25,872 |
| $ | 283 |
| $ | 223,028 |
Common Stock Treasury
StockAdditional
Paid-in
CapitalRetained
EarningsAccumulated
Other
Comprehensive
Income (Loss)Total Shares Amount Balance on December 31, 2020 13,534,829 $ 141 $ (9,209) $ 208,995 $ 14,756 $ 882 $ 215,565 Employee stock purchase plan 873 — — 16 — — 16 Stock based compensation expense — — — 324 — — 324 Exercise of stock options 52,845 1 — 436 — — 437 Restricted stock issued 127,499 1 — — — — 1 Treasury stock, net of reissuance (54,479) — (878) (1) — — (879) Net income — — — — 4,785 — 4,785 Other comprehensive income (loss) — — — — — (218) (218) Balance on March 31, 2021 13,661,567 $ 143 $ (10,087) $ 209,770 $ 19,541 $ 664 $ 220,031 Balance on December 31, 2021 13,446,400 $ 144 $ (16,003) $ 212,012 $ 36,120 $ (749) $ 231,524 Stock based compensation expense — — — 1,724 — — 1,724 Exercise of stock options 58,998 1 — 616 — — 617 Restricted stock issued 170,647 1 — (1) — — — Treasury stock, net of reissuance (10,244) — (198) — — — (198) Net income — — — — 2,419 — 2,419 Other comprehensive income (loss) — — — — — (6,313) (6,313) Balance on March 31, 2022 13,665,801 $ 146 $ (16,201) $ 214,351 $ 38,539 $ (7,062) $ 229,773
Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
Cash flows from operating activities | ||||||||||||||
Net income | $ | 2,419 | $ | 4,785 | ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
Provision for loan losses | 851 | 1,038 | ||||||||||||
Amortization of purchase accounting adjustments | (1,629) | (1,255) | ||||||||||||
Depreciation and amortization | 616 | 995 | ||||||||||||
Gain on call of securities | — | (1) | ||||||||||||
Equity unrealized change in market value | 199 | 91 | ||||||||||||
Net amortization of securities | 386 | 568 | ||||||||||||
Net amortization of deferred loan fees | (1,534) | (2,802) | ||||||||||||
Originations of loans held for sale | (5,226) | (2,338) | ||||||||||||
Proceeds from sales of loans held for sale | 4,403 | — | ||||||||||||
Income from bank-owned life insurance | (273) | (282) | ||||||||||||
Loss on disposal of premises and equipment | — | 137 | ||||||||||||
Employee stock purchase plan | — | 16 | ||||||||||||
Stock compensation | 2,339 | 325 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||
Accrued interest payable (receivable) | (253) | 155 | ||||||||||||
Other assets | (34) | (2,136) | ||||||||||||
Official checks, accrued interest, interest payable and other liabilities | 4,605 | (113) | ||||||||||||
Net cash provided by (used in) operating activities | 6,869 | (817) | ||||||||||||
Cash flows from investing activities | ||||||||||||||
Proceeds from maturities and paydowns of securities available for sale | 7,870 | 5,733 | ||||||||||||
Proceeds from calls of securities available for sale | — | 1,514 | ||||||||||||
Proceeds from paydowns of securities held to maturity | 17 | 29 | ||||||||||||
Purchase of securities available for sale | (28,626) | — | ||||||||||||
Loans originations, net of principal repayments | (42,480) | (70,834) | ||||||||||||
Redemption of Federal Reserve Bank stock | (312) | — | ||||||||||||
Purchase of Federal Home Loan Bank Stock | — | (182) | ||||||||||||
Net redemption of Federal Home Loan Bank Stock | 793 | 700 | ||||||||||||
Purchases of premises and equipment, net | (128) | (779) | ||||||||||||
Net cash used in investing activities | (62,866) | (63,819) | ||||||||||||
Cash flows from financing activities | ||||||||||||||
Net increase in deposits | 216,012 | 246,462 | ||||||||||||
Proceeds from issuance of stock, net of issuance costs | 2 | 437 | ||||||||||||
Purchase of treasury stock | (198) | (879) | ||||||||||||
Repayments of Federal Home Loan advances | (30,000) | — | ||||||||||||
Net proceeds from issuance of subordinated notes payable | 24,440 | — | ||||||||||||
Repayment of line of credit | (10,000) | — | ||||||||||||
Repayments of PPPLF advances | — | (74,627) | ||||||||||||
Net cash provided by financing activities | 200,256 | 171,393 | ||||||||||||
| | | | | | |
| | Six Months Ended June 30, | ||||
|
| 2021 |
| 2020 | ||
Cash flows from operating activities |
| |
|
| |
|
Net income (loss) | | $ | 11,116 | | $ | 1,814 |
Adjustments to reconcile net income to net cash from operating activities | |
|
| |
|
|
Provision for loan losses | |
| 1,800 | |
| 2,595 |
Deferred income tax benefit (expense) | |
| 988 | |
| (499) |
Depreciation and amortization | |
| 739 | |
| 739 |
Gain on sale of securities | | | — | | | (4) |
Gain on call of securities | | | (22) | | | (11) |
Equity unrealized change in market value | | | 63 | | | (24) |
Net amortization of securities | |
| 1,396 | |
| (906) |
Net amortization of deferred loan fees | |
| (4,400) | |
| 1,118 |
Loans held for sale | | | (769) | | | (1,070) |
Proceeds from sale of loans | | | — | | | 110 |
Income from bank owned life insurance | |
| (563) | |
| (255) |
Loss on disposal of premises and equipment | | | 137 | | | — |
Employee stock purchase plan | | | 34 | | | 58 |
Stock compensation | |
| 710 | |
| 492 |
Changes in operating assets and liabilities: | |
|
| |
|
|
Accrued interest receivable | |
| 1,217 | |
| (1,472) |
Other assets | |
| (1,098) | |
| 1,887 |
Official checks, accrued interest, interest payable and other liabilities | |
| (1,385) | |
| (3,395) |
Net cash provided by operating activities | |
| 9,963 | |
| 1,177 |
| | | | | | |
Cash flows from investing activities | |
|
| |
|
|
Proceeds from maturities and paydowns of securities available for sale | |
| 11,123 | |
| 6,256 |
Proceeds from calls of securities available for sale | | | 4,648 | | | 4,835 |
Proceeds from maturities and paydowns of securities held to maturity | |
| 257 | |
| 44 |
Purchase of securities available for sale | |
| (50,922) | |
| (60,693) |
Proceeds from sale of securities available for sale | | | — | | | 1,739 |
Loans originations, net of principal repayments | |
| (47,410) | |
| (256,731) |
Purchase of Federal Reserve Bank stock | |
| (192) | |
| (2,671) |
Proceeds from maturities of Federal Home Loan Bank Stock | | | 888 | | | — |
Purchase of Federal Home Loan Bank Stock | |
| — | |
| (1,297) |
Purchases of premises and equipment | |
| (455) | |
| (741) |
Proceeds from acquisition | | | — | | | 26,860 |
Net cash used in investing activities | |
| (82,063) | |
| (282,399) |
| | | | | | |
Cash flows from financing activities | |
|
| |
|
|
Net increase (decrease) in deposits | |
| 617,620 | |
| 126,404 |
Proceeds from issuance of stock, net of issuance costs | |
| 544 | |
| 60,258 |
Purchase of treasury stock | | | (4,342) | | | (4,986) |
Proceeds from Federal Home Loan Bank advances | |
| — | |
| 10,000 |
Repayments of Federal Home Loan advances | |
| (5,000) | |
| (25,000) |
Repayment of line of credit | | | — | | | (9,999) |
Proceeds from PPPLF advances | | | — | | | 218,080 |
Repayments of PPPLF advances | | | (101,358) | | | — |
Net cash provided by financing activities | |
| 507,464 | |
| 374,757 |
| | | | | | |
Increase in cash and cash equivalents | |
| 435,364 | |
| 93,535 |
| | | | | | |
Cash and cash equivalents at beginning of period | |
| 216,972 | |
| 198,950 |
| | | | | | |
Cash and cash equivalents at end of period | | $ | 652,336 | | $ | 292,485 |
| | | | | | |
Supplemental cash flow information: | |
|
| |
|
|
Cash paid during the period for interest | | $ | 4,425 | | $ | 4,907 |
Cash paid during the period for taxes | |
| 3,000 | |
| 20 |
| | | | | | |
Supplemental noncash disclosures: | |
|
| |
|
|
Lease liabilities arising from obtaining right of use assets | | $ | — | | $ | 1,620 |
Total assets acquired | | | — | | | 589,374 |
Total liabilities assumed | | | — | | | 539,403 |
6
Increase in cash and cash equivalents | 144,259 | 106,757 | ||||||||||||
Cash and cash equivalents at beginning of period | 597,467 | 216,972 | ||||||||||||
Cash and cash equivalents at end of period | $ | 741,726 | $ | 323,729 | ||||||||||
Supplemental cash flow information: | ||||||||||||||
Cash paid during the period for interest | $ | 2,135 | $ | 2,203 | ||||||||||
Cash paid during the period for taxes | 7,491 | — | ||||||||||||
Supplemental noncash disclosures: | ||||||||||||||
Recognition of participation loans as secured borrowings | $ | — | $ | 732 | ||||||||||
2021.
Adoption of new accounting standards:
ASU 2019-12, Income Taxes (Topic 740)
In December 2019, FASB issued guidance which simplifies the accounting for income taxes by removing multiple exceptions to the general principals in Topic 740. The standard is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020. The new guidance did not materially impact the Company’s Consolidated Financial Statements or disclosures.
ASU 2020-04, Reference Rate Reform (Topic 848)
In March 2020, FASB issued guidance which provides optional guidance to ease the accounting burden in accounting for, or recognizing the effects from, reference rate reform on financial reporting. The new standard is a result of the London Interbank Offered Rate ("LIBOR") likely being discontinued as an available benchmark rate. The standard is elective and provides optional expedients and exceptions for applying U.S. Generally Accepted Accounting Principles (“GAAP”) to contracts, hedging relationships, or other transactions that reference LIBOR, or another reference rate expected to be discontinued. The amendments in the update are effective for all entities between March 12, 2020 and December 31, 2022. The Company has established a cross-functional working group to guide the Company’s transition from LIBOR and has begun efforts to transition to alternative rates consistent with industry timelines. The Company has identified its products that utilize LIBOR and has implemented enhanced fallback language to facilitate the transition to alternative reference rates. The Company is evaluating existing platforms and systems and preparing to offer new rates. The new guidance did not materially impact the Company’s Consolidated Financial Statements or disclosures.
7
New accounting standards that have not yet been adopted:
|
| ||||
ASU | |||||
Description | In | ||||
Date of Adoption |
| ||||
Effect on the Consolidated Financial Statements |
|
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
|
| 2021 |
| 2020 | | 2021 |
| 2020 | ||||
Basic earnings per share: |
| |
|
| |
| | |
|
| |
|
Net income | | $ | 6,331 | | $ | 3,131 | | $ | 11,116 | | $ | 1,814 |
Total weighted average common stock outstanding | |
| 13,397,747 | |
| 13,415,525 | |
| 13,419,929 | |
| 11,516,756 |
Net income per share | | $ | 0.47 | | $ | 0.23 | | $ | 0.83 | | $ | 0.16 |
Diluted earnings per share: | |
| | |
| | |
| | |
| |
Net income | | $ | 6,331 | | $ | 3,131 | | $ | 11,116 | | $ | 1,814 |
Total weighted average common stock outstanding | |
| 13,397,747 | |
| 13,415,525 | |
| 13,419,929 | |
| 11,516,756 |
Add: Dilutive effect of employee stock options | | | 564,822 | | | 518,435 | | | 521,900 | | | 526,503 |
Total weighted average diluted stock outstanding | | | 13,962,569 | | | 13,933,960 | | | 13,941,829 | | | 12,043,259 |
Net income per share | | $ | 0.45 | | $ | 0.22 | | $ | 0.80 | | $ | 0.15 |
For the three months ended June 30, 2021, there were 270,850 thousand stock options that were anti-dilutive and for the three months ended June 30, 2020, there were 29,350 thousand stock options that were anti-dilutive. For the six months ended June 30, 2021, there were 270,850 thousand stock options that were anti-dilutive and for the six months ended June 30, 2020, there were 29,350 thousand stock options that were anti-dilutive.
8
Three Months Ended | ||||||||||||||||||||||||||||||||
(Dollar amounts in thousands, except per share data) | March 31, 2022 | March 31, 2021 | ||||||||||||||||||||||||||||||
Basic earnings per share: | ||||||||||||||||||||||||||||||||
Net income | $ | 2,419 | $ | 4,785 | ||||||||||||||||||||||||||||
Total weighted average common stock outstanding | 13,345,565 | 13,442,359 | ||||||||||||||||||||||||||||||
Net income per share | $ | 0.18 | $ | 0.36 | ||||||||||||||||||||||||||||
Diluted earnings per share: | ||||||||||||||||||||||||||||||||
Net income | $ | 2,419 | $ | 4,785 | ||||||||||||||||||||||||||||
Total weighted average common stock outstanding | 13,345,565 | 13,442,359 | ||||||||||||||||||||||||||||||
Add: dilutive effect of employee restricted stock and options | 613,807 | 478,915 | ||||||||||||||||||||||||||||||
Total weighted average diluted stock outstanding | 13,959,372 | 13,921,274 | ||||||||||||||||||||||||||||||
Net income per share | $ | 0.17 | $ | 0.34 | ||||||||||||||||||||||||||||
Anti-dilutive restricted stock and options | 36,422 | 403,000 |
(Dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||||
March 31, 2022 | ||||||||||||||||||||||||||
Available for sale - taxable | ||||||||||||||||||||||||||
Small Business Administration loan pools | $ | 37,713 | $ | 15 | $ | (529) | $ | 37,199 | ||||||||||||||||||
Mortgage-backed securities | 142,815 | 1 | (8,601) | 134,215 | ||||||||||||||||||||||
United States agency obligations | 2,943 | 6 | (116) | 2,833 | ||||||||||||||||||||||
Corporate bonds | 1,500 | 11 | — | 1,511 | ||||||||||||||||||||||
Total available for sale - taxable | $ | 184,971 | $ | 33 | $ | (9,246) | $ | 175,758 | ||||||||||||||||||
Available for sale - tax-exempt | ||||||||||||||||||||||||||
Community Development District bonds | $ | 29,645 | $ | 194 | $ | (428) | $ | 29,411 | ||||||||||||||||||
Municipals | 1,047 | — | (12) | 1,035 | ||||||||||||||||||||||
Total available for sale - tax-exempt | $ | 30,692 | $ | 194 | $ | (440) | $ | 30,446 | ||||||||||||||||||
Amortized Cost | Gross Unrecognized Gains | Gross Unrecognized Losses | Fair Value | |||||||||||||||||||||||
Held to Maturity | ||||||||||||||||||||||||||
Mortgage-backed securities | $ | 218 | $ | 1 | $ | (5) | $ | 214 | ||||||||||||||||||
Total Held to Maturity | $ | 218 | $ | 1 | $ | (5) | $ | 214 |
| | | | | | | | | | | | |
|
| | |
| Gross |
| Gross |
| | | ||
| | Amortized | | Unrealized | | Unrealized | | | | |||
June 30, 2021 | | Cost | | Gains | | Losses | | Fair Value | ||||
Available-for-sale - taxable | | | | | | | | | | | | |
Small Business Administration loan pools | | $ | 43,091 | | $ | 78 | | $ | (573) | | $ | 42,596 |
Mortgage-backed securities | |
| 54,517 | |
| 205 | |
| (182) | |
| 54,540 |
United States agency obligations | | | 2,001 | | | 88 | | | - | | | 2,089 |
Corporate bonds | |
| 1,500 | |
| 10 | |
| - | |
| 1,510 |
Total available-for-sale - taxable | | $ | 101,109 | | $ | 381 | | $ | (755) | | $ | 100,735 |
Available-for-sale - tax exempt | | | | | | | | | | | | |
Community Development District bonds | | $ | 17,954 | | $ | 704 | | $ | - | | $ | 18,658 |
Municipals | | | 1,057 | | | 46 | | | - | | | 1,103 |
Total available-for-sale - tax exempt | | $ | 19,011 | | $ | 750 | | $ | - | | $ | 19,761 |
| | | | | | | | | | | | |
|
| | |
| Gross |
| Gross |
|
| | ||
| | Amortized | | Unrecognized | | Unrecognized | | | | |||
| | Cost | | Gains | | Losses | | Fair Value | ||||
Held-to-Maturity | |
|
| |
|
| |
|
| |
|
|
Mortgage-backed securities | | $ | 285 | | $ | 11 | | $ | — | | $ | 296 |
Foreign Bonds | | | 1,000 | | | — | | | — | | | 1,000 |
Total Held-to-Maturity | | $ | 1,285 | | $ | 11 | | $ | — | | $ | 1,296 |
| | | | | | | | | | | | |
|
| | |
| Gross |
| Gross |
| | | ||
| | Amortized | | Unrealized | | Unrealized | | Fair | ||||
December 31, 2020 | | Cost | | Gains | | Losses | | Value | ||||
Available-for-sale - taxable |
| |
|
| |
|
| |
|
| |
|
Small Business Administration loan pools | | $ | 30,678 | | $ | 77 | | $ | (199) | | $ | 30,556 |
Mortgage-backed securities | |
| 28,514 | |
| 438 | |
| (30) | |
| 28,922 |
United States agency obligations | | | 3,000 | | | 122 | | | - | | | 3,122 |
Corporate bonds | |
| 2,501 | |
| 9 | |
| - | |
| 2,510 |
Total available-for-sale - taxable | | $ | 64,693 | | $ | 646 | | $ | (229) | | $ | 65,110 |
Available-for-sale - tax exempt | | | | | | | | | | | | |
Community Development District bonds | | $ | 20,582 | | $ | 717 | | $ | - | | $ | 21,299 |
Municipals | | | 1,064 | | | 35 | | | - | | | 1,099 |
Total available-for-sale - tax exempt | | $ | 21,646 | | $ | 752 | | $ | - | | $ | 22,398 |
| | | | | | | | | | | | |
|
| | |
| Gross |
| Gross | | | | ||
| | Amortized | | Unrecognized | | Unrecognized | | Fair | ||||
| | Cost | | Gains | | Losses |
| Value | ||||
Held-to-Maturity |
| |
|
| |
|
| |
|
| |
|
Mortgage-backed securities | | $ | 345 | | $ | 14 | | $ | — | | $ | 359 |
United States Treasury | | | 202 | | | — | | | — | | | 202 |
Foreign Bonds | | | 1,000 | | | — | | | — | | | 1,000 |
Total Held-to-Maturity | | $ | 1,547 | | $ | 14 | | $ | — | | $ | 1,561 |
Amortized Cost | Gross Unrecognized Gains | Gross Unrecognized Losses | Fair Value | |||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||
Mutual Funds | $ | 5,639 | $ | — | $ | — | $ | 5,639 | ||||||||||||||||||
Other equity securities | 800 | — | — | 800 | ||||||||||||||||||||||
Total Equity | $ | 6,439 | $ | — | $ | — | $ | 6,439 |
(Dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||
Available for sale - taxable | ||||||||||||||||||||||||||
Small Business Administration loan pools | $ | 40,368 | $ | 38 | $ | (472) | $ | 39,934 | ||||||||||||||||||
Mortgage-backed securities | 131,273 | 70 | (1,240) | 130,103 | ||||||||||||||||||||||
United States agency obligations | 3,939 | 54 | (7) | 3,986 | ||||||||||||||||||||||
Corporate bonds | 1,500 | 13 | — | 1,513 | ||||||||||||||||||||||
Total available for sale - taxable | $ | 177,080 | $ | 175 | $ | (1,719) | $ | 175,536 | ||||||||||||||||||
Available for sale - tax-exempt | ||||||||||||||||||||||||||
Community development district bonds | $ | 17,163 | $ | 512 | $ | (1) | $ | 17,674 | ||||||||||||||||||
Municipals | 1,051 | 40 | — | 1,091 | ||||||||||||||||||||||
Total available for sale - tax-exempt | $ | 18,214 | $ | 552 | $ | (1) | $ | 18,765 | ||||||||||||||||||
Amortized Cost | Gross Unrecognized Gains | Gross Unrecognized Losses | Fair Value | |||||||||||||||||||||||
Held to Maturity | ||||||||||||||||||||||||||
Mortgage backed securities | $ | 236 | $ | 6 | $ | — | $ | 242 | ||||||||||||||||||
Total held to maturity | $ | 236 | $ | 6 | $ | — | $ | 242 |
Amortized Cost | Gross Unrecognized Gains | Gross Unrecognized Losses | Fair Value | |||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||
Mutual funds | $ | 5,838 | $ | — | $ | — | $ | 5,838 | ||||||||||||||||||
Other equity securities | 800 | — | — | 800 | ||||||||||||||||||||||
Total equity | $ | 6,638 | $ | — | $ | — | $ | 6,638 |
9
were $1.7 million, with gross realized gains of $4 thousand. Proceeds from redemption of securities for the year ended December 31, 2020, were $9.1 million, with gross realized gains of $33$1 thousand. Total securities pledged as of June 30, 2021March 31, 2022, and December 31, 2020,2021, were $13.3$2.1 million and $12.5$2.4 million, respectively. Securitiesrespectively, which included securities pledged for derivative SWAPswap transactions as of June 30, 2021, were $1.1 million which were included in the total securities pledged, such securities were generallyand pledged for public funds. There were no securities pledged for derivate SWAP transactions at December 31, 2020.
March 31, 2022 | ||||||||||||||
(Dollars in thousands) | Amortized Cost | Fair Value | ||||||||||||
Available for sale | ||||||||||||||
Due in one year or less | $ | 5,734 | $ | 5,716 | ||||||||||
Due after one year through five years | 22,236 | 22,208 | ||||||||||||
Due after five years through ten years | 7,165 | 6,866 | ||||||||||||
Due after ten years | — | — | ||||||||||||
Subtotal | $ | 35,135 | $ | 34,790 | ||||||||||
Small Business Administration loan pools | $ | 37,713 | $ | 37,199 | ||||||||||
Mortgage-backed securities | 142,815 | 134,215 | ||||||||||||
Total available for sale | $ | 215,663 | $ | 206,204 | ||||||||||
Held to maturity | ||||||||||||||
Mortgage-backed securities | $ | 218 | $ | 214 | ||||||||||
Total held to maturity | $ | 218 | $ | 214 |
| | | | | | |
| | June 30, 2021 | ||||
|
| Amortized |
| Fair | ||
| | Cost | | Value | ||
Available-for-sale | | | | | | |
Due in one year or less | | $ | 1,038 | | $ | 1,056 |
Due after one year through five years | |
| 21,159 | |
| 21,975 |
Due after five years through ten years | | | 315 | | | 329 |
Due after ten years | | | — | | | — |
Subtotal | | $ | 22,512 | | $ | 23,360 |
| | | | | | |
Small Business Administration loan pools | | $ | 43,091 | | $ | 42,596 |
Mortgage-backed securities | | | 54,517 | | | 54,540 |
Total available-for-sale | | $ | 120,120 | | $ | 120,496 |
| | | | | | |
Held-to-maturity | | | | | | |
Due in one year or less | | $ | 1,000 | | $ | 1,000 |
Due after one year through five years | | | — | | | — |
Subtotal | | $ | 1,000 | | $ | 1,000 |
| | | | | | |
Mortgage-backed securities | | $ | 285 | | $ | 296 |
Total held-to-maturity | | $ | 1,285 | | $ | 1,296 |
At June 30, 2021
At June 30, 2021 On March 31, 2022, and December 31, 2020,2021, the number of investment positions that are in an unrealized loss position were 48155 and 36,92, respectively.
10
losses were outstanding at June 30, 2021on March 31, 2022, and December 31, 2020,2021, respectively, aggregated by major security type and length of time in a continuous unrealized loss position:
| | | | | | | | | | | | | | | | | | |
| | Less Than 12 Months | | 12 Months or Longer | | Total | ||||||||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||
| | Value | | Losses | | Value | | Losses | | Value | | Losses | ||||||
June 30, 2021 | | | | | | | | | | | | | | | | | | |
Available-for-sale - taxable | | | | | | | | | | | | | | | | | | |
Small Business Administration loan pools | | $ | 15,273 | | $ | (427) | | $ | 17,777 | | $ | (146) | | $ | 33,050 | | $ | (573) |
Mortgage-backed securities | |
| 14,648 | |
| (181) | |
| 1,286 | |
| (1) | |
| 15,934 | |
| (182) |
United States agency obligations | | | — | | | — | | | — | | | — | | | — | | | — |
Corporate bonds | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
Total available-for-sale - taxable | | $ | 29,921 | | $ | (608) | | $ | 19,063 | | $ | (147) | | $ | 48,984 | | $ | (755) |
Available-for-sale - tax exempt | | | | | | | | | | | | | | | | | | |
Community Development District bonds | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Municipals | | | — | | | — | | | — | | | — | | | — | | | — |
Total available-for-sale - tax exempt | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
| | | | | | | | | | | | | | | | | | |
December 31, 2020 | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Available-for-sale - taxable | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Small Business Administration loan pools | | $ | 18,849 | | $ | (133) | | $ | 8,945 | | $ | (66) | | $ | 27,794 | | $ | (199) |
Mortgage-backed securities | |
| 5,839 | |
| — | |
| 2,510 | |
| (30) | |
| 8,349 | |
| (30) |
United States agency obligations | | | 227 | | | — | | | — | | | — | | | 227 | | | — |
Corporate bonds | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
Total available-for-sale - taxable | | $ | 24,915 | | $ | (133) | | $ | 11,455 | | $ | (96) | | $ | 36,370 | | $ | (229) |
Available-for-sale - tax exempt | | | | | | | | | | | | | | | | | | |
Community Development District bonds | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Municipals | | | — | | | — | | | — | | | — | | | — | | | — |
Total available-for-sale - tax exempt | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Less Than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||||
March 31, 2022 | ||||||||||||||||||||||||||||||||||||||
Available for sale - taxable | ||||||||||||||||||||||||||||||||||||||
Small Business Administration loan pools | $ | 19,363 | $ | (371) | $ | 13,711 | $ | (158) | $ | 33,074 | $ | (529) | ||||||||||||||||||||||||||
Mortgage-backed securities | 132,409 | (8,412) | 1,637 | (189) | 134,046 | (8,601) | ||||||||||||||||||||||||||||||||
United States agency obligations | 1,824 | (116) | — | — | 1,824 | (116) | ||||||||||||||||||||||||||||||||
Total available for sale - taxable | $ | 153,596 | $ | (8,899) | $ | 15,348 | $ | (347) | $ | 168,944 | $ | (9,246) | ||||||||||||||||||||||||||
Available for sale - tax-exempt | ||||||||||||||||||||||||||||||||||||||
Community Development District bonds | $ | 14,788 | $ | (428) | $ | — | $ | — | $ | 14,788 | $ | (428) | ||||||||||||||||||||||||||
Municipals | 1,036 | (12) | — | — | 1,036 | (12) | ||||||||||||||||||||||||||||||||
Total available for sale - tax-exempt | $ | 15,824 | $ | (440) | $ | — | $ | — | $ | 15,824 | $ | (440) | ||||||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||||||||
Available for sale - taxable | ||||||||||||||||||||||||||||||||||||||
Small Business Administration loan pools | $ | 17,428 | $ | (335) | $ | 14,872 | $ | (136) | $ | 32,300 | $ | (471) | ||||||||||||||||||||||||||
Mortgage-backed securities | 109,621 | (1,168) | 1,710 | (73) | 111,331 | (1,241) | ||||||||||||||||||||||||||||||||
United States agency obligations | 1,930 | (7) | — | — | 1,930 | (7) | ||||||||||||||||||||||||||||||||
Total available for sale - taxable | $ | 128,979 | $ | (1,510) | $ | 16,582 | $ | (209) | $ | 145,561 | $ | (1,719) | ||||||||||||||||||||||||||
Available for sale - tax-exempt | ||||||||||||||||||||||||||||||||||||||
Community Development District bonds | $ | 809 | $ | (1) | $ | — | $ | — | $ | 809 | $ | (1) | ||||||||||||||||||||||||||
Total available for sale - tax-exempt | $ | 809 | $ | (1) | $ | — | $ | — | $ | 809 | $ | (1) |
11
| | | | | | |
|
| June 30, 2021 |
| December 31, 2020 | ||
Commercial real estate | | $ | 875,453 | | $ | 777,776 |
Residential real estate | |
| 361,946 | |
| 380,491 |
Commercial | |
| 373,333 | |
| 396,642 |
Construction and land development | |
| 74,175 | |
| 99,883 |
Consumer and other | |
| 14,575 | |
| 11,688 |
Total loans | |
| 1,699,482 | |
| 1,666,480 |
Unearned loan origination (fees) costs, net | |
| (1,984) | |
| (1,323) |
Unearned PPP loan origination (fees) costs, net | | | (4,855) | | | (4,255) |
Allowance for loan loss | |
| (10,418) | |
| (16,259) |
Loans held for sale | | | (2,039) | | | (1,270) |
Other | | | (18) | | | — |
Loans, net | | $ | 1,680,168 | | $ | 1,643,373 |
(Dollars in thousands) | March 31, 2022 | December 31, 2021 | ||||||||||||
Loans held for investment: | ||||||||||||||
Commercial real estate | $ | 931,904 | $ | 902,654 | ||||||||||
Residential real estate | 381,182 | 377,511 | ||||||||||||
Commercial (non-PPP) | 357,124 | 325,415 | ||||||||||||
Commercial (PPP) | 31,097 | 58,615 | ||||||||||||
Construction and land development | 98,984 | 91,520 | ||||||||||||
Consumer and other | 22,425 | 21,449 | ||||||||||||
Total loans held for investment, gross | 1,822,716 | 1,777,164 | ||||||||||||
Allowance for loan losses | (13,555) | (12,704) | ||||||||||||
Loans held for investment, net | $ | 1,809,161 | $ | 1,764,460 | ||||||||||
Loans held for sale: | ||||||||||||||
Loans held for sale | $ | 988 | $ | 165 | ||||||||||
Total loans held for sale | $ | 988 | $ | 165 |
At June 30, 2021
.
| | | | | | | | | | | | | | | | | | | | | |
| | 30 – 59 | | 60 – 89 | | Greater than | | | | | | | | | | | | | |||
| | Days | | Days | | 89 Days | | | | | Total | | Loans Not | | | | |||||
|
| Past Due |
| Past Due |
| Past Due |
| Nonaccrual |
| Past Due |
| Past Due |
| Total | |||||||
June 30, 2021 |
| |
|
| |
|
| |
| | |
| | |
|
| |
|
| |
|
Commercial real estate | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 875,453 | | $ | 875,453 |
Residential real estate | |
| — | |
| — | |
| — | |
| — | |
| — | |
| 361,946 | |
| 361,946 |
Commercial | |
| — | |
| — | |
| — | |
| 1,468 | |
| 1,468 | |
| 371,865 | |
| 373,333 |
Construction and land development | |
| — | |
| — | |
| — | |
| — | |
| — | |
| 74,175 | |
| 74,175 |
Consumer and other | |
| — | |
| 94 | |
| — | | | 1,307 | | | 1,401 | |
| 13,174 | |
| 14,575 |
Total | | $ | — | | $ | 94 | | $ | — | | $ | 2,775 | | $ | 2,869 | | $ | 1,696,613 | | $ | 1,699,482 |
| | | | | | | | | | | | | | | | | | | | | |
| | 30 – 59 | | 60 – 89 | | Greater than | | | | | | | | | | | | | |||
| | Days | | Days | | 89 Days | | | | | Total | | Loans Not | | | | |||||
|
| Past Due |
| Past Due |
| Past Due |
| Nonaccrual |
| Past Due |
| Past Due |
| Total | |||||||
December 31, 2020 | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 777,776 | | $ | 777,776 |
Residential real estate | |
| 1,303 | |
| — | |
| — | |
| — | |
| 1,303 | |
| 379,188 | |
| 380,491 |
Commercial | |
| 278 | |
| — | |
| — | |
| 9,127 | |
| 9,405 | |
| 387,237 | |
| 396,642 |
Construction and land development | |
| — | |
| — | |
| — | |
| — | |
| — | |
| 99,883 | |
| 99,883 |
Consumer and other | |
| — | |
| — | |
| — | | | 1,307 | | | 1,307 | |
| 10,381 | |
| 11,688 |
Total | | $ | 1,581 | | $ | — | | $ | — | | $ | 10,434 | | $ | 12,015 | | $ | 1,654,465 | | $ | 1,666,480 |
12
(Dollars in thousands) | 30 – 59 Days Past Due | 60 – 89 Days Past Due | Greater than 90 Days Past Due | Nonaccrual | Total Past Due | Loans Not Past Due | Total | |||||||||||||||||||||||||||||||||||||
March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 931,904 | $ | 931,904 | ||||||||||||||||||||||||||||||
Residential real estate | — | — | — | — | — | 381,182 | 381,182 | |||||||||||||||||||||||||||||||||||||
Commercial (non-PPP) | 430 | — | — | 1,468 | 1,898 | 355,227 | 357,124 | |||||||||||||||||||||||||||||||||||||
Commercial (PPP) | — | 163 | — | — | 163 | 30,934 | 31,097 | |||||||||||||||||||||||||||||||||||||
Construction and land development | — | — | — | — | — | 98,984 | 98,984 | |||||||||||||||||||||||||||||||||||||
Consumer and other | — | — | — | 654 | 654 | 21,771 | 22,425 | |||||||||||||||||||||||||||||||||||||
Total | $ | 430 | $ | 163 | $ | — | $ | 2,122 | $ | 2,715 | $ | 1,820,002 | $ | 1,822,716 |
(Dollars in thousands) | 30 – 59 Days Past Due | 60 – 89 Days Past Due | Greater than 90 Days Past Due | Nonaccrual | Total Past Due | Loans Not Past Due | Total | |||||||||||||||||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate | $ | 292 | $ | — | $ | — | $ | — | $ | 292 | $ | 902,362 | $ | 902,654 | ||||||||||||||||||||||||||||||
Residential real estate | — | — | — | — | — | 377,511 | 377,511 | |||||||||||||||||||||||||||||||||||||
Commercial (non-PPP) | 449 | — | — | 1,468 | 1,917 | 323,498 | 325,415 | |||||||||||||||||||||||||||||||||||||
Commercial (PPP) | 7 | — | — | — | 7 | 58,608 | 58,615 | |||||||||||||||||||||||||||||||||||||
Construction and land development | — | — | — | — | — | 91,520 | 91,520 | |||||||||||||||||||||||||||||||||||||
Consumer and other | — | — | — | 654 | 654 | 20,795 | 21,449 | |||||||||||||||||||||||||||||||||||||
Total | $ | 748 | $ | — | $ | — | $ | 2,122 | $ | 2,870 | $ | 1,774,294 | $ | 1,777,164 |
At June 30, 2021, there were 6 impaired loans (consisting of nonaccrual loans, troubled debt restructured loans, loans past due 90 days or more and still accruing interest and other loans based on management’s judgment) with both unpaid principal balance and recorded investments totaling $5.4 million. NaN of these loans were impaired loans with a recorded investment of $2.8 million with an allowance of $0.7 million and 1 substandard accruing loan with a recorded investment of $2.3 million with no allowance. The average net investment on the impaired residential real estate and commercial loans during the three months ended June 30, 2021, were $0.9 million. Residential real estate loans had $2.4 thousand and $5.0 thousand interest income recognized for the three and six months ended June 30, 2021 and 2020, respectively, which was equal to the cash basis interest income. At December 31, 2020, there were 6 impaired loans with recorded investments totaling $13.1 million, of which there were 3 impaired loans with a recorded investment of $10.4 million on nonaccrual with an allowance of $8.3 million and 1 substandard accruing loan with a recorded investment of $2.4 million with no allowance. The average net investment on the impaired residential real estate and commercial loans during the year ended December 31, 2020, was $2.2 million. The residential real estate loans had $12.7 thousand of interest income recognized during the year ended December 31, 2020, which was equal to the cash basis interest income.
Troubled Debt Restructurings:
Riskless:
13
track record of timely loan payments, no material adverse changes to underlying collateral, and no material adverse change to guarantor(s) financial capacity, evidenced by public record searches.
| | | | | | | | | | | | | | | |
| | | | | Special | | | | | | | | | | |
(Dollars in thousands) |
| Pass |
| Mention |
| Substandard |
| Doubtful |
| Total | |||||
June 30, 2021 | | | |
| | |
| | |
| | |
| | |
Commercial real estate | | $ | 873,127 | | $ | — | | $ | 2,326 | | $ | — | | $ | 875,453 |
Residential real estate | |
| 361,946 |
|
| — |
|
| — |
|
| — |
|
| 361,946 |
Commercial | |
| 371,400 |
|
| 465 |
|
| 1,468 |
|
| — |
|
| 373,333 |
Construction and land development | |
| 74,175 |
|
| — |
|
| — |
|
| — |
|
| 74,175 |
Consumer | |
| 13,174 |
|
| 94 |
|
| 1,307 |
|
| — |
|
| 14,575 |
Total | | $ | 1,693,822 |
| $ | 559 |
| $ | 5,101 |
| $ | — |
| $ | 1,699,482 |
| | | |
| | |
| | |
| | |
| | |
December 31, 2020 | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 775,420 | | $ | — | | $ | 2,356 | | $ | — | | $ | 777,776 |
Residential real estate | |
| 380,062 |
|
| 429 |
|
| — |
|
| — |
|
| 380,491 |
Commercial | |
| 387,403 |
|
| 112 |
|
| 9,127 |
|
| — |
|
| 396,642 |
Construction and land development | |
| 99,883 |
|
| — |
|
| — |
|
| — |
|
| 99,883 |
Consumer | |
| 10,381 |
|
| — |
|
| 1,307 |
|
| — |
|
| 11,688 |
Total | | $ | 1,653,149 |
| $ | 541 |
| $ | 12,790 |
| $ | — |
| $ | 1,666,480 |
(Dollars in thousands) | Pass | Special Mention | Substandard | Doubtful | Total | |||||||||||||||||||||||||||
March 31, 2022 | ||||||||||||||||||||||||||||||||
Commercial real estate | $ | 929,624 | $ | — | $ | 2,280 | $ | — | $ | 931,904 | ||||||||||||||||||||||
Residential real estate | 381,182 | — | — | — | 381,182 | |||||||||||||||||||||||||||
Commercial (non-PPP) | 355,565 | 91 | 1,468 | — | 357,124 | |||||||||||||||||||||||||||
Commercial (PPP) | 31,097 | — | — | — | 31,097 | |||||||||||||||||||||||||||
Construction and land development | 98,984 | — | — | — | 98,984 | |||||||||||||||||||||||||||
Consumer | 21,693 | 78 | — | 654 | 22,425 | |||||||||||||||||||||||||||
Total | $ | 1,818,145 | $ | 169 | $ | 3,748 | $ | 654 | $ | 1,822,716 | ||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||
Commercial real estate | $ | 900,364 | $ | — | $ | 2,290 | $ | — | $ | 902,654 | ||||||||||||||||||||||
Residential real estate | 377,511 | — | — | — | 377,511 | |||||||||||||||||||||||||||
Commercial (non-PPP) | 323,657 | 290 | 1,468 | — | 325,415 | |||||||||||||||||||||||||||
Commercial (PPP) | 58,615 | — | — | — | 58,615 | |||||||||||||||||||||||||||
Construction and land development | 91,520 | — | — | — | 91,520 | |||||||||||||||||||||||||||
Consumer | 20,712 | 83 | — | 654 | 21,449 | |||||||||||||||||||||||||||
Total | $ | 1,772,379 | $ | 373 | $ | 3,758 | $ | 654 | $ | 1,777,164 |
| | | | | | |
(Dollars in thousands) | | June 30, 2021 |
| December 31, 2020 | ||
Commercial real estate(1) | | $ | 5,892 | | $ | — |
Residential real estate | | | 452 | | | 405 |
Commercial | |
| 616 | |
| 746 |
Construction and development(1) | |
| — | |
| 3,732 |
Carrying amount, net of total discounts | | $ | 6,960 | | $ | 4,883 |
14
(Dollars in thousands) | March 31, 2022 | December 31, 2021 | ||||||||||||
Commercial real estate | $ | 5,822 | $ | 5,845 | ||||||||||
Residential real estate | — | 89 | ||||||||||||
Commercial | 205 | 410 | ||||||||||||
Construction and development | — | — | ||||||||||||
Consumer and other loans | — | — | ||||||||||||
Carrying amount | $ | 6,027 | $ | 6,344 |
Changes in the carrying amount of the accretableAccretable yield for all purchased credit impaired loans were as follows for the sixthree months ended June 30, 2021:
March 31, 2022:
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
For those purchased credit impaired loans disclosed above, 0no allowances for loan losses were recorded or reversed during the sixthree months ended June 30, 2021.
The credit fair value adjustment on purchased credit impairment (“PCI”) loans represents the portion of the loan balances that have been deemed uncollectible based on the Company’s expectations of future cash flows for each respective loan. PCI loans purchased on March 26, 2020, for which it was probable at acquisition that all contractually required payments would not be collected are as follows:
| | | |
(Dollars in thousands) |
| March 26, 2020 | |
Contractually required principal and interest by loan type | | | |
Commercial real estate | | $ | 427 |
Residential real estate | |
| 604 |
Commercial | |
| 2,176 |
Construction and development | |
| 5,614 |
Consumer and other loans | |
| - |
Total | | $ | 8,821 |
Contractual cash flows not expected to be collected (nonaccretable discount) | | | |
Commercial real estate | | $ | 80 |
Residential real estate | |
| 138 |
Commercial | |
| 1,123 |
Construction and development | |
| 2,297 |
Consumer and other loans | |
| - |
Total | | $ | 3,638 |
| | | |
Expected cash flows | | $ | 5,183 |
Interest component of expected cash flows (accretable discount) | | | (545) |
Fair value of PCI loans accounted for under ASC 310-30 | | $ | 4,638 |
31, 2022.
Paycheck Protection Program
During the three months ended June 30, 2021, the Company funded 172 loans representing $17.6 million under Round 3 of the Paycheck Protection Program (“PPP.”). As of June 30, 2021, the Company participated in all three rounds of the PPP and funded 2,287 small business loans representing approximately $340.5 million in relief proceeds, of which 1,362 loans totaling $196.9 million were forgiven by the SBA. Most of the PPP loans were initially pledged to the Federal Reserve as part of the Payroll Protection Program
15
Liquidity Facility ("PPPLF"). The PPPLF pledged loans are non-recourse to the Company. However, the Company paid off all of the PPPLF advances during the first and second quarter of 2021 and the balance was $0 as of June 30, 2021.
Debt Service Relief Requests Related to COVID-19
As a result of the COVID-19 pandemic the Company has reviewed and processed numerous debt service relief requests in accordance with Section 4013 of the CARES Act and interagency guidelines published by federal banking regulators on March 13, 2020. As currently interpreted by the agencies, the guidelines assert that short-term modifications made on good faith for reasons related to the COVID-19 pandemic to borrowers who were current prior to such relief are not considered TDRs. These modifications include deferrals of principal and interest, modification to interest only, and deferrals to escrow requirements. The modifications have varying terms up to six months. As of June 30, 2021, all these loans had returned to normal payment schedules.
NOTE 5 — ALLOWANCE FOR LOAN LOSSES
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Construction | | | | | | ||
| | Commercial | | Residential | | | | | and land | | Consumer | | | | ||||
|
| Real Estate |
| Real Estate |
| Commercial |
| Development |
| and Other |
| Total | ||||||
June 30, 2021 |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Allowance for loan losses: |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Beginning balance | | $ | 3,159 | | $ | 2,177 | | $ | 10,462 | | $ | 388 | | $ | 73 | | $ | 16,259 |
Provision for loan losses | |
| 1,126 | |
| 92 | |
| 602 | |
| (27) | |
| 7 | |
| 1,800 |
Loans charged-off | |
| - | |
| - | |
| (7,641) | |
| - | |
| - | |
| (7,641) |
Recoveries | |
| - | |
| - | |
| - | |
| - | |
| - | |
| - |
Total ending allowance balance | | $ | 4,285 | | $ | 2,269 | | $ | 3,423 | | $ | 361 | | $ | 80 | | $ | 10,418 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Construction | | | | | | | |
| | Commercial | | Residential | | | | | and land | | Consumer | | | | ||||
|
| Real Estate |
| Real Estate |
| Commercial |
| Development |
| and Other |
| Total | ||||||
December 31, 2020 |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Allowance for loan losses: |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Beginning balance | | $ | 1,845 | | $ | 3,115 | | $ | 1,235 | | $ | 272 | | $ | 81 | | $ | 6,548 |
Provision for loan losses | |
| 1,314 | |
| (731) | |
| 9,326 | |
| 116 | |
| (8) | |
| 10,017 |
Loans charged-off | |
| — | |
| (207) | |
| (99) | |
| — | |
| — | |
| (306) |
Recoveries | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
Total ending allowance balance | | $ | 3,159 | | $ | 2,177 | | $ | 10,462 | | $ | 388 | | $ | 73 | | $ | 16,259 |
16
(Dollars in thousands) | Commercial Real Estate | Residential Real Estate | Commercial | Construction and Land Development | Consumer and Other | Total | ||||||||||||||||||||||||||||||||
March 31, 2022 | ||||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 4,471 | $ | 2,339 | $ | 4,637 | $ | 471 | $ | 786 | $ | 12,704 | ||||||||||||||||||||||||||
Provision for loan losses | 264 | 43 | 496 | 40 | 8 | 851 | ||||||||||||||||||||||||||||||||
Loans charged-off | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Recoveries | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Total ending allowance balance | $ | 4,735 | $ | 2,382 | $ | 5,133 | $ | 511 | $ | 794 | $ | 13,555 |
(Dollars in thousands) | Commercial Real Estate | Residential Real Estate | Commercial | Construction and Land Development | Consumer and Other | Total | ||||||||||||||||||||||||||||||||
March 31, 2021 | ||||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,159 | $ | 2,177 | $ | 10,462 | $ | 388 | $ | 73 | $ | 16,259 | ||||||||||||||||||||||||||
Provision for loan losses | 323 | 11 | 700 | 16 | (12) | 1,038 | ||||||||||||||||||||||||||||||||
Loans charged-off | — | — | (7,641) | — | — | (7,641) | ||||||||||||||||||||||||||||||||
Recoveries | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Total ending allowance balance | $ | 3,482 | $ | 2,188 | $ | 3,521 | $ | 404 | $ | 61 | $ | 9,656 |
(Dollars in thousands) | Commercial Real Estate | Residential Real Estate | Commercial | Construction and Land Development | Consumer and Other | Total | ||||||||||||||||||||||||||||||||
March 31, 2022 | ||||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||||
Ending allowance balance attributable to loans | ||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | — | $ | 689 | $ | — | $ | 654 | $ | 1,343 | ||||||||||||||||||||||||||
Purchased Credit Impaired (PCI) loans | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 4,735 | 2,382 | 4,444 | 511 | 140 | 12,212 | ||||||||||||||||||||||||||||||||
Total ending allowance balance | $ | 4,735 | $ | 2,382 | $ | 5,133 | $ | 511 | $ | 794 | $ | 13,555 | ||||||||||||||||||||||||||
Loans: | ||||||||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 2,280 | $ | — | $ | 1,468 | $ | — | $ | 654 | $ | 4,402 | ||||||||||||||||||||||||||
Loans collectively evaluated for impairment | 929,624 | 381,182 | 386,753 | 98,984 | 21,771 | 1,818,314 | ||||||||||||||||||||||||||||||||
Total ending loans balance | $ | 931,904 | $ | 381,182 | $ | 388,221 | $ | 98,984 | $ | 22,425 | $ | 1,822,716 | ||||||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||||
Ending allowance balance attributable to loans | ||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | — | $ | 671 | $ | — | $ | 654 | $ | 1,325 | ||||||||||||||||||||||||||
Purchased Credit Impaired (PCI) loans | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 4,471 | 2,339 | 3,966 | 471 | 132 | 11,379 | ||||||||||||||||||||||||||||||||
Total ending allowance balance | $ | 4,471 | $ | 2,339 | $ | 4,637 | $ | 471 | $ | 786 | $ | 12,704 | ||||||||||||||||||||||||||
Loans: | ||||||||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 2,290 | $ | — | $ | 1,468 | $ | — | $ | 654 | $ | 4,412 | ||||||||||||||||||||||||||
Loans collectively evaluated for impairment | 900,364 | 377,511 | 382,562 | 91,520 | 20,795 | 1,772,752 | ||||||||||||||||||||||||||||||||
Total ending loans balance | $ | 902,654 | $ | 377,511 | $ | 384,030 | $ | 91,520 | $ | 21,449 | $ | 1,777,164 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Construction | | | | | | ||
| | Commercial | | Residential | | | | | and Land | | Consumer | | | | ||||
|
| Real Estate |
| Real Estate |
| Commercial |
| Development |
| and Other |
| Total | ||||||
June 30, 2021 | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Allowance for loan losses: | | | | | | | | | | | | | | | | | | |
Ending allowance balance attributable to loans | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | — | | $ | — | | $ | 658 | | $ | — | | $ | — | | $ | 658 |
Purchased Credit Impaired (PCI) loans | | | — | | | — | | | — | | | — | | | — | | | — |
Collectively evaluated for impairment | | | 4,285 | | | 2,269 | | | 2,765 | | | 361 | | | 80 | | | 9,760 |
Total ending allowance balance | | $ | 4,285 | | $ | 2,269 | | $ | 3,423 | | $ | 361 | | $ | 80 | | $ | 10,418 |
| | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 2,326 | | $ | 252 | | $ | 1,468 | | $ | — | | $ | 1,307 | | $ | 5,353 |
Loans collectively evaluated for impairment | | | 873,127 | | | 361,694 | | | 371,865 | | | 74,175 | | | 13,268 | | | 1,694,129 |
Total ending loans balance | | $ | 875,453 | | $ | 361,946 | | $ | 373,333 | | $ | 74,175 | | $ | 14,575 | | $ | 1,699,482 |
| | | | | | | | | | | | | | | | | | |
December 31, 2020 | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | |
Ending allowance balance attributable to loans | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | — | | $ | — | | $ | 8,309 | | $ | — | | $ | — | | $ | 8,309 |
Purchased Credit Impaired (PCI) loans | | | — | | | — | | | — | | | — | | | — | | | |
Collectively evaluated for impairment | | | 3,159 | | | 2,177 | | | 2,153 | | | 388 | | | 73 | | | 7,950 |
Total ending allowance balance | | $ | 3,159 | | $ | 2,177 | | $ | 10,462 | | $ | 388 | | $ | 73 | | $ | 16,259 |
| | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 2,356 | | $ | 298 | | $ | 9,127 | | $ | — | | $ | 1,307 | | $ | 13,088 |
Loans collectively evaluated for impairment | | | 775,420 | | | 380,193 | | | 387,515 | | | 99,883 | | | 10,381 | | | 1,653,392 |
Total ending loans balance | | $ | 777,776 | | $ | 380,491 | | $ | 396,642 | | $ | 99,883 | | $ | 11,688 | | $ | 1,666,480 |
NOTE 6 — DEPOSITS
March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||
(Dollars in thousands) | Ending Balance | % of Total | Ending Balance | % of Total | ||||||||||||||||||||||
NOW accounts | $ | 356,600 | 13.8% | $ | 310,362 | 13.1% | ||||||||||||||||||||
Money market accounts | 1,037,795 | 40.1% | 1,055,033 | 44.5% | ||||||||||||||||||||||
Brokered deposits | 57,908 | 2.2% | 58,365 | 2.5% | ||||||||||||||||||||||
Savings accounts | 12,397 | 0.5% | 12,558 | 0.5% | ||||||||||||||||||||||
Certificates of deposit | 251,220 | 9.7% | 261,067 | 11.0% | ||||||||||||||||||||||
Total interest-bearing deposits | 1,715,920 | 66.3% | 1,697,385 | 71.6% | ||||||||||||||||||||||
Noninterest-bearing deposits | 871,357 | 33.7% | 674,003 | 28.4% | ||||||||||||||||||||||
Total deposits | $ | 2,587,277 | 100.0% | $ | 2,371,388 | 100.0% |
| | | | | | | | | | | |
| | For the Six Months Ended | | For the Year Ended | | ||||||
| | June 30, 2021 | | December 31, 2020 | | ||||||
| | Ending | | | | Ending | | | | ||
(Dollars in thousands) |
| Balance |
| % of Total |
| Balance |
| % of Total |
| ||
NOW accounts | | $ | 286,173 | | 12.6 | % | $ | 232,367 | | 14.0 | % |
Money market accounts | |
| 810,913 |
| 35.6 | % |
| 679,761 |
| 41.0 | % |
Brokered deposits | | | 56,534 | | 2.5 | % | | 30,137 | | 1.8 | % |
Savings accounts | |
| 11,814 |
| 0.5 | % |
| 9,727 |
| 0.6 | % |
Certificates of deposit | |
| 257,056 |
| 11.3 | % |
| 231,953 |
| 14.0 | % |
Total interest-bearing deposits | |
| 1,422,490 |
| 62.5 | % |
| 1,183,945 |
| 71.3 | % |
Noninterest-bearing deposits | |
| 854,673 |
| 37.5 | % |
| 475,598 |
| 28.7 | % |
Total deposits | | $ | 2,277,163 | | 100.0 | % | $ | 1,659,543 | | 100.0 | % |
| | | | | | | | | | | | | | | |
|
| | |
| Over |
| Over Six |
| | |
| | | ||
| | Three | | Three | | Months | | | | | | | |||
| | Months or | | Through | | Through | | Over | | | | ||||
(Dollars in thousands) | | Less | | Six Months | | 12 Months | | 12 Months | | Total | |||||
Time deposits of $250,000 or less | | $ | 15,852 | | $ | 12,749 | | $ | 43,020 | | $ | 22,047 | | $ | 93,668 |
Time deposits of more than $250,000 | | | 23,302 | | | 24,537 | | | 85,376 | | | 34,797 | | | 168,012 |
Total | | $ | 39,154 | | $ | 37,286 | | $ | 128,396 | | $ | 56,844 | | $ | 261,680 |
17
(Dollars in thousands) | Three Months or Less | Over Three Through Six Months | Over Six Months Through 12 Months | Over 12 Months | Total | |||||||||||||||||||||||||||
Time deposits of $250,000 or less | $ | 26,833 | $ | 35,643 | $ | 21,692 | $ | 4,452 | $ | 88,620 | ||||||||||||||||||||||
Time deposits of more than $250,000 | 55,027 | 64,859 | 44,322 | 3,020 | 167,228 | |||||||||||||||||||||||||||
Total | $ | 81,860 | $ | 100,502 | $ | 66,014 | $ | 7,472 | $ | 255,848 |
The following tables present the maturities of our time deposits including time deposits that meet or exceed the $250,000 FDIC insurance limit as of December 31, 2020.
| | | | | | | | | | | | | | | |
|
| | |
| Over |
| Over Six |
| | |
| | | ||
| | Three | | Three | | Months | | | | | | | |||
| | Months or | | Through | | Through | | Over | | | | ||||
(Dollars in thousands) | | Less | | Six Months | | 12 Months | | 12 Months | | Total | |||||
Time deposits of $250,000 or less | | $ | 20,767 | | $ | 13,258 | | $ | 24,805 | | $ | 19,240 | | $ | 78,070 |
Time deposits of more than $250,000 | | | 40,189 | | | 35,314 | | | 42,844 | | | 40,158 | | | 158,505 |
Total | | $ | 60,956 | | $ | 48,572 | | $ | 67,649 | | $ | 59,398 | | $ | 236,575 |
2021.
(Dollars in thousands) | Three Months or Less | Over Three Through Six Months | Over Six Months Through 12 Months | Over 12 Months | Total | |||||||||||||||||||||||||||
Time deposits of $250,000 or less | $ | 17,431 | $ | 26,721 | $ | 44,373 | $ | 4,631 | $ | 93,156 | ||||||||||||||||||||||
Time deposits of more than $250,000 | 32,058 | 54,429 | 83,290 | 2,760 | 172,537 | |||||||||||||||||||||||||||
Total | $ | 49,489 | $ | 81,150 | $ | 127,663 | $ | 7,391 | $ | 265,693 |
| | | | | | |
| | June 30, 2021 | | December 31, 2020 | ||
Less than 1 year | | $ | 204,836 | | $ | 177,178 |
Over 1 through 2 years | | | 55,625 | | | 57,034 |
Over 2 through 3 years | | | 1,179 | | | 1,658 |
Over 3 through 4 years | | | 40 | | | 705 |
Over 4 through 5 years | | | - | | | - |
Over 5 years | | | - | | | - |
Total | | $ | 261,680 | | $ | 236,575 |
(Dollars in thousands) | March 31, 2022 | December 31, 2021 | ||||||||||||
1 year or less | $ | 248,376 | $ | 258,302 | ||||||||||
Over 1 through 2 years | 7,345 | 6,669 | ||||||||||||
Over 2 through 3 years | 127 | 722 | ||||||||||||
Over 3 through 4 years | — | — | ||||||||||||
Over 4 through 5 years | — | — | ||||||||||||
Over 5 years | — | — | ||||||||||||
Total | $ | 255,848 | $ | 265,693 |
2021.
AND BORROWINGS
Subordinated Debt.
subordinate notes for general corporate purposes.
18
NOTE 8 — BORROWINGS
The Company uses short-term and long-term borrowings to supplement deposits to fund lending and investment activities.
| | | | | | | |
| | Six Months Ended | | Year Ended | | ||
(Dollars in thousands) |
| June 30, 2021 |
| December 31, 2020 | | ||
Amount outstanding at period-end | | $ | 35,000 | | $ | 40,000 | |
Weighted average interest rate at period-end | |
| 2.04 | % |
| 1.96 | % |
Maximum month-end balance during period | | $ | 40,000 | | $ | 70,000 | |
Average balance outstanding during period | |
| 38,867 | |
| 58,210 | |
Weighted average interest rate during period | |
| 1.98 | % |
| 1.63 | % |
(Dollars in thousands) | March 31, 2022 | December 31, 2021 | ||||||||||||
Amount outstanding at period-end | $ | 5,000 | $ | 35,000 | ||||||||||
Weighted average interest rate at period-end | 0.81% | 2.04% | ||||||||||||
Maximum month-end balance during period | $ | 35,000 | $ | 35,000 | ||||||||||
Average balance outstanding during period | $ | 26,333 | $ | 36,918 | ||||||||||
Weighted average interest rate during period | 2.04% | 2.01% |
PPPLF Advances. The Company initially funded PPP loans with the PPPLF. Most of the PPP loans were initially pledged to the Federal Reserve as part of the PPPLF. The PPPLF pledged loans are non-recourse to the Company. In addition, we paid off approximately $101.4 million in PPPLF advances for a balance of $0 at June 30,March 31, 2022 and December 31, 2021.
exercised.
19
Class B Non-voting Common Stock
20
Accrued interest receivable: The carrying amounts of accrued interest approximate their fair values.
Basis:
There were 0 securities reclassified into or out
Fair Value Measurements on March 31, 2022 Using: | ||||||||||||||||||||||||||
(Dollars in thousands) | Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
ASSETS: | ||||||||||||||||||||||||||
Securities available for sale - taxable | ||||||||||||||||||||||||||
Small Business Administration loan pools | $ | 37,199 | $ | — | $ | 37,199 | $ | — | ||||||||||||||||||
Mortgage-backed securities | 134,215 | — | 134,215 | — | ||||||||||||||||||||||
United States agency obligations | 2,833 | — | 2,833 | — | ||||||||||||||||||||||
Corporate bonds | 1,511 | — | 1,511 | — | ||||||||||||||||||||||
Securities available for sale - tax-exempt | ||||||||||||||||||||||||||
Community Development District bonds | 29,411 | — | 29,411 | — | ||||||||||||||||||||||
Municipals | 1,035 | — | 1,035 | — | ||||||||||||||||||||||
Equity securities | ||||||||||||||||||||||||||
Mutual funds | $ | 5,639 | $ | 5,639 | $ | — | $ | — | ||||||||||||||||||
Other equity securities | 800 | 800 | — | — | ||||||||||||||||||||||
Loans held for sale | $ | 988 | $ | 988 | $ | — | $ | — | ||||||||||||||||||
Customer derivatives - interest rate swaps | $ | 1,912 | $ | — | $ | 1,912 | $ | — | ||||||||||||||||||
LIABILITIES: | ||||||||||||||||||||||||||
Customer derivatives - interest rate swaps | $ | 1,912 | $ | — | $ | 1,912 | $ | — | ||||||||||||||||||
Contents
| | | | | | | | | | | | |
| | | | | Fair Value Measurements | |||||||
| | | | | at June 30, 2021 Using: | |||||||
| | | | | | | | Significant | | | | |
| | | | | Quoted Prices in | | Other | | Significant | |||
| | | | | Active Markets for | | Observable | | Unobservable | |||
| | Fair | | Identical Assets | | Inputs | | Inputs | ||||
June 30, 2021 |
| Value |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Available-for-sale - taxable |
| |
|
| |
|
| |
|
| |
|
Small Business Administration loan pools | | $ | 42,596 | | $ | — | | $ | 42,596 | | $ | — |
Mortgage-backed securities | |
| 54,540 | |
| — | |
| 54,540 | |
| — |
United States agency obligations | | | 2,089 | | | — | | | 2,089 | | | — |
Corporate bonds | |
| 1,510 | |
| — | |
| 1,510 | |
| — |
Total | | $ | 100,735 | | $ | — | | $ | 100,735 | | $ | — |
Available-for-sale - tax exempt | | | | | | | | | | | | |
Community Development District bonds | | $ | 18,658 | | $ | — | | $ | 18,658 | | $ | — |
Municipals | | | 1,103 | | | — | | | 1,103 | | | — |
Total | | $ | 19,761 | | $ | — | | $ | 19,761 | | $ | — |
Equity |
| |
|
| |
|
| |
|
| |
|
Mutual funds | | $ | 5,942 | | $ | 5,942 | | $ | — | | $ | — |
Total | | $ | 5,942 | | $ | 5,942 | | $ | — | | $ | — |
21
Fair Value Measurements on December 31, 2021 Using: | ||||||||||||||||||||||||||
(Dollars in thousands) | Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
ASSETS: | ||||||||||||||||||||||||||
Securities available for sale - taxable | ||||||||||||||||||||||||||
Small Business Administration loan pools | $ | 39,934 | $ | — | $ | 39,934 | $ | — | ||||||||||||||||||
Mortgage-backed securities | 130,103 | — | 130,103 | — | ||||||||||||||||||||||
United States agency obligations | 3,986 | — | 3,986 | — | ||||||||||||||||||||||
Corporate bonds | 1,513 | — | 1,513 | — | ||||||||||||||||||||||
Securities available for sale - tax-exempt | ||||||||||||||||||||||||||
Community Development District bonds | 17,674 | — | 17,674 | — | ||||||||||||||||||||||
Municipals | 1,091 | — | 1,091 | — | ||||||||||||||||||||||
Equity securities | ||||||||||||||||||||||||||
Mutual funds | $ | 5,838 | $ | 5,838 | $ | — | $ | — | ||||||||||||||||||
Other Equity Securities | 800 | 800 | — | — | ||||||||||||||||||||||
Loans held for sale | $ | 165 | $ | 165 | $ | — | $ | — | ||||||||||||||||||
Customer derivatives - interest rate swaps | $ | 1,144 | $ | — | $ | 1,144 | $ | — | ||||||||||||||||||
LIABILITIES: | ||||||||||||||||||||||||||
Customer derivatives - interest rate swaps | $ | 1,144 | $ | — | $ | 1,144 | $ | — | ||||||||||||||||||
| | | | | | | | | | | | |
| | | | | Fair Value Measurements | |||||||
| | | | | at December 31, 2020 Using: | |||||||
| | | | | | | | Significant | | | | |
| | | | | Quoted Prices in | | Other | | Significant | |||
| | | | | Active Markets for | | Observable | | Unobservable | |||
| | Fair | | Identical Assets | | Inputs | | Inputs | ||||
December 31, 2020 |
| Value |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Available-for-sale - taxable |
| |
|
| |
|
| |
|
| |
|
Small Business Administration loan pools | | $ | 30,556 | | $ | — | | $ | 30,556 | | $ | — |
Mortgage-backed securities | |
| 28,922 | |
| — | |
| 28,922 | |
| — |
United States agency obligations | |
| 3,122 | |
| — | |
| 3,122 | |
| — |
Corporate bonds | |
| 2,510 | |
| — | |
| 2,510 | |
| — |
Total | | $ | 65,110 | | $ | — | | $ | 65,110 | | $ | — |
Available-for-sale - tax exempt | | | | | | | | | | | | |
Community Development District bonds | | $ | 21,299 | | $ | — | | $ | 21,299 | | $ | — |
Municipals | | | 1,099 | | | — | | | 1,099 | | | — |
Total | | $ | 22,398 | | $ | — | | $ | 22,398 | | $ | — |
Equity |
| |
|
| |
|
| |
|
| |
|
Mutual funds | | $ | 6,005 | | $ | 6,005 | | $ | — | | $ | — |
Total | | $ | 6,005 | | $ | 6,005 | | $ | — | | $ | — |
| | | | | | | | | | | | |
| | | | | at June 30, 2021 Using: | |||||||
| | | | | | | | Significant | | | | |
| | | | | Quoted Prices in | | Other | | Significant | |||
| | | | | Active Markets for | | Observable | | Unobservable | |||
| | Fair | | Identical Assets | | Inputs | | Inputs | ||||
June 30, 2021 |
| Value |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Customer Derivatives: Interest Rate SWAPs |
| |
|
| |
|
| |
|
| |
|
Customer Derivatives - Interest Rate SWAPs Asset | | $ | 863 | | $ | — | | $ | 863 | | $ | — |
Customer Derivatives - Interest Rate SWAPs Liability | | | (863) | | | — | | | (863) | | | — |
Total | | $ | — | | $ | — | | $ | — | | $ | — |
As of December 31, 2020, the Company did not hold any interest rate SWAPs.
Impaired loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Such adjustments result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.
Specifically, regarding the Coex loan, the carrying amount
22
value of collateral was noted as $0.6 million. The net result of these calculations provides for 0 specific reserve within the Allowance for Loan and Lease Losses (“ALLL”) associated with the Coex loan or approximately 0% of the carrying value of the loan.
Assets measured at fair value on a non-recurring basis are summarized below:
| | | | | | | | | | | | | | | |
| | | | | Fair Value Measurements | ||||||||||
| | | | | at June 30, 2021 Using: | ||||||||||
| | | | | | | | Significant | | | | | | | |
| | | | | Quoted Prices in | | Other | | Significant | | | | |||
| | Total at | | Active Markets for | | Observable | | Unobservable | | | | ||||
| | June 30, | | Identical Assets | | Inputs | | Inputs | | Total Gains | |||||
(Dollars in thousands) |
| 2021 |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| (Losses) | |||||
Impaired Loans: |
| |
|
| |
|
| |
|
| |
| | |
|
Commercial real estate | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Residential real estate | |
| — | |
| — | |
| — | |
| — | |
| — |
Commercial | | | 810 | | | — | | | — | | | 810 | | | (658) |
Construction and land development | | | — | | | — | | | — | | | — | | | — |
Consumer and other | |
| — | |
| — | |
| — | |
| — | |
| — |
Total | | $ | 810 | | $ | — | | $ | — | | $ | 810 | | $ | (658) |
| | | | | | | | | | | | | | | |
| | | | | Fair Value Measurements | ||||||||||
| | | | | at December 31, 2020 Using: | ||||||||||
| | | | | | | | Significant | | | | | | | |
| | | | | Quoted Prices in | | Other | | Significant | | | | |||
| | Total at | | Active Markets for | | Observable | | Unobservable | | | | ||||
| | December 31, | | Identical Assets | | Inputs | | Inputs | | Total Gains | |||||
(Dollars in thousands) |
| 2020 |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| (Losses) | |||||
Impaired Loans: |
| |
|
| |
|
| |
|
| |
| | |
|
Commercial real estate | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Residential real estate | |
| — | |
| — | |
| — | |
| — | |
| — |
Commercial | | | 818 | | | — | | | — | | | 818 | | | (8,309) |
Construction and land development | | | — | | | — | | | — | | | — | | | — |
Consumer and other | |
| — | |
| — | |
| — | |
| — | |
| — |
Total | | $ | 818 | | $ | — | | $ | — | | $ | 818 | | $ | (8,309) |
23
Fair Value Measurements on March 31, 2022 Using: | ||||||||||||||||||||||||||||||||
(Dollars in thousands) | Total at March 31, 2022 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Gains (Losses) | |||||||||||||||||||||||||||
Impaired Loans: | ||||||||||||||||||||||||||||||||
Commercial real estate | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
Residential real estate | — | — | — | — | — | |||||||||||||||||||||||||||
Commercial | 779 | — | — | 779 | (689) | |||||||||||||||||||||||||||
Construction and land development | — | — | — | — | — | |||||||||||||||||||||||||||
Consumer and other | — | — | — | — | (654) | |||||||||||||||||||||||||||
Total | $ | 779 | $ | — | $ | — | $ | 779 | $ | (1,343) |
Fair Value Measurements on December 31, 2021 Using: | ||||||||||||||||||||||||||||||||
(Dollars in thousands) | Total at December 31, 2021 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Gains (Losses) | |||||||||||||||||||||||||||
Impaired Loans: | ||||||||||||||||||||||||||||||||
Commercial real estate | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
Residential real estate | — | — | — | — | — | |||||||||||||||||||||||||||
Commercial | 797 | — | — | 797 | (671) | |||||||||||||||||||||||||||
Construction and land development | — | — | — | — | — | |||||||||||||||||||||||||||
Consumer and other | — | — | — | — | (654) | |||||||||||||||||||||||||||
Total | $ | 797 | $ | — | $ | — | $ | 797 | $ | (1,325) |
As shown above our impaired loans consist solely of commercial loans considered to be Level 3. These Level 3 loans have significant unobservable inputs such as appraisal adjustments for local market conditions and economic factors that may result in changes in value of an assets over time.
March 31, 2022 | ||||||||||||||||||||
(Dollars in thousands) | Carrying Amount | Fair Value | Fair Value Hierarchy | |||||||||||||||||
Financial Assets: | ||||||||||||||||||||
Cash & due from banks, including interest bearing deposits | $ | 717,637 | $ | 717,637 | Level 1 | |||||||||||||||
Federal funds sold | 24,089 | 24,089 | Level 1 | |||||||||||||||||
Securities, available for sale - taxable | 184,971 | 175,758 | Level 2 | |||||||||||||||||
Securities, available for sale - tax-exempt | 30,692 | 30,446 | Level 2 | |||||||||||||||||
Securities, held to maturity | 218 | 214 | Level 2 | |||||||||||||||||
Securities, equity | 5,639 | 5,639 | Level 1 | |||||||||||||||||
Securities, other equity | 800 | 800 | Level 1 | |||||||||||||||||
Loans, net | 1,809,161 | 1,816,008 | Level 3 | |||||||||||||||||
Loans held for sale | 988 | 988 | Level 1 | |||||||||||||||||
Bank owned life insurance | 38,758 | 38,758 | Level 2 | |||||||||||||||||
Customer derivatives - interest rate swaps | 1,912 | 1,912 | Level 2 | |||||||||||||||||
Accrued interest receivable | 5,525 | 5,525 | Level 1, 2 & 3 | |||||||||||||||||
Financial Liabilities: | ||||||||||||||||||||
Deposits | $ | 2,587,277 | $ | 2,475,854 | Level 2 | |||||||||||||||
Federal Home Loan Bank advances | 5,000 | 4,989 | Level 2 | |||||||||||||||||
Subordinated debt | 24,409 | 24,409 | Level 2 | |||||||||||||||||
Customer derivatives - interest rate swaps | 1,912 | 1,912 | Level 2 | |||||||||||||||||
December 31, 2021 | ||||||||||||||||||||
(Dollars in thousands) | Carrying Amount | Fair Value | Fair Value Hierarchy | |||||||||||||||||
Financial Assets: | ||||||||||||||||||||
Cash & due from banks, including interest bearing deposits | $ | 583,990 | $ | 583,990 | Level 1 | |||||||||||||||
Federal funds sold | 13,477 | 13,477 | Level 1 | |||||||||||||||||
Securities, available for sale - taxable | 177,080 | 175,536 | Level 2 | |||||||||||||||||
Securities, available for sale - tax-exempt | 18,214 | 18,765 | Level 2 | |||||||||||||||||
Securities, held to maturity | 236 | 242 | Level 2 | |||||||||||||||||
Securities, equity | 5,838 | 5,838 | Level 1 | |||||||||||||||||
Securities, other equity | 800 | 800 | Level 1 | |||||||||||||||||
Loans, net | 1,764,460 | 1,779,968 | Level 3 | |||||||||||||||||
Loans held for sale | 165 | 165 | Level 1 | |||||||||||||||||
Bank owned life insurance | 38,485 | 38,485 | Level 2 | |||||||||||||||||
Customer derivatives - interest rate swaps | 1,144 | 1,144 | Level 2 | |||||||||||||||||
Accrued interest receivable | 5,272 | 5,272 | Level 1, 2 & 3 | |||||||||||||||||
Financial Liabilities: | ||||||||||||||||||||
Deposits | $ | 2,371,388 | $ | 2,372,372 | Level 2 | |||||||||||||||
Federal Home Loan Bank advances | 35,000 | 34,274 | Level 2 | |||||||||||||||||
Line of credit | 10,000 | 10,000 | Level 2 | |||||||||||||||||
Customer derivatives - interest rate swaps | 1,144 | 1,144 | Level 2 | |||||||||||||||||
| | | | | | | | |
| | June 30, 2021 | ||||||
| | Carrying | | Fair | | Fair Value | ||
|
| Amount |
| Value |
| Hierarchy | ||
Financial Assets: |
| |
|
| |
|
|
|
Cash & Due from Banks, including interest bearing deposits | | $ | 616,180 | | $ | 616,180 |
| Level 1 |
Federal Funds Sold | |
| 36,156 | |
| 36,156 |
| Level 1 |
Securities, Available for Sale - taxable | |
| 101,109 | |
| 100,735 |
| Level 2 |
Securities, Available for Sale - tax exempt | | | 19,011 | | | 19,761 | | Level 2 |
Securities, Held to Maturity | |
| 1,285 | |
| 1,296 |
| Level 2 |
Securities, Equity | |
| 5,942 | |
| 5,942 |
| Level 1 |
Loans, net | |
| 1,680,168 | |
| 1,702,726 |
| Level 3 |
Loans Held For Sale | |
| 2,039 | |
| 2,039 |
| Level 1 |
Bank Owned Life Insurance | | | 37,923 | | | 37,923 | | Level 2 |
Accrued Interest Receivable | |
| 5,449 | |
| 5,449 |
| Level 1, 2 & 3 |
Customer Derivatives - Interest Rate SWAPs | | | 863 | | | 863 | | Level 2 |
| | | | | | | | |
Financial Liabilities: | |
|
| |
|
|
|
|
Deposits | |
| 2,277,163 | |
| 2,246,864 |
| Level 2 |
Federal Home Loan Bank Advances | |
| 35,000 | |
| 33,671 |
| Level 2 |
Subordinated Debt | | | 10,062 | | | 10,062 | | Level 2 |
PPPLF Advances | | | — | | | — | | Level 2 |
Loan Participations | | | — | | | — | | Level 2 |
Customer Derivatives - Interest Rate SWAPs | | | 863 | | | 863 | | Level 2 |
Accrued Interest Payable | |
| 267 | |
| 267 |
| Level 2 |
| | | | | | | | |
| | December 31, 2020 | ||||||
| | Carrying | | Fair | | Fair Value | ||
|
| Amount |
| Value |
| Hierarchy | ||
Financial Assets: |
| |
|
| |
|
|
|
Cash & Due from Banks, including interest bearing deposits | | $ | 191,597 | | $ | 191,597 |
| Level 1 |
Federal Funds Sold | |
| 25,375 | |
| 25,375 |
| Level 1 |
Securities, Available for Sale - taxable | |
| 65,110 | |
| 65,110 |
| Level 2 |
Securities, Available for Sale - tax exempt | | | 22,398 | | | 22,398 | | Level 2 |
Securities, Held to Maturity | |
| 1,547 | |
| 1,561 |
| Level 2 |
Securities, Equity | |
| 6,005 | |
| 6,005 |
| Level 1 |
Loans, net | |
| 1,643,373 | |
| 1,653,401 |
| Level 3 |
Loans Held For Sale | | | 1,270 | | | 1,270 | | Level 1 |
Bank Owned Life Insurance | |
| 37,360 | |
| 37,360 |
| Level 2 |
Accrued Interest Receivable | |
| 6,666 | |
| 6,666 |
| Level 1, 2 & 3 |
| | | | | | | | |
Financial Liabilities: | |
|
| |
|
|
|
|
Deposits | |
| 1,659,543 | |
| 1,693,331 |
| Level 2 |
Federal Home Loan Bank Advances | |
| 40,000 | |
| 37,927 |
| Level 2 |
Subordinated Debt | | | 10,153 | | | 10,153 | | Level 2 |
PPPLF Advances | | | 101,358 | | | 101,519 | | Level 2 |
Loan Participations | | | 13,215 | | | 13,215 | | Level 2 |
Accrued Interest Payable | |
| 546 | |
| 546 |
| Level 2 |
During the first quarter of 2021, the Company established a program whereby it originates a variable rate loan and enters into a variable-to-fixed interest rate SWAPswap with the customer. The Company also enters into an offsetting SWAPswap with a SWAPswap dealer. These back-to-back SWAPswap agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. The SWAPs with both the customers and thirdpartiesswaps are notdesignated as hedges under FASB ASC Topic 815,Derivatives and Hedging, and are marked to market through earnings. As the SWAPsswaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to
24
earnings; however, there maybe fair value adjustments related to credit quality variations between counterparties, which mayimpact earnings as required by FASB ASC Topic 820,Fair Value Measurement and Disclosure (“ASC 820”). During the six months ended June 30, 2021,As of March 31, 2022, the Company recorded 5 SWAP14 swap transactions with clients having a total notional amount of $22.3$58.6 million, offset by five SWAP14 swap transactions with dealers having a total notional amount of $22.3$58.6 million. Additionally, we recorded $0.5$0.1 million in SWAP fees.back-to-back swap fee income. The fair value of these derivatives is based on a market standard discounted cash flow approach. The Company incorporates credit value adjustments on derivatives to properly reflect the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives. As of June 30, 2021,March 31, 2022, the Bank’s asset fair value position in other assets was $0.9$1.9 million and liability fair value position in other liabilities was $0.9$1.9 million, whichand were fully collateralized with pledged securities held with the counterparty in excess of the exposure amount at quarter end.
| | | | | | |
(Dollars in thousands) |
| June 30, 2021 |
| December 31, 2020 | ||
Unfunded lines of credit | | $ | 366,015 | | $ | 356,955 |
Commitments to extend credit | |
| 83,857 | |
| 40,629 |
Letters of credit | |
| 11,226 | |
| 13,036 |
Total credit extension commitments | | $ | 461,098 | | $ | 410,620 |
(Dollars in thousands) | March 31, 2022 | December 31, 2021 | ||||||||||||
Available lines of credit | $ | 457,260 | $ | 415,402 | ||||||||||
Unfunded loan commitments – fixed | 75,345 | 62,126 | ||||||||||||
Unfunded loan commitments – variable | 26,848 | 46,698 | ||||||||||||
Standby letters of credit | 11,842 | 12,095 | ||||||||||||
Commercial letters of credit | 3,483 | 2,765 | ||||||||||||
Total credit extension commitments | $ | 574,778 | $ | 539,086 |
25
Actual and required capital amounts and ratios are presented below at June 30, 2021on March 31, 2022, and December 31, 2020.2021. The required amounts for capital adequacy shown below do not include the capital conservation buffer previously discussed.
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Minimum to be well | | |||
| | Actual | | Minimum for capital adequacy | | capitalized | | |||||||||
(Dollars in thousands) |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| |||
June 30, 2021 |
| |
|
|
|
| |
|
|
|
| |
|
|
| |
Total capital ratio |
| |
|
| |
| |
|
|
|
| |
|
|
| |
Bank | | $ | 198,836 |
| 12.8 | % | $ | 124,003 |
| 8.0 | % | $ | 155,004 |
| 10.0 | % |
Company | |
| 218,325 |
| 14.1 | % |
| 124,003 |
| 8.0 | % |
| N/A |
| N/A | |
Tier 1 capital ratio | |
|
|
| | |
|
|
|
| |
|
|
|
| |
Bank | |
| 187,416 |
| 12.1 | % |
| 93,002 |
| 6.0 | % |
| 124,003 |
| 8.0 | % |
Company | |
| 196,844 |
| 12.7 | % |
| 93,002 |
| 6.0 | % |
| N/A |
| N/A | |
Tier1 leverage ratio | |
|
|
| | |
|
|
|
| |
|
|
|
| |
Bank | |
| 187,416 |
| 7.4 | % |
| 101,368 |
| 4.0 | % |
| 126,710 |
| 5.0 | % |
Company | |
| 196,844 |
| 7.8 | % |
| 101,368 |
| 4.0 | % |
| N/A |
| N/A | |
Common equity tier 1 capital ratio | |
|
|
| | |
| |
|
| |
|
|
|
| |
Bank | |
| 187,416 |
| 12.1 | % |
| 69,752 |
| 4.5 | % |
| 100,753 |
| 6.5 | % |
Company | |
| 196,844 |
| 12.7 | % |
| 69,752 |
| 4.5 | % |
| N/A |
| N/A | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Minimum to be well |
| |||
| | Actual | | Minimum for capital adequacy | | capitalized |
| |||||||||
(Dollars in thousands) |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| |||
December 31, 2020 | |
|
|
|
| |
|
|
|
| |
|
|
|
| |
Total capital ratio | |
|
|
|
| |
|
|
|
| |
|
|
|
| |
Bank | | $ | 176,633 |
| 12.0 | % | $ | 117,298 |
| 8.0 | % | $ | 146,623 |
| 10.0 | % |
Company | |
| 215,977 |
| 14.7 | % |
| 117,298 |
| 8.0 | % |
| N/A |
| N/A | |
Tier 1 capital ratio | |
|
|
| | |
|
|
|
| |
|
|
|
| |
Bank | |
| 159,448 |
| 10.9 | % |
| 87,974 |
| 6.0 | % |
| 117,298 |
| 8.0 | % |
Company | |
| 188,639 |
| 12.9 | % |
| 87,974 |
| 6.0 | % |
| N/A |
| N/A | |
Tier1 leverage ratio | |
|
|
| | |
|
|
|
| |
|
|
|
| |
Bank | |
| 159,448 |
| 8.4 | % |
| 75,723 |
| 4.0 | % |
| 94,654 |
| 5.0 | % |
Company | |
| 188,639 |
| 10.0 | % |
| 75,723 |
| 4.0 | % |
| N/A |
| N/A | |
Common equity tier 1 capital ratio | |
|
|
| | |
| |
|
| |
|
|
|
| |
Bank | |
| 159,448 |
| 10.9 | % |
| 65,980 |
| 4.5 | % |
| 95,305 |
| 6.5 | % |
Company | |
| 188,639 |
| 12.9 | % |
| 65,980 |
| 4.5 | % |
| N/A |
| N/A | |
NOTE 14 — STOCK BASED COMPENSATION
Restricted Stock
An award of restricted stock involves the immediate transfer by the Company to the participant of a specific number of shares of our Class A voting common stock, which are subject to a risk of forfeiture and a restriction on transferability. This restriction will lapse following a stated period of time. The participant does not pay for the restricted stock and has all of the rights of a holder of a share of our Class A voting common stock (except for the restriction on transferability), including the right to vote and receive dividends unless otherwise determined by the Compensation Committee and set forth in the award agreement.
The Company has limited the aggregate number of shares of our Class A voting common stock to be awarded under the 2019 Equity Incentive Plan as restricted stock to 300,000 shares. The Company has 222,009 shares of restricted stock outstanding, at a weighted average exercise price of $16.82, to employees and directors under the 2019 Equity Incentive Plan as of June 30, 2021, for which the Company did not receive, nor will it receive, any monetary consideration. Therefore, there were 77,991 restricted shares available to be issued at June 30, 2021. As of June 30, 2021, there was approximately $2.9 million in unrecognized compensation expense in regard to restricted stock that will be recognized over a three-year period.
26
(Dollars in thousands) | Actual | Required for Capital Adequacy Purposes | Well Capitalized Prompt Corrective Action Regulations | |||||||||||||||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||||||||||
March 31, 2022 | ||||||||||||||||||||||||||||||||||||||
Total Capital ratio | ||||||||||||||||||||||||||||||||||||||
Bank | $ | 235,860 | 12.8 | % | $ | 147,313 | 8.0 | % | $ | 184,141 | 10.0 | % | ||||||||||||||||||||||||||
Company | 250,202 | 13.6 | % | 147,313 | 8.0 | % | N/A | N/A | ||||||||||||||||||||||||||||||
Tier 1 Capital ratio | ||||||||||||||||||||||||||||||||||||||
Bank | 221,203 | 12.0 | % | 110,484 | 6.0 | % | 147,313 | 8.0 | % | |||||||||||||||||||||||||||||
Company | 211,136 | 11.5 | % | 110,484 | 6.0 | % | N/A | N/A | ||||||||||||||||||||||||||||||
Tier 1 Leverage ratio | ||||||||||||||||||||||||||||||||||||||
Bank | 221,203 | 8.1 | % | 108,580 | 4.0 | % | 135,725 | 5.0 | % | |||||||||||||||||||||||||||||
Company | 211,136 | 7.8 | % | 108,580 | 4.0 | % | N/A | N/A | ||||||||||||||||||||||||||||||
Common Equity Tier 1 | ||||||||||||||||||||||||||||||||||||||
Bank | 221,203 | 12.0 | % | 82,863 | 4.5 | % | 119,692 | 6.5 | % | |||||||||||||||||||||||||||||
Company | 211,136 | 11.5 | % | 82,863 | 4.5 | % | N/A | N/A | ||||||||||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||||||||
Total Capital ratio | ||||||||||||||||||||||||||||||||||||||
Bank | $ | 222,696 | 12.1 | % | $ | 147,313 | 8.0 | % | $ | 184,141 | 10.0 | % | ||||||||||||||||||||||||||
Company | 220,206 | 12.0 | % | 147,313 | 8.0 | % | N/A | N/A | ||||||||||||||||||||||||||||||
Tier 1 Capital ratio | ||||||||||||||||||||||||||||||||||||||
Bank | 208,997 | 11.3 | % | 110,484 | 6.0 | % | 147,313 | 8.0 | % | |||||||||||||||||||||||||||||
Company | 206,507 | 11.9 | % | 110,484 | 6.0 | % | N/A | N/A | ||||||||||||||||||||||||||||||
Tier 1 Leverage ratio | ||||||||||||||||||||||||||||||||||||||
Bank | 208,997 | 7.7 | % | 108,580 | 4.0 | % | 135,725 | 5.0 | % | |||||||||||||||||||||||||||||
Company | 206,507 | 7.7 | % | 108,580 | 4.0 | % | N/A | N/A | ||||||||||||||||||||||||||||||
Common Equity Tier 1 | ||||||||||||||||||||||||||||||||||||||
Bank | 208,997 | 12.1 | % | 82,863 | 4.5 | % | 119,692 | 6.5 | % | |||||||||||||||||||||||||||||
Company | 206,507 | 11.9 | % | 82,863 | 4.5 | % | N/A | N/A |
NOTE 15 — LEASES
Operating leases in which the Company is the lessee are recorded as right-of-use (“ROU”) assets and operating lease liabilities, including premises and equipment and other liabilities, respectively on the Consolidated Balance Sheets. Currently the Company does not have any lessor leases (formerly known as capital leases) to report on its financials.
The Company’s ROU assets are classified under premises and equipment on the Balance Sheet. The ROU liabilities are classified under other liabilities. The Company did 0t record new ROU during the six months ended June 30, 2021, and recorded $2.0 million during the year ended December 31, 2020. The total amount of ROU was $5.6 and $6.5 million at June 30, 2021 and December 31, 2020, respectively.
The majority of the Company’s lessee leases are operating leases and consist of leased real estate for branches and operations centers. The Company elected the short term lease recognition exemption for all leases that qualify, meaning those with terms under twelve months. The ROU assets represent the Company’s right to use the underlying assets during the lease term and operating liabilities represent the obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement. Options to extend and renew leases are generally exercised under normal circumstances. Advance notification is required prior to termination, and any noticing period is often limited to the months prior to renewal. Variable payments generally consist of common area maintenance and taxes. Rent escalations are generally specified by a payment schedule or are subject to a defined formula. The Company also does not separate lease and non-lease components for all leases, the majority of which consist of real estate common area maintenance expenses. Generally, leases do not include guaranteed residual values, but instead typically specify that the leased premises are to be returned in satisfactory condition with the Company liable for damages.
Lease cost for the three and six months ended June 30, 2021 and 2020 consists of:
| | | | | | | | | | | | |
| | Three Months Ended | | Three Months Ended | | Six Months Ended | | Six Months Ended | ||||
|
| June 30, 2021 | | June 30, 2020 | | June 30, 2021 |
| June 30, 2020 | ||||
Operating Lease and Interest Cost | | $ | 326 | | $ | 445 | | $ | 794 | | $ | 756 |
Variable Lease Cost | |
| 82 | |
| 142 | |
| 199 | |
| 249 |
Total Lease Cost | | $ | 408 | | $ | 587 | | $ | 993 | | $ | 1,005 |
The following table provides supplemental information related to leases for the three and six months ended June 30, 2021 and 2020:
| | | | | | | | | | | | | |
| | Three Months Ended | | Three Months Ended | | Six Months Ended | | Six Months Ended | | ||||
|
| June 30, 2021 | | June 30, 2020 | | June 30, 2021 |
| June 30, 2020 | | ||||
Operating Lease - Operating Cash Flows (Fixed Payments) | | $ | 326 | | $ | 445 | | $ | 793 | | $ | 756 | |
Operating Lease - Operating Cash Flows (Liability Reduction) | | $ | 296 | | $ | 416 | | $ | 921 | | $ | 669 | |
New ROU Assets - Operating Leases | | $ | — | | $ | — | | $ | — | | $ | 1,620 | |
Weighted Average Lease Term (Years) - Operating Leases | | | | | | | | | 5.25 | | | 6.02 | |
Weighted Average Discount Rate - Operating Leases | | | | % | | | % | | 3.13 | % | | 3.02 | % |
A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liabilities as of June 30, 2021, is as follows:
| | | |
|
| June 30, 2021 | |
Operating lease payments due: |
| |
|
Within one year | | $ | 1,400 |
After one but within two years | |
| 1,421 |
After two but within three years | | | 1,296 |
After three but within four years | | | 1,093 |
After four years but within five years | | | 955 |
After five years | | | 706 |
Total undiscounted cash flows | | | 6,871 |
Discount on cash flows | | | (1,291) |
Total operating lease liabilities | | $ | 5,580 |
27
NOTE 16 — SUBSEQUENT EVENTS
Loan Production Offices
On July 12, 2021, the Company expanded its Florida footprint by opening up 2 new loan production offices in Tampa/St. Petersburg and Jacksonville.
28
2021.
29
Results of Operations for the Three Months Ended March 31, 2022
Results of Operations for the three months ended June 30,March 31, 2022, and 2021
Results of Operations for the six months ended June 30, 2021
Financial Condition
At June 30, 2021:
31
Operating Results
Results of Operations for the three months ended June 30, 2021 and 2020
The following table sets forth the principal components of net income for the periods indicated.
| | | | | | | | | |
| | Three Months Ended June 30, |
| ||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| Change |
| ||
Interest income | | $ | 18,962 | | $ | 18,522 |
| 2.4 | % |
Interest expense | |
| 1,760 | |
| 2,231 |
| (21.1) | % |
Net Interest income | |
| 17,202 | |
| 16,291 |
| 5.6 | % |
Provision for loan losses | |
| 762 | |
| 1,750 |
| (56.5) | % |
Net interest income after provision | |
| 16,440 | |
| 14,541 |
| 13.1 | % |
Noninterest income | |
| 2,302 | |
| 968 |
| 137.8 | % |
Noninterest expense | |
| 10,954 | |
| 11,548 |
| (5.1) | % |
Income before income taxes | |
| 7,788 | |
| 3,961 |
| 96.6 | % |
Income tax expense | |
| 1,457 | |
| 830 |
| 75.5 | % |
Net income | | $ | 6,331 | | $ | 3,131 |
| 102.2 | % |
Three Months Ended March 31, | ||||||||||||||||||||
(Dollars in thousands) | 2022 | 2021 | Change | |||||||||||||||||
Interest income | $ | 21,022 | $ | 19,772 | 6.3 | % | ||||||||||||||
Interest expense | 1,975 | 1,893 | 4.3 | % | ||||||||||||||||
Net interest income | 19,047 | 17,879 | 6.5 | % | ||||||||||||||||
Provision for loan losses | 851 | 1,038 | (18.0) | % | ||||||||||||||||
Net interest income after provision | 18,196 | 16,841 | 8.0 | % | ||||||||||||||||
Noninterest income | 1,273 | 1,119 | 13.8 | % | ||||||||||||||||
Noninterest expense | 16,495 | 11,788 | 39.9 | % | ||||||||||||||||
Income before income taxes | 2,974 | 6,172 | (51.8) | % | ||||||||||||||||
Income tax expense | 555 | 1,387 | (60.0) | % | ||||||||||||||||
Net income | $ | 2,419 | $ | 4,785 | (49.4) | % |
190 at March 31, 2021.
32
using effective asset-liability management techniques is critical to maintaining the stability of our net interest income and net interest margin as our primary sources of earnings.
For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Average Outstanding Balance | Interest Income/ Expense(4) | Average Yield/Rate | Average Outstanding Balance | Interest Income/ Expense(4) | Average Yield/Rate | ||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||
Interest earning assets | ||||||||||||||||||||||||||||||||||||||
Interest-earning deposits | $ | 576,478 | $ | 276 | 0.19 | % | $ | 179,127 | $ | 46 | 0.10 | % | ||||||||||||||||||||||||||
Federal funds sold | 28,234 | 18 | 0.26 | % | 44,264 | 16 | 0.15 | % | ||||||||||||||||||||||||||||||
Federal Reserve Bank stock, FHLB stock and other corporate stock | 7,598 | 97 | 5.18 | % | 7,965 | 95 | 4.84 | % | ||||||||||||||||||||||||||||||
Investment securities - taxable | 187,273 | 638 | 1.38 | % | 69,797 | 179 | 1.04 | % | ||||||||||||||||||||||||||||||
Investment securities - tax-exempt | 25,902 | 213 | 3.34 | % | 21,639 | 203 | 3.80 | % | ||||||||||||||||||||||||||||||
Loans (1) | 1,773,887 | 19,780 | 4.52 | % | 1,663,532 | 19,233 | 4.69 | % | ||||||||||||||||||||||||||||||
Total interest earning assets | 2,599,372 | 21,022 | 3.28 | % | 1,986,324 | 19,772 | 4.04 | % | ||||||||||||||||||||||||||||||
Loans held for sale | 693 | 1,354 | ||||||||||||||||||||||||||||||||||||
Noninterest earning assets | 136,270 | 129,296 | ||||||||||||||||||||||||||||||||||||
Total assets | $ | 2,736,335 | $ | 2,116,974 | ||||||||||||||||||||||||||||||||||
Liabilities and shareholders’ equity | ||||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | $ | 1,672,387 | 1,586 | 0.38 | % | $ | 1,208,741 | 1,317 | 0.44 | % | ||||||||||||||||||||||||||||
Borrowed funds | 50,493 | 389 | 3.12 | % | 146,408 | 576 | 1.60 | % | ||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 1,722,880 | 1,975 | 0.46 | % | 1,355,149 | 1,893 | 0.57 | % | ||||||||||||||||||||||||||||||
Noninterest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||
Noninterest-bearing deposits | 764,763 | 524,114 | ||||||||||||||||||||||||||||||||||||
Other noninterest-bearing liabilities | 16,666 | 18,629 | ||||||||||||||||||||||||||||||||||||
Shareholders’ equity | 232,026 | 219,082 | ||||||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,736,335 | $ | 2,116,974 | ||||||||||||||||||||||||||||||||||
Net interest spread (2) | 2.82 | % | 3.47 | % | ||||||||||||||||||||||||||||||||||
Net interest income | $ | 19,047 | $ | 17,879 | ||||||||||||||||||||||||||||||||||
Net interest margin (3) | 2.97 | % | 3.65 | % |
33
| | | | | | | | | | | | | | | | | |
| | For the Three Months Ended June 30, | |||||||||||||||
| | 2021 | | 2020 | | ||||||||||||
|
| Average |
| Interest |
| |
| Average |
| Interest |
| |
| ||||
| | Outstanding | | Income/ | | Average | | Outstanding | | Income/ | | Average | | ||||
(Dollars in thousands) | | Balance | | Expense(4) | | Yield/Rate | | Balance | | Expense(4) | | Yield/Rate | | ||||
Assets |
| |
|
| |
|
|
|
| |
|
| |
|
|
|
|
Interest earning assets |
| |
|
| |
|
|
|
| |
|
| |
|
|
|
|
Interest-bearing deposits | | $ | 580,632 | | $ | 178 |
| 0.12 | % | $ | 170,658 | | $ | 44 |
| 0.10 | % |
Federal funds sold | |
| 69,506 | |
| 24 |
| 0.14 | % |
| 32,965 | |
| 12 |
| 0.15 | % |
Federal Reserve Bank stock, FHLB stock and other corporate stock | |
| 7,391 | |
| 99 |
| 5.37 | % |
| 7,598 | |
| 131 |
| 6.93 | % |
Investment securities - taxable | |
| 70,137 | |
| 161 |
| 0.92 | % |
| 88,365 | |
| 241 |
| 1.10 | % |
Investment securities - tax exempt | | | 20,172 | | | 189 | | 3.76 | % | | 20,973 | | | 197 | | 3.78 | % |
Loans(1) | |
| 1,699,403 | |
| 18,311 |
| 4.32 | % |
| 1,501,590 | |
| 17,897 |
| 4.79 | % |
Total interest earning assets | |
| 2,447,241 | |
| 18,962 |
| 3.11 | % |
| 1,822,149 | |
| 18,522 |
| 4.09 | % |
Loans held for sale | | | 2,638 | | | | | | | | — | | | | | | |
Noninterest earning assets | |
| 115,358 | |
|
|
| | |
| 102,663 | |
|
|
|
| |
Total assets | | $ | 2,565,237 | |
|
|
| | | $ | 1,924,812 | |
|
|
|
| |
Liabilities and stockholders’ equity | |
|
| |
|
|
| | |
|
| |
|
|
|
| |
Interest-bearing liabilities | |
|
| |
|
|
| | |
|
| |
|
|
|
| |
Interest-bearing deposits | |
| 1,377,712 | |
| 1,430 |
| 0.42 | % |
| 994,972 | |
| 1,617 |
| 0.65 | % |
Borrowed funds | |
| 56,347 | |
| 330 |
| 2.35 | % |
| 230,516 | |
| 614 |
| 1.07 | % |
Total interest-bearing liabilities | |
| 1,434,059 | |
| 1,760 |
| 0.49 | % |
| 1,225,488 | |
| 2,231 |
| 0.73 | % |
Noninterest-bearing liabilities | |
|
| |
|
|
| | |
|
| |
|
|
|
| |
Noninterest-bearing deposits | |
| 890,292 | |
|
|
| | |
| 475,613 | |
|
|
|
| |
Other noninterest-bearing liabilities | |
| 17,690 | |
|
|
| | |
| 19,540 | |
|
|
|
| |
Stockholders’ equity | |
| 223,196 | |
|
|
| | |
| 204,171 | |
|
|
|
| |
Total liabilities and stockholders’ equity | | $ | 2,565,237 | |
|
|
| | | $ | 1,924,812 | |
|
|
|
| |
Net interest spread(2) | |
|
| |
|
|
| 2.62 | % |
|
| |
|
|
| 3.36 | % |
Net interest income | |
|
| | $ | 17,202 |
| | |
|
| | $ | 16,291 |
|
| |
Net interest margin(3) | |
|
| |
|
|
| 2.82 | % |
|
| |
|
|
| 3.60 | % |
The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been proportionately allocated to both volume and rate.
| | | | | | | | | |
| | For the Three Months Ended June 30, 2021 | |||||||
| | Compared to 2020 | |||||||
| | Change Due To | | | | ||||
(Dollars in thousands) |
| Volume |
| Rate |
| Total | |||
Interest income |
| |
|
| |
|
| |
|
Interest-bearing deposits | | $ | 106 | | $ | 28 | | $ | 134 |
Federal funds sold | |
| 13 | |
| (1) | |
| 12 |
Federal Reserve Bank stock, Federal Home Loan Bank stock and other corporate stock | |
| (4) | |
| (28) | |
| (32) |
Investment securities - taxable | |
| (50) | |
| (30) | |
| (80) |
Investment securities - tax exempt | | | (8) | | | — | | | (8) |
Loans | |
| 2,358 | |
| (1,944) | |
| 414 |
Total | | $ | 2,415 | | $ | (1,975) | | $ | 440 |
Interest expense | |
|
| |
|
| |
|
|
Interest-bearing deposits | |
| 622 | |
| (809) | |
| (187) |
Borrowed funds | |
| (464) | |
| 180 | |
| (284) |
Total | | $ | 158 | | $ | (629) | | $ | (471) |
For the Three Months Ended March 31, 2022 Compared to 2021 | ||||||||||||||||||||
Change Due To | ||||||||||||||||||||
(Dollars in thousands) | Volume | Rate | Total | |||||||||||||||||
Interest income | ||||||||||||||||||||
Interest earning deposits | $ | 102 | $ | 128 | $ | 230 | ||||||||||||||
Federal funds sold | (6) | 8 | 2 | |||||||||||||||||
Federal Reserve Bank stock, Federal Home Loan Bank stock and other corporate stock | (4) | 6 | 2 | |||||||||||||||||
Investment securities - taxable | 301 | 158 | 459 | |||||||||||||||||
Investment securities - tax-exempt | 40 | (30) | 10 | |||||||||||||||||
Loans | 1,276 | (729) | 547 | |||||||||||||||||
Total | $ | 1,709 | $ | (459) | $ | 1,250 | ||||||||||||||
Interest expense | ||||||||||||||||||||
Interest-bearing deposits | 505 | (236) | 269 | |||||||||||||||||
Borrowed funds | (377) | 190 | (187) | |||||||||||||||||
Total | $ | 128 | $ | (46) | $ | 82 |
Net interest income totaled $17.2increased by $1.2 million to $19.0 million for the three months ended June 30, 2021, down $0.7 million, or 3.8%March 31, 2022, compared to the three months ended March 31, 2021. Our total net interest income was impacted by an increase in interest earning assets, which was primarily due to increased balances in our loan portfolio. Average total interest earning assets were $2.6 billion for the three months ended March 31, 2022, compared to $2.0 billion for the three months ended March 31, 2021. The annualized yield on interest earning assets decreased 76 basis points for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to increased cash balances and accelerated paydowns of principal in higher yielding loan payoffs and a decrease in loan fees associated with PPP loan
34
forgiveness. Net interest margin decreased 83 basis points from the first quarter of 2021 to 2.82% for the second quarter of 2021 due to an increase in low yielding cash assets and loan payoffs on higher yielding assets. Our weighted average roll-off rate for loans paid off was 4.7% and the weighted average roll-on rate for loans originated was 3.9% at June 30, 2021.
Net interest income increased by $0.9 million to $17.2 million for the three months ended June 30, 2021, compared to the three months ended June 30, 2020. Our total interest income was impacted by an increase in interest earning assets, primarily due to increased balances in large low yielding cash assets, coupled with increases in our portfolio of lower yielding loans, offset by decreased cost of funds to the Company. Average total interest earning assets were $2.4 billion for the three months ended June 30, 2021, compared with $1.8 billion for the three months ended June 30, 2020. The annualized yield on those interest earning assets decreased 98 basis points for the three months ended June 30, 2021, due to loans repricing downward, coupled with higher yielding loan payoffs.loans. The increase in the average balance of interest earning assets was driven primarily by our growth in cash of $359.9,$397.4 million, or 123.0% and221.8%, growth in our loan portfolio of $120.3$110.4 million, or 7.7%6.6%, and growth in our investment portfolio of $121.7 million, or 133.1%, compared to three months ended June 30, 2020.March 31, 2021. The growth in theour loan portfolio was due to organic loan originations and the Professional Bank PPP.
originations.
35
Provision for Loan Losses
36
extent they exceed the direct loan origination costs, which are generally recognized over the life of the related loan as an adjustment to yield using the interest method.
| | | | | | | | | |
| | Three Months Ended June 30, | | ||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| Increase (Decrease) |
| ||
Noninterest income |
| |
|
| |
|
|
|
|
Service charges on deposit accounts | | $ | 1,199 | | $ | 307 | | 290.6 | % |
Income from Bank owned life insurance | |
| 281 | |
| 126 | | 123.0 | % |
Gain on sale and call of securities | |
| 21 | |
| 11 | | 90.9 | % |
SBA origination fees | |
| — | |
| 84 | | (100.0) | % |
SWAP fees | |
| 364 | |
| 210 | | 73.3 | % |
Third party loan sales | | | 226 | | | 157 | | 43.9 | % |
Other | | | 211 | | | 73 | | 189.0 | % |
Total noninterest income | | $ | 2,302 | | $ | 968 | | 137.8 | % |
Three Months Ended March 31, | ||||||||||||||||||||
(Dollars in thousands) | 2022 | 2021 | Increase (Decrease) | |||||||||||||||||
Noninterest income | ||||||||||||||||||||
Service charges on deposit accounts | $ | 517 | $ | 395 | 30.9% | |||||||||||||||
Income from bank owned life insurance | 273 | 282 | (3.2)% | |||||||||||||||||
SBA origination fees | — | 145 | 100.0% | |||||||||||||||||
Swap fee income | 112 | 209 | (46.4)% | |||||||||||||||||
Loans held for sale income | 71 | 75 | (5.3)% | |||||||||||||||||
Gain on sale and call of securities | — | 1 | (100.0)% | |||||||||||||||||
Other | 300 | 12 | — | |||||||||||||||||
Total noninterest income | $ | 1,273 | $ | 1,119 | 13.8% |
See Note 11 to$137 thousand loss on fixed asset disposals recorded in the Consolidated Financial Statements (unaudited) dated June 30, 2021, entitled "Customer Derivatives – Interest Rate SWAPs" for additional information regarding our derivative financial instruments.
prior year.
| | | | | | | | | |
| | Three Months Ended June 30, | | ||||||
| | | | | | | | Increase | |
(Dollars in thousands) |
| 2021 |
| 2020 |
| (Decrease) |
| ||
Noninterest expense |
| |
|
| |
|
|
|
|
Salaries and employee benefits | | $ | 7,099 | | $ | 6,912 | | 2.7 | % |
Occupancy and equipment | |
| 905 | |
| 1,081 | | (16.3) | % |
Data processing | |
| 276 | |
| 421 | | (34.4) | % |
Marketing | |
| 165 | |
| 151 | | 9.3 | % |
Professional fees | |
| 770 | |
| 806 | | (4.5) | % |
Acquisition expenses | | | — | | | 560 | | (100.0) | % |
Regulatory assessments | | | 418 | | | 300 | | 39.3 | % |
Other | | | 1,321 | | | 1,317 | | 0.3 | % |
Total noninterest expense | | $ | 10,954 | | $ | 11,548 | | (5.1) | % |
Three Months Ended March 31, | ||||||||||||||||||||
(Dollars in thousands) | 2022 | 2021 | Increase (Decrease) | |||||||||||||||||
Noninterest expense | ||||||||||||||||||||
Salaries and employee benefits | $ | 11,220 | $ | 6,784 | 65.4% | |||||||||||||||
Occupancy and equipment | 1,002 | 1,102 | (9.1)% | |||||||||||||||||
Data processing | 314 | 290 | 8.3% | |||||||||||||||||
Marketing | 196 | 153 | 28.1% | |||||||||||||||||
Professional fees | 919 | 628 | 46.3% | |||||||||||||||||
Acquisition expenses | — | 684 | (100.0)% | |||||||||||||||||
Regulatory assessments | 549 | 349 | 57.3% | |||||||||||||||||
Other | 2,295 | 1,798 | 27.6% | |||||||||||||||||
Total noninterest expense | $ | 16,495 | $ | 11,788 | 39.9% |
190 at March 31, 2021.
37
liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense was $1.5 million for the three months ended June 30, 2021, compared to $0.8 million for the three months ended June 30, 2020. Our effective tax rates for those periods were 18.7% and 21.0%, respectively. The change in the effective tax rate was due to the decrease in nondeductible expenses, an increase in tax-exempt income, and an increase in excess tax benefits from stock-based compensation.
Results of Operations for the six months ended June 30, 2021 and 2020
The following table sets forth the principal components of net income for the periods indicated.
| | | | | | | | | |
| | Six Months Ended June 30, | | ||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| Change |
| ||
Interest income | | $ | 38,734 | | $ | 29,542 |
| 31.1 | % |
Interest expense | |
| 3,653 | |
| 5,190 |
| (29.6) | % |
Net Interest income | |
| 35,081 | |
| 24,352 |
| 44.1 | % |
Provision for loan losses | |
| 1,800 | |
| 2,595 |
| (30.6) | % |
Net interest income after provision | |
| 33,281 | |
| 21,757 |
| 53.0 | % |
Noninterest income | |
| 3,421 | |
| 1,824 |
| 87.6 | % |
Noninterest expense | |
| 22,742 | |
| 21,034 |
| 8.1 | % |
Income before income taxes | |
| 13,960 | |
| 2,547 |
| 448.1 | % |
Income tax expense | |
| 2,844 | |
| 733 |
| 288.0 | % |
Net income | | $ | 11,116 | | $ | 1,814 |
| 512.8 | % |
Net income for the six months ended June 30, 2021, was $11.1 million, an increase of $9.3 million, or 512.8%, compared to the six months ended June 30, 2020. Interest income increased $9.2 million while interest expense decreased $1.5 million, resulting in a net interest income increase of $10.7 million for the six months ended June 30, 2021, compared to the same period in the prior year. The increase in our interest income was primarily due to the MBI Variance, increased loan portfolio growth, and decreased cost of funds to the Company. Provision for loan losses decreased by $0.8 million for the six months ended June 30, 2021, compared to the same period in the prior year. The decrease in the provision expense was due primarily to to the need for an increased reserve at the early stages of COVID-19 in 2020 and the decreasing impact of COVID-19 on the economy in 2021. The increase in noninterest expense for the six months ended June 30, 2021, compared to the same period in the prior year was primarily due to increased salaries and investment in digital infrastructure. The Bank’s number of employees increased from 137 as of December 31, 2019, to 179 as of June 30, 2020, which increase was due to the MBI acquisition, and further increased to 194 as of June 30, 2021.
Net Interest Income and Net Interest Margin Analysis
We analyze our ability to maximize income generated from interest earning assets and control the interest expenses associated with our liabilities, measured as net interest income, through our net interest margin and net interest spread. Net interest income is the difference between the interest and fees earned on interest earning assets, such as loans and securities, and the interest expense paid on interest bearing liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest margin is a ratio calculated as annualized net interest income divided by average interest earning assets for the same period. Net interest spread is the difference between average interest rates earned on interest earning assets and average interest rates paid on interest-bearing liabilities.
Changes in market interest rates and the interest rates we earn on interest earning assets or pay on interest-bearing liabilities, as well as in the volume and types of interest earning assets, interest bearing and noninterest-bearing liabilities and stockholders’ equity, are usually the largest drivers of periodic changes in net interest income, net interest margin and net interest spread. Fluctuations in market interest rates are driven by many factors, including governmental monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment rates, the money supply, political and international conditions and conditions in domestic and foreign financial markets. Periodic changes in the volume and types of loans in our loan portfolio are affected by, among other factors, the economic and competitive conditions in the Miami-Dade MSA, as well as developments affecting the real estate, technology, government services, hospitality and tourism, and financial services sectors within the Miami-Dade MSA. Our ability to respond to changes in these factors by using effective asset-liability management techniques is critical to maintaining the stability of our net interest income and net interest margin as our primary sources of earnings.
38
The following table shows the average outstanding balance of each principal category of our assets, liabilities, and stockholders’ equity, together with the average yields on our assets and the average costs of our liabilities for the periods indicated. Such yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period.
| | | | | | | | | | | | | | | | | |
| | For the Six Months Ended June 30, | | ||||||||||||||
| | 2021 | | 2020 | | ||||||||||||
|
| Average |
| Interest |
| |
| Average |
| Interest |
| |
| ||||
| | Outstanding | | Income/ | | Average | | Outstanding | | Income/ | | Average | | ||||
(Dollars in thousands) | | Balance | | Expense(4) | | Yield/Rate | | Balance | | Expense(4) | | Yield/Rate | | ||||
Assets |
| |
|
| |
|
|
|
| |
|
| |
|
|
|
|
Interest earning assets |
| |
|
| |
|
|
|
| |
|
| |
|
|
|
|
Interest-bearing deposits | | $ | 380,989 | | $ | 224 |
| 0.12 | % | $ | 173,907 | | $ | 629 |
| 0.73 | % |
Federal funds sold | |
| 56,955 | |
| 40 |
| 0.14 | % |
| 33,954 | |
| 131 |
| 0.78 | % |
Federal Reserve Bank stock, FHLB stock and other corporate stock | |
| 7,676 | |
| 194 |
| 5.11 | % |
| 6,550 | |
| 210 |
| 6.45 | % |
Investment securities - Taxable | |
| 69,968 | |
| 340 |
| 0.98 | % |
| 68,085 | |
| 454 |
| 1.34 | % |
Investment securities - Non-taxable | | | 20,902 | | | 392 | | 3.79 | % | | 11,122 | | | 206 | | 3.72 | % |
Loans(1) | |
| 1,681,566 | |
| 37,544 |
| 4.51 | % |
| 1,156,151 | |
| 27,912 |
| 4.85 | % |
Total interest earning assets | |
| 2,218,056 | |
| 38,734 |
| 3.53 | % |
| 1,449,769 | |
| 29,542 |
| 4.10 | % |
Loans held for sale | | | 1,999 | | | | | | | | 1,186 | | | | | | |
Noninterest earning assets | |
| 122,420 | |
|
|
| | |
| 80,730 | |
|
|
|
| |
Total assets | | $ | 2,342,475 | |
|
|
| | | $ | 1,531,685 | |
|
|
|
| |
Liabilities and shareholders’ equity | |
|
| |
|
|
| | |
|
| |
|
|
|
| |
Interest-bearing liabilities | |
|
| |
|
|
| | |
|
| |
|
|
|
| |
Interest-bearing deposits | |
| 1,293,693 | |
| 2,747 |
| 0.43 | % |
| 879,749 | |
| 4,243 |
| 0.97 | % |
Borrowed funds | |
| 101,129 | |
| 906 |
| 1.81 | % |
| 146,828 | |
| 947 |
| 1.30 | % |
Total interest-bearing liabilities | |
| 1,394,822 | |
| 3,653 |
| 0.53 | % |
| 1,026,577 | |
| 5,190 |
| 1.02 | % |
Noninterest-bearing liabilities | |
|
| |
|
|
| | |
|
| |
|
|
|
| |
Noninterest-bearing deposits | |
| 708,215 | |
|
|
| | |
| 332,474 | |
|
|
|
| |
Other noninterest-bearing liabilities | |
| 18,288 | |
|
|
| | |
| 15,801 | |
|
|
|
| |
Shareholders’ equity | |
| 221,150 | |
|
|
| | |
| 156,833 | |
|
|
|
| |
Total liabilities and shareholders’ equity | | $ | 2,342,475 | |
|
|
| | | $ | 1,531,685 | |
|
|
|
| |
Net interest spread(2) | |
|
| |
|
|
| 3.00 | % |
|
| |
|
|
| 3.08 | % |
Net interest income | |
|
| | $ | 35,081 |
| | |
|
| | $ | 24,352 |
|
| |
Net interest margin(3) | |
|
| |
|
|
| 3.20 | % |
|
| |
|
|
| 3.38 | % |
The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been proportionately allocated to both volume and rate.
39
| | | | | | | | | |
| | For the Six Months Ended June 30, 2021 | |||||||
| | Compared to 2020 | |||||||
| | Change Due To | | | | ||||
(Dollars in thousands) |
| Volume |
| Rate |
| Total | |||
Interest income |
| |
|
| |
|
| |
|
Interest-bearing deposits | | $ | 749 | | $ | (1,154) | | $ | (405) |
Federal funds sold | |
| 89 | |
| (180) | |
| (91) |
Federal Reserve Bank stock, Federal Home Loan Bank stock and other corporate stock | |
| 36 | |
| (52) | |
| (16) |
Investment securities - taxable | |
| 13 | |
| (127) | |
| (114) |
Investment securities - tax exempt | | | 181 | | | 5 | | | 186 |
Loans | |
| 12,685 | |
| (3,053) | |
| 9,632 |
Total | | $ | 13,753 | | $ | (4,561) | | $ | 9,192 |
Interest expense | |
|
| |
|
| |
|
|
Interest-bearing deposits | |
| 1,996 | |
| (3,492) | |
| (1,496) |
Borrowed funds | |
| (295) | |
| 254 | |
| (41) |
Total | | $ | 1,701 | | $ | (3,238) | | $ | (1,537) |
Net interest income increased by $10.7 million to $35.1 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020. Our total interest income was impacted by an increase in interest earning assets, primarily due to increases in annualized average interest rates primarily reflected an increase in interest earning assets, primarily due to increased balances in our low yielding cash assets as well as increases in our loan portfolio of lower yielding loans, offset by decreased cost of funds to the Company. Average total interest earning assets were $2.2 billion for the six months ended June 30, 2021, compared with $1.4 billion for the six months ended June 30, 2020. The annualized yield on those interest earning assets decreased 57 basis points to for the six months ended June 30, 2021, due to loans repricing downward, coupled with higher yielding loan payoffs. The increase in the average balance of interest earning assets was driven primarily by the MBI Variance and growth in our loan portfolio of $525.4 million, or 45.4%, compared to the six months ended June 30, 2020. The growth in the loan portfolio was due to organic loan originations and the Professional Bank PPP during the six months ended June 30, 2021.
Average interest-bearing liabilities increased due to the MBI Variance and organic deposit growth and grew by $368.2 million, or 35.9%, for the six months ended June 30, 2021. The increase was primarily due to a $413.9 million, or 47.1%, increase in the average balance of interest-bearing deposits. The increase in the average balance of interest-bearing deposits was primarily due to increases in NOW and money market accounts for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, and, to a lesser extent, increases in certificates of deposits. The annualized average interest rate paid on average interest-bearing liabilities decreased to 0.53% for the six months ended June 30, 2021, compared to 1.02% for the six months ended June 30, 2020. Annualized average interest rate paid on interest-bearing deposits decreased 54 basis points to 0.43% and the annualized average interest rate paid on borrowed funds increased by 51 basis points to 1.81%. Compared to the six months ended June 30, 2020, the Company participated in the PPPLF which had a downward effect on our loan portfolio yields. For the six months ended June 30, 2021, our average other noninterest-bearing liabilities increased $2.5 million, or 15.7%, compared to the six months ended June 30, 2020. Average noninterest-bearing deposits also increased $375.7 million, or 113.0%, compared to the six months ended June 30, 2020. For the six months ended June 30, 2021, our annual net interest margin was 3.20% and net interest spread was 3.00%. For the six months ended June 30, 2020, annual net interest margin was 3.38% and net interest spread was 3.08%.
Provision for Loan Losses
The provision for loan losses is a charge to income in order to bring our allowance for loan losses to a level deemed appropriate by management. For a description of the factors taken into account by our management in determining the allowance for loan losses see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Allowance for Loan Losses.”
Our provision for loan losses amounted to $1.8 million for the six months ended June 30, 2021, and $2.6 million for the six months ended June 30, 2020. The decrease from 2020 to 2021 was made primarily due loan payoffs in higher risk categories offset by an increase in loan originations. We recorded one net charge-off of $7.6 million for the six months ended June 30, 2021. We did not record any net charge-offs for the six months ended June 30, 2020. Our allowance for loan losses as a percentage of total loans (excluding Professional PPP loans) was 0.67% at June 30, 2021, compared to 1.10% at December 31, 2020. See Reconciliation of non-GAAP Financial Measures.
40
Noninterest Income
Our primary sources of recurring noninterest income are service charges on deposit accounts, mortgage banking revenue, interest rate SWAP fees, origination fees for SBA loans, and other fees and charges. Noninterest income does not include loan origination fees to the extent they exceed the direct loan origination costs, which are generally recognized over the life of the related loan as an adjustment to yield using the interest method. The following table presents the major categories of noninterest income for the periods indicated.
| | | | | | | | | |
| | Six Months Ended June 30, | | ||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| Increase (Decrease) |
| ||
Noninterest income |
| |
|
| |
|
|
|
|
Service charges on deposit accounts | | $ | 1,594 | | $ | 529 | | 201.3 | % |
Income from Bank owned life insurance | |
| 563 | |
| 255 | | 120.8 | % |
Gain on sale and call of securities | |
| 22 | |
| 15 | | 46.7 | % |
SBA origination fees | |
| 145 | |
| 114 | | 27.2 | % |
SWAP fees | |
| 573 | |
| 473 | | 21.1 | % |
Third party loan sales | | | 301 | | | 267 | | 12.7 | % |
Other | | | 223 | | | 171 | | 30.4 | % |
Total noninterest income | | $ | 3,421 | | $ | 1,824 | | 87.6 | % |
Noninterest income for the six months ended June 30, 2021, was $3.4 million, a $1.6 million, or 87.6%, increase compared to for the six months ended June 30, 2020. The increase was primarily due to growth in deposit transaction accounts, coupled with increases in service charges on deposit accounts with the Correspondent Banking Relationship, $0.3 million increase in income from BOLI, and $0.1 million increase in SWAP fees.
During the first quarter of 2021, the Company established a program whereby it originates a variable rate loan and enters into a variable-to-fixed interest rate SWAP with the customer. The Company also enters into an offsetting SWAP with a SWAP dealer. These back-to-back SWAP agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. See Note 11 to the Consolidated Financial Statements (unaudited) dated June 30, 2021, entitled "Customer Derivatives – Interest Rate SWAPs" for additional information regarding our derivative financial instruments.
Noninterest Expense
Generally, noninterest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining client relationships and providing banking services. The largest component of noninterest expense is salaries and employee benefits. Noninterest expense also includes operational expenses, such as occupancy and equipment expenses, professional fees, data processing expenses, advertising expenses, loan processing expenses and other general and administrative expenses, including FDIC assessments, communications, travel, meals, training, supplies and postage. The following table presents the major categories of noninterest expense for the periods indicated.
| | | | | | | | | |
| | Six Months Ended June 30, | | ||||||
| | | | | | | | Increase | |
(Dollars in thousands) |
| 2021 |
| 2020 |
| (Decrease) |
| ||
Noninterest expense |
| |
|
| |
|
|
|
|
Salaries and employee benefits | | $ | 13,883 | | $ | 12,175 | | 14.0 | % |
Occupancy and equipment | |
| 2,007 | |
| 1,855 | | 8.2 | % |
Data processing | |
| 566 | |
| 597 | | (5.2) | % |
Marketing | |
| 318 | |
| 288 | | 10.4 | % |
Professional fees | |
| 1,398 | |
| 1,161 | | 20.4 | % |
Acquisition expenses | | | 684 | | | 2,223 | | (69.2) | % |
Regulatory assessments | | | 767 | | | 514 | | 49.2 | % |
Other | | | 3,119 | | | 2,221 | | 40.4 | % |
Total noninterest expense | | $ | 22,742 | | $ | 21,034 | | 8.1 | % |
Noninterest expense amounted to $22.7 million for the six months ended June 30, 2021, an increase of $1.7 million, or 8.1%, compared to for the six months ended June 30, 2020. The increase was primarily due to increased salaries and investment in digital
41
infrastructure, offset by a reduction in acquisition expenses. The Bank’s number of employees increased from 137 as of December 31, 2019, to 179 as of June 30, 2020, which increase was due to the MBI acquisition, and further increased to 194 as of June 30, 2021.
Income Tax Expense
The amount of income tax expense we incur is influenced by the amounts of our pre-tax income, and other nondeductible expenses. Deferred tax assets and liabilities are reflected at current income tax rates in effect for the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, such as the Tax Act, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
related to share-based compensation which are recorded entirely in the period identified as a discrete item of tax.
For the six months ended June 30, 2021,
March 31, 2022
.42
loss. Gains and losses on the sale of available-for-saleavailable for sale securities are recorded on the trade date and are determined using the specific-identification method. Premiums and discounts on securities available for sale are recognized in interest income using the interest method over the period to maturity.
method.
| | | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 | ||||||||
(Dollars in thousands) |
| Book Value |
| Fair Value |
| Book Value |
| Fair Value | ||||
Securities Available for Sale - taxable |
| |
|
| |
|
| |
|
| |
|
Small Business Administration loan pools | | $ | 43,091 | | $ | 42,596 | | $ | 30,678 | | $ | 30,556 |
Mortgage-backed securities | |
| 54,517 | |
| 54,540 | |
| 28,514 | |
| 28,922 |
United States agency obligations | |
| 2,001 | |
| 2,089 | |
| 3,000 | |
| 3,122 |
Corporate bonds | |
| 1,500 | |
| 1,510 | |
| 2,501 | |
| 2,510 |
Total | | $ | 101,109 | | $ | 100,735 | | $ | 64,693 | | $ | 65,110 |
Securities Available for Sale - tax exempt | | | | | | | | | | | | |
Community Development District bonds | | $ | 17,954 | | $ | 18,658 | | $ | 20,582 | | $ | 21,299 |
Municipals | | | 1,057 | | | 1,103 | | | 1,064 | | | 1,099 |
Total | | $ | 19,011 | | $ | 19,761 | | $ | 21,646 | | $ | 22,398 |
Securities Held to Maturity | |
|
| |
|
| |
|
| |
|
|
Mortgage-backed securities | | | 285 | | | 296 | | | 345 | | | 359 |
United States Treasury | | | — | | | — | | | 202 | | | 202 |
Foreign Bonds | |
| 1,000 | | | 1,000 | |
| 1,000 | | | 1,000 |
Total | | $ | 1,285 | | $ | 1,296 | | $ | 1,547 | | $ | 1,561 |
Equity Securities | |
|
| |
|
| |
|
| |
|
|
Mutual Funds | |
| 5,942 | |
| 5,942 | |
| 6,005 | |
| 6,005 |
Total | | $ | 5,942 | | $ | 5,942 | | $ | 6,005 | | $ | 6,005 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | More than One Year | | More than Five Years | | | | | | | | | | | | ||||||||||
| | One Year or Less | | Through Five Years | | Through 10 Years | | More than 10 Years | | Total | | ||||||||||||||||||
| | | | | Weighted | | | | | Weighted | | | | | Weighted | | | | | Weighted | | | | | | | | Weighted | |
At June 30, 2021 | | | | Average | | | | Average | | | | Average | | | | Average | | | | | | | Average | | |||||
(Dollars in thousands) |
| Book Value |
| Yield | | Book Value |
| Yield | | Book Value |
| Yield | | Book Value |
| Yield | | Book Value |
| Fair Value |
| Yield | | ||||||
Securities Available for Sale - taxable | | |
| |
|
| |
| |
|
| |
| |
| | | | | | | |
| | |
| |
| |
Small Business Administration loan pools | | $ | — | | — | % | $ | 609 | | 0.96 | % | $ | 19,879 | | 1.51 | % | $ | 22,603 | | 1.38 | % | $ | 43,091 | | $ | 42,596 | | 1.43 | % |
Mortgage-backed securities | |
| — | | — | % |
| — | | — | % |
| 6,361 | | 0.74 | % |
| 48,156 | | 1.27 | % |
| 54,517 | |
| 54,540 | | 1.21 | % |
United States agency obligations | |
| 998 | | 2.54 | % |
| 1,003 | | 2.66 | % |
| — | | — | % |
| — | | — | % |
| 2,001 | |
| 2,089 | | 2.60 | % |
Corporate bonds | |
| — | | — | % |
| 1,500 | | 1.18 | % |
| — | | — | % |
| — | | — | % |
| 1,500 | |
| 1,510 | | 1.18 | % |
Total | | $ | 998 | | 2.54 | % | $ | 3,112 | | 1.61 | % | $ | 26,240 | | 1.32 | % | $ | 70,759 | | 1.31 | % | $ | 101,109 | | $ | 100,735 | | 1.33 | % |
Securities Available for Sale - tax exempt | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Community Development District bonds | | $ | 40 | | 4.00 | % | $ | 17,599 | | 3.87 | % | $ | 315 | | 3.00 | % | $ | — | | — | % | $ | 17,954 | | $ | 18,658 | | 3.86 | % |
Municipals | | | — | | — | % | | 1,057 | | 1.75 | % | | — | | — | % | | — | | — | % | | 1,057 | | | 1,103 | | 1.75 | % |
Total | | $ | 40 | | 4.00 | % | $ | 18,656 | | 3.75 | % | $ | 315 | | 3.00 | % | $ | — | | — | % | $ | 19,011 | | $ | 19,761 | | 3.74 | % |
Securities Held to Maturity | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage-backed securities | | | — | | — | % | | — | | — | % | | — | | — | % | | 285 | | 2.57 | % | | 285 | | | 296 | | 2.57 | % |
United States Treasury | | | — | | — | % | | — | | — | % | | — | | — | % | | — | | — | % | | — | | | — | | — | % |
Foreign Bonds | | | 1,000 | | 0.47 | % | | — | | — | % | | — | | — | % | | — | | — | % | | 1,000 | | | 1,000 | | 0.47 | % |
Total | | $ | 1,000 | | 0.47 | % | $ | — | | — | % | $ | — | | — | % | $ | 285 | | 2.57 | % | $ | 1,285 | | $ | 1,296 | | 0.93 | % |
Equity Securities | |
| | |
| |
|
| |
| |
|
| |
| |
|
| |
| |
|
| |
|
| |
| |
Mutual Funds | |
| 5,942 | | 1.13 | % |
| — | | — | % |
| — | | — | % |
| — | | — | % |
| 5,942 | |
| 5,942 | | 1.13 | % |
Total | | $ | 5,942 | | 1.13 | % | $ | — | | — | % | $ | — | | — | % | $ | — | | — | % | $ | 5,942 | | $ | 5,942 | | 1.13 | % |
43
March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||
(Dollars in thousands) | Book Value | Fair Value | Book Value | Fair Value | ||||||||||||||||||||||
Securities Available for Sale - taxable | ||||||||||||||||||||||||||
Small Business Administration loan pools | $ | 37,713 | $ | 37,199 | $ | 40,368 | $ | 39,934 | ||||||||||||||||||
Mortgage-backed securities | 142,815 | 134,215 | 131,273 | 130,103 | ||||||||||||||||||||||
United States agency obligations | 2,943 | 2,833 | 3,939 | 3,986 | ||||||||||||||||||||||
Corporate bonds | 1,500 | 1,511 | 1,500 | 1,513 | ||||||||||||||||||||||
Total | $ | 184,971 | $ | 175,758 | $ | 177,080 | $ | 175,536 | ||||||||||||||||||
Securities Available for Sale - tax-exempt | ||||||||||||||||||||||||||
Community Development District bonds | $ | 29,645 | $ | 29,411 | $ | 17,163 | $ | 17,674 | ||||||||||||||||||
Municipals | 1,047 | 1,035 | 1,051 | 1,091 | ||||||||||||||||||||||
Total | $ | 30,692 | $ | 30,446 | $ | 18,214 | $ | 18,765 | ||||||||||||||||||
Securities Held to Maturity | ||||||||||||||||||||||||||
Mortgage-backed securities | $ | 218 | $ | 214 | $ | 236 | $ | 242 | ||||||||||||||||||
Total | $ | 218 | $ | 214 | $ | 236 | $ | 242 | ||||||||||||||||||
Equity Securities | ||||||||||||||||||||||||||
Mutual Funds | $ | 5,639 | $ | 5,639 | $ | 5,838 | $ | 5,838 | ||||||||||||||||||
Other equity securities | 800 | 800 | 800 | 800 | ||||||||||||||||||||||
Total | $ | 6,439 | $ | 6,439 | $ | 6,638 | $ | 6,638 |
One Year or Less | More than One Year Through Five Years | More than Five Years Through 10 Years | More than 10 Years | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
On March 31, 2022 (Dollars in thousands) | Book Value | Weighted Average Yield (1) | Book Value | Weighted Average Yield (1) | Book Value | Weighted Average Yield (1) | Book Value | Weighted Average Yield (1) | Book Value | Fair Value | Weighted Average Yield (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available for Sale - taxable | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SBA loan pools | $ | — | — | % | $ | 404 | 0.78 | % | $ | 19,238 | 1.37 | % | $ | 18,071 | 1.44 | % | $ | 37,713 | $ | 37,199 | 1.40 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | — | — | % | 624 | 1.00 | % | 4,732 | 0.96 | % | 137,460 | 1.67 | % | 142,816 | 134,215 | 1.64 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
United States agency obligations | — | — | % | 1,002 | 2.66 | % | 1,941 | 1.31 | % | — | — | % | 2,943 | 2,833 | 1.77 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate bonds | 1,500 | 1.98 | % | — | — | % | — | — | % | — | — | % | 1,500 | 1,511 | 1.98 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 1,500 | 1.98 | % | $ | 2,030 | 1.78 | % | $ | 25,911 | 1.29 | % | $ | 155,531 | 1.64 | % | $ | 184,972 | $ | 175,758 | 1.60 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Available for Sale - tax-exempt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CDD bonds | $ | 4,235 | 3.92 | % | $ | 20,186 | 4.30 | % | $ | 5,225 | 3.60 | % | $ | — | — | % | $ | 29,646 | $ | 29,411 | 4.12 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Municipals | — | — | % | 1,047 | 2.27 | % | — | — | % | — | — | % | 1,047 | 1,035 | 2.27 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 4,235 | 3.92 | % | $ | 21,233 | 4.20 | % | $ | 5,225 | 3.60 | % | $ | — | — | % | $ | 30,693 | $ | 30,446 | 4.06 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Held to Maturity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | — | — | % | — | — | % | — | — | % | 218 | 2.77 | % | 218 | 214 | 2.77 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | 218 | 2.77 | % | $ | 218 | $ | 214 | 2.77 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Equity Securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mutual Funds | 5,639 | 1.44 | % | — | — | % | — | — | % | — | — | % | 5,639 | 5,639 | 1.44 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other equity securities | 800 | — | % | — | — | % | — | — | % | — | — | % | 800 | 800 | — | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 6,439 | 1.44 | % | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | 6,439 | $ | 6,439 | 1.26 | % |
Loan Portfolio
| | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 | | ||||||
(Dollars in thousands) |
| Amount |
| Percent |
| Amount |
| Percent |
| ||
Commercial real estate | | $ | 875,453 |
| 51.4 | % | $ | 777,776 |
| 46.7 | % |
Owner Occupied | |
| 305,854 |
| — | |
| 286,992 |
| — | |
Non-Owner Occupied | |
| 569,599 |
| — | |
| 490,784 |
| — | |
Residential real estate | |
| 361,946 |
| 21.3 | % |
| 380,491 |
| 22.8 | % |
Commercial (Non-PPP) | |
| 229,215 |
| 13.5 | % |
| 206,665 |
| 12.4 | % |
Commercial (PPP) | | | 144,118 | | 8.5 | % | | 189,977 | | 11.4 | % |
Construction and development | |
| 74,175 |
| 4.4 | % |
| 99,883 |
| 6.0 | % |
Consumer and other loans | |
| 14,575 |
| 0.9 | % |
| 11,688 |
| 0.7 | % |
Total loans | | $ | 1,699,482 |
| 100.0 | % | $ | 1,666,480 |
| 100.0 | % |
Unearned loan origination (fees) costs, net | |
| (1,984) |
|
| |
| (1,323) |
|
| |
Unearned PPP loan origination (fees) costs, net | | | (4,855) | | | | | (4,255) | | | |
Allowance for loan loss | |
| (10,418) |
|
| |
| (16,259) |
|
| |
Loans held for sale | | | (2,039) | | | | | (1,270) | | | |
Other | | | (18) | | | | | — | | | |
Loans, net | | $ | 1,680,168 |
|
| | $ | 1,643,373 |
|
| |
Commercial Real Estate Loans. We originate both owner-occupied and non-owner-occupied commercial real estate loans. These loans may be more adversely affected by conditions in the real estate markets or in the general economy. Commercial real estate loans that are secured by owner-occupied commercial real estate and primarily collateralizedsupported by operating cash flows are also included in this category of loans. As of June 30, 2021March 31, 2022, we had $305.9$355.4 million of owner-occupied commercial real estate loans and $569.6$576.5 million of investment commercial real estate loans, representing 34.9%38.1% and 65.1%61.9%, respectively, of our commercial real estate portfolio. As of June 30, 2021March 31, 2022, the average loan balance of loans in our commercial real estate loan portfolio was approximately $1.2$1.4 million for owner-occupied and $1.8$2.4 million for non-owner occupied. Commercial real estate loan terms are generally extended for 10 years or less and amortize generally over 25 years or less. Terms of 15 years are permitted where the loan is fully amortized over the term of the loan. The maximum loan to value is generally, 80% of the market value or purchase price, but may be as high as 90% for SBA 504 owner-occupied loans. As of June 30, 2021,March 31, 2022, we did not have any commercial real estate loans with a loan to value over 100%. Our credit policy also usually requires a minimum debt service coverage ratio of 1.20x. As of June 30, 2021March 31, 2022, our weighted-average loan-to-value ratios for owner-occupied and non-owner-occupied commercial real estate were 48.5%49.4% and 50.0%49.5%, respectively and debt service coverage ratios were 2.37x3.15x and 1.78x,1.97x, respectively. The interest rates on our commercial real estate loans have initial fixed rate terms that adjust typically at five years, and we routinely charge an origination fee for our services. We generally require personal guarantees from the principal owners of the business, supported by a review of the principal owners’ personal financial statements and global debt service obligations. All commercial real estate loans with an outstanding balance of $1.0 million or more are reviewed at least
44
As of March 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||||
(Dollars in thousands) | Amount | Percent | Amount | Percent | ||||||||||||||||||||||
Commercial Real Estate | ||||||||||||||||||||||||||
Auto (Car Lot/Auto Repair) | $ | 26,676 | 2.9% | $ | 27,419 | 3.0% | ||||||||||||||||||||
Educational Facility | 25,898 | 2.8% | 32,281 | 3.6% | ||||||||||||||||||||||
Gas Station | 56,702 | 6.1% | 60,854 | 6.7% | ||||||||||||||||||||||
Hotel | 84,876 | 9.1% | 75,617 | 8.4% | ||||||||||||||||||||||
Mixed Use | 37,748 | 4.1% | 28,762 | 3.2% | ||||||||||||||||||||||
Multifamily | 138,853 | 14.9% | 140,496 | 15.6% | ||||||||||||||||||||||
Office | 114,358 | 12.3% | 109,010 | 12.1% | ||||||||||||||||||||||
Other / Special Use | 70,005 | 7.5% | 56,276 | 6.2% | ||||||||||||||||||||||
Religious Facility | 10,500 | 1.1% | 10,679 | 1.2% | ||||||||||||||||||||||
Retail | 211,166 | 22.6% | 209,283 | 23.2% | ||||||||||||||||||||||
Vacant Land | 6,560 | 0.7% | 6,523 | 0.7% | ||||||||||||||||||||||
Warehouse | 148,562 | 15.9% | 145,454 | 16.1% | ||||||||||||||||||||||
Total | $ | 931,904 | 100.0% | $ | 902,654 | 100.0% |
As of March 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||||
(Dollars in thousands) | Amount | Percent | Amount | Percent | ||||||||||||||||||||||
Commercial Real Estate | ||||||||||||||||||||||||||
Broward | $ | 158,990 | 17.1% | $ | 111,224 | 12.3% | ||||||||||||||||||||
Miami-Dade | 509,139 | 54.6% | 559,966 | 62.0% | ||||||||||||||||||||||
Palm Beach | 158,474 | 17.0% | 139,517 | 15.5% | ||||||||||||||||||||||
Other FL County | 93,197 | 10.0% | 49,892 | 5.5% | ||||||||||||||||||||||
Out of State | 12,104 | 1.3% | 42,055 | 4.7% | ||||||||||||||||||||||
Total | $ | 931,904 | 100.0% | $ | 902,654 | 100.0% |
| | | | | | | | | | | | |
| | As of June 30, 2021 |
| | As of December 31, 2020 |
| ||||||
(Dollars in thousands) | | Amount | | Percent |
| | Amount | | Percent |
| ||
Commercial Real Estate |
| |
|
|
| | | |
|
|
| |
Auto (Car Lot/Auto Repair) | | $ | 28,055 |
| 3.2 | % | | $ | 22,483 |
| 2.9 | % |
Educational Facility | |
| 32,979 |
| 3.8 | % | |
| 14,328 |
| 1.8 | % |
Gas Station | |
| 70,053 |
| 8.0 | % | |
| 64,162 |
| 8.2 | % |
Hotel | |
| 61,887 |
| 7.1 | % | |
| 54,324 |
| 7.0 | % |
Mixed Use | | | 36,756 | | 4.2 | % | | | 29,987 | | 3.9 | % |
Multifamily | |
| 118,978 |
| 13.6 | % | |
| 98,837 |
| 12.7 | % |
Office | |
| 106,333 |
| 12.1 | % | |
| 111,850 |
| 14.4 | % |
Other / Special Use | |
| 43,467 |
| 5.0 | % | |
| 41,739 |
| 5.4 | % |
Religious Facility | |
| 8,175 |
| 0.9 | % | |
| 8,450 |
| 1.1 | % |
Retail | |
| 215,402 |
| 24.6 | % | |
| 192,105 |
| 24.7 | % |
Vacant Land | |
| 7,491 |
| 0.9 | % | |
| 7,847 |
| 1.0 | % |
Warehouse | |
| 145,877 |
| 16.7 | % | |
| 131,664 |
| 16.9 | % |
Total | | $ | 875,453 |
| 100.0 | % | | $ | 777,776 |
| 100.0 | % |
| | | | | | | | | | | | |
| | As of June 30, 2021 |
| | As of December 31, 2020 |
| ||||||
(Dollars in thousands) |
| Amount |
| Percent |
| | Amount |
| Percent |
| ||
Commercial Real Estate |
| |
|
|
| | | |
|
|
| |
Broward | | $ | 130,231 |
| 14.9 | % | | $ | 118,408 |
| 15.2 | % |
Miami-Dade | |
| 538,691 |
| 61.5 | % | |
| 501,168 |
| 64.4 | % |
Palm Beach | |
| 144,719 |
| 16.5 | % | |
| 113,405 |
| 14.6 | % |
Other FL County | |
| 37,491 |
| 4.3 | % | |
| 27,154 |
| 3.5 | % |
Out of State | |
| 24,321 |
| 2.8 | % | |
| 17,641 |
| 2.3 | % |
Total | | $ | 875,453 |
| 100.0 | % | | $ | 777,776 |
| 100.0 | % |
As of June 30, 2021March 31, 2022, non-owner occupied commercial real estate loans of $569.6$576.5 million represented 36.7%31.3% of total risk-weighted assets.
| | | | | | | | | | | | |
| | As of June 30, 2021 |
| | As of December 31, 2020 |
| ||||||
(Dollars in thousands) | | Amount | | Percent |
| | Amount | | Percent |
| ||
Construction & Development |
| |
|
|
| | | |
|
|
| |
1 – 4 Family Construction | | $ | 39,783 |
| 53.6 | % | | $ | 45,209 |
| 45.3 | % |
Commercial Construction | |
| 11,985 |
| 16.2 | % | |
| 34,082 |
| 34.1 | % |
Land Development | |
| 5,241 |
| 7.1 | % | |
| 5,789 |
| 5.8 | % |
Vacant Land | |
| 17,166 |
| 23.1 | % | |
| 14,803 |
| 14.8 | % |
Total | | $ | 74,175 |
| 100.0 | % | | $ | 99,883 |
| 100.0 | % |
45
As of March 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||||
(Dollars in thousands) | Amount | Percent | Amount | Percent | ||||||||||||||||||||||
Construction & Development | ||||||||||||||||||||||||||
1 – 4 Family Construction | $ | 50,588 | 51.1 | % | $ | 47,164 | 51.5 | % | ||||||||||||||||||
Commercial Construction | — | — | % | — | — | % | ||||||||||||||||||||
Land Development | 9,694 | 9.8 | % | 9,620 | 10.5 | % | ||||||||||||||||||||
Vacant Land | 38,702 | 39.1 | % | 34,736 | 38.0 | % | ||||||||||||||||||||
Total | $ | 98,984 | 100.0 | % | $ | 91,520 | 100.0 | % |
As of March 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||||
(Dollars in thousands) | Amount | Percent | Amount | Percent | ||||||||||||||||||||||
Construction & Development | ||||||||||||||||||||||||||
Broward | $ | 2,037 | 2.1% | $ | 1,194 | 1.3% | ||||||||||||||||||||
Miami-Dade | 72,635 | 73.3% | 67,562 | 73.9% | ||||||||||||||||||||||
Palm Beach | 22,260 | 22.5% | 21,080 | 23.0% | ||||||||||||||||||||||
Other FL County | 2,052 | 2.1% | 1,684 | 1.8% | ||||||||||||||||||||||
Total | $ | 98,984 | 100.0% | $ | 91,520 | 100.0% |
| | | | | | | | | | | | |
| | As of June 30, 2021 |
| | As of December 31, 2020 |
| ||||||
(Dollars in thousands) |
| Amount |
| Percent |
| | Amount |
| Percent |
| ||
Construction & Development |
| |
|
|
| | | |
|
|
| |
Broward | | $ | 2,799 |
| 3.8 | % | | $ | 21,737 |
| 21.8 | % |
Miami-Dade | |
| 49,586 |
| 66.9 | % | |
| 57,192 |
| 57.3 | % |
Palm Beach | |
| 16,268 |
| 21.9 | % | |
| 15,137 |
| 15.2 | % |
Other FL County | |
| 5,522 |
| 7.4 | % | |
| 5,817 |
| 5.8 | % |
Total | | $ | 74,175 |
| 100.0 | % | | $ | 99,883 |
| 100.0 | % |
As of June 30, 2021March 31, 2022, total construction and land development loans of $74.2$99.0 million represented 4.8%5.4% of total risk-weighted assets.
As of March 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Amount | Percent | LTV (%) | Amount | Percent | LTV (%) | ||||||||||||||||||||||||||||||||
Residential Real Estate | ||||||||||||||||||||||||||||||||||||||
Owner Occupied | $ | 276,747 | 72.6% | 55.5 | % | $ | 272,858 | 72.3% | 57.8 | % | ||||||||||||||||||||||||||||
Investor Owned Residences | 57,734 | 15.1% | 52.3 | % | 54,698 | 14.5% | 50.7 | % | ||||||||||||||||||||||||||||||
HELOC | 46,701 | 12.3% | 55.7 | % | 49,955 | 13.2% | 57.1 | % | ||||||||||||||||||||||||||||||
Total | $ | 381,182 | 100.0% | $ | 377,511 | 100.0% | ||||||||||||||||||||||||||||||||
Loans held for sale | $ | 988 | 100.0% | $ | 165 | 100.0 | % |
| | | | | | | | | | | | | | | | |
| | As of June 30, 2021 |
| | As of December 31, 2020 |
| ||||||||||
(Dollars in thousands) |
| Amount |
| Percent |
| LTV (%) |
| | Amount |
| Percent |
| LTV (%) |
| ||
Residential Real Estate | |
|
|
|
|
|
| | |
|
|
|
|
|
| |
Owner Occupied | | $ | 247,239 |
| 68.3 | % | 57.1 | % | | $ | 270,960 |
| 71.2 | % | 57.8 | % |
Investor Owned Residences | | | 59,830 | | 16.5 | % | 52.8 | % | | | 48,026 | | 12.6 | % | 50.7 | % |
HELOC | | | 52,838 | | 14.6 | % | 56.6 | % | | | 60,235 | | 15.8 | % | 57.1 | % |
Loans Held for Sale | | | 2,039 | | 0.6 | % | 0.0 | % | | | 1,270 | | 0.3 | % | 0.0 | % |
Total | | $ | 361,946 | | 100.0 | % | | | | $ | 380,491 | | 100.0 | % | | |
Commercial Loans (non-PPP). In addition to our other loan products, we provide general commercial loans, including commercial lines of credit, working capital loans, term loans, equipment financing, letters of credit and other loan products, primarily in our market, and underwritten based on each borrower’s ability to service debt from income. These loans are primarily made based on the identified cash flows of the borrower, as determined based on a review of the client’s financial statements, and secondarily, on the underlying collateral provided by the borrower. The average loan balance of the non-Professional Bank PPP loans in our commercial loan portfolio, excluding Professional Bank PPP loans was $0.5$0.8 million as of June 30, 2021.March 31, 2022. As of June 30, 2021,March 31, 2022, non-Professional Bank PPP commercial loans was $229.2totaled $357.1 million, and Professional Bank PPP commercial loans was $144.1totaled $31.1 million. For commercial loans over $0.5 million, a global cash flow analysis is generally required, which formsis part of the basisanalysis for the credit approval,approval. “Global cash flow” is defined as a cash flow calculation which includes all income sources of all principals in the transaction as well as all debt payments, including the debt service associated with the proposed transaction. In general, a minimum 1.20x debt service coverage is preferred, but in no event may the debt service coverage ratio be less than 1.00x. As of June 30, 2021,March 31, 2022, the debt service coverage ratio for our Bank commercial loan portfolio was approximately 2.50x2.52x for non-Professional Bank PPP loans, excluding approximately 3.8%2.8% of the commercial loan portfolio that is cash secured. Most commercial business loans, which includeexclude Professional Bank PPP loans, are secured by a lien on general business assets including, among other things, available real estate,
46
accounts receivable, promissory notes, inventory and equipment, and we generally obtain a personal guaranty from the borrower or other principal. The following table shows our commercial loan portfolio by industry segment as of March 31, 2022.
As of March 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||||
(Dollars in thousands) | Amount | Percent | Amount | Percent | ||||||||||||||||||||||
Commercial Loans (non-PPP) | ||||||||||||||||||||||||||
Business Products | $ | — | —% | $ | 13 | —% | ||||||||||||||||||||
Business Services | 70,072 | 19.6% | 73,868 | 22.7% | ||||||||||||||||||||||
Communication | 10,393 | 2.9% | 389 | 0.1% | ||||||||||||||||||||||
Construction | 33,818 | 9.5% | 31,285 | 9.6% | ||||||||||||||||||||||
Finance | 115,106 | 32.3% | 100,849 | 31.1% | ||||||||||||||||||||||
Healthcare | 23,380 | 6.5% | 23,564 | 7.2% | ||||||||||||||||||||||
Services | 36,830 | 10.3% | 34,112 | 10.5% | ||||||||||||||||||||||
Technology | 7,284 | 2.0% | 2,979 | 0.9% | ||||||||||||||||||||||
Trade | 47,086 | 13.2% | 47,522 | 14.6% | ||||||||||||||||||||||
Transportation | 1,163 | 0.3% | 1,593 | 0.5% | ||||||||||||||||||||||
Other | 11,992 | 3.4% | 9,241 | 2.8% | ||||||||||||||||||||||
Total | $ | 357,124 | 100.0% | $ | 325,415 | 100.0% |
| | | | | | | | | | | | |
| | As of June 30, 2021 |
| | As of December 31, 2020 |
| ||||||
(Dollars in thousands) | | Amount | | Percent |
| | Amount | | Percent |
| ||
Commercial Loans |
| |
|
|
| | | |
|
|
| |
Business Products | | $ | 1,152 |
| 0.5 | % | | $ | 1,163 |
| 0.6 | % |
Business Services | |
| 57,052 |
| 24.9 | % | |
| 29,584 |
| 14.3 | % |
Communication | |
| 17,733 |
| 7.7 | % | |
| 17,740 |
| 8.6 | % |
Construction | |
| 20,490 |
| 8.9 | % | |
| 19,269 |
| 9.3 | % |
Finance | |
| 48,677 |
| 21.2 | % | |
| 56,652 |
| 27.4 | % |
Healthcare | |
| 6,699 |
| 2.9 | % | |
| 7,379 |
| 3.6 | % |
Services | |
| 36,868 |
| 16.1 | % | |
| 23,319 |
| 11.3 | % |
Technology | |
| 802 |
| 0.3 | % | |
| 853 |
| 0.4 | % |
Trade | |
| 32,298 |
| 14.1 | % | |
| 44,359 |
| 21.5 | % |
Transportation | | | 2,010 | | 0.9 | % | | | 2,928 | | 1.4 | % |
Other | |
| 5,434 |
| 2.4 | % | |
| 3,419 |
| 1.7 | % |
Total | | $ | 229,215 |
| 100.0 | % | | $ | 206,665 |
| 100.0 | % |
Consumer and Other Loans. We offer consumer, or retail credit, to individuals for household, family, or other personal expenditures. Generally, these are either in the form of closed-end/installment credit loans or open-end/revolving credit loans. Occasionally, we will make unsecured consumer loans to highly qualified clients in amounts up to $250,000 with up to three-year repayment terms.
47
The following chart illustrates our gross loans and weighted average loan-to-value ratio for our collateralized loan portfolio as of the end of the periods indicated.
Second quarter loans totaled $1.7 billion, a decrease of $39.1 million, or 2.2% from the prior quarter due to a reduction in PPP loans. Loan growth, net of PPP loans, was up $27.6 million, or 1.8% quarter-over-quarter. We experienced strong originations across all loan types due to new loan originations of $186.8 million ($169.2 million of conventional loans, of which $118.0 million funded, coupled with
48
$17.6 million of PPP loans) partially offset by payoffs of $162.2 million ($77.9 million of conventional loans and $84.3 million of PPP loans forgiven).
The repayment of loans is a source of additional liquidity for us. The following table details maturities and sensitivity to interest rate changes for our loan portfolio at on June 30, 2021March 31, 2022.
| | | | | | | | | | | | |
| | June 30, 2021 | ||||||||||
|
| Due in One |
| Due in One to |
| Due After |
| | | |||
(Dollars in thousands) | | Year or Less | | Five Years | | Five Years | | Total | ||||
Commercial Real Estate | | $ | 98,118 | | $ | 230,947 | | $ | 546,388 | | $ | 875,453 |
Residential Real Estate | |
| 14,141 | |
| 19,401 | |
| 328,404 | |
| 361,946 |
Commercial* | |
| 108,402 | |
| 166,295 | |
| 98,636 | |
| 373,333 |
Construction and Development | |
| 29,355 | |
| 20,219 | |
| 24,601 | |
| 74,175 |
Consumer and Other | |
| 4,141 | |
| 7,330 | |
| 3,104 | |
| 14,575 |
Total loans | | $ | 254,157 | | $ | 444,192 | | $ | 1,001,133 | | $ | 1,699,482 |
Amounts with fixed rates | | $ | 149,697 | | $ | 398,716 | | $ | 965,071 | | $ | 1,513,484 |
Amounts with floating rates | | $ | 104,460 | | $ | 45,476 | | $ | 36,062 | | $ | 185,998 |
*Includes Paycheck Protection Program (PPP) loans. | | | | | | | | | | | | |
| | December 31, 2020 | ||||||||||
|
| Due in One |
| Due in One to |
| Due After |
| | | |||
(Dollars in thousands) | | Year or Less | | Five Years | | Five Years | | Total | ||||
Commercial Real Estate | | $ | 63,277 | | $ | 221,328 | | $ | 493,171 | | $ | 777,776 |
Residential Real Estate | |
| 16,386 | |
| 23,832 | |
| 340,273 | |
| 380,491 |
Commercial* | |
| 93,338 | |
| 232,428 | |
| 70,876 | |
| 396,642 |
Construction and Development | |
| 37,205 | |
| 30,165 | |
| 32,513 | |
| 99,883 |
Consumer and Other | |
| 5,619 | |
| 3,855 | |
| 2,214 | |
| 11,688 |
Total loans | | $ | 215,825 | | $ | 511,608 | | $ | 939,047 | | $ | 1,666,480 |
Amounts with fixed rates | | $ | 110,152 | | $ | 473,839 | | $ | 910,452 | | $ | 1,494,443 |
Amounts with floating rates | | $ | 105,673 | | $ | 37,769 | | $ | 28,595 | | $ | 172,037 |
*Includes Paycheck Protection Program (PPP) loans. | | | | | | | | | | | | |
49
March 31, 2022 | ||||||||||||||||||||||||||||||||
(Dollars in thousands) | Due in One Year or Less | Due in One to Five Years | Due in Five to Fifteen Years | Due After Fifteen Years | Total | |||||||||||||||||||||||||||
Commercial Real Estate | $ | 92,895 | $ | 253,067 | $ | 563,529 | $ | 22,413 | $ | 931,904 | ||||||||||||||||||||||
Residential Real Estate | 4,096 | 19,979 | 17,611 | 339,496 | 381,182 | |||||||||||||||||||||||||||
Commercial* | 106,157 | 136,011 | 118,228 | 27,825 | 388,221 | |||||||||||||||||||||||||||
Construction and Development | 43,544 | 20,954 | 3,096 | 31,390 | 98,984 | |||||||||||||||||||||||||||
Consumer and Other | 4,475 | 6,691 | 11,259 | — | 22,425 | |||||||||||||||||||||||||||
Total loans | $ | 251,167 | $ | 436,702 | $ | 713,723 | $ | 421,124 | $ | 1,822,716 | ||||||||||||||||||||||
Amounts with fixed rates | $ | 88,159 | $ | 330,456 | $ | 696,833 | $ | 399,689 | $ | 1,515,137 | ||||||||||||||||||||||
Amounts with floating rates | $ | 163,008 | $ | 106,246 | $ | 16,890 | $ | 21,435 | $ | 307,579 | ||||||||||||||||||||||
*Includes Paycheck Protection Program (PPP) loans. | ||||||||||||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||
(Dollars in thousands) | Due in One Year or Less | Due in One to Five Years | Due in Five to Fifteen Years | Due After Fifteen Years | Total | |||||||||||||||||||||||||||
Commercial Real Estate | $ | 87,405 | $ | 233,829 | $ | 567,349 | $ | 14,071 | $ | 902,654 | ||||||||||||||||||||||
Residential Real Estate | 10,201 | 21,210 | 15,904 | 330,196 | 377,511 | |||||||||||||||||||||||||||
Commercial* | 113,129 | 131,332 | 111,645 | 27,924 | 384,030 | |||||||||||||||||||||||||||
Construction and Development | 40,851 | 17,029 | 3,141 | 30,499 | 91,520 | |||||||||||||||||||||||||||
Consumer and Other | 4,226 | 7,444 | 9,779 | — | 21,449 | |||||||||||||||||||||||||||
Total loans | $ | 255,812 | $ | 410,844 | $ | 707,818 | $ | 402,690 | $ | 1,777,164 | ||||||||||||||||||||||
Amounts with fixed rates | $ | 98,992 | $ | 327,126 | $ | 673,381 | $ | 385,663 | $ | 1,485,162 | ||||||||||||||||||||||
Amounts with floating rates | $ | 156,820 | $ | 83,718 | $ | 34,437 | $ | 17,027 | $ | 292,002 | ||||||||||||||||||||||
*Includes Paycheck Protection Program (PPP) loans. |
Paycheck Protection Program
During the three months ended June 30, 2021, we funded 172 loans representing $17.6 million under Round 3 of the PPP. As of June 30, 2021, we participated in all three rounds of the PPP and funded 2,287 small business loans representing approximately $340.5 million in relief proceeds, of which 1,362 loans totaling $196.9 million were forgiven by the SBA. Most of the Professional Bank PPP loans were initially pledged to the Federal Reserve as part of the PPPLF. The PPPLF pledged loans are non-recourse to the Company. However, we paid off all of the PPPLF advances during the first and second quarter of 2021 and the balance was $0 as of June 30, 2021.
Nonperforming Assets
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. In general, we place loans on nonaccrual status when they become 90 days past due. We also place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt. When interest accrual is discontinued, all unpaid accrued interest is reversed from income. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are, in management’s opinion, reasonably assured. Any loan which the Bank deems to be uncollectible, in whole or in part, is charged off to the extent of the anticipated loss. Loans that are past due for 180 days or more are charged off unless the loan is well secured and in the process of collection. We currently have no loans accruing over 90 days or greater past due as of June 30, 2021March 31, 2022.
50
factor in the recent increase in our nonperforming assets relative to our historically low, near-zero levels. However, wee believe that our low loan-to-value loan portfolio is well positioned to withstand these types of discrete events as they occur from time to time. There can be no assurance, however, that our loan portfolio will not become subject to increasing pressures from deteriorating borrower credit due to general economic conditions.
| | | | | | | |
(Dollars in thousands) |
| June 30, 2021 |
| December 31, 2020 |
| ||
Nonaccrual Loans | | | | | | | |
Commercial real estate | | $ | — | | $ | — | |
Residential real estate | |
| — | |
| — | |
Commercial | |
| 1,468 | |
| 9,127 | |
Construction and development | |
| — | |
| — | |
Consumer and other loans | |
| 1,307 | |
| 1,307 | |
Accruing loans 90 or more days past due | |
| — | |
| — | |
Total nonperforming loans | | $ | 2,775 | | $ | 10,434 | |
Other real estate owned | |
| — | |
| — | |
Total nonperforming assets | | $ | 2,775 | | $ | 10,434 | |
Restructured loans-nonaccrual | | $ | — | | $ | — | |
Restructured loans-accruing | | $ | 252 | | $ | 298 | |
Ratio of nonperforming loans to total loans | |
| 0.16 | % |
| 0.63 | % |
Ratio of nonperforming assets to total assets | |
| 0.11 | % |
| 0.51 | % |
(Dollars in thousands) | March 31, 2022 | December 31, 2021 | ||||||||||||
Nonaccrual Loans | ||||||||||||||
Commercial real estate | $ | — | $ | — | ||||||||||
Residential real estate | — | — | ||||||||||||
Commercial | 1,468 | 1,468 | ||||||||||||
Construction and development | — | — | ||||||||||||
Consumer and other loans | 654 | 654 | ||||||||||||
Accruing loans 90 or more days past due | — | — | ||||||||||||
Total nonperforming loans | $ | 2,122 | $ | 2,122 | ||||||||||
Other real estate owned | — | — | ||||||||||||
Total nonperforming assets | $ | 2,122 | $ | 2,122 | ||||||||||
Restructured loans-nonaccrual | $ | — | $ | — | ||||||||||
Restructured loans-accruing | $ | 14 | $ | 55 | ||||||||||
Ratio of nonperforming loans to total loans | 0.12% | 0.12% | ||||||||||||
Ratio of nonperforming assets to total assets | 0.07% | 0.08% |
51
substandard, doubtful, or even a charged-off status. Based onSee Note 4 - Loans to the most recent analysis performed, theConsolidated Financial Statements (unaudited) dated March 31, 2022, for additional information regarding risk category of loans by class of loans is as follows:
| | | | | | | | | | | | | | | |
| | | | | Special | | | | | | | | | | |
(Dollars in thousands) |
| Pass |
| Mention |
| Substandard |
| Doubtful |
| Total | |||||
June 30, 2021 | | | |
| | |
| | |
| | |
| | |
Commercial real estate | | $ | 873,127 | | $ | — | | $ | 2,326 | | $ | — | | $ | 875,453 |
Residential real estate | |
| 361,946 |
|
| — |
|
| — |
|
| — |
|
| 361,946 |
Commercial | |
| 371,400 |
|
| 465 |
|
| 1,468 |
|
| — |
|
| 373,333 |
Construction and land development | |
| 74,175 |
|
| — |
|
| — |
|
| — |
|
| 74,175 |
Consumer | |
| 13,174 |
|
| 94 |
|
| 1,307 |
|
| — |
|
| 14,575 |
Total | | $ | 1,693,822 |
| $ | 559 |
| $ | 5,101 |
| $ | — |
| $ | 1,699,482 |
| | | |
| | |
| | |
| | |
| | |
December 31, 2020 | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 775,420 | | $ | — | | $ | 2,356 | | $ | — | | $ | 777,776 |
Residential real estate | |
| 380,062 |
|
| 429 |
|
| — |
|
| — |
|
| 380,491 |
Commercial | |
| 387,403 |
|
| 112 |
|
| 9,127 |
|
| — |
|
| 396,642 |
Construction and land development | |
| 99,883 |
|
| — |
|
| — |
|
| — |
|
| 99,883 |
Consumer | |
| 10,381 |
|
| — |
|
| 1,307 |
|
| — |
|
| 11,688 |
Total | | $ | 1,653,149 |
| $ | 541 |
| $ | 12,790 |
| $ | — |
| $ | 1,666,480 |
loans.
52
adjusted for various internal and external risk factors unique to each loan pool.
| | | | | | | | | | | | | |
| | For the Six Months Ended June 30, | | For the Year Ended December 31, | |||||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| 2020 |
| 2019 |
| ||||
Balance at beginning of period | | $ | 16,259 | | $ | 6,548 | | $ | 6,548 | | $ | 5,685 | |
Charge-offs | |
|
| |
|
| |
|
| |
|
| |
Commercial real estate | |
| — | |
| — | |
| — | |
| — | |
Residential real estate | |
| — | |
| — | |
| (207) | |
| — | |
Commercial | |
| (7,641) | |
| (98) | |
| (99) | |
| — | |
Construction and development | |
| — | |
| — | |
| — | |
| — | |
Consumer and other | |
| — | |
| — | |
| — | |
| — | |
Total Charge-offs | |
| (7,641) | |
| (98) | |
| (306) | |
| — | |
Recoveries | |
|
| |
|
| |
|
| |
|
| |
Commercial real estate | |
| — | |
| — | |
| — | |
| — | |
Residential real estate | |
| — | |
| — | |
| — | |
| — | |
Commercial | |
| — | |
| — | |
| — | |
| — | |
Construction and development | |
| — | |
| — | |
| — | |
| — | |
Consumer and other | |
| — | |
| — | |
| — | |
| 1 | |
Total recoveries | |
| — | |
| — | |
| — | |
| 1 | |
Net charge-offs (recoveries) | |
| (7,641) | |
| (98) | |
| (306) | |
| — | |
Provision for loan losses | |
| 1,800 | |
| 2,595 | |
| 10,017 | |
| 862 | |
Balance at end of period | | $ | 10,418 | | $ | 9,045 | | $ | 16,259 | | $ | 6,548 | |
ALLL as a percentage of total loans at end of period | | | 0.62 | % | | 0.58 | % | | 0.99 | % | | 0.83 | % |
ALLL as a percentage of loans (excluding PPP loans) at end of period | |
| 0.67 | % |
| 0.67 | % |
| 1.10 | % |
| 0.83 | % |
ALLL as a multiple of net charge-offs | |
| N/A | |
| N/A | |
| 53.1 | |
| N/A | |
ALLL as a percentage of nonperforming loans | |
| 375.4 | % |
| 224.4 | % |
| 155.8 | % |
| 287.2 | % |
2021.
For the Three Months Ended March 31, | ||||||||||||||||||||||||||
(Dollars in thousands) | 2022 | 2021 | ||||||||||||||||||||||||
Balance at beginning of period | $ | 12,704 | $ | 16,259 | ||||||||||||||||||||||
Charge-offs | ||||||||||||||||||||||||||
Commercial real estate | — | — | ||||||||||||||||||||||||
Residential real estate | — | — | ||||||||||||||||||||||||
Commercial | — | (7,641) | ||||||||||||||||||||||||
Construction and development | — | — | ||||||||||||||||||||||||
Consumer and other | — | — | ||||||||||||||||||||||||
Total Charge-offs | — | (7,641) | ||||||||||||||||||||||||
Recoveries | ||||||||||||||||||||||||||
Commercial real estate | — | — | ||||||||||||||||||||||||
Residential real estate | — | — | ||||||||||||||||||||||||
Commercial | — | — | ||||||||||||||||||||||||
Construction and development | — | — | ||||||||||||||||||||||||
Consumer and other | — | — | ||||||||||||||||||||||||
Total recoveries | — | — | ||||||||||||||||||||||||
Net charge-offs | — | (7,641) | ||||||||||||||||||||||||
Provision for loan losses | 851 | 1,038 | ||||||||||||||||||||||||
Balance at end of period | $ | 13,555 | $ | 9,656 | ||||||||||||||||||||||
Ratio of net charge-offs to average loans | — | % | 1.86 | % | ||||||||||||||||||||||
March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||
ALLL as a percentage of loans at end of period | 0.75 | % | 0.72 | % | ||||||||||||||||||||||
ALLL as a percentage of loans (excluding PPP loans) at end of period (non-GAAP) | 0.76 | % | 0.74 | % | ||||||||||||||||||||||
ALLL as a multiple of net charge-offs | N/A | 1.5 | ||||||||||||||||||||||||
ALLL as a percentage of nonperforming loans | 638.8 | % | 598.7 | % |
Our allowance for loan losses was $10.4$13.6 million at June 30, 2021 on March 31, 2022, compared to $16.3$12.7 million at on December 31, 20202021, an increase of 6.7%. The increase was primarily due to a decreasehigher volume of 35.9%. A reasonable balance was maintained in response to economic weakening andloan production during the onset of COVID variants. At three months ended March 31, 2022. On June 30, 2021March 31, 2022, our allowance for loan losses was 0.67%0.76% of total gross loans (excluding Professional Bank PPP loans) and provided coverage of 375.4%638.8% of our nonperforming loans, compared to an allowance for loan losses to total gross loans (net of overdrafts) ratio of 1.10%0.74% as of December 31, 20202021. See Reconciliation of non-GAAP Financial Measures. We believe our allowance at on June 30, 2021March 31, 2022, was adequate to absorb probable incurred losses inherent in our loan portfolio. The following table provides an allocation of the allowance for loan losses to specific loan types as of June 30, 2021March 31, 2022, and December 31, 2020.
| | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 | | ||||||
(Dollars in thousands) |
| Allowance |
| Percent |
| Allowance |
| Percent |
| ||
Commercial real estate | | $ | 4,285 |
| 41.1 | % | $ | 3,159 |
| 19.4 | % |
Residential real estate | |
| 2,269 |
| 21.8 | % |
| 2,177 |
| 13.4 | % |
Commercial | |
| 3,423 |
| 32.9 | % |
| 10,462 |
| 64.3 | % |
Construction and development | |
| 361 |
| 3.5 | % |
| 388 |
| 2.4 | % |
Consumer and other | |
| 80 |
| 0.8 | % |
| 73 |
| 0.4 | % |
Total allowance for loan losses | | $ | 10,418 |
| 100.0 | % | $ | 16,259 |
| 100.0 | % |
At June 30, 2021.
March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||
(Dollars in thousands) | Allowance | Percent | Allowance | Percent | ||||||||||||||||||||||
Commercial real estate | $ | 4,735 | 34.9% | $ | 4,471 | 35.2% | ||||||||||||||||||||
Residential real estate | 2,382 | 17.6% | 2,339 | 18.4% | ||||||||||||||||||||||
Commercial | 5,133 | 37.8% | 4,637 | 36.5% | ||||||||||||||||||||||
Construction and development | 511 | 3.8% | 471 | 3.7% | ||||||||||||||||||||||
Consumer and other | 794 | 5.9% | 786 | 6.2% | ||||||||||||||||||||||
Total allowance for loan losses | $ | 13,555 | 100.0% | $ | 12,704 | 100.0% |
2021. There was also a substandard accruing loan with a recorded investment of $2.3 million, with no allowance on December 31, 2021.
53
Deposits
Deposits are our primary source of funding. We offer a variety of deposit products including checking, NOW, savings, money market, and time accounts all of which we actively market at competitive pricing. We generate deposits from our consumer and commercial clients through the efforts of our private bankers. We had public deposits of $93.6$89.3 million and $98.2$84.4 million at June 30, 2021, on March 31, 2022, and December 31, 2020,2021, respectively. Additionally, we supplement our deposits with wholesale funding sources such as Quickrate,Qwickrate brokered deposits. However, we do not significantly rely on wholesale funding sources, which are generally viewed as less stable compared to core deposits due to the relatively higher price elasticity of demand for deposits from wholesale sources. As of June 30, 2021March 31, 2022, and December 31, 2020,2021, these wholesale deposits represented 2.5%2.4% and 4.3%3.9%, respectively, of our total deposits.
Interest-bearing
| | | | | | | | | | | |
| | For the Six Months Ended | | For the Year Ended | | ||||||
| | June 30, 2021 | | December 31, 2020 | | ||||||
| | Average | | | | Average | | | | ||
(Dollars in thousands) |
| Balance |
| Average Rate |
| Balance |
| Average Rate |
| ||
NOW accounts | | $ | 262,165 | | 0.21 | % | $ | 167,991 | | 0.26 | % |
Money market accounts | |
| 746,474 |
| 0.40 | % |
| 586,240 |
| 0.65 | % |
Brokered deposits | |
| 30,475 |
| 0.63 | % |
| 11,339 |
| 0.90 | % |
Savings accounts | | | 10,590 | | 0.10 | % | | 7,564 | | 0.13 | % |
Certificates of deposit | |
| 243,989 |
| 0.73 | % |
| 216,467 |
| 1.13 | % |
Total interest-bearing deposits | |
| 1,293,693 |
| 0.43 | % |
| 989,601 |
| 0.97 | % |
Noninterest-bearing deposits | |
| 708,215 |
| — | % |
| 410,357 |
| — | % |
Total deposits | | $ | 2,001,908 |
| 0.28 | % | $ | 1,399,958 |
| 0.48 | % |
For the Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | |||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Average Rate | Average Balance | Average Rate | ||||||||||||||||||||||
NOW accounts | $ | 319,771 | 0.18% | $ | 60,162 | 0.25% | ||||||||||||||||||||
Money market accounts | 1,022,564 | 0.38% | 856,615 | 0.38% | ||||||||||||||||||||||
Brokered deposits | 58,549 | 0.46% | 30,480 | 0.31% | ||||||||||||||||||||||
Savings accounts | 13,189 | 0.10% | 25,064 | 0.37% | ||||||||||||||||||||||
Certificates of deposit | 258,314 | 0.65% | 236,420 | 0.74% | ||||||||||||||||||||||
Total interest-bearing deposits | 1,672,387 | 0.38% | 1,208,741 | 0.44% | ||||||||||||||||||||||
Noninterest-bearing deposits | 764,763 | —% | 524,114 | —% | ||||||||||||||||||||||
Total deposits | $ | 2,437,150 | 0.26% | $ | 1,732,855 | 0.31% |
| | | | | | | | | | | |
| | For the Six Months Ended | | For the Year Ended | | ||||||
| | June 30, 2021 | | December 31, 2020 | | ||||||
| | Ending | | | | Ending | | | | ||
(Dollars in thousands) |
| Balance |
| % of Total |
| Balance |
| % of Total |
| ||
NOW accounts | | $ | 286,173 | | 12.6 | % | $ | 232,367 | | 14.0 | % |
Money market accounts | |
| 810,913 |
| 35.6 | % |
| 679,761 |
| 41.0 | % |
Brokered deposits | | | 56,534 | | 2.5 | % | | 30,137 | | 1.8 | % |
Savings accounts | |
| 11,814 |
| 0.5 | % |
| 9,727 |
| 0.6 | % |
Certificates of deposit | |
| 257,056 |
| 11.3 | % |
| 231,953 |
| 14.0 | % |
Total interest-bearing deposits | |
| 1,422,490 |
| 62.5 | % |
| 1,183,945 |
| 71.3 | % |
Noninterest-bearing deposits | |
| 854,673 |
| 37.5 | % |
| 475,598 |
| 28.7 | % |
Total deposits(1) | | $ | 2,277,163 | | 100.0 | % | $ | 1,659,543 | | 100.0 | % |
For the Three Months Ended March 31, 2022 | For the Year Ended December 31, 2021 | |||||||||||||||||||||||||
(Dollars in thousands) | Ending Balance | % of Total | Ending Balance | % of Total | ||||||||||||||||||||||
NOW accounts | $ | 356,600 | 13.8 | % | $ | 310,362 | 13.1 | % | ||||||||||||||||||
Money market accounts | 1,037,795 | 40.1 | % | 1,055,033 | 44.5 | % | ||||||||||||||||||||
Brokered deposits | 57,908 | 2.2 | % | 58,365 | 2.5 | % | ||||||||||||||||||||
Savings accounts | 12,397 | 0.5 | % | 12,558 | 0.5 | % | ||||||||||||||||||||
Certificates of deposit | 251,220 | 9.7 | % | 261,067 | 11.0 | % | ||||||||||||||||||||
Total interest-bearing deposits | 1,715,920 | 66.3 | % | 1,697,385 | 71.6 | % | ||||||||||||||||||||
Noninterest-bearing deposits | 871,357 | 33.7 | % | 674,003 | 28.4 | % | ||||||||||||||||||||
Total deposits(1) | $ | 2,587,277 | 100.0 | % | $ | 2,371,388 | 100.0 | % |
54
The following table presentsFor more information regarding the maturities of our certificates of deposittime deposits including time deposits that meet or exceed the $250,000 FDIC insurance limit as of June 30, 2021.
| | | | | | | | | | | | | | | |
|
| | |
| Over |
| Over Six |
| | |
| | | ||
| | Three | | Three | | Months | | | | | | | |||
| | Months or | | Through | | Through | | Over | | | | ||||
(Dollars in thousands) | | Less | | Six Months | | 12 Months | | 12 Months | | Total | |||||
Time deposits less than $100,000 | | $ | 4,145 | | $ | 3,059 | | $ | 9,717 | | $ | 3,445 | | $ | 20,366 |
Time deposits greater than or equal to $100,000 | | | 35,008 | | | 34,227 | | | 118,680 | | | 53,399 | | | 241,314 |
Total | | $ | 39,153 | | $ | 37,286 | | $ | 128,397 | | $ | 56,844 | | $ | 261,680 |
The following table presents the maturities of our certificates of deposit as of March 31, 2022, and December 31, 2020.
| | | | | | | | | | | | | | | |
|
| | |
| Over |
| Over Six |
| | |
| | | ||
| | Three | | Three | | Months | | | | | | | |||
| | Months or | | Through | | Through | | Over | | | | ||||
(Dollars in thousands) | | Less | | Six Months | | 12 Months | | 12 Months | | Total | |||||
Time deposits less than $100,000 | | $ | 5,429 | | $ | 3,392 | | $ | 6,691 | | $ | 4,602 | | $ | 20,114 |
Time deposits greater than or equal to $100,000 | | | 55,527 | | | 45,180 | | | 60,959 | | | 54,795 | | | 216,461 |
Total | | $ | 60,956 | | $ | 48,572 | | $ | 67,650 | | $ | 59,397 | | $ | 236,575 |
Debt
See2021, refer to Note 76 Deposits to the Consolidated Financial Statements (unaudited) dated June 30, 2021, entitled "Debt"March 31, 2022.
| | | | | | | |
| | Six Months Ended | | Year Ended | | ||
(Dollars in thousands) |
| June 30, 2021 |
| December 31, 2020 | | ||
Amount outstanding at period-end | | $ | 35,000 | | $ | 40,000 | |
Weighted average interest rate at period-end | |
| 2.04 | % |
| 1.96 | % |
Maximum month-end balance during period | | $ | 40,000 | | $ | 70,000 | |
Average balance outstanding during period | |
| 38,867 | |
| 58,210 | |
Weighted average interest rate during period | |
| 1.98 | % |
| 1.63 | % |
(Dollars in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | ||||||||||||
Weighted average interest rate at period-end | 0.81% | 1.96% | ||||||||||||
Maximum month-end balance during period | $ | 35,000 | $ | 40,000 | ||||||||||
Average balance outstanding during period | $ | 26,333 | $ | 40,000 | ||||||||||
Weighted average interest rate during period | 2.04% | 1.96% |
Federal Reserve Bank of Atlanta. The Federal Reserve Bank of Atlanta has an available borrower in custody arrangement which allows us to borrow on a collateralized basis. No advances were outstanding under this facility as of March 31, 2022 and June 30,December 31, 2021.
PPPLF Advances. The Company initially funded Professional Bank PPP loans with the PPPLF. Most of the Professional Bank PPP loans were initially pledged to the Federal Reserve as part of the PPPLF. The PPPLF pledged loans are non-recourse to the Company. In addition, we paid off approximately $101.4 million in PPPLF advances for a balance of $0 at June 30, 2021.
55
In July 2013, federal bank regulatory agencies issued a final rule that revised their risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with certain standards that were developed by Basel III and certain provisions of the Dodd-Frank Act. The final rule applies to all depository institutions and bank holding companies and savings and loan holding companies with total consolidated assets of more than $1 billion, which we refer to below as “covered” banking organizations. We were required to implement the new Basel III capital standards as of January 1, 2015, and January 1, 2018, respectively.
56
The following table presents our regulatory capital ratios as of June 30, 2021March 31, 2022, and December 31, 20202021. The amounts presented exclude the capital conservation buffer.
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Minimum to be well | | |||
| | Actual | | Minimum for capital adequacy | | capitalized | | |||||||||
(Dollars in thousands) |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| |||
June 30, 2021 |
| |
|
|
|
| |
|
|
|
| |
|
|
| |
Total capital ratio |
| |
|
| |
| |
|
|
|
| |
|
|
| |
Bank | | $ | 198,836 |
| 12.8 | % | $ | 124,003 |
| 8.0 | % | $ | 155,004 |
| 10.0 | % |
Company | |
| 218,325 |
| 14.1 | % |
| 124,003 |
| 8.0 | % |
| N/A |
| N/A | |
Tier 1 capital ratio | |
|
|
| | |
|
|
|
| |
|
|
|
| |
Bank | |
| 187,416 |
| 12.1 | % |
| 93,002 |
| 6.0 | % |
| 124,003 |
| 8.0 | % |
Company | |
| 196,844 |
| 12.7 | % |
| 93,002 |
| 6.0 | % |
| N/A |
| N/A | |
Tier1 leverage ratio | |
|
|
| | |
|
|
|
| |
|
|
|
| |
Bank | |
| 187,416 |
| 7.4 | % |
| 101,368 |
| 4.0 | % |
| 126,710 |
| 5.0 | % |
Company | |
| 196,844 |
| 7.8 | % |
| 101,368 |
| 4.0 | % |
| N/A |
| N/A | |
Common equity tier 1 capital ratio | |
|
|
| | |
| |
|
| |
|
|
|
| |
Bank | |
| 187,416 |
| 12.1 | % |
| 69,752 |
| 4.5 | % |
| 100,753 |
| 6.5 | % |
Company | |
| 196,844 |
| 12.7 | % |
| 69,752 |
| 4.5 | % |
| N/A |
| N/A | |
Actual | Minimum for capital adequacy | Minimum to be well capitalized | ||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||
March 31, 2022 | ||||||||||||||||||||||||||||||||||||||
Total capital ratio | ||||||||||||||||||||||||||||||||||||||
Bank | $ | 235,860 | 12.8 | % | $ | 147,313 | 8.0 | % | $ | 184,141 | 10.0 | % | ||||||||||||||||||||||||||
Company | 250,202 | 13.6 | % | 147,313 | 8.0 | % | N/A | N/A | ||||||||||||||||||||||||||||||
Tier 1 Capital ratio | ||||||||||||||||||||||||||||||||||||||
Bank | 221,203 | 12.0 | % | 110,484 | 6.0 | % | 147,313 | 8.0 | % | |||||||||||||||||||||||||||||
Company | 211,136 | 11.5 | % | 110,484 | 6.0 | % | N/A | N/A | ||||||||||||||||||||||||||||||
Tier 1 Leverage ratio | ||||||||||||||||||||||||||||||||||||||
Bank | 221,203 | 8.1 | % | 108,580 | 4.0 | % | 135,725 | 5.0 | % | |||||||||||||||||||||||||||||
Company | 211,136 | 7.8 | % | 108,580 | 4.0 | % | N/A | N/A | ||||||||||||||||||||||||||||||
Common Equity Tier 1 | ||||||||||||||||||||||||||||||||||||||
Bank | 221,203 | 12.0 | % | 82,863 | 4.5 | % | 119,692 | 6.5 | % | |||||||||||||||||||||||||||||
Company | 211,136 | 11.5 | % | 82,863 | 4.5 | % | N/A | N/A |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Minimum to be well |
| |||
| | Actual | | Minimum for capital adequacy | | capitalized |
| |||||||||
(Dollars in thousands) |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| |||
December 31, 2020 | |
|
|
|
| |
|
|
|
| |
|
|
|
| |
Total capital ratio | |
|
|
|
| |
|
|
|
| |
|
|
|
| |
Bank | | $ | 176,633 |
| 12.0 | % | $ | 117,298 |
| 8.0 | % | $ | 146,623 |
| 10.0 | % |
Company | |
| 215,977 |
| 14.7 | % |
| 117,298 |
| 8.0 | % |
| N/A |
| N/A | |
Tier 1 capital ratio | |
|
|
| | |
|
|
|
| |
|
|
|
| |
Bank | |
| 159,448 |
| 10.9 | % |
| 87,974 |
| 6.0 | % |
| 117,298 |
| 8.0 | % |
Company | |
| 188,639 |
| 12.9 | % |
| 87,974 |
| 6.0 | % |
| N/A |
| N/A | |
Tier1 leverage ratio | |
|
|
| | |
|
|
|
| |
|
|
|
| |
Bank | |
| 159,448 |
| 8.4 | % |
| 75,723 |
| 4.0 | % |
| 94,654 |
| 5.0 | % |
Company | |
| 188,639 |
| 10.0 | % |
| 75,723 |
| 4.0 | % |
| N/A |
| N/A | |
Common equity tier 1 capital ratio | |
|
|
| | |
| |
|
| |
|
|
|
| |
Bank | |
| 159,448 |
| 10.9 | % |
| 65,980 |
| 4.5 | % |
| 95,305 |
| 6.5 | % |
Company | |
| 188,639 |
| 12.9 | % |
| 65,980 |
| 4.5 | % |
| N/A |
| N/A | |
Actual | Minimum for capital adequacy | Minimum to be well capitalized | ||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||||||||
Total capital ratio | ||||||||||||||||||||||||||||||||||||||
Bank | $ | 222,696 | 12.1% | $ | 147,313 | 8.0% | $ | 184,141 | 10.0% | |||||||||||||||||||||||||||||
Company | 220,206 | 12.0% | 147,313 | 8.0% | N/A | N/A | ||||||||||||||||||||||||||||||||
Tier 1 capital ratio | ||||||||||||||||||||||||||||||||||||||
Bank | 208,997 | 11.3% | 110,484 | 6.0% | 147,313 | 8.0% | ||||||||||||||||||||||||||||||||
Company | 206,507 | 11.9% | 110,484 | 6.0% | N/A | N/A | ||||||||||||||||||||||||||||||||
Tier1 leverage ratio | ||||||||||||||||||||||||||||||||||||||
Bank | 208,997 | 7.7% | 108,580 | 4.0% | 135,725 | 5.0% | ||||||||||||||||||||||||||||||||
Company | 206,507 | 7.7% | 108,580 | 4.0% | N/A | N/A | ||||||||||||||||||||||||||||||||
Common equity tier 1 capital ratio | ||||||||||||||||||||||||||||||||||||||
Bank | 208,997 | 12.1% | 82,863 | 4.5% | 119,692 | 6.5% | ||||||||||||||||||||||||||||||||
Company | 206,507 | 11.9% | 82,863 | 4.5% | N/A | N/A |
At June 30, 2021,
57
We also view our investment portfolio as a liquidity source and have the option to pledge securities in our portfolio as collateral for borrowings or deposits, and/or sell selected securities. At June 30, 2021On March 31, 2022, and December 31, 2020,2021, there were $209.9$236.6 million and $227.8$235.3 million in total loans pledged to the FHLB for liquidity. Our investment portfolio primarily consists of debt issued by the federal government and governmental agencies. The weighted-average maturity of our investment portfolio was 3.705.07 years and 3.024.41 years at June 30, 2021on March 31, 2022, and December 31, 20202021, respectively,respectively. The duration of our investment portfolio was 4.48 years and had a net unrealized pre-tax gain of $0.4 million4.08 years on March 31, 2022, and $1.2 million, respectively, in our available for sale securities portfolio as of those dates.
December 31, 2021, respectively.
of
December 31, 2021.The
2022 which could lead to market volatility.
| | | | | | | | | | | | | | | |
| | | | | | | | Due After | | | | | | | |
| | | | | Due after One | | Three | | | | | | | ||
| | Due in One | | Through Three | | Through | | Due After | | | | ||||
(Dollars in thousands) |
| Year or Less |
| Years |
| Five Years |
| Five Years |
| Total | |||||
FHLB advances | | $ | — | | $ | — | | $ | 30,000 | | $ | 5,000 | | $ | 35,000 |
Certificates of deposit less than $100,000 | |
| 16,921 | |
| 3,405 | |
| 40 | |
| — | |
| 20,366 |
Certificates of deposit $100,000 or more | |
| 187,915 | |
| 53,399 | |
| — | |
| — | |
| 241,314 |
Operating leases | |
| 1,400 | |
| 2,717 | |
| 2,048 | |
| 706 | |
| 6,871 |
Subordinated debt | | | — | | | — | | | — | | | 10,062 | | | 10,062 |
Total | | $ | 206,236 | | $ | 59,521 | | $ | 32,088 | | $ | 15,768 | | $ | 313,613 |
(Dollars in thousands) | Due in One Year or Less | Due after One Through Three Years | Due After Three Through Five Years | Due After Five Years | Total | |||||||||||||||||||||||||||
FHLB advances | $ | — | $ | — | $ | — | $ | 5,000 | $ | 5,000 | ||||||||||||||||||||||
Time deposits of $250,000 or less | 84,168 | 4,452 | — | — | 88,620 | |||||||||||||||||||||||||||
Time deposits of more than $250,000 | 164,208 | 3,020 | — | — | 167,228 | |||||||||||||||||||||||||||
Operating leases | 1,349 | 2,371 | 1,493 | 445 | 5,658 | |||||||||||||||||||||||||||
Subordinated debt | — | — | — | 24,409 | 24,409 | |||||||||||||||||||||||||||
Total | $ | 249,725 | $ | 9,843 | $ | 1,493 | $ | 29,854 | $ | 290,915 |
58
Our commitments associated with outstanding letters of credit and commitments to extend credit expiring by period as of the date indicated are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.
| | | | | | |
(Dollars in thousands) |
| June 30, 2021 |
| December 31, 2020 | ||
Unfunded lines of credit | | $ | 366,015 | | $ | 356,955 |
Commitments to extend credit | |
| 83,857 | |
| 40,629 |
Letters of credit | |
| 11,226 | |
| 13,036 |
Total credit extension commitments | | $ | 461,098 | | $ | 410,620 |
(Dollars in thousands) | March 31, 2022 | December 31, 2021 | ||||||||||||
Unfunded lines of credit | $ | 460,743 | $ | 418,167 | ||||||||||
Commitments to extend credit | 102,193 | 108,824 | ||||||||||||
Standby letters of credit | 11,842 | 12,095 | ||||||||||||
Total credit extension commitments | $ | 574,778 | $ | 539,086 |
| | | | | |
|
| Six Months Ended | | Year Ended | |
|
| June 30, 2021 | | December 31, 2020 |
|
Return on Average Assets | | 0.95 | % | 0.46 | % |
Return on Average Equity | | 10.05 | % | 4.30 | % |
Average Equity to Average Assets | | 9.44 | % | 10.64 | % |
2021.
(Dollars in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | ||||||||||||
Return on average assets | 0.36 | % | 0.90 | % | ||||||||||
Return on average equity | 4.23 | % | 8.74 | % | ||||||||||
Average equity to average assets | 8.48 | % | 10.35 | % |
59
risk involving exchange rates, commodity prices, or equity prices. In asset and liability management activities, our policies are designed to minimize structural interest rate risk.
60
Analysis
The following table indicates that, for periods less than one year, rate-sensitive assets exceeded rate-sensitive liabilities, resulting in a slightly asset-sensitive position. For a bank with an asset-sensitive position, otherwise referred to as a positive gap, rising interest rates would generally be expected to have a positive effect on net interest income, and falling interest rates would generally be expected to have the opposite effect.
| | | | | | | | | | | | | | | | | | |
| | | | | After One | | After Three | | | | | | | | | | ||
| | | | | Month | | Months | | | | | Greater than | | | | |||
June 30, 2021 | | Within One | | Through Three | | Through | | Within One | | One Year | | | ||||||
(Dollars in thousands) |
| Month |
| Months |
| 12 Months |
| Year |
| or Nonsensitive |
| Total | ||||||
Assets |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Interest earning assets |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Loans | | $ | 414,242 | | $ | 112,022 | | $ | 345,668 | | $ | 871,932 | | $ | 808,236 | | $ | 1,680,168 |
Loans held for sale | | | 2,039 | | | — | | | — | | | 2,039 | | | — | | | 2,039 |
Securities | |
| 11,617 | |
| 7,010 | |
| 46,396 | |
| 65,023 | |
| 62,700 | |
| 127,723 |
Interest-bearing deposits at other financial institutions | |
| 616,180 | |
| — | |
| — | |
| 616,180 | |
| — | |
| 616,180 |
Federal funds sold | | | 36,156 | | | — | | | — | | | 36,156 | | | — | | | 36,156 |
FHLB & FRB stock | |
| 7,295 | |
| — | |
| — | |
| 7,295 | |
| — | |
| 7,295 |
Total interest earning assets | | $ | 1,087,529 | | $ | 119,032 | | $ | 392,064 | | $ | 1,598,625 | | $ | 870,936 | | $ | 2,469,561 |
Liabilities | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Interest-bearing liabilities | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Interest-bearing deposits | | $ | 652,409 | | $ | 18,476 | | $ | 83,136 | | $ | 754,021 | | $ | 406,789 | | $ | 1,160,810 |
Time deposits | |
| 15,533 | |
| 23,620 | |
| 165,683 | |
| 204,836 | |
| 56,844 | |
| 261,680 |
Total interest-bearing deposits | |
| 667,942 | |
| 42,096 | |
| 248,819 | |
| 958,857 | |
| 463,633 | |
| 1,422,490 |
Securities sold under agreements to repurchase | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
FHLB advances | |
| — | |
| — | |
| — | |
| — | |
| 35,000 | |
| 35,000 |
Subordinated debt | |
| — | |
| — | |
| — | |
| — | |
| 10,062 | |
| 10,062 |
Total interest-bearing liabilities | | $ | 667,942 | | $ | 42,096 | | $ | 248,819 | | $ | 958,857 | | $ | 508,695 | | $ | 1,467,552 |
Period gap | | $ | 419,587 | | $ | 76,936 | | $ | 143,245 | | $ | 639,768 | | $ | 362,241 | |
|
|
Cumulative gap | | $ | 419,587 | | $ | 496,523 | | $ | 639,768 | | $ | 639,768 | | $ | 1,002,009 | |
|
|
Ratio of cumulative gap to total earning assets | |
| 38.58 | % |
| 417.13 | % |
| 163.18 | % |
| 40.02 | % |
| 115.05 | % |
|
|
Ratio of cumulative gap to cumulative total earning assets | |
| 16.99 | % |
| 20.11 | % |
| 25.91 | % |
| 25.91 | % |
| 40.57 | % |
|
|
March 31, 2022 (Dollars in thousands) | Within One Month | After One Month Through Three Months | After Three Months Through 12 Months | Within One Year | Greater than One Year or Nonsensitive | Total | ||||||||||||||||||||||||||||||||
Interest Earning Assets | ||||||||||||||||||||||||||||||||||||||
Loans | $ | 468,979 | $ | 58,224 | $ | 229,046 | $ | 756,249 | $ | 1,052,912 | $ | 1,809,161 | ||||||||||||||||||||||||||
Loans held for sale | 988 | — | — | 988 | — | 988 | ||||||||||||||||||||||||||||||||
Securities | 43,524 | 13,398 | 10,393 | 67,315 | 145,546 | 212,861 | ||||||||||||||||||||||||||||||||
Interest earning deposits at other financial institutions | 671,595 | — | — | 671,595 | 46,042 | 717,637 | ||||||||||||||||||||||||||||||||
Federal funds sold | 24,089 | — | — | 24,089 | — | 24,089 | ||||||||||||||||||||||||||||||||
FHLB & FRB stock | 7,286 | — | — | 7,286 | — | 7,286 | ||||||||||||||||||||||||||||||||
Total interest earning assets | $ | 1,216,461 | $ | 71,622 | $ | 239,439 | $ | 1,527,522 | $ | 1,244,500 | $ | 2,772,022 | ||||||||||||||||||||||||||
Interest-Bearing Liabilities | ||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | $ | 731,091 | $ | 24,384 | $ | 109,728 | $ | 865,203 | $ | 594,869 | $ | 1,460,072 | ||||||||||||||||||||||||||
Time deposits | 28,803 | 53,057 | 166,516 | 248,376 | 7,472 | 255,848 | ||||||||||||||||||||||||||||||||
Total interest-bearing deposits | 759,894 | 77,441 | 276,244 | 1,113,579 | 602,341 | 1,715,920 | ||||||||||||||||||||||||||||||||
FHLB advances | — | — | — | — | 5,000 | 5,000 | ||||||||||||||||||||||||||||||||
Subordinated debt | — | — | — | — | 24,409 | 24,409 | ||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | $ | 759,894 | $ | 77,441 | $ | 276,244 | $ | 1,113,579 | $ | 631,750 | $ | 1,745,329 | ||||||||||||||||||||||||||
Period gap | $ | 456,567 | $ | (5,819) | $ | (36,805) | $ | 413,943 | $ | 612,750 | ||||||||||||||||||||||||||||
Cumulative gap | $ | 456,567 | $ | 450,748 | $ | 413,943 | $ | 413,943 | $ | 1,026,693 | ||||||||||||||||||||||||||||
Ratio of cumulative gap to total earning assets | 37.53% | 629.34% | 172.88% | 27.10% | 82.50% | |||||||||||||||||||||||||||||||||
Ratio of cumulative gap to cumulative total earning assets | 16.47% | 16.26% | 14.93% | 14.93% | 37.04% |
61
CASH FLOW GAP
| | | | | | | | | | | | | | | | | | |
|
| | |
| After One |
| After Three |
| | |
| | |
|
| | ||
| | | | | Month | | Months | | | | | Greater than | |
| | |||
June 30, 2021 | | Within One | | Through Three | | Through | | Within One | | One Year | |
| | |||||
(Dollars in thousands) | | Month | | Months | | 12 Months | | Year | | or Nonsensitive | | Total | ||||||
Assets |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Interest earning assets |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Loans | | $ | 127,533 | | $ | 129,493 | | $ | 342,715 | | $ | 599,741 | | $ | 1,080,427 | | $ | 1,680,168 |
Loans held for sale | | | 2,039 | | | — | | | — | | | 2,039 | | | — | | | 2,039 |
Securities | |
| 7,384 | |
| 2,498 | |
| 10,898 | |
| 20,780 | |
| 106,943 | |
| 127,723 |
Interest-bearing deposits at other financial institutions | |
| 616,180 | |
| — | |
| — | |
| 616,180 | | | — | |
| 616,180 |
Federal funds sold | | | 36,156 | | | — | | | — | | | 36,156 | | | — | | | 36,156 |
FHLB & FRB stock | |
| — | |
| — | |
| — | |
| — | |
| 7,295 | |
| 7,295 |
Total interest earning assets | | $ | 789,292 | | $ | 131,991 | | $ | 353,613 | | $ | 1,274,896 | | $ | 1,194,665 | | $ | 2,469,561 |
Liabilities | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Interest-bearing liabilities | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Interest-bearing deposits | | $ | 22,144 | | $ | 44,288 | | $ | 199,303 | | $ | 265,735 | | $ | 895,075 | | $ | 1,160,810 |
Time deposits | |
| 15,533 | |
| 23,620 | |
| 165,683 | |
| 204,836 | |
| 56,844 | |
| 261,680 |
Total interest-bearing deposits | |
| 37,677 | |
| 67,908 | |
| 364,986 | |
| 470,571 | |
| 951,919 | |
| 1,422,490 |
Securities sold under agreements to repurchase | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
FHLB advances | |
| — | |
| — | |
| — | |
| — | |
| 35,000 | |
| 35,000 |
Subordinated debt | |
| — | |
| — | |
| — | |
| — | |
| 10,062 | |
| 10,062 |
Total interest-bearing liabilities | | $ | 37,677 | | $ | 67,908 | | $ | 364,986 | | $ | 470,571 | | $ | 996,981 | | $ | 1,467,552 |
Period gap | | $ | 751,615 | | $ | 64,083 | | $ | (11,373) | | $ | 804,325 | | $ | 197,684 | |
| |
Cumulative gap | | $ | 751,615 | | $ | 815,698 | | $ | 804,325 | | $ | 804,325 | | $ | 1,002,009 | |
| |
Ratio of cumulative gap to total earning assets | |
| 95.23 | % |
| 618.00 | % |
| 227.46 | % |
| 63.09 | % |
| 83.87 | % |
| |
March 31, 2022 (Dollars in thousands) | Within One Month | After One Month Through Three Months | After Three Months Through 12 Months | Within One Year | Greater than One Year or Nonsensitive | Total | ||||||||||||||||||||||||||||||||
Interest Earning Assets | ||||||||||||||||||||||||||||||||||||||
Loans | $ | 119,724 | $ | 65,347 | $ | 287,759 | $ | 472,830 | $ | 1,336,331 | $ | 1,809,161 | ||||||||||||||||||||||||||
Loans held for sale | 988 | — | — | 988 | — | 988 | ||||||||||||||||||||||||||||||||
Securities | 7,533 | 6,912 | 15,356 | 29,801 | 183,060 | 212,861 | ||||||||||||||||||||||||||||||||
Interest earning deposits at other financial institutions | 671,595 | — | — | 671,595 | 46,042 | 717,637 | ||||||||||||||||||||||||||||||||
Federal funds sold | 24,089 | — | — | 24,089 | — | 24,089 | ||||||||||||||||||||||||||||||||
FHLB & FRB stock (1) | 7,286 | — | — | 7,286 | — | 7,286 | ||||||||||||||||||||||||||||||||
Total interest earning assets | $ | 831,215 | $ | 72,259 | $ | 303,115 | $ | 1,206,589 | $ | 1,565,433 | $ | 2,772,022 | ||||||||||||||||||||||||||
Interest-Bearing Liabilities | ||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | $ | 731,091 | $ | 24,384 | $ | 109,728 | $ | 865,203 | $ | 594,869 | $ | 1,460,072 | ||||||||||||||||||||||||||
Time deposits | 28,803 | 53,057 | 166,516 | 248,376 | 7,472 | 255,848 | ||||||||||||||||||||||||||||||||
Total interest-bearing deposits | 759,894 | 77,441 | 276,244 | 1,113,579 | 602,341 | 1,715,920 | ||||||||||||||||||||||||||||||||
FHLB advances | 5,000 | — | — | 5,000 | — | 5,000 | ||||||||||||||||||||||||||||||||
Subordinated debt | — | — | — | — | 24,409 | 24,409 | ||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | $ | 764,894 | $ | 77,441 | $ | 276,244 | $ | 1,118,579 | $ | 626,750 | $ | 1,745,329 | ||||||||||||||||||||||||||
Period gap | $ | 66,321 | $ | (5,182) | $ | 26,871 | $ | 88,010 | $ | 938,683 | ||||||||||||||||||||||||||||
Cumulative gap | $ | 66,321 | $ | 61,139 | $ | 88,010 | $ | 88,010 | $ | 1,026,693 | ||||||||||||||||||||||||||||
Ratio of cumulative gap to total earning assets | 7.98% | 84.61% | 29.04% | 7.29% | 65.59% | |||||||||||||||||||||||||||||||||
Ratio of cumulative gap to cumulative total earning assets | 2.39% | 2.21% | 3.17% | 3.17% | 37.04% |
| | | | | | | | | | | | | | | | | | | |
Net Interest Income at Risk – 12 months |
| -400bps |
| -300bps |
| -200bps |
| -100bps |
| Flat |
| +100bps |
| +200bps |
| +300bps |
| +400bps |
|
Policy Limit |
| (20.0) | % | (15.0) | % | (10.0) | % | (5.0) | % | N/A |
| 10.0 | % | 15.0 | % | 20.0 | % | 25.0 | % |
June 30, 2021 |
| (7.8) | % | (5.9) | % | (3.4) | % | (0.7) | % | N/A |
| 9.2 | % | 18.4 | % | 27.5 | % | 36.5 | % |
December 31, 2020 |
| (3.1) | % | (2.4) | % | (1.2) | % | (0.2) | % | N/A |
| 1.5 | % | 3.5 | % | 5.5 | % | 7.3 | % |
December 31, 2019 |
| (9.9) | % | (6.6) | % | (4.7) | % | (1.6) | % | N/A |
| 0.6 | % | 0.8 | % | 1.0 | % | 1.2 | % |
| | | | | | | | | | | | | | | | | | | |
Net Interest Income at Risk – 24 months |
| -400bps |
| -300bps |
| -200bps |
| -100bps |
| Flat |
| +100bps |
| +200bps |
| +300bps |
| +400bps |
|
Policy Limit |
| (20.0) | % | (15.0) | % | (10.0) | % | (5.0) | % | N/A |
| 10.0 | % | 15.0 | % | 20.0 | % | 25.0 | % |
June 30, 2021 |
| (15.3) | % | (12.6) | % | (9.1) | % | (5.4) | % | N/A |
| 11.4 | % | 22.4 | % | 33.5 | % | 44.4 | % |
December 31, 2020 |
| (4.3) | % | (3.6) | % | (2.6) | % | (1.8) | % | N/A |
| 5.8 | % | 12.0 | % | 17.9 | % | 23.6 | % |
December 31, 2019 |
| (16.1) | % | (12.0) | % | (7.7) | % | (2.7) | % | N/A |
| 1.3 | % | 2.3 | % | 3.1 | % | 3.7 | % |
.
Net Interest Income at Risk – 12 months | -400bps | -300bps | -200bps | -100bps | Flat | +100bps | +200bps | +300bps | +400bps | |||||||||||||||||||||||||||||||||||||||||||||||
Policy Limit | (20.0) | % | (15.0) | % | (10.0) | % | (5.0) | % | — | % | 5.0 | % | 10.0 | % | 15.0 | % | 20.0 | % | ||||||||||||||||||||||||||||||||||||||
March 31, 2022 | (17.9) | % | (16.1) | % | (14.8) | % | (9.0) | % | — | % | 6.0 | % | 11.8 | % | 17.6 | % | 23.4 | % | ||||||||||||||||||||||||||||||||||||||
December 31, 2021 | (6.0) | % | (4.0) | % | (1.5) | % | 1.3 | % | — | % | 4.2 | % | 8.4 | % | 12.4 | % | 16.2 | % | ||||||||||||||||||||||||||||||||||||||
Net Interest Income at Risk – 24 months | -400bps | -300bps | -200bps | -100bps | Flat | +100bps | +200bps | +300bps | +400bps | |||||||||||||||||||||||||||||||||||||||||||||||
Policy Limit | (20.0) | % | (15.0) | % | (10.0) | % | (5.0) | % | — | % | 5.0 | % | 10.0 | % | 15.0 | % | 20.0 | % | ||||||||||||||||||||||||||||||||||||||
March 31, 2022 | (32.1) | % | (31.1) | % | (26.4) | % | (11.3) | % | — | % | 7.4 | % | 14.9 | % | 22.4 | % | 29.8 | % | ||||||||||||||||||||||||||||||||||||||
December 31, 2021 | (15.6) | % | (12.5) | % | (9.1) | % | (4.7) | % | — | % | 6.5 | % | 12.7 | % | 18.6 | % | 24.4 | % |
62
The following table illustrates the results of our EVE analysis as of June 30, 2021March 31, 2022, and December 31, 20202021. and 2019.
| | | | | | | | | | | | | | | | | | | |
Economic Value of Equity as of |
| -400bps |
| -300bps |
| -200bps |
| -100bps |
| Flat |
| +100bps |
| +200bps |
| +300bps |
| +400bps |
|
Policy Limit |
| (30.0) | % | (20.0) | % | (15.0) | % | (10.0) | % | N/A |
| 17.5 | % | 22.5 | % | 27.5 | % | 37.5 | % |
June 30, 2021 |
| (0.4) | % | (0.5) | % | (0.3) | % | (1.6) | % | N/A |
| 1.8 | % | 3.2 | % | 4.0 | % | 4.2 | % |
December 31, 2020 |
| 0.8 | % | 1.5 | % | 2.6 | % | 2.5 | % | N/A |
| (2.5) | % | (5.1) | % | (8.1) | % | (11.3) | % |
December 31, 2019 |
| (5.3) | % | (0.4) | % | 0.7 | % | 0.6 | % | N/A |
| (3.7) | % | (8.2) | % | (13.2) | % | (19.0) | % |
Economic Value of Equity | -400bps | -300bps | -200bps | -100bps | Flat | +100bps | +200bps | +300bps | +400bps | |||||||||||||||||||||||||||||||||||||||||||||||
Policy Limit | (30.0) | % | (20.0) | % | (15.0) | % | (10.0) | % | — | % | 10.0 | % | 15.0 | % | 20.0 | % | 30.0 | % | ||||||||||||||||||||||||||||||||||||||
March 31, 2022 | (5.5) | % | (7.1) | % | (7.1) | % | (2.9) | % | — | % | 1.1 | % | 1.9 | % | 2.0 | % | 1.6 | % | ||||||||||||||||||||||||||||||||||||||
December 31, 2021 | 6.7 | % | 6.2 | % | 5.9 | % | 4.8 | % | — | % | (3.7) | % | (7.3) | % | (11.1) | % | (15.4) | % |
We have identified the following accounting policies and estimates that, due to the difficult, subjective, consolidated financial position and/or complex judgments and assumptions inherent in those policies and estimates and the potential sensitivity of the financial statements to those judgments and assumptions, are critical to an understanding of our financial condition andconsolidated results of operations. We believe that the judgments, estimatesThe more critical accounting and assumptions used in the preparation of the consolidated financial statements are appropriate.
Allowancereporting policies include our accounting for Loan Losses
The allowance for loan losses provides for probable incurred losses in the loan portfolio based upon management’s best assessment of the loan portfolio at each balance sheet date. It is maintained at a level estimated to be adequate to absorb potential losses through periodic charges to the provision for loan losses.
The allowance for loan losses consists of specific and general reserves. Specific reserves relate to loans classified as impaired. Loans are considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due in accordance with the contractual terms of the loan. Impaired loans include troubled debt restructurings, and performing and nonperforming loans. Impaired loans are reviewed individually and a specific allowance is allocated, if necessary, based on evaluation of either the fair value of the collateral underlying the loan or the present value of future cash flows calculated using the loan’s existing interest rate. General reserves relate to the remainder of the loan portfolio, including overdrawn deposit accounts, and are based on evaluation of a number of factors, such as current economic conditions, the quality and composition of the loan portfolio, loss history, and other relevant factors.
Our loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. However, the ability of borrowers to honor their contractual repayment obligations is substantially dependent on changing economic conditions. Because of the uncertainties associated with economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that management’s estimate of loan losses in the loan portfolio and the amount of the allowance needed may change in the future. The determination of the allowance for loan losses is, in large part, based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In situations where the repayment of a loan is dependent on the value of the underlying collateral, an independent appraisal of the collateral’s current market value is customarily obtained and used in the determination of the allowance for loan loss.
While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in economic conditions. Also regulatory agencies, as an integral part of their examination process, periodically review management’s assessments of the adequacy of the allowance for loan losses. Such agencies may require us to recognize additional losses based on their judgments about information available to them at the time of their examination.
Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date. The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or
63
observable market inputs. For financial instruments thatmeasurements. Significant accounting policies are traded actively and have quoted market prices or observable market inputs, there is minimal subjectivity involveddiscussed in measuring fair value. However, when quoted market prices or observable market inputs are not fully available, significant management judgment may be necessary to estimate fair value. In developing our fair value estimates, we maximize the use of observable inputs and minimize the use of unobservable inputs.
The fair value hierarchy defines Level 1 valuations as those based on quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 valuations include inputs based on quoted prices for similar assets or liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 valuations are based on at least one significant assumption not observable in the market, or significant management judgment or estimation, some of which may be internally developed.
Financial assets that are recorded at fair value on a recurring basis include investment securities available for sale and loans held for sale. Determining the fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and goodwill, is a complicated process involving significant judgment regarding methods and assumptions used to calculate the estimated fair values. As of June 30, 2021, purchase accounting loan marks were $16.1 million.
Recent Accounting Pronouncements
The following provides a brief description of accounting standards that have been issued but are not yet adopted that could have a material effect on our financial statements. Please also refer to the Notes to Consolidated Financial Statements within our consolidated financial statements includedAnnual Report. There have been no changes in this quarterly report for a full descriptionsuch policies or the application of recent accounting pronouncements, includingsuch policies during the respective expected dates of adoption and anticipated effects on our results of operations and financial condition.
ASU 2016-13, Financial Instruments — Credit Loses (Topic 326)
three months ended March 31, 2022.
Pro Opp Fund LLC
On April 8, 2021, the Company formed a separately capitalized subsidiary, Pro Opp Fund LLC. Subsequent to the close of the quarter ended June 30, 2021, Pro Opp Fund LLC committed to investments of approximately $1.7 million in businesses indirectly, directly, and tangentially related to the Company’s core business as permitted under the U.S. Bank Holding Company Act.
COVID-19 Operational Response and Bank Preparedness
The Company continues to work within the COVID-19 pandemic response plans which were originally established in the spring of 2020. In the summer of 2021, we returned to a normalized office schedule. The Company continues to monitor the situation closely, updating plans where necessary, including for the variants of COVID, to ensure that they comply with the latest governmental guidelines and health conditions.
will adopt this accounting standard effective January 1, 2023.
64
Management uses these non-GAAP financial measures in its analysis of the Company’s performance and believes these measures are useful supplemental information that can enhance investors’ understanding of the Company’s business and performance without considering taxes or provisions for loan losses and can be useful when comparing performance with other financial institutions. However, these non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures.
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Three Months Ended | | Six Months Ended | | |||||||||
| | June 30, | | March 31, | | June 30, | | |||||||||
(Dollar amounts in thousands, except per share data) |
| 2021 |
| 2020 |
| 2021 |
| 2021 |
| 2020 | | |||||
Net interest income (GAAP) | | $ | 17,202 | | $ | 16,291 | | $ | 17,879 | | $ | 35,081 | | $ | 24,352 | |
Total non-interest income | | | 2,302 | | | 968 | | | 1,119 | | | 3,421 | | | 1,824 | |
Total non-interest expense | | | 10,954 | | | 11,548 | | | 11,788 | | | 22,742 | | | 21,034 | |
Pre-tax pre-provision earnings (non-GAAP) | | $ | 8,550 | | $ | 5,711 | | $ | 7,210 | | $ | 15,760 | | $ | 5,142 | |
Total adjustments to non-interest expense | | | — | | | (560) | | | (684) | | | (684) | | | (2,223) | |
Adjusted pre-tax pre-provision earnings (non-GAAP) | | $ | 8,550 | | $ | 6,271 | | $ | 7,894 | | $ | 16,444 | | $ | 7,365 | |
| | | | | | | | | | | | | | | | |
Return on average assets (GAAP) | | | 0.99 | % | | 0.38 | % | | 0.90 | % | | 0.95 | % | | 0.24 | % |
Adjusted return on average assets (non-GAAP) | |
| | |
| | |
| | |
| | |
| | |
Annualized pre-tax pre-provision ROAA (non-GAAP) | | | 1.33 | % | | 1.19 | % | | 1.36 | % | | 1.35 | % | | 0.67 | % |
Adjusted annualized pre-tax pre-provision ROAA (non-GAAP) | |
| 1.33 | % |
| 1.30 | % |
| 1.45 | % |
| 1.40 | % |
| 0.96 | % |
Three Months Ended | ||||||||||||||||||||||||||||||||||||||
(Dollar amounts in thousands, except per share data) | March 31, 2022 | December 31, 2021 | March 31, 2021 | |||||||||||||||||||||||||||||||||||
Net interest income (GAAP) | $ | 19,047 | $ | 18,123 | $ | 17,879 | ||||||||||||||||||||||||||||||||
Total non-interest income | 1,273 | 1,290 | 1,119 | |||||||||||||||||||||||||||||||||||
Total non-interest expense | 16,495 | 12,900 | 11,788 | |||||||||||||||||||||||||||||||||||
Pre-tax pre-provision earnings (non-GAAP) | $ | 3,825 | $ | 6,513 | $ | 7,210 | ||||||||||||||||||||||||||||||||
Total adjustments to non-interest expense (1) | (2,915) | — | (684) | |||||||||||||||||||||||||||||||||||
Adjusted pre-tax pre-provision earnings (non-GAAP) | $ | 6,740 | $ | 6,513 | $ | 7,894 | ||||||||||||||||||||||||||||||||
Net interest income after provision for loan losses (GAAP) | $ | 18,196 | $ | 16,243 | $ | 16,841 | ||||||||||||||||||||||||||||||||
Total non-interest income | 1,273 | 1,290 | 1,119 | |||||||||||||||||||||||||||||||||||
Total non-interest expense | 16,495 | 12,900 | 11,788 | |||||||||||||||||||||||||||||||||||
Total adjustments to non-interest expense (1) | (2,915) | — | (684) | |||||||||||||||||||||||||||||||||||
Adjusted income before income taxes (non-GAAP) | $ | 5,889 | $ | 4,633 | $ | 6,856 | ||||||||||||||||||||||||||||||||
Income tax provision | 903 | 673 | 1,541 | |||||||||||||||||||||||||||||||||||
Adjusted net income (non-GAAP) | $ | 4,986 | $ | 3,960 | $ | 5,315 | ||||||||||||||||||||||||||||||||
Return on average assets (GAAP) | 0.36 | % | 0.58 | % | 0.90 | % | ||||||||||||||||||||||||||||||||
Annualized pre-tax pre-provision ROAA (non-GAAP) | 0.57 | % | 0.95 | % | 1.36 | % | ||||||||||||||||||||||||||||||||
Adjusted annualized pre-tax pre-provision ROAA (non-GAAP) | 1.00 | % | 0.95 | % | 1.49 | % |
| | | | | | | |
| | June 30, 2021 |
| December 31, 2020 | | ||
Total loans (GAAP) | | $ | 1,680,186 | | $ | 1,643,373 | |
Add allowance for loan loss | | | 10,418 | | | 16,259 | |
Add unearned loan origination fees (costs), net | | | 6,839 | | | 5,578 | |
Add loans held for sale | | | 2,039 | | | 1,270 | |
Total gross loans | | $ | 1,699,482 | | $ | 1,666,480 | |
Less PPP loans | | | 144,118 | | | 189,977 | |
Total gross loans excluding Professional Bank PPP loans (non-GAAP) | | $ | 1,555,364 | | $ | 1,476,503 | |
Add purchase accounting loan marks | | | 16,133 | | | 18,835 | |
Total gross loans excluding PPP loans and loan marks (non-GAAP) | | $ | 1,571,497 | | $ | 1,495,338 | |
| | | | | | | |
Allowance for loan loss as a % of total loans (GAAP) | | | 0.62 | % | | 0.99 | % |
Allowance for loan loss as a % of total gross loans excluding Professional Bank PPP loans (non-GAAP) | | | 0.67 | % | | 1.10 | % |
Loan marks + allowance for loan loss / total gross loans excluding PPP loans and loan marks (non-GAAP) | | | 1.69 | % | | 2.35 | % |
Adjustments to non-interest expense for the three months ended March 31, 2022 were related to severance and accelerated vesting expense related to the departure of the former Chief Executive Officer. Adjustments to non-interest expense for the three months ended March 31, 2021 were related to change in control payments to two former Marquis employees.
(Dollar amounts in thousands, except per share data) | March 31, 2022 | December 31, 2021 | ||||||||||||
Total loans held for investment (GAAP) | $ | 1,809,161 | $ | 1,764,460 | ||||||||||
Add allowance for loan loss ("ALLL") | 13,555 | 12,704 | ||||||||||||
Total gross loans held for investment ("LHFI") | 1,822,716 | 1,777,164 | ||||||||||||
Less Professional Bank net PPP loans ("PPP") | $ | 31,097 | $ | 58,615 | ||||||||||
Total gross LHFI excluding net PPP loans (non-GAAP) | $ | 1,791,619 | $ | 1,718,549 | ||||||||||
Add purchase accounting loan marks ("PA") | 11,466 | 13,003 | ||||||||||||
Total gross LHFI excluding net PPP loans (non-GAAP) + PA marks | $ | 1,803,085 | $ | 1,731,552 | ||||||||||
ALLL as a % of LHFI (GAAP) | 0.75 | % | 0.72 | % | ||||||||||
ALLL as a % of total LHFI excluding net PPP loans (non-GAAP) | 0.76 | % | 0.74 | % | ||||||||||
PA marks + ALLL / LHFI excluding net PPP loans (non-GAAP) | 1.39 | % | 1.48 | % |
(Dollar amounts in thousands, except per share data) | Three Months Ended | |||||||||||||||||||
March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||
Net interest income (GAAP) | $ | 19,047 | $ | 18,123 | $ | 17,879 | ||||||||||||||
Less: PPP net interest income recognized | (1,059) | (1,269) | (2,982) | |||||||||||||||||
Net interest income excluding PPP (non-GAAP) | 17,988 | 16,854 | 14,897 | |||||||||||||||||
Less: PA premium/discounts | (1,661) | (1,442) | (1,269) | |||||||||||||||||
Net interest income excluding PPP and PA (non-GAAP) | $ | 16,327 | $ | 15,412 | $ | 13,628 | ||||||||||||||
Average interest earning assets (GAAP) | 2,599,372 | 2,584,329 | 1,986,324 | |||||||||||||||||
Less: average PPP loans | (44,585) | (72,728) | (190,713) | |||||||||||||||||
Average interest earning assets, excluding PPP (non-GAAP) | 2,554,787 | 2,511,601 | 1,795,611 | |||||||||||||||||
Add: average PA marks | 12,314 | 14,051 | 18,459 | |||||||||||||||||
Average interest earning assets, excluding PPP and PA (non-GAAP) | $ | 2,567,101 | $ | 2,525,652 | $ | 1,814,070 | ||||||||||||||
Net interest margin (GAAP) | 2.97 | % | 2.78 | % | 3.65 | % | ||||||||||||||
Net interest margin excluding PPP (non-GAAP) | 2.86 | % | 2.66 | % | 3.36 | % | ||||||||||||||
Net interest margin excluding PPP and PA (non-GAAP) | 2.58 | % | 2.42 | % | 3.04 | % |
As disclosed in Part II, Item 9A. Controls and Procedures in our Annual Report on Form 10-K dated DecemberMarch 31, 2020, management observed deficiencies associated with controls that address infrequent significant transactions in the2022. The Company’s control environment, that, in the aggregate, resulted in a material weakness. Individually, each of the observations were determined to be immaterial. The observations included Accounting for Participation Loan Sales, Recording of Inter-company Capital Transactions, and Business Combination Accounting. The Company has developed and is in the process of implementingdisclosure controls and procedures as part ofare designed to ensure that information required to be disclosed by the remediation effortsCompany in connectionthe reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the identified deficiencies described above. Therefore,Company’s management, including the Chief Executive Officer and Chief AccountingFinancial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2021, ourthe Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of such date.
Despite the foregoing, our management has concluded that, the financial statements fairly present in all material respects, our financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity GAAP.
65
Changes in Internal Control over Financial Reporting
Not applicable.
As of June 30, 2021, we used approximately $4.0 million for expenses associated with the MBI acquisition, and $10.0 million to paydown our line of credit with Valley National Bank, with the remaining proceeds pushed down to the Bank for general corporate purposes, including working capital and capital expenditures. None of the proceeds were used as payments to our directors or officers (or their associates), or to our affiliates or 10% stockholders.
66
program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. The purchases made during the three months ended June 30, 2021,March 31, 2022, are shown below:
Periods | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May yet be Purchased Under the Plan | |||||||||||||||||
January 1, 2022 to January 31, 2022: | — | $ | — | $ | 4,091,454 | |||||||||||||||
February 1, 2022 to February 28, 2022: | — | — | 4,091,454 | |||||||||||||||||
March 1, 2022 to March 31, 2022: | — | — | 4,091,454 | |||||||||||||||||
Total - 1st Quarter | — | $ | — | $ | 4,091,454 |
| | | | | | | | |
| | | | | | Approximate Dollar | ||
| | | | | | Value of Shares that | ||
| | Total Number of | | Average Price | | May yet be Purchased | ||
Periods |
| Shares Purchased |
| Paid per Share |
| Under the Plan | ||
April 1, 2021 to April 30, 2021: |
| 443 | | | 16.99 |
| | 4,060,469 |
May 1, 2021 to May 31, 2021: |
| 55,229 | | | 17.95 |
| | 8,995,600 |
June 1, 2021 to June 30, 2021: |
| 137,617 | | | 17.86 |
| | 6,537,348 |
Total - 2nd Quarter | | 193,289 | | $ | 17.88 | | $ | 6,537,348 |
|
|
| |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit No. | Description of Exhibit | ||||||||||
31.1 |
| ||||||||||
31.2 |
| ||||||||||
31.3 | |||||||||||
32.1 |
| ||||||||||
32.2 |
| ||||||||||
32.3 | |||||||||||
101.INS |
| XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||||
101.SCH |
| XBRL Taxonomy Extension Schema Document | |||||||||
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document | |||||||||
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document | |||||||||
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||
Exhibit 104 |
| Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
67
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
Pursuant to the requirements of the Securities Exchange Act of 1943, this Report has been signed by the following persons in the capacities set forth opposite their names and on the dates indicated.
|
|
|
|
| ||||||||||
Signature | Title | Date | ||||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
/s/ Abel L. Iglesias |
|
|
|
| ||||||||||
Abel L. Iglesias |
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
/s/ |
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
/s/ |
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
68