Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 13, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Entity Registrant Name | Partners Bancorp | |
Title of 12(b) Security | Common Stock, par value $.01 per share | |
Trading Symbol | PTRS | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 17,810,213 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0000832090 | |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
ASSETS | ||
Cash and due from banks | $ 220,612 | $ 36,295 |
Interest bearing deposits in other financial institutions | 34,334 | 27,586 |
Federal funds sold | 34,345 | 31,230 |
Cash and cash equivalents | 289,291 | 95,111 |
Securities available for sale, at fair value | 128,011 | 104,321 |
Loans held for sale, at fair value | 7,765 | 3,555 |
Loans, less allowance for credit losses of $11,396 at September 30, 2020 and $7,304 at December 31, 2019 | 1,043,143 | 986,684 |
Accrued interest receivable | 6,254 | 3,138 |
Premises and equipment, less accumulated depreciation | 15,667 | 13,705 |
Restricted stock | 4,421 | 5,311 |
Operating lease right-of-use assets | 3,958 | 4,504 |
Financing lease right-of-use assets | 1,858 | 1,961 |
Other investments | 6,734 | 4,773 |
Bank owned life insurance | 14,747 | 7,817 |
Other real estate owned | 2,796 | 2,417 |
Core deposit intangible, net | 2,833 | 3,373 |
Goodwill | 9,391 | 9,391 |
Other assets | 7,088 | 6,544 |
Total assets | 1,543,957 | 1,252,605 |
Deposits: | ||
Non interest bearing demand | 393,267 | 261,631 |
NOW | 111,460 | 76,947 |
Savings and money market | 296,532 | 222,975 |
Time, $100,000 or more | 284,589 | 274,387 |
Other time | 149,078 | 170,841 |
Deposits, Total | 1,234,926 | 1,006,781 |
Accrued interest payable | 448 | 572 |
Short-term borrowings with the Federal Home Loan Bank | 21,200 | 48,000 |
Long-term borrowings with the Federal Home Loan Bank | 53,136 | 48,830 |
Subordinated notes payable, net | 24,089 | 6,435 |
Other borrowings | 65,475 | 1,249 |
Operating lease liabilities | 4,267 | 4,797 |
Financing lease liabilities | 2,270 | 2,355 |
Other liabilities | 2,206 | 2,709 |
Total liabilities | 1,408,017 | 1,121,728 |
COMMITMENTS, CONTINGENCIES & SUBSEQUENT EVENT | ||
STOCKHOLDERS’ EQUITY | ||
Common stock, par value $.01, authorized 40,000,000 shares, issued and outstanding 17,810,213 as of September 30, 2020 and 17,790,181 as of December 31, 2019 | 178 | 178 |
Surplus | 87,562 | 87,437 |
Retained earnings | 45,013 | 41,785 |
Noncontrolling interest in consolidated subsidiaries | 1,063 | 738 |
Accumulated other comprehensive income, net of tax | 2,124 | 739 |
Total stockholders’ equity | 135,940 | 130,877 |
Total liabilities and stockholders’ equity | $ 1,543,957 | $ 1,252,605 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
CONSOLIDATED BALANCE SHEETS | ||
Allowance for credit losses | $ 11,396 | $ 7,304 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 17,810,213 | 17,790,181 |
Common stock, shares outstanding | 17,810,213 | 17,790,181 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
INTEREST INCOME ON: | ||||
Loans, including fees | $ 12,816 | $ 8,688 | $ 39,308 | $ 25,916 |
Investment securities: | ||||
Taxable | 473 | 171 | 1,337 | 518 |
Tax -Exempt | 241 | 154 | 702 | 445 |
Federal funds sold | 5 | 58 | 117 | 81 |
Other interest income | 119 | 215 | 478 | 527 |
TOTAL INTEREST INCOME | 13,654 | 9,286 | 41,942 | 27,487 |
INTEREST EXPENSE ON: | ||||
Deposits | 2,288 | 1,556 | 7,331 | 4,388 |
Borrowings | 816 | 435 | 2,053 | 1,274 |
TOTAL INTEREST EXPENSE | 3,104 | 1,991 | 9,384 | 5,662 |
NET INTEREST INCOME | 10,550 | 7,295 | 32,558 | 21,825 |
Provisions for credit losses | 1,967 | 300 | 5,142 | 900 |
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 8,583 | 6,995 | 27,416 | 20,925 |
OTHER INCOME: | ||||
Service charges on deposit accounts | 197 | 295 | 628 | 861 |
Gain on sales and calls of investment securities | 97 | 568 | 97 | |
Mortgage banking income | 1,305 | 2,589 | ||
Other income | 828 | 739 | 2,236 | 1,771 |
TOTAL OTHER INCOME | 2,330 | 1,131 | 6,021 | 2,729 |
OTHER EXPENSES: | ||||
Salaries and employee benefits | 5,124 | 2,788 | 14,725 | 8,459 |
Premises and equipment | 1,150 | 897 | 3,407 | 2,732 |
Amortization of core deposit intangible | 177 | 76 | 540 | 226 |
Gains on other real estate owned | 31 | 44 | 75 | 38 |
Other expenses | 2,767 | 1,726 | 8,347 | 5,097 |
TOTAL OTHER EXPENSES | 9,249 | 5,531 | 27,094 | 16,552 |
INCOME BEFORE TAXES ON INCOME | 1,664 | 2,595 | 6,343 | 7,102 |
Federal and state income taxes | 308 | 810 | 1,410 | 2,167 |
NET INCOME | 1,356 | 1,785 | 4,933 | 4,935 |
Net (income) attributable to noncontrolling interest | (239) | (370) | ||
NET INCOME ATTRIBUTABLE TO PARTNERS BANCORP | $ 1,117 | $ 1,785 | $ 4,563 | $ 4,935 |
Earnings per common share | ||||
Basic earnings per share | $ 0.063 | $ 0.179 | $ 0.256 | $ 0.494 |
Diluted earnings per share | $ 0.063 | $ 0.178 | $ 0.256 | $ 0.494 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
NET INCOME | $ 1,356 | $ 1,785 | $ 4,933 | $ 4,935 |
OTHER COMPREHENSIVE INCOME, NET OF TAX: | ||||
Unrealized holding gains on securities available for sale arising during the period | 65 | 356 | 2,452 | 1,960 |
Income tax expense | (17) | (95) | (650) | (519) |
Other comprehensive income, net of tax | 48 | 261 | 1,802 | 1,441 |
Reclassification adjustment for gains included in net income | (97) | (568) | (97) | |
Income tax expense | 26 | 151 | 25 | |
Other comprehensive income, net of tax | (71) | (417) | (72) | |
TOTAL OTHER COMPREHENSIVE INCOME | 48 | 190 | 1,385 | 1,369 |
TOTAL COMPREHENSIVE INCOME | 1,404 | 1,975 | 6,318 | 6,304 |
COMPREHENSIVE (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTEREST | (239) | (370) | ||
COMPREHENSIVE INCOME ATTRIBUTABLE TO PARTNERS BANCORP | $ 1,165 | $ 1,975 | $ 5,948 | $ 6,304 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Accumulated Other Comprehensive (Loss) Income | Total |
Balances at Dec. 31, 2018 | $ 100 | $ 29,470 | $ 37,149 | $ (731) | $ 65,988 | |
COMPREHENSIVE INCOME | ||||||
Net income | 4,935 | 4,935 | ||||
Other comprehensive income, net of tax: | ||||||
Reclassification adjustment for gains included in net income | (72) | |||||
Other comprehensive income, net of tax | 1,369 | 1,369 | ||||
TOTAL COMPREHENSIVE INCOME | 6,304 | |||||
Cash dividends | (749) | (749) | ||||
Stock-based compensation expense recognized in earnings, net of employee tax obligation | 16 | 16 | ||||
Balances at Sep. 30, 2019 | 100 | 29,486 | 41,335 | 638 | 71,559 | |
Balances at Jun. 30, 2019 | 100 | 29,481 | 39,800 | 448 | 69,829 | |
COMPREHENSIVE INCOME | ||||||
Net income | 1,785 | 1,785 | ||||
Other comprehensive income, net of tax: | ||||||
Reclassification adjustment for gains included in net income | (71) | |||||
Other comprehensive income, net of tax | 190 | 190 | ||||
TOTAL COMPREHENSIVE INCOME | 1,975 | |||||
Cash dividends | (250) | (250) | ||||
Stock-based compensation expense recognized in earnings, net of employee tax obligation | 5 | 5 | ||||
Balances at Sep. 30, 2019 | 100 | 29,486 | 41,335 | 638 | 71,559 | |
Balances at Dec. 31, 2019 | 178 | 87,437 | 41,785 | $ 738 | 739 | 130,877 |
COMPREHENSIVE INCOME | ||||||
Net income | 4,563 | 370 | 4,933 | |||
Other comprehensive income, net of tax: | ||||||
Reclassification adjustment for gains included in net income | (417) | |||||
Other comprehensive income, net of tax | 1,385 | 1,385 | ||||
TOTAL COMPREHENSIVE INCOME | 6,318 | |||||
Cash dividends | (1,335) | (1,335) | ||||
Minority interest contributed capital | (45) | (45) | ||||
Stock option exercises, net | 98 | 98 | ||||
Warrant exercises, net | 10 | 10 | ||||
Stock-based compensation expense recognized in earnings, net of employee tax obligation | 17 | 17 | ||||
Balances at Sep. 30, 2020 | 178 | 87,562 | 45,013 | 1,063 | 2,124 | 135,940 |
Balances at Jun. 30, 2020 | 178 | 87,552 | 44,341 | 824 | 2,076 | 134,971 |
COMPREHENSIVE INCOME | ||||||
Net income | 1,117 | 239 | 1,356 | |||
Other comprehensive income, net of tax: | ||||||
Other comprehensive income, net of tax | 48 | 48 | ||||
TOTAL COMPREHENSIVE INCOME | 1,404 | |||||
Cash dividends | (445) | (445) | ||||
Stock option exercises, net | 4 | 4 | ||||
Stock-based compensation expense recognized in earnings, net of employee tax obligation | 6 | 6 | ||||
Balances at Sep. 30, 2020 | $ 178 | $ 87,562 | $ 45,013 | $ 1,063 | $ 2,124 | $ 135,940 |
CONSOLIDATED STATEMENTS OF ST_2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | ||||
Cash dividends per share | $ 0.025 | $ 0.025 | $ 0.075 | $ 0.075 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||
Net income | $ 1,117 | $ 1,785 | $ 4,563 | $ 4,935 | |
Adjustments to reconcile net income to net cash (used) provided by operating activities: | |||||
Provision for credit losses and unfunded commitments | 1,967 | 300 | 5,142 | 900 | |
Depreciation | 1,076 | 864 | |||
Amortization and accretion | 457 | 495 | |||
Gain on sales and calls of investment securities | (568) | (97) | |||
Gain on equity securities | (47) | ||||
Gain on sale of loans held for sale, originated | (2,434) | ||||
Net (gains) losses on other real estate owned, including write‑downs | (18) | 45 | |||
Increase in bank owned life insurance cash surrender value | (170) | ||||
Deferred income tax (benefits) expenses | (691) | 1,444 | |||
Stock-based compensation expense, net of employee tax obligation | 17 | 16 | |||
Net accretion of certain acquisition related fair value adjustments | (127) | (34) | (843) | (127) | |
Changes in assets and liabilities: | |||||
Loans held for sale | (1,776) | ||||
Accrued interest receivable | (3,116) | 5 | |||
Other assets | 292 | (3,383) | |||
Accrued interest payable | (124) | 176 | |||
Other liabilities | (1,033) | 3,699 | |||
Net cash (used) provided by operating activities | 727 | 8,972 | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||
Purchases of securities available for sale | (59,258) | (12,084) | |||
Purchases of other investments | (1,890) | ||||
Purchases of bank owned life insurance | (6,760) | ||||
Proceeds from maturities and paydowns of securities available for sale | 19,509 | 9,348 | |||
Proceeds from sales of securities available for sale | 18,052 | ||||
Net increase in loans | (60,718) | (2,204) | |||
Proceeds from sale of assets | 1 | ||||
Purchases of premises and equipment | (3,040) | (950) | |||
Proceeds from the sales of foreclosed assets | 147 | 184 | |||
Proceeds from sales of Federal Home Loan Bank stock | 890 | ||||
Purchase of Federal Home Loan Bank stock | (1,729) | ||||
Net cash used by investing activities | (93,067) | (7,435) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||
Increase in demand, NOW, money market, and savings deposits, net | 239,706 | 19,938 | |||
Cash received for the exercise of stock options | 98 | ||||
Cash received for the exercise of warrants | 10 | ||||
(Decrease) increase in time deposits, net | (11,564) | 25,538 | |||
Increase (decrease) in other borrowings, net | 59,365 | (1,494) | |||
Net decrease in minority interest contributed capital | 325 | ||||
Decrease in finance lease liability | (85) | ||||
Dividends paid | (1,335) | (749) | |||
Net cash provided by financing activities | 286,520 | 43,233 | |||
Net increase in cash and cash equivalents | 194,180 | 44,770 | |||
Cash and cash equivalents, beginning of period | 95,111 | 29,694 | $ 29,694 | ||
Cash and cash equivalents, ending of period | $ 289,291 | $ 74,464 | 289,291 | 74,464 | $ 95,111 |
Supplementary cash flow information: | |||||
Interest paid | 9,509 | 5,486 | |||
Income taxes paid | 3,559 | 922 | |||
Total appreciation on securities available for sale | 1,386 | 1,863 | |||
SUPPLEMENTARY NON‑CASH INVESTING ACTIVITIES | |||||
Loans converted to other real estate owned | $ 508 | $ 209 |
Nature of Business and Its Sign
Nature of Business and Its Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Nature of Business and Its Significant Accounting Policies | |
Nature of Business and Its Significant Accounting Policies | Note 1. Nature of Business and Its Significant Accounting Policies Partners Bancorp (the “Company”) is a multi-bank holding company with two wholly owned subsidiaries (the “Subsidiaries”), The Bank of Delmarva (“Delmarva”), a commercial bank headquartered in Seaford, Delaware that operates primarily in Wicomico and Worcester counties in Maryland, Sussex County in Delaware, and Camden and Burlington counties in New Jersey, and Virginia Partners Bank (“Partners”), a commercial bank headquartered in Fredericksburg, Virginia that operates primarily in and around the greater Fredericksburg, Virginia area, including Stafford County, Spotsylvania County, King George County, Caroline County, and the City of Fredericksburg, Virginia. Partners also operates in Anne Arundel County and the three counties of Southern Maryland, including Charles County, Calvert County, and St. Mary’s County. The Subsidiaries engage in the general banking business and provide a broad range of financial services to individual and corporate customers, and are subject to competition from other financial institutions. The Subsidiaries are also subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory authorities. The accounting and reporting policies of the Company and its Subsidiaries conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and practices within the banking industry. Significant accounting policies not disclosed elsewhere in the consolidated financial statements are as follows: Principles of Consolidation: The consolidated financial statements include the accounts of the Company; the Subsidiaries, along with their consolidated subsidiaries: Delmarva Real Estate Holdings, LLC., a wholly owned subsidiary of Delmarva, which is a real estate holding company; Davie Circle, LLC, a wholly owned subsidiary of Delmarva, which is a real estate holding company; Delmarva BK Holdings, LLC, a wholly owned subsidiary of Delmarva, which is a real estate holding company; DHB Development, LLC, of which Delmarva holds a 40.55% interest, and is a real estate holding company; West Nithsdale Enterprises, LLC, of which Delmarva holds a 10% interest, and is a real estate holding company; and FBW, LLC, of which Delmarva holds 50% interest, and is a real estate holding company; Bear Holdings, Inc., a wholly owned subsidiary of Partners, and is a real estate holding company; Johnson Mortgage Company, LLC, of which Partners owns 51% interest, and is a residential mortgage company; and 410 William Street, LLC, a wholly owned subsidiary of Partners, and which holds investment property. All significant intercompany accounts and transactions have been eliminated in consolidation. Financial Statement Presentation: The unaudited interim consolidated financial statements do not include all information and notes necessary for a complete presentation of financial position, results of operations, changes in stockholder's equity, and cash flows in conformity with U.S. GAAP. In the opinion of management, the unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the consolidated financial position at September 30, 2020 and December 31, 2019, the results of its operations and its cash flows for the nine months ended September 30, 2020 and 2019 in conformity with U.S. GAAP. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, or for any other period. Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Securities Available for Sale: Marketable debt securities not classified as held to maturity are classified as available for sale. Securities available for sale are acquired as part of the Subsidiaries' asset/liability management strategy and may be sold in response to changes in interest rates, loan demand, changes in prepayment risk, and other factors. Securities available for sale are carried at fair value as determined by quoted market prices. Unrealized gains or losses based on the difference between amortized cost and fair value are reported in other comprehensive income, net of deferred tax. Realized gains and losses, using the specific identification method, are included as a separate component of other income (expense) and, when applicable, are reported as a reclassification adjustment, net of tax, in other comprehensive income. Premiums and discounts are recognized in interest income using the interest method over the period to maturity. Additionally, declines in the fair value of individual investment securities below their cost that are other than temporary are reflected as realized losses in the consolidated statements of income. Impairment may result from credit deterioration of the issuer or collateral underlying the security. In performing an assessment of recoverability, all relevant information is considered, including the length of time and extent to which fair value has been less than the amortized cost basis, the cause of the price decline, credit performance of the issuer and underlying collateral, and recoveries or further declines in fair value subsequent to the balance sheet date. For debt securities, the Company measures and recognizes other-than-temporary impairment (“OTTI”) losses through earnings if (1) the Company has the intent to sell the security or (2) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. In these circumstances, the impairment loss is equal to the full difference between the amortized cost basis and the fair value of the security. For securities that are considered OTTI that the Company has the intent and ability to hold in an unrealized loss position, the OTTI write-down is separated into an amount representing the credit loss, which is recognized in earnings, and the amount related to other factors, which is recognized as a component of other comprehensive income (“OCI”). Restricted Stock, Equity Securities and Other Investments: Federal Home Loan Bank (“FHLB”) stock, at cost, and Atlantic Central Bankers Bank (“ACBB”), at cost, Community Bankers Bank (“CBB”) and Maryland Financial Bank (“MFB”) are equity interests in the FHLB, ACBB, CBB and MFB, respectively. These securities do not have a readily determinable fair value for purposes of Accounting Standards Codification (“ASC”) 320‑10 Investments‑Debts and Equity Securities because their ownership is restricted and they lack an active market. As there is no readily determinable fair value for these securities, they are carried at cost less any OTTI. Equity securities with readily determinable fair values are carried at fair value, with changes in fair value reported in net income. Any equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments. The entirety of any impairment on equity securities is recognized in earnings. Other investments includes an equity ownership of Solomon Hess SBA Loan Fund LLC which the value is adjusted for its prorata share of assets in the fund and investment in the stock of the Federal Reserve Bank (“FRB”). Other investments also includes equity securities the Company holds with Community Capital Management in their Community Reinvestment Act (“CRA”) Qualified Investment Fund. Bank Owned Life Insurance The Company has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other changes or amounts due that are probable at settlement. Loans and the Allowance for Credit Losses: Loans are generally carried at the amount of unpaid principal, adjusted for unearned loan fees, which are amortized over the term of the loan using the effective interest rate method. Interest on loans is accrued based on the principal amounts outstanding. It is the Subsidiaries' policy to discontinue the accrual of interest when a loan is specifically determined to be impaired or when principal or interest is delinquent for ninety days or more. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Interest income generally is not recognized on specific impaired loans unless the likelihood of further loss is remote. Cash collections on such loans are applied as reductions of the loan principal balance and no interest income is recognized on those loans until the principal balance has been collected. Interest income on other nonaccrual loans is recognized only to the extent of interest payments received. The carrying value of impaired loans is based on the present value of the loan's expected future cash flows or, alternatively, the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent. The allowance for credit losses is maintained at a level believed adequate by management to absorb probable losses inherent in the loan portfolio and is based on the size and current risk characteristics of the loan portfolio, an assessment of individual problem loans and actual loss experience, the value of the underlying collateral, and current economic events in specific industries and geographical areas, including unemployment levels, and other pertinent factors, including regulatory guidance and general economic conditions. Determination of the allowance for credit losses is inherently subjective, as it requires significant estimates, including the amounts and timing on historical loss experience, and consideration of current economic trends, all of which may be susceptible to significant change. Loan losses are charged off against the allowance for credit losses, while recoveries of amounts previously charged off are credited to the allowance for credit losses. A provision for credit losses is charged to operations based on management's periodic evaluation of the factors previously mentioned, as well as other pertinent factors. Evaluations are conducted at least monthly and more often if deemed necessary. The allowance for credit losses typically consists of an allocated component and an unallocated component. The allocated component of the allowance for credit losses reflects expected losses resulting from analyses developed through specific credit allocations for individual loans and historical loss experience for each loan category. The specific credit allocations are based on regular analyses of all loans that are considered impaired. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. The historical loan loss element is determined statistically using an informal loss migration analysis that examines loss experience and the related internal gradings of loans charged off. The loss migration analysis is performed quarterly and loss factors are updated regularly based on actual experience. The allocated component of the allowance for credit losses also includes consideration of concentrations and changes in portfolio mix and volume. Any unallocated portion of the allowance for credit losses reflects management's estimate of probable inherent but undetected losses within the loan portfolio due to uncertainties in economic conditions, delays in obtaining information, including unfavorable information about a borrower's financial condition, the difficulty in identifying triggering events that correlate perfectly to subsequent loss rates, and risk factors that have not yet manifested themselves in loss allocation factors. In addition, the unallocated portion of the allowance for credit losses includes a component that explicitly accounts for the inherent imprecision in loan loss migration models. The historical losses used in the migration analysis may not be representative of actual unrealized losses inherent in the loan portfolio. It is management's intent to continually refine the methodology for the allowance for credit losses in an attempt to directly allocate potential losses in the loan portfolio under ASC Topic 310 and minimize the unallocated portion of the allowance for credit losses. Loan Charge‑off Policies Loans are generally fully or partially charged down to the fair value of securing collateral when: · management deems the asset to be uncollectible; · repayment is deemed to be made beyond the reasonable time frames; · the asset has been classified as a loss by internal or external review; and · the borrower has filed bankruptcy and the loss becomes evident owing to a lack of assets. Acquired Loans Loans acquired in connection with business combinations are recorded at their acquisition‑date fair value with no carry over of related allowance for credit losses. Any allowance for credit loss on these pools reflect only losses incurred after the acquisition (meaning the present value of all cash flows expected at acquisition that ultimately are not expected to be received). Determining the fair value of the acquired loans involves estimating the principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. Management considers a number of factors in evaluating the acquisition‑date fair value including the remaining life of the acquired loans, delinquency status, estimated prepayments, payment options and other loan features, internal risk grade, estimated value of the underlying collateral and interest rate environment. Acquired loans that meet the criteria for nonaccrual of interest prior to the acquisition may be considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if we can reasonably estimate the timing and amount of the expected cash flows on such loans and if we expect to fully collect the new carrying value of the loans, including the impact of any accretable yield. Loans acquired with deteriorated credit quality are accounted for in accordance with ASC 310‑30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (ASC 310‑30) if, at acquisition, the loans have evidence of credit quality deterioration since origination and it is probable that all contractually required payments will not be collected. At acquisition, the Company considers several factors as an indicator that an acquired loan has evidence of deterioration in credit quality. These factors include; loans 90 days or more past due, loans with an internal risk grade of substandard or below, loans classified as non‑accrual by the acquired institution, and loans that have been previously modified in a troubled debt restructuring. Under the ASC 310‑30 model, the excess of cash flows expected to be collected at acquisition over recorded fair value is referred to as the accretable yield and is the interest component of expected cash flow. The accretable yield is recognized into income over the remaining life of the loan if the timing and/or amount of cash flows expected to be collected can be reasonably estimated (the accretion method). If the timing or amount of cash flows expected to be collected cannot be reasonably estimated, the cost recovery method of income recognition is used. The difference between the loan's total scheduled principal and interest payment over all cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the non‑accretable difference. The non‑accretable difference represents contractually required principal and interest payments which the Company does not expect to collect. Over the life of the loan, management continues to estimate cash flows expected to be collected. Decreases in expected cash flows are recognized as impairments through a charge to the provision for credit losses resulting in an increase in the allowance for credit losses. Subsequent improvements in cash flows result in first, reversal of existing valuation allowances recognized subsequent to acquisition, if any, and next, an increase in the amount of accretable yield to be subsequently recognized as interest income on a prospective basis over the loan's remaining life. Acquired loans that were not individually determined to be purchased with deteriorated credit quality are accounted for in accordance with ASC 310‑20, Nonrefundable Fees and Other Costs (ASC 310‑20), whereby the premium or discount derived from the fair market value adjustment, on a loan‑by‑loan or pooled basis, is recognized into interest income on a level yield basis over the remaining expected life of the loan or pool. Troubled Debt Restructurings A loan is accounted for and reported as a troubled debt restructuring (“TDR”) when, for economic or legal reasons, we grant a concession to a borrower experiencing financial difficulty that we would not otherwise consider. Management strives to identify borrowers in financial difficulty early and works with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. A restructuring that results in only an insignificant delay in payment is not considered a concession. A delay may be considered insignificant if the payments subject to the delay are insignificant relative to the unpaid principal or collateral value and the contractual amount due, or the delay in timing of the restructured payment period is insignificant relative to the frequency of the payments, the debt’s original contractual maturity or original expected duration. TDRs are designated as impaired loans because interest and principal payments will not be received in accordance with the original contract terms. TDRs that are performing and on accrual status as of the date of the modification remain on accrual status. TDRs that are nonperforming as of the date of modification generally remain as nonaccrual until the prospect of future payments in accordance with the modified loan agreement is reasonably assured, generally demonstrated when the borrower maintains compliance with the restructured terms for a predetermined period, normally at least six months. TDRs with temporary below-market concessions remain designated as a TDR and impaired regardless of the accrual or performance status until the loan is paid off. However, if the TDR loan has been modified in a subsequent restructure with market terms and the borrower is not currently experiencing financial difficulty, then the loan may be no longer designated as a TDR. Loans Held for Sale: These loans consist of loans made through Partners’ majority owned subsidiary Johnson Mortgage Company, LLC (“JMC”). JMC is engaged in the mortgage brokerage business in which JMC originates, closes, and immediately sells mortgage loans and related servicing rights to permanent investors in the secondary market. JMC has written commitments from several permanent investors (large financial institutions) and only closes loans that meet the lending requirements of the permanent investors. Loans are made in connection with the purchase or refinancing of existing and new one-to-four family residences primarily in southeastern and northern Virginia. Loans are initially funded primarily by JMC’s lines of credit. With the concurrent sale and delivery of mortgage loans to the permanent investors, JMC records receivables for mortgage loans sold and recognizes the related gains and losses on such sales. The receivables for mortgage loans sold are usually satisfied within 30 days of sale, whereupon the related borrowings on the lines of credit are repaid. Because of the short holding period, these loans are carried at the lower of cost or market and no market adjustments were deemed necessary in the first three quarters of 2020 or during 2019. JMC’s agreements with its permanent investors include provisions that could require JMC to repurchase loans under certain circumstances, and also provide for the assessment of fees if loans go into default or are refinanced within specified periods of time. JMC has never been required to repurchase a loan and no allowance has been made as of September 30, 2020 or December 31, 2019 for possible repurchases. Management does not believe that a provision for early default or refinancing costs is necessary at September 30, 2020 or December 31, 2019. JMC enters into commitments with its customers to originate loans where the interest rate on the loans is determined (locked) prior to funding. While this subjects JMC to the risk that interest rates may change from the commitment date to the funding date, JMC simultaneously enters into financial agreements (best efforts forward sales commitments) with its permanent investors giving JMC the right to deliver (put) loans to the investors at specified yields, thus enabling JMC to manage its exposure to changes in interest rates such that JMC is not subject to fluctuations in fair values of these agreements due to changes in interest rates. However, a default by a permanent investor required to purchase loans under such an agreement would expose JMC to potential fluctuation in selling prices of loans due to changes in interest rate. The fair value of rate lock commitments and forward sales commitments was considered immaterial at September 30, 2020 and December 31, 2019 and an adjustment was not recorded. Gains and losses on the sale of mortgages as well as origination fees, brokerage fees, interest rate lock-in fees and other fees paid by mortgagors are included in Mortgage banking income on the Company’s consolidated statements of income. Other Real Estate Owned (OREO): OREO comprises properties acquired in partial or total satisfaction of problem loans. The properties are recorded at fair value at the date acquired. Losses arising at the time of acquisition of such properties are charged against the allowance for credit losses. Subsequent write‑downs that may be required and expenses of operation are included in other expenses. Gains and losses realized from the sale of OREO are included in other expenses. At September 30, 2020 there were five properties with a combined estimated value of $ 2.8 million included in OREO and at December 31, 2019, there were four properties with a combined estimated value of $2.4 million included in OREO. Intangible Assets and Amortization: During the fourth quarter of 2019, the Company acquired Partners and during the first quarter of 2018, the Company acquired Liberty. ASC 350, Intangibles‑Goodwill and Other (“ASC 350”), prescribes accounting for intangible assets subsequent to initial recognition. Acquired intangible assets (such as core deposit intangibles) are separately recognized if the benefit of the assets can be sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives. Intangible assets related to the acquisitions are amortized (See Note 12 – Goodwill and Intangible Assets for further information). Goodwill The Company’s goodwill was recognized in connection with the acquisitions of Partners and Liberty. The Company reviews the carrying value of goodwill at least annually or more frequently if certain impairment indicators exist. In testing goodwill for impairment, the Company may first consider qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, we conclude that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then no further testing is required and the goodwill of the reporting unit is not impaired. If the Company elects to bypass the qualitative assessment or if we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the fair value of the reporting unit is compared with its carrying amount to determine whether an impairment exists. Accounting for Stock Based Compensation: The Company follows ASC 718‑10, Compensation—Stock Compensation (“ASC 718-10”) for accounting and reporting for stock‑based compensation plans. ASC 718‑10 defines a fair value at grant date to be used for measuring compensation expense for stock‑based compensation plans to be recognized in the statement of income. Earnings Per Share: Basic earnings per common share are determined by dividing net income and accretion of warrants by the weighted average number of shares outstanding for each period, giving retroactive effect to stock splits and dividends. Weighted average common shares outstanding were 1 7,810,090 and 17,808,2 12 for the three and nine months ended September 30, 2020, respectively, and 9,985,321 for the three and nine months ended September 30, 2020. Calculations of diluted earnings per common share include the average dilutive common stock equivalents outstanding during the period, unless they are anti‑dilutive. Dilutive common equivalent shares consist of stock options calculated using the treasury stock method and restricted stock awards (See Note 8 – Earnings Per Share for further information). |
Investment Securities
Investment Securities | 9 Months Ended |
Sep. 30, 2020 | |
Investment Securities | |
Investment Securities | Note 2. Investment Securities Securities available for sale are as follows: September 30, 2020 Dollars in Thousands Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Obligations of U.S. Government agencies and corporations $ 5,753 $ 172 $ 7 $ 5,918 Obligations of States and political subdivisions 36,787 1,700 — 38,487 Mortgage-backed securities 79,132 1,074 160 80,046 Subordinated debt investments 3,486 74 — 3,560 $ 125,158 $ 3,020 $ 167 $ 128,011 December 31, 2019 Dollars in Thousands Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Obligations of U.S. Government agencies and corporations $ 10,186 $ 162 $ 36 $ 10,312 Obligations of States and political subdivisions 33,885 716 43 34,558 Mortgage-backed securities 56,275 236 90 56,421 Subordinated debt investments 2,988 42 — 3,030 $ 103,334 $ 1,156 $ 169 $ 104,321 Gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2020 and December 31, 2019, are as follows: September 30, 2020 Dollars in Thousands Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized Value Loss Value Loss Value Loss Obligations of U.S. Government agencies and corporations $ 1,493 $ 7 $ — $ — $ 1,493 $ 7 Obligations of States and political subdivisions — — — — — — Mortgage-backed securities 23,670 160 — — 23,670 160 Subordinated debt investments — — — — — — Total securities with unrealized losses $ 25,163 $ 167 $ — $ — $ 25,163 $ 167 December 31, 2019 Dollars in Thousands Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized Value Loss Value Loss Value Loss Obligations of U.S. Government agencies and corporations $ 5,269 $ 34 $ 2,000 $ 2 $ 7,269 $ 36 Obligations of States and political subdivisions 4,669 43 — — 4,669 43 Mortgage-backed securities 11,600 32 4,489 58 16,089 90 Subordinated debt investments — — — — — — Total securities with unrealized losses $ 21,538 $ 109 $ 6,489 $ 60 $ 28,027 $ 169 For individual securities classified as either available for sale or held to maturity, the Company must determine whether a decline in fair value below the amortized cost basis is other than temporary. In estimating OTTI losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near‑term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. If the decline in fair value is considered to be other than temporary, the cost basis of the individual security shall be written down to the fair value as a new cost basis and the amount of the write‑down shall be included in earnings (that is, accounted for as a realized loss). At September 30, 2020 there were four mortgage‑backed securities (MBS) and one agency investment that have been in a continuous unrealized loss position for less than twelve months. At September 30, 2020 there were no securities that had been in a continuous unrealized loss position for more than twelve months. Management found no evidence of OTTI on any of these securities and believes that unrealized losses are due to fluctuations in fair values resulting from changes in market interest rates and are considered temporary. As of September 30, 2020, management also believes it has the ability and intent to hold the securities for a period of time sufficient for a recovery of cost. During the three and nine months ended September 30, 2020 the Company sold ten securities, resulting in a gain of $401 thousand. During the three and nine months ended September 30, 2020, the Company did not sell any securities. During the three and nine months ended September 30, 2020, fourteen securities were either matured or called, resulting in a net gain of $167 thousand. During the three and nine months ended September 30, 2019, five and eleven securities were either matured or called, respectively, resulting in a gain of $97 thousand for both periods. The Company has pledged certain securities as collateral for qualified customers’ deposit accounts at September 30, 2020 and December 31, 2019. The amortized cost and fair value of these pledged securities was $10.0 million and $10.4 million, respectively, at September 30, 2020. The amortized cost and fair value of these pledged securities was $9.1 million and $9.2 million, respectively, at December 31, 2019. Contractual maturities of investment securities at September 30, 2020 are shown below. Actual maturities may differ from contractual maturities because debtors may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage‑backed securities have no stated maturity and primarily reflect investments in various Pass‑through and Participation Certificates issued by the Federal National Mortgage Association and the Government National Mortgage Association. Repayment of mortgage‑backed securities is affected by the contractual repayment terms of the underlying mortgages collateralizing these obligations and the current level of interest rates. The following is a summary of maturities, calls, or repricing of securities available for sale: September 30, 2020 Securities Available for Sale Dollars in Thousands Amortized Fair Cost Value Due in one year or less $ 625 $ 626 Due after one year through five years 2,238 2,435 Due after five years through ten years 21,456 22,168 Due after ten years or more 21,707 22,736 Mortgage-backed securities, due in monthly installments 79,132 80,046 $ 125,158 $ 128,011 |
Loans, Allowance for Credit Los
Loans, Allowance for Credit Losses and Impaired Loans | 9 Months Ended |
Sep. 30, 2020 | |
Loans, Allowance for Credit Losses and Impaired Loans | |
Loans, Allowance for Credit Losses and Impaired Loans | Note 3. Loans, Allowance for Credit Losses and Impaired Loans Major categories of loans as of September 30, 2020 and December 31, 2019 are as follows: (Dollars in thousands) At September 30, 2020 At December 31, 2019 Originated Loans Real Estate Mortgage Construction and land development $ 70,798 $ 59,236 Residential real estate 120,746 108,590 Nonresidential 373,734 325,916 Home equity loans 16,072 13,736 Commercial 135,131 52,838 Consumer and other loans 3,032 2,669 719,513 562,985 Acquired Loans Real Estate Mortgage Construction and land development $ 3,394 $ 25,515 Residential real estate 81,032 100,696 Nonresidential 191,289 218,633 Home equity loans 17,286 23,979 Commercial 39,957 59,159 Consumer and other loans 2,065 3,021 335,023 431,003 Total Loans Real Estate Mortgage Construction and land development $ 74,193 $ 84,751 Residential real estate 201,779 209,286 Nonresidential 565,024 544,549 Home equity loans 33,358 37,715 Commercial 175,088 111,997 Consumer and other loans 5,097 5,690 1,054,539 993,988 Less: Allowance for credit losses (11,396) (7,304) $ 1,043,143 $ 986,684 Allowance for Credit Losses Management has an established methodology to determine the adequacy of the allowance for credit losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for credit losses, the Company has segmented the loan portfolio into the following classifications: · Real Estate Mortgage (which includes Construction and Land Development, Residential Real Estate, Nonresidential Real Estate and Home Equity Loans) · Commercial · Consumer and other loans Each of these segments are reviewed and analyzed quarterly using historical charge‑off experience for their respective segments as well as the following qualitative factors: · Changes in the levels and trends in delinquencies, non‑accruals, classified assets and TDRs · Changes in the nature and volume of the portfolio · Effects of any changes in lending policies, procedures, including underwriting standards and collections, charge off and recovery practices · Changes in the experience, depth and ability of management · Changes in the national and local economic conditions and developments, including the condition of various market segments · Changes in the concentration of credits within each pool · Changes in the quality of the Company’s loan review system and the degree of oversight by the Company’s Board of Directors · Changes in external factors such as competition and the legal environment. The above factors result in a FASB ASC 450‑10‑ 20 calculated reserve for environmental factors. All credit exposures graded at a rating of “non-pass” with outstanding balances less than or equal to $250 thousand and credit exposures graded at a rating of “pass” are reviewed and analyzed quarterly using historical charge-off experience for their respective segments as well as the qualitative factors discussed above. The historical charge-off experience is further adjusted based on delinquency risk trend assessments and concentration risk assessments. All credit exposures graded at a rating of “non-pass” with outstanding balances greater than $250 thousand are to be reviewed no less than quarterly for the purpose of determining if a specific allocation is needed for that credit. The determination for a specific reserve is measured based on the present value of expected future cash flows, discounted at the loan's effective interest rate, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases management uses the current fair value of the collateral, less selling cost when foreclosure is probable, instead of discounted cash flows. If management determines that the value of the loan is less than the recorded investment in the loan (net of previous charge‑offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance for credit losses estimate or a charge‑off to the allowance for credit losses. The establishment of a specific reserve does not necessarily mean that the credit with the specific reserve will definitely incur loss at the reserve level. It is only an estimation of the potential loss based upon anticipated events. A specific reserve will not be established unless loss elements can be determined and quantified based on known facts. The total allowance reflects management's estimate of credit losses inherent in the loan portfolio as of September 30, 2020 and December 31, 2019. The following tables include impairment information relating to loans and the allowance for credit losses as of September 30, 2020 and December 31, 2019: Real Estate Mortgage Construction and Land Residential Consumer Dollars in Thousands Development Real Estate Nonresidential Home Equity Commercial and Other Unallocated Total Balance at September 30, 2020 Purchased credit impaired loans Balance in allowance $ — $ — $ — $ — $ — $ — $ — $ — Related loan balance 44 1,855 2,248 — 407 — — 4,554 Individually evaluated for impairment: Balance in allowance $ — $ 198 $ 23 $ — $ 550 $ — $ — $ 771 Related loan balance 176 3,029 8,690 — 539 — — 12,434 Collectively evaluated for impairment: Balance in allowance $ 907 $ 1,736 $ 6,114 $ 216 $ 1,039 $ 20 $ 593 $ 10,625 Related loan balance 73,973 196,895 554,086 33,358 174,142 5,097 — 1,037,551 Note: The balances above include unamortized discounts on acquired loans of $4 .1 million . Real Estate Mortgage Construction and Land Residential Consumer Dollars in Thousands Development Real Estate Nonresidential Home Equity Commercial and Other Unallocated Total Balance at December 31, 2019 Purchased credit impaired loans Balance in allowance $ — $ — $ — $ — $ — $ — $ — $ — Related loan balance 44 1,986 2,323 — 1,020 — — 5,373 Individually evaluated for impairment: Balance in allowance $ — $ 216 $ 82 $ — $ 274 $ — $ — $ 572 Related loan balance 177 3,123 9,504 — 1,274 — — 14,078 Collectively evaluated for impairment: Balance in allowance $ 602 $ 1,164 $ 3,991 $ 142 $ 552 $ 14 $ 267 $ 6,732 Related loan balance 84,530 204,177 532,722 37,715 109,703 5,690 — 974,537 Note: The balances above include unamortized discounts on acquired loans of $6.1 million. The following tables provide a summary of the activity in the allowance for credit losses allocated by loan class for the three and nine months ended September 30, 2020 and 2019. Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses in other loan classes. September 30, 2020 Real Estate Mortgage Construction and Land Residential Consumer Dollars in Thousands Development Real Estate Nonresidential Home Equity Commercial and Other Unallocated Total Quarter Ended Beginning Balance $ 898 $ 1,893 $ 5,487 $ 184 $ 1,430 $ 20 $ 89 $ 10,001 Charge-offs — — (38) — (497) (55) — (590) Recoveries — 2 6 — 1 9 — 18 Provision 9 39 682 32 655 46 504 1,967 Ending Balance $ 907 $ 1,934 $ 6,137 $ 216 $ 1,589 $ 20 $ 593 $ 11,396 Nine Months Ended Beginning Balance 602 1,380 4,073 142 826 14 267 7,304 Charge-offs — (25) (163) (13) (828) (103) — (1,132) Recoveries 1 10 10 10 20 31 — 82 Provision 304 569 2,217 77 1,571 78 326 5,142 Ending Balance 907 1,934 6,137 216 1,589 20 593 11,396 September 30, 2019 Real Estate Mortgage Construction and Land Residential Consumer Dollars in Thousands Development Real Estate Nonresidential Home Equity Commercial and Other Unallocated Total Quarter Ended Beginning Balance $ 575 $ 1,203 $ 3,784 $ 144 $ 624 $ 10 $ 726 $ 7,066 Charge-offs — — — — (425) (28) — (453) Recoveries 5 24 80 — 23 9 — 141 Provision 15 86 (66) 8 504 20 (267) 300 Ending Balance $ 595 $ 1,313 S 3,798 $ 152 $ 726 $ 11 $ 459 $ 7,054 Nine Months Ended Beginning Balance 647 1,521 3,629 122 641 13 490 7,063 Charge-offs (11) (193) (410) (4) (534) (99) — (1,251) Recoveries 9 165 88 — 43 37 — 342 Provision (50) (180) 491 34 576 60 (31) 900 Ending Balance 595 1,313 3,798 152 726 11 459 7,054 The Company had an unallocated amount of approximately $ 593 thousand in the allowance that is reflected in the above table as of September 30, 2020. The Company had an unallocated amount of approximately $459 thousand in the allowance that is reflected in the above table as of September 30, 2019. Management believes this amount is adequate to absorb additional inherent, but as yet unidentified, losses in the loan portfolio. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law, which established the Paycheck Protection Program (“PPP”) and allocated $349.0 billion of loans to be issued by financial institutions. Under the program, the Small Business Administration (“SBA”) will forgive loans, in whole or in part, made by approved lenders to eligible borrowers for Paycheck and other permitted purposes in accordance with the requirements of the program. These loans carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. The loans are 100% guaranteed by the SBA and payments are deferred for the first six months of the loan. The Bank receives a processing fee ranging from 1% to 5% based on the size of the loan from the SBA. The Paycheck Protection Program and Health Care Enhancement Act (“PPP/ HCEA Act”) was signed into law on April 24, 2020. The PPP/HCEA Act authorized additional funding under the CARES Act of $310.0 billion for PPP loans to be issued by financial institutions through the SBA. The Company has provided $6 4.2 million in funding to over 600 customers through the PPP as of September 30, 2020. Because these loans are 100% guaranteed by the SBA and did not undergo the Bank’s typical underwriting process, they are not graded and do not have an associated reserve at this time. Credit Quality Information The following tables represent credit exposures by creditworthiness category at September 30, 2020 and December 31, 2019. The use of creditworthiness categories to grade loans permits management to estimate a portion of credit risk. The Company’s internal creditworthiness is based on experience with similarly graded credits. The Company uses the definitions below for categorizing and managing its criticized loans. Loans catergorized as “Pass” do not meet the criteria set forth below and are not considered criticized. Marginal — Loans in this category are presently protected from loss, but weaknesses are apparent which, if not corrected, could cause future problems. Loans in this category may not meet required underwriting criteria and have no mitigating factors. More than the ordinary amount of attention is warranted for these loans. Substandard — Loans in this category exhibit well-defined weaknesses that would typically bring normal repayment into jeopardy. These loans are no longer adequately protected due to well-defined weaknesses that affect the repayment capacity of the borrower. The possibility of loss is much more evident and above average supervision is required for these loans. Doubtful — Loans in this category have all the weaknesses inherent in a loan categorized as Substandard, with the characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loss — Loans in this category are of little value and are not warranted as a bankable asset. Non‑accruals In general, a loan will be placed on non‑accrual status at the end of the reporting month in which the interest or principal is past due more than 90 days. Exceptions to the policy are those loans that are in the process of collection and are well-secured. A well‑secured loan is secured by collateral with sufficient market value to repay principal and all accrued interest. A summary of loans by risk rating is as follows: Real Estate Secured Construction & Land Residential Consumer & September 30, 2020 Development Real Estate Nonresidential Home Equity Commercial Other Total Dollars in Thousands Pass $ 74,017 $ 198,513 $ 557,334 $ 33,304 $ 174,349 $ 5,097 $ 1,042,614 Marginal — — 3,339 — 89 — 3,428 Substandard 176 3,266 4,351 54 650 — 8,497 TOTAL $ 74,193 $ 201,779 $ 565,024 $ 33,358 $ 175,088 $ 5,097 $ 1,054,539 Non-Accrual $ 176 $ 3,215 $ 412 $ 54 $ 489 $ — $ 4,346 Real Estate Secured Construction & Land Residential Consumer & December 31, 2019 Development Real Estate Nonresidential Home Equity Commercial Other Total Dollars in Thousands Pass $ 84,574 $ 206,150 $ 539,259 $ 37,715 $ 110,349 $ 5,690 $ 983,737 Marginal — — — — — — — Substandard 177 3,136 5,290 — 1,648 — 10,251 TOTAL $ 84,751 $ 209,286 $ 544,549 $ 37,715 $ 111,997 $ 5,690 $ 993,988 Non-Accrual $ 177 $ 1,620 $ 2,608 $ 5 $ 131 $ — $ 4,541 A summary of loans that were modified under the terms of a TDR during the three and nine month periods ended September 30, 2020 is shown below by class. The post-modification recorded balance reflects the period end balances, inclusive of any interest capitalized to principal, partial principal pay-downs, and principal charge-offs since the modification date. Loans modified as TDRs that were fully paid down, charged off, or foreclosed upon by period end are not reported. There were no loans modified under the terms of a TDR during the three and nine months ended September 30, 2019. Real Estate Secured Construction & Land Residential Consumer & Development Real Estate Nonresidential Home Equity Commercial Other Total Dollars in Thousands Three months ended September 30, 2020 Number of loans modified during the period — — — — — — — Pre-modification recorded balance $ — $ — $ — $ — $ — $ — $ — Post- modification recorded balance — — — — — — — Nine months ended September 30, 2020 Number of loans modified during the period — — — — 1 — 1 Pre-modification recorded balance $ — $ — $ — $ — $ 1,196 $ — $ 1,196 Post- modification recorded balance — — — — 489 — 489 During the nine months ended September 30, 2020, 2020, there was one loan modified as a TDRs that subsequently defaulted which had been modified as a TDR during the twelve months prior to default. This loan had a balance of $1.2 million prior to charge-offs of $7 07 thousand. There were no loans modified as TDRs that subsequently defaulted during the year ended December 31, 2019 which had been modified as TDRs during the twelve months prior to default. There were two loans secured by 1-4 family residential properties with an aggregrate balance of $ 362 thousand that were in the process of foreclosure at September 30, 2020. There were three loans secured by 1-4 family residential properties with aggregrate balances of $1.2 million that were in the process of foreclosure at December 31, 2019. The following tables include an aging analysis of the recorded investment of past due financing receivables as of September 30, 2020 and December 31, 2019: Recorded Investment Greater than Total >90 Days 30 - 59 Days 60 - 89 Days 90 Days Total Current Financing Past Due At September 30, 2020 Past Due* Past Due Past Due** Past Due Balance Receivables and Accruing Dollars in Thousands Real Estate Construction and land development $ 66 $ — $ 176 $ 242 $ 73,951 $ 74,193 $ — Residential real estate 1,157 85 698 1,940 199,839 201,779 286 Nonresidential 207 871 1,327 2,405 562,619 565,024 — Home equity loans — — 54 54 33,304 33,358 — Commercial 129 50 489 668 174,420 175,088 — Consumer and other loans 3 — — 3 5,094 5,097 — TOTAL $ 1,562 $ 1,006 $ 2,744 $ 5,312 $ 1,049,227 $ 1,054,539 $ 286 * Includes $ 901 thousand of non‑accrual loans. ** Includes $ 2.5 million of non-accrual loans. Recorded Investment Greater than Total >90 Days 30 - 59 Days 60 - 89 Days 90 Days Total Current Financing Past Due At December 31, 2019 Past Due* Past Due** Past Due*** Past Due Balance Receivables and Accruing Dollars in Thousands Real Estate Construction and land development $ 424 $ — $ 177 $ 601 $ 84,150 $ 84,751 $ — Residential real estate 1,296 677 702 2,675 206,611 209,286 — Nonresidential 635 144 1,823 2,602 541,947 544,549 — Home equity loans — — — — 37,715 37,715 — Commercial 231 1,207 94 1,532 110,465 111,997 — Consumer and other loans 1 19 — 20 5,670 5,690 5 TOTAL $ 2,587 $ 2,047 $ 2,796 $ 7,430 $ 986,558 $ 993,988 $ 5 * Includes $95 6 thousand of non‑accrual loans. ** Includes $81 thousand of non-accrual loans. *** Includes $2.6 million of non-accrual loans . Impaired Loans Impaired loans are defined as non‑accrual loans, TDRs, purchased credit impaired loans (“PCI”) and loans risk rated substandard or above. When management identifies a loan as impaired, the impairment is measured for potential loss based on the present value of expected future cash flows, discounted at the loan's effective interest rate, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases management uses the current fair value of the collateral, less selling cost when foreclosure is probable, instead of discounted cash flows. If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge‑offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge‑off to the allowance. When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on non‑accrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is on non‑accrual status, contractual interest is credited to interest income when received, under the cash basis method. The following tables include the recorded investment and unpaid principal balances for impaired financing receivables, excluding purchased credit impaired, with the associated allowance amount, if applicable. Also presented are the average recorded investments in the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired. Unpaid Interest Average Recorded Principal Income Specific Recorded September 30, 2020 Investment Balance Recognized Reserve Investment Dollars in Thousands Impaired loans with specific reserves: Real Estate Mortgage Construction and land development $ — $ — $ — $ — $ — Residential real estate 938 938 5 198 833 Nonresidential 2,306 2,306 155 23 2,381 Home equity loans — — — — — Commercial 539 1,246 12 550 906 Consumer and other loans — — — — — Total impaired loans with specific reserves $ 3,783 $ 4,490 $ 172 $ 771 $ 4,120 Impaired loans with no specific reserve: Real Estate Mortgage Construction and land development $ 176 $ 176 $ — $ — $ 176 Residential real estate 2,091 2,141 76 — 2,244 Nonresidential 6,384 6,485 302 — 6,717 Home equity loans — — — — — Commercial — — — — — Consumer and other loans — — — — — Total impaired loans with no specific reserve $ 8,651 $ 8,802 $ 378 $ — $ 9,137 TOTAL $ 12,434 $ 13,292 $ 550 $ 771 $ 13,257 Total impaired loans of $ 12.4 million at September 30, 2020 do not include PCI loan balances of $ 4.6 million, which are net of a discount of $642,000. Unpaid Interest Average Recorded Principal Income Specific Recorded December 31, 2019 Investment Balance Recognized Reserve Investment Dollars in Thousands Impaired loans with specific reserves: Real Estate Mortgage Construction and land development $ — $ — $ — $ — $ — Residential real estate 727 727 — 216 2,337 Nonresidential 2,456 2,456 260 82 2,866 Home equity loans — — — — — Commercial 1,274 1,274 53 274 659 Consumer and other loans — — — — — Total impaired loans with specific reserves $ 4,457 $ 4,457 $ 313 $ 572 $ 5,862 Impaired loans with no specific reserve: Real Estate Mortgage Construction and land development $ 177 $ 177 $ — $ — $ 198 Residential real estate 2,396 3,069 132 — 3,733 Nonresidential 7,048 7,326 501 — 9,839 Home equity loans — — — — 347 Commercial — — — — 902 Consumer and other loans — — — — — Total impaired loans with no specific reserve $ 9,621 $ 10,572 $ 633 $ — $ 15,019 TOTAL $ 14,078 $ 15,029 $ 946 $ 572 $ 20,881 Total impaired loans of $14. 1 million at December 31, 2019 do not include PCI loan balances of $5.4 million, which are net of a discount of $1.1 million. All acquired loans were initially recorded at fair value at the acquisition date. The outstanding balance and the carrying amount of acquired loans included in the consolidated balance sheets are as follows: Dollars in Thousands September 30, 2020 December 31, 2019 Accountable for under ASC 310-30 (PCI loans) Outstanding balance $ 5,196 $ 6,426 Carrying amount 4,554 5,373 Accountable for under ASC 310-20 (non-PCI loans) Outstanding balance $ 334,173 $ 430,711 Carrying amount 330,469 425,630 Total acquired loans Outstanding balance $ 339,369 $ 437,137 Carrying amount 335,023 431,003 The following table provides changes in accretable yield for all acquired loans accounted for under ASC 310‑20: Dollars in Thousands September 30, 2020 December 31, 2019 Balance at beginning of period $ 5,081 $ 745 Acquisitions — 4,990 Accretion (1,376) (654) Other changes, net (1) — Balance at end of period $ 3,704 $ 5,081 During the three and nine months ended September 30, 2020, the Company recorded $ 54 thousand and $180 thousand, respectively, in accretion on acquired loans accounted for under ASC 310-30. During the three and nine months ended September 30, 2019, the Company recorded $2 4 thousand and $ 80 thousand, respectively, in accretion on acquired loans accounted for under ASC 310-30. Non‑accretable yield on PCI loans was $ 1.6 million at September 30, 2020 and December 31, 2019. Concentration of Risk: The Company makes loans to customers located primarily within Anne Arundel, Charles, Calvert, St. Mary’s, Wicomico, and Worcester Counties, Maryland; Sussex County, Delaware; Camden and Burlington Counties, New Jersey; Stafford, Spotsylvania, King George, and Caroline Counties, Virginia; and the City of Fredericksburg, Virginia. A substantial portion of its loan portfolio consists of residential and commercial real estate mortgages. The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in these areas. The Company had no commitments to loan additional funds to the borrowers of restructured, impaired, or non‑accrual loans as of September 30, 2020 and December 31, 2019. |
Borrowings and Notes Payable
Borrowings and Notes Payable | 9 Months Ended |
Sep. 30, 2020 | |
Borrowings and Notes Payable | |
Credit Facilities | Note 4. Borrowings and Notes Payable The Company owns capital stock of the FHLB as a condition for a $3 73.8 million convertible advance credit facility from the FHLB. As of September 30, 2020 the Company had remaining credit availability of $2 99.5 million under this facility. The following table details the advances the Company had outstanding with the FHLB at September 30, 2020 and December 31, 2019 and outstanding lines of credit: September 30, 2020 Dollars in Thousands Outstanding Balance Interest Rate Maturity Date Interest Payment Fixed rate 12,000 0.24 % October 2020 Fixed, at maturity Fixed rate 6,000 0.19 % October 2020 Fixed, at maturity Fixed rate 3,200 0.19 % October 2020 Fixed, at maturity Fixed rate hybrid 5,000 3.04 % November 2020 Fixed, paid monthly Fixed rate hybrid 5,000 2.91 % November 2020 Fixed, paid quarterly Fixed rate hybrid 6,000 2.44 % April 2021 Fixed, paid quarterly Convertible 10,000 2.68 % May 2021 Fixed, paid quarterly Fixed rate hybrid 5,000 3.15 % October 2022 Fixed, paid quarterly Principal reducing credit 1,071 1.62 % March 2023 Fixed, paid quarterly Fixed rate hybrid 9,900 1.29 % March 2024 Fixed, paid quarterly Fixed rate hybrid 9,900 1.29 % March 2024 Fixed, paid quarterly Principal reducing credit 1,265 1.99 % March 2026 Fixed, paid quarterly Total advances 74,336 December 31, 2019 Dollars in Thousands Outstanding Balance Interest Rate Maturity Date Interest Payment Fixed rate 12,000 1.73 % January 2020 Fixed, at maturity Fixed rate 4,500 1.76 % January 2020 Fixed, at maturity Fixed rate 7,600 1.68 % January 2020 Fixed, at maturity Fixed rate 7,700 1.68 % January 2020 Fixed, at maturity Fixed rate 6,000 1.70 % January 2020 Fixed, at maturity Fixed rate 3,200 1.71 % January 2020 Fixed, at maturity Fixed rate 7,000 1.70 % January 2020 Fixed, at maturity Fixed rate hybrid 15,000 2.09 % June 2020 Fixed, paid monthly Fixed rate hybrid 5,000 3.04 % November 2020 Fixed, paid monthly Fixed rate hybrid 5,000 2.91 % November 2020 Fixed, paid quarterly Fixed rate hybrid 6,000 2.44 % April 2021 Fixed, paid quarterly Convertible 10,000 2.68 % May 2021 Fixed, paid quarterly Fixed rate hybrid 5,000 3.15 % October 2022 Fixed, paid quarterly Principal reducing credit 1,393 1.62 % March 2023 Fixed, paid quarterly Principal reducing credit 1,437 1.99 % March 2026 Fixed, paid quarterly Total advances 96,830 Average short‑term borrowings under FHLB approximated $42. 4 million and $9.3 million for the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively. Borrowings with the FHLB are considered short-term if they have an original maturity of less than a year. The Company has pledged a portion of its residential and commercial mortgage loan portfolio as collateral for these credit facilities. Principal balances outstanding on these pledged loans totaled approximately $2 15.0 million and $223.5 million at September 30, 2020 and December 31, 2019, respectively. In addition to the FHLB credit facility, in October 2015, the Company entered into a subordinated loan agreement for an aggregate principal amount of $2.0 million, net of issuance costs. Interest‑only payments are due quarterly at 6.71% per annum, and the outstanding principal balance matures in October 2025. In January 2018, the Company entered into a subordinated loan agreement for an aggregate principal amount of $4.5 million to fund the acquisition of Liberty Bell Bank, net of loan costs. Interest‑only payments are due quarterly at 6.875% per annum, and the outstanding principal balance matures in April 2028. In June 2020, the Company entered into a subordinated loan agreement for an aggregate principal amount of $17.6 million, net of issuance costs, to provide capital to support organic growth or growth through strategic acquisitions and capital expenditures. The notes will initially bear interest at 6.000% per annum, beginning June 25, 2020 to but excluding July 1, 2025, payable semi-annually in arrears. From and including July 1, 2025 to but excluding July 1, 2030, or up to an early redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month SOFR plus 590 basis points, payable quarterly in arrears. Beginning on July 1, 2025 through maturity, the notes may be redeemed, at the Company’s option, on any scheduled interest payment date. The notes will mature on July 1, 2030. The notes are subject to customary representations, warranties and covenants made by the Company and the purchasers. Partners owns a one-half undivided interest in 410 William Street, Fredericksburg, Virginia. Partners purchased a one-half interest in the land for cash, plus additional settlement costs, and assumption of one-half of the remaining deed of trust loan on December 14, 2012. Partners indemnified the indemnities, who are the personal guarantors of the deed of trust loan in the amount of $886 thousand, which was one-half of the outstanding balance of the loan as of the purchase date. Partners has a remaining obligation under the note payable of $6 60 thousand as of September 30, 2020. The loan was refinanced on April 30, 2015 with a twenty-five year amortization. The interest rate is fixed at 3.60% for the first 10 years, and then becomes a variable rate of 3.0% plus the 10 year Treasury rate until maturity. The Company provides JMC a warehouse line of credit, which is eliminated in consolidation. In addition, JMC has a warehouse line of credit with another financial institution in the amount of $3.0 million. The interest rate is the weekly average of the one month LIBOR plus 2.250%, rounded to the nearest 0.125% (2.750% at September 30, 2020 and 4.0% at December 31, 2019). The rate is subject to change the first of every month. Amounts borrowed are collateralized by a security interest in the mortgage loans financed under the line and are payable upon demand. The warehouse line of credit is set to renew or mature on August 31, 2021. The balance outstanding at September 30, 2020 and December 31, 2019 was $ 615 thousand and $576 thousand, respectively. Interest expense on the warehouse lines of credit was $ 32 thousand and $ 83 thousand during the three month and nine month periods ended September 30, 2020, respectively. During the second quarter of 2020, in connection with the loans originated as part of the PPP, the Company borrowed under the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”). Under the terms of the PPPLF, the Company can borrow funds which are secured by the Company’s PPP loans. As of September 30, 2020, the Company’s outstanding advances under the PPPLF were $64.2 million. The interest rate on the advances is fixed at a rate of 0.35% through the advance maturities ranging from April 2022 to June 2025. The Company’s available borrowing capacity under the PPPLF as of September 30, 2020 was $64.2 million, all of which was currently outstanding. The proceeds of these long‑term borrowings were generally used to purchase higher yielding investment securities, fund additional loans, redeem preferred stock, or fund acquisitions. Additionally, the Company has secured credit availability of $5.0 million with a correspondent bank and unsecured credit availability of $59.0 million with several other correspondent banks for short‑term liquidity needs, if necessary. The secured facility must be collateralized by specific securities at the time of any usage. At September 30, 2020 and December 31, 2019, there were no borrowings outstanding under these credit agreements. The Company has pledged investment securities available for sale with an amortized cost and fair value of $ 2.4 million and $ 2.5 million, respectively, with the FRB to secure Discount Window borrowings at September 30, 2020. The combined amortized cost and fair value of these pledged investment securities were $2.3 million at December 31, 2019. At September 30, 2020 and December 31, 2019 there were no outstanding borrowings under these facilities. Maturities on debt are as follows (dollars in thousands): 2020 $ 31,357 2021 17,244 2022 66,246 2023 310 2024 and thereafter 48,743 |
Lease Commitments
Lease Commitments | 9 Months Ended |
Sep. 30, 2020 | |
Lease Commitments | |
Lease Commitments | Note 5. Lease Commitments The Company adopted ASU 2016-02, Leases (Topic 842) , on January 1, 2019, using a modified-retrospective approach, whereby comparative periods were not restated. No cumulative effect adjustment to the opening balance of retained earnings was required. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things allowed the Company to carry forward the historical lease classifications. Additionally, the Company elected the hindsight practical expedient to determine the lease term for existing leases. The Company leases eighteen locations for administrative offices and branch locations. Sixteen leases were classified as operating leases and two as finance leases. Leases with an initial term of 12 months or less as well as leases with a discounted present value of future cash flows below $25 thousand are not recorded on the balance sheet and the related lease expense is recognized over the lease term. The Company elected to use the practical expedient to not recognize short-term leases on the consolidated balance sheet and instead account for them as executory contracts. Certain leases include options to renew, with renewal terms that can extend the lease term, typically for five years. Lease assets and liabilities include related options that are reasonably certain of being exercised. The Company has determined that it will place a limit on exercises of available lease renewal options that would extend the lease term up to a maximum of fifteen years, including the initial term. The depreciable life of leased assets are limited by the expected lease term. Adoption of this standard resulted in the Company recognizing a right of use asset and a corresponding lease liability of $3.6 million on January 1, 2019. Supplemental lease information at or for the nine months ended September 30, 2020 is as follows: Dollars in Thousands Balance Sheet Operating Lease Amounts Right-of-use asset $ 3,958 Lease liability 4,267 Finance Lease Amounts Right-of-use asset $ 1,858 Lease liability 2,270 Income Statement Three Months Ended September 30, 2020 Operating lease cost classified as premises and equipment $ 223 Finance lease cost classified as interest on borrowings 16 Nine Months Ended September 30, 2020 Operating lease cost classified as premises and equipment $ 658 Finance lease cost classified as interest on borrowings 49 Weighted average lease term - Operating Leases (Yrs.) 8.44 Weighted average lease term - Finance Leases (Yrs.) 13.34 Weighted average discount rate - Operating Leases (1) 2.83 % Weighted average discount rate - Finance Leases (1) 2.84 % Operating outgoing cash flows from operating leases $ 625 Operating outgoing cash flows from finance leases $ 134 (1) The discount rate was developed by using the fixed rate credit advance borrowing rate at the FHLB of Atlanta for a term correlating to the remaining life of each lease. Management believes this rate closely mirrors its incremental borrowing rate for similar terms. A maturity analysis of the Company’s lease liabilities at September 30, 2020 was as follows: Dollars in Thousands Operating Leases: One year or less $ 668 One to three years 1,189 Three to five years 1,071 Over 5 years 1,968 Total undiscounted cash flows 4,896 Less: Discount (629) Lease Liabilities $ 4,267 Finance Leases: One year or less $ 178 One to three years 363 Three to five years 393 Over 5 years 1,824 Total undiscounted cash flows 2,758 Less: Discount (488) Lease Liabilities $ 2,270 |
Stock Option Plans
Stock Option Plans | 9 Months Ended |
Sep. 30, 2020 | |
Stock Option Plans | |
Stock Option Plans | Note 6. Stock Option Plans Partners Bancorp Stock Option Plan The Company had employee and director stock option plans and had reserved shares of stock for issuance thereunder. Options granted under these plans had a ten‑year life with a four‑year vesting period that began one year after date of grant, and were exercisable at a price equal to the fair value of the Company’s stock on the date of the grant. Each award from all plans was evidenced by an award agreement that specifies the option price, the duration of the option, the number of shares to which the option pertains, and such other provisions as the grantor determines. The plan term ended in 2014, therefore no new options can be granted. All remaining stock options expired during the second quarter of 2019. Liberty Bell Bank Stock Option Plans In 2004, Liberty Bell Bank (“Liberty”) adopted the 2004 Incentive Stock Option Plan and the 2004 Non‑Qualified Stock Option Plan, which were stock‑based incentive compensation plans (the “Liberty Plans”). In February 2014, the Liberty Plans expired pursuant to their terms. Options under these plans had a 10 year life and vested over 5 years. Remaining options under the Liberty Plans became fully vested with the approval by the board of directors of Liberty signing the Agreement of Merger with the Company in July 2017 (the “Liberty Merger”). In accordance with the terms of the Agreement of Merger between the Company and Liberty, the Liberty Plans were assumed by the Company, and the options were converted into and became an option to purchase an adjusted number of shares of the common stock of the Company at an adjusted exercise price per share. The number of shares was determined by multiplying the number of shares of Liberty common stock for which the option was exercisable by the number of shares of the Company’s common stock into which shares of Liberty common stock were convertible in the Liberty Merger, which was 0.2857 (the “Liberty Conversion Ratio”), rounded to the next lower whole share. The exercise price was determined by dividing the exercise price per share of Liberty common stock by the Liberty Conversion Ratio, rounded up to the nearest cent. At the effective time of the Liberty Merger there were 48,225 options outstanding at an exercise price of $1.18. These shares were converted to 13,771 options outstanding at an exercise price of $4.14. A summary of stock option transactions for the nine months ended September 30, 2020 is as follows: Employees Directors Average Average Shares Price Amount Shares Price Amount December 31, 2019 2,355 $ 4.14 $ 9,750 6,354 $ 4.14 $ 26,307 Exercised in 2020 — 4.14 — (1,028) 4.14 (4,256) September 30, 2020 2,355 $ 4.14 $ 9,750 5,326 $ 4.14 $ 22,051 Virginia Partners Bank Stock Option Plan In 2015, Partners adopted the 2015 Stock Option Plan (the “2015 Partners Plan”), which allowed both incentive stock options and nonqualified stock options to be granted. The exercise price of each stock option equaled the market price of Partners' common stock on the date of grant and a stock option’s maximum term was 10 years. Stock options granted in the years ended December 31, 2018 and 2017 vested over 3 years. Partners previous stock compensation plan (the “2008 Partners Plan”) provided for the grant of share based awards in the form of incentive stock options and nonqualified stock options to Partners’ directors, officers and employees. In April 2015 the 2008 Partners Plan was terminated and replaced with the 2015 Partners Plan. Stock options outstanding prior to April 2015 were granted under the 2008 Partners Plan and became subject to the provisions of the 2015 Partners Plan. The 2008 Partners Plan also provided for stock options to be granted to seed investors as a reward for the contribution to organizational funds which were at risk if Partners’ organization had not been successful. Under the 2008 Partners Plan, Partners granted stock options to seed investors in 2008, which were fully vested upon the date of the grant. As a result of the Company’s acquisition of Partners in November 2019 through an exchange of shares in an all-stock transaction, (the “Partners Share Exchange”), each stock option (the "Partners Options"), whether vested or unvested, issued and outstanding immediately prior to the effective time under the 2008 Partners Plan or the 2015 Partners Plan and together with the 2008 Partners Plan, (the "Partners Stock Plans"), immediately 100% vested, to the extent not already vested, and converted into and became stock options to purchase the Company’s common stock. In addition, the Company assumed each of the Partners Stock Plans, and assumed each Partners Option in accordance with the terms and conditions of the Partners Stock Plan pursuant to which it was issued. As such, Partners Options to acquire 149,200 shares of Partner’s common stock at a weighted average exercise price of $10.52 per share were converted into stock options to acquire 256,294 shares of the Company’s common stock at a weighted average exercise price of $6.13 per share. The number of shares was determined by multiplying the number of shares of Partners common stock for which the option was exercisable by the number of shares of the Company’s common stock into which shares of Partners common stock were convertible in the Partners Share Exchange, which was 1.7179 (the “Partners Conversion Ratio”), rounded to the next lower whole share. The exercise price was determined by dividing the exercise price per share of Partners common stock by the Partners Conversion Ratio, rounded up to the nearest cent. A summary of stock option transactions for the nine months ended September 30, 2020 is as follows: September 30, 2020 Weighted Weighted Average Average Remaining Exercise Contractual Intrinsic Shares Price Life Value Outstanding at beginning of period 247,705 $ Granted — — — Exercised (16,147) — Forfeited (8,589) — Outstanding at end of period 222,969 $ $ 121,207 Options exercisable at September 30, 2020 222,969 $ Weighted average fair value of options granted during the period $ — The intrinsic value represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock options exceeds the exercise price) that would have been received by the holders had they exercised their stock options on September 30, 2020. As stated in Note 1, the Company follows ASC 718‑10 which requires that stock‑based compensation to employees and directors be recognized as compensation cost in the income statement based on their fair values on the measurement date, which, for the Company, is the date of the grant. All stock option expenses had been fully recognized prior to 2019. |
Restricted Stock Plan
Restricted Stock Plan | 9 Months Ended |
Sep. 30, 2020 | |
Restricted Stock Plan | |
Restricted Stock Plan | Note 7. Restricted Stock Plan The Company had an employee and director restricted stock plan (the “Company Plan”) and reserved 405,805 shares of stock for issuance thereunder. The Company adopted the Company Plan, pursuant to which employee and directors of the Company could acquire shares of common stock. The Company Plan was adopted by the Company’s Board of Directors in April 2014, and was subject to the right of the Board of Directors to terminate the Company Plan at any time. The Company Plan terminated at its scheduled date on June 30, 2018. The termination of the Company Plan, either at the scheduled termination date or before such date, did not affect any award issued prior to termination. As of September 30, 2020 non‑vested restricted stock awards totaling 3,000 were outstanding as follows: Employees Weighted Average Shares Fair Value Nonvested Awards December 31, 2019 6,000 $ 7.30 Vested in 2020 (3,000) 7.30 Nonvested Awards September 30, 2020 3,000 $ 7.30 As stated in Note 1, the Company follows ASC 718‑10 which requires that restricted stock‑based compensation to employees and directors be recognized as compensation cost in the income statement based on their fair values on the measurement date. The fair value of restricted stock granted is equal to the underlying fair value of the stock. As a result of applying the provisions of ASC 718‑10, during the three and nine months ended September 30, 2019 t he Company recognized restricted stock‑based compensation expense of $6 thousand , or $4 thousand net of tax, and $17 thousand, or $ 12 thousand net of tax, respectively, related to the 2014 restricted stock awards under the Company Plan. Unrecognized restricted stock‑based compensation expense related to 2014 restricted stock awards under the Company Plan totaled approximately $ 31,000 at September 30, 2020. The remaining period over which this unrecognized expense is expected to be recognized is approximately five months. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share | |
Earnings Per Share | Note 8. Earnings Per Share Basic earnings per share (EPS) is computed by dividing net income or loss by the weighted average number of shares outstanding during the period. Diluted EPS is computed using the weighted average number of shares outstanding during the period, including the effect of all potentially dilutive shares outstanding attributable to stock instruments. Applicable guidance requires that outstanding, unvested share-based payment awards that contain voting rights and rights to nonforfeitable dividends participate in undistributed earnings with common shareholders. Accordingly, the weighted average number of shares of the Company’s common stock used in the calculation of basic and diluted net income per common share includes unvested shares of the Company’s outstanding restricted common stock. The following table presents basic and diluted EPS for the three and nine month periods ended September 30, 2020 and 2019: Net Income Applicable (Dollars in thousands, except per share data) to Basic Earnings Weighted Average For the three months ended September 30, 2020 Per Common Share Shares Outstanding Basic EPS $ 1,118 17,810,090 $ 0.063 Effect of dilutive stock awards — 8,102 — Diluted EPS $ 1,118 17,818,192 $ 0.063 For the nine months ended September 30, 2020 Basic EPS $ 4,564 17,808,212 $ 0.256 Effect of dilutive stock awards — 30,159 — Diluted EPS $ 4,564 17,838,371 $ 0.256 For the three months ended September 30, 2019 Basic EPS $ 1,785 9,985,321 $ 0.179 Effect of dilutive stock awards — 14,358 (0.001) Diluted EPS $ 1,785 9,999,679 $ 0.178 For the nine months ended September 30, 2019 Basic EPS $ 4,935 9,985,321 $ 0.494 Effect of dilutive stock awards — 14,290 — Diluted EPS $ 4,935 9,999,611 $ 0.494 |
Regulatory Capital Requirements
Regulatory Capital Requirements | 9 Months Ended |
Sep. 30, 2020 | |
Regulatory Capital Requirements | |
Regulatory Capital Requirements | Note 9. Regulatory Capital Requirements The Company’s subsidiaries are subject to various regulatory capital requirements administered by Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company’s subsidiaries must meet specific capital adequacy guidelines that involve quantitative measures of the Company’s subsidiaries assets, liabilities, and certain off‑balance‑sheet items as calculated under regulatory accounting practices. The Company’s subsidiaries’ capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weighting, and other factors. Federal banking regulations also impose regulatory capital requirements on bank holding companies. Under the small bank holding company policy statement of the Federal Reserve Board, which applies to certain bank holding companies with consolidated total assets of less than $3 billion, the Company is not subject to regulatory capital requirements. On September 17, 2019 the Federal Deposit Insurance Corporation finalized a rule that introduces an optional simplified measure of capital adequacy for qualifying community banking organizations (i.e., the community bank leverage ratio (CBLR) framework), as required by the Economic Growth, Regulatory Relief and Consumer Protection Act. The CBLR framework is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. In order to qualify for the CBLR framework, a community banking organization must have a tier 1 leverage ratio of at least 9 percent, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the CBLR framework and meets all requirements under the framework will be considered to have met the well-capitalized ratio requirements under the Prompt Corrective Action regulations and will not be required to report or calculate risk-based capital. The Company has elected not to opt into the CBLR framework at this time. Quantitative measures established by regulation to ensure capital adequacy require the Company’s subsidiaries to maintain minimum amounts and ratios (as defined in the regulations) of total and Tier 1 capital to risk‑weighted assets, Tier 1 capital to average assets, and common equity Tier 1 capital to risk‑weighted assets. Management believes as of September 30, 2020 that the Company’s subsidiaries met all capital adequacy requirements to which they are subject. As of September 30, 2020, the most recent notification from the Federal Deposit Insurance Corporation (“FDIC”) categorized the Company’s subsidiaries as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Company’s subsidiaries must maintain minimum total risk‑based, Tier 1 risk‑based, Tier 1 leverage and common equity Tier 1 risk‑based ratios. There are no conditions or events since that notification that management believes have changed the Company’s subsidiaries category. The Common Equity Tier 1, Tier 1 and Total capital ratios are calculated by dividing the respective capital amounts by risk‑weighted assets. Risk‑weighted assets are calculated based on regulatory requirements and include total assets, with certain exclusions, allocated by risk weight category, and certain off‑balance‑sheet items, among other things. The Tier 1 leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, which exclude goodwill and other intangible assets, among other things. The Basel III Capital Rules require the Company’s subsidiaries to maintain (i) a minimum ratio of Common Equity Tier 1 capital to risk‑weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% Common Equity Tier 1 capital ratio, effectively resulting in a minimum ratio of Common Equity Tier 1 capital to risk‑weighted assets of at least 7.0%), (ii) a minimum ratio of Tier 1 capital to risk‑weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio, effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a minimum ratio of Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk‑weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% Total capital ratio, effectively resulting in a minimum Total capital ratio of 10.5%) and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average quarterly assets. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and was phased in over a four-year period (increasing by that amount on each subsequent January 1, until it reached 2.5% on January 1, 2019). The Basel III Capital Rules also provide for a “countercyclical capital buffer” that is applicable to only certain covered institutions and does not have any current applicability to the Subsidiaries or the Company. The capital conservation buffer is designed to absorb losses during periods of economic stress and, as detailed above, effectively increases the minimum required risk‑weighted capital ratios. Banking institutions with a ratio of Common Equity Tier 1 capital to risk‑weighted assets below the effective minimum (4.5% plus the capital conservation buffer and, if applicable, the countercyclical capital buffer) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. The following table presents actual and required capital ratios as of September 30, 2020 and December 31, 2019 for the Company’s subsidiaries under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of September 30, 2020 and December 31, 2019 based on the fully phased‑in provisions of the Basel III Capital Rules. Capital levels required to be considered well capitalized are based on prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules. A comparison of the Company’s subsidiaries’ capital amounts and ratios as of September 30, 2020 and December 31, 2019 with the minimum requirements are presented below. To Be Well Capitalized For Capital Under Prompt Adequacy Corrective Action In Thousands Actual Purposes Provisions Amount Ratio Amount Ratio Amount Ratio As of September 30, 2020 Total Capital Ratio (To Risk Weighted Assets) The Bank of Delmarva 81,828 12.8 % 67,195 10.5 % 63,995 10.0 % Virginia Partners Bank 51,045 13.0 % 41,085 10.5 % 39,129 10.0 % Tier I Capital Ratio (To Risk Weighted Assets) The Bank of Delmarva 73,802 11.5 % 54,396 8.5 % 51,196 8.0 % Virginia Partners Bank 49,599 12.7 % 33,259 8.5 % 31,303 8.0 % Common Equity Tier I Ratio (To Risk Weighted Assets) The Bank of Delmarva 73,802 11.5 % 44,796 7.0 % 41,597 6.5 % Virginia Partners Bank 49,599 12.7 % 27,390 7.0 % 25,434 6.5 % Tier I Leverage Ratio (To Average Assets) The Bank of Delmarva 73,802 8.0 % 37,081 4.0 % 46,352 5.0 % Virginia Partners Bank 49,599 9.5 % 20,797 4.0 % 25,997 5.0 % As of December 31, 2019 Total Capital Ratio (To Risk Weighted Assets) The Bank of Delmarva 79,080 12.7 % 65,132 10.5 % 62,030 10.0 % Virginia Partners Bank 47,122 12.5 % 39,676 10.5 % 37,787 10.0 % Tier I Capital Ratio (To Risk Weighted Assets) The Bank of Delmarva 71,752 11.6 % 52,726 8.5 % 49,624 8.0 % Virginia Partners Bank 46,881 12.4 % 32,119 8.5 % 30,230 8.0 % Common Equity Tier I Ratio (To Risk Weighted Assets) The Bank of Delmarva 71,752 11.6 % 43,421 7.0 % 40,320 6.5 % Virginia Partners Bank 46,881 12.4 % 26,451 7.0 % 24,562 6.5 % Tier I Leverage Ratio (To Average Assets) The Bank of Delmarva 71,752 9.1 % 31,520 4.0 % 39,399 5.0 % Virginia Partners Bank 46,881 10.4 % 18,093 4.0 % 22,616 5.0 % Banking regulations also limit the amount of dividends that may be paid without prior approval of the Company’s regulatory agencies. Regulatory approval is required to pay dividends, which exceed the Company’s net profits for the current year plus its retained net profits for the preceding two years. |
Fair Values of Financial Instru
Fair Values of Financial Instruments | 9 Months Ended |
Sep. 30, 2020 | |
Fair Values of Financial Instruments | |
Fair Values of Financial Instruments | Note 10. Fair Values of Financial Instruments FASB ASC 825, Financial Instruments, requires disclosure about fair value of financial instruments, including those financial assets and financial liabilities that are not required to be measured and reported at fair value on a recurring or nonrecurring basis. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. Additionally, in accordance with ASU 2016-01, the Company uses the exit price notion, rather than the entry price notion, in calculating the fair values of financial instruments not measured at fair value on a recurring basis. The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows: Dollars are in thousands Fair Value Measurements at September 30, 2020 Quoted Prices in Significant Significant Carrying Active Markets for Other Unobservable Amount Identical Assets Observable Inputs Inputs September 30, 2020 (Level 1) (Level 2) (Level 3) Balance Financial assets: Cash and due from banks $ 220,612 $ 220,612 $ — $ — $ 220,612 Interest bearing deposits 34,334 34,334 — — 34,334 Federal funds sold 34,345 34,345 — — 34,345 Securities: Available for sale 128,011 — 128,011 — 128,011 Loans held for sale 7,765 — 7,765 — 7,765 Loans, net of allowance for credit losses 1,043,143 — — 1,041,511 1,041,511 Accrued interest receivable 6,254 — 6,254 — 6,254 Restricted stock 4,421 — 4,421 — 4,421 Other investments 6,734 — 6,734 — 6,734 Bank owned life insurance 14,747 — 14,747 — 14,747 Other real estate owned 2,796 — — 2,796 2,796 Financial liabilities: Deposits $ 1,234,926 $ — $ 1,243,447 $ — $ 1,243,447 Accrued interest payable 448 — 448 — 448 FHLB advances 74,336 — 76,025 — 76,025 Subordinated notes payable 24,089 — 36,461 — 36,461 Other borrowings 65,475 — — 65,475 65,475 Dollars are in thousands Fair Value Measurements at December 31, 2019 Quoted Prices in Significant Significant Carrying Active Markets for Other Unobservable Amount Identical Assets Observable Inputs Inputs December 31, 2019 (Level 1) (Level 2) (Level 3) Balance Financial assets: Cash and due from banks $ 36,295 $ 36,295 $ — $ — $ 36,295 Interest bearing deposits 27,586 27,586 — — 27,586 Federal funds sold 31,230 31,230 — — 31,230 Securities: Available for sale 104,321 — 104,321 — 104,321 Loans held for sale 3,555 — 3,555 — 3,555 Loans, net of allowance for credit losses 986,684 — — 976,636 976,636 Accrued interest receivable 3,138 — 3,138 — 3,138 Restricted stock 5,311 — 5,311 — 5,311 Other investments 4,773 — 4,773 — 4,773 Bank owned life insurance 7,817 — 7,817 — 7,817 Other real estate owned 2,417 — — 2,417 2,417 Financial liabilities: Deposits $ 1,006,781 $ — $ 1,008,842 $ — $ 1,008,842 Accrued interest payable 572 — 572 — 572 FHLB advances 96,830 — 97,248 — 97,248 Subordinated notes payable 6,435 — 9,006 — 9,006 Other borrowings 1,249 — — 1,249 1,249 The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of the Company’s financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to repay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Bank's overall interest rate risk. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Measurements | |
Fair Value Measurements | Note 11. Fair Value Measurements The Company follows ASC 820‑10 Fair Value Measurements and Disclosures (“ASC 820-10”) which provides a framework for measuring and disclosing fair value under generally accepted accounting principles. ASC Topic 820 requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available for sale investments securities) or on a nonrecurring basis (for example, impaired loans). ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value. Fair Value Hierarchy In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1 - Valuation is based on quoted prices in active markets for identical assets and liabilities. Level 2 - Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market. Level 3 - Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market. The following describes the valuation techniques used by the Company to measure certain financial assets recorded at fair value on a recurring basis in the financial statements: Investment Securities Available for Sale: Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Currently, all of the Company’s investment securities available for sale are considered to be Level 2 securities. The following tables present the balances of financial assets measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019: Fair Dollars are in thousands Level 1 Level 2 Level 3 Value September 30, 2020 Securities available for sale: Obligations of U.S. Government agencies and corporations $ — $ 5,918 $ — $ 5,918 Obligations of States and political subdivisions — 38,487 — 38,487 Mortgage-backed securities — 80,046 — 80,046 Subordinated debt investments — 3,560 — 3,560 Total securities available for sale $ — $ 128,011 $ — $ 128,011 December 31, 2019 Securities available for sale: Obligations of U.S. Government agencies and corporations $ — $ 10,312 $ — $ 10,312 Obligations of States and political subdivisions — 34,558 — 34,558 Mortgage-backed securities — 56,421 — 56,421 Subordinated debt investments — 3,030 — 3,030 Total securities available for sale $ — $ 104,321 $ — $ 104,321 Certain financial assets are measured at fair value on a nonrecurring basis in accordance with U.S. GAAP. Adjustments to the fair value of these financial assets usually result from the application of lower of cost or market accounting or write-downs of individual assets. The following describes the valuation techniques used by the Company to measure certain financial assets recorded at fair value on a nonrecurring basis in the financial statements: Loans Held for Sale: Loans held for sale are loans originated by JMC for sale in the secondary market. Loans originated for sale by JMC are recorded at lower of cost or market. No market adjustments were required at September 30, 2020; therefore, loans held for sale were carried at cost. Because of the short-term nature, the book value of these loans approximates fair value at September 30, 2020. Impaired Loans: Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected when due. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Fair value is measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’s financial statements if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans allocated to the allowance for loan losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as a provision for loan losses on the consolidated statement of income. Other Real Estate Owned: Other real estate owned (“OREO”) is measured at fair value less cost to sell, based on an appraisal conducted by an independent, licensed appraiser outside of the Company. If the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. OREO is measured at fair value on a nonrecurring basis. Any initial fair value adjustment is charged against the allowance for loan losses. Subsequent fair value adjustments are recorded in the period incurred and included in other noninterest expense on the consolidated statement of income. The following table presents the balances of financial assets measured at fair value on a non-recurring basis as of September 30, 2020 and December 31, 2019. Fair Dollars are in thousands Level 1 Level 2 Level 3 Value September 30, 2020 Impaired loans $ — $ — $ 3,012 $ 3,012 OREO — — 2,796 2,796 Total $ — $ — $ 5,808 $ 5,808 December 31, 2019 Impaired loans $ — $ — $ 3,885 $ 3,885 OREO — — 2,417 2,417 Total $ — $ — $ 6,302 $ 6,302 The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis and for which Partners has utilized Level 3 inputs to determine fair value as of September 30, 2020: Dollars are in thousands Valuation Unobservable Range of Fair Value Technique Inputs Inputs Impaired loans $ 3,012 Appraisals Discount to reflect current market conditions and estimated selling costs 8% OREO 2,796 Appraisals Discount to reflect current market conditions and estimated selling costs 8% Total $ 5,808 The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis and for which Partners has utilitzed Level 3 inputs to determine fair value as of December 31, 2019: Dollars are in thousands Valuation Unobservable Range of Fair Value Technique Inputs Inputs Impaired loans $ 3,885 Appraisals Discount to reflect current market conditions and estimated selling costs 8% OREO 2,417 Appraisals Discount to reflect current market conditions and estimated selling costs 8% Total $ 6,302 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | Note 12. Goodwill and Intangible Assets The Company accounts for goodwill and other intangible assets in accordance with ASC 805. The Company records the excess of cost acquired entities over the fair value of identifiable tangible and intangible assets acquired, less liabilities assumed, as goodwill. The Company amortizes acquired intangible assets with definite useful economic lives over their useful economic lives. On a periodic basis, management assesses whether events or changes in circumstances indicate that the carrying amount of the intangible assets may be impaired. The Company does not amortize goodwill or any acquired intangible assets with an indefinite useful economic life, but reviews them for impairment on an annual basis, or when events or changes in circumstances indicate that the carrying amounts may be impaired. The Company has performed the required goodwill impairment test and has determined that goodwill was not impaired as of December 31, 2019. The Company is currently in the process of evaluating goodwill impairment for the current year ended December 31, 2020. Goodwill: The Company acquired goodwill in the purchase of Partners (see Note 13 – Virginia Partners Bank Transaction for further information). The following table provides changes in goodwill for the nine months ended September 30, 2020 and the year ended December 31, 2019: September 30, December 31, Dollars in Thousands 2020 2019 Balance at the beginning of the period $ 9,391 $ 5,237 Partners acquisition — 4,154 Impairment — — Balance at the end of the period $ 9,391 $ 9,391 Core Deposit Intangible: The Company acquired core deposit intangibles in the Liberty merger and the Partners Share Exchange. For the core deposit intangible related to Liberty, the Company utilizes the double declining balance method of amortization, in which the straight line amortization rate is doubled and applied to the remaining unamortized portion of the intangible asset. The amortization method changes to the straight line method of amortization when the straight line amortization amount exceeds the amount that would be calculated under the double declining balance method. This core deposit intangible is being amortized over seven years. For the core deposit intangible related to Partners, the Company utilizes the sum of months method and an estimated average life of 120 months. The following table provides changes for the nine months ended September 30, 2020, and the year ended December 31, 2019: September 30, December 31, Dollars in Thousands 2020 2019 Balance at the beginning of the period $ 3,373 $ 1,069 Partners acquisition — 2,650 Amortization (540) (346) Balance at the end of the period $ 2,833 $ 3,373 The following table provides the amortization expense for the core deposit intangible over the years indicated below: September 30, Dollars in Thousands 2020 2020 $ 173 2021 600 2022 520 2023 467 2024 and thereafter 1,073 $ 2,833 Net Deposits Purchased Premium and Discount: The Company paid a deposit premium in the Liberty Merger and received a deposit discount in the Partners Share Exchange, which are included in the balances of time deposits on the balance sheets. The premium amount is amortized as a reduction in interest expense over the life of the acquired time deposits and the discount is accreted as an increase in interest expense over the life of the acquired time deposits. The premium and discount on deposits will both be amortized and accreted over approximately five years. The following table provides changes in the net deposit discount for the nine months ended September 30, 2020 and the year ended December 31, 2019: September 30, December 31, Dollars in Thousands 2020 2019 Balance at the beginning of the period $ (31) $ 27 Partners acquisition — (38) Amortization, net 3 (20) Balance at the end of the period $ (28) $ (31) The following table provides the accretion for the net deposit discount over the years indicated below: September 30, Dollars in Thousands 2020 2020 $ 5 2021 14 2022 6 2023 2 2024 and thereafter 1 $ 28 The net effect of the amortization of premiums and accretion of discounts associated with the Bank’s acquisition accounting adjustments to assets acquired and liabilities assumed had the following impact on the consolidated statement of income for the periods indicated below: September 30, September 30, 2020 2019 Nine Months Ended Dollars in Thousands Adjustments to net income Loans (1) $ 1,391 $ 335 Time deposits (2) (3) 19 Core deposit intangible (3) (540) (227) Note Payable (4) (5) — Net impact to income before taxes $ 843 $ 127 September 30, September 30, 2020 2019 Three Months Ended Dollars in Thousands Adjustments to net income Loans (1) $ 307 $ 104 Time deposits (2) (2) 6 Core deposit intangible (3) (177) (76) Note Payable (4) (1) — Net impact to income before taxes $ 127 $ 34 (1) Loan discount accretion is included in the "Loans, including fees" section of "Interest Income" in the Consolidated Statement of Income. (2) Time deposit discount accretion is included in the "Deposits" section of "Interest Expense" in the Consolidated Statement of Income. (3) Core deposit intangible premium amortization is included in the "Other Expense" section of "Non-interest Expense" in the Consolidated Statement of Income. (4) Note payable discount accretion is included in the "Borrowings" section of "Interest Expense" in the Consolidated Statement of Income. |
Virginia Partners Transaction
Virginia Partners Transaction | 9 Months Ended |
Sep. 30, 2020 | |
Virginia Partners Bank | |
Business combination | |
Business Combination | Note 13. Virginia Partners Bank Transaction On November 15, 2019, the Company completed its share exchange with Partners, a Virginia chartered commercial bank. Partners stockholders received 1.7179 shares of the Company’s common stock for each share of Partners common stock they owned as of the effective date of the share exchange. The aggregate consideration paid to Partners stockholders was $52.3 million. Additionally, $350 thousand was included as consideration for replacement stock option awards per the share exchange agreement and $2 thousand in cash in lieu of fractional shares. The results of Partners' operations are included in the Company’s consolidated statements of income for the nine months ended September 30, 2020 and for the period beginning after November 15, 2019, the date of the effectiveness of the share exchange. The acquisition resulted in three new branches, an operations center and administrative headquarters in Fredericksburg, Virginia, along with an additional branch office in La Plata, Maryland and a loan production office in Annapolis, Maryland. The acquisition of Partners was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration paid were recorded at their estimated fair values as of the acquisition date. The excess consideration paid over the fair value of net assets acquired has been reported as goodwill in the Company’s consolidated balance sheet as of September 30, 2020 and December 31, 2019. The assets acquired and liabilities assumed in the acquisition of Partners were recorded at their estimated fair values based on management's best estimates using information available at the date of the acquisition and are subject to adjustment for up to one year after the closing date of the acquisition. The items most susceptible to adjustment are the credit fair value adjustments on loans, core deposit intangible and the deferred income tax assets resulting from the acquisition. In connection with the acquisition, the consideration paid and the fair value of identifiable assets acquired and liabilities assumed as of the date of acquisition are summarized in the following table: Estimated Fair Value as of Dollars in Thousands November 15, 2019 Consideration paid: Cash $ 2 Common stock issued in acquisition 52,282 Stock options issued in acquisition (replacement awards) 350 Total consideration paid $ 52,634 Assets acquired: Cash and cash equivalents 6,743 Investment securities 65,373 Investments in correspondent bank stock 3,670 Loans 357,127 Premises and equipment 3,627 Accrued interest receivable 1,155 Core deposit intangible 2,650 Deferred tax asset 1,239 Other assets 12,584 Total assets acquired $ 454,168 Liabilities assumed: Deposits $ 348,552 Other liabilities 56,408 Total liabilities assumed $ 404,960 Net assets acquired $ 49,208 Noncontrolling interest in consolidated subsidiaries $ 728 Goodwill recorded in acquisition $ 4,154 Acquired loans (impaired and nonimpaired) are initially recorded at their acquisition date fair values using Level 3 inputs. Fair values are based on a discounted cash flow methodology that involves assumptions and judgments as to credit risk, expected life time losses, environmental factors, collateral values, discount rates, expected payments and expected prepayments. Specifically, the Company has prepared three separate loan fair value adjustments that it believes a market participant might employ in estimating the entire fair value adjustment necessary under ASC 820-10 for the acquired loan portfolio. The three separate fair valuation methodologies employed are: (i) an interest rate loan fair value adjustment, (ii) a general credit fair value adjustment, and (iii) a specific credit fair value adjustment for PCI loans subject to ASC 310-30 provisions. The acquired loans were recorded at fair value at the acquisition date without carryover of Partners’ previously established allowance for loan losses. The fair value of the financial assets acquired included loans receivable with a principal balance, prior to fair value adjustments, of $362.9 million. The table below illustrates the fair value adjustments made to the amortized cost basis to present a fair value of the loans acquired: Dollars in Thousands At November 15, 2019 Gross principal balance $ 362,916 Fair value adjustment on pools of non-credit impaired loans (4,990) Fair value adjustment on PCI loans (799) Fair value of acquired loans $ 357,127 The credit adjustment on acquired impaired loans is derived in accordance with ASC 310-30 and 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: Dollars in Thousands At November 15, 2019 Contractually required principal and interest at acquisition $ 6,713 Contractual cashflows not expected to be collected (non-accretable discount) (1,371) Expected cash flows at acquisition 5,342 Interest component of expected cash flows (673) Fair value for loans acquired under ASC 310-30 $ 4,669 The fair value of savings and transaction deposit accounts acquired from Partners provide value to the Company as a source of below market rate funds. The fair value of the core deposit intangible was determined based on a discounted cash flow analysis using a discount rate based on the estimated cost of capital for a market participant. To calculate cash flows, the sum of deposit account servicing costs (net of deposit fee income) and interest expense on deposits were compared to the cost of alternative funding sources available to the Company. The expected cash flows of the deposit base included estimated attrition rates. The core deposit intangible was valued at $2.7 million or 1.01% of total deposits. The core deposit intangible asset is being amortized on the sum of months method over 10 years. Direct costs related to the merger were accrued and expensed as incurred. During the nine months ended September 30, 2020 he Company incurred $8 thousand in Partners merger-related expenses. During the three months ended September 30, 2020 he Company incurred no Partners merger-related expenses. |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2020 | |
Revenue Recognition | |
Revenue Recognition | Note 14. Revenue Recognition The Company follows ASU No. 2014-09 Revenue from Contracts with Customers (“Topic 606”) and all subsequent ASUs that modified Topic 606. Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. Topic 606 is applicable to noninterest revenue streams such as deposit related fees, interchange fees and merchant income. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Substantially all of the Company’s revenue is generated from contracts with customers. Noninterest revenue streams in-scope of Topic 606 are discussed below. Service Charges on Deposit Accounts Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or at the end of the month through a direct charge to customers’ accounts. Mortgage Banking Income Mortgage banking income, which is included is noninterest income, consists of fees for loans originated by the Company through an application process that are sent to a mortgage broker. The loan application and underwriting processes are completed by other various financial institutions. The Company receives a pre-negotiated fee at settlement for initiating the loan origination. The Company receives the fee and recognizes the income when the loan goes to settlement. Other Noninterest Income Other noninterest income consists of: fees, exchange, other service charges, safety deposit box rental fees, and other miscellaneous revenue streams. Fees and other service charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Visa. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2020 | |
Recent Accounting Pronouncements | |
Recent Accounting Pronouncements | Note 15. Recent Accounting Pronouncements Information about certain recently issued accounting standards updates is presented below. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).” The amendments in ASU 2016-13, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The FASB has issued multiple updates to ASU 2016-13 as codified in Topic 326, including ASU’s 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03. These ASU’s have provided for various minor technical corrections and improvements to the codification as well as other transition matters. Smaller reporting companies who file with the U.S. Securities and Exchange Commission (the “SEC”) and all other entities who do not file with the SEC are required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022. The Company is currently evaluating the potential impact of ASU 2016‑13 on our consolidated financial statements. We are currently working through our implementation plan which includes assessment and documentation of processes, internal controls and data sources; model development and documentation; and systems configuration, among other things. We are also in the process of implementing a third‑party vendor solution to assist us in the application of ASU 2016‑13. The adoption of ASU 2016‑13 could result in an increase in the allowance for credit losses as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016‑13 will necessitate that we establish an allowance for expected credit losses for certain debt securities and other financial assets. While we are currently unable to reasonably estimate the impact of adopting ASU 2016‑13, we expect that the impact of adoption will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date. Effective November 25, 2019, the SEC adopted Staff Accounting Bulletin (“SAB”) No. 119 (“SAB 119”). SAB 119 updated portions of SEC interpretative guidance to align with ASC 326, “Financial Instruments – Credit Losses .” It covers topics including (1) measuring current expected credit losses; (2) development, governance, and documentation of a systematic methodology; (3) documenting the results of a systematic methodology; and (4) validating a systematic methodology. In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes (“ASU 2019-12”).” ASU 2019-12 is expected to reduce cost and complexity related to the accounting for income taxes by removing specific exceptions to general principles in Topic 740 (eliminating the need for an organization to analyze whether certain exceptions apply in a given period) and improving financial statement preparers’ application of certain income tax-related guidance. ASU 2019-12 is part of the FASB’s simplification initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact that ASU 2019-12 will have on its consolidated financial statements. In January 2020, the FASB issued ASU 2020-01, “Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU 2020-01”).” ASU 2020-01 is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2020-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, the amendments in ASU 2020-01 are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted . Management does not expect the adoption of ASU 2020-01 to have a material impact on its consolidated financial statements . In March 2020, the FASB issued ASU No. 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).” ASU 2020-04 provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is assessing ASU 2020-04 and its impact on the Company’s transition away from LIBOR for its loan and other financial instruments, and is currently evaluating the effect that ASU 2020-04 will have on the Company’s consolidated financial statements. On March 12, 2020, the SEC finalized amendments to the definitions of its “accelerated filer” and “large accelerated filer” definitions. The amendments increase the threshold criteria for meeting these filer classifications and are effective on April 27, 2020. Any changes in filer status are to be applied beginning with the filer’s first annual report filed with the SEC subsequent to the effective date. Prior to these changes, the Company had not been required to comply with section 404(b) of the Sarbanes Oxley Act of 2002 concerning auditor attestation over internal control over financial reporting (“ICFR”) as an “accelerated filer” as it had less than $75 million in public float. The rule change expands the definition of “smaller reporting companies” to include entities with public float of less than $700 million and less than $100 million in annual revenues. The Company will continue to be a smaller reporting company under the expanded definition. The classifications of “accelerated filer” and “large accelerated filer” require a public company to obtain an auditor attestation concerning the effectiveness of ICFR and include the opinion on ICFR in its annual report on Form 10-K. Smaller reporting companies also have additional time to file quarterly and annual financial statements. All public companies are required to obtain and file annual financial statement audits, as well as provide management’s assertion on effectiveness of internal control over financial reporting, but the external auditor attestation of internal control over financial reporting is not required for smaller reporting companies. This change does not affect the Company’s annual reporting and audit requirements . In August 2020, the FASB issued ASU No. 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.(ASU 2020-06)” The ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas. In addition, the amendment updates the disclosure requirements for convertible instruments to increase the information transparency. For public business entities, excluding smaller reporting companies, the amendments in the ASU are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, the standard will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. Management does not expect the adoption of ASU 2020-06 to have a material impact on its consolidated financial statements. In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable fees and Other Costs (ASU 2020-08).” This ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is not permitted. All entities should apply ASU No. 2020-08 on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. Management does not expect the adoption of ASU 2020-08 to have a material impact on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. ASU 2017-04 eliminates the prior requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. ASU 2017-04 was effective for the Company on January 1, 2020. The guidance did not have a significant impact on the Company’s financial position, results of operations, or disclosures. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements by requiring that Level 3 fair value disclosures include the range and weighted average of significant unobservable inputs used to develop those fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. Certain disclosure requirements in Topic 820 were also removed or modified. ASU 2018-13 was effective for the Company on January 1, 2020. The adoption of ASU 2018‑13 did not have a material impact on the Company’s consolidated financial statements. In March 2020, (revised in April 2020) various regulatory agencies, including the Board of Governors of the Federal Reserve System and the FDIC, (“the Agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by a novel strain of coronavirus disease (“COVID-19”). The interagency statement was effective immediately and impacted accounting for loan modifications. Under ASC 310-40, “Receivables – Troubled Debt Restructurings by Creditors ,” (“ASC 310-40”), a restructuring of debt constitutes a TDR if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. The Agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. The Company has granted loan payment deferrals to certain borrowers, who were current on their payments prior to the COVID-19 pandemic, on a short-term basis of three to six months. As of September 30, 2020, on a consolidated basis, the Company had approved loan payment deferrals or payments of interest only for 116 loans totaling $93.8 million. Management expects this interagency guidance to have an impact on the Company’s financial statements; however, the full impact cannot be quantified at this time. |
Nature of Business and Its Si_2
Nature of Business and Its Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Nature of Business and Its Significant Accounting Policies | |
Principles of Consolidation | Principles of Consolidation: The consolidated financial statements include the accounts of the Company; the Subsidiaries, along with their consolidated subsidiaries: Delmarva Real Estate Holdings, LLC., a wholly owned subsidiary of Delmarva, which is a real estate holding company; Davie Circle, LLC, a wholly owned subsidiary of Delmarva, which is a real estate holding company; Delmarva BK Holdings, LLC, a wholly owned subsidiary of Delmarva, which is a real estate holding company; DHB Development, LLC, of which Delmarva holds a 40.55% interest, and is a real estate holding company; West Nithsdale Enterprises, LLC, of which Delmarva holds a 10% interest, and is a real estate holding company; and FBW, LLC, of which Delmarva holds 50% interest, and is a real estate holding company; Bear Holdings, Inc., a wholly owned subsidiary of Partners, and is a real estate holding company; Johnson Mortgage Company, LLC, of which Partners owns 51% interest, and is a residential mortgage company; and 410 William Street, LLC, a wholly owned subsidiary of Partners, and which holds investment property. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Financial Statement Presentation | Financial Statement Presentation: The unaudited interim consolidated financial statements do not include all information and notes necessary for a complete presentation of financial position, results of operations, changes in stockholder's equity, and cash flows in conformity with U.S. GAAP. In the opinion of management, the unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the consolidated financial position at September 30, 2020 and December 31, 2019, the results of its operations and its cash flows for the nine months ended September 30, 2020 and 2019 in conformity with U.S. GAAP. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, or for any other period. |
Use of Estimates | Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Securities Available for Sale | Securities Available for Sale: Marketable debt securities not classified as held to maturity are classified as available for sale. Securities available for sale are acquired as part of the Subsidiaries' asset/liability management strategy and may be sold in response to changes in interest rates, loan demand, changes in prepayment risk, and other factors. Securities available for sale are carried at fair value as determined by quoted market prices. Unrealized gains or losses based on the difference between amortized cost and fair value are reported in other comprehensive income, net of deferred tax. Realized gains and losses, using the specific identification method, are included as a separate component of other income (expense) and, when applicable, are reported as a reclassification adjustment, net of tax, in other comprehensive income. Premiums and discounts are recognized in interest income using the interest method over the period to maturity. Additionally, declines in the fair value of individual investment securities below their cost that are other than temporary are reflected as realized losses in the consolidated statements of income. Impairment may result from credit deterioration of the issuer or collateral underlying the security. In performing an assessment of recoverability, all relevant information is considered, including the length of time and extent to which fair value has been less than the amortized cost basis, the cause of the price decline, credit performance of the issuer and underlying collateral, and recoveries or further declines in fair value subsequent to the balance sheet date. For debt securities, the Company measures and recognizes other-than-temporary impairment (“OTTI”) losses through earnings if (1) the Company has the intent to sell the security or (2) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. In these circumstances, the impairment loss is equal to the full difference between the amortized cost basis and the fair value of the security. For securities that are considered OTTI that the Company has the intent and ability to hold in an unrealized loss position, the OTTI write-down is separated into an amount representing the credit loss, which is recognized in earnings, and the amount related to other factors, which is recognized as a component of other comprehensive income (“OCI”). |
Restricted Stock, Equity Securities and Other Investment | Restricted Stock, Equity Securities and Other Investments: Federal Home Loan Bank (“FHLB”) stock, at cost, and Atlantic Central Bankers Bank (“ACBB”), at cost, Community Bankers Bank (“CBB”) and Maryland Financial Bank (“MFB”) are equity interests in the FHLB, ACBB, CBB and MFB, respectively. These securities do not have a readily determinable fair value for purposes of Accounting Standards Codification (“ASC”) 320‑10 Investments‑Debts and Equity Securities because their ownership is restricted and they lack an active market. As there is no readily determinable fair value for these securities, they are carried at cost less any OTTI. Equity securities with readily determinable fair values are carried at fair value, with changes in fair value reported in net income. Any equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments. The entirety of any impairment on equity securities is recognized in earnings. Other investments includes an equity ownership of Solomon Hess SBA Loan Fund LLC which the value is adjusted for its prorata share of assets in the fund and investment in the stock of the Federal Reserve Bank (“FRB”). Other investments also includes equity securities the Company holds with Community Capital Management in their Community Reinvestment Act (“CRA”) Qualified Investment Fund. |
Bank Owned Life Insurance | Bank Owned Life Insurance The Company has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other changes or amounts due that are probable at settlement. |
Loans and the Allowance for Credit Losses | Loans and the Allowance for Credit Losses: Loans are generally carried at the amount of unpaid principal, adjusted for unearned loan fees, which are amortized over the term of the loan using the effective interest rate method. Interest on loans is accrued based on the principal amounts outstanding. It is the Subsidiaries' policy to discontinue the accrual of interest when a loan is specifically determined to be impaired or when principal or interest is delinquent for ninety days or more. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Interest income generally is not recognized on specific impaired loans unless the likelihood of further loss is remote. Cash collections on such loans are applied as reductions of the loan principal balance and no interest income is recognized on those loans until the principal balance has been collected. Interest income on other nonaccrual loans is recognized only to the extent of interest payments received. The carrying value of impaired loans is based on the present value of the loan's expected future cash flows or, alternatively, the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent. The allowance for credit losses is maintained at a level believed adequate by management to absorb probable losses inherent in the loan portfolio and is based on the size and current risk characteristics of the loan portfolio, an assessment of individual problem loans and actual loss experience, the value of the underlying collateral, and current economic events in specific industries and geographical areas, including unemployment levels, and other pertinent factors, including regulatory guidance and general economic conditions. Determination of the allowance for credit losses is inherently subjective, as it requires significant estimates, including the amounts and timing on historical loss experience, and consideration of current economic trends, all of which may be susceptible to significant change. Loan losses are charged off against the allowance for credit losses, while recoveries of amounts previously charged off are credited to the allowance for credit losses. A provision for credit losses is charged to operations based on management's periodic evaluation of the factors previously mentioned, as well as other pertinent factors. Evaluations are conducted at least monthly and more often if deemed necessary. The allowance for credit losses typically consists of an allocated component and an unallocated component. The allocated component of the allowance for credit losses reflects expected losses resulting from analyses developed through specific credit allocations for individual loans and historical loss experience for each loan category. The specific credit allocations are based on regular analyses of all loans that are considered impaired. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. The historical loan loss element is determined statistically using an informal loss migration analysis that examines loss experience and the related internal gradings of loans charged off. The loss migration analysis is performed quarterly and loss factors are updated regularly based on actual experience. The allocated component of the allowance for credit losses also includes consideration of concentrations and changes in portfolio mix and volume. Any unallocated portion of the allowance for credit losses reflects management's estimate of probable inherent but undetected losses within the loan portfolio due to uncertainties in economic conditions, delays in obtaining information, including unfavorable information about a borrower's financial condition, the difficulty in identifying triggering events that correlate perfectly to subsequent loss rates, and risk factors that have not yet manifested themselves in loss allocation factors. In addition, the unallocated portion of the allowance for credit losses includes a component that explicitly accounts for the inherent imprecision in loan loss migration models. The historical losses used in the migration analysis may not be representative of actual unrealized losses inherent in the loan portfolio. It is management's intent to continually refine the methodology for the allowance for credit losses in an attempt to directly allocate potential losses in the loan portfolio under ASC Topic 310 and minimize the unallocated portion of the allowance for credit losses. Loan Charge‑off Policies Loans are generally fully or partially charged down to the fair value of securing collateral when: · management deems the asset to be uncollectible; · repayment is deemed to be made beyond the reasonable time frames; · the asset has been classified as a loss by internal or external review; and · the borrower has filed bankruptcy and the loss becomes evident owing to a lack of assets. Acquired Loans Loans acquired in connection with business combinations are recorded at their acquisition‑date fair value with no carry over of related allowance for credit losses. Any allowance for credit loss on these pools reflect only losses incurred after the acquisition (meaning the present value of all cash flows expected at acquisition that ultimately are not expected to be received). Determining the fair value of the acquired loans involves estimating the principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. Management considers a number of factors in evaluating the acquisition‑date fair value including the remaining life of the acquired loans, delinquency status, estimated prepayments, payment options and other loan features, internal risk grade, estimated value of the underlying collateral and interest rate environment. Acquired loans that meet the criteria for nonaccrual of interest prior to the acquisition may be considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if we can reasonably estimate the timing and amount of the expected cash flows on such loans and if we expect to fully collect the new carrying value of the loans, including the impact of any accretable yield. Loans acquired with deteriorated credit quality are accounted for in accordance with ASC 310‑30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (ASC 310‑30) if, at acquisition, the loans have evidence of credit quality deterioration since origination and it is probable that all contractually required payments will not be collected. At acquisition, the Company considers several factors as an indicator that an acquired loan has evidence of deterioration in credit quality. These factors include; loans 90 days or more past due, loans with an internal risk grade of substandard or below, loans classified as non‑accrual by the acquired institution, and loans that have been previously modified in a troubled debt restructuring. Under the ASC 310‑30 model, the excess of cash flows expected to be collected at acquisition over recorded fair value is referred to as the accretable yield and is the interest component of expected cash flow. The accretable yield is recognized into income over the remaining life of the loan if the timing and/or amount of cash flows expected to be collected can be reasonably estimated (the accretion method). If the timing or amount of cash flows expected to be collected cannot be reasonably estimated, the cost recovery method of income recognition is used. The difference between the loan's total scheduled principal and interest payment over all cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the non‑accretable difference. The non‑accretable difference represents contractually required principal and interest payments which the Company does not expect to collect. Over the life of the loan, management continues to estimate cash flows expected to be collected. Decreases in expected cash flows are recognized as impairments through a charge to the provision for credit losses resulting in an increase in the allowance for credit losses. Subsequent improvements in cash flows result in first, reversal of existing valuation allowances recognized subsequent to acquisition, if any, and next, an increase in the amount of accretable yield to be subsequently recognized as interest income on a prospective basis over the loan's remaining life. Acquired loans that were not individually determined to be purchased with deteriorated credit quality are accounted for in accordance with ASC 310‑20, Nonrefundable Fees and Other Costs (ASC 310‑20), whereby the premium or discount derived from the fair market value adjustment, on a loan‑by‑loan or pooled basis, is recognized into interest income on a level yield basis over the remaining expected life of the loan or pool. Troubled Debt Restructurings A loan is accounted for and reported as a troubled debt restructuring (“TDR”) when, for economic or legal reasons, we grant a concession to a borrower experiencing financial difficulty that we would not otherwise consider. Management strives to identify borrowers in financial difficulty early and works with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. A restructuring that results in only an insignificant delay in payment is not considered a concession. A delay may be considered insignificant if the payments subject to the delay are insignificant relative to the unpaid principal or collateral value and the contractual amount due, or the delay in timing of the restructured payment period is insignificant relative to the frequency of the payments, the debt’s original contractual maturity or original expected duration. TDRs are designated as impaired loans because interest and principal payments will not be received in accordance with the original contract terms. TDRs that are performing and on accrual status as of the date of the modification remain on accrual status. TDRs that are nonperforming as of the date of modification generally remain as nonaccrual until the prospect of future payments in accordance with the modified loan agreement is reasonably assured, generally demonstrated when the borrower maintains compliance with the restructured terms for a predetermined period, normally at least six months. TDRs with temporary below-market concessions remain designated as a TDR and impaired regardless of the accrual or performance status until the loan is paid off. However, if the TDR loan has been modified in a subsequent restructure with market terms and the borrower is not currently experiencing financial difficulty, then the loan may be no longer designated as a TDR. |
Loans Held for Sale | Loans Held for Sale: These loans consist of loans made through Partners’ majority owned subsidiary Johnson Mortgage Company, LLC (“JMC”). JMC is engaged in the mortgage brokerage business in which JMC originates, closes, and immediately sells mortgage loans and related servicing rights to permanent investors in the secondary market. JMC has written commitments from several permanent investors (large financial institutions) and only closes loans that meet the lending requirements of the permanent investors. Loans are made in connection with the purchase or refinancing of existing and new one-to-four family residences primarily in southeastern and northern Virginia. Loans are initially funded primarily by JMC’s lines of credit. With the concurrent sale and delivery of mortgage loans to the permanent investors, JMC records receivables for mortgage loans sold and recognizes the related gains and losses on such sales. The receivables for mortgage loans sold are usually satisfied within 30 days of sale, whereupon the related borrowings on the lines of credit are repaid. Because of the short holding period, these loans are carried at the lower of cost or market and no market adjustments were deemed necessary in the first three quarters of 2020 or during 2019. JMC’s agreements with its permanent investors include provisions that could require JMC to repurchase loans under certain circumstances, and also provide for the assessment of fees if loans go into default or are refinanced within specified periods of time. JMC has never been required to repurchase a loan and no allowance has been made as of September 30, 2020 or December 31, 2019 for possible repurchases. Management does not believe that a provision for early default or refinancing costs is necessary at September 30, 2020 or December 31, 2019. JMC enters into commitments with its customers to originate loans where the interest rate on the loans is determined (locked) prior to funding. While this subjects JMC to the risk that interest rates may change from the commitment date to the funding date, JMC simultaneously enters into financial agreements (best efforts forward sales commitments) with its permanent investors giving JMC the right to deliver (put) loans to the investors at specified yields, thus enabling JMC to manage its exposure to changes in interest rates such that JMC is not subject to fluctuations in fair values of these agreements due to changes in interest rates. However, a default by a permanent investor required to purchase loans under such an agreement would expose JMC to potential fluctuation in selling prices of loans due to changes in interest rate. The fair value of rate lock commitments and forward sales commitments was considered immaterial at September 30, 2020 and December 31, 2019 and an adjustment was not recorded. Gains and losses on the sale of mortgages as well as origination fees, brokerage fees, interest rate lock-in fees and other fees paid by mortgagors are included in Mortgage banking income on the Company’s consolidated statements of income. |
Other Real Estate Owned (OREO) | Other Real Estate Owned (OREO): OREO comprises properties acquired in partial or total satisfaction of problem loans. The properties are recorded at fair value at the date acquired. Losses arising at the time of acquisition of such properties are charged against the allowance for credit losses. Subsequent write‑downs that may be required and expenses of operation are included in other expenses. Gains and losses realized from the sale of OREO are included in other expenses. At September 30, 2020 there were five properties with a combined estimated value of $ 2.8 million included in OREO and at December 31, 2019, there were four properties with a combined estimated value of $2.4 million included in OREO. |
Intangible Assets and Amortization | Intangible Assets and Amortization: During the fourth quarter of 2019, the Company acquired Partners and during the first quarter of 2018, the Company acquired Liberty. ASC 350, Intangibles‑Goodwill and Other (“ASC 350”), prescribes accounting for intangible assets subsequent to initial recognition. Acquired intangible assets (such as core deposit intangibles) are separately recognized if the benefit of the assets can be sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives. Intangible assets related to the acquisitions are amortized (See Note 12 – Goodwill and Intangible Assets for further information). |
Goodwill | Goodwill The Company’s goodwill was recognized in connection with the acquisitions of Partners and Liberty. The Company reviews the carrying value of goodwill at least annually or more frequently if certain impairment indicators exist. In testing goodwill for impairment, the Company may first consider qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, we conclude that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then no further testing is required and the goodwill of the reporting unit is not impaired. If the Company elects to bypass the qualitative assessment or if we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the fair value of the reporting unit is compared with its carrying amount to determine whether an impairment exists. |
Accounting for Stock Based Compensation | Accounting for Stock Based Compensation: The Company follows ASC 718‑10, Compensation—Stock Compensation (“ASC 718-10”) for accounting and reporting for stock‑based compensation plans. ASC 718‑10 defines a fair value at grant date to be used for measuring compensation expense for stock‑based compensation plans to be recognized in the statement of income. |
Earnings Per Share | Earnings Per Share: Basic earnings per common share are determined by dividing net income and accretion of warrants by the weighted average number of shares outstanding for each period, giving retroactive effect to stock splits and dividends. Weighted average common shares outstanding were 1 7,810,090 and 17,808,2 12 for the three and nine months ended September 30, 2020, respectively, and 9,985,321 for the three and nine months ended September 30, 2020. Calculations of diluted earnings per common share include the average dilutive common stock equivalents outstanding during the period, unless they are anti‑dilutive. Dilutive common equivalent shares consist of stock options calculated using the treasury stock method and restricted stock awards (See Note 8 – Earnings Per Share for further information). |
Investment Securities (Tables)
Investment Securities (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Investment Securities | |
Schedule of securities available for sale | September 30, 2020 Dollars in Thousands Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Obligations of U.S. Government agencies and corporations $ 5,753 $ 172 $ 7 $ 5,918 Obligations of States and political subdivisions 36,787 1,700 — 38,487 Mortgage-backed securities 79,132 1,074 160 80,046 Subordinated debt investments 3,486 74 — 3,560 $ 125,158 $ 3,020 $ 167 $ 128,011 December 31, 2019 Dollars in Thousands Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Obligations of U.S. Government agencies and corporations $ 10,186 $ 162 $ 36 $ 10,312 Obligations of States and political subdivisions 33,885 716 43 34,558 Mortgage-backed securities 56,275 236 90 56,421 Subordinated debt investments 2,988 42 — 3,030 $ 103,334 $ 1,156 $ 169 $ 104,321 |
Schedule of gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position | September 30, 2020 Dollars in Thousands Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized Value Loss Value Loss Value Loss Obligations of U.S. Government agencies and corporations $ 1,493 $ 7 $ — $ — $ 1,493 $ 7 Obligations of States and political subdivisions — — — — — — Mortgage-backed securities 23,670 160 — — 23,670 160 Subordinated debt investments — — — — — — Total securities with unrealized losses $ 25,163 $ 167 $ — $ — $ 25,163 $ 167 December 31, 2019 Dollars in Thousands Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized Value Loss Value Loss Value Loss Obligations of U.S. Government agencies and corporations $ 5,269 $ 34 $ 2,000 $ 2 $ 7,269 $ 36 Obligations of States and political subdivisions 4,669 43 — — 4,669 43 Mortgage-backed securities 11,600 32 4,489 58 16,089 90 Subordinated debt investments — — — — — — Total securities with unrealized losses $ 21,538 $ 109 $ 6,489 $ 60 $ 28,027 $ 169 |
Schedule of maturities, calls, or repricing of securities available for sale | September 30, 2020 Securities Available for Sale Dollars in Thousands Amortized Fair Cost Value Due in one year or less $ 625 $ 626 Due after one year through five years 2,238 2,435 Due after five years through ten years 21,456 22,168 Due after ten years or more 21,707 22,736 Mortgage-backed securities, due in monthly installments 79,132 80,046 $ 125,158 $ 128,011 |
Loans, Allowance for Credit L_2
Loans, Allowance for Credit Losses and Impaired Loans (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Loans, Allowance for Credit Losses and Impaired Loans | |
Schedule of major categories of loans | (Dollars in thousands) At September 30, 2020 At December 31, 2019 Originated Loans Real Estate Mortgage Construction and land development $ 70,798 $ 59,236 Residential real estate 120,746 108,590 Nonresidential 373,734 325,916 Home equity loans 16,072 13,736 Commercial 135,131 52,838 Consumer and other loans 3,032 2,669 719,513 562,985 Acquired Loans Real Estate Mortgage Construction and land development $ 3,394 $ 25,515 Residential real estate 81,032 100,696 Nonresidential 191,289 218,633 Home equity loans 17,286 23,979 Commercial 39,957 59,159 Consumer and other loans 2,065 3,021 335,023 431,003 Total Loans Real Estate Mortgage Construction and land development $ 74,193 $ 84,751 Residential real estate 201,779 209,286 Nonresidential 565,024 544,549 Home equity loans 33,358 37,715 Commercial 175,088 111,997 Consumer and other loans 5,097 5,690 1,054,539 993,988 Less: Allowance for credit losses (11,396) (7,304) $ 1,043,143 $ 986,684 |
Schedule of allowance for credit losses by loan category | Real Estate Mortgage Construction and Land Residential Consumer Dollars in Thousands Development Real Estate Nonresidential Home Equity Commercial and Other Unallocated Total Balance at September 30, 2020 Purchased credit impaired loans Balance in allowance $ — $ — $ — $ — $ — $ — $ — $ — Related loan balance 44 1,855 2,248 — 407 — — 4,554 Individually evaluated for impairment: Balance in allowance $ — $ 198 $ 23 $ — $ 550 $ — $ — $ 771 Related loan balance 176 3,029 8,690 — 539 — — 12,434 Collectively evaluated for impairment: Balance in allowance $ 907 $ 1,736 $ 6,114 $ 216 $ 1,039 $ 20 $ 593 $ 10,625 Related loan balance 73,973 196,895 554,086 33,358 174,142 5,097 — 1,037,551 Real Estate Mortgage Construction and Land Residential Consumer Dollars in Thousands Development Real Estate Nonresidential Home Equity Commercial and Other Unallocated Total Balance at December 31, 2019 Purchased credit impaired loans Balance in allowance $ — $ — $ — $ — $ — $ — $ — $ — Related loan balance 44 1,986 2,323 — 1,020 — — 5,373 Individually evaluated for impairment: Balance in allowance $ — $ 216 $ 82 $ — $ 274 $ — $ — $ 572 Related loan balance 177 3,123 9,504 — 1,274 — — 14,078 Collectively evaluated for impairment: Balance in allowance $ 602 $ 1,164 $ 3,991 $ 142 $ 552 $ 14 $ 267 $ 6,732 Related loan balance 84,530 204,177 532,722 37,715 109,703 5,690 — 974,537 September 30, 2020 Real Estate Mortgage Construction and Land Residential Consumer Dollars in Thousands Development Real Estate Nonresidential Home Equity Commercial and Other Unallocated Total Quarter Ended Beginning Balance $ 898 $ 1,893 $ 5,487 $ 184 $ 1,430 $ 20 $ 89 $ 10,001 Charge-offs — — (38) — (497) (55) — (590) Recoveries — 2 6 — 1 9 — 18 Provision 9 39 682 32 655 46 504 1,967 Ending Balance $ 907 $ 1,934 $ 6,137 $ 216 $ 1,589 $ 20 $ 593 $ 11,396 Nine Months Ended Beginning Balance 602 1,380 4,073 142 826 14 267 7,304 Charge-offs — (25) (163) (13) (828) (103) — (1,132) Recoveries 1 10 10 10 20 31 — 82 Provision 304 569 2,217 77 1,571 78 326 5,142 Ending Balance 907 1,934 6,137 216 1,589 20 593 11,396 September 30, 2019 Real Estate Mortgage Construction and Land Residential Consumer Dollars in Thousands Development Real Estate Nonresidential Home Equity Commercial and Other Unallocated Total Quarter Ended Beginning Balance $ 575 $ 1,203 $ 3,784 $ 144 $ 624 $ 10 $ 726 $ 7,066 Charge-offs — — — — (425) (28) — (453) Recoveries 5 24 80 — 23 9 — 141 Provision 15 86 (66) 8 504 20 (267) 300 Ending Balance $ 595 $ 1,313 S 3,798 $ 152 $ 726 $ 11 $ 459 $ 7,054 Nine Months Ended Beginning Balance 647 1,521 3,629 122 641 13 490 7,063 Charge-offs (11) (193) (410) (4) (534) (99) — (1,251) Recoveries 9 165 88 — 43 37 — 342 Provision (50) (180) 491 34 576 60 (31) 900 Ending Balance 595 1,313 3,798 152 726 11 459 7,054 |
Schedule of loans by risk rating | Real Estate Secured Construction & Land Residential Consumer & September 30, 2020 Development Real Estate Nonresidential Home Equity Commercial Other Total Dollars in Thousands Pass $ 74,017 $ 198,513 $ 557,334 $ 33,304 $ 174,349 $ 5,097 $ 1,042,614 Marginal — — 3,339 — 89 — 3,428 Substandard 176 3,266 4,351 54 650 — 8,497 TOTAL $ 74,193 $ 201,779 $ 565,024 $ 33,358 $ 175,088 $ 5,097 $ 1,054,539 Non-Accrual $ 176 $ 3,215 $ 412 $ 54 $ 489 $ — $ 4,346 Real Estate Secured Construction & Land Residential Consumer & December 31, 2019 Development Real Estate Nonresidential Home Equity Commercial Other Total Dollars in Thousands Pass $ 84,574 $ 206,150 $ 539,259 $ 37,715 $ 110,349 $ 5,690 $ 983,737 Marginal — — — — — — — Substandard 177 3,136 5,290 — 1,648 — 10,251 TOTAL $ 84,751 $ 209,286 $ 544,549 $ 37,715 $ 111,997 $ 5,690 $ 993,988 Non-Accrual $ 177 $ 1,620 $ 2,608 $ 5 $ 131 $ — $ 4,541 |
Schedule of loans modified under the terms of a TDR by class | Real Estate Secured Construction & Land Residential Consumer & Development Real Estate Nonresidential Home Equity Commercial Other Total Dollars in Thousands Three months ended September 30, 2020 Number of loans modified during the period — — — — — — — Pre-modification recorded balance $ — $ — $ — $ — $ — $ — $ — Post- modification recorded balance — — — — — — — Nine months ended September 30, 2020 Number of loans modified during the period — — — — 1 — 1 Pre-modification recorded balance $ — $ — $ — $ — $ 1,196 $ — $ 1,196 Post- modification recorded balance — — — — 489 — 489 |
Schedule of aging analysis of the recorded investment of past due financing receivables | Recorded Investment Greater than Total >90 Days 30 - 59 Days 60 - 89 Days 90 Days Total Current Financing Past Due At September 30, 2020 Past Due* Past Due Past Due** Past Due Balance Receivables and Accruing Dollars in Thousands Real Estate Construction and land development $ 66 $ — $ 176 $ 242 $ 73,951 $ 74,193 $ — Residential real estate 1,157 85 698 1,940 199,839 201,779 286 Nonresidential 207 871 1,327 2,405 562,619 565,024 — Home equity loans — — 54 54 33,304 33,358 — Commercial 129 50 489 668 174,420 175,088 — Consumer and other loans 3 — — 3 5,094 5,097 — TOTAL $ 1,562 $ 1,006 $ 2,744 $ 5,312 $ 1,049,227 $ 1,054,539 $ 286 * Includes $ 901 thousand of non‑accrual loans. ** Includes $ 2.5 million of non-accrual loans. Recorded Investment Greater than Total >90 Days 30 - 59 Days 60 - 89 Days 90 Days Total Current Financing Past Due At December 31, 2019 Past Due* Past Due** Past Due*** Past Due Balance Receivables and Accruing Dollars in Thousands Real Estate Construction and land development $ 424 $ — $ 177 $ 601 $ 84,150 $ 84,751 $ — Residential real estate 1,296 677 702 2,675 206,611 209,286 — Nonresidential 635 144 1,823 2,602 541,947 544,549 — Home equity loans — — — — 37,715 37,715 — Commercial 231 1,207 94 1,532 110,465 111,997 — Consumer and other loans 1 19 — 20 5,670 5,690 5 TOTAL $ 2,587 $ 2,047 $ 2,796 $ 7,430 $ 986,558 $ 993,988 $ 5 * Includes $95 6 thousand of non‑accrual loans. ** Includes $81 thousand of non-accrual loans. *** Includes $2.6 million of non-accrual loans . |
Schedule of impaired loans | Unpaid Interest Average Recorded Principal Income Specific Recorded September 30, 2020 Investment Balance Recognized Reserve Investment Dollars in Thousands Impaired loans with specific reserves: Real Estate Mortgage Construction and land development $ — $ — $ — $ — $ — Residential real estate 938 938 5 198 833 Nonresidential 2,306 2,306 155 23 2,381 Home equity loans — — — — — Commercial 539 1,246 12 550 906 Consumer and other loans — — — — — Total impaired loans with specific reserves $ 3,783 $ 4,490 $ 172 $ 771 $ 4,120 Impaired loans with no specific reserve: Real Estate Mortgage Construction and land development $ 176 $ 176 $ — $ — $ 176 Residential real estate 2,091 2,141 76 — 2,244 Nonresidential 6,384 6,485 302 — 6,717 Home equity loans — — — — — Commercial — — — — — Consumer and other loans — — — — — Total impaired loans with no specific reserve $ 8,651 $ 8,802 $ 378 $ — $ 9,137 TOTAL $ 12,434 $ 13,292 $ 550 $ 771 $ 13,257 Unpaid Interest Average Recorded Principal Income Specific Recorded December 31, 2019 Investment Balance Recognized Reserve Investment Dollars in Thousands Impaired loans with specific reserves: Real Estate Mortgage Construction and land development $ — $ — $ — $ — $ — Residential real estate 727 727 — 216 2,337 Nonresidential 2,456 2,456 260 82 2,866 Home equity loans — — — — — Commercial 1,274 1,274 53 274 659 Consumer and other loans — — — — — Total impaired loans with specific reserves $ 4,457 $ 4,457 $ 313 $ 572 $ 5,862 Impaired loans with no specific reserve: Real Estate Mortgage Construction and land development $ 177 $ 177 $ — $ — $ 198 Residential real estate 2,396 3,069 132 — 3,733 Nonresidential 7,048 7,326 501 — 9,839 Home equity loans — — — — 347 Commercial — — — — 902 Consumer and other loans — — — — — Total impaired loans with no specific reserve $ 9,621 $ 10,572 $ 633 $ — $ 15,019 TOTAL $ 14,078 $ 15,029 $ 946 $ 572 $ 20,881 |
Schedule of outstanding balance and carrying amount of acquired loans | Dollars in Thousands September 30, 2020 December 31, 2019 Accountable for under ASC 310-30 (PCI loans) Outstanding balance $ 5,196 $ 6,426 Carrying amount 4,554 5,373 Accountable for under ASC 310-20 (non-PCI loans) Outstanding balance $ 334,173 $ 430,711 Carrying amount 330,469 425,630 Total acquired loans Outstanding balance $ 339,369 $ 437,137 Carrying amount 335,023 431,003 |
Schedule of changes in accretable yield of acquired loans | Dollars in Thousands September 30, 2020 December 31, 2019 Balance at beginning of period $ 5,081 $ 745 Acquisitions — 4,990 Accretion (1,376) (654) Other changes, net (1) — Balance at end of period $ 3,704 $ 5,081 |
Borrowings and Notes Payable (T
Borrowings and Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Borrowings and Notes Payable | |
Schedule of advances outstanding with the Federal Home Loan Bank and outstanding lines of credit | September 30, 2020 Dollars in Thousands Outstanding Balance Interest Rate Maturity Date Interest Payment Fixed rate 12,000 0.24 % October 2020 Fixed, at maturity Fixed rate 6,000 0.19 % October 2020 Fixed, at maturity Fixed rate 3,200 0.19 % October 2020 Fixed, at maturity Fixed rate hybrid 5,000 3.04 % November 2020 Fixed, paid monthly Fixed rate hybrid 5,000 2.91 % November 2020 Fixed, paid quarterly Fixed rate hybrid 6,000 2.44 % April 2021 Fixed, paid quarterly Convertible 10,000 2.68 % May 2021 Fixed, paid quarterly Fixed rate hybrid 5,000 3.15 % October 2022 Fixed, paid quarterly Principal reducing credit 1,071 1.62 % March 2023 Fixed, paid quarterly Fixed rate hybrid 9,900 1.29 % March 2024 Fixed, paid quarterly Fixed rate hybrid 9,900 1.29 % March 2024 Fixed, paid quarterly Principal reducing credit 1,265 1.99 % March 2026 Fixed, paid quarterly Total advances 74,336 December 31, 2019 Dollars in Thousands Outstanding Balance Interest Rate Maturity Date Interest Payment Fixed rate 12,000 1.73 % January 2020 Fixed, at maturity Fixed rate 4,500 1.76 % January 2020 Fixed, at maturity Fixed rate 7,600 1.68 % January 2020 Fixed, at maturity Fixed rate 7,700 1.68 % January 2020 Fixed, at maturity Fixed rate 6,000 1.70 % January 2020 Fixed, at maturity Fixed rate 3,200 1.71 % January 2020 Fixed, at maturity Fixed rate 7,000 1.70 % January 2020 Fixed, at maturity Fixed rate hybrid 15,000 2.09 % June 2020 Fixed, paid monthly Fixed rate hybrid 5,000 3.04 % November 2020 Fixed, paid monthly Fixed rate hybrid 5,000 2.91 % November 2020 Fixed, paid quarterly Fixed rate hybrid 6,000 2.44 % April 2021 Fixed, paid quarterly Convertible 10,000 2.68 % May 2021 Fixed, paid quarterly Fixed rate hybrid 5,000 3.15 % October 2022 Fixed, paid quarterly Principal reducing credit 1,393 1.62 % March 2023 Fixed, paid quarterly Principal reducing credit 1,437 1.99 % March 2026 Fixed, paid quarterly Total advances 96,830 |
Schedule of maturities of debt | 2020 $ 31,357 2021 17,244 2022 66,246 2023 310 2024 and thereafter 48,743 |
Lease Commitment (Tables)
Lease Commitment (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Lease Commitments | |
Schedule of supplemental lease information | Supplemental lease information at or for the nine months ended September 30, 2020 is as follows: Dollars in Thousands Balance Sheet Operating Lease Amounts Right-of-use asset $ 3,958 Lease liability 4,267 Finance Lease Amounts Right-of-use asset $ 1,858 Lease liability 2,270 Income Statement Three Months Ended September 30, 2020 Operating lease cost classified as premises and equipment $ 223 Finance lease cost classified as interest on borrowings 16 Nine Months Ended September 30, 2020 Operating lease cost classified as premises and equipment $ 658 Finance lease cost classified as interest on borrowings 49 Weighted average lease term - Operating Leases (Yrs.) 8.44 Weighted average lease term - Finance Leases (Yrs.) 13.34 Weighted average discount rate - Operating Leases (1) 2.83 % Weighted average discount rate - Finance Leases (1) 2.84 % Operating outgoing cash flows from operating leases $ 625 Operating outgoing cash flows from finance leases $ 134 (1) The discount rate was developed by using the fixed rate credit advance borrowing rate at the FHLB of Atlanta for a term correlating to the remaining life of each lease. Management believes this rate closely mirrors its incremental borrowing rate for similar terms. |
Schedule of maturities of lease liabilities | A maturity analysis of the Company’s lease liabilities at September 30, 2020 was as follows: Dollars in Thousands Operating Leases: One year or less $ 668 One to three years 1,189 Three to five years 1,071 Over 5 years 1,968 Total undiscounted cash flows 4,896 Less: Discount (629) Lease Liabilities $ 4,267 Finance Leases: One year or less $ 178 One to three years 363 Three to five years 393 Over 5 years 1,824 Total undiscounted cash flows 2,758 Less: Discount (488) Lease Liabilities $ 2,270 |
Stock Option Plans (Tables)
Stock Option Plans (Tables) - Stock options | 9 Months Ended |
Sep. 30, 2020 | |
Liberty 2004 Stock Option Plan | |
Stock options | |
Summary of stock option activity | Employees Directors Average Average Shares Price Amount Shares Price Amount December 31, 2019 2,355 $ 4.14 $ 9,750 6,354 $ 4.14 $ 26,307 Exercised in 2020 — 4.14 — (1,028) 4.14 (4,256) September 30, 2020 2,355 $ 4.14 $ 9,750 5,326 $ 4.14 $ 22,051 |
Virginia Partners Stock Option Plan | |
Stock options | |
Summary of stock option activity | September 30, 2020 Weighted Weighted Average Average Remaining Exercise Contractual Intrinsic Shares Price Life Value Outstanding at beginning of period 247,705 $ Granted — — — Exercised (16,147) — Forfeited (8,589) — Outstanding at end of period 222,969 $ $ 121,207 Options exercisable at September 30, 2020 222,969 $ Weighted average fair value of options granted during the period $ — |
Restricted Stock Plan (Tables)
Restricted Stock Plan (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Restricted Stock Plan | |
Summary of non vested restricted stock awards | Employees Weighted Average Shares Fair Value Nonvested Awards December 31, 2019 6,000 $ 7.30 Vested in 2020 (3,000) 7.30 Nonvested Awards September 30, 2020 3,000 $ 7.30 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share | |
Schedule of basic and diluted EPS | Net Income Applicable (Dollars in thousands, except per share data) to Basic Earnings Weighted Average For the three months ended September 30, 2020 Per Common Share Shares Outstanding Basic EPS $ 1,118 17,810,090 $ 0.063 Effect of dilutive stock awards — 8,102 — Diluted EPS $ 1,118 17,818,192 $ 0.063 For the nine months ended September 30, 2020 Basic EPS $ 4,564 17,808,212 $ 0.256 Effect of dilutive stock awards — 30,159 — Diluted EPS $ 4,564 17,838,371 $ 0.256 For the three months ended September 30, 2019 Basic EPS $ 1,785 9,985,321 $ 0.179 Effect of dilutive stock awards — 14,358 (0.001) Diluted EPS $ 1,785 9,999,679 $ 0.178 For the nine months ended September 30, 2019 Basic EPS $ 4,935 9,985,321 $ 0.494 Effect of dilutive stock awards — 14,290 — Diluted EPS $ 4,935 9,999,611 $ 0.494 |
Regulatory Capital Requiremen_2
Regulatory Capital Requirements (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Regulatory Capital Requirements | |
Summary of comparison of the Company’s and the Bank’s capital amounts and ratios with the minimum requirements | To Be Well Capitalized For Capital Under Prompt Adequacy Corrective Action In Thousands Actual Purposes Provisions Amount Ratio Amount Ratio Amount Ratio As of September 30, 2020 Total Capital Ratio (To Risk Weighted Assets) The Bank of Delmarva 81,828 12.8 % 67,195 10.5 % 63,995 10.0 % Virginia Partners Bank 51,045 13.0 % 41,085 10.5 % 39,129 10.0 % Tier I Capital Ratio (To Risk Weighted Assets) The Bank of Delmarva 73,802 11.5 % 54,396 8.5 % 51,196 8.0 % Virginia Partners Bank 49,599 12.7 % 33,259 8.5 % 31,303 8.0 % Common Equity Tier I Ratio (To Risk Weighted Assets) The Bank of Delmarva 73,802 11.5 % 44,796 7.0 % 41,597 6.5 % Virginia Partners Bank 49,599 12.7 % 27,390 7.0 % 25,434 6.5 % Tier I Leverage Ratio (To Average Assets) The Bank of Delmarva 73,802 8.0 % 37,081 4.0 % 46,352 5.0 % Virginia Partners Bank 49,599 9.5 % 20,797 4.0 % 25,997 5.0 % As of December 31, 2019 Total Capital Ratio (To Risk Weighted Assets) The Bank of Delmarva 79,080 12.7 % 65,132 10.5 % 62,030 10.0 % Virginia Partners Bank 47,122 12.5 % 39,676 10.5 % 37,787 10.0 % Tier I Capital Ratio (To Risk Weighted Assets) The Bank of Delmarva 71,752 11.6 % 52,726 8.5 % 49,624 8.0 % Virginia Partners Bank 46,881 12.4 % 32,119 8.5 % 30,230 8.0 % Common Equity Tier I Ratio (To Risk Weighted Assets) The Bank of Delmarva 71,752 11.6 % 43,421 7.0 % 40,320 6.5 % Virginia Partners Bank 46,881 12.4 % 26,451 7.0 % 24,562 6.5 % Tier I Leverage Ratio (To Average Assets) The Bank of Delmarva 71,752 9.1 % 31,520 4.0 % 39,399 5.0 % Virginia Partners Bank 46,881 10.4 % 18,093 4.0 % 22,616 5.0 % |
Fair Values of Financial Inst_2
Fair Values of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair Values of Financial Instruments | |
Summary of the estimated fair value and the related carrying values of the Company’s financial instruments | Dollars are in thousands Fair Value Measurements at September 30, 2020 Quoted Prices in Significant Significant Carrying Active Markets for Other Unobservable Amount Identical Assets Observable Inputs Inputs September 30, 2020 (Level 1) (Level 2) (Level 3) Balance Financial assets: Cash and due from banks $ 220,612 $ 220,612 $ — $ — $ 220,612 Interest bearing deposits 34,334 34,334 — — 34,334 Federal funds sold 34,345 34,345 — — 34,345 Securities: Available for sale 128,011 — 128,011 — 128,011 Loans held for sale 7,765 — 7,765 — 7,765 Loans, net of allowance for credit losses 1,043,143 — — 1,041,511 1,041,511 Accrued interest receivable 6,254 — 6,254 — 6,254 Restricted stock 4,421 — 4,421 — 4,421 Other investments 6,734 — 6,734 — 6,734 Bank owned life insurance 14,747 — 14,747 — 14,747 Other real estate owned 2,796 — — 2,796 2,796 Financial liabilities: Deposits $ 1,234,926 $ — $ 1,243,447 $ — $ 1,243,447 Accrued interest payable 448 — 448 — 448 FHLB advances 74,336 — 76,025 — 76,025 Subordinated notes payable 24,089 — 36,461 — 36,461 Other borrowings 65,475 — — 65,475 65,475 Dollars are in thousands Fair Value Measurements at December 31, 2019 Quoted Prices in Significant Significant Carrying Active Markets for Other Unobservable Amount Identical Assets Observable Inputs Inputs December 31, 2019 (Level 1) (Level 2) (Level 3) Balance Financial assets: Cash and due from banks $ 36,295 $ 36,295 $ — $ — $ 36,295 Interest bearing deposits 27,586 27,586 — — 27,586 Federal funds sold 31,230 31,230 — — 31,230 Securities: Available for sale 104,321 — 104,321 — 104,321 Loans held for sale 3,555 — 3,555 — 3,555 Loans, net of allowance for credit losses 986,684 — — 976,636 976,636 Accrued interest receivable 3,138 — 3,138 — 3,138 Restricted stock 5,311 — 5,311 — 5,311 Other investments 4,773 — 4,773 — 4,773 Bank owned life insurance 7,817 — 7,817 — 7,817 Other real estate owned 2,417 — — 2,417 2,417 Financial liabilities: Deposits $ 1,006,781 $ — $ 1,008,842 $ — $ 1,008,842 Accrued interest payable 572 — 572 — 572 FHLB advances 96,830 — 97,248 — 97,248 Subordinated notes payable 6,435 — 9,006 — 9,006 Other borrowings 1,249 — — 1,249 1,249 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Measurements | |
Summary of fair value measurements on a recurring basis | Fair Dollars are in thousands Level 1 Level 2 Level 3 Value September 30, 2020 Securities available for sale: Obligations of U.S. Government agencies and corporations $ — $ 5,918 $ — $ 5,918 Obligations of States and political subdivisions — 38,487 — 38,487 Mortgage-backed securities — 80,046 — 80,046 Subordinated debt investments — 3,560 — 3,560 Total securities available for sale $ — $ 128,011 $ — $ 128,011 December 31, 2019 Securities available for sale: Obligations of U.S. Government agencies and corporations $ — $ 10,312 $ — $ 10,312 Obligations of States and political subdivisions — 34,558 — 34,558 Mortgage-backed securities — 56,421 — 56,421 Subordinated debt investments — 3,030 — 3,030 Total securities available for sale $ — $ 104,321 $ — $ 104,321 |
Summary of the balances of financial assets measured at fair value on a non-recurring basis | Fair Dollars are in thousands Level 1 Level 2 Level 3 Value September 30, 2020 Impaired loans $ — $ — $ 3,012 $ 3,012 OREO — — 2,796 2,796 Total $ — $ — $ 5,808 $ 5,808 December 31, 2019 Impaired loans $ — $ — $ 3,885 $ 3,885 OREO — — 2,417 2,417 Total $ — $ — $ 6,302 $ 6,302 |
Schedule of fair value financial assets measured on non-recurring basis valuation techniques | Dollars are in thousands Valuation Unobservable Range of Fair Value Technique Inputs Inputs Impaired loans $ 3,012 Appraisals Discount to reflect current market conditions and estimated selling costs 8% OREO 2,796 Appraisals Discount to reflect current market conditions and estimated selling costs 8% Total $ 5,808 Dollars are in thousands Valuation Unobservable Range of Fair Value Technique Inputs Inputs Impaired loans $ 3,885 Appraisals Discount to reflect current market conditions and estimated selling costs 8% OREO 2,417 Appraisals Discount to reflect current market conditions and estimated selling costs 8% Total $ 6,302 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Intangible assets | |
Schedule of changes in carrying amount of goodwill | September 30, December 31, Dollars in Thousands 2020 2019 Balance at the beginning of the period $ 9,391 $ 5,237 Partners acquisition — 4,154 Impairment — — Balance at the end of the period $ 9,391 $ 9,391 |
Schedule of the net effect of amortization of premiums and accretion of discounts associated with acquisition accounting adjustments to assets acquired and liabilities assumed | September 30, September 30, 2020 2019 Nine Months Ended Dollars in Thousands Adjustments to net income Loans (1) $ 1,391 $ 335 Time deposits (2) (3) 19 Core deposit intangible (3) (540) (227) Note Payable (4) (5) — Net impact to income before taxes $ 843 $ 127 September 30, September 30, 2020 2019 Three Months Ended Dollars in Thousands Adjustments to net income Loans (1) $ 307 $ 104 Time deposits (2) (2) 6 Core deposit intangible (3) (177) (76) Note Payable (4) (1) — Net impact to income before taxes $ 127 $ 34 (1) Loan discount accretion is included in the "Loans, including fees" section of "Interest Income" in the Consolidated Statement of Income. (2) Time deposit discount accretion is included in the "Deposits" section of "Interest Expense" in the Consolidated Statement of Income. (3) Core deposit intangible premium amortization is included in the "Other Expense" section of "Non-interest Expense" in the Consolidated Statement of Income. Note payable discount accretion is included in the "Borrowings" section of "Interest Expense" in the Consolidated Statement of Income. |
Core deposit intangible | |
Intangible assets | |
Summary of changes in the intangible assets | September 30, December 31, Dollars in Thousands 2020 2019 Balance at the beginning of the period $ 3,373 $ 1,069 Partners acquisition — 2,650 Amortization (540) (346) Balance at the end of the period $ 2,833 $ 3,373 |
Schedule of future amortization | September 30, Dollars in Thousands 2020 2020 $ 173 2021 600 2022 520 2023 467 2024 and thereafter 1,073 $ 2,833 |
Deposits Purchased Premium (Discount) Net | |
Intangible assets | |
Summary of changes in the intangible assets | September 30, December 31, Dollars in Thousands 2020 2019 Balance at the beginning of the period $ (31) $ 27 Partners acquisition — (38) Amortization, net 3 (20) Balance at the end of the period $ (28) $ (31) |
Schedule of future accretion | September 30, Dollars in Thousands 2020 2020 $ 5 2021 14 2022 6 2023 2 2024 and thereafter 1 $ 28 |
Virginia Partners Transaction (
Virginia Partners Transaction (Tables) - Virginia Partners Bank | 9 Months Ended |
Sep. 30, 2020 | |
Business Acquisition [Line Items] | |
Summary of consideration paid and the fair value of identifiable assets acquired and liabilities assumed as of the date of acquisition | Estimated Fair Value as of Dollars in Thousands November 15, 2019 Consideration paid: Cash $ 2 Common stock issued in acquisition 52,282 Stock options issued in acquisition (replacement awards) 350 Total consideration paid $ 52,634 Assets acquired: Cash and cash equivalents 6,743 Investment securities 65,373 Investments in correspondent bank stock 3,670 Loans 357,127 Premises and equipment 3,627 Accrued interest receivable 1,155 Core deposit intangible 2,650 Deferred tax asset 1,239 Other assets 12,584 Total assets acquired $ 454,168 Liabilities assumed: Deposits $ 348,552 Other liabilities 56,408 Total liabilities assumed $ 404,960 Net assets acquired $ 49,208 Noncontrolling interest in consolidated subsidiaries $ 728 Goodwill recorded in acquisition $ 4,154 |
Summary of fair value adjustments made to the amortized cost basis to present a fair value of the loans acquired | Dollars in Thousands At November 15, 2019 Gross principal balance $ 362,916 Fair value adjustment on pools of non-credit impaired loans (4,990) Fair value adjustment on PCI loans (799) Fair value of acquired loans $ 357,127 |
Summary of portion of the loan balances that have been deemed uncollectible based on the Company’s expectations of future cash flows for each respective loan | Dollars in Thousands At November 15, 2019 Contractually required principal and interest at acquisition $ 6,713 Contractual cashflows not expected to be collected (non-accretable discount) (1,371) Expected cash flows at acquisition 5,342 Interest component of expected cash flows (673) Fair value for loans acquired under ASC 310-30 $ 4,669 |
Nature of Business and Its Si_3
Nature of Business and Its Significant Accounting Policies - Consolidation (Details) | 9 Months Ended |
Sep. 30, 2020subsidiary | |
Principles of Consolidation | |
Number of subsidiaries | 2 |
The Bank of Delmarva | DHB Development LLC | |
Principles of Consolidation | |
Ownership interest (as a percent) | 40.55% |
The Bank of Delmarva | West Nithsdale Enterprises LLC | |
Principles of Consolidation | |
Ownership interest (as a percent) | 10.00% |
The Bank of Delmarva | FBW LLC | |
Principles of Consolidation | |
Ownership interest (as a percent) | 50.00% |
Virginia Partners Bank | Johnson Mortgage Company LLC | |
Principles of Consolidation | |
Ownership interest (as a percent) | 51.00% |
Nature of Business and Its Si_4
Nature of Business and Its Significant Accounting Policies - Loans Held for Sale (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | |
Loans held for sale | |||||
Provisions for credit losses | $ 1,967 | $ 300 | $ 5,142 | $ 900 | |
Johnson Mortgage Company LLC | Real Estate | |||||
Loans held for sale | |||||
Receivable settlement period on mortgage loans sold | 30 days | ||||
Allowance for repurchase of loans sold | $ 0 | $ 0 | $ 0 | ||
Provisions for credit losses | $ 0 | $ 0 | |||
Johnson Mortgage Company LLC | Real Estate | Minimum | |||||
Loans held for sale | |||||
Number of family residences in structures for which mortgages are purchased or refinanced | item | 1 | ||||
Johnson Mortgage Company LLC | Real Estate | Maximum | |||||
Loans held for sale | |||||
Number of family residences in structures for which mortgages are purchased or refinanced | item | 4 |
Nature of Business and Its Si_5
Nature of Business and Its Significant Accounting Policies - OREO (Details) $ in Thousands | Sep. 30, 2020USD ($)property | Dec. 31, 2019USD ($)property |
Nature of Business and Its Significant Accounting Policies | ||
Number of properties | property | 5 | 4 |
Other real estate owned | $ | $ 2,796 | $ 2,417 |
Nature of Business and Its Si_6
Nature of Business and Its Significant Accounting Policies - Earnings Per Share (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Weighted average shares outstanding | ||||
Weighted average shares outstanding | 17,810,090 | 9,985,321 | 17,808,212 | 9,985,321 |
Investment Securities - Availab
Investment Securities - Available for sale (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Marketable securities | ||
Amortized Cost | $ 125,158 | $ 103,334 |
Gross Unrealized Gains | 3,020 | 1,156 |
Gross Unrealized Losses | 167 | 169 |
Fair Value | 128,011 | 104,321 |
Obligations of U.S. Government agencies | ||
Debt securities | ||
Amortized Cost | 5,753 | 10,186 |
Gross Unrealized Gains | 172 | 162 |
Gross Unrealized Losses | 7 | 36 |
Fair Value | 5,918 | 10,312 |
Obligations of States and political subdivisions | ||
Debt securities | ||
Amortized Cost | 36,787 | 33,885 |
Gross Unrealized Gains | 1,700 | 716 |
Gross Unrealized Losses | 43 | |
Fair Value | 38,487 | 34,558 |
Mortgage-backed securities | ||
Debt securities | ||
Amortized Cost | 79,132 | 56,275 |
Gross Unrealized Gains | 1,074 | 236 |
Gross Unrealized Losses | 160 | 90 |
Fair Value | 80,046 | 56,421 |
Subordinated debt investments | ||
Debt securities | ||
Amortized Cost | 3,486 | 2,988 |
Gross Unrealized Gains | 74 | 42 |
Fair Value | $ 3,560 | $ 3,030 |
Investment Securities - Unreali
Investment Securities - Unrealized loss positions (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Marketable securities - Fair Value | ||
Less than 12 months | $ 25,163 | $ 21,538 |
12 months or more | 6,489 | |
Total | 25,163 | 28,027 |
Marketable securities - Unrealized Loss | ||
Less than 12 months | 167 | 109 |
12 months or more | 60 | |
Total | 167 | 169 |
Obligations of U.S. Government agencies | ||
Debt securities - Fair Value | ||
Less than 12 months | 1,493 | 5,269 |
12 months or more | 2,000 | |
Total | 1,493 | 7,269 |
Debt securities - Unrealized Loss | ||
Less than 12 months | 7 | 34 |
12 months or more | 2 | |
Total | 7 | 36 |
Obligations of States and political subdivisions | ||
Debt securities - Fair Value | ||
Less than 12 months | 4,669 | |
Total | 4,669 | |
Debt securities - Unrealized Loss | ||
Less than 12 months | 43 | |
Total | 43 | |
Mortgage-backed securities | ||
Debt securities - Fair Value | ||
Less than 12 months | 23,670 | 11,600 |
12 months or more | 4,489 | |
Total | 23,670 | 16,089 |
Debt securities - Unrealized Loss | ||
Less than 12 months | 160 | 32 |
12 months or more | 58 | |
Total | $ 160 | $ 90 |
Investment Securities - Number
Investment Securities - Number of positions (Details) | Sep. 30, 2020position |
Investment Securities | |
Debt securities - Number of position | 4 |
Equity Investment - Number of position | 0 |
Subordinated debt investments | |
Investment Securities | |
Debt securities - Number of position | 1 |
Investment Securities - Other i
Investment Securities - Other information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($)security | Sep. 30, 2019USD ($)security | Sep. 30, 2020USD ($)security | Sep. 30, 2019USD ($)security | Dec. 31, 2019USD ($) | |
Investment Holdings [Line Items] | |||||
Number of securities sold | security | 10 | 0 | 10 | 0 | |
Net gain (loss) on sale of securities | $ 401 | $ 401 | |||
Number of securities either matured or called | security | 14 | 5 | 14 | 11 | |
Net gain (loss) on securities either matured or called | $ 167 | $ 97 | $ 167 | $ 97 | |
Secured Credit | Collateral Pledged | |||||
Investment Holdings [Line Items] | |||||
Amortized cost | 10,000 | 10,000 | $ 9,100 | ||
Fair value | $ 10,400 | $ 10,400 | $ 9,200 |
Investment Securities - Maturit
Investment Securities - Maturities (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Amortized Cost | ||
Due in one year or less | $ 625 | |
Due after one year through five years | 2,238 | |
Due after five years through ten years | 21,456 | |
Due after ten years or more | 21,707 | |
Mortgage-backed, due in monthly installments | 79,132 | |
Amortized Cost | 125,158 | $ 103,334 |
Fair Value | ||
Due in one year or less | 626 | |
Due after one year through five years | 2,435 | |
Due after five years through ten years | 22,168 | |
Due after ten years or more | 22,736 | |
Mortgage-backed securities, due in monthly installments | 80,046 | |
Fair Value | $ 128,011 | $ 104,321 |
Loans, Allowance for Credit L_3
Loans, Allowance for Credit Losses and Impaired Loans - Major Categories of Loans (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Jun. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | $ 1,054,539 | $ 993,988 | ||||
Less: Allowance for loan losses | (11,396) | $ (10,001) | (7,304) | $ (7,054) | $ (7,066) | $ (7,063) |
Carrying amount | 1,043,143 | 986,684 | ||||
Real Estate Mortgage | Construction and Land Development | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 74,193 | 84,751 | ||||
Less: Allowance for loan losses | (907) | (898) | (602) | (595) | (575) | (647) |
Real Estate Mortgage | Residential Real Estate | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 201,779 | 209,286 | ||||
Less: Allowance for loan losses | (1,934) | (1,893) | (1,380) | (1,313) | (1,203) | (1,521) |
Real Estate Mortgage | Nonresidential | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 565,024 | 544,549 | ||||
Less: Allowance for loan losses | (6,137) | (5,487) | (4,073) | (3,798) | (3,784) | (3,629) |
Real Estate Mortgage | Home Equity Loans | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 33,358 | 37,715 | ||||
Less: Allowance for loan losses | (216) | (184) | (142) | (152) | (144) | (122) |
Commercial | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 175,088 | 111,997 | ||||
Less: Allowance for loan losses | (1,589) | (1,430) | (826) | (726) | (624) | (641) |
Consumer and Other | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 5,097 | 5,690 | ||||
Less: Allowance for loan losses | (20) | $ (20) | (14) | $ (11) | $ (10) | $ (13) |
Originated Loans | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 719,513 | 562,985 | ||||
Originated Loans | Real Estate Mortgage | Construction and Land Development | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 70,798 | 59,236 | ||||
Originated Loans | Real Estate Mortgage | Residential Real Estate | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 120,746 | 108,590 | ||||
Originated Loans | Real Estate Mortgage | Nonresidential | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 373,734 | 325,916 | ||||
Originated Loans | Real Estate Mortgage | Home Equity Loans | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 16,072 | 13,736 | ||||
Originated Loans | Commercial | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 135,131 | 52,838 | ||||
Originated Loans | Consumer and Other | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 3,032 | 2,669 | ||||
Acquired Loans | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 335,023 | 431,003 | ||||
Acquired Loans | Real Estate Mortgage | Construction and Land Development | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 3,394 | 25,515 | ||||
Acquired Loans | Real Estate Mortgage | Residential Real Estate | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 81,032 | 100,696 | ||||
Acquired Loans | Real Estate Mortgage | Nonresidential | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 191,289 | 218,633 | ||||
Acquired Loans | Real Estate Mortgage | Home Equity Loans | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 17,286 | 23,979 | ||||
Acquired Loans | Commercial | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | 39,957 | 59,159 | ||||
Acquired Loans | Consumer and Other | ||||||
Investment Securities | ||||||
Loans and leases receivable net of unamortized discount | $ 2,065 | $ 3,021 |
Loans, Allowance for Credit L_4
Loans, Allowance for Credit Losses and Impaired Loans - Loan Impairment and Allowance for Credit Losses (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020USD ($)customer | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)customer | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | |
Allowance for credit losses | |||||
Beginning Balance | $ 10,001 | $ 7,066 | $ 7,304 | $ 7,063 | $ 7,063 |
Charge-offs | (590) | (453) | (1,132) | (1,251) | |
Recoveries | 18 | 141 | 82 | 342 | |
Provisions for credit losses | 1,967 | 300 | 5,142 | 900 | |
Ending Balance | 11,396 | 7,054 | 11,396 | 7,054 | 7,304 |
Purchased credit impaired loans: Related loan balance | 4,554 | 4,554 | 5,373 | ||
Individually evaluated for impairment: Balance in allowance | 771 | 771 | 572 | ||
Individually evaluated for impairment: Related loan balance | 12,434 | 12,434 | 14,078 | ||
Collectively evaluated for impairment: Balance in allowance | 10,625 | 10,625 | 6,732 | ||
Collectively evaluated for impairment: Related loan balance | 1,037,551 | 1,037,551 | 974,537 | ||
Unamortized discounts on acquired loans | 4,100 | 4,100 | 6,100 | ||
Non-accrual loans | |||||
Loans past due 90 days or more still accruing interest | 286 | 286 | 5 | ||
PPP Loans | |||||
Paycheck Protection Program | |||||
Loans funded | $ 64,200 | $ 64,200 | |||
Number of customers through PPP | customer | 600 | 600 | |||
Real Estate Mortgage | Construction and Land Development | |||||
Allowance for credit losses | |||||
Beginning Balance | $ 898 | 575 | $ 602 | 647 | 647 |
Charge-offs | (11) | ||||
Recoveries | 5 | 1 | 9 | ||
Provisions for credit losses | 9 | 15 | 304 | (50) | |
Ending Balance | 907 | 595 | 907 | 595 | 602 |
Purchased credit impaired loans: Related loan balance | 44 | 44 | 44 | ||
Individually evaluated for impairment: Related loan balance | 176 | 176 | 177 | ||
Collectively evaluated for impairment: Balance in allowance | 907 | 907 | 602 | ||
Collectively evaluated for impairment: Related loan balance | 73,973 | 73,973 | 84,530 | ||
Real Estate Mortgage | Residential Real Estate | |||||
Allowance for credit losses | |||||
Beginning Balance | 1,893 | 1,203 | 1,380 | 1,521 | 1,521 |
Charge-offs | (25) | (193) | |||
Recoveries | 2 | 24 | 10 | 165 | |
Provisions for credit losses | 39 | 86 | 569 | (180) | |
Ending Balance | 1,934 | 1,313 | 1,934 | 1,313 | 1,380 |
Purchased credit impaired loans: Related loan balance | 1,855 | 1,855 | 1,986 | ||
Individually evaluated for impairment: Balance in allowance | 198 | 198 | 216 | ||
Individually evaluated for impairment: Related loan balance | 3,029 | 3,029 | 3,123 | ||
Collectively evaluated for impairment: Balance in allowance | 1,736 | 1,736 | 1,164 | ||
Collectively evaluated for impairment: Related loan balance | 196,895 | 196,895 | 204,177 | ||
Non-accrual loans | |||||
Loans past due 90 days or more still accruing interest | 286 | 286 | |||
Real Estate Mortgage | Nonresidential | |||||
Allowance for credit losses | |||||
Beginning Balance | 5,487 | 3,784 | 4,073 | 3,629 | 3,629 |
Charge-offs | (38) | (163) | (410) | ||
Recoveries | 6 | 80 | 10 | 88 | |
Provisions for credit losses | 682 | (66) | 2,217 | 491 | |
Ending Balance | 6,137 | 3,798 | 6,137 | 3,798 | 4,073 |
Purchased credit impaired loans: Related loan balance | 2,248 | 2,248 | 2,323 | ||
Individually evaluated for impairment: Balance in allowance | 23 | 23 | 82 | ||
Individually evaluated for impairment: Related loan balance | 8,690 | 8,690 | 9,504 | ||
Collectively evaluated for impairment: Balance in allowance | 6,114 | 6,114 | 3,991 | ||
Collectively evaluated for impairment: Related loan balance | 554,086 | 554,086 | 532,722 | ||
Real Estate Mortgage | Home Equity Loans | |||||
Allowance for credit losses | |||||
Beginning Balance | 184 | 144 | 142 | 122 | 122 |
Charge-offs | (13) | (4) | |||
Recoveries | 10 | ||||
Provisions for credit losses | 32 | 8 | 77 | 34 | |
Ending Balance | 216 | 152 | 216 | 152 | 142 |
Collectively evaluated for impairment: Balance in allowance | 216 | 216 | 142 | ||
Collectively evaluated for impairment: Related loan balance | 33,358 | 33,358 | 37,715 | ||
Commercial | |||||
Allowance for credit losses | |||||
Beginning Balance | 1,430 | 624 | 826 | 641 | 641 |
Charge-offs | (497) | (425) | (828) | (534) | |
Recoveries | 1 | 23 | 20 | 43 | |
Provisions for credit losses | 655 | 504 | 1,571 | 576 | |
Ending Balance | 1,589 | 726 | 1,589 | 726 | 826 |
Purchased credit impaired loans: Related loan balance | 407 | 407 | 1,020 | ||
Individually evaluated for impairment: Balance in allowance | 550 | 550 | 274 | ||
Individually evaluated for impairment: Related loan balance | 539 | 539 | 1,274 | ||
Collectively evaluated for impairment: Balance in allowance | 1,039 | 1,039 | 552 | ||
Collectively evaluated for impairment: Related loan balance | 174,142 | 174,142 | 109,703 | ||
Consumer and Other | |||||
Allowance for credit losses | |||||
Beginning Balance | 20 | 10 | 14 | 13 | 13 |
Charge-offs | (55) | (28) | (103) | (99) | |
Recoveries | 9 | 9 | 31 | 37 | |
Provisions for credit losses | 46 | 20 | 78 | 60 | |
Ending Balance | 20 | 11 | 20 | 11 | 14 |
Collectively evaluated for impairment: Balance in allowance | 20 | 20 | 14 | ||
Collectively evaluated for impairment: Related loan balance | 5,097 | 5,097 | 5,690 | ||
Non-accrual loans | |||||
Loans past due 90 days or more still accruing interest | 5 | ||||
Unallocated | |||||
Allowance for credit losses | |||||
Beginning Balance | 89 | 726 | 267 | 490 | 490 |
Provisions for credit losses | 504 | (267) | 326 | (31) | |
Ending Balance | 593 | $ 459 | 593 | $ 459 | 267 |
Collectively evaluated for impairment: Balance in allowance | $ 593 | $ 593 | $ 267 |
Loans, Allowance for Credit L_5
Loans, Allowance for Credit Losses and Impaired Loans - Loan by Risk Rating (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2019loan | Sep. 30, 2020USD ($)loan | Sep. 30, 2019loan | Dec. 31, 2019USD ($)loan | |
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | $ 1,054,539 | $ 993,988 | ||
Non-Accrual | $ 4,346 | $ 4,541 | ||
Number of TDR accounts | loan | 0 | 0 | ||
Number of loans modified during the period | loan | 1 | |||
Pre-modification recorded balance | $ 1,196 | |||
Post- modification recorded balance | $ 489 | |||
Number of loans modified as TDR that subsequently defaulted | loan | 1 | 0 | ||
Loan balance of defaulted loan modified as TDR | $ 1,200 | |||
Charge-off of defaulted loan | 707 | |||
Pass | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 1,042,614 | $ 983,737 | ||
Marginal | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 3,428 | |||
Substandard | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 8,497 | 10,251 | ||
Real Estate Mortgage | Construction and Land Development | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 74,193 | 84,751 | ||
Non-Accrual | 176 | 177 | ||
Real Estate Mortgage | Construction and Land Development | Pass | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 74,017 | 84,574 | ||
Real Estate Mortgage | Construction and Land Development | Substandard | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 176 | 177 | ||
Real Estate Mortgage | Residential Real Estate | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 201,779 | 209,286 | ||
Non-Accrual | $ 3,215 | $ 1,620 | ||
Number of loans in the process of foreclosure | loan | 2 | 3 | ||
Aggregate balances of loans in the process of foreclosure | $ 362 | $ 1,200 | ||
Real Estate Mortgage | Residential Real Estate | Pass | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 198,513 | 206,150 | ||
Real Estate Mortgage | Residential Real Estate | Substandard | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 3,266 | 3,136 | ||
Real Estate Mortgage | Nonresidential | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 565,024 | 544,549 | ||
Non-Accrual | 412 | 2,608 | ||
Real Estate Mortgage | Nonresidential | Pass | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 557,334 | 539,259 | ||
Real Estate Mortgage | Nonresidential | Marginal | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 3,339 | |||
Real Estate Mortgage | Nonresidential | Substandard | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 4,351 | 5,290 | ||
Real Estate Mortgage | Home Equity Loans | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 33,358 | 37,715 | ||
Non-Accrual | 54 | 5 | ||
Real Estate Mortgage | Home Equity Loans | Pass | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 33,304 | 37,715 | ||
Real Estate Mortgage | Home Equity Loans | Substandard | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 54 | |||
Commercial | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 175,088 | 111,997 | ||
Non-Accrual | $ 489 | 131 | ||
Number of loans modified during the period | loan | 1 | |||
Pre-modification recorded balance | $ 1,196 | |||
Post- modification recorded balance | 489 | |||
Commercial | Pass | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 174,349 | 110,349 | ||
Commercial | Marginal | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 89 | |||
Commercial | Substandard | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 650 | 1,648 | ||
Consumer and Other | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | 5,097 | 5,690 | ||
Consumer and Other | Pass | ||||
Loans by risk rating | ||||
Loans and leases receivable net of unamortized discount | $ 5,097 | $ 5,690 |
Loans, Allowance for Credit L_6
Loans, Allowance for Credit Losses and Impaired Loans - Aging (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Past due financing receivables | ||
Total Past Due | $ 5,312 | $ 7,430 |
Current Balance | 1,049,227 | 986,558 |
Total Financing Receivables | 1,054,539 | 993,988 |
Recorded Investment >90 Days Past Due and Accruing | 286 | 5 |
Non-accrual loans | 4,346 | 4,541 |
Unamortized discounts on acquired loans | 4,100 | 6,100 |
30-59 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 1,562 | 2,587 |
Non-accrual loans | 901 | 956 |
60-89 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 1,006 | 2,047 |
Non-accrual loans | 81 | |
Greater than 90 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 2,744 | 2,796 |
Non-accrual loans | 2,500 | 2,600 |
Real Estate Mortgage | Construction and Land Development | ||
Past due financing receivables | ||
Total Past Due | 242 | 601 |
Current Balance | 73,951 | 84,150 |
Total Financing Receivables | 74,193 | 84,751 |
Non-accrual loans | 176 | 177 |
Real Estate Mortgage | Construction and Land Development | 30-59 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 66 | 424 |
Real Estate Mortgage | Construction and Land Development | Greater than 90 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 176 | 177 |
Real Estate Mortgage | Residential Real Estate | ||
Past due financing receivables | ||
Total Past Due | 1,940 | 2,675 |
Current Balance | 199,839 | 206,611 |
Total Financing Receivables | 201,779 | 209,286 |
Recorded Investment >90 Days Past Due and Accruing | 286 | |
Non-accrual loans | 3,215 | 1,620 |
Real Estate Mortgage | Residential Real Estate | 30-59 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 1,157 | 1,296 |
Real Estate Mortgage | Residential Real Estate | 60-89 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 85 | 677 |
Real Estate Mortgage | Residential Real Estate | Greater than 90 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 698 | 702 |
Real Estate Mortgage | Nonresidential | ||
Past due financing receivables | ||
Total Past Due | 2,405 | 2,602 |
Current Balance | 562,619 | 541,947 |
Total Financing Receivables | 565,024 | 544,549 |
Non-accrual loans | 412 | 2,608 |
Real Estate Mortgage | Nonresidential | 30-59 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 207 | 635 |
Real Estate Mortgage | Nonresidential | 60-89 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 871 | 144 |
Real Estate Mortgage | Nonresidential | Greater than 90 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 1,327 | 1,823 |
Real Estate Mortgage | Home Equity Loans | ||
Past due financing receivables | ||
Total Past Due | 54 | |
Current Balance | 33,304 | 37,715 |
Total Financing Receivables | 33,358 | 37,715 |
Non-accrual loans | 54 | 5 |
Real Estate Mortgage | Home Equity Loans | Greater than 90 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 54 | |
Commercial | ||
Past due financing receivables | ||
Total Past Due | 668 | 1,532 |
Current Balance | 174,420 | 110,465 |
Total Financing Receivables | 175,088 | 111,997 |
Non-accrual loans | 489 | 131 |
Commercial | 30-59 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 129 | 231 |
Commercial | 60-89 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 50 | 1,207 |
Commercial | Greater than 90 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | 489 | 94 |
Consumer and Other | ||
Past due financing receivables | ||
Total Past Due | 3 | 20 |
Current Balance | 5,094 | 5,670 |
Total Financing Receivables | 5,097 | 5,690 |
Recorded Investment >90 Days Past Due and Accruing | 5 | |
Consumer and Other | 30-59 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | $ 3 | 1 |
Consumer and Other | 60-89 Days Past Due | ||
Past due financing receivables | ||
Total Past Due | $ 19 |
Loans, Allowance for Credit L_7
Loans, Allowance for Credit Losses and Impaired Loans - Impaired loans (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Impaired loans | ||
Impaired loans with specific reserves - Recorded Investment | $ 3,783 | $ 4,457 |
Impaired loans with specific reserves - Unpaid Principal Balance | 4,490 | 4,457 |
Impaired loans with specific reserves - Interest Income Recognized | 172 | 313 |
Impaired loans with specific reserves - Specific Reserve | 771 | 572 |
Impaired loans with specific reserves - Average Recorded Investment | 4,120 | 5,862 |
Impaired loans with no specific reserves - Recorded Investment | 8,651 | 9,621 |
Impaired loans with no specific reserves - Unpaid Principal Balance | 8,802 | 10,572 |
Impaired loans with no specific reserves - Interest Income Recognized | 378 | 633 |
Impaired loans with no specific reserves - Average Recorded Investment | 9,137 | 15,019 |
Impaired loans specific reserves - Recorded Investment | 12,434 | 14,078 |
Impaired loans specific reserves - Unpaid Principal Balance | 13,292 | 15,029 |
Impaired loans specific reserves - Interest Income Recognized | 550 | 946 |
Impaired loans specific reserves - Average Recorded Investment | 13,257 | 20,881 |
Loans | ||
Carrying amount | 1,054,539 | 993,988 |
Unamortized discounts on acquired loans | 4,100 | 6,100 |
PCI loans | ||
Loans | ||
Carrying amount | 4,554 | 5,373 |
Unamortized discounts on acquired loans | 642 | 1,100 |
Real Estate Mortgage | Construction and Land Development | ||
Impaired loans | ||
Impaired loans with no specific reserves - Recorded Investment | 176 | 177 |
Impaired loans with no specific reserves - Unpaid Principal Balance | 176 | 177 |
Impaired loans with no specific reserves - Average Recorded Investment | 176 | 198 |
Loans | ||
Carrying amount | 74,193 | 84,751 |
Real Estate Mortgage | Residential Real Estate | ||
Impaired loans | ||
Impaired loans with specific reserves - Recorded Investment | 938 | 727 |
Impaired loans with specific reserves - Unpaid Principal Balance | 938 | 727 |
Impaired loans with specific reserves - Interest Income Recognized | 5 | |
Impaired loans with specific reserves - Specific Reserve | 198 | 216 |
Impaired loans with specific reserves - Average Recorded Investment | 833 | 2,337 |
Impaired loans with no specific reserves - Recorded Investment | 2,091 | 2,396 |
Impaired loans with no specific reserves - Unpaid Principal Balance | 2,141 | 3,069 |
Impaired loans with no specific reserves - Interest Income Recognized | 76 | 132 |
Impaired loans with no specific reserves - Average Recorded Investment | 2,244 | 3,733 |
Loans | ||
Carrying amount | 201,779 | 209,286 |
Real Estate Mortgage | Nonresidential | ||
Impaired loans | ||
Impaired loans with specific reserves - Recorded Investment | 2,306 | 2,456 |
Impaired loans with specific reserves - Unpaid Principal Balance | 2,306 | 2,456 |
Impaired loans with specific reserves - Interest Income Recognized | 155 | 260 |
Impaired loans with specific reserves - Specific Reserve | 23 | 82 |
Impaired loans with specific reserves - Average Recorded Investment | 2,381 | 2,866 |
Impaired loans with no specific reserves - Recorded Investment | 6,384 | 7,048 |
Impaired loans with no specific reserves - Unpaid Principal Balance | 6,485 | 7,326 |
Impaired loans with no specific reserves - Interest Income Recognized | 302 | 501 |
Impaired loans with no specific reserves - Average Recorded Investment | 6,717 | 9,839 |
Loans | ||
Carrying amount | 565,024 | 544,549 |
Real Estate Mortgage | Home Equity Loans | ||
Impaired loans | ||
Impaired loans with no specific reserves - Average Recorded Investment | 347 | |
Loans | ||
Carrying amount | 33,358 | 37,715 |
Commercial | ||
Impaired loans | ||
Impaired loans with specific reserves - Recorded Investment | 539 | 1,274 |
Impaired loans with specific reserves - Unpaid Principal Balance | 1,246 | 1,274 |
Impaired loans with specific reserves - Interest Income Recognized | 12 | 53 |
Impaired loans with specific reserves - Specific Reserve | 550 | 274 |
Impaired loans with specific reserves - Average Recorded Investment | 906 | 659 |
Impaired loans with no specific reserves - Average Recorded Investment | 902 | |
Loans | ||
Carrying amount | 175,088 | 111,997 |
Consumer and Other | ||
Loans | ||
Carrying amount | $ 5,097 | $ 5,690 |
Loans, Allowance for Credit L_8
Loans, Allowance for Credit Losses and Impaired Loans - Acquired loans (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Acquired loans | ||
Carrying amount | $ 1,054,539 | $ 993,988 |
Acquired Loans | ||
Acquired loans | ||
Outstanding balance | 339,369 | 437,137 |
Carrying amount | 335,023 | 431,003 |
PCI loans | ||
Acquired loans | ||
Outstanding balance | 5,196 | 6,426 |
Carrying amount | 4,554 | 5,373 |
Non PCI loans | ||
Acquired loans | ||
Outstanding balance | 334,173 | 430,711 |
Carrying amount | $ 330,469 | $ 425,630 |
Loans, Allowance for Credit L_9
Loans, Allowance for Credit Losses and Impaired Loans - Accretable Yield (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
PCI loans | |||||
Changes in accretable yield under ASC 310-20: | |||||
Accretion | $ (54) | $ (24) | $ (180) | $ (80) | |
Non-accretable yield on purchased credit impaired loans | 1,600 | 1,600 | $ 1,600 | ||
Non PCI loans | |||||
Changes in accretable yield under ASC 310-20: | |||||
Balance at beginning of period | 5,081 | $ 745 | 745 | ||
Acquisitions | 4,990 | ||||
Accretion | (1,376) | (654) | |||
Other changes, net | (1) | ||||
Balance at end of period | $ 3,704 | $ 3,704 | $ 5,081 |
Loans, Allowance for Credit _10
Loans, Allowance for Credit Losses and Impaired Loans - Related Party Loans (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Loans, Allowance for Credit Losses and Impaired Loans | ||
Commitments to loan additional funds | $ 0 | $ 0 |
Borrowings and Notes Payable -
Borrowings and Notes Payable - Federal Home Loan Bank Advances (Details) - Federal Home Loan Bank of Atlanta - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Advances from Federal Home Loan Banks | ||
Credit facility from FHLB | $ 373,800 | |
Remaining credit availability | 299,500 | |
Outstanding Balance | 74,336 | $ 96,830 |
Average short-term borrowings | 42,400 | 9,300 |
Principal balances outstanding on pledged loans | 215,000 | 223,500 |
FHLB 2.09% Fixed Rate Hybrid Advance Maturing June 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 15,000 | |
Interest rate | 2.09% | |
FHLB 0.22% Fixed Rate Hybrid Advance Maturing July 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 12,000 | |
Interest rate | 0.24% | |
FHLB 0.19% Fixed Rate Hybrid Advance 1 Maturing July 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 6,000 | |
Interest rate | 0.19% | |
FHLB 0.19% Fixed Rate Hybrid Advance 2 Maturing July 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 3,200 | |
Interest rate | 0.19% | |
FHLB 3.04% Fixed Rate Hybrid Advance Maturing November 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 5,000 | $ 5,000 |
Interest rate | 3.04% | 3.04% |
FHLB 2.91% Fixed Rate Hybrid Advance Maturing November 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 5,000 | $ 5,000 |
Interest rate | 2.91% | 2.91% |
FHLB 2.44% Fixed Rate Hybrid Advance Maturing April 2021 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 6,000 | $ 6,000 |
Interest rate | 2.44% | 2.44% |
FHLB 2.68% Convertible Rate Advance Maturing May 2021 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 10,000 | $ 10,000 |
Interest rate | 2.68% | 2.68% |
FHLB 3.15% Fixed Rate Hybrid Advance Maturing October 2022 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 5,000 | $ 5,000 |
Interest rate | 3.15% | 3.15% |
FHLB 1.62% Principal Reducing Credit Advance Maturing March 2023 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 1,071 | $ 1,393 |
Interest rate | 1.62% | 1.62% |
FHLB 1.29% Fixed Rate Hybrid Advance 1 Maturing March 2024 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 9,900 | |
Interest rate | 1.29% | |
FHLB 1.29% Fixed Rate Hybrid Advance 2 Maturing March 2024 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 9,900 | |
Interest rate | 1.29% | |
FHLB 1.99% Principal Reducing Credit Advance Maturing March 2026 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 1,265 | $ 1,437 |
Interest rate | 1.99% | 1.99% |
FHLB 1.73% Fixed Rate Advance Maturing January 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 12,000 | |
Interest rate | 1.73% | |
FHLB 1.76% Fixed Rate Advance Maturing January 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 4,500 | |
Interest rate | 1.76% | |
FHLB 1.68% Fixed Rate Advance 1 Maturing January 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 7,600 | |
Interest rate | 1.68% | |
FHLB 1.68% Fixed Rate Advance 2 Maturing January 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 7,700 | |
Interest rate | 1.68% | |
FHLB 1.70% Fixed Rate Advance 1 Maturing January 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 6,000 | |
Interest rate | 1.70% | |
FHLB 1.70% Fixed Rate Advance 2 Maturing January 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 7,000 | |
Interest rate | 1.70% | |
FHLB 1.71% Fixed Rate Advance Maturing January 2020 | ||
Advances from Federal Home Loan Banks | ||
Outstanding Balance | $ 3,200 | |
Interest rate | 1.71% |
Borrowings and Notes Payable _2
Borrowings and Notes Payable - Subordinated Loans (Details) - USD ($) $ in Millions | 1 Months Ended | ||
Jun. 30, 2020 | Jan. 31, 2018 | Oct. 31, 2015 | |
Subordinated loan maturing October 2025 | |||
Long-Term Obligations | |||
Aggregate principal amount | $ 2 | ||
Interest rate | 6.71% | ||
Subordinated loan maturing April 2028 | |||
Long-Term Obligations | |||
Aggregate principal amount | $ 4.5 | ||
Interest rate | 6.875% | ||
Subordinated Loan Maturing July 2030 | |||
Long-Term Obligations | |||
Aggregate principal amount | $ 17.6 | ||
Interest rate | 6.00% | ||
Subordinated Loan Maturing July 2030 | 3-month SOFR | |||
Long-Term Obligations | |||
Basis spread on variable rate effective after July 1, 2030 | 5.90% |
Borrowings and Notes Payable _3
Borrowings and Notes Payable - Partners Bank Debt (Details) - Virginia Partners Bank - USD ($) $ in Thousands | Apr. 30, 2015 | Dec. 14, 2012 | Sep. 30, 2020 |
Deed of Trust Loan | |||
Long-Term Obligations | |||
Amortization period | 25 years | ||
Interest rate | 3.60% | ||
Period contractual interest rate remains fixed | 10 years | ||
Deed of Trust Loan | 10 Year US Treasury (UST) Interest Rate | |||
Long-Term Obligations | |||
Basis spread on variable rate | 3.00% | ||
410 William Street, Fredericksburg, VA | |||
Long-Term Obligations | |||
Ownership percentage | 50.00% | ||
Ownership percentage acquired | 50.00% | ||
410 William Street, Fredericksburg, VA | Deed of Trust Loan | |||
Long-Term Obligations | |||
Indemnification of debt obligations | $ 886 | ||
Outstanding debt balance | $ 660 |
Borrowings and Notes Payable _4
Borrowings and Notes Payable - Secured Credit Facility (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Credit Facilities | |||||
Interest expense | $ 3,104 | $ 1,991 | $ 9,384 | $ 5,662 | |
Secured Credit | |||||
Credit Facilities | |||||
Maximum borrowing capacity | 5,000 | 5,000 | |||
Borrowing outstanding | 0 | 0 | $ 0 | ||
Secured Credit | Collateral Pledged | |||||
Credit Facilities | |||||
Amortized cost | 10,000 | 10,000 | 9,100 | ||
Fair value | 10,400 | 10,400 | 9,200 | ||
Unsecured Credit | |||||
Credit Facilities | |||||
Maximum borrowing capacity | 59,000 | 59,000 | |||
Borrowing outstanding | 0 | 0 | 0 | ||
Federal Reserve Bank Discount Window | |||||
Credit Facilities | |||||
Borrowing outstanding | 0 | 0 | 0 | ||
Federal Reserve Bank Discount Window | Collateral Pledged | |||||
Credit Facilities | |||||
Amortized cost | 2,400 | 2,400 | |||
Fair value | 2,500 | 2,500 | |||
Combined amortized cost and fair value | 2,300 | ||||
Paycheck Protection Program Liquidity Fund (PPPLF) | |||||
Credit Facilities | |||||
Maximum borrowing capacity | 64,200 | 64,200 | |||
Borrowing outstanding | $ 64,200 | $ 64,200 | |||
Fixed interest rate | 0.35% | 0.35% | |||
Johnson Mortgage Company LLC | Secured Credit | |||||
Credit Facilities | |||||
Maximum borrowing capacity | $ 3,000 | $ 3,000 | |||
Borrowing outstanding | 615 | 615 | $ 576 | ||
Interest expense | $ 32 | $ 83 | |||
Johnson Mortgage Company LLC | Secured Credit | LIBOR | |||||
Credit Facilities | |||||
Variable rate basis | one month LIBOR | ||||
Basis spread on variable rate | 2.25% | ||||
Rounding factor for effective interest rate | 0.125% | ||||
Effective interest rate | 2.75% | 2.75% | 4.00% |
Borrowings and Notes Payable _5
Borrowings and Notes Payable - Maturities (Details) $ in Thousands | Sep. 30, 2020USD ($) |
Maturities on debt | |
2020 | $ 31,357 |
2021 | 17,244 |
2022 | 66,246 |
2023 | 310 |
2024 | $ 48,743 |
Lease Commitments - Lease Infor
Lease Commitments - Lease Information (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020USD ($)lease | Jan. 01, 2019USD ($) | |
Leases | ||
Lease, Practical Expedients, Package | true | |
Lease, Practical Expedient, Use of Hindsight | true | |
Number of lease locations | lease | 18 | |
Number of operating leases | lease | 16 | |
Number of finance leases | lease | 2 | |
Options to renew | true | |
Renewal term of the lease | 5 years | |
ASU 2016-02 | Restatement Adjustment | ||
Leases | ||
Right-of-use asset | $ | $ 3,600 | |
Lease liability | $ | $ 3,600 | |
Maximum | ||
Leases | ||
Initial term of leases not recorded on the balance sheet | 12 months | |
Threshold of discounted present value of future cash flows below which a lease is not recorded on the balance sheet | $ | $ 25 | |
Term of lease including available lease renewal options | 15 years |
Lease Commitments - Supplementa
Lease Commitments - Supplemental Lease Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | |
Balance Sheet | |||
Right-of-use asset, operating lease | $ 3,958 | $ 3,958 | $ 4,504 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Property, Plant and Equipment, Net | Property, Plant and Equipment, Net | |
Lease liability, operating lease | $ 4,267 | $ 4,267 | 4,797 |
Operating Lease, Liability, Statement of Financial Position [Extensible List] | Other Liabilities | Other Liabilities | |
Right-of-use asset, finance lease | $ 1,858 | $ 1,858 | 1,961 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Property, Plant and Equipment, Net | Property, Plant and Equipment, Net | |
Lease Liabilities | $ 2,270 | $ 2,270 | $ 2,355 |
Finance Lease, Liability, Statement of Financial Position [Extensible List] | Other Liabilities | Other Liabilities | |
Lease cost information | |||
Weighted average lease term - Operating Leases | 8 years 5 months 9 days | 8 years 5 months 9 days | |
Weighted average lease term - Finance Leases | 13 years 4 months 2 days | 13 years 4 months 2 days | |
Weighted average discount rate - Operating Leases | 2.83% | 2.83% | |
Weighted average discount rate - Finance Leases | 2.84% | 2.84% | |
Operating outgoing cash flows from operating leases | $ 625 | ||
Operating outgoing cash flows from finance leases | 134 | ||
Premises and Equipment | |||
Income Statement | |||
Operating lease cost classified as premises and equipment | $ 223 | 658 | |
Interest expense - Borrowings | |||
Income Statement | |||
Finance lease cost classified as interest on borrowings | $ 16 | $ 49 |
Lease Commitments - Maturities
Lease Commitments - Maturities of lease Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Operating Leases: | ||
One year or less | $ 668 | |
One to three years | 1,189 | |
Three to five years | 1,071 | |
Over 5 years | 1,968 | |
Total undiscounted cash flows | 4,896 | |
Less: Discount | (629) | |
Operating lease liabilities | 4,267 | $ 4,797 |
Finance Leases: | ||
One year or less | 178 | |
One to three years | 363 | |
Three to five years | 393 | |
Over 5 years | 1,824 | |
Total undiscounted cash flows | 2,758 | |
Less: Discount | (488) | |
Lease Liabilities | $ 2,270 | $ 2,355 |
Stock Option Plans - Partners B
Stock Option Plans - Partners Bancorp Stock Option Plan (Details) - Delmar 2004 Stock Option Plan - Stock options | 9 Months Ended |
Sep. 30, 2020shares | |
Equity Compensation | |
Contractual life | 10 years |
Vesting period (in years) | 4 years |
Options available to be granted | 0 |
Stock Option Plans - Liberty Be
Stock Option Plans - Liberty Bell Stock Option Plan (Details) - Liberty 2004 Stock Option Plan - Stock options | 1 Months Ended | 9 Months Ended | |
Jul. 31, 2017$ / sharesshares | Sep. 30, 2020USD ($)$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | |
Equity Compensation | |||
Contractual life | 10 years | ||
Vesting period (in years) | 5 years | ||
Conversion ratio, stock based compensation | 0.2857 | ||
Number of options converted | shares | 48,225 | ||
Exercise price of option converted | $ 1.18 | ||
Number of options outstanding after conversion | shares | 13,771 | ||
Average price | $ 4.14 | ||
Employees | |||
Equity Compensation | |||
Exercise price of option exercised | $ 4.14 | ||
Shares | shares | 2,355 | 2,355 | |
Average price | $ 4.14 | $ 4.14 | |
Exercised in 2020 (Per share) | $ 4.14 | ||
Amount | $ | $ 9,750 | $ 9,750 | |
Directors | |||
Equity Compensation | |||
Number of options exercised | shares | 1,028 | ||
Exercise price of option exercised | $ 4.14 | ||
Shares | shares | 5,326 | 6,354 | |
Exercised in 2020 (Shares) | shares | (1,028) | ||
Average price | $ 4.14 | $ 4.14 | |
Exercised in 2020 (Per share) | $ 4.14 | ||
Amount | $ | $ 22,051 | $ 26,307 | |
Exercised in 2020 (in dollars) | $ | $ (4,256) |
Stock Option Plans - Virginia P
Stock Option Plans - Virginia Partners Stock Option Plan Information (Details) - Virginia Partners Stock Option Plan - Stock options | Nov. 15, 2019$ / sharesshares | Sep. 30, 2020$ / shares | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2015 | Dec. 31, 2019$ / shares |
Equity Compensation | ||||||
Vesting period (in years) | 3 years | 3 years | ||||
Percentage of options vesting at the merger | 100.00% | |||||
Number of options converted | shares | 149,200 | |||||
Exercise price of option converted | $ / shares | $ 10.52 | |||||
Number of options outstanding after conversion | shares | 256,294 | |||||
Exercise price of option outstanding | $ / shares | $ 6.13 | $ 6.17 | $ 6.14 | |||
Conversion ratio, stock based compensation | 1.7179 | |||||
Maximum | ||||||
Equity Compensation | ||||||
Contractual life | 10 years |
Stock Option Plans - Virginia_2
Stock Option Plans - Virginia Partners Stock Option Activity (Details) - Virginia Partners Stock Option Plan - Stock options - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Outstanding shares | ||
Outstanding at the beginning of year | 247,705 | |
Exercised | (16,147) | |
Forfeited | (8,589) | |
Outstanding at the end of year | 222,969 | 247,705 |
Options exercisable at end of year | 222,969 | |
Weighted Average Exercise Price | ||
Balance at the beginning of year | $ 6.14 | |
Exercised in 2020 (Per share) | 5.83 | |
Forfeited | 5.83 | |
Balance at the end of year | 6.17 | $ 6.14 |
Options exercisable at end of year | $ 6.17 | |
Weighted-Average Remaining Contractual Life | ||
Outstanding at end of year | 3 years 4 months 2 days | 3 years 9 months 22 days |
Intrinsic value, Balance at the end of year | $ 121,207 |
Restricted Stock Plan (Details)
Restricted Stock Plan (Details) - Restricted stock plan - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Stock options | ||||
Shares reserved for issuance | 405,805 | 405,805 | ||
Weighted Average Grant Date Fair Value | ||||
Stock-based compensation expense recognized | $ 6 | $ 17 | $ 6 | $ 17 |
Stock based compensation expense, net of tax | 4 | $ 12 | 4 | $ 12 |
Total unrecognized compensation cost related to non-vested restricted stock units | $ 31 | $ 31 | ||
Weighted-average period over which unrecognized compensation cost will be recognized | 5 months | |||
Employees | ||||
Shares | ||||
Non-vested balance at beginning of period (in shares) | 6,000 | |||
Vested (in shares) | (3,000) | |||
Non-vested balance at end of period (in shares) | 3,000 | 3,000 | ||
Weighted Average Grant Date Fair Value | ||||
Non-vested balance at beginning of period (in dollars per share) | $ 7.30 | |||
Vested (in dollars per share) | 7.30 | |||
Non-vested balance at end of period (in dollars per share) | $ 7.30 | $ 7.30 |
Earnings Per Share - Basic and
Earnings Per Share - Basic and Diluted Earnings (Loss) per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Basic EPS | ||||
Net Income Applicable to Basic Earnings Per Common Share | $ 1,118 | $ 1,785 | $ 4,564 | $ 4,935 |
Weighted Average Shares Outstanding | 17,810,090 | 9,985,321 | 17,808,212 | 9,985,321 |
Basic EPS | $ 0.063 | $ 0.179 | $ 0.256 | $ 0.494 |
Effect of dilutive securities: | ||||
Effect of dilutive stock awards, shares | 8,102 | 14,358 | 30,159 | 14,290 |
Effect of dilutive stock awards, per share | $ (0.001) | |||
Diluted EPS | ||||
Net Income Applicable to Basic Earnings Per Common Share | $ 1,118 | $ 1,785 | $ 4,564 | $ 4,935 |
Weighted Average Shares Outstanding | 17,818,192 | 9,999,679 | 17,838,371 | 9,999,611 |
Diluted EPS | $ 0.063 | $ 0.178 | $ 0.256 | $ 0.494 |
Regulatory Capital Requiremen_3
Regulatory Capital Requirements (Details) - FDIC | 9 Months Ended |
Sep. 30, 2020 | |
Minimum | |
Regulatory Capital Requirements | |
Common Equity Tier 1 Capital (to risk weighted assets), ratio (as a percent) | 4.50% |
Tier 1 Capital (to risk weighted assets), ratio (as a percent) | 6.00% |
Total Capital (to risk weighted assets), ratio (as a percent) | 8.00% |
Tier 1 Leverage ratio (as a percent) | 4.00% |
Basel III Capital Rules | |
Regulatory Capital Requirements | |
Capital conservation buffer ratio | 2.50% |
Capital conservation buffer ratio annual increment during phase-in period | 0.625% |
Implementation period of capital conservation buffer requirement | 4 years |
Basel III Capital Rules | Minimum | |
Regulatory Capital Requirements | |
Common Equity Tier 1 Capital (to risk weighted assets), ratio (as a percent) | 7.00% |
Tier 1 Capital (to risk weighted assets), ratio (as a percent) | 8.50% |
Total Capital (to risk weighted assets), ratio (as a percent) | 10.50% |
Regulatory Capital Requiremen_4
Regulatory Capital Requirements - Bank's capital amounts (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
The Bank of Delmarva | ||
Total Capital Ratio (To Risk Weighted Assets) | ||
Actual | $ 81,828 | $ 79,080 |
Actual, ratio | 12.80% | 12.70% |
For Capital Adequacy Purposes | $ 67,195 | $ 65,132 |
For Capital Adequacy Purposes, ratio | 10.50% | 10.50% |
To Be Well Capitalized Under Prompt Corrective Action Provisions | $ 63,995 | $ 62,030 |
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio | 10.00% | 10.00% |
Tier I Capital Ratio (To Risk Weighted Assets) | ||
Actual | $ 73,802 | $ 71,752 |
Actual, ratio | 11.50% | 11.60% |
For Capital Adequacy Purposes | $ 54,396 | $ 52,726 |
For Capital Adequacy Purposes, ratio | 8.50% | 8.50% |
To Be Well Capitalized Under Prompt Corrective Action Provisions | $ 51,196 | $ 49,624 |
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio | 8.00% | 8.00% |
Common Equity Tier I Ratio (To Risk Weighted Assets) | ||
Actual | $ 73,802 | $ 71,752 |
Actual, ratio | 11.50% | 11.60% |
For Capital Adequacy Purposes | $ 44,796 | $ 43,421 |
For Capital Adequacy Purposes, ratio | 7.00% | 7.00% |
To Be Well Capitalized Under Prompt Corrective Action Provisions | $ 41,597 | $ 40,320 |
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio | 6.50% | 6.50% |
Tier I Leverage Ratio (To Average Assets) | ||
Actual | $ 73,802 | $ 71,752 |
Actual, ratio | 8.00% | 9.10% |
For Capital Adequacy Purposes | $ 37,081 | $ 31,520 |
For Capital Adequacy Purposes, ratio | 4.00% | 4.00% |
To Be Well Capitalized Under Prompt Corrective Action Provisions | $ 46,352 | $ 39,399 |
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio | 5.00% | 5.00% |
Virginia Partners Bank | ||
Total Capital Ratio (To Risk Weighted Assets) | ||
Actual | $ 51,045 | $ 47,122 |
Actual, ratio | 13.00% | 12.50% |
For Capital Adequacy Purposes | $ 41,085 | $ 39,676 |
For Capital Adequacy Purposes, ratio | 10.50% | 10.50% |
To Be Well Capitalized Under Prompt Corrective Action Provisions | $ 39,129 | $ 37,787 |
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio | 10.00% | 10.00% |
Tier I Capital Ratio (To Risk Weighted Assets) | ||
Actual | $ 49,599 | $ 46,881 |
Actual, ratio | 12.70% | 12.40% |
For Capital Adequacy Purposes | $ 33,259 | $ 32,119 |
For Capital Adequacy Purposes, ratio | 8.50% | 8.50% |
To Be Well Capitalized Under Prompt Corrective Action Provisions | $ 31,303 | $ 30,230 |
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio | 8.00% | 8.00% |
Common Equity Tier I Ratio (To Risk Weighted Assets) | ||
Actual | $ 49,599 | $ 46,881 |
Actual, ratio | 12.70% | 12.40% |
For Capital Adequacy Purposes | $ 27,390 | $ 26,451 |
For Capital Adequacy Purposes, ratio | 7.00% | 7.00% |
To Be Well Capitalized Under Prompt Corrective Action Provisions | $ 25,434 | $ 24,562 |
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio | 6.50% | 6.50% |
Tier I Leverage Ratio (To Average Assets) | ||
Actual | $ 49,599 | $ 46,881 |
Actual, ratio | 9.50% | 10.40% |
For Capital Adequacy Purposes | $ 20,797 | $ 18,093 |
For Capital Adequacy Purposes, ratio | 4.00% | 4.00% |
To Be Well Capitalized Under Prompt Corrective Action Provisions | $ 25,997 | $ 22,616 |
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio | 5.00% | 5.00% |
Fair Values of Financial Inst_3
Fair Values of Financial Instruments - Estimated Fair Value and Related Carrying Values of Financial Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Financial assets: | ||
Restricted stock | $ 4,421 | $ 5,311 |
Bank owned life insurance | 14,747 | 7,817 |
Other real estate owned | 2,796 | 2,417 |
Financial liabilities: | ||
Subordinated notes payable | 24,089 | 6,435 |
Other borrowings | 65,475 | 1,249 |
Carrying Amount | ||
Financial assets: | ||
Cash and due from banks | 220,612 | 36,295 |
Interest bearing deposits | 34,334 | 27,586 |
Federal funds sold | 34,345 | 31,230 |
Securities: Available for sale | 128,011 | 104,321 |
Loans held for sale | 7,765 | 3,555 |
Loans, net of allowance for credit losses | 1,043,143 | 986,684 |
Accrued interest receivable | 6,254 | 3,138 |
Restricted stock | 4,421 | 5,311 |
Other investments | 6,734 | 4,773 |
Bank owned life insurance | 14,747 | 7,817 |
Other real estate owned | 2,796 | 2,417 |
Financial liabilities: | ||
Deposits | 1,234,926 | 1,006,781 |
Accrued interest payable | 448 | 572 |
FHLB advances | 74,336 | 96,830 |
Subordinated notes payable | 24,089 | 6,435 |
Other borrowings | 65,475 | 1,249 |
Estimated Fair Value | ||
Financial assets: | ||
Cash and due from banks | 220,612 | 36,295 |
Interest bearing deposits | 34,334 | 27,586 |
Federal funds sold | 34,345 | 31,230 |
Securities: Available for sale | 128,011 | 104,321 |
Loans held for sale | 7,765 | 3,555 |
Loans, net of allowance for credit losses | 1,041,511 | 976,636 |
Accrued interest receivable | 6,254 | 3,138 |
Restricted stock | 4,421 | 5,311 |
Other investments | 6,734 | 4,773 |
Bank owned life insurance | 14,747 | 7,817 |
Other real estate owned | 2,796 | 2,417 |
Financial liabilities: | ||
Deposits | 1,243,447 | 1,008,842 |
Accrued interest payable | 448 | 572 |
FHLB advances | 76,025 | 97,248 |
Subordinated notes payable | 36,461 | 9,006 |
Other borrowings | 65,475 | 1,249 |
Level 1 | Estimated Fair Value | ||
Financial assets: | ||
Cash and due from banks | 220,612 | 36,295 |
Interest bearing deposits | 34,334 | 27,586 |
Federal funds sold | 34,345 | 31,230 |
Level 2 | Estimated Fair Value | ||
Financial assets: | ||
Securities: Available for sale | 128,011 | 104,321 |
Loans held for sale | 7,765 | 3,555 |
Accrued interest receivable | 6,254 | 3,138 |
Restricted stock | 4,421 | 5,311 |
Other investments | 6,734 | 4,773 |
Bank owned life insurance | 14,747 | 7,817 |
Financial liabilities: | ||
Deposits | 1,243,447 | 1,008,842 |
Accrued interest payable | 448 | 572 |
FHLB advances | 76,025 | 97,248 |
Subordinated notes payable | 36,461 | 9,006 |
Level 3 | Estimated Fair Value | ||
Financial assets: | ||
Loans, net of allowance for credit losses | 1,041,511 | 976,636 |
Other real estate owned | 2,796 | 2,417 |
Financial liabilities: | ||
Other borrowings | $ 65,475 | $ 1,249 |
Fair Value Measurements - Recur
Fair Value Measurements - Recurring Basis (Details) - Measured on a recurring basis - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Securities available for sale: | ||
Total securities available for sale | $ 128,011 | $ 104,321 |
Obligations of U.S. Government agencies | ||
Securities available for sale: | ||
Total securities available for sale | 5,918 | 10,312 |
Obligations of States and political subdivisions | ||
Securities available for sale: | ||
Total securities available for sale | 38,487 | 34,558 |
Mortgage-backed securities | ||
Securities available for sale: | ||
Total securities available for sale | 80,046 | 56,421 |
Subordinated debt investments | ||
Securities available for sale: | ||
Total securities available for sale | 3,560 | 3,030 |
Level 2 | ||
Securities available for sale: | ||
Total securities available for sale | 128,011 | 104,321 |
Level 2 | Obligations of U.S. Government agencies | ||
Securities available for sale: | ||
Total securities available for sale | 5,918 | 10,312 |
Level 2 | Obligations of States and political subdivisions | ||
Securities available for sale: | ||
Total securities available for sale | 38,487 | 34,558 |
Level 2 | Mortgage-backed securities | ||
Securities available for sale: | ||
Total securities available for sale | 80,046 | 56,421 |
Level 2 | Subordinated debt investments | ||
Securities available for sale: | ||
Total securities available for sale | $ 3,560 | $ 3,030 |
Fair Value Measurements - Non-r
Fair Value Measurements - Non-recurring Basis (Details) - Fair Value, Nonrecurring $ in Thousands | Sep. 30, 2020USD ($) | Dec. 31, 2019USD ($) |
Securities available for sale: | ||
Fair Value, assets | $ 5,808 | $ 6,302 |
Impaired Loans | ||
Securities available for sale: | ||
Fair Value, assets | 3,012 | 3,885 |
OREO | ||
Securities available for sale: | ||
Fair Value, assets | 2,796 | 2,417 |
Level 3 | ||
Securities available for sale: | ||
Fair Value, assets | 5,808 | 6,302 |
Level 3 | Impaired Loans | ||
Securities available for sale: | ||
Fair Value, assets | $ 3,012 | $ 3,885 |
Debt Instrument, Measurement Input | 0.08 | 800 |
Debt Instrument, Valuation Technique [Extensible List] | us-gaap:ValuationTechniqueConsensusPricingModelMember | us-gaap:ValuationTechniqueConsensusPricingModelMember |
Debt Instrument, Measurement Input [Extensible List] | us-gaap:MeasurementInputAppraisedValueMember | us-gaap:MeasurementInputAppraisedValueMember |
Level 3 | OREO | ||
Securities available for sale: | ||
Fair Value, assets | $ 2,796 | $ 2,417 |
Other Real Estate Owned, Measurement Input | 0.08 | 800 |
Other Real Estate Owned, Valuation Technique [Extensible List] | us-gaap:ValuationTechniqueConsensusPricingModelMember | us-gaap:ValuationTechniqueConsensusPricingModelMember |
Other Real Estate Owned, Measurement Input [Extensible List] | us-gaap:MeasurementInputAppraisedValueMember | us-gaap:MeasurementInputAppraisedValueMember |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Changes in goodwill | ||
Balance at beginning of the period | $ 9,391 | $ 5,237 |
Balance at end of the period | 9,391 | 9,391 |
Virginia Partners Bank | ||
Changes in goodwill | ||
Partners acquisition | $ 4,154 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Core Deposit Intangible (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Changes in the core deposit intangible | |||||
Balance at the beginning of the period | $ 3,373 | ||||
Amortization | $ (177) | $ (76) | (540) | $ (226) | |
Balance at the end of the period | 2,833 | 2,833 | $ 3,373 | ||
Core deposit intangible | |||||
Changes in the core deposit intangible | |||||
Balance at the beginning of the period | 3,373 | $ 1,069 | 1,069 | ||
Amortization | (540) | (346) | |||
Balance at the end of the period | $ 2,833 | $ 2,833 | 3,373 | ||
Liberty Bell Bank | Core deposit intangible | |||||
Intangibles | |||||
Amortization period | 7 years | ||||
Virginia Partners Bank | Core deposit intangible | |||||
Intangibles | |||||
Amortization period | 120 months | ||||
Changes in the core deposit intangible | |||||
Partners acquisition | $ 2,650 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Core Deposit Intangible Amortization (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Remaining amortization | |||
2020 | $ 173 | ||
2021 | 600 | ||
2022 | 520 | ||
2023 | 467 | ||
2024 and thereafter | 1,073 | ||
Total | 2,833 | $ 3,373 | |
Core deposit intangible | |||
Remaining amortization | |||
Total | $ 2,833 | $ 3,373 | $ 1,069 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Deposits Purchased Premium and Discount (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Deposits Purchased Premium and Discount | ||
Balance at the end of the period | $ (28) | |
Deposits Purchased Premium (Discount) Net | ||
Deposits Purchased Premium and Discount | ||
Accretion period | 5 years | |
Balance at the beginning of the period | $ (31) | $ 27 |
Amortization, net | 3 | (20) |
Balance at the end of the period | $ (28) | (31) |
Virginia Partners Bank | Deposits Purchased Premium (Discount) Net | ||
Deposits Purchased Premium and Discount | ||
Partners acquisition | $ (38) |
Goodwill and Intangible Asset_6
Goodwill and Intangible Assets - Deposits Purchased Premium and Discount, Amortization and Accretion (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Remaining accretion | |||
2020 | $ 5 | ||
2021 | 14 | ||
2022 | 6 | ||
2023 | 2 | ||
2024 and thereafter | 1 | ||
Net deposit discount | 28 | ||
Deposits Purchased Premium (Discount) Net | |||
Remaining accretion | |||
Net deposit discount | $ 28 | $ 31 | $ (27) |
Goodwill and Intangible Asset_7
Goodwill and Intangible Assets - Effect of Acquisition Accounting Adjustments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Intangibles | ||||
Net impact of income before taxes | $ 127 | $ 34 | $ 843 | $ 127 |
Notes Payable | Interest expense - Borrowings | ||||
Intangibles | ||||
Net impact of income before taxes | (1) | (5) | ||
Core deposit intangible | ||||
Intangibles | ||||
Net impact of income before taxes | (177) | (76) | (540) | (227) |
Loans | Interest Income - Loans including fees | ||||
Intangibles | ||||
Net impact of income before taxes | 307 | 104 | 1,391 | 335 |
Time Deposits | Interest expense - Deposits | ||||
Intangibles | ||||
Net impact of income before taxes | $ (2) | $ 6 | $ (3) | $ 19 |
Virginia Partners Transaction -
Virginia Partners Transaction - Consideration Paid and Fair Value of Identifiable Assets Acquired and Liabilities Assumed (Details) $ in Thousands | Nov. 15, 2019USD ($)itemshares | Sep. 30, 2020USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) |
Liabilities assumed: | ||||
Goodwill | $ 9,391 | $ 9,391 | $ 5,237 | |
Virginia Partners Bank | ||||
Business combination | ||||
Conversion of common stock | shares | 1.7179 | |||
Number of new branches added | item | 3 | |||
Consideration paid: | ||||
Cash consideration | $ 2 | |||
Common stock issued in acquisition | 52,282 | |||
Stock options issued in acquisition (replacement awards) | 350 | |||
Total consideration paid | 52,634 | |||
Assets acquired: | ||||
Cash and cash equivalents | 6,743 | |||
Investment securities | 65,373 | |||
Investments in correspondent bank stock | 3,670 | |||
Loans | 357,127 | |||
Premises and equipment | 3,627 | |||
Accrued interest receivable | 1,155 | |||
Intangible assets | 2,650 | |||
Deferred tax asset | 1,239 | |||
Other assets | 12,584 | |||
Total assets acquired | 454,168 | |||
Liabilities assumed: | ||||
Deposits | 348,552 | |||
Other liabilities | 56,408 | |||
Total liabilities assumed | 404,960 | |||
Net assets acquired | 49,208 | |||
Noncontrolling interest in consolidated subsidiaries | 728 | |||
Goodwill | $ 4,154 |
Virginia Partners Transaction_2
Virginia Partners Transaction - Fair Value of Loans Acquired (Details) - Virginia Partners Bank $ in Thousands | Nov. 15, 2019USD ($) |
Fair value adjustments made to the amortized cost basis to present a fair value of the loans acquired | |
Gross principal balance | $ 362,916 |
Fair value adjustment on pools of non‑credit impaired loans | (4,990) |
Fair value adjustment on purchased credit impaired loans | (799) |
Fair value of acquired loans | $ 357,127 |
Virginia Partners Transaction_3
Virginia Partners Transaction - Credit Adjustment on Acquired Impaired Loans (Details) - Virginia Partners Bank $ in Thousands | Nov. 15, 2019USD ($) |
Fair value of loans acquired under ACS 310-30 | |
Contractually required principal and interest at acquisition | $ 6,713 |
Contractual cashflows not expected to be collected (non‑accretable discount) | (1,371) |
Expected cash flows at acquisition | 5,342 |
Interest component of expected cash flows | (673) |
Fair value for loans acquired under ASC 310-30 | $ 4,669 |
Virginia Partners Transaction_4
Virginia Partners Transaction - Core Deposit Intangible (Details) - Virginia Partners Bank - USD ($) $ in Thousands | Nov. 15, 2019 | Sep. 30, 2020 | Sep. 30, 2020 |
Fair value of the core deposit intangible | |||
Acquisition related costs | $ 0 | $ 8 | |
Core deposit intangible | |||
Fair value of the core deposit intangible | |||
Core deposit intangible value | $ 2,700 | ||
Core deposit intangible (as a percent) | 1.01% | ||
Core deposit intangible, amortization period | 10 years |
Recent Accounting Pronounceme_2
Recent Accounting Pronouncements - COVID-19 (Details) - COVID-19 $ in Millions | 9 Months Ended |
Sep. 30, 2020USD ($)loan | |
Short-term Modification Actions | |
Number of loans granted short-term loan payment deferrals or payments of interest only due to COVID-19 | loan | 116 |
Outstanding balance of loans granted short-term loan payment deferrals or payments of interest only due to COVID-19 | $ | $ 93.8 |
Minimum | |
Short-term Modification Actions | |
Term for short-term loan payment deferrals granted to certain borrowers due to COVID-19 | 3 months |
Maximum | |
Short-term Modification Actions | |
Term for short-term loan payment deferrals granted to certain borrowers due to COVID-19 | 6 months |