Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 08, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Entity Registrant Name | ALERUS FINANCIAL CORPORATION | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 17,105,668 | |
Entity Central Index Key | 0000903419 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Assets | ||
Cash and cash equivalents | $ 198,489 | $ 144,006 |
Available-for-sale | 354,149 | 310,350 |
Equity | 2,808 | |
Loans held for sale | 72,258 | 46,846 |
Loans | 1,758,277 | 1,721,279 |
Allowance for loan losses | (27,019) | (23,924) |
Net loans | 1,731,258 | 1,697,355 |
Land, premises and equipment, net | 20,372 | 20,629 |
Operating lease right-of-use assets | 7,965 | 8,343 |
Accrued interest receivable | 7,425 | 7,551 |
Bank-owned life insurance | 31,763 | 31,566 |
Goodwill | 27,329 | 27,329 |
Other intangible assets | 17,401 | 18,391 |
Servicing rights | 3,277 | 3,845 |
Deferred income taxes, net | 6,185 | 7,891 |
Other assets | 34,207 | 29,968 |
Total assets | 2,512,078 | 2,356,878 |
Deposits | ||
Noninterest-bearing | 608,559 | 577,704 |
Interest-bearing | 1,512,955 | 1,393,612 |
Total deposits | 2,121,514 | 1,971,316 |
Long-term debt | 58,762 | 58,769 |
Operating lease liabilities | 8,480 | 8,864 |
Accrued expenses and other liabilities | 29,714 | 32,201 |
Total liabilities | 2,218,470 | 2,071,150 |
Stockholders’ equity | ||
Common stock, $1 par value, 30,000,000 shares authorized: 17,105,668 and 17,049,551 issued and outstanding | 17,106 | 17,050 |
Additional paid-in capital | 88,703 | 88,650 |
Retained earnings | 180,650 | 178,092 |
Accumulated other comprehensive income (loss) | 7,149 | 1,936 |
Total stockholders’ equity | 293,608 | 285,728 |
Total liabilities and stockholders’ equity | $ 2,512,078 | $ 2,356,878 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Consolidated Balance Sheets | ||
Preferred stock, par value | $ 1 | $ 1 |
Preferred Stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 1 | $ 1 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 17,105,668 | 17,049,551 |
Common stock, shares outstanding | 17,105,668 | 17,049,551 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Interest Income | ||
Loans, including fees | $ 20,542 | $ 21,573 |
Investment securities - Taxable | 1,759 | 1,309 |
Investment securities -Exempt from federal income taxes | 235 | 244 |
Other | 570 | 184 |
Total interest income | 23,106 | 23,310 |
Interest Expense | ||
Deposits | 3,392 | 2,748 |
Short-term borrowings | 531 | |
Long-term debt | 877 | 911 |
Total interest expense | 4,269 | 4,190 |
Net interest income | 18,837 | 19,120 |
Provision for loan losses | 2,500 | 2,220 |
Net interest income after provision for loan losses | 16,337 | 16,900 |
Noninterest Income | ||
Retirement and benefit services | 16,220 | 15,059 |
Wealth management | 4,046 | 3,611 |
Mortgage banking | 5,045 | 4,569 |
Service charges on deposit accounts | 423 | 444 |
Net gains (losses) on investment securities | 127 | |
Other | 1,455 | 1,264 |
Total noninterest income | 27,189 | 25,074 |
Noninterest Expense | ||
Compensation | 18,731 | 16,813 |
Employee taxes and benefits | 5,308 | 5,428 |
Occupancy and equipment expense | 2,755 | 2,745 |
Business services, software and technology expense | 4,444 | 3,798 |
Intangible amortization expense | 990 | 1,051 |
Professional fees and assessments | 1,040 | 1,066 |
Marketing and business development | 610 | 427 |
Supplies and postage | 703 | 733 |
Travel | 261 | 502 |
Mortgage and lending expenses | 1,043 | 446 |
Other | 841 | 505 |
Total noninterest expense | 36,726 | 33,514 |
Income before income taxes | 6,800 | 8,460 |
Income tax expense | 1,437 | 2,024 |
Net income | $ 5,363 | $ 6,436 |
Basic earnings per common share | $ 0.31 | $ 0.47 |
Diluted earnings per common share | 0.30 | 0.46 |
Dividends declared per common share | $ 0.15 | $ 0.14 |
Average common shares outstanding | 17,070 | 13,781 |
Diluted average common shares outstanding | 17,405 | 14,078 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Consolidated Statements of Comprehensive Income | ||
Net Income | $ 5,363 | $ 6,436 |
Other Comprehensive Income (Loss), Net of Tax | ||
Unrealized gains (losses) on available-for-sale securities | 6,959 | 3,150 |
Reclassification adjustment for losses (gains) realized in income | (113) | |
Total other comprehensive income (loss), before tax | 6,959 | 3,037 |
Income tax expense (benefit) related to items of other comprehensive income | 1,746 | 762 |
Other comprehensive income (loss), net of tax | 5,213 | 2,275 |
Total comprehensive income | $ 10,576 | $ 8,711 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders Equity - USD ($) $ in Thousands | Common Stock | Additional Paid in Capital. | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | ESOP – Owned Shares | Total |
Beginning balance at Dec. 31, 2018 | $ 13,775 | $ 27,743 | $ 159,037 | $ (3,601) | $ (34,494) | $ 162,460 |
Net Income | 6,436 | 6,436 | ||||
Other comprehensive income (loss) | 2,275 | 2,275 | ||||
Common stock repurchased | (4) | (14) | (71) | (89) | ||
Common stock dividends | (1,973) | (1,973) | ||||
Share-based compensation expense | 346 | 346 | ||||
Vesting of restricted stock | 30 | (30) | ||||
Ending balance at Mar. 31, 2019 | 13,801 | 28,045 | 163,429 | (1,326) | $ (34,494) | 169,455 |
Beginning balance at Dec. 31, 2019 | 17,050 | 88,650 | 178,092 | 1,936 | 285,728 | |
Net Income | 5,363 | 5,363 | ||||
Other comprehensive income (loss) | 5,213 | 5,213 | ||||
Common stock repurchased | (15) | (111) | (210) | (336) | ||
Common stock dividends | (2,595) | (2,595) | ||||
Share-based compensation expense | 235 | 235 | ||||
Vesting of restricted stock | 71 | (71) | ||||
Ending balance at Mar. 31, 2020 | $ 17,106 | $ 88,703 | $ 180,650 | $ 7,149 | $ 293,608 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Operating Activities | ||
Net income | $ 5,363 | $ 6,436 |
Adjustments to reconcile net income to net cash provided (used) by operating activities | ||
Deferred income taxes | (40) | 480 |
Provision for loan losses | 2,500 | 2,220 |
Depreciation and amortization | 2,075 | 2,054 |
Amortization and accretion of premiums/discounts on investment securities | 305 | 280 |
Amortization of operating lease right-of-use assets | (6) | 6 |
Stock-based compensation | 235 | 346 |
Increase in value of bank-owned life insurance | (197) | (196) |
Realized loss (gain) on forward sale derivatives | (11) | |
Realized loss (gain) on rate lock commitments | 12 | |
Realized loss (gain) on sale of foreclosed assets | (63) | (57) |
Realized loss (gain) on sale of investment securities | (113) | |
Realized loss (gain) on servicing rights | 381 | (67) |
Net change in: | ||
Securities held for trading | 1,539 | |
Loans held for sale | (25,412) | (13,069) |
Accrued interest receivable | 126 | (332) |
Other assets | (4,038) | 2,657 |
Accrued expenses and other liabilities | (2,395) | (3,584) |
Net cash provided (used) by operating activities | (21,166) | (1,399) |
Investing Activities | ||
Proceeds from sales or calls of investment securities available-for-sale | 4,000 | 4,763 |
Proceeds from maturities of investment securities available-for-sale | 9,003 | 10,282 |
Purchases of investment securities available-for-sale | (50,148) | (17,901) |
Net (increase) decrease in equity securities | 2,808 | 248 |
Net (increase) decrease in loans | (36,637) | (10,368) |
Purchases of premises and equipment | (689) | (1,366) |
Proceeds from sales of foreclosed assets | 96 | 254 |
Net cash provided (used) by investing activities | (71,567) | (14,088) |
Financing Activities | ||
Net increase (decrease) in deposits | 150,198 | 103,201 |
Net increase (decrease) in short-term borrowings | (81,410) | |
Repayments of long-term debt | (51) | (45) |
Cash dividends paid on common stock | (2,595) | (1,973) |
Repurchase of common stock | (336) | (89) |
Net cash provided (used) by financing activities | 147,216 | 19,684 |
Net change in cash and cash equivalents | 54,483 | 4,197 |
Cash and cash equivalents at beginning of period | 144,006 | 40,651 |
Cash and cash equivalents at end of period | 198,489 | 44,848 |
Cash paid for: | ||
Interest | 4,128 | 3,290 |
Income taxes | 103 | |
Non-cash information | ||
Loan collateral transferred to foreclosed assets | 234 | 142 |
Unrealized gain (loss) on investment securities available-for-sale | 5,213 | 2,275 |
Initial recognition of operating lease right-of-use assets | 10,000 | |
Initial recognition of operating lease liabilities | $ 10,521 | |
Right-of-use assets obtained in exchange for new operating leases | $ 183 |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Significant Accounting Policies | |
Significant Accounting Policies | NOTE 1 Significant Accounting Policies Organization Alerus Financial Corporation is a financial holding company organized under the laws of the state of Delaware. Alerus Financial Corporation, or the Company, and its subsidiaries is a diversified financial services company headquartered in Grand Forks, North Dakota. Through its subsidiary, Alerus Financial, National Association, or the Bank, the Company provides innovative and comprehensive financial solutions to businesses and consumers through four distinct business lines—banking, retirement and benefit services, wealth management, and mortgage. Initial Public Offering On September 17, 2019, the Company sold 2,860,000 shares of common stock in its initial public offering. On September 25, 2019, the Company sold an additional 429,000 shares of common stock pursuant to the exercise in full, by the underwriters, of their option to purchase additional shares. The aggregate offering price for the shares sold by the Company was $69.1 million, and after deducting $4.7 million of underwriting discounts and $1.6 million of offering expenses paid to third parties, the Company received total net proceeds of $62.8 million. Basis of Presentation The accompanying unaudited consolidated financial statements and notes thereto of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC, and conform to practices within the banking industry and include all of the information and disclosures required by generally accepted accounting principles in the United States of America, or GAAP, for interim financial reporting. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of financial results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results for the full year or any other period. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q. These interim unaudited financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 26, 2020. Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company’s principal operating subsidiary is the Bank. In the normal course of business, the Company may enter into a transaction with a variable interest entity, or VIE. VIE’s are legal entities whose investors lack the ability to make decisions about the entity’s activities, or whose equity investors do not have the right to receive the residual returns of the entity. The applicable accounting guidance requires the Company to perform ongoing quantitative and qualitative analysis to determine whether it must consolidate any VIE. The Company does not have any ownership interest in, or exert any control, over any VIE, and thus no VIE’s are included in the consolidated financial statements. Use of Estimates The preparation of consolidated financial statements in conformity with 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the valuation of investment securities, determination of the allowance for loan losses, valuation of reporting units for the purpose of testing goodwill and other intangible assets for impairment, valuation of deferred tax assets, and fair values of financial instruments. Reclassifications Certain items previously reported have been reclassified to conform to the current period’s reporting format. Such reclassifications did not affect net income or stockholders’ equity. Other Information On March 11, 2020, the World Health Organization declared the spread of Coronavirus Disease 2019, or COVID-19, a worldwide pandemic. The COVID-19 pandemic is having significant effects on global markets, supply chains, businesses, and communities. Specific to the Company, COVID-19 is expected to impact various parts of its 2020 operations and financial results, including, but not limited to, additional loan loss reserves, costs for emergency preparedness, or potential shortages of personnel. Management believes the Company is taking appropriate actions to mitigate, to the extent possible, the negative impact. However, the full impact of COVID-19 is currently unknown and cannot be reasonably estimated as the events are continuing to unfold as the year progresses. In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, or the agencies, issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting loan modifications. Under Accounting Standards Codification 310-40, “Receivables – Troubled Debt Restructurings by Creditors,” or ASC 310-40, a restructuring of debt constitutes a troubled debt restructuring, or 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 Financial Accounting Standards Boards, or 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. This interagency guidance is expected to have a material impact on the Company’s financial statements for disclosure of the impact to date. Emerging Growth Company The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, even if the Company complies with the greater obligations of public companies that are not emerging growth companies, the Company may avail itself of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as the Company is an emerging growth company. The Company will continue to be an emerging growth company until the earliest to occur of: (1) the end of the fiscal year following the fifth anniversary of the date of the first sale of common equity securities under the Company’s Registration Statement on Form S-1, which was declared effective by the SEC on September 12, 2019; (2) the last day of the fiscal year in which the Company has $1.07 billion or more in annual revenues; (3) the date on which the Company is deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the “Exchange Act”; or (4) the date on which the Company has, during the previous three-year period, issued publicly or privately, more than $1.0 billion in non-convertible debt securities. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company elected to take advantage of the benefits of this extended transition period. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2020 | |
Recent Accounting Pronouncements | |
Review Accounting Pronouncements | NOTE 2 Recent Accounting Pronouncements The following FASB Accounting Standards Updates, or ASUs, are divided into pronouncements which have been adopted by the Company since January 1, 2020, and those which are not yet effective and have been evaluated or are currently being evaluated by management as of March 31, 2020. Adopted Pronouncements In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. This ASU removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a goodwill impairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its estimated fair value, not to exceed the carrying amount of goodwill. For public business entities that are US Securities and Exchange Commission filers, ASU 2017-04, is effective for interim and annual reporting periods beginning after December 15, 2019. The Company adopted ASU 2017-04 effective January 1, 2020, the new guidance did not have an impact on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018‑13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds, and modifies certain disclosure requirements for estimated fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfer between Level 1 and Level 2 of the estimated fair value hierarchy, but will be required to disclose the range and weighted-average used to develop significant unobservable inputs for Level 3 estimated fair value measurements. ASU 2018‑13 is effective for all entities interim and annual reporting periods beginning after December 15, 2019. The Company adopted ASU 2018-13 effective January 1, 2020, the revised disclosure requirements did not have a material impact on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40) – Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. ASU 2018-15 was effective for the Company on January 1, 2020, and did not have a material impact on the Company’s consolidated financial statements. Pronouncements Not Yet Effective In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires a new impairment model known as the current expected credit loss, or CECL, which significantly changes the way impairment of financial instruments is recognized by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of financial instruments. The main provisions of ASU 2016-13 include (1) replacing the “incurred cost” approach under GAAP with an “expected loss” model for instruments measured at amortized cost, (2) requiring entities to record an allowance for credit losses related to available-for-sale debt securities rather than a direct write-down of the carrying amount of the investments, as is required by the other-than-temporary impairment model under current GAAP, and (3) a simplified accounting model for purchase credit-impaired debt securities and loans. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326). This update amends the effective date of ASU No. 2016-13 for certain entities, including private companies and smaller reporting companies, until fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. As an emerging growth company, the Company can take advantage of this delay and plans to adopt the standard with the amended effective date. The Company does not plan to early adopt this standard but continues to work through implementation. The Company continues collecting and retaining loan and credit data and evaluating various loss estimation models. While we currently cannot reasonably estimate the impact of adopting this standard, we expect the impact will be influenced by the composition, characteristics, and quality of our loan portfolio, as well as the general economic conditions and forecasts as of the adoption date. In April 2019, the FASB issued ASU 2019‑04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. This update is not expected to have a significant impact on the Company’s consolidated financial statements. In May 2019, the FASB issued ASU 2019‑05, Targeted Transition Relief to provide entities with an option to irrevocably elect the fair value option applied on an instrument-by-instrument basis for eligible instruments. In November 2019, the FASB Issued ASU 2019-10, which amends the effective date of this ASU for certain entities, including private companies and smaller reporting companies until after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, the Company can take advantage of this delay and plans to adopt the standard with the amended effective date. This update is not expected to have a significant impact on the Company’s consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), which simplifies accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for the areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2020, for public business entities. For private companies and smaller reporting companies, this guidance is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2021. As an emerging growth company, the Company can take advantage of this later effective date. Early adoption of the amendments is permitted, including adoption in any interim period for which financial statements have not yet been issued. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective, or prospective basis. The Company is currently reviewing the provisions of this new pronouncement, but does not expect adoption of this guidance to have a material impact on the Company’s consolidated financial statements. |
Investment Securities
Investment Securities | 3 Months Ended |
Mar. 31, 2020 | |
Investment Securities | |
Investment Securities | NOTE 3 Investment Securities The following tables present amortized cost, gross unrealized gain and losses, and fair value of the available-for-sale investment securities as of March 31, 2020 and December 31, 2019: March 31, 2020 Amortized Unrealized Unrealized Fair (dollars in thousands) Cost Gains Losses Value U.S. Treasury and agencies $ 16,538 $ 93 $ (4) $ 16,627 Obligations of state and political agencies 67,921 1,212 (27) 69,106 Mortgage backed securities Residential agency 221,844 7,483 (18) 229,309 Commercial 29,128 899 (117) 29,910 Asset backed securities 134 7 — 141 Corporate bonds 9,039 18 (1) 9,056 Total available-for-sale investment securities $ 344,604 $ 9,712 $ (167) $ 354,149 December 31, 2019 Amortized Unrealized Unrealized Fair (dollars in thousands) Cost Gains Losses Value U.S. Treasury and agencies $ 21,246 $ 9 $ (15) $ 21,240 Obligations of state and political agencies 68,162 647 (161) 68,648 Mortgage backed securities Residential agency 180,411 2,258 (131) 182,538 Commercial 30,752 101 (168) 30,685 Asset backed securities 139 5 — 144 Corporate bonds 7,054 41 — 7,095 Total available-for-sale investment securities $ 307,764 $ 3,061 $ (475) $ 310,350 The following tables present unrealized losses and fair values for available-for-sale investment securities as of March 31, 2020 and December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position: March 31, 2020 Less than 12 Months Over 12 Months Total Unrealized Fair Unrealized Fair Unrealized Fair (dollars in thousands) Losses Value Losses Value Losses Value U.S. Treasury and agencies $ (4) $ 1,342 $ — $ — $ (4) $ 1,342 Obligations of state and political agencies (27) 12,420 — — (27) 12,420 Mortgage backed securities Residential agency (5) 2,664 (13) 1,691 (18) 4,355 Commercial — — (117) 6,932 (117) 6,932 Asset backed securities — 2 — — — 2 Corporate bonds (1) 2,009 — — (1) 2,009 Total available-for-sale investment securities $ (37) $ 18,437 $ (130) $ 8,623 $ (167) $ 27,060 December 31, 2019 Less than 12 Months Over 12 Months Total Unrealized Fair Unrealized Fair Unrealized Fair (dollars in thousands) Losses Value Losses Value Losses Value U.S. Treasury and agencies $ (5) $ 1,740 $ (10) $ 9,990 $ (15) $ 11,730 Obligations of state and political agencies (140) 11,959 (21) 5,798 (161) 17,757 Mortgage backed securities Residential agency (52) 17,131 (79) 14,036 (131) 31,167 Commercial (116) 15,235 (52) 6,195 (168) 21,430 Asset backed securities — 2 — — — 2 Corporate bonds — — — — — — Total available-for-sale investment securities $ (313) $ 46,067 $ (162) $ 36,019 $ (475) $ 82,086 For all of the above investment securities, the unrealized losses were generally due to changes in interest rates and unrealized losses were considered to be temporary as the fair value is expected to recover as the securities approach their maturity dates. The Company evaluates securities for other-than-temporary impairment, or OTTI, on a quarterly basis, at a minimum, and more frequently when economic or market concerns warrant such evaluation. In estimating OTTI losses, consideration is given to the severity and duration of the impairment; the financial condition and near-term prospects of the issuer, which for debt securities, considers external credit ratings and recent downgrades; and the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value. For the three months ended March 31, 2020 and 2019, the Company did not recognize OTTI losses on its investment securities. The following table presents amortized cost and estimated fair value of the available-for-sale investment securities as of March 31, 2020, by contractual maturity: Amortized Fair (dollars in thousands) Cost Value Due within one year or less $ 16,054 $ 16,149 Due after one year through five years 25,745 25,934 Due after five years through ten years 78,317 80,298 Due after 10 years 224,488 231,768 Total available-for-sale investment securities $ 344,604 $ 354,149 Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Investment securities with carrying value of $125.7 million and $136.2 million were pledged as of March 31, 2020 and December 31, 2019, respectively, to secure public deposits and for other purposes required or permitted by law. Proceeds from the sale or call of available‑for‑sale investment securities, for the three months ended March 31, 2020 and 2019, are displayed in the table below: Three months ended March 31, (dollars in thousands) 2020 2019 Proceeds $ 4,000 $ 4,763 Realized gains — 119 Realized losses — 6 As of March 31, 2020 and December 31, 2019, the carrying value of the Company’s Federal Reserve stock and Federal Home Loan Bank of Des Moines, or FHLB, stock was as follows: March 31, December 31, (dollars in thousands) 2020 2019 Federal Reserve $ 2,675 $ 2,675 FHLB 3,284 3,080 These securities can only be redeemed or sold at their par value and only to the respective issuing institution or to another member institution. The Company records these non-marketable equity securities as a component of other assets and periodically evaluates these securities for impairment. Management considers these non-marketable equity securities to be long-term investments. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value. Visa Class B Restricted Shares In 2008, the Company received Visa Class B restricted shares as part of Visa’s initial public offering. These shares are transferable only under limited circumstances until they can be converted into the publicly traded Class A common shares. This conversion will not occur until the settlement of certain litigation which will be indemnified by Visa members, including the Company. Visa funded an escrow account from its initial public offering to settle these litigation claims. Should this escrow account be insufficient to cover these litigation claims, Visa is entitled to fund additional amounts to the escrow account by reducing each member bank’s Class B conversion ratio to unrestricted Class A shares. As of March 31, 2020, the conversion ratio was 1.6228. Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation mentioned above, the 6,924 Class B shares (11,236 Class A equivalents) that the Company owns as of March 31, 2020 and December 31, 2019, are carried at a zero cost basis. |
Loans and Allowance for Loan Lo
Loans and Allowance for Loan Losses | 3 Months Ended |
Mar. 31, 2020 | |
Loans and Allowance for Loan Losses | |
Loans and Allowance for Loan Losses | NOTE 4 Loans and Allowance for Loan Losses The following table presents total loans outstanding, by portfolio segment, as of March 31, 2020 and December 31, 2019: March 31, December 31, (dollars in thousands) 2020 2019 Commercial Commercial and industrial $ 502,637 $ 479,144 Real estate construction 25,487 26,378 Commercial real estate 522,106 494,703 Total commercial 1,050,230 1,000,225 Consumer Residential real estate first mortgage 457,895 457,155 Residential real estate junior lien 170,538 177,373 Other revolving and installment 79,614 86,526 Total consumer 708,047 721,054 Total loans $ 1,758,277 $ 1,721,279 Total loans included net deferred loan fees and costs of $994 thousand and $1.0 million at March 31, 2020 and December 31, 2019, respectively. Management monitors the credit quality of its loan portfolio on an ongoing basis. Measurement of delinquency and past due status are based on the contractual terms of each loan. Past due loans are reviewed regularly to identify loans for nonaccrual status. The following tables present a past due aging analysis of total loans outstanding, by portfolio segment, as of March 31, 2020 and December 31, 2019: March 31, 2020 90 Days Accruing 30 - 89 Days or More Total (dollars in thousands) Current Past Due Past Due Nonaccrual Loans Commercial Commercial and industrial $ 497,635 $ 438 $ — $ 4,564 $ 502,637 Real estate construction 25,487 — — — 25,487 Commercial real estate 518,064 2,602 — 1,440 522,106 Total commercial 1,041,186 3,040 — 6,004 1,050,230 Consumer Residential real estate first mortgage 455,580 1,574 — 741 457,895 Residential real estate junior lien 170,099 237 11 191 170,538 Other revolving and installment 79,274 317 — 23 79,614 Total consumer 704,953 2,128 11 955 708,047 Total loans $ 1,746,139 $ 5,168 $ 11 $ 6,959 $ 1,758,277 December 31, 2019 90 Days Accruing 30 - 89 Days or More Total (dollars in thousands) Current Past Due Past Due Nonaccrual Loans Commercial Commercial and industrial $ 473,900 $ 382 $ — $ 4,862 $ 479,144 Real estate construction 26,251 127 — — 26,378 Commercial real estate 492,707 556 — 1,440 494,703 Total commercial 992,858 1,065 — 6,302 1,000,225 Consumer Residential real estate first mortgage 455,244 666 448 797 457,155 Residential real estate junior lien 176,915 184 — 274 177,373 Other revolving and installment 86,172 348 — 6 86,526 Total consumer 718,331 1,198 448 1,077 721,054 Total loans $ 1,711,189 $ 2,263 $ 448 $ 7,379 $ 1,721,279 The Company’s consumer loan portfolio is primarily comprised of both secured and unsecured loans that are evaluated at origination on a centralized basis against standardized underwriting criteria. The Company generally does not risk rate consumer loans unless a default event such as bankruptcy or extended nonperformance takes place. Credit quality for the consumer loan portfolio is measured by delinquency rates, nonaccrual amounts and actual losses incurred. The Company assigns a risk rating to all commercial loans, except pools of homogeneous loans, and periodically performs detailed internal and external reviews of risk rated loans over a certain threshold to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by the Company’s regulators. During the internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which the borrowers operate and the estimated fair values of collateral securing the loans. These credit quality indicators are used to assign a risk rating to each individual loan. The Company’s ratings are aligned to pass and criticized categories. The criticized category includes special mention, substandard, and doubtful risk ratings. The risk ratings are defined as follows: Pass: A pass loan is a credit with no existing or known potential weaknesses deserving of management’s close attention. Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, this potential weakness may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Substandard: Loans classified as substandard are not adequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans classified as substandard have a well‑defined weakness or weaknesses that jeopardize the repayment of the debt. Well‑defined weaknesses include a borrower’s lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time, or the failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loss: Loans classified as loss are considered uncollectible and charged off immediately. The tables below present total loans outstanding, by loan portfolio segment, and risk category as of March 31, 2020 and December 31, 2019: March 31, 2020 Criticized Special (dollars in thousands) Pass Mention Substandard Doubtful Total Commercial Commercial and industrial $ 470,867 $ 10,178 $ 21,575 $ 17 $ 502,637 Real estate construction 24,941 279 267 — 25,487 Commercial real estate 492,434 4,422 25,250 — 522,106 Total commercial 988,242 14,879 47,092 17 1,050,230 Consumer Residential real estate first mortgage 455,720 1,434 741 — 457,895 Residential real estate junior lien 167,356 1,952 1,230 — 170,538 Other revolving and installment 79,591 — 23 — 79,614 Total consumer 702,667 3,386 1,994 — 708,047 Total loans $ 1,690,909 $ 18,265 $ 49,086 $ 17 $ 1,758,277 December 31, 2019 Criticized Special (dollars in thousands) Pass Mention Substandard Doubtful Total Commercial Commercial and industrial $ 448,306 $ 9,585 $ 21,253 $ — $ 479,144 Real estate construction 25,119 282 977 — 26,378 Commercial real estate 462,294 2,359 30,050 — 494,703 Total commercial 935,719 12,226 52,280 — 1,000,225 Consumer Residential real estate first mortgage 456,358 — 797 — 457,155 Residential real estate junior lien 176,122 — 1,251 — 177,373 Other revolving and installment 86,520 — 6 — 86,526 Total consumer 719,000 — 2,054 — 721,054 Total loans $ 1,654,719 $ 12,226 $ 54,334 $ — $ 1,721,279 The adequacy of the allowance for loan losses is assessed at the end of each quarter. The allowance for loan losses includes a specific component related to loans that are individually evaluated for impairment and a general component related to loans that are segregated into homogeneous pools and collectively evaluated for impairment. The factors applied to these pools are an estimate of probable incurred losses based on management’s evaluation of historical net losses from loans with similar characteristics, which are adjusted by management to reflect current events, trends, and conditions. The adjustments include consideration of the following: changes in lending policies and procedures, economic conditions, nature and volume of the portfolio, experience of lending management, volume and severity of past due loans, quality of the loan review system, value of underlying collateral for collateral dependent loans, concentrations, and other external factors. The following tables present, by loan portfolio segment, a summary of the changes in the allowance for loan losses for the three months ended March 31, 2020 and 2019: Three months ended March 31, 2020 Beginning Provision for Loan Loan Ending (dollars in thousands) Balance Loan Losses Charge-offs Recoveries Balance Commercial Commercial and industrial $ 12,270 $ 70 $ (32) $ 593 $ 12,901 Real estate construction 303 31 — — 334 Commercial real estate 6,688 1,588 — — 8,276 Total commercial 19,261 1,689 (32) 593 21,511 Consumer Residential real estate first mortgage 1,448 761 — — 2,209 Residential real estate junior lien 671 317 — 37 1,025 Other revolving and installment 352 92 (67) 64 441 Total consumer 2,471 1,170 (67) 101 3,675 Unallocated 2,192 (359) — — 1,833 Total $ 23,924 $ 2,500 $ (99) $ 694 $ 27,019 Three months ended March 31, 2019 Beginning Provision for Loan Loan Ending (dollars in thousands) Balance Loan Losses Charge-offs Recoveries Balance Commercial Commercial and industrial $ 12,127 $ 3,407 $ (1,785) $ 66 $ 13,815 Real estate construction 250 2 (1) — 251 Commercial real estate 6,279 (436) — — 5,843 Total commercial 18,656 2,973 (1,786) 66 19,909 Consumer Residential real estate first mortgage 1,156 454 — — 1,610 Residential real estate junior lien 805 7 (104) 53 761 Other revolving and installment 380 (46) (58) 73 349 Total consumer 2,341 415 (162) 126 2,720 Unallocated 1,177 (1,168) — — 9 Total $ 22,174 $ 2,220 $ (1,948) $ 192 $ 22,638 The following tables present the recorded investment in loans and related allowance for loan losses, by loan portfolio segment, disaggregated on the basis of the Company’s impairment methodology, as of March 31, 2020 and December 31, 2019: March 31, 2020 Recorded Investment Allowance for Loan Losses Individually Collectively Individually Collectively (dollars in thousands) Evaluated Evaluated Total Evaluated Evaluated Unallocated Total Commercial Commercial and industrial $ 5,422 $ 497,215 $ 502,637 $ 2,764 $ 10,137 $ — $ 12,901 Real estate construction — 25,487 25,487 — 334 — 334 Commercial real estate 1,524 520,582 522,106 271 8,005 — 8,276 Total commercial 6,946 1,043,284 1,050,230 3,035 18,476 — 21,511 Consumer Residential real estate first mortgage 733 457,162 457,895 — 2,209 — 2,209 Residential real estate junior lien 241 170,297 170,538 20 1,005 — 1,025 Other revolving and installment 22 79,592 79,614 11 430 — 441 Total consumer 996 707,051 708,047 31 3,644 — 3,675 Total loans $ 7,942 $ 1,750,335 $ 1,758,277 $ 3,066 $ 22,120 $ 1,833 $ 27,019 December 31, 2019 Recorded Investment Allowance for Loan Losses Individually Collectively Individually Collectively (dollars in thousands) Evaluated Evaluated Total Evaluated Evaluated Unallocated Total Commercial Commercial and industrial $ 976 $ 478,168 $ 479,144 $ 189 $ 12,081 $ — $ 12,270 Real estate construction — 26,378 26,378 — 303 — 303 Commercial real estate 5,925 488,778 494,703 2,946 3,742 — 6,688 Total commercial 6,901 993,324 1,000,225 3,135 16,126 — 19,261 Consumer Residential real estate first mortgage 782 456,373 457,155 — 1,448 — 1,448 Residential real estate junior lien 266 177,107 177,373 — 671 — 671 Other revolving and installment 5 86,521 86,526 3 349 — 352 Total consumer 1,053 720,001 721,054 3 2,468 — 2,471 Total loans $ 7,954 $ 1,713,325 $ 1,721,279 $ 3,138 $ 18,594 $ 2,192 $ 23,924 The tables below summarize key information on impaired loans. These impaired loans may have estimated losses which are included in the allowance for loan losses. March 31, 2020 December 31, 2019 Recorded Unpaid Related Recorded Unpaid Related (dollars in thousands) Investment Principal Allowance Investment Principal Allowance Impaired loans with a valuation allowance Commercial and industrial $ 4,891 $ 5,028 $ 2,764 $ 639 $ 727 $ 189 Commercial real estate 1,524 1,642 271 5,718 5,823 2,946 Residential real estate junior lien 20 20 20 — — — Other revolving and installment 17 17 11 5 6 3 Total impaired loans with a valuation allowance 6,452 6,707 3,066 6,362 6,556 3,138 Impaired loans without a valuation allowance Commercial and industrial 531 611 — 337 1,110 — Commercial real estate — — — 207 236 — Residential real estate first mortgage 733 741 — 782 797 — Residential real estate junior lien 221 325 — 266 372 — Other revolving and installment 5 5 — — — — Total impaired loans without a valuation allowance 1,490 1,682 — 1,592 2,515 — Total impaired loans Commercial and industrial 5,422 5,639 2,764 976 1,837 189 Commercial real estate 1,524 1,642 271 5,925 6,059 2,946 Residential real estate first mortgage 733 741 — 782 797 — Residential real estate junior lien 241 345 20 266 372 — Other revolving and installment 22 22 11 5 6 3 Total impaired loans $ 7,942 $ 8,389 $ 3,066 $ 7,954 $ 9,071 $ 3,138 The table below presents the average recorded investment in impaired loans and interest income for the three months ended March 31, 2020 and 2019: Three Months Ended March 31, 2020 2019 Average Average Recorded Interest Recorded Interest (dollars in thousands) Investment Income Investment Income Impaired loans with a valuation allowance Commercial and industrial $ 4,979 $ 15 $ 5,529 $ — Commercial real estate 1,536 8 1,533 — Residential real estate junior lien 20 — — — Other revolving and installment 17 — 27 — Total impaired loans with a valuation allowance 6,552 23 7,089 — Impaired loans without a valuation allowance Commercial and industrial 545 27 1,816 46 Real estate construction — — 220 9 Residential real estate first mortgage 835 — — — Residential real estate junior lien 224 3 290 4 Other revolving and installment 8 — — — Total impaired loans without a valuation allowance 1,612 30 2,326 59 Total impaired loans Commercial and industrial 5,524 42 7,345 46 Real estate construction — — 220 9 Commercial real estate 1,536 8 1,533 — Residential real estate first mortgage 835 — — — Residential real estate junior lien 244 3 290 4 Other revolving and installment 25 — 27 — Total impaired loans $ 8,164 $ 53 $ 9,415 $ 59 Loans with a carrying value of $1.2 billion as of March 31, 2020 and $1.2 billion as of December 31, 2019, were pledged to secure public deposits, and for other purposes required or permitted by law. Under certain circumstances, the Company will provide borrowers relief through loan restructurings. A restructuring of debt constitutes a TDR if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. TDR concessions can include reduction of interest rates, extension of maturity dates, forgiveness of principal or interest due, or acceptance of other assets in full or partial satisfaction of the debt. During the first quarter of 2020 there were no loans modified as a TDR. As of April 21, 2020, we had executed 325 principal and interest deferrals on outstanding loan balances of $97.4 million in connection with the COVID-19 relief provided by the CARES Act. These deferrals were generally no more than 90 days in duration and were not considered TDRs based on the interagency guidance issued in March. During the first quarter of 2019, there was one loan modified as a TDR as a result of extending the amortization period. As of December 31, 2019, the carrying value of the restructured loan was $0.2 million. The loan is currently performing according to the modified terms and there was no specific reserve for loan losses allocated to the loan modified as troubled debt restructuring. The Company does not have material commitments to lend additional funds to borrowers with loans whose terms have been modified in troubled debt restructurings or whose loans are on nonaccrual. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | NOTE 5 Goodwill and Other Intangible Assets The following table summarizes the carrying amount of goodwill, by segment, as of March 31, 2020 and December 31, 2019: March 31, December 31, (dollars in thousands) 2020 2019 Banking $ 20,131 $ 20,131 Retirement and benefit services 7,198 7,198 Total goodwill $ 27,329 $ 27,329 The gross carrying amount and accumulated amortization for each type of identifiable intangible asset are as follows: March 31, 2020 December 31, 2019 (dollars in thousands) Gross Carrying Amount Accumulated Amortization Total Gross Carrying Amount Accumulated Amortization Total Identifiable customer intangibles $ 31,857 $ (15,088) $ 16,769 $ 31,857 $ (14,287) $ 17,570 Core deposit intangible assets 3,793 (3,161) 632 4,993 (4,172) 821 Total intangible assets $ 35,650 $ (18,249) $ 17,401 $ 36,850 $ (18,459) $ 18,391 Amortization of intangible assets was $1.0 million and $1.1 million for the three months ended March 31, 2020, and 2019, respectively. |
Loan Servicing
Loan Servicing | 3 Months Ended |
Mar. 31, 2020 | |
Loan Servicing | |
Loan Servicing | NOTE 6 Loan Servicing Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others totaled $524.6 million and $541.9 million as of March 31, 2020 and December 31, 2019, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and collection and foreclosure processing. Loan servicing income is recorded on an accrual basis and includes servicing fees from investors and certain charges collected from borrowers, such as late payment fees, and is net of fair value adjustments to capitalized mortgage servicing rights. The following table summarizes the Company’s activity related to servicing rights for the three months ended March 31, 2020 and 2019: Three months ended March 31, (dollars in thousands) 2020 2019 Balance, beginning of period $ 3,845 $ 4,623 Additions 24 67 Amortization (187) (165) (Impairment)/Recovery (405) 5 Balance, end of period $ 3,277 $ 4,530 The following is a summary of key data and assumptions used in the valuation of servicing rights as of March 31, 2020 and December 31, 2019. Increases or decreases in any one of these assumptions would result in lower or higher fair value measurements. March 31, December 31, (dollars in thousands) 2020 2019 Fair value of servicing rights $ 3,277 $ 3,845 Weighted-average remaining term, years 20.0 20.1 Prepayment speeds 14.2 % 11.8 % Discount rate 9.4 % 9.4 % |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases | |
Leases | NOTE 7 Leases Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches, and office equipment rentals with terms extending through 2032. Portions of certain properties are subleased for terms extending through 2024. Substantially all of the Company’s leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated financial statements. The Company has one existing finance lease for the Company’s headquarters building with a lease term through 2022. The Company elected not to include short‑term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated financial statements. The following table presents the classification of the Company’s ROU assets and lease liabilities on the consolidated financial statements. March 31, December 31, (dollars in thousands) 2020 2019 Lease Right-of-Use Assets Classification Operating lease right-of-use assets Operating lease right-of-use assets $ 7,965 $ 8,343 Finance lease right-of-use assets Land, premises and equipment, net 289 318 Total lease right-of-use assets $ 8,254 $ 8,661 Lease Liabilities Operating lease liabilities Operating lease liabilities $ 8,480 $ 8,864 Finance lease liabilities Long-term debt 589 640 Total lease liabilities $ 9,069 $ 9,504 The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was used. For the Company’s only finance lease, the Company utilized its incremental borrowing rate at lease inception. March 31, December 31, 2020 2019 Weighted-average remaining lease term, years Operating leases 6.1 6.2 Finance leases 2.6 2.8 Weighted-average discount rate Operating leases 3.2 % 3.1 % Finance leases 7.8 % 7.8 % As the Company elected, for all classes of underlying assets, not to separate lease and non‑lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities. Variable lease cost also includes payments for usage or maintenance of those capitalized equipment operating leases. The following table presents lease costs and other lease information for the three months ending March 31, 2020 and 2019. Three months ended March 31, (dollars in thousands) 2020 2019 Lease costs Operating lease cost $ 623 $ 572 Variable lease cost 197 199 Short-term lease cost 95 205 Finance lease cost Interest on lease liabilities 12 15 Amortization of right-of-use assets 29 29 Sublease income (66) (71) Net lease cost $ 890 $ 949 Other information Cash paid for amounts included in the measurement of lease liabilities operating cash flows from operating leases $ 618 $ 577 Right-of-use assets obtained in exchange for new operating lease liabilities 183 — Right-of-use assets obtained in exchange for new finance lease liabilities — — Future minimum payments for finance and operating leases with initial or remaining terms of one year or more as of March 31, 2020 were as follows: Finance Operating (dollars in thousands) Leases Leases Twelve months ended March 31, 2021 $ 251 $ 2,037 March 31, 2022 251 1,630 March 31, 2023 150 1,592 March 31, 2024 — 1,441 March 31, 2025 — 761 Thereafter — 2,083 Total future minimum lease payments $ 652 $ 9,544 Amounts representing interest (63) (1,064) Total operating lease liabilities $ 589 $ 8,480 |
Deposits
Deposits | 3 Months Ended |
Mar. 31, 2020 | |
Deposits. | |
Deposits | NOTE 8 Deposits The components of deposits in the consolidated balance sheets as of March 31, 2020 and December 31, 2019 were as follows: March 31, December 31, (dollars in thousands) 2020 2019 Noninterest-bearing $ 608,559 $ 577,704 Interest-bearing Interest-bearing demand 477,752 458,689 Savings accounts 60,181 55,777 Money market savings 773,652 683,064 Time deposits 201,370 196,082 Total interest-bearing 1,512,955 1,393,612 Total deposits $ 2,121,514 $ 1,971,316 |
Short-Term Borrowings
Short-Term Borrowings | 3 Months Ended |
Mar. 31, 2020 | |
Short-Term Borrowings | |
Short-Term Borrowings | NOTE 9 Short‑Term Borrowings There were no short‑term borrowings outstanding as of March 31, 2020 and December 31, 2019. The following table presents information related to short-term borrowings for the three months ending March 31, 2020 and 2019: Three months ended March 31, (dollars in thousands) 2020 2019 Fed funds purchased Balance as of end of period $ — $ 12,050 Average daily balance — 83,331 Maximum month-end balance — 92,371 Weighted-average rate During period — % 2.59 % End of period — % 2.62 % |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2020 | |
Long-Term Debt. | |
Long-Term Debt | NOTE 10 Long‑Term Debt Long‑term debt as of March 31, 2020 and December 31, 2019 consisted of the following: March 31, 2020 Period End Face Carrying Interest Maturity (dollars in thousands) Value Value Interest Rate Rate Date Call Date Subordinated notes payable $ 50,000 $ 49,641 Fixed 5.75 % 12/30/2025 12/30/2020 Junior subordinated debenture (Trust I) 4,124 3,413 Three-month LIBOR + 3.10% 4.33 % 6/26/2033 6/26/2008 Junior subordinated debenture (Trust II) 6,186 5,119 Three-month LIBOR + 1.80% 2.54 % 9/15/2036 9/15/2011 Finance lease liability 2,700 589 Fixed 7.81 % 10/31/2022 N/A Total long-term debt $ 63,010 $ 58,762 December 31, 2019 Period End Face Carrying Interest Maturity (dollars in thousands) Value Value Interest Rate Rate Date Call Date Subordinated notes payable $ 50,000 $ 49,625 Fixed 5.75 % 12/30/2025 12/30/2020 Junior subordinated debenture (Trust I) 4,124 3,402 Three-month LIBOR + 3.10% 5.05 % 6/26/2033 6/26/2008 Junior subordinated debenture (Trust II) 6,186 5,102 Three-month LIBOR + 1.80% 3.69 % 9/15/2036 9/15/2011 Finance lease liability 2,700 640 Fixed 7.81 % 10/31/2022 N/A Total long-term debt $ 63,010 $ 58,769 |
Financial Instruments with Off-
Financial Instruments with Off-Balance Sheet Risk | 3 Months Ended |
Mar. 31, 2020 | |
Financial Instruments with Off-Balance Sheet Risk | |
Financial Instruments with Off-Balance Sheet Risk | NOTE 11 Financial Instruments with Off‑Balance Sheet Risk In the normal course of business, the Bank has outstanding commitment and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying consolidated financial statements. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the statements of financial condition. As of March 31, 2020 and December 31, 2019, the following financial instruments whose contract amount represents credit risk were approximately as follows: March 31, December 31, (dollars in thousands) 2020 2019 Commitments to extend credit $ 524,069 $ 586,365 Standby letters of credit 3,276 8,516 Total $ 527,345 $ 594,881 Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each client’s creditworthiness on a case by case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property and equipment, and income producing commercial properties. The Company was not required to perform on any financial guarantees and did not incur any losses on its commitments during the past two years. The Company utilizes standby letters of credit issued by either the Federal Home Loan Bank or the Bank of North Dakota to secure public unit deposits. The Company had a $150 thousand letter of credit with the Federal Home Loan Bank as of March 31, 2020 and December 31, 2019. With the Bank of North Dakota, the Company had $25.0 million of letters of credit outstanding as of March 31, 2020 and $20.0 million as of December 31, 2019. Bank of North Dakota letters of credit were collateralized by loans pledged to the Bank of North Dakota in the amount of $250.3 million and $242.0 million as of March 31, 2020 and December 31, 2019, respectively. |
Share-Based Compensation Plan
Share-Based Compensation Plan | 3 Months Ended |
Mar. 31, 2020 | |
Share-Based Compensation Plan | |
Share-Based Compensation Plan | NOTE 12 Share-Based Compensation The Company has granted equity awards pursuant to the Alerus Financial Corporation 2009 Stock Plan. The awards were in the form of restricted stock or restricted stock units and are considered to represent an element of employee compensation. Compensation expense for the award is based on the fair value of Alerus Financial Corporation common stock at the time of grant. The value of awards that are expected to vest are amortized into expense over the vesting periods. The ability to grant awards under this plan has expired. On May 6, 2019, the Company’s stockholders approved the Alerus Financial Corporation 2019 Equity Incentive Plan. This plan allows the compensation committee the ability to grant a wide variety of equity awards, including stock options, stock appreciation rights, restricted stock, restricted stock units and cash incentive awards in such forms and amounts as it deems appropriate to accomplish the goals of the plan. Any shares subject to an award that is cancelled, forfeited, or expires prior to exercise or realization, either in full or in part, shall again become available for issuance under the plan. However, shares subject to an award shall not again be made available for issuance or delivery under the plan if such shares are (a) tendered in payment of the exercise price of a stock option, (b) delivered to, or withheld by, the Company to satisfy any tax withholding obligation, or (c) covered by a stock‑settled stock appreciation right or other awards that were not issued upon the settlement of the award. Shares vest, become exercisable and contain such other terms and conditions as determined by the compensation committee and set forth in individual agreements with the participant receiving the award. The plan is authorized to issue up to 1,100,000. As of March 31, 2020, 13,444 restricted stock awards and 49,604 restricted stock units had been issued under the plan. Compensation expense relating to awards under these plans was $ 253 thousand and $ 346 thousand for the three months ending March 31, 2020 and 2019, respectively. The following table presents the activity in the stock plans for the three months ended March 31, 2020 and 2019: Three months ended March 31, 2020 Three months ended March 31, 2019 Weighted- Weighted- Average Grant Average Grant Awards Date Fair Value Awards Date Fair Value Restricted Stock and Restricted Stock Unit Awards Outstanding at beginning of period 347,211 $ 18.64 337,014 $ 18.36 Granted 63,048 20.23 70,617 19.87 Vested (71,339) 16.06 (29,837) 19.96 Forfeited or cancelled (5,068) 19.37 (753) 21.76 Outstanding at end of period 333,852 $ 19.47 377,041 $ 18.51 As of March 31, 2020, there was $3. 7 million of unrecognized compensation expense related to non-vested awards granted under the plans. The expense is expected to be recognized over a weighted-average period of 3.65 years. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Taxes | |
Income Taxes | NOTE 13 Income Taxes The components of income tax expense (benefit) for the three months ended March 31, 2020 and 2019 are as follows: Three months ended March 31, 2020 2019 Percent of Percent of (dollars in thousands) Amount Pretax Income Amount Pretax Income Taxes at statutory federal income tax rate $ 1,428 21.0 % $ 1,777 21.0 % Tax effect of: Tax exempt interest income (121) (1.8) % (73) (0.9) % Other 130 1.9 % 320 3.8 % Applicable income taxes $ 1,437 21.1 % $ 2,024 23.9 % It is the opinion of management that the Company has no significant uncertain tax positions that would be subject to change upon examination. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting | |
Segment Reporting | NOTE 14 Segment Reporting The Company determines reportable segments based on the services offered, the significance of the services offered, the significance of those services to the Company’s financial statements, and management’s regular review of the operating results of those services. The Company operates through four operating segments: Banking, Retirement and Benefit Services, Wealth Management, and Mortgage. The financial information presented for each segment includes net interest income, provision for loan losses, direct noninterest income, and direct noninterest expense, before indirect allocations. Corporate Administration includes the indirect overhead and is set forth in the table below. The segment net income before taxes represents direct revenue and expense before indirect allocations and income taxes. The following table presents key metrics related to the Company’s segments for the periods presented: Three months ended March 31, 2020 Retirement and Wealth Corporate (dollars in thousands) Banking Benefit Services Management Mortgage Administration Consolidated Net interest income $ 19,446 $ — $ — $ 268 $ (877) $ 18,837 Provision for loan losses 2,500 — — — — 2,500 Noninterest income 1,874 16,220 4,046 5,045 4 27,189 Noninterest expense 12,652 7,932 1,515 5,439 9,188 36,726 Net income before taxes $ 6,168 $ 8,288 $ 2,531 $ (126) $ (10,061) $ 6,800 Three months ended March 31, 2019 Retirement and Wealth Corporate (dollars in thousands) Banking Benefit Services Management Mortgage Administration Consolidated Net interest income $ 19,900 $ — $ — $ 129 $ (909) $ 19,120 Provision for loan losses 2,220 — — — — 2,220 Noninterest income 1,831 15,059 3,611 4,569 4 25,074 Noninterest expense 9,992 8,990 1,924 3,962 8,646 33,514 Net income before taxes $ 9,519 $ 6,069 $ 1,687 $ 736 $ (9,551) $ 8,460 Banking The Banking division offers a complete line of loan, deposit, cash management, and treasury services through fifteen offices in North Dakota, Minnesota, and Arizona. These products and services are supported through web and mobile based applications. The majority of the Company’s assets and liabilities are in the Banking segment’s balance sheet. Retirement and Benefit Services Retirement and Benefit Services provides the following services nationally: recordkeeping and administration services to qualified retirement plans; ESOP trustee, recordkeeping, and administration; investment fiduciary services to retirement plans; health savings accounts, flex spending accounts, COBRA recordkeeping and administration services, and payroll to employers; payroll and HIRS services for employers. In addition, the division operates within each of the banking markets as well as in Albert Lea, Minnesota, Lansing, Michigan, Bedford, New Hampshire, and 13 satellite offices. Wealth Management The Wealth Management division provides advisory and planning services, investment management, and trust and fiduciary services to clients across the Company’s footprint. Mortgage The mortgage division offers first and second mortgage loans through a centralized mortgage unit in Minneapolis, Minnesota as well as through the Banking office locations. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share | |
Earnings Per Share | NOTE 15 Earnings Per Share Beginning in the third quarter of 2019, the Company elected to prospectively use the two-class method in calculating earnings per share due to the restricted stock awards and restricted stock units qualifying as participating securities. Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participating rights in undistributed earnings. Average shares of common stock for diluted net income per common share include shares to be issued upon the vesting of restricted stock awards and restricted stock units granted under the Company's share-based compensation plans. The calculation of basic and diluted earnings per share using the two-class method for the three months ending March 31, 2020 is presented below: Three months ended March 31, (dollars and shares in thousands, except per share data) 2020 Net income $ 5,363 Dividends and undistributed earnings allocated to participating securities 82 Net income available to common shareholders $ 5,281 Weighted-average common shares outstanding for basic earnings per share 17,070 Dilutive effect of stock-based awards 335 Weighted-average common shares outstanding for diluted earnings per share 17,405 Earnings per common share: Basic earnings per common share $ 0.31 Diluted earnings per common share $ 0.30 For the three months ended March 31, 2019, the basic and diluted earnings per share were calculated using the treasury stock method, as presented in the table below. The Company determined that the impact to diluted earnings per share would be immaterial if calculated under the two-class method for the three months ended March 31, 2020. The calculation of basic and diluted earnings per share using the treasury stock method for the three months ending March 31, 2019 is presented below: Three months ended March 31, (dollars and shares in thousands, except per share data) 2019 Basic: Net income attributable to common shareholders $ 6,436 Weighted-average common shares outstanding 13,781 Basic earnings per common share $ 0.47 Diluted: Net income attributable to common shareholders $ 6,436 Weighted-average common shares outstanding 13,781 Add: Dilutive effect of stock-based awards 297 Weighted-average common shares outstanding for diluted EPS 14,078 Diluted earnings per common share $ 0.46 |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments | |
Derivative Instruments | NOTE 16 Derivative Instruments The Company did not have any derivatives designated as hedging instruments, as of March 31, 2020 and December 31, 2019. The following table presents the amounts recorded in the Company’s consolidated balance sheets, for derivatives not designated as hedging instruments, as of March 31, 2020 and December 31, 2019: March 31, 2020 December 31, 2019 Fair Notional Fair Notional (dollars in thousands) Value Amount Value Amount Asset Derivatives Consolidated Balance Sheet Location Interest rate lock commitments Other assets $ 2,543 $ 147,414 $ 1,228 $ 45,715 Forward loan sales commitments Other assets 1,059 35,011 393 12,784 TBA mortgage backed securities Other assets — — — — Total asset derivatives $ 3,602 $ 182,425 $ 1,621 $ 58,499 Liability Derivatives Interest rate lock commitments Accrued expenses and other liabilities $ — $ — $ — $ — Forward loan sales commitments Accrued expenses and other liabilities — — — — TBA mortgage backed securities Accrued expenses and other liabilities 2,884 193,500 109 68,500 Total liability derivatives $ 2,884 $ 193,500 $ 109 $ 68,500 The gain (loss) recognized on derivative instruments for the three months ended March 31, 2020 and 2019 was as follows: Three months ended Consolidated Statements of March 31, March 31, (dollars in thousands) Income Location 2020 2019 Interest rate lock commitments Mortgage banking $ 1,227 $ 1,789 Forward loan sales commitments Mortgage banking 666 246 TBA mortgage backed securities Mortgage banking (3,423) (454) Total gain/(loss) from derivative instruments $ (1,530) $ 1,581 |
Regulatory Matters
Regulatory Matters | 3 Months Ended |
Mar. 31, 2020 | |
Regulatory Matters | |
Regulatory Matters | NOTE 17 Regulatory Matters The Company and the Bank are subject to various regulatory capital requirements administered by the 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 consolidated financial statements. Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of common equity tier 1, tier 1, and total capital (as defined in the regulations) to risk weighted assets (as defined) and of tier 1 capital (as defined) to average assets (as defined). Management believes at March 31, 2020 and December 31, 2019, each of the Company and the Bank had met all of the capital adequacy requirements to which it is subject. The following table presents the Company’s and the Bank’s actual capital amounts and ratios as of March 31, 2020 and December 31, 2019: March 31, 2020 Minimum to be Requirements Well Capitalized for Capital Under Prompt Actual Adequacy Purposes Corrective Action (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Common equity tier 1 capital to risk weighted assets Consolidated $ 243,448 12.36 % $ 88,643 4.50 % $ N/A N/A Bank 232,162 11.80 % 88,567 4.50 % 127,930 6.50 % Tier 1 capital to risk weighted assets . Consolidated 251,671 12.78 % 118,190 6.00 % N/A N/A Bank 232,162 11.80 % 118,089 6.00 % 157,452 8.00 % Total capital to risk weighted assets Consolidated 325,964 16.55 % 157,587 8.00 % N/A N/A Bank 256,793 13.05 % 157,452 8.00 % 196,815 10.00 % Tier 1 capital to average assets Consolidated 251,671 10.62 % 94,826 4.00 % N/A N/A Bank 232,162 9.80 % 94,752 4.00 % 118,440 5.00 % December 31, 2019 Minimum to be Requirements Well Capitalized for Capital Under Prompt Actual Adequacy Purposes Corrective Action (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Common equity tier 1 capital to risk weighted assets Consolidated $ 239,672 12.48 % $ 86,452 4.50 % $ N/A N/A Bank 228,512 11.91 % 86,362 4.50 % 124,745 6.50 % Tier 1 capital to risk weighted assets . Consolidated 247,866 12.90 % 115,270 6.00 % N/A N/A Bank 228,512 11.91 % 115,149 6.00 % 153,532 8.00 % Total capital to risk weighted assets Consolidated 321,415 16.73 % 153,693 8.00 % N/A N/A Bank 252,436 13.15 % 153,532 8.00 % 191,915 10.00 % Tier 1 capital to average assets Consolidated 247,866 11.05 % 91,504 4.00 % N/A N/A Bank 228,512 10.20 % 89,615 4.00 % 112,018 5.00 % The Bank is subject to certain restrictions on the amount of dividends that it may pay without prior regulatory approval. The Company and the Bank are subject to the rules of the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act rules. The rules included the implementation of a 2.5 percent capital conservation buffer that is added to the minimum requirements for capital adequacy purposes. A banking organization with a conservation buffer of less than the required amount will be subject to the limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. At March 31, 2020, the ratios for the Company and the Bank were sufficient to meet the conservation buffer. In addition, the Company must adhere to various U.S. Department of Housing and Urban Development, or HUD, regulatory guidelines including required minimum capital and liquidity to maintain their Federal Housing Administration approval status. Failure to comply with the HUD guidelines could result in withdrawal of this certification. As of March 31, 2020, and December 31, 2019, the Company was in compliance with HUD guidelines. |
Fair Value of Assets and Liabil
Fair Value of Assets and Liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value of Assets and Liabilities | |
Fair Value of Assets and Liabilities | NOTE 18 Fair Value of Assets and Liabilities The Company categorizes its assets and liabilities measured at estimated fair value into a three level hierarchy based on the priority of the inputs to the valuation technique used to determine estimated fair value. The estimated fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used in the determination of the estimated fair value measurement fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the estimated fair value measurement. Assets and liabilities valued at estimated fair value are categorized based on the following inputs to the valuation techniques as follows: Level 1— Inputs that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that an entity has the ability to access. Level 2— Inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Estimated fair values for these instruments are estimated using pricing models, quoted prices of investment securities with similar characteristics, or discounted cash flows. Level 3— Inputs that are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. Subsequent to initial recognition, the Company may re‑measure the carrying value of assets and liabilities measured on a nonrecurring basis to estimated fair value. Adjustments to estimated fair value usually result when certain assets are impaired. Such assets are written down from their carrying amounts to their estimated fair value. Professional standards allow entities the irrevocable option to elect to measure certain financial instruments and other items at estimated fair value for the initial and subsequent measurement on an instrument‑by‑instrument basis. The Company adopted the policy to value certain financial instruments at estimated fair value. The Company has not elected to measure any existing financial instruments at estimated fair value; however, it may elect to measure newly acquired financial instruments at estimated fair value in the future. Recurring Basis The Company uses estimated fair value measurements to record estimated fair value adjustments to certain assets and liabilities and to determine estimated fair value disclosures. The following tables present the balances of the assets and liabilities measured at estimated fair value on a recurring basis as of March 31, 2020 and December 31, 2019: March 31, 2020 (dollars in thousands) Level 1 Level 2 Level 3 Total Available-for-sale and equity securities U.S. treasury and government agencies $ — $ 16,627 $ — $ 16,627 Obligations of state and political agencies — 69,106 — 69,106 Mortgage backed securities Residential agency — 229,309 — 229,309 Commercial — 29,910 — 29,910 Asset backed securities — 141 — 141 Corporate bonds — 9,056 — 9,056 Total available-for-sale securities $ — $ 354,149 $ — $ 354,149 Other assets Derivatives $ — $ 3,602 $ — $ 3,602 Other liabilities Derivatives $ — $ 2,884 $ — $ 2,884 December 31, 2019 (dollars in thousands) Level 1 Level 2 Level 3 Total Available-for-sale and equity securities U.S. treasury and government agencies $ — $ 21,240 $ — $ 21,240 Obligations of state and political agencies — 68,648 — 68,648 Mortgage backed securities Residential agency — 182,538 — 182,538 Commercial — 30,685 — 30,685 Asset backed securities — 144 — 144 Corporate bonds — 7,095 — 7,095 Equity securities 2,808 — — 2,808 Total available-for-sale and equity securities $ 2,808 $ 310,350 $ — $ 313,158 Other assets Derivatives $ — $ 1,621 $ — $ 1,621 Other liabilities Derivatives $ — $ 109 $ — $ 109 The following is a description of the valuation methodologies used for instruments measured at estimated fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy. Investment Securities When available, the Company uses quoted market prices to determine the estimated fair value of investment securities; such items are classified in Level 1 of the estimated fair value hierarchy. For the Company’s investment securities for which quoted prices are not available for identical investment securities in an active market, the Company determines estimated fair value utilizing vendors who apply matrix pricing for similar bonds for which no prices are observable or may compile prices from various sources. These models are primarily industry‑standard models that consider various assumptions, including time value, yield curve, volatility factors, prepayment speeds, default rates, loss severity, current market, and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. Estimated fair values from these models are verified, where possible, against quoted prices for recent trading activity of assets with similar characteristics to the security being valued. Such methods are generally classified as Level 2. However, when prices from independent sources vary, cannot be obtained, or cannot be corroborated, a security is generally classified as Level 3. Derivatives All of the Company’s derivatives are traded in over‑the‑counter markets where quoted market prices are not readily available. For these derivatives, estimated fair value is measured using internally developed models that use primarily market observable inputs, such as yield curves and option volatilities, and accordingly, classify as Level 2. Examples of Level 2 derivatives are basic interest rate swaps and forward contracts. Nonrecurring Basis Certain assets are measured at estimated fair value on a nonrecurring basis. These assets are not measured at estimated fair value on an ongoing basis; however, they are subject to estimated fair value adjustments in certain circumstances, such as when there is evidence of impairment or a change in the amount of previously recognized impairment. Net impairment related to nonrecurring estimated fair value measurements of certain assets as of March 31, 2020 and December 31, 2019 consisted of the following: March 31, 2020 (dollars in thousands) Level 2 Level 3 Total Impairment Loans held for sale $ 72,258 $ — $ 72,258 $ — Impaired loans — 4,876 4,876 3,066 Foreclosed assets — 209 209 — Servicing rights — 3,277 3,277 — December 31, 2019 (dollars in thousands) Level 2 Level 3 Total Impairment Loans held for sale $ 46,846 $ — $ 46,846 $ — Impaired loans — 4,816 4,816 3,138 Foreclosed assets — 8 8 — Servicing rights — 3,845 3,845 — Loans Held for Sale Loans originated and held for sale are carried at the lower of cost or estimated fair value. The Company obtains quotes or bids on these loans directly from purchasing financial institutions. Typically these quotes include a premium on the sale and thus these quotes indicate estimated fair value of the held for sale loans is greater than cost. Impairment losses for loans held for sale that are carried at the lower of cost or estimated fair value, represent additional net write‑downs during the period to record these loans at the lower of cost or estimated fair value, subsequent to their initial classification as loans held for sale. Impaired Loans In accordance with the provisions of the loan impairment guidance, loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms are measured for impairment. Allowable methods for estimating fair value include using the estimated fair value of the collateral for collateral dependent loans or, where a loan is determined not to be collateral dependent, using a discounted cash flow method. The estimated fair value method requires obtaining a current independent appraisal of the collateral and applying a discount factor, if necessary, to the appraised value and including costs to the sell. Because many of these inputs are not observable, the measurements are classified as Level 3. Foreclosed Assets Foreclosed assets are recorded at estimated fair value based on property appraisals, less estimated selling costs, at the date of the transfer with any impairment amount charged to the allowance for loan losses. Subsequent to the transfer, foreclosed assets are carried at the lower of cost or estimated fair value, less estimated selling costs with changes in the estimated fair value or any impairment amount recorded in other noninterest expense. Fair value measurements may be based upon appraisals, third‑party price opinions, or internally developed pricing methods. These measurements are classified as Level 3. Servicing Rights Servicing rights do not trade in an active market with readily observable prices. Accordingly, the estimated fair value of servicing rights is determined using a valuation model that calculates the present value of estimated future net servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, ancillary income, and late fees. Servicing rights are carried at lower of cost or market value, and therefore can be subject to estimated fair value measurements on a nonrecurring basis. Estimated fair value measurements of servicing rights use significant unobservable inputs and accordingly, are classified as Level 3. The Company obtains the estimated fair value of servicing rights from an independent third party pricing service and records the unadjusted estimated fair values in the financial statements. The valuation techniques and significant unobservable inputs used to measure Level 3 estimated fair values as of March 31, 2020, and December 31, 2019, were as follows: March 31, 2020 (dollars in thousands) Weighted Asset Type Valuation Technique Unobservable Input Fair Value Range Average Impaired loans Appraisal value Property specific adjustment $ 4,876 N/A N/A Foreclosed assets Appraisal value Property specific adjustment 209 N/A N/A Servicing rights Discounted cash flows Prepayment speed assumptions 3,277 158-471 237 Discount rate 9.4 % 9.4 % December 31, 2019 (dollars in thousands) Weighted Asset Type Valuation Technique Unobservable Input Fair Value Range Average Impaired loans Appraisal value Property specific adjustment $ 4,816 N/A N/A Foreclosed assets Appraisal value Property specific adjustment 8 N/A N/A Servicing rights Discounted cash flows Prepayment speed assumptions 3,845 123-267 194 Discount rate 9.4 % 9.4 % Disclosure of estimated fair value information about financial instruments, for which it is practicable to estimate that value, is required whether or not recognized in the consolidated balance sheets. In cases in which quoted market prices are not available, estimated fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. In that regard, the derived estimated fair value estimates cannot be substantiated by comparison to independent markets and, in many cases could not be realized in immediate settlement of the instruments. Certain financial instruments, with an estimated fair value that is not practicable to estimate and all non‑financial instruments, are excluded from the disclosure requirements. Accordingly, the aggregate estimated fair value amounts presented do not necessarily represent the underlying value of the Company. The following disclosures represent financial instruments in which the ending balances, as of March 31, 2020 and December 31, 2019, were not carried at estimated fair value in their entirety on the consolidated balance sheets. Cash and Cash Equivalents and Accrued Interest The carrying amounts reported in the consolidated balance sheets approximate those assets and liabilities estimated fair values. Loans For variable‑rate loans that reprice frequently and with no significant change in credit risk, estimated fair values are based on carrying values. The estimated fair values of other loans are estimated using discounted cash flow analysis, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Bank‑Owned Life Insurance Bank‑owned life insurance is carried at the amount due upon surrender of the policy, which is also the estimated fair value. This amount was provided by the insurance companies based on the terms of the underlying insurance contract. Deposits The estimated fair values of demand deposits are, by definition, equal to the amount payable on demand at the consolidated balance sheet date. The estimated fair values of fixed‑rate certificates of deposit are estimated using a discounted cash flow calculation that applies current incremental interest rates being offered on certificates of deposit to a schedule of aggregated expected monthly maturities of the outstanding certificates of deposit. Short‑Term Borrowings and Long‑Term Debt For variable‑rate borrowings that reprice frequently, estimated fair values are based on carrying values. The estimated fair value of fixed‑rate borrowings are estimated using discounted cash flow analysis, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. Off‑Balance Sheet Credit‑Related Commitments Off‑balance sheet credit related commitments are generally of short‑term nature. The contract amount of such commitments approximates their estimated fair value since the commitments are comprised primarily of unfunded loan commitments which are generally priced at market at the time of funding. The estimated fair values, and related carrying or notional amounts, of the Company’s financial instruments are as follows: March 31, 2020 Carrying Estimated Fair Value (dollars in thousands) Amount Level 1 Level 2 Level 3 Total Financial Assets Cash and cash equivalents $ 198,489 $ 198,489 $ — $ — $ 198,489 Loans 1,731,258 — — 1,761,783 1,761,783 Accrued interest receivable 7,425 7,425 — — 7,425 Bank-owned life insurance 31,763 — 31,763 — 31,763 Financial Liabilities Noninterest-bearing deposits $ 608,559 $ — $ 608,559 $ — $ 608,559 Interest-bearing deposits 1,311,585 — 1,311,585 — 1,311,585 Time deposits 201,370 — — 202,892 202,892 Long-term debt 58,762 — 57,941 — 57,941 Accrued interest payable 1,760 1,760 — — 1,760 December 31, 2019 Carrying Estimated Fair Value (dollars in thousands) Amount Level 1 Level 2 Level 3 Total Financial Assets Cash and cash equivalents $ 144,006 $ 144,006 $ — $ — $ 144,006 Loans 1,697,355 — — 1,693,824 1,693,824 Accrued interest receivable 7,551 7,551 — — 7,551 Bank-owned life insurance 31,566 — 31,566 — 31,566 Financial Liabilities Noninterest-bearing deposits $ 577,704 $ — $ 577,704 $ — $ 577,704 Interest-bearing deposits 1,197,530 — 1,197,530 — 1,197,530 Time deposits 196,082 — — 196,182 196,182 Long-term debt 58,769 — 58,239 — 58,239 Accrued interest payable 1,038 1,038 — — 1,038 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events | |
Subsequent Events | NOTE 19 Subsequent Events On March 27, 2020, President Trump signed into Law the Coronavirus Aid Relief and Economic Security Act, or CARES Act, which establishes a $2.0 trillion economic stimulus package, including cash payments to individuals, supplemental unemployment insurance benefits and a $349 billion loan program administered through the U.S. Small Business Administration, or SBA, referred to as the paycheck protection program, or PPP. Under the PPP, small businesses, sole proprietorships, independent contractors, and self-employed individuals may apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. The Bank is participating as a lender in the PPP. In addition, the CARES Act provides financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. See “Note 4 Loans and Allowance for Loan Losses” for additional discussion regarding TDRs. On April 2, 2020, the SBA issued an interim final rule, announcing the implementation of sections 1102 and 1106 of the CARES Act. Section 1102 of the CARES Act temporarily added a new program, the PPP, to the SBA’s 7(a) Loan Program. Section 1106 of the CARES Act provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the PPP. The PPP and loan forgiveness are intended to provide economic relief to small businesses nationwide adversely impacted by COVID-19. As an SBA-Certified Preferred lender we were delegated the authority as part of the CARES Act to make PPP SBA-guaranteed financing available to eligible borrowers. As of April 21, 2020, we had assisted over 900 new and existing clients secure approximately $300 million of PPP financing. The SBA will pay a processing fee based on the balance of the financing outstanding at the time of final disbursement. The processing fees will be as follows: five percent for loans of not more than $350 thousand, three percent for loans of more than $350 thousand and less than $2 million, and one percent for loans of at least $2 million. We currently expect to receive approximately $8.9 million in net processing fees which will be deferred and recognized as interest income on a level yield method over the life of the respective loans. On April 7, 2020, the Board of Governors of the Federal Reserve System, or FRB, authorized each of the Federal Reserve Banks to establish the Payment Protection Program Lending Facility, or PPPL Facility, pursuant to section 13(3) of the Federal Reserve Act. Under the PPPL Facility, each of the Federal Reserve Banks will extend non-recourse loans to eligible financial institutions to fund loans guaranteed by the SBA under the PPP established by the CARES Act. On April 15, 2020, we executed a PPPL Facility Agreement with the Federal Reserve Bank of Minneapolis. The PPP loans guaranteed by the SBA are eligible to serve as collateral for the PPPL Facility. The PPPL Facility will provide us with additional liquidity to facilitate lending to small businesses under the PPP. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Significant Accounting Policies | |
Organization | Organization Alerus Financial Corporation is a financial holding company organized under the laws of the state of Delaware. Alerus Financial Corporation, or the Company, and its subsidiaries is a diversified financial services company headquartered in Grand Forks, North Dakota. Through its subsidiary, Alerus Financial, National Association, or the Bank, the Company provides innovative and comprehensive financial solutions to businesses and consumers through four distinct business lines—banking, retirement and benefit services, wealth management, and mortgage. |
Initial Public Offering | Initial Public Offering On September 17, 2019, the Company sold 2,860,000 shares of common stock in its initial public offering. On September 25, 2019, the Company sold an additional 429,000 shares of common stock pursuant to the exercise in full, by the underwriters, of their option to purchase additional shares. The aggregate offering price for the shares sold by the Company was $69.1 million, and after deducting $4.7 million of underwriting discounts and $1.6 million of offering expenses paid to third parties, the Company received total net proceeds of $62.8 million. |
Basis of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements and notes thereto of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC, and conform to practices within the banking industry and include all of the information and disclosures required by generally accepted accounting principles in the United States of America, or GAAP, for interim financial reporting. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of financial results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results for the full year or any other period. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q. These interim unaudited financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 26, 2020. |
Principles of Consolidation | Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company’s principal operating subsidiary is the Bank. In the normal course of business, the Company may enter into a transaction with a variable interest entity, or VIE. VIE’s are legal entities whose investors lack the ability to make decisions about the entity’s activities, or whose equity investors do not have the right to receive the residual returns of the entity. The applicable accounting guidance requires the Company to perform ongoing quantitative and qualitative analysis to determine whether it must consolidate any VIE. The Company does not have any ownership interest in, or exert any control, over any VIE, and thus no VIE’s are included in the consolidated financial statements. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the valuation of investment securities, determination of the allowance for loan losses, valuation of reporting units for the purpose of testing goodwill and other intangible assets for impairment, valuation of deferred tax assets, and fair values of financial instruments. |
Reclassifications | Reclassifications Certain items previously reported have been reclassified to conform to the current period’s reporting format. Such reclassifications did not affect net income or stockholders’ equity. |
Emerging Growth Company | Emerging Growth Company The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, even if the Company complies with the greater obligations of public companies that are not emerging growth companies, the Company may avail itself of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as the Company is an emerging growth company. The Company will continue to be an emerging growth company until the earliest to occur of: (1) the end of the fiscal year following the fifth anniversary of the date of the first sale of common equity securities under the Company’s Registration Statement on Form S-1, which was declared effective by the SEC on September 12, 2019; (2) the last day of the fiscal year in which the Company has $1.07 billion or more in annual revenues; (3) the date on which the Company is deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the “Exchange Act”; or (4) the date on which the Company has, during the previous three-year period, issued publicly or privately, more than $1.0 billion in non-convertible debt securities. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company elected to take advantage of the benefits of this extended transition period. |
New Accounting Pronouncements | Adopted Pronouncements In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. This ASU removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a goodwill impairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its estimated fair value, not to exceed the carrying amount of goodwill. For public business entities that are US Securities and Exchange Commission filers, ASU 2017-04, is effective for interim and annual reporting periods beginning after December 15, 2019. The Company adopted ASU 2017-04 effective January 1, 2020, the new guidance did not have an impact on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018‑13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds, and modifies certain disclosure requirements for estimated fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfer between Level 1 and Level 2 of the estimated fair value hierarchy, but will be required to disclose the range and weighted-average used to develop significant unobservable inputs for Level 3 estimated fair value measurements. ASU 2018‑13 is effective for all entities interim and annual reporting periods beginning after December 15, 2019. The Company adopted ASU 2018-13 effective January 1, 2020, the revised disclosure requirements did not have a material impact on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40) – Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. ASU 2018-15 was effective for the Company on January 1, 2020, and did not have a material impact on the Company’s consolidated financial statements. Pronouncements Not Yet Effective In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires a new impairment model known as the current expected credit loss, or CECL, which significantly changes the way impairment of financial instruments is recognized by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of financial instruments. The main provisions of ASU 2016-13 include (1) replacing the “incurred cost” approach under GAAP with an “expected loss” model for instruments measured at amortized cost, (2) requiring entities to record an allowance for credit losses related to available-for-sale debt securities rather than a direct write-down of the carrying amount of the investments, as is required by the other-than-temporary impairment model under current GAAP, and (3) a simplified accounting model for purchase credit-impaired debt securities and loans. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326). This update amends the effective date of ASU No. 2016-13 for certain entities, including private companies and smaller reporting companies, until fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. As an emerging growth company, the Company can take advantage of this delay and plans to adopt the standard with the amended effective date. The Company does not plan to early adopt this standard but continues to work through implementation. The Company continues collecting and retaining loan and credit data and evaluating various loss estimation models. While we currently cannot reasonably estimate the impact of adopting this standard, we expect the impact will be influenced by the composition, characteristics, and quality of our loan portfolio, as well as the general economic conditions and forecasts as of the adoption date. In April 2019, the FASB issued ASU 2019‑04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. This update is not expected to have a significant impact on the Company’s consolidated financial statements. In May 2019, the FASB issued ASU 2019‑05, Targeted Transition Relief to provide entities with an option to irrevocably elect the fair value option applied on an instrument-by-instrument basis for eligible instruments. In November 2019, the FASB Issued ASU 2019-10, which amends the effective date of this ASU for certain entities, including private companies and smaller reporting companies until after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, the Company can take advantage of this delay and plans to adopt the standard with the amended effective date. This update is not expected to have a significant impact on the Company’s consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), which simplifies accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for the areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2020, for public business entities. For private companies and smaller reporting companies, this guidance is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2021. As an emerging growth company, the Company can take advantage of this later effective date. Early adoption of the amendments is permitted, including adoption in any interim period for which financial statements have not yet been issued. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective, or prospective basis. The Company is currently reviewing the provisions of this new pronouncement, but does not expect adoption of this guidance to have a material impact on the Company’s consolidated financial statements. |
Investment Securities (Tables)
Investment Securities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Investment Securities | |
Schedule of amortized cost of investment securities to estimated fair values | March 31, 2020 Amortized Unrealized Unrealized Fair (dollars in thousands) Cost Gains Losses Value U.S. Treasury and agencies $ 16,538 $ 93 $ (4) $ 16,627 Obligations of state and political agencies 67,921 1,212 (27) 69,106 Mortgage backed securities Residential agency 221,844 7,483 (18) 229,309 Commercial 29,128 899 (117) 29,910 Asset backed securities 134 7 — 141 Corporate bonds 9,039 18 (1) 9,056 Total available-for-sale investment securities $ 344,604 $ 9,712 $ (167) $ 354,149 December 31, 2019 Amortized Unrealized Unrealized Fair (dollars in thousands) Cost Gains Losses Value U.S. Treasury and agencies $ 21,246 $ 9 $ (15) $ 21,240 Obligations of state and political agencies 68,162 647 (161) 68,648 Mortgage backed securities Residential agency 180,411 2,258 (131) 182,538 Commercial 30,752 101 (168) 30,685 Asset backed securities 139 5 — 144 Corporate bonds 7,054 41 — 7,095 Total available-for-sale investment securities $ 307,764 $ 3,061 $ (475) $ 310,350 |
Schedule of investment securities with gross unrealized losses | March 31, 2020 Less than 12 Months Over 12 Months Total Unrealized Fair Unrealized Fair Unrealized Fair (dollars in thousands) Losses Value Losses Value Losses Value U.S. Treasury and agencies $ (4) $ 1,342 $ — $ — $ (4) $ 1,342 Obligations of state and political agencies (27) 12,420 — — (27) 12,420 Mortgage backed securities Residential agency (5) 2,664 (13) 1,691 (18) 4,355 Commercial — — (117) 6,932 (117) 6,932 Asset backed securities — 2 — — — 2 Corporate bonds (1) 2,009 — — (1) 2,009 Total available-for-sale investment securities $ (37) $ 18,437 $ (130) $ 8,623 $ (167) $ 27,060 December 31, 2019 Less than 12 Months Over 12 Months Total Unrealized Fair Unrealized Fair Unrealized Fair (dollars in thousands) Losses Value Losses Value Losses Value U.S. Treasury and agencies $ (5) $ 1,740 $ (10) $ 9,990 $ (15) $ 11,730 Obligations of state and political agencies (140) 11,959 (21) 5,798 (161) 17,757 Mortgage backed securities Residential agency (52) 17,131 (79) 14,036 (131) 31,167 Commercial (116) 15,235 (52) 6,195 (168) 21,430 Asset backed securities — 2 — — — 2 Corporate bonds — — — — — — Total available-for-sale investment securities $ (313) $ 46,067 $ (162) $ 36,019 $ (475) $ 82,086 |
Schedule of contractual maturity of amortized cost and estimated fair value | Amortized Fair (dollars in thousands) Cost Value Due within one year or less $ 16,054 $ 16,149 Due after one year through five years 25,745 25,934 Due after five years through ten years 78,317 80,298 Due after 10 years 224,488 231,768 Total available-for-sale investment securities $ 344,604 $ 354,149 |
Schedule of proceeds from the sale of available for sale securities | Three months ended March 31, (dollars in thousands) 2020 2019 Proceeds $ 4,000 $ 4,763 Realized gains — 119 Realized losses — 6 |
Schedule of federal home loan bank | March 31, December 31, (dollars in thousands) 2020 2019 Federal Reserve $ 2,675 $ 2,675 FHLB 3,284 3,080 |
Loans and Allowance for Loan _2
Loans and Allowance for Loan Losses (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Loans and Allowance for Loan Losses | |
Schedule of total loans outstanding by portfolio segment | March 31, December 31, (dollars in thousands) 2020 2019 Commercial Commercial and industrial $ 502,637 $ 479,144 Real estate construction 25,487 26,378 Commercial real estate 522,106 494,703 Total commercial 1,050,230 1,000,225 Consumer Residential real estate first mortgage 457,895 457,155 Residential real estate junior lien 170,538 177,373 Other revolving and installment 79,614 86,526 Total consumer 708,047 721,054 Total loans $ 1,758,277 $ 1,721,279 |
Schedule of past due aging analysis of the loan portfolio | March 31, 2020 90 Days Accruing 30 - 89 Days or More Total (dollars in thousands) Current Past Due Past Due Nonaccrual Loans Commercial Commercial and industrial $ 497,635 $ 438 $ — $ 4,564 $ 502,637 Real estate construction 25,487 — — — 25,487 Commercial real estate 518,064 2,602 — 1,440 522,106 Total commercial 1,041,186 3,040 — 6,004 1,050,230 Consumer Residential real estate first mortgage 455,580 1,574 — 741 457,895 Residential real estate junior lien 170,099 237 11 191 170,538 Other revolving and installment 79,274 317 — 23 79,614 Total consumer 704,953 2,128 11 955 708,047 Total loans $ 1,746,139 $ 5,168 $ 11 $ 6,959 $ 1,758,277 December 31, 2019 90 Days Accruing 30 - 89 Days or More Total (dollars in thousands) Current Past Due Past Due Nonaccrual Loans Commercial Commercial and industrial $ 473,900 $ 382 $ — $ 4,862 $ 479,144 Real estate construction 26,251 127 — — 26,378 Commercial real estate 492,707 556 — 1,440 494,703 Total commercial 992,858 1,065 — 6,302 1,000,225 Consumer Residential real estate first mortgage 455,244 666 448 797 457,155 Residential real estate junior lien 176,915 184 — 274 177,373 Other revolving and installment 86,172 348 — 6 86,526 Total consumer 718,331 1,198 448 1,077 721,054 Total loans $ 1,711,189 $ 2,263 $ 448 $ 7,379 $ 1,721,279 |
Schedule of loans outstanding, by portfolio segment and risk category | March 31, 2020 Criticized Special (dollars in thousands) Pass Mention Substandard Doubtful Total Commercial Commercial and industrial $ 470,867 $ 10,178 $ 21,575 $ 17 $ 502,637 Real estate construction 24,941 279 267 — 25,487 Commercial real estate 492,434 4,422 25,250 — 522,106 Total commercial 988,242 14,879 47,092 17 1,050,230 Consumer Residential real estate first mortgage 455,720 1,434 741 — 457,895 Residential real estate junior lien 167,356 1,952 1,230 — 170,538 Other revolving and installment 79,591 — 23 — 79,614 Total consumer 702,667 3,386 1,994 — 708,047 Total loans $ 1,690,909 $ 18,265 $ 49,086 $ 17 $ 1,758,277 December 31, 2019 Criticized Special (dollars in thousands) Pass Mention Substandard Doubtful Total Commercial Commercial and industrial $ 448,306 $ 9,585 $ 21,253 $ — $ 479,144 Real estate construction 25,119 282 977 — 26,378 Commercial real estate 462,294 2,359 30,050 — 494,703 Total commercial 935,719 12,226 52,280 — 1,000,225 Consumer Residential real estate first mortgage 456,358 — 797 — 457,155 Residential real estate junior lien 176,122 — 1,251 — 177,373 Other revolving and installment 86,520 — 6 — 86,526 Total consumer 719,000 — 2,054 — 721,054 Total loans $ 1,654,719 $ 12,226 $ 54,334 $ — $ 1,721,279 |
Summary of changes in allowances | Three months ended March 31, 2020 Beginning Provision for Loan Loan Ending (dollars in thousands) Balance Loan Losses Charge-offs Recoveries Balance Commercial Commercial and industrial $ 12,270 $ 70 $ (32) $ 593 $ 12,901 Real estate construction 303 31 — — 334 Commercial real estate 6,688 1,588 — — 8,276 Total commercial 19,261 1,689 (32) 593 21,511 Consumer Residential real estate first mortgage 1,448 761 — — 2,209 Residential real estate junior lien 671 317 — 37 1,025 Other revolving and installment 352 92 (67) 64 441 Total consumer 2,471 1,170 (67) 101 3,675 Unallocated 2,192 (359) — — 1,833 Total $ 23,924 $ 2,500 $ (99) $ 694 $ 27,019 Three months ended March 31, 2019 Beginning Provision for Loan Loan Ending (dollars in thousands) Balance Loan Losses Charge-offs Recoveries Balance Commercial Commercial and industrial $ 12,127 $ 3,407 $ (1,785) $ 66 $ 13,815 Real estate construction 250 2 (1) — 251 Commercial real estate 6,279 (436) — — 5,843 Total commercial 18,656 2,973 (1,786) 66 19,909 Consumer Residential real estate first mortgage 1,156 454 — — 1,610 Residential real estate junior lien 805 7 (104) 53 761 Other revolving and installment 380 (46) (58) 73 349 Total consumer 2,341 415 (162) 126 2,720 Unallocated 1,177 (1,168) — — 9 Total $ 22,174 $ 2,220 $ (1,948) $ 192 $ 22,638 |
Schedule of loans distributed by portfolio segment and impairment methodology | March 31, 2020 Recorded Investment Allowance for Loan Losses Individually Collectively Individually Collectively (dollars in thousands) Evaluated Evaluated Total Evaluated Evaluated Unallocated Total Commercial Commercial and industrial $ 5,422 $ 497,215 $ 502,637 $ 2,764 $ 10,137 $ — $ 12,901 Real estate construction — 25,487 25,487 — 334 — 334 Commercial real estate 1,524 520,582 522,106 271 8,005 — 8,276 Total commercial 6,946 1,043,284 1,050,230 3,035 18,476 — 21,511 Consumer Residential real estate first mortgage 733 457,162 457,895 — 2,209 — 2,209 Residential real estate junior lien 241 170,297 170,538 20 1,005 — 1,025 Other revolving and installment 22 79,592 79,614 11 430 — 441 Total consumer 996 707,051 708,047 31 3,644 — 3,675 Total loans $ 7,942 $ 1,750,335 $ 1,758,277 $ 3,066 $ 22,120 $ 1,833 $ 27,019 December 31, 2019 Recorded Investment Allowance for Loan Losses Individually Collectively Individually Collectively (dollars in thousands) Evaluated Evaluated Total Evaluated Evaluated Unallocated Total Commercial Commercial and industrial $ 976 $ 478,168 $ 479,144 $ 189 $ 12,081 $ — $ 12,270 Real estate construction — 26,378 26,378 — 303 — 303 Commercial real estate 5,925 488,778 494,703 2,946 3,742 — 6,688 Total commercial 6,901 993,324 1,000,225 3,135 16,126 — 19,261 Consumer Residential real estate first mortgage 782 456,373 457,155 — 1,448 — 1,448 Residential real estate junior lien 266 177,107 177,373 — 671 — 671 Other revolving and installment 5 86,521 86,526 3 349 — 352 Total consumer 1,053 720,001 721,054 3 2,468 — 2,471 Total loans $ 7,954 $ 1,713,325 $ 1,721,279 $ 3,138 $ 18,594 $ 2,192 $ 23,924 |
Schedule of impaired loans | March 31, 2020 December 31, 2019 Recorded Unpaid Related Recorded Unpaid Related (dollars in thousands) Investment Principal Allowance Investment Principal Allowance Impaired loans with a valuation allowance Commercial and industrial $ 4,891 $ 5,028 $ 2,764 $ 639 $ 727 $ 189 Commercial real estate 1,524 1,642 271 5,718 5,823 2,946 Residential real estate junior lien 20 20 20 — — — Other revolving and installment 17 17 11 5 6 3 Total impaired loans with a valuation allowance 6,452 6,707 3,066 6,362 6,556 3,138 Impaired loans without a valuation allowance Commercial and industrial 531 611 — 337 1,110 — Commercial real estate — — — 207 236 — Residential real estate first mortgage 733 741 — 782 797 — Residential real estate junior lien 221 325 — 266 372 — Other revolving and installment 5 5 — — — — Total impaired loans without a valuation allowance 1,490 1,682 — 1,592 2,515 — Total impaired loans Commercial and industrial 5,422 5,639 2,764 976 1,837 189 Commercial real estate 1,524 1,642 271 5,925 6,059 2,946 Residential real estate first mortgage 733 741 — 782 797 — Residential real estate junior lien 241 345 20 266 372 — Other revolving and installment 22 22 11 5 6 3 Total impaired loans $ 7,942 $ 8,389 $ 3,066 $ 7,954 $ 9,071 $ 3,138 The table below presents the average recorded investment in impaired loans and interest income for the three months ended March 31, 2020 and 2019: Three Months Ended March 31, 2020 2019 Average Average Recorded Interest Recorded Interest (dollars in thousands) Investment Income Investment Income Impaired loans with a valuation allowance Commercial and industrial $ 4,979 $ 15 $ 5,529 $ — Commercial real estate 1,536 8 1,533 — Residential real estate junior lien 20 — — — Other revolving and installment 17 — 27 — Total impaired loans with a valuation allowance 6,552 23 7,089 — Impaired loans without a valuation allowance Commercial and industrial 545 27 1,816 46 Real estate construction — — 220 9 Residential real estate first mortgage 835 — — — Residential real estate junior lien 224 3 290 4 Other revolving and installment 8 — — — Total impaired loans without a valuation allowance 1,612 30 2,326 59 Total impaired loans Commercial and industrial 5,524 42 7,345 46 Real estate construction — — 220 9 Commercial real estate 1,536 8 1,533 — Residential real estate first mortgage 835 — — — Residential real estate junior lien 244 3 290 4 Other revolving and installment 25 — 27 — Total impaired loans $ 8,164 $ 53 $ 9,415 $ 59 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Other Intangible Assets | |
Schedule of goodwill by segment | The following table summarizes the carrying amount of goodwill, by segment, as of March 31, 2020 and December 31, 2019: March 31, December 31, (dollars in thousands) 2020 2019 Banking $ 20,131 $ 20,131 Retirement and benefit services 7,198 7,198 Total goodwill $ 27,329 $ 27,329 |
Schedule of identifiable intangible assets | March 31, 2020 December 31, 2019 (dollars in thousands) Gross Carrying Amount Accumulated Amortization Total Gross Carrying Amount Accumulated Amortization Total Identifiable customer intangibles $ 31,857 $ (15,088) $ 16,769 $ 31,857 $ (14,287) $ 17,570 Core deposit intangible assets 3,793 (3,161) 632 4,993 (4,172) 821 Total intangible assets $ 35,650 $ (18,249) $ 17,401 $ 36,850 $ (18,459) $ 18,391 |
Loan Servicing (Tables)
Loan Servicing (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Loan Servicing | |
Summary of activity related to loan servicing | Three months ended March 31, (dollars in thousands) 2020 2019 Balance, beginning of period $ 3,845 $ 4,623 Additions 24 67 Amortization (187) (165) (Impairment)/Recovery (405) 5 Balance, end of period $ 3,277 $ 4,530 |
Summary of key economic assumptions | March 31, December 31, (dollars in thousands) 2020 2019 Fair value of servicing rights $ 3,277 $ 3,845 Weighted-average remaining term, years 20.0 20.1 Prepayment speeds 14.2 % 11.8 % Discount rate 9.4 % 9.4 % |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases | |
Schedule of right-of-use assets and lease liabilities | March 31, December 31, (dollars in thousands) 2020 2019 Lease Right-of-Use Assets Classification Operating lease right-of-use assets Operating lease right-of-use assets $ 7,965 $ 8,343 Finance lease right-of-use assets Land, premises and equipment, net 289 318 Total lease right-of-use assets $ 8,254 $ 8,661 Lease Liabilities Operating lease liabilities Operating lease liabilities $ 8,480 $ 8,864 Finance lease liabilities Long-term debt 589 640 Total lease liabilities $ 9,069 $ 9,504 |
Schedule of weighted average remaining lease term and average discount rate | March 31, December 31, 2020 2019 Weighted-average remaining lease term, years Operating leases 6.1 6.2 Finance leases 2.6 2.8 Weighted-average discount rate Operating leases 3.2 % 3.1 % Finance leases 7.8 % 7.8 % |
Schedule of lease costs and other lease information | Three months ended March 31, (dollars in thousands) 2020 2019 Lease costs Operating lease cost $ 623 $ 572 Variable lease cost 197 199 Short-term lease cost 95 205 Finance lease cost Interest on lease liabilities 12 15 Amortization of right-of-use assets 29 29 Sublease income (66) (71) Net lease cost $ 890 $ 949 Other information Cash paid for amounts included in the measurement of lease liabilities operating cash flows from operating leases $ 618 $ 577 Right-of-use assets obtained in exchange for new operating lease liabilities 183 — Right-of-use assets obtained in exchange for new finance lease liabilities — — |
Schedule of future minimum payments for finance leases | Future minimum payments for finance and operating leases with initial or remaining terms of one year or more as of March 31, 2020 were as follows: Finance Operating (dollars in thousands) Leases Leases Twelve months ended March 31, 2021 $ 251 $ 2,037 March 31, 2022 251 1,630 March 31, 2023 150 1,592 March 31, 2024 — 1,441 March 31, 2025 — 761 Thereafter — 2,083 Total future minimum lease payments $ 652 $ 9,544 Amounts representing interest (63) (1,064) Total operating lease liabilities $ 589 $ 8,480 |
Schedule of future minimum payments for operating leases | Finance Operating (dollars in thousands) Leases Leases Twelve months ended March 31, 2021 $ 251 $ 2,037 March 31, 2022 251 1,630 March 31, 2023 150 1,592 March 31, 2024 — 1,441 March 31, 2025 — 761 Thereafter — 2,083 Total future minimum lease payments $ 652 $ 9,544 Amounts representing interest (63) (1,064) Total operating lease liabilities $ 589 $ 8,480 |
Deposits (Tables)
Deposits (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Deposits. | |
Schedule of components of deposits | March 31, December 31, (dollars in thousands) 2020 2019 Noninterest-bearing $ 608,559 $ 577,704 Interest-bearing Interest-bearing demand 477,752 458,689 Savings accounts 60,181 55,777 Money market savings 773,652 683,064 Time deposits 201,370 196,082 Total interest-bearing 1,512,955 1,393,612 Total deposits $ 2,121,514 $ 1,971,316 |
Short-Term Borrowings (Tables)
Short-Term Borrowings (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Short-Term Borrowings | |
Schedule of short-term borrowings | Three months ended March 31, (dollars in thousands) 2020 2019 Fed funds purchased Balance as of end of period $ — $ 12,050 Average daily balance — 83,331 Maximum month-end balance — 92,371 Weighted-average rate During period — % 2.59 % End of period — % 2.62 % |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Long-Term Debt. | |
Schedule of long-term debt | March 31, 2020 Period End Face Carrying Interest Maturity (dollars in thousands) Value Value Interest Rate Rate Date Call Date Subordinated notes payable $ 50,000 $ 49,641 Fixed 5.75 % 12/30/2025 12/30/2020 Junior subordinated debenture (Trust I) 4,124 3,413 Three-month LIBOR + 3.10% 4.33 % 6/26/2033 6/26/2008 Junior subordinated debenture (Trust II) 6,186 5,119 Three-month LIBOR + 1.80% 2.54 % 9/15/2036 9/15/2011 Finance lease liability 2,700 589 Fixed 7.81 % 10/31/2022 N/A Total long-term debt $ 63,010 $ 58,762 December 31, 2019 Period End Face Carrying Interest Maturity (dollars in thousands) Value Value Interest Rate Rate Date Call Date Subordinated notes payable $ 50,000 $ 49,625 Fixed 5.75 % 12/30/2025 12/30/2020 Junior subordinated debenture (Trust I) 4,124 3,402 Three-month LIBOR + 3.10% 5.05 % 6/26/2033 6/26/2008 Junior subordinated debenture (Trust II) 6,186 5,102 Three-month LIBOR + 1.80% 3.69 % 9/15/2036 9/15/2011 Finance lease liability 2,700 640 Fixed 7.81 % 10/31/2022 N/A Total long-term debt $ 63,010 $ 58,769 |
Financial Instruments with Of_2
Financial Instruments with Off-Balance Sheet Risk (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Financial Instruments with Off-Balance Sheet Risk | |
Schedule of financial instruments whose contract amount represents credit risk | March 31, December 31, (dollars in thousands) 2020 2019 Commitments to extend credit $ 524,069 $ 586,365 Standby letters of credit 3,276 8,516 Total $ 527,345 $ 594,881 |
Share-Based Compensation Plan (
Share-Based Compensation Plan (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-Based Compensation Plan | |
Schedule of stock plan activity | Three months ended March 31, 2020 Three months ended March 31, 2019 Weighted- Weighted- Average Grant Average Grant Awards Date Fair Value Awards Date Fair Value Restricted Stock and Restricted Stock Unit Awards Outstanding at beginning of period 347,211 $ 18.64 337,014 $ 18.36 Granted 63,048 20.23 70,617 19.87 Vested (71,339) 16.06 (29,837) 19.96 Forfeited or cancelled (5,068) 19.37 (753) 21.76 Outstanding at end of period 333,852 $ 19.47 377,041 $ 18.51 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Income Taxes | |
Schedule of effective income tax rate reconciliation | Three months ended March 31, 2020 2019 Percent of Percent of (dollars in thousands) Amount Pretax Income Amount Pretax Income Taxes at statutory federal income tax rate $ 1,428 21.0 % $ 1,777 21.0 % Tax effect of: Tax exempt interest income (121) (1.8) % (73) (0.9) % Other 130 1.9 % 320 3.8 % Applicable income taxes $ 1,437 21.1 % $ 2,024 23.9 % |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting | |
Schedule of key metrics related to segments | Three months ended March 31, 2020 Retirement and Wealth Corporate (dollars in thousands) Banking Benefit Services Management Mortgage Administration Consolidated Net interest income $ 19,446 $ — $ — $ 268 $ (877) $ 18,837 Provision for loan losses 2,500 — — — — 2,500 Noninterest income 1,874 16,220 4,046 5,045 4 27,189 Noninterest expense 12,652 7,932 1,515 5,439 9,188 36,726 Net income before taxes $ 6,168 $ 8,288 $ 2,531 $ (126) $ (10,061) $ 6,800 Three months ended March 31, 2019 Retirement and Wealth Corporate (dollars in thousands) Banking Benefit Services Management Mortgage Administration Consolidated Net interest income $ 19,900 $ — $ — $ 129 $ (909) $ 19,120 Provision for loan losses 2,220 — — — — 2,220 Noninterest income 1,831 15,059 3,611 4,569 4 25,074 Noninterest expense 9,992 8,990 1,924 3,962 8,646 33,514 Net income before taxes $ 9,519 $ 6,069 $ 1,687 $ 736 $ (9,551) $ 8,460 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share | |
Schedule of basic and diluted earnings per share | Three months ended March 31, (dollars and shares in thousands, except per share data) 2020 Net income $ 5,363 Dividends and undistributed earnings allocated to participating securities 82 Net income available to common shareholders $ 5,281 Weighted-average common shares outstanding for basic earnings per share 17,070 Dilutive effect of stock-based awards 335 Weighted-average common shares outstanding for diluted earnings per share 17,405 Earnings per common share: Basic earnings per common share $ 0.31 Diluted earnings per common share $ 0.30 Three months ended March 31, (dollars and shares in thousands, except per share data) 2019 Basic: Net income attributable to common shareholders $ 6,436 Weighted-average common shares outstanding 13,781 Basic earnings per common share $ 0.47 Diluted: Net income attributable to common shareholders $ 6,436 Weighted-average common shares outstanding 13,781 Add: Dilutive effect of stock-based awards 297 Weighted-average common shares outstanding for diluted EPS 14,078 Diluted earnings per common share $ 0.46 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments | |
Schedule of amounts recorded in the Company’s consolidated balance sheets for derivatives not designated as hedging instruments | March 31, 2020 December 31, 2019 Fair Notional Fair Notional (dollars in thousands) Value Amount Value Amount Asset Derivatives Consolidated Balance Sheet Location Interest rate lock commitments Other assets $ 2,543 $ 147,414 $ 1,228 $ 45,715 Forward loan sales commitments Other assets 1,059 35,011 393 12,784 TBA mortgage backed securities Other assets — — — — Total asset derivatives $ 3,602 $ 182,425 $ 1,621 $ 58,499 Liability Derivatives Interest rate lock commitments Accrued expenses and other liabilities $ — $ — $ — $ — Forward loan sales commitments Accrued expenses and other liabilities — — — — TBA mortgage backed securities Accrued expenses and other liabilities 2,884 193,500 109 68,500 Total liability derivatives $ 2,884 $ 193,500 $ 109 $ 68,500 |
Schedule of gain (loss) recognized on derivatives instruments | Three months ended Consolidated Statements of March 31, March 31, (dollars in thousands) Income Location 2020 2019 Interest rate lock commitments Mortgage banking $ 1,227 $ 1,789 Forward loan sales commitments Mortgage banking 666 246 TBA mortgage backed securities Mortgage banking (3,423) (454) Total gain/(loss) from derivative instruments $ (1,530) $ 1,581 |
Regulatory Matters (Tables)
Regulatory Matters (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Regulatory Matters | |
Schedule of Bank’s actual capital amounts and ratios | March 31, 2020 Minimum to be Requirements Well Capitalized for Capital Under Prompt Actual Adequacy Purposes Corrective Action (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Common equity tier 1 capital to risk weighted assets Consolidated $ 243,448 12.36 % $ 88,643 4.50 % $ N/A N/A Bank 232,162 11.80 % 88,567 4.50 % 127,930 6.50 % Tier 1 capital to risk weighted assets . Consolidated 251,671 12.78 % 118,190 6.00 % N/A N/A Bank 232,162 11.80 % 118,089 6.00 % 157,452 8.00 % Total capital to risk weighted assets Consolidated 325,964 16.55 % 157,587 8.00 % N/A N/A Bank 256,793 13.05 % 157,452 8.00 % 196,815 10.00 % Tier 1 capital to average assets Consolidated 251,671 10.62 % 94,826 4.00 % N/A N/A Bank 232,162 9.80 % 94,752 4.00 % 118,440 5.00 % December 31, 2019 Minimum to be Requirements Well Capitalized for Capital Under Prompt Actual Adequacy Purposes Corrective Action (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Common equity tier 1 capital to risk weighted assets Consolidated $ 239,672 12.48 % $ 86,452 4.50 % $ N/A N/A Bank 228,512 11.91 % 86,362 4.50 % 124,745 6.50 % Tier 1 capital to risk weighted assets . Consolidated 247,866 12.90 % 115,270 6.00 % N/A N/A Bank 228,512 11.91 % 115,149 6.00 % 153,532 8.00 % Total capital to risk weighted assets Consolidated 321,415 16.73 % 153,693 8.00 % N/A N/A Bank 252,436 13.15 % 153,532 8.00 % 191,915 10.00 % Tier 1 capital to average assets Consolidated 247,866 11.05 % 91,504 4.00 % N/A N/A Bank 228,512 10.20 % 89,615 4.00 % 112,018 5.00 % |
Fair Value of Assets and Liab_2
Fair Value of Assets and Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value of Assets and Liabilities | |
Summary of balances of the assets and liabilities measured at estimated fair value on a recurring basis | March 31, 2020 (dollars in thousands) Level 1 Level 2 Level 3 Total Available-for-sale and equity securities U.S. treasury and government agencies $ — $ 16,627 $ — $ 16,627 Obligations of state and political agencies — 69,106 — 69,106 Mortgage backed securities Residential agency — 229,309 — 229,309 Commercial — 29,910 — 29,910 Asset backed securities — 141 — 141 Corporate bonds — 9,056 — 9,056 Total available-for-sale securities $ — $ 354,149 $ — $ 354,149 Other assets Derivatives $ — $ 3,602 $ — $ 3,602 Other liabilities Derivatives $ — $ 2,884 $ — $ 2,884 December 31, 2019 (dollars in thousands) Level 1 Level 2 Level 3 Total Available-for-sale and equity securities U.S. treasury and government agencies $ — $ 21,240 $ — $ 21,240 Obligations of state and political agencies — 68,648 — 68,648 Mortgage backed securities Residential agency — 182,538 — 182,538 Commercial — 30,685 — 30,685 Asset backed securities — 144 — 144 Corporate bonds — 7,095 — 7,095 Equity securities 2,808 — — 2,808 Total available-for-sale and equity securities $ 2,808 $ 310,350 $ — $ 313,158 Other assets Derivatives $ — $ 1,621 $ — $ 1,621 Other liabilities Derivatives $ — $ 109 $ — $ 109 |
Schedule of net impairment losses related to nonrecurring estimated fair value measurements of certain assets | March 31, 2020 (dollars in thousands) Level 2 Level 3 Total Impairment Loans held for sale $ 72,258 $ — $ 72,258 $ — Impaired loans — 4,876 4,876 3,066 Foreclosed assets — 209 209 — Servicing rights — 3,277 3,277 — December 31, 2019 (dollars in thousands) Level 2 Level 3 Total Impairment Loans held for sale $ 46,846 $ — $ 46,846 $ — Impaired loans — 4,816 4,816 3,138 Foreclosed assets — 8 8 — Servicing rights — 3,845 3,845 — |
Schedule of valuation techniques and significant unobservable inputs used to measure Level 3 estimated fair values | March 31, 2020 (dollars in thousands) Weighted Asset Type Valuation Technique Unobservable Input Fair Value Range Average Impaired loans Appraisal value Property specific adjustment $ 4,876 N/A N/A Foreclosed assets Appraisal value Property specific adjustment 209 N/A N/A Servicing rights Discounted cash flows Prepayment speed assumptions 3,277 158-471 237 Discount rate 9.4 % 9.4 % December 31, 2019 (dollars in thousands) Weighted Asset Type Valuation Technique Unobservable Input Fair Value Range Average Impaired loans Appraisal value Property specific adjustment $ 4,816 N/A N/A Foreclosed assets Appraisal value Property specific adjustment 8 N/A N/A Servicing rights Discounted cash flows Prepayment speed assumptions 3,845 123-267 194 Discount rate 9.4 % 9.4 % |
Summary of estimated fair values and related carrying or notional amounts, of the Company’s financial instruments | March 31, 2020 Carrying Estimated Fair Value (dollars in thousands) Amount Level 1 Level 2 Level 3 Total Financial Assets Cash and cash equivalents $ 198,489 $ 198,489 $ — $ — $ 198,489 Loans 1,731,258 — — 1,761,783 1,761,783 Accrued interest receivable 7,425 7,425 — — 7,425 Bank-owned life insurance 31,763 — 31,763 — 31,763 Financial Liabilities Noninterest-bearing deposits $ 608,559 $ — $ 608,559 $ — $ 608,559 Interest-bearing deposits 1,311,585 — 1,311,585 — 1,311,585 Time deposits 201,370 — — 202,892 202,892 Long-term debt 58,762 — 57,941 — 57,941 Accrued interest payable 1,760 1,760 — — 1,760 December 31, 2019 Carrying Estimated Fair Value (dollars in thousands) Amount Level 1 Level 2 Level 3 Total Financial Assets Cash and cash equivalents $ 144,006 $ 144,006 $ — $ — $ 144,006 Loans 1,697,355 — — 1,693,824 1,693,824 Accrued interest receivable 7,551 7,551 — — 7,551 Bank-owned life insurance 31,566 — 31,566 — 31,566 Financial Liabilities Noninterest-bearing deposits $ 577,704 $ — $ 577,704 $ — $ 577,704 Interest-bearing deposits 1,197,530 — 1,197,530 — 1,197,530 Time deposits 196,082 — — 196,182 196,182 Long-term debt 58,769 — 58,239 — 58,239 Accrued interest payable 1,038 1,038 — — 1,038 |
Significant Accounting Polici_3
Significant Accounting Policies (Details) $ in Millions | Sep. 25, 2019shares | Sep. 25, 2019USD ($) | Sep. 17, 2019shares | Mar. 31, 2020segment |
Significant Accounting Policies | ||||
Number of operating segments | segment | 4 | |||
Aggregate offering price | $ 69.1 | |||
Underwriting Discounts | 4.7 | |||
Offering cost | 1.6 | |||
Net proceeds | $ 62.8 | |||
IPO | ||||
Significant Accounting Policies | ||||
Shares sold | shares | 2,860,000 | |||
Underwriter | ||||
Significant Accounting Policies | ||||
Shares sold | shares | 429,000 |
Investment Securities (Details)
Investment Securities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Investment securities available-for-sale | ||
Amortized Cost | $ 344,604 | $ 307,764 |
Unrealized Gains | 9,712 | 3,061 |
Unrealized Losses | (167) | (475) |
Fair Value | 354,149 | 310,350 |
U. S. Treasury and agencies | ||
Investment securities available-for-sale | ||
Amortized Cost | 16,538 | 21,246 |
Unrealized Gains | 93 | 9 |
Unrealized Losses | (4) | (15) |
Fair Value | 16,627 | 21,240 |
Obligations of state and political agencies | ||
Investment securities available-for-sale | ||
Amortized Cost | 67,921 | 68,162 |
Unrealized Gains | 1,212 | 647 |
Unrealized Losses | (27) | (161) |
Fair Value | 69,106 | 68,648 |
Mortgage backed securities - Residential Agency | ||
Investment securities available-for-sale | ||
Amortized Cost | 221,844 | 180,411 |
Unrealized Gains | 7,483 | 2,258 |
Unrealized Losses | (18) | (131) |
Fair Value | 229,309 | 182,538 |
Mortgage backed securities - Commercial | ||
Investment securities available-for-sale | ||
Amortized Cost | 29,128 | 30,752 |
Unrealized Gains | 899 | 101 |
Unrealized Losses | (117) | (168) |
Fair Value | 29,910 | 30,685 |
Asset backed securities | ||
Investment securities available-for-sale | ||
Amortized Cost | 134 | 139 |
Unrealized Gains | 7 | 5 |
Fair Value | 141 | 144 |
Corporate bonds | ||
Investment securities available-for-sale | ||
Amortized Cost | 9,039 | 7,054 |
Unrealized Gains | 18 | 41 |
Unrealized Losses | (1) | |
Fair Value | $ 9,056 | $ 7,095 |
Investment Securities - Gross u
Investment Securities - Gross unrealized losses (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Investment securities available-for-sale | ||
Unrealized losses less than 12 months | $ (37) | $ (313) |
Fair value less than 12 months | 18,437 | 46,067 |
Unrealized losses over 12 months | (130) | (162) |
Fair value over 12 months | 8,623 | 36,019 |
Total Unrealized losses | (167) | (475) |
Total Fair value | 27,060 | 82,086 |
U. S. Treasury and agencies | ||
Investment securities available-for-sale | ||
Unrealized losses less than 12 months | (4) | (5) |
Fair value less than 12 months | 1,342 | 1,740 |
Unrealized losses over 12 months | (10) | |
Fair value over 12 months | 9,990 | |
Total Unrealized losses | (4) | (15) |
Total Fair value | 1,342 | 11,730 |
Obligations of state and political agencies | ||
Investment securities available-for-sale | ||
Unrealized losses less than 12 months | (27) | (140) |
Fair value less than 12 months | 12,420 | 11,959 |
Unrealized losses over 12 months | (21) | |
Fair value over 12 months | 5,798 | |
Total Unrealized losses | (27) | (161) |
Total Fair value | 12,420 | 17,757 |
Mortgage backed securities - Residential Agency | ||
Investment securities available-for-sale | ||
Unrealized losses less than 12 months | (5) | (52) |
Fair value less than 12 months | 2,664 | 17,131 |
Unrealized losses over 12 months | (13) | (79) |
Fair value over 12 months | 1,691 | 14,036 |
Total Unrealized losses | (18) | (131) |
Total Fair value | 4,355 | 31,167 |
Mortgage backed securities - Commercial | ||
Investment securities available-for-sale | ||
Unrealized losses less than 12 months | (116) | |
Fair value less than 12 months | 15,235 | |
Unrealized losses over 12 months | (117) | (52) |
Fair value over 12 months | 6,932 | 6,195 |
Total Unrealized losses | (117) | (168) |
Total Fair value | 6,932 | 21,430 |
Asset backed securities | ||
Investment securities available-for-sale | ||
Fair value less than 12 months | 2 | 2 |
Total Fair value | 2 | $ 2 |
Corporate bonds | ||
Investment securities available-for-sale | ||
Unrealized losses less than 12 months | (1) | |
Fair value less than 12 months | 2,009 | |
Total Unrealized losses | (1) | |
Total Fair value | $ 2,009 |
Investment Securities - Amortiz
Investment Securities - Amortized cost and estimated fair value (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Amortized Cost | |
Due within one year or less | $ 16,054 |
Due after one year through five years | 25,745 |
Due after five years through ten years | 78,317 |
Due after 10 years | 224,488 |
Total investment securities available-for-sale | 344,604 |
Fair Value | |
Due within one year or less | 16,149 |
Due after one year through five years | 25,934 |
Due after five years through ten years | 80,298 |
Due after 10 years | 231,768 |
Total investment securities available-for-sale | $ 354,149 |
Investment Securities - Pledged
Investment Securities - Pledged (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Investment Securities | ||
Investment securities with carrying value | $ 125.7 | $ 136.2 |
Investment Securities - Proceed
Investment Securities - Proceeds from sale of available for sale securities (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Investment Securities | ||
Proceeds | $ 4,000 | $ 4,763 |
Realized gains | 119 | |
Realized losses | $ 6 |
Investment Securities - Carryin
Investment Securities - Carrying value (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Investment Securities | ||
Federal Reserve | $ 2,675 | $ 2,675 |
FHLB | $ 3,284 | $ 3,080 |
Investment Securities - Visa Cl
Investment Securities - Visa Class B Restricted Shares (Details) - Visa $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)shares | Dec. 31, 2019USD ($) | |
Common Class A | ||
Securities | ||
Investment shares owned, if converted | 11,236 | |
Common Class B | ||
Securities | ||
Conversion ratio | 1.6228 | |
Investment shares owned | 6,924 | |
Cost basis | $ | $ 0 | $ 0 |
Loans and Allowance for Loan _3
Loans and Allowance for Loan Losses - Loans outstanding by portfolio segment (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Loans and Allowance for Loan Losses | ||
Total loans | $ 1,758,277 | $ 1,721,279 |
Deferred loan fees and costs | 994,000 | 1,000 |
Commercial | ||
Loans and Allowance for Loan Losses | ||
Total loans | 1,050,230 | 1,000,225 |
Consumer | ||
Loans and Allowance for Loan Losses | ||
Total loans | 708,047 | 721,054 |
Commercial and industrial | Commercial | ||
Loans and Allowance for Loan Losses | ||
Total loans | 502,637 | 479,144 |
Real estate construction | Commercial | ||
Loans and Allowance for Loan Losses | ||
Total loans | 25,487 | 26,378 |
Residential | Consumer | Real estate first mortgage | ||
Loans and Allowance for Loan Losses | ||
Total loans | 457,895 | 457,155 |
Residential | Consumer | Real estate junior lien | ||
Loans and Allowance for Loan Losses | ||
Total loans | 170,538 | 177,373 |
Commercial real estate | Commercial | ||
Loans and Allowance for Loan Losses | ||
Total loans | 522,106 | 494,703 |
Other revolving and installment | Consumer | ||
Loans and Allowance for Loan Losses | ||
Total loans | $ 79,614 | $ 86,526 |
Loans and Allowance for Loan _4
Loans and Allowance for Loan Losses - Past due aging analysis (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Past due aging analysis of loans | ||
Loans and Leases Receivable, Gross, Total | $ 1,758,277 | $ 1,721,279 |
Performing | ||
Past due aging analysis of loans | ||
Accruing Current | 1,746,139 | 1,711,189 |
Nonaccrual | 6,959 | 7,379 |
Loans and Leases Receivable, Gross, Total | 1,758,277 | 1,721,279 |
30 - 89 Days Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 5,168 | 2,263 |
90 Days or More Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 11 | 448 |
Commercial | ||
Past due aging analysis of loans | ||
Loans and Leases Receivable, Gross, Total | 1,050,230 | 1,000,225 |
Commercial | Performing | ||
Past due aging analysis of loans | ||
Accruing Current | 1,041,186 | 992,858 |
Nonaccrual | 6,004 | 6,302 |
Loans and Leases Receivable, Gross, Total | 1,050,230 | 1,000,225 |
Commercial | 30 - 89 Days Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 3,040 | 1,065 |
Commercial | Commercial and industrial | ||
Past due aging analysis of loans | ||
Loans and Leases Receivable, Gross, Total | 502,637 | 479,144 |
Commercial | Commercial and industrial | Performing | ||
Past due aging analysis of loans | ||
Accruing Current | 497,635 | 473,900 |
Nonaccrual | 4,564 | 4,862 |
Loans and Leases Receivable, Gross, Total | 502,637 | 479,144 |
Commercial | Commercial and industrial | 30 - 89 Days Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 438 | 382 |
Commercial | Real estate construction | ||
Past due aging analysis of loans | ||
Loans and Leases Receivable, Gross, Total | 25,487 | 26,378 |
Commercial | Real estate construction | Performing | ||
Past due aging analysis of loans | ||
Accruing Current | 25,487 | 26,251 |
Loans and Leases Receivable, Gross, Total | 25,487 | 26,378 |
Commercial | Real estate construction | 30 - 89 Days Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 127 | |
Commercial | Commercial real estate | ||
Past due aging analysis of loans | ||
Loans and Leases Receivable, Gross, Total | 522,106 | 494,703 |
Commercial | Commercial real estate | Performing | ||
Past due aging analysis of loans | ||
Accruing Current | 518,064 | 492,707 |
Nonaccrual | 1,440 | 1,440 |
Loans and Leases Receivable, Gross, Total | 522,106 | 494,703 |
Commercial | Commercial real estate | 30 - 89 Days Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 2,602 | 556 |
Consumer | ||
Past due aging analysis of loans | ||
Loans and Leases Receivable, Gross, Total | 708,047 | 721,054 |
Consumer | Performing | ||
Past due aging analysis of loans | ||
Accruing Current | 704,953 | 718,331 |
Nonaccrual | 955 | 1,077 |
Loans and Leases Receivable, Gross, Total | 708,047 | 721,054 |
Consumer | 30 - 89 Days Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 2,128 | 1,198 |
Consumer | 90 Days or More Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 11 | 448 |
Consumer | Residential | Real estate first mortgage | ||
Past due aging analysis of loans | ||
Loans and Leases Receivable, Gross, Total | 457,895 | 457,155 |
Consumer | Residential | Real estate first mortgage | Performing | ||
Past due aging analysis of loans | ||
Accruing Current | 455,580 | 455,244 |
Nonaccrual | 741 | 797 |
Loans and Leases Receivable, Gross, Total | 457,895 | 457,155 |
Consumer | Residential | Real estate first mortgage | 30 - 89 Days Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 1,574 | 666 |
Consumer | Residential | Real estate first mortgage | 90 Days or More Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 448 | |
Consumer | Residential | Real estate junior lien | ||
Past due aging analysis of loans | ||
Loans and Leases Receivable, Gross, Total | 170,538 | 177,373 |
Consumer | Residential | Real estate junior lien | Performing | ||
Past due aging analysis of loans | ||
Accruing Current | 170,099 | 176,915 |
Nonaccrual | 191 | 274 |
Loans and Leases Receivable, Gross, Total | 170,538 | 177,373 |
Consumer | Residential | Real estate junior lien | 30 - 89 Days Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 237 | 184 |
Consumer | Residential | Real estate junior lien | 90 Days or More Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | 11 | |
Consumer | Other revolving and installment | ||
Past due aging analysis of loans | ||
Loans and Leases Receivable, Gross, Total | 79,614 | 86,526 |
Consumer | Other revolving and installment | Performing | ||
Past due aging analysis of loans | ||
Accruing Current | 79,274 | 86,172 |
Nonaccrual | 23 | 6 |
Loans and Leases Receivable, Gross, Total | 79,614 | 86,526 |
Consumer | Other revolving and installment | 30 - 89 Days Past Due | Performing | ||
Past due aging analysis of loans | ||
Past due | $ 317 | $ 348 |
Loans and Allowance for Loan _5
Loans and Allowance for Loan Losses - Loans by risk category (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Loans outstanding by loan portfolio segment and risk category | ||
Loans | $ 1,758,277 | $ 1,721,279 |
Pass | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 1,690,909 | 1,654,719 |
Special Mention | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 18,265 | 12,226 |
Substandard | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 49,086 | 54,334 |
Doubtful | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 17 | |
Commercial | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 1,050,230 | 1,000,225 |
Commercial | Pass | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 988,242 | 935,719 |
Commercial | Special Mention | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 14,879 | 12,226 |
Commercial | Substandard | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 47,092 | 52,280 |
Commercial | Doubtful | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 17 | |
Commercial | Commercial and industrial | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 502,637 | 479,144 |
Commercial | Commercial and industrial | Pass | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 470,867 | 448,306 |
Commercial | Commercial and industrial | Special Mention | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 10,178 | 9,585 |
Commercial | Commercial and industrial | Substandard | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 21,575 | 21,253 |
Commercial | Commercial and industrial | Doubtful | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 17 | |
Commercial | Real estate construction | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 25,487 | 26,378 |
Commercial | Real estate construction | Pass | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 24,941 | 25,119 |
Commercial | Real estate construction | Special Mention | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 279 | 282 |
Commercial | Real estate construction | Substandard | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 267 | 977 |
Commercial | Commercial real estate | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 522,106 | 494,703 |
Commercial | Commercial real estate | Pass | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 492,434 | 462,294 |
Commercial | Commercial real estate | Special Mention | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 4,422 | 2,359 |
Commercial | Commercial real estate | Substandard | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 25,250 | 30,050 |
Consumer | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 708,047 | 721,054 |
Consumer | Pass | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 702,667 | 719,000 |
Consumer | Special Mention | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 3,386 | |
Consumer | Substandard | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 1,994 | 2,054 |
Consumer | Residential | Real estate first mortgage | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 457,895 | 457,155 |
Consumer | Residential | Real estate first mortgage | Pass | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 455,720 | 456,358 |
Consumer | Residential | Real estate first mortgage | Special Mention | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 1,434 | |
Consumer | Residential | Real estate first mortgage | Substandard | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 741 | 797 |
Consumer | Residential | Real estate junior lien | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 170,538 | 177,373 |
Consumer | Residential | Real estate junior lien | Pass | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 167,356 | 176,122 |
Consumer | Residential | Real estate junior lien | Special Mention | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 1,952 | |
Consumer | Residential | Real estate junior lien | Substandard | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 1,230 | 1,251 |
Consumer | Other revolving and installment | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 79,614 | 86,526 |
Consumer | Other revolving and installment | Pass | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | 79,591 | 86,520 |
Consumer | Other revolving and installment | Substandard | ||
Loans outstanding by loan portfolio segment and risk category | ||
Loans | $ 23 | $ 6 |
Loans and Allowance for Loan _6
Loans and Allowance for Loan Losses - Changes in allowance (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Changes in the allowance | ||
Beginning Balance | $ 23,924 | $ 22,174 |
Provision for loan losses | 2,500 | 2,220 |
Loan charge-offs | (99) | (1,948) |
Loan recoveries | 694 | 192 |
Ending Balance | 27,019 | 22,638 |
Unallocated | ||
Changes in the allowance | ||
Beginning Balance | 2,192 | 1,177 |
Provision for loan losses | (359) | (1,168) |
Ending Balance | 1,833 | 9 |
Commercial | ||
Changes in the allowance | ||
Beginning Balance | 19,261 | 18,656 |
Provision for loan losses | 1,689 | 2,973 |
Loan charge-offs | (32) | (1,786) |
Loan recoveries | 593 | 66 |
Ending Balance | 21,511 | 19,909 |
Commercial | Commercial and industrial | ||
Changes in the allowance | ||
Beginning Balance | 12,270 | 12,127 |
Provision for loan losses | 70 | 3,407 |
Loan charge-offs | (32) | (1,785) |
Loan recoveries | 593 | 66 |
Ending Balance | 12,901 | 13,815 |
Commercial | Real estate construction | ||
Changes in the allowance | ||
Beginning Balance | 303 | 250 |
Provision for loan losses | 31 | 2 |
Loan charge-offs | (1) | |
Ending Balance | 334 | 251 |
Commercial | Commercial real estate | ||
Changes in the allowance | ||
Beginning Balance | 6,688 | 6,279 |
Provision for loan losses | 1,588 | (436) |
Ending Balance | 8,276 | 5,843 |
Consumer | ||
Changes in the allowance | ||
Beginning Balance | 2,471 | 2,341 |
Provision for loan losses | 1,170 | 415 |
Loan charge-offs | (67) | (162) |
Loan recoveries | 101 | 126 |
Ending Balance | 3,675 | 2,720 |
Consumer | Residential | Real estate first mortgage | ||
Changes in the allowance | ||
Beginning Balance | 1,448 | 1,156 |
Provision for loan losses | 761 | 454 |
Ending Balance | 2,209 | 1,610 |
Consumer | Residential | Real estate junior lien | ||
Changes in the allowance | ||
Beginning Balance | 671 | 805 |
Provision for loan losses | 317 | 7 |
Loan charge-offs | (104) | |
Loan recoveries | 37 | 53 |
Ending Balance | 1,025 | 761 |
Consumer | Other revolving and installment | ||
Changes in the allowance | ||
Beginning Balance | 352 | 380 |
Provision for loan losses | 92 | (46) |
Loan charge-offs | (67) | (58) |
Loan recoveries | 64 | 73 |
Ending Balance | $ 441 | $ 349 |
Loans and Allowance for Loan _7
Loans and Allowance for Loan Losses - Components of loans and associated allowance (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Loans and Allowance for Loan Losses | ||||
Recorded Investment, Individually Evaluated | $ 7,942 | $ 7,954 | ||
Recorded Investment, Collectively Evaluated | 1,750,335 | 1,713,325 | ||
Loans and Leases Receivable, Gross, Total | 1,758,277 | 1,721,279 | ||
Allowance Allocation, Individually Evaluated | 3,066 | 3,138 | ||
Allowance Allocation, Collectively Evaluated | 22,120 | 18,594 | ||
Allowance Allocation, Unallocated | 1,833 | 2,192 | ||
Loans and Leases Receivable, Allowance, Total | 27,019 | 23,924 | $ 22,638 | $ 22,174 |
Commercial | ||||
Loans and Allowance for Loan Losses | ||||
Recorded Investment, Individually Evaluated | 6,946 | 6,901 | ||
Recorded Investment, Collectively Evaluated | 1,043,284 | 993,324 | ||
Loans and Leases Receivable, Gross, Total | 1,050,230 | 1,000,225 | ||
Allowance Allocation, Individually Evaluated | 3,035 | 3,135 | ||
Allowance Allocation, Collectively Evaluated | 18,476 | 16,126 | ||
Loans and Leases Receivable, Allowance, Total | 21,511 | 19,261 | 19,909 | 18,656 |
Commercial | Commercial and industrial | ||||
Loans and Allowance for Loan Losses | ||||
Recorded Investment, Individually Evaluated | 5,422 | 976 | ||
Recorded Investment, Collectively Evaluated | 497,215 | 478,168 | ||
Loans and Leases Receivable, Gross, Total | 502,637 | 479,144 | ||
Allowance Allocation, Individually Evaluated | 2,764 | 189 | ||
Allowance Allocation, Collectively Evaluated | 10,137 | 12,081 | ||
Loans and Leases Receivable, Allowance, Total | 12,901 | 12,270 | 13,815 | 12,127 |
Commercial | Real estate construction | ||||
Loans and Allowance for Loan Losses | ||||
Recorded Investment, Collectively Evaluated | 25,487 | 26,378 | ||
Loans and Leases Receivable, Gross, Total | 25,487 | 26,378 | ||
Allowance Allocation, Collectively Evaluated | 334 | 303 | ||
Loans and Leases Receivable, Allowance, Total | 334 | 303 | 251 | 250 |
Commercial | Commercial real estate | ||||
Loans and Allowance for Loan Losses | ||||
Recorded Investment, Individually Evaluated | 1,524 | 5,925 | ||
Recorded Investment, Collectively Evaluated | 520,582 | 488,778 | ||
Loans and Leases Receivable, Gross, Total | 522,106 | 494,703 | ||
Allowance Allocation, Individually Evaluated | 271 | 2,946 | ||
Allowance Allocation, Collectively Evaluated | 8,005 | 3,742 | ||
Loans and Leases Receivable, Allowance, Total | 8,276 | 6,688 | 5,843 | 6,279 |
Consumer | ||||
Loans and Allowance for Loan Losses | ||||
Recorded Investment, Individually Evaluated | 996 | 1,053 | ||
Recorded Investment, Collectively Evaluated | 707,051 | 720,001 | ||
Loans and Leases Receivable, Gross, Total | 708,047 | 721,054 | ||
Allowance Allocation, Individually Evaluated | 31 | 3 | ||
Allowance Allocation, Collectively Evaluated | 3,644 | 2,468 | ||
Loans and Leases Receivable, Allowance, Total | 3,675 | 2,471 | 2,720 | 2,341 |
Consumer | Residential | Real estate first mortgage | ||||
Loans and Allowance for Loan Losses | ||||
Recorded Investment, Individually Evaluated | 733 | 782 | ||
Recorded Investment, Collectively Evaluated | 457,162 | 456,373 | ||
Loans and Leases Receivable, Gross, Total | 457,895 | 457,155 | ||
Allowance Allocation, Collectively Evaluated | 2,209 | 1,448 | ||
Loans and Leases Receivable, Allowance, Total | 2,209 | 1,448 | 1,610 | 1,156 |
Consumer | Residential | Real estate junior lien | ||||
Loans and Allowance for Loan Losses | ||||
Recorded Investment, Individually Evaluated | 241 | 266 | ||
Recorded Investment, Collectively Evaluated | 170,297 | 177,107 | ||
Loans and Leases Receivable, Gross, Total | 170,538 | 177,373 | ||
Allowance Allocation, Individually Evaluated | 20 | |||
Allowance Allocation, Collectively Evaluated | 1,005 | 671 | ||
Loans and Leases Receivable, Allowance, Total | 1,025 | 671 | 761 | 805 |
Consumer | Other revolving and installment | ||||
Loans and Allowance for Loan Losses | ||||
Recorded Investment, Individually Evaluated | 22 | 5 | ||
Recorded Investment, Collectively Evaluated | 79,592 | 86,521 | ||
Loans and Leases Receivable, Gross, Total | 79,614 | 86,526 | ||
Allowance Allocation, Individually Evaluated | 11 | 3 | ||
Allowance Allocation, Collectively Evaluated | 430 | 349 | ||
Loans and Leases Receivable, Allowance, Total | $ 441 | $ 352 | $ 349 | $ 380 |
Loans and Allowance for Loan _8
Loans and Allowance for Loan Losses - Impaired loans (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Impaired | ||
Loans with related allowance for loan losses, Recorded investment | $ 6,452 | $ 6,362 |
Loans with related allowance for loan losses, unpaid principal | 6,707 | 6,556 |
Loans with related allowance for loan losses, Related Allowance | 3,066 | 3,138 |
Loans with no related allowance for loan losses, Recorded investment | 1,490 | 1,592 |
Loans with no related allowance for loan losses, unpaid principal | 1,682 | 2,515 |
Recorded investment | 7,942 | 7,954 |
Unpaid principal balance | 8,389 | 9,071 |
Commercial | Commercial and industrial | ||
Impaired | ||
Loans with related allowance for loan losses, Recorded investment | 4,891 | 639 |
Loans with related allowance for loan losses, unpaid principal | 5,028 | 727 |
Loans with related allowance for loan losses, Related Allowance | 2,764 | 189 |
Loans with no related allowance for loan losses, Recorded investment | 531 | 337 |
Loans with no related allowance for loan losses, unpaid principal | 611 | 1,110 |
Recorded investment | 5,422 | 976 |
Unpaid principal balance | 5,639 | 1,837 |
Commercial | Commercial real estate | ||
Impaired | ||
Loans with related allowance for loan losses, Recorded investment | 1,524 | 5,718 |
Loans with related allowance for loan losses, unpaid principal | 1,642 | 5,823 |
Loans with related allowance for loan losses, Related Allowance | 271 | 2,946 |
Loans with no related allowance for loan losses, Recorded investment | 207 | |
Loans with no related allowance for loan losses, unpaid principal | 236 | |
Recorded investment | 1,524 | 5,925 |
Unpaid principal balance | 1,642 | 6,059 |
Consumer | Residential | Real estate first mortgage | ||
Impaired | ||
Loans with no related allowance for loan losses, Recorded investment | 733 | 782 |
Loans with no related allowance for loan losses, unpaid principal | 741 | 797 |
Recorded investment | 733 | 782 |
Unpaid principal balance | 741 | 797 |
Consumer | Residential | Real estate junior lien | ||
Impaired | ||
Loans with related allowance for loan losses, Recorded investment | 20 | |
Loans with related allowance for loan losses, unpaid principal | 20 | |
Loans with related allowance for loan losses, Related Allowance | 20 | |
Loans with no related allowance for loan losses, Recorded investment | 221 | 266 |
Loans with no related allowance for loan losses, unpaid principal | 325 | 372 |
Recorded investment | 241 | 266 |
Unpaid principal balance | 345 | 372 |
Consumer | Other revolving and installment | ||
Impaired | ||
Loans with related allowance for loan losses, Recorded investment | 17 | 5 |
Loans with related allowance for loan losses, unpaid principal | 17 | 6 |
Loans with related allowance for loan losses, Related Allowance | 11 | 3 |
Loans with no related allowance for loan losses, Recorded investment | 5 | |
Loans with no related allowance for loan losses, unpaid principal | 5 | |
Recorded investment | 22 | 5 |
Unpaid principal balance | $ 22 | $ 6 |
Loans and Allowance for Loan _9
Loans and Allowance for Loan Losses - Interest Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Impaired | ||
Loans with related allowance for loan losses, Average recorded investment | $ 6,552 | $ 7,089 |
Loans with no related allowance for loan losses, Average recorded investment | 1,612 | 2,326 |
Loans, Average recorded investment | 8,164 | 9,415 |
Loans with related allowance for loan losses, Interest income | 23 | |
Loans with no related allowance for loan losses, Interest income | 30 | 59 |
Loans, Interest income | 53 | 59 |
Commercial | Commercial and industrial | ||
Impaired | ||
Loans with related allowance for loan losses, Average recorded investment | 4,979 | 5,529 |
Loans with no related allowance for loan losses, Average recorded investment | 545 | 1,816 |
Loans, Average recorded investment | 5,524 | 7,345 |
Loans with related allowance for loan losses, Interest income | 15 | |
Loans with no related allowance for loan losses, Interest income | 27 | 46 |
Loans, Interest income | 42 | 46 |
Commercial | Real estate construction | ||
Impaired | ||
Loans with no related allowance for loan losses, Average recorded investment | 220 | |
Loans, Average recorded investment | 220 | |
Loans with no related allowance for loan losses, Interest income | 9 | |
Loans, Interest income | 9 | |
Commercial | Commercial real estate | ||
Impaired | ||
Loans with related allowance for loan losses, Average recorded investment | 1,536 | 1,533 |
Loans, Average recorded investment | 1,536 | 1,533 |
Loans with related allowance for loan losses, Interest income | 8 | |
Loans, Interest income | 8 | |
Consumer | Residential | Real estate first mortgage | ||
Impaired | ||
Loans with related allowance for loan losses, Average recorded investment | 20 | |
Loans with no related allowance for loan losses, Average recorded investment | 835 | |
Loans, Average recorded investment | 835 | |
Consumer | Residential | Real estate junior lien | ||
Impaired | ||
Loans with no related allowance for loan losses, Average recorded investment | 224 | 290 |
Loans, Average recorded investment | 244 | 290 |
Loans with no related allowance for loan losses, Interest income | 3 | 4 |
Loans, Interest income | 3 | 4 |
Consumer | Other revolving and installment | ||
Impaired | ||
Loans with related allowance for loan losses, Average recorded investment | 17 | 27 |
Loans with no related allowance for loan losses, Average recorded investment | 8 | |
Loans, Average recorded investment | $ 25 | $ 27 |
Loans and Allowance for Loan_10
Loans and Allowance for Loan Losses - Pledged (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Loans and Allowance for Loan Losses | ||
Total loans | $ 1,758,277 | $ 1,721,279 |
Pledged | ||
Loans and Allowance for Loan Losses | ||
Total loans | $ 1,200,000 | $ 1,200,000 |
Loans and Allowance for Loan_11
Loans and Allowance for Loan Losses - Troubled Debt Restructurings (Details) $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Apr. 21, 2020USD ($)loan | Mar. 31, 2020loan | Mar. 31, 2019loan | Dec. 31, 2019USD ($) | |
Troubled debt restructuring | ||||
Number of loans modified as modified as a troubled debt restructuring | loan | 0 | |||
Number of principal and interest deferrals in connection with the CARES Act | loan | 325 | |||
Loan principal and interest deferrals in connection with the CARES Act | $ | $ 97.4 | |||
Maximum | ||||
Troubled debt restructuring | ||||
Typical loan deferral period under the CARES Act | 90 days | |||
Interest Rate Below Market Reduction | ||||
Troubled debt restructuring | ||||
Number of loans modified as modified as a troubled debt restructuring | loan | 1 | |||
Carrying value of restructured loan | $ | $ 0.2 | |||
Specific reserve for loan losses allocated | $ | $ 0 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Goodwill | ||
Goodwill | $ 27,329 | $ 27,329 |
Banking | ||
Goodwill | ||
Goodwill | 20,131 | 20,131 |
Retirement and Benefit Services | ||
Goodwill | ||
Goodwill | $ 7,198 | $ 7,198 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Goodwill | |||
Gross Carrying Amount | $ 35,650 | $ 36,850 | |
Accumulated Amortization | (18,249) | (18,459) | |
Total | 17,401 | 18,391 | |
Intangible amortization expense | 990 | $ 1,051 | |
Identifiable customer intangibles | |||
Goodwill | |||
Gross Carrying Amount | 31,857 | 31,857 | |
Accumulated Amortization | (15,088) | (14,287) | |
Total | 16,769 | 17,570 | |
Core deposit intangible assets | |||
Goodwill | |||
Gross Carrying Amount | 3,793 | 4,993 | |
Accumulated Amortization | (3,161) | (4,172) | |
Total | $ 632 | $ 821 |
Loan Servicing (Details)
Loan Servicing (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Loan Servicing | |||
Loans serviced for others | $ 524,600 | $ 541,900 | |
Servicing Asset at Fair Value, Amount | |||
Balance, beginning of period | 3,845 | $ 4,623 | |
Additions | 24 | 67 | |
Amortization | (187) | (165) | |
(Impairment)/Recovery | (405) | 5 | |
Balance, end of period | $ 3,277 | $ 4,530 |
Loan Servicing - Key economic a
Loan Servicing - Key economic assumptions (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Loan Servicing | ||
Fair value of servicing rights | $ 3,277 | $ 3,845 |
Weighted average remaining term, years | 20 years | 20 years 1 month 6 days |
Prepayment speeds | 14.20% | 11.80% |
Discount rate | 9.40% | 9.40% |
Leases - Lease right-of-use ass
Leases - Lease right-of-use assets and liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Lease Right-of-Use Assets | ||
Operating lease right-of-use assets | $ 7,965 | $ 8,343 |
Finance lease right-of-use assets | $ 289 | $ 318 |
Finance Lease, Right-of-Use Asset, balance sheet location | us-gaap:PropertyPlantAndEquipmentNet | us-gaap:PropertyPlantAndEquipmentNet |
Lease right-of-use assets | $ 8,254 | $ 8,661 |
Operating lease liabilities | 8,480 | 8,864 |
Finance lease liabilities | $ 589 | $ 640 |
Finance lease liabilities, balance sheet location | us-gaap:LongTermDebt | us-gaap:LongTermDebt |
Lease liabilities | $ 9,069 | $ 9,504 |
Leases - Weighted-average remai
Leases - Weighted-average remaining lease term and average discount rate (Details) | Mar. 31, 2020 | Dec. 31, 2019 |
Leases | ||
Weighted-average remaining lease term, Operating leases | 6 years 1 month 6 days | 6 years 2 months 12 days |
Weighted-average remaining lease term, Finance leases | 2 years 7 months 6 days | 2 years 9 months 18 days |
Weighted-average discount rate, Operating leases | 3.20% | 3.10% |
Weighted-average discount rate, Finance leases | 7.80% | 7.80% |
Leases - Lease costs and other
Leases - Lease costs and other lease information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Lease costs | ||
Operating lease cost | $ 623 | $ 572 |
Variable lease cost | 197 | 199 |
Short-term lease cost | 95 | 205 |
Finance lease cost | ||
Interest on lease liabilities | 12 | 15 |
Amortization of right-of-use assets | 29 | 29 |
Sublease Income | (66) | (71) |
Net lease cost | 890 | 949 |
Operating cash flows from operating leases | 618 | $ 577 |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 183 | |
Minimum | ||
Finance lease cost | ||
Initial or remaining lease term under operating lease | 1 year | |
Initial or remaining lease term under finance lease | 1 year |
Leases - Future minimum payment
Leases - Future minimum payments for finance and operating leases (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Finance leases | ||
2020 | $ 251 | |
2021 | 251 | |
2022 | 150 | |
Total future minimum lease payments | 652 | |
Amounts representing interest | (63) | |
Total operating lease liabilities | 589 | $ 640 |
Operating leases | ||
2020 | 2,037 | |
2021 | 1,630 | |
2022 | 1,592 | |
2023 | 1,441 | |
2024 | 761 | |
Thereafter | 2,083 | |
Total future minimum lease payments | 9,544 | |
Amounts representing interest | (1,064) | |
Total operating lease liabilities | $ 8,480 | $ 8,864 |
Deposits (Details)
Deposits (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Deposits. | ||
Noninterest-bearing | $ 608,559 | $ 577,704 |
Interest-bearing demand | 477,752 | 458,689 |
Savings accounts | 60,181 | 55,777 |
Money market savings | 773,652 | 683,064 |
Time deposits | 201,370 | 196,082 |
Total interest-bearing | 1,512,955 | 1,393,612 |
Total deposits | $ 2,121,514 | $ 1,971,316 |
Short-Term Borrowings (Details)
Short-Term Borrowings (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2020 | Dec. 31, 2019 | |
Short-term borrowings | |||
Balance as of end of period | $ 0 | $ 0 | |
Federal Funds Purchased | |||
Short-term borrowings | |||
Balance as of end of period | $ 12,050 | ||
Average daily balance | 83,331 | ||
Maximum month-end balance | $ 92,371 | ||
During period | 2.59% | ||
End of period | 2.62% |
Long-Term Debt (Details)
Long-Term Debt (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Long-Term Debt | ||
Face Value | $ 63,010 | $ 63,010 |
Carrying Amount | 58,762 | 58,769 |
Subordinated notes payable | ||
Long-Term Debt | ||
Face Value | 50,000 | 50,000 |
Carrying Amount | $ 49,641 | $ 49,625 |
Fixed interest rate | 5.75% | 5.75% |
Junior subordinated debenture (Trust I) | ||
Long-Term Debt | ||
Face Value | $ 4,124 | $ 4,124 |
Carrying Amount | $ 3,413 | $ 3,402 |
Period End Interest Rate | 4.33% | 5.05% |
Junior subordinated debenture (Trust I) | Three - month LIBOR | ||
Long-Term Debt | ||
Interest Rate | 3.10% | 3.10% |
Junior subordinated debenture (Trust II) | ||
Long-Term Debt | ||
Face Value | $ 6,186 | $ 6,186 |
Carrying Amount | $ 5,119 | $ 5,102 |
Period End Interest Rate | 2.54% | 3.69% |
Junior subordinated debenture (Trust II) | Three - month LIBOR | ||
Long-Term Debt | ||
Interest Rate | 1.80% | 1.80% |
Finance lease liability | ||
Long-Term Debt | ||
Face Value | $ 2,700 | $ 2,700 |
Carrying Amount | $ 589 | $ 640 |
Fixed interest rate | 7.81% | 7.81% |
Financial Instruments with Of_3
Financial Instruments with Off-Balance Sheet Risk (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Financial Instruments with Off Balance Sheet Risk | ||
Amount of credit risk | $ 527,345 | $ 594,881 |
Commitments to extend credit | ||
Financial Instruments with Off Balance Sheet Risk | ||
Amount of credit risk | 524,069 | 586,365 |
Standby letters of credit | ||
Financial Instruments with Off Balance Sheet Risk | ||
Amount of credit risk | $ 3,276 | $ 8,516 |
Financial Instruments with Off
Financial Instruments with Off Balance Sheet Risk - Narrative (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Letter of credit with FHLB | ||
Financial Instruments with Off Balance Sheet Risk | ||
Outstanding letters of credit | $ 150 | $ 150 |
Letter of credit with Bank of North Dakota | ||
Financial Instruments with Off Balance Sheet Risk | ||
Outstanding letters of credit | 25,000 | 20,000 |
Collateralized loans | $ 250,300 | $ 242,000 |
Share-Based Compensation - Plan
Share-Based Compensation - Plan Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Share-Based Compensation | ||
Compensation expense | $ 253 | $ 346 |
2019 Equity Incentive Plan | ||
Share-Based Compensation | ||
Awards authorized | 1,100,000 | |
2019 Equity Incentive Plan | Restricted stock awards | ||
Share-Based Compensation | ||
Awards issued | 13,444 | |
2019 Equity Incentive Plan | Restricted stock units | ||
Share-Based Compensation | ||
Awards issued | 49,604 |
Share-Based Compensation Plan -
Share-Based Compensation Plan - Activity in stock plan (Details) - Restricted Stock Awards and Units - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Restricted Stock Awards and Units | ||
Outstanding at beginning of period | 347,211 | 337,014 |
Granted | 63,048 | 70,617 |
Vested | (71,339) | (29,837) |
Forfeited or cancelled | (5,068) | (753) |
Outstanding at end of period | 333,852 | 377,041 |
Weighted Average Grant Date Fair Value | ||
Outstanding at beginning of period | $ 18.64 | $ 18.36 |
Granted | 20.23 | 19.87 |
Vested | 16.06 | 19.96 |
Forfeited or cancelled | 19.37 | 21.76 |
Outstanding at end of period | $ 19.47 | $ 18.51 |
Additional disclosures | ||
Unrecognized compensation cost | $ 3.7 | |
Weighted average period | 3 years 7 months 24 days |
Income Taxes - Reconciliation b
Income Taxes - Reconciliation between applicable income taxes and statutory federal tax rate (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Tax amount | ||
Taxes at statutory federal income tax rate | $ 1,428 | $ 1,777 |
Tax effect of tax exempt income | (121) | (73) |
Tax effect of other | 130 | 320 |
Total income tax expense | $ 1,437 | $ 2,024 |
Percentage of pretax income | ||
Taxes at statutory federal income tax rate (as percentage) | 21.00% | 21.00% |
Tax effect of tax exempt income (as percentage) | (1.80%) | (0.90%) |
Tax effect of other (as percentage) | 1.90% | 3.80% |
Applicable income taxes (as percentage) | 21.10% | 23.90% |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)segmentitem | Mar. 31, 2019USD ($) | |
Segment Reporting | ||
Number of operating segments | segment | 4 | |
Number of Banking offices | item | 15 | |
Number of satellite offices | item | 13 | |
Key metrics related to segments | ||
Net interest income | $ 18,837 | $ 19,120 |
Provision for loan losses | 2,500 | 2,220 |
Noninterest income | 27,189 | 25,074 |
Noninterest expense | 36,726 | 33,514 |
Net income before taxes | 6,800 | 8,460 |
Corporate Administration | ||
Key metrics related to segments | ||
Net interest income | (877) | (909) |
Noninterest income | 4 | 4 |
Noninterest expense | 9,188 | 8,646 |
Net income before taxes | (10,061) | (9,551) |
Banking | Operating Segments | ||
Key metrics related to segments | ||
Net interest income | 19,446 | 19,900 |
Provision for loan losses | 2,500 | 2,220 |
Noninterest income | 1,874 | 1,831 |
Noninterest expense | 12,652 | 9,992 |
Net income before taxes | 6,168 | 9,519 |
Retirement and Benefit Services | Operating Segments | ||
Key metrics related to segments | ||
Noninterest income | 16,220 | 15,059 |
Noninterest expense | 7,932 | 8,990 |
Net income before taxes | 8,288 | 6,069 |
Wealth Management | Operating Segments | ||
Key metrics related to segments | ||
Noninterest income | 4,046 | 3,611 |
Noninterest expense | 1,515 | 1,924 |
Net income before taxes | 2,531 | 1,687 |
Mortgage | Operating Segments | ||
Key metrics related to segments | ||
Net interest income | 268 | 129 |
Noninterest income | 5,045 | 4,569 |
Noninterest expense | 5,439 | 3,962 |
Net income before taxes | $ (126) | $ 736 |
Earnings Per Share - Two-class
Earnings Per Share - Two-class method (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Earnings Per Share | ||
Net Income | $ 5,363 | $ 6,436 |
Dividends and undistributed earnings allocated to participating securities | 82 | |
Net income available to common shareholders | $ 5,281 | |
Weighted-average common shares outstanding for basic earnings per share | 17,070 | 13,781 |
Dilutive effect of stock-based awards | 335 | 297 |
Weighted-average common shares outstanding for diluted earnings per share | 17,405 | 14,078 |
Earnings per common share: | ||
Basic earnings per common share | $ 0.31 | $ 0.47 |
Diluted earnings per common share | $ 0.30 | $ 0.46 |
Earnings Per Share - Treasury s
Earnings Per Share - Treasury stock method (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Earnings Per Share | ||
Net income attributable to common shareholders | $ 5,363 | $ 6,436 |
Weighted-average common shares outstanding for basic earnings per share | 17,070 | 13,781 |
Basic earnings per common share | $ 0.31 | $ 0.47 |
Dilutive effect of stock-based awards | 335 | 297 |
Weighted-average common shares outstanding for diluted earnings per share | 17,405 | 14,078 |
Diluted earnings per common share | $ 0.30 | $ 0.46 |
Derivative Instruments (Details
Derivative Instruments (Details) - Not designated as hedging - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Derivative Instruments | ||
Fair Value, Derivative Assets | $ 3,602 | $ 1,621 |
Fair Value, Derivative Liabilities | 2,884 | 109 |
Notional Amount, Derivative Assets | 182,425 | 58,499 |
Notional Amount, Derivative Liabilities | 193,500 | 68,500 |
Interest rate lock commitments | Other assets | ||
Derivative Instruments | ||
Fair Value, Derivative Assets | 2,543 | 1,228 |
Notional Amount, Derivative Assets | 147,414 | 45,715 |
Forward loan sales commitments | Other assets | ||
Derivative Instruments | ||
Fair Value, Derivative Assets | 1,059 | 393 |
Notional Amount, Derivative Assets | 35,011 | 12,784 |
TBA mortgage backed securities | Accrued expenses and other liabilities | ||
Derivative Instruments | ||
Fair Value, Derivative Liabilities | 2,884 | 109 |
Notional Amount, Derivative Liabilities | $ 193,500 | $ 68,500 |
Derivative Instruments - Gain (
Derivative Instruments - Gain (loss) recognized on derivatives instruments (Details) - Not designated as hedging - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Gain (loss) recognized on derivative instruments | ||
Gain (loss) recognized on derivatives instruments | $ (1,530) | $ 1,581 |
Interest rate lock commitments | Mortgage banking | ||
Gain (loss) recognized on derivative instruments | ||
Gain (loss) recognized on derivatives instruments | 1,227 | 1,789 |
Forward loan sales commitments | Mortgage banking | ||
Gain (loss) recognized on derivative instruments | ||
Gain (loss) recognized on derivatives instruments | 666 | 246 |
TBA mortgage backed securities | Mortgage banking | ||
Gain (loss) recognized on derivative instruments | ||
Gain (loss) recognized on derivatives instruments | $ (3,423) | $ (454) |
Regulatory Matters (Details)
Regulatory Matters (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Common equity tier 1 capital to risk weighted assets | ||
Actual | $ 243,448 | $ 239,672 |
Requirements for Capital Adequacy Purposes | $ 88,643 | $ 86,452 |
Actual | 12.36% | 12.48% |
Requirements | 4.50% | 4.50% |
Tier 1 capital to risk weighted assets | ||
Actual | $ 251,671 | $ 247,866 |
Requirements for Capital Adequacy Purposes | $ 118,190 | $ 115,270 |
Actual | 12.78% | 12.90% |
Requirements | 6.00% | 6.00% |
Total capital to risk weighted assets | ||
Actual | $ 325,964 | $ 321,415 |
Requirements for Capital Adequacy Purposes | $ 157,587 | $ 153,693 |
Actual | 16.55% | 16.73% |
Requirements | 8.00% | 8.00% |
Tier 1 capital to average assets | ||
Actual | $ 251,671 | $ 247,866 |
Requirements for Capital Adequacy Purposes | $ 94,826 | $ 91,504 |
Actual | 10.62% | 11.05% |
Requirements | 4.00% | 4.00% |
Bank | ||
Common equity tier 1 capital to risk weighted assets | ||
Actual | $ 232,162 | $ 228,512 |
Requirements for Capital Adequacy Purposes | 88,567 | 86,362 |
Minimum to be Well Capitalized Under Prompt Corrective Action | $ 127,930 | $ 124,745 |
Actual | 11.80% | 11.91% |
Requirements | 4.50% | 4.50% |
Minimum to be Well Capitalized Under Prompt Corrective Action | 6.50% | 6.50% |
Tier 1 capital to risk weighted assets | ||
Actual | $ 232,162 | $ 228,512 |
Requirements for Capital Adequacy Purposes | 118,089 | 115,149 |
Minimum to be Well Capitalized Under Prompt Corrective Action | $ 157,452 | $ 153,532 |
Actual | 11.80% | 11.91% |
Requirements | 6.00% | 6.00% |
Minimum to be Well Capitalized Under Prompt Corrective Action | 8.00% | 8.00% |
Total capital to risk weighted assets | ||
Actual | $ 256,793 | $ 252,436 |
Requirements for Capital Adequacy Purposes | 157,452 | 153,532 |
Minimum to be Well Capitalized Under Prompt Corrective Action | $ 196,815 | $ 191,915 |
Actual | 13.05% | 13.15% |
Requirements | 8.00% | 8.00% |
Minimum to be Well Capitalized Under Prompt Corrective Action | 10.00% | 10.00% |
Tier 1 capital to average assets | ||
Actual | $ 232,162 | $ 228,512 |
Requirements for Capital Adequacy Purposes | 94,752 | 89,615 |
Minimum to be Well Capitalized Under Prompt Corrective Action | $ 118,440 | $ 112,018 |
Actual | 9.80% | 10.20% |
Requirements | 4.00% | 4.00% |
Minimum to be Well Capitalized Under Prompt Corrective Action | 5.00% | 5.00% |
Fair Value of Assets and Liab_3
Fair Value of Assets and Liabilities - Recurring Basis (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | $ 354,149 | $ 310,350 |
Equity securities | 2,808 | |
Mortgage backed securities - Residential Agency | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 229,309 | 182,538 |
Mortgage backed securities - Commercial | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 29,910 | 30,685 |
Asset backed securities | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 141 | 144 |
Corporate bonds | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 9,056 | 7,095 |
Recurring | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Equity securities | 2,808 | |
Total available-for-sale and equity securities | 354,149 | 313,158 |
Derivates assets | 3,602 | 1,621 |
Derivative liabilities | 2,884 | 109 |
Recurring | U.S. treasury and government agencies | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 16,627 | 21,240 |
Recurring | Obligations of state and political agencies | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 69,106 | 68,648 |
Recurring | Mortgage backed securities - Residential Agency | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 229,309 | 182,538 |
Recurring | Mortgage backed securities - Commercial | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 29,910 | 30,685 |
Recurring | Asset backed securities | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 141 | 144 |
Recurring | Corporate bonds | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 9,056 | 7,095 |
Recurring | Level 1 | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Equity securities | 2,808 | |
Total available-for-sale and equity securities | 2,808 | |
Recurring | Level 2 | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Total available-for-sale and equity securities | 354,149 | 310,350 |
Derivates assets | 3,602 | 1,621 |
Derivative liabilities | 2,884 | 109 |
Recurring | Level 2 | U.S. treasury and government agencies | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 16,627 | 21,240 |
Recurring | Level 2 | Obligations of state and political agencies | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 69,106 | 68,648 |
Recurring | Level 2 | Mortgage backed securities - Residential Agency | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 229,309 | 182,538 |
Recurring | Level 2 | Mortgage backed securities - Commercial | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 29,910 | 30,685 |
Recurring | Level 2 | Asset backed securities | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | 141 | 144 |
Recurring | Level 2 | Corporate bonds | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Available-for-sale | $ 9,056 | $ 7,095 |
Fair Value of Assets and Liab_4
Fair Value of Assets and Liabilities - Nonrecurring Basis (Details) - Non recurring - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Impaired loans | $ 4,876 | $ 4,816 |
Foreclosed assets | 209 | 8 |
Servicing rights | 3,277 | 3,845 |
Loans held for sale | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Loans held for sale | 72,258 | 46,846 |
Impaired loans | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Net impairment | 3,066 | 3,138 |
Level 2 | Loans held for sale | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Loans held for sale | 72,258 | 46,846 |
Level 3 | ||
Fair value, assets and liabilities measured on recurring and non recurring basis | ||
Impaired loans | 4,876 | 4,816 |
Foreclosed assets | 209 | 8 |
Servicing rights | $ 3,277 | $ 3,845 |
Fair Value of Assets and Liab_5
Fair Value of Assets and Liabilities - Valuation Technique (Details) - Level 3 | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) |
Impaired loans | Appraisal value | Property specific adjustment | ||
Valuation techniques and significant unobservable inputs | ||
Impaired loans | $ 4,876,000 | $ 4,816,000 |
Foreclosed assets | Appraisal value | Property specific adjustment | ||
Valuation techniques and significant unobservable inputs | ||
Foreclosed assets | $ 209,000 | $ 8,000 |
Servicing rights | ||
Valuation techniques and significant unobservable inputs | ||
Servicing Asset, Valuation Technique [Extensible List] | us-gaap:ValuationTechniqueDiscountedCashFlowMember | us-gaap:ValuationTechniqueDiscountedCashFlowMember |
Servicing rights | Prepayment speed assumptions | ||
Valuation techniques and significant unobservable inputs | ||
Servicing rights | $ 3,277,000 | $ 3,845,000 |
Servicing rights | Prepayment speed assumptions | Minimum | ||
Valuation techniques and significant unobservable inputs | ||
Servicing Asset, Measurement Input | 158 | 123 |
Servicing rights | Prepayment speed assumptions | Maximum | ||
Valuation techniques and significant unobservable inputs | ||
Servicing Asset, Measurement Input | 471 | 267 |
Servicing rights | Prepayment speed assumptions | Weighted average | ||
Valuation techniques and significant unobservable inputs | ||
Servicing Asset, Measurement Input | 237 | 194 |
Servicing rights | Discount rate | ||
Valuation techniques and significant unobservable inputs | ||
Servicing Asset, Measurement Input | 0.094 | 0.094 |
Servicing rights | Discount rate | Weighted average | ||
Valuation techniques and significant unobservable inputs | ||
Servicing Asset, Measurement Input | 0.094 | 0.094 |
Fair Value of Assets and Liab_6
Fair Value of Assets and Liabilities - Off-Balance Sheet Credit-Related Commitments (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Carrying amount | ||
Financial Assets | ||
Cash and cash equivalents | $ 198,489 | $ 144,006 |
Loans | 1,731,258 | 1,697,355 |
Accrued interest receivable | 7,425 | 7,551 |
Bank-owned life insurance | 31,763 | 31,566 |
Financial Liabilities | ||
Noninterest-bearing deposits | 608,559 | 577,704 |
Interest-bearing deposits | 1,311,585 | 1,197,530 |
Time deposits | 201,370 | 196,082 |
Long-term debt | 58,762 | 58,769 |
Accrued interest payable | 1,760 | 1,038 |
Estimated fair value | ||
Financial Assets | ||
Cash and cash equivalents | 198,489 | 144,006 |
Loans | 1,761,783 | 1,693,824 |
Accrued interest receivable | 7,425 | 7,551 |
Bank-owned life insurance | 31,763 | 31,566 |
Financial Liabilities | ||
Noninterest-bearing deposits | 608,559 | 577,704 |
Interest-bearing deposits | 1,311,585 | 1,197,530 |
Time deposits | 202,892 | 196,182 |
Long-term debt | 57,941 | 58,239 |
Accrued interest payable | 1,760 | 1,038 |
Level 1 | Estimated fair value | ||
Financial Assets | ||
Cash and cash equivalents | 198,489 | 144,006 |
Accrued interest receivable | 7,425 | 7,551 |
Financial Liabilities | ||
Accrued interest payable | 1,760 | 1,038 |
Level 2 | Estimated fair value | ||
Financial Assets | ||
Bank-owned life insurance | 31,763 | 31,566 |
Financial Liabilities | ||
Noninterest-bearing deposits | 608,559 | 577,704 |
Interest-bearing deposits | 1,311,585 | 1,197,530 |
Long-term debt | 57,941 | 58,239 |
Level 3 | Estimated fair value | ||
Financial Assets | ||
Loans | 1,761,783 | 1,693,824 |
Financial Liabilities | ||
Time deposits | $ 202,892 | $ 196,182 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event $ in Thousands | Apr. 21, 2020USD ($)client |
PPP Loans | |
Subsequent Events | |
Number of clients assisted under the PPP | client | 900 |
Loans financed | $ 300,000 |
Expected net processing fees to be received | $ 8,900 |
PPP Loans - Less than $350 Thousand | |
Subsequent Events | |
Processing fees on PPP loans (as a percent) | 5.00% |
Threshold value loans financed under the PPP | $ 350 |
PPP Loans - $350 Thousand to $2 Million | |
Subsequent Events | |
Processing fees on PPP loans (as a percent) | 3.00% |
PPP Loans - $350 Thousand to $2 Million | Minimum | |
Subsequent Events | |
Threshold value loans financed under the PPP | $ 350 |
PPP Loans - $350 Thousand to $2 Million | Maximum | |
Subsequent Events | |
Threshold value loans financed under the PPP | $ 2,000 |
PPP Loans - $2 Million | |
Subsequent Events | |
Processing fees on PPP loans (as a percent) | 1.00% |
Threshold value loans financed under the PPP | $ 2,000 |