Notes to the Consolidated Financial Statements
Note 1 – Nature of Operations and Basis of Presentation
Business and Organization
MVB Financial Corp. (“MVB” or the “Company”) is a financial holding company organized as a West Virginia corporation that operates principally through its wholly owned subsidiary, MVB Bank, Inc. (the “Bank”). The Bank’s subsidiaries include MVB Insurance, LLC, a title insurance company (“MVB Insurance”), MVB Community Development Corporation (“MVB CDC”), ProCo Global, Inc. (“Chartwell”, which began doing business under the registered trade name Chartwell Compliance), Paladin Fraud, LLC (“Paladin Fraud”) and MVB Technology, LLC (“MVB Technology”). The Company also owns a minority interest in Intercoastal Mortgage Company, LLC (“ICM”) and the Bank owns a majority interest in Flexia Payments, LLC (“Flexia”)
The Company conducts a wide range of business activities, primarily commercial and retail (“CoRe”) banking. The Company also continues to be involved in new innovative strategies to provide independent banking to corporate clients throughout the United States by leveraging recent investments in Fintech related companies. The Company considers Fintech companies as those entities that use technology to electronically move funds.
COVID-19 Pandemic
Throughout 2020 and into 2021, economies throughout the world have been severely disrupted as a result of the outbreak of COVID-19. The outbreak and any preventative or protective actions that the Company or its clients may take in respect of this virus may result in a period of disruption, including the Company’s financial reporting capabilities, its operations generally and could potentially impact the Company’s clients, providers and third parties. The extent to which the COVID-19 pandemic impacts the Company’s future operating results will depend on future developments, which are highly uncertain and cannot be predicted.
Principles of Consolidation and Basis of Presentation
The financial statements are consolidated to include the accounts of the Company, its subsidiary, the Bank and the Bank’s subsidiaries. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, practices in the banking industry and with instructions to Form 10-Q. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. The consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements included in the Company's Annual Report on Form 10-K for the 2020 Form 10-K. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
In February 2021, the Bank entered into an agreement to acquire an 80% interest in Flexia. Flexia owns a license for technology which allows users to access a reloadable account that combines a debit card account and casino gaming accounts into one card, allowing them for non-cash transactions at participating casinos in the United States and Canada. Although the Company owns, through its subsidiary, the Bank, an 80% interest in Flexia, the Company is required to consolidate 100% of Flexia within the consolidated financial statements. The remaining 20% is accounted for separately as noncontrolling interests within the consolidated financial statements. Noncontrolling interest represents the portion of ownership and profit or loss that is attributable to the minority owners of Flexia.
In preparing the consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the period. Estimates are based on known facts and circumstances and actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change relate to determination of the allowance for loan losses (“ALL”), purchased credit impaired loans (“PCI loans”), derivative instruments, goodwill and deferred tax assets and liabilities.
Unconsolidated investments where the Company has the ability to exercise significant influence over the operating and financial policies of the respective investee are accounted for using the equity method of accounting; those that are not consolidated or accounted for using the equity method of accounting are accounted for under cost or fair value accounting. For these investments accounted for under the equity method, the Company records its investment in non-consolidated affiliates and the portion of
income or loss in equity in earnings of non-consolidated affiliates. The Company periodically evaluates these investments for impairment. As of March 31, 2021, the Company holds one equity method investment.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2020 Form 10-K.
In certain instances, amounts reported in prior periods’ consolidated financial statements have been reclassified to conform to the current presentation.
The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance in November 2018, ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, in April 2019, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, in May 2019, ASU 2019-05, Financial Instruments – Credit Losses, Topic 326 and in November 2019, ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, all of which clarifies codification and corrects unintended application of the guidance. The new guidance replaces the incurred loss impairment methodology in current U.S. GAAP with an expected credit loss methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. PCI loans will receive an allowance account at the acquisition date that represents a component of the purchase price allocation. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited to the amount by which fair value is below amortized cost. The guidance was initially effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. On November 15, 2019, the FASB issued ASU 2019-10, Financial Investments – Credit Issues (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which finalizes a delay in the effective date of the standard for smaller reporting companies until January 2023. The Company expects to recognize a one-time cumulative effect adjustment to the ALL as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements. In that regard, the Company has formed a cross-functional implementation team. The team is working to develop an implementation plan which will include assessment and documentation of processes, internal controls and data sources; model development and documentation; and system configuration, among other things. The Company is also in the process of implementing a third-party vendor solution to assist it in the application of this standard. The adoption of this standard could result in an increase in the ALL as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. While the Company is currently unable to reasonably estimate the impact of adopting ASU 2016-13, it expects that the impact of adoption will be significantly influenced by the composition, characteristics and quality of its loan portfolio, as well as the prevailing economic conditions and forecasts as of the adoption date.
In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirement for Defined Benefit Plans, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The updates in this ASU are part of the disclosure framework project ASU 2018-14 and modify the disclosure requirements under Accounting Standards Codification (“ASC”) 715-20 for employers that sponsor defined benefit pension or other postretirement plans. Those modifications include the removal and addition of disclosure requirements as well as clarifying specific disclosure requirements. The ASU removed the following disclosures: 1) the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year; 2) the amount and timing of plan assets expected to be returned to the employer; 3) the disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law; 4) related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan; 5) for nonpublic entities, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy; however, nonpublic entities will be required to disclose separately the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets and 6) for public entities, the effects of a one-percentage-point change in assumed health care cost trend rates on the (i) aggregate of the service and interest cost components of net periodic benefit costs and (ii) benefit obligation for postretirement health care benefits. The ASU added the following disclosures: 1) the weighted-
average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and 2) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The ASU then clarified the following disclosures: 1) the projected benefit obligation (“PBO”) and fair value of plan assets for plans with PBOs more than plan assets; and 2) the accumulated benefit obligation (“ABO”) and fair value of plan assets for plans with ABOs more than plan assets. ASU 2018-14 is effective for public business entities for fiscal years ending after December 15, 2020. As ASU 2018-14 revises disclosure requirements. As ASU 2018-04 only revises disclosure requirements, the adoption did not have a material impact on the Company's interim consolidated financial statements. The Company's year-end disclosures will be revised to comply with the new requirements.
In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. ASU 2020-01 clarifies the interaction between accounting standards related to equity securities, equity method investments and certain derivatives, including accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. The amendments were effective for the Company beginning January 1, 2021 and did not have a material effect on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional expedients and exceptions for certain contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of rate reform. The guidance is effective from the date of issuance until December 31, 2022. The guidance permits entities to not apply modification accounting or remeasure lease payments in lease contracts if the changes to the contract are related to the discontinuation of the reference rate. If certain criteria are met, the amendments also allow exceptions to the de-designation criteria of the hedging relationship and the assessment of hedge effectiveness during the transition period. In January 2021, ASU 2021-01 was issued by the FASB and clarifies that certain exceptions in reference rate reform apply to derivatives that are affected by the discounting transition. The Company will continue to assess the impact as the reference rate transition occurs over the next two years.
Note 2 – Investment Securities
The following tables present amortized cost and fair values of investment securities available-for-sale as of the periods indicated:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(Dollars in thousands)
|
|
Amortized Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Fair Value
|
United States government agency securities
|
|
$
|
48,483
|
|
|
$
|
446
|
|
|
$
|
(825)
|
|
|
$
|
48,104
|
|
United States sponsored mortgage-backed securities
|
|
90,076
|
|
|
428
|
|
|
(1,297)
|
|
|
89,207
|
|
United States treasury securities
|
|
56,953
|
|
|
97
|
|
|
(80)
|
|
|
56,970
|
|
Municipal securities
|
|
206,135
|
|
|
4,607
|
|
|
(1,008)
|
|
|
209,734
|
|
Other debt securities
|
|
7,500
|
|
|
—
|
|
|
—
|
|
|
7,500
|
|
Total debt securities
|
|
409,147
|
|
|
5,578
|
|
|
(3,210)
|
|
|
411,515
|
|
Other securities
|
|
11,543
|
|
|
109
|
|
|
(45)
|
|
|
11,607
|
|
Total investment securities available-for-sale
|
|
$
|
420,690
|
|
|
$
|
5,687
|
|
|
$
|
(3,255)
|
|
|
$
|
423,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
(Dollars in thousands)
|
|
Amortized Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Fair Value
|
United States government agency securities
|
|
$
|
56,207
|
|
|
$
|
995
|
|
|
$
|
(210)
|
|
|
$
|
56,992
|
|
United States sponsored mortgage-backed securities
|
|
94,968
|
|
|
972
|
|
|
(171)
|
|
|
95,769
|
|
Municipal securities
|
|
223,642
|
|
|
8,327
|
|
|
(82)
|
|
|
231,887
|
|
Other debt securities
|
|
7,500
|
|
|
—
|
|
|
—
|
|
|
7,500
|
|
Total debt securities
|
|
382,317
|
|
|
10,294
|
|
|
(463)
|
|
|
392,148
|
|
Other securities
|
|
18,401
|
|
|
146
|
|
|
(71)
|
|
|
18,476
|
|
Total investment securities available-for-sale
|
|
$
|
400,718
|
|
|
$
|
10,440
|
|
|
$
|
(534)
|
|
|
$
|
410,624
|
|
The following table presents amortized cost and fair values of available-for-sale debt securities by contractual maturity as of the period indicated:
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|
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|
|
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|
|
|
|
|
|
March 31, 2021
|
(Dollars in thousands)
|
|
Amortized Cost
|
|
Fair Value
|
Within one year
|
|
$
|
—
|
|
|
$
|
—
|
|
After one year, but within five years
|
|
62,819
|
|
|
63,045
|
|
After five years, but within ten years
|
|
37,397
|
|
|
37,427
|
|
After ten years
|
|
308,931
|
|
|
311,043
|
|
Total
|
|
$
|
409,147
|
|
|
$
|
411,515
|
|
The table above reflects contractual maturities. Actual results will differ as the loans underlying the mortgage-backed securities may repay sooner than scheduled.
Investment securities with a carrying value of $239.4 million and $229.4 million at March 31, 2021 and December 31, 2020, respectively, were pledged to secure public funds, repurchase agreements and potential borrowings at the Federal Reserve Discount Window.
The Company’s investment portfolio includes securities that are in an unrealized loss position as of March 31, 2021, the details of which are included in the following table. Although these securities, if sold at March 31, 2021, would result in a pretax loss of $3.3 million, the Company has no intent to sell the applicable securities at such fair values, and maintains the Company has the ability to hold these securities until all principal has been recovered. It is more likely than not that the Company will not, for liquidity purposes, sell any securities at a loss. Declines in the fair values of these securities can be traced to general market conditions, which reflect the prospect for the economy as a whole. When determining other-than-temporary impairment on securities, the Company considers such factors as adverse conditions specifically related to a certain security or to specific conditions in an industry or geographic area, the time frame securities have been in an unrealized loss position, the Company’s ability to hold the security for a period of time sufficient to allow for anticipated recovery in value, whether or not the security has been downgraded by a rating agency and whether or not the financial condition of the security issuer has severely deteriorated. As of March 31, 2021, the Company considers all securities with unrealized loss positions to be temporarily impaired, and consequently, does not believe the Company will sustain any material realized losses as a result of the current decline in fair value.
The following tables presents investments in an unrealized loss position as of the periods indicated:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(Dollars in thousands)
|
|
Less than 12 months
|
|
12 months or more
|
Description and number of positions
|
|
Fair Value
|
|
Unrealized Loss
|
|
Fair Value
|
|
Unrealized Loss
|
United States government agency securities (28)
|
|
$
|
23,502
|
|
|
$
|
(705)
|
|
|
$
|
11,617
|
|
|
$
|
(120)
|
|
United States sponsored mortgage-backed securities (21)
|
|
68,695
|
|
|
(1,287)
|
|
|
2,005
|
|
|
(10)
|
|
United States treasury securities (9)
|
|
35,568
|
|
|
(80)
|
|
|
—
|
|
|
—
|
|
Municipal securities (86)
|
|
73,445
|
|
|
(952)
|
|
|
2,049
|
|
|
(56)
|
|
Other securities (3)
|
|
1,957
|
|
|
(43)
|
|
|
1,013
|
|
|
(2)
|
|
|
|
$
|
203,167
|
|
|
$
|
(3,067)
|
|
|
$
|
16,684
|
|
|
$
|
(188)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
(Dollars in thousands)
|
|
Less than 12 months
|
|
12 months or more
|
Description and number of positions
|
|
Fair Value
|
|
Unrealized Loss
|
|
Fair Value
|
|
Unrealized Loss
|
United States government agency securities (27)
|
|
$
|
19,021
|
|
|
$
|
(68)
|
|
|
$
|
12,574
|
|
|
$
|
(142)
|
|
United States sponsored mortgage-backed securities (9)
|
|
15,331
|
|
|
(155)
|
|
|
3,349
|
|
|
(16)
|
|
Municipal securities (14)
|
|
11,856
|
|
|
(82)
|
|
|
—
|
|
|
—
|
|
Other securities (5)
|
|
3,947
|
|
|
(71)
|
|
|
—
|
|
|
—
|
|
|
|
$
|
50,155
|
|
|
$
|
(376)
|
|
|
$
|
15,923
|
|
|
$
|
(158)
|
|
The following table summarizes investment sales and related gains and losses for the periods shown:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(Dollars in thousands)
|
|
2021
|
|
2020
|
Sales of available-for-sale investments
|
|
$
|
41,037
|
|
|
$
|
10,318
|
|
Gains, gross
|
|
1,156
|
|
|
276
|
|
|
|
|
|
|
Losses, gross
|
|
13
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
For the three months ended March 31, 2021 and 2020, the Company sold no equity investments.
For the three months ended March 31, 2021, the Company recognized unrealized holding gains on equity securities of $0.5 million which are included in noninterest income. Unrealized holding gains on equity securities for the three months ended March 31, 2020 were not material.
Qualified Affordable Housing Projects
The Company has invested, as a limited partner, in three Section 42 affordable housing investment funds. In exchange for these investments, the Company receives its pro rata share of income, expense, gains and losses, including tax credits, that are received by the projects. As of March 31, 2021 and December 31, 2020, the Company has recognized, as an investment, $2.7 million and $2.8 million in the aggregate between the three affordable housing investment funds and has recognized cumulative losses of $1.3 million and $1.2 million from these funds as of March 31, 2021 and December 31, 2020, respectively.
Note 3 – Loans and Allowance for Loan Losses
Prior to the ICM transaction, the Company routinely generated one to four family mortgages for sale into the secondary market. During the three months ended March 31, 2020, the Company received sales proceeds of $419.9 million, resulting in mortgage fee income of $11.2 million.
The following table presents the components of loans as of the periods indicated:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
Commercial and non-residential real estate
|
|
$
|
1,353,339
|
|
|
$
|
1,141,114
|
|
Residential real estate
|
|
275,710
|
|
|
240,264
|
|
Home equity
|
|
28,843
|
|
|
30,828
|
|
Consumer
|
|
3,149
|
|
|
3,156
|
|
Total
|
|
1,661,041
|
|
|
1,415,362
|
|
Purchased credit impaired loans:
|
|
|
|
|
Commercial and non-residential real estate
|
|
19,834
|
|
|
21,008
|
|
Residential real estate
|
|
14,306
|
|
|
16,943
|
|
|
|
|
|
|
Consumer
|
|
1,284
|
|
|
1,488
|
|
Total purchased credit impaired loans
|
|
35,424
|
|
|
39,439
|
|
Total Loans
|
|
$
|
1,696,465
|
|
|
$
|
1,454,801
|
|
Deferred loan origination costs and (fees), net
|
|
(2,080)
|
|
|
(1,057)
|
|
Loans receivable
|
|
$
|
1,694,385
|
|
|
$
|
1,453,744
|
|
The Company currently manages its loan portfolios and the respective exposure to credit losses (credit risk) by the following specific portfolio segments which are levels at which the Company develops and documents its systematic methodology to determine the allowance for credit losses attributable to each respective portfolio segment. These segments are as follows:
Commercial business loans – Commercial loans are made to provide funds for equipment and general corporate needs, as well as to finance owner occupied real estate, and to finance future cash flows of Federal Government lease contracts. Repayment of these loans primarily uses the funds obtained from the operation of the borrower’s business. Commercial loans also include lines of credit that are utilized to finance a borrower’s short-term credit needs and/or to finance a percentage of eligible receivables and inventory. This segment includes both company originated and purchased participation loans. Credit risk arises from the
successful operation of the business which may be affected by competition, rising interest rates, regulatory changes and adverse conditions in the local and regional economy.
Commercial real estate loans – Commercial real estate loans consist of non-owner occupied properties, such as investment properties for retail, office and multifamily with a history of occupancy and cash flow. This segment includes both company originated and purchased participation loans. These loans carry the risk of adverse changes in the local economy and a tenant’s deteriorating credit strength, lease expirations in soft markets and sustained vacancies which can adversely impact cash flow.
Commercial acquisition, development and construction loans – Commercial acquisition, development and construction loans are intended to finance the construction of commercial and residential properties, including the construction of single-family dwellings, and also includes loans for the acquisition and development of land. Construction loans represent a higher degree of risk than permanent real estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that constructed units may not be absorbed by the market within the anticipated time frame or at the anticipated price. The loan commitment on these loans often includes an interest reserve that allows the lender to periodically advance loan funds to pay interest charges on the outstanding balance of the loan.
Commercial Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans –This segment includes the loan originated through the recently created SBA PPP loans. Credit risk is heightened as this SBA program mandates that these loans require no collateral and no guarantors of the loans. However, the loans are backed by a full guaranty of the SBA, so long as the loans were originated in accordance with the program guidelines. Additionally, these loans are eligible for full forgiveness by the SBA so long as the borrowers comply with the program guidelines as it pertains to their eligibility to borrow these funds, as well as their use of the funds.
Residential mortgage loans – This residential real estate subsegment contains permanent and construction mortgage loans principally to consumers secured by residential real estate. Residential real estate loans are evaluated for the adequacy of repayment sources at the time of approval, based upon measures including credit scores, debt-to-income ratios and collateral values. Credit risk arises from the borrower’s, and where applicable the builder's, continuing financial stability, which can be adversely impacted by job loss, divorce, illness or personal bankruptcy, among other factors. Also impacting credit risk would be a shortfall in the value of the residential real estate in relation to the outstanding loan balance in the event of a default or subsequent liquidation of the real estate collateral.
Home equity lines of credit – This segment includes subsegment for senior lien and subordinate lien lines of credit. Credit risk is similar to residential real estate loans described above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan.
Consumer loans – This segment of loans includes primarily installment loans and personal lines of credit. Consumer loans include installment loans used by clients to purchase automobiles, boats and recreational vehicles. Credit risk is similar to residential real estate loans described above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan.
The following table presents impaired loans by class, excluding PCI loans, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans with Specific Allowance
|
|
Impaired Loans with No Specific Allowance
|
|
Total Impaired Loans
|
(Dollars in thousands)
|
|
Recorded Investment
|
|
Related Allowance
|
|
Recorded Investment
|
|
Recorded Investment
|
|
Unpaid Principal Balance
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
3,504
|
|
|
$
|
741
|
|
|
$
|
3,824
|
|
|
$
|
7,328
|
|
|
$
|
8,770
|
|
Commercial real estate
|
|
767
|
|
|
267
|
|
|
956
|
|
|
1,723
|
|
|
1,877
|
|
Acquisition and development
|
|
—
|
|
|
—
|
|
|
2,035
|
|
|
2,035
|
|
|
3,441
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
4,271
|
|
|
1,008
|
|
|
6,815
|
|
|
11,086
|
|
|
14,088
|
|
Residential
|
|
—
|
|
|
—
|
|
|
1,927
|
|
|
1,927
|
|
|
2,160
|
|
Home equity
|
|
—
|
|
|
—
|
|
|
95
|
|
|
95
|
|
|
95
|
|
Consumer
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|
3
|
|
Total impaired loans
|
|
$
|
4,271
|
|
|
$
|
1,008
|
|
|
$
|
8,840
|
|
|
$
|
13,111
|
|
|
$
|
16,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
3,431
|
|
|
$
|
1,032
|
|
|
$
|
5,653
|
|
|
$
|
9,084
|
|
|
$
|
10,440
|
|
Commercial real estate
|
|
772
|
|
|
264
|
|
|
944
|
|
|
1,716
|
|
|
1,864
|
|
Acquisition and development
|
|
—
|
|
|
—
|
|
|
2,534
|
|
|
2,534
|
|
|
3,939
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
4,203
|
|
|
1,296
|
|
|
9,131
|
|
|
13,334
|
|
|
16,243
|
|
Residential
|
|
—
|
|
|
—
|
|
|
1,960
|
|
|
1,960
|
|
|
2,232
|
|
Home equity
|
|
—
|
|
|
—
|
|
|
95
|
|
|
95
|
|
|
95
|
|
Consumer
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|
5
|
|
Total impaired loans
|
|
$
|
4,203
|
|
|
$
|
1,296
|
|
|
$
|
11,191
|
|
|
$
|
15,394
|
|
|
$
|
18,575
|
|
The following table presents the average recorded investment in impaired loans, excluding PCI loans, and related interest income recognized for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2021
|
|
2020
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
Average Investment in Impaired Loans
|
|
Interest Income Recognized on Accrual Basis
|
|
Interest Income Recognized on Cash Basis
|
|
Average Investment in Impaired Loans
|
|
Interest Income Recognized on Accrual Basis
|
|
Interest Income Recognized on Cash Basis
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
|
|
|
|
|
|
$
|
6,521
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,261
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial real estate
|
|
|
|
|
|
|
|
2,278
|
|
|
11
|
|
|
10
|
|
|
2,898
|
|
|
26
|
|
|
23
|
|
Acquisition and development
|
|
|
|
|
|
|
|
357
|
|
|
—
|
|
|
—
|
|
|
2,048
|
|
|
29
|
|
|
19
|
|
SBA PPP
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total commercial
|
|
|
|
|
|
|
|
9,156
|
|
|
11
|
|
|
10
|
|
|
8,207
|
|
|
55
|
|
|
42
|
|
Residential
|
|
|
|
|
|
|
|
1,944
|
|
|
3
|
|
|
4
|
|
|
2,382
|
|
|
5
|
|
|
5
|
|
Home equity
|
|
|
|
|
|
|
|
69
|
|
|
—
|
|
|
—
|
|
|
101
|
|
|
—
|
|
|
—
|
|
Consumer
|
|
|
|
|
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
—
|
|
Total
|
|
|
|
|
|
|
|
$
|
11,172
|
|
|
$
|
14
|
|
|
$
|
14
|
|
|
$
|
10,709
|
|
|
$
|
60
|
|
|
$
|
47
|
|
As of March 31, 2021, the Bank’s other real estate owned balance totaled $5.2 million, of which $4.1 million was related to the acquisition of The First State Bank (“First State”) in 2020. The Bank held 37 foreclosed residential real estate properties representing $3.5 million, or 67.3%, of the total balance of other real estate owned. The remaining $1.7 million, or 32.7%, of other real estate owned is the result of the foreclosure of seven unrelated commercial loans. There are nine additional consumer mortgage loans collateralized by residential real estate properties in the process of foreclosure, with a total recorded investment of
$0.7 million as of March 31, 2021. These include five MVB loans totaling $0.2 million and four First State loans totaling $0.5 million. These loans are included in the table above and have no specific allowance allocated to them.
Bank management uses a nine point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions.
Loans categorized as “Pass” rated have adequate sources of repayment, with little identifiable risk of collection and general conformity to the Bank's policy requirements, product guidelines and underwriting standards. Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors.
Loans categorized as “Special Mention” rated have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification.
Loans categorized as “Substandard” rated are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that bank will sustain some loss if the deficiencies are not corrected.
Loans categorized as “Doubtful” rated have all the weakness inherent in those classified substandard with the added characteristic that the weakness make collections or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt.
The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Any portion of a loan that has been or is expected to be charged off is placed in the Loss category.
To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as past due status, bankruptcy, repossession or death occurs to raise awareness of a possible credit event. The Bank’s Chief Credit Officer is responsible for the timely and accurate risk rating of the loans in the portfolio at origination and on an ongoing basis. The Credit Department ensures that a review of all commercial relationships of $1.0 million or greater is performed annually.
Review of the appropriate risk grade is included in both the internal and external loan review process, and on an ongoing basis. The Bank has an experienced Credit Department that continually reviews and assesses loans within the portfolio. The Bank engages an external consultant to conduct independent loan reviews on at least an annual basis. Generally, the external consultant reviews larger commercial relationships or criticized relationships. The Credit Department compiles detailed reviews, including plans for resolution, on loans classified as Substandard on a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.
The following table represents the classes of the loan portfolio, excluding PCI loans, summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
523,254
|
|
|
$
|
14,114
|
|
|
$
|
14,081
|
|
|
$
|
962
|
|
|
$
|
552,411
|
|
Commercial real estate
|
|
425,841
|
|
|
31,503
|
|
|
33,774
|
|
|
533
|
|
|
491,651
|
|
Acquisition and development
|
|
87,603
|
|
|
25,064
|
|
|
4,366
|
|
|
1,683
|
|
|
118,716
|
|
SBA PPP
|
|
190,561
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
190,561
|
|
Total commercial
|
|
1,227,259
|
|
|
70,681
|
|
|
52,221
|
|
|
3,178
|
|
|
1,353,339
|
|
Residential
|
|
271,772
|
|
|
933
|
|
|
2,834
|
|
|
171
|
|
|
275,710
|
|
Home equity
|
|
28,295
|
|
|
380
|
|
|
142
|
|
|
26
|
|
|
28,843
|
|
Consumer
|
|
3,120
|
|
|
24
|
|
|
5
|
|
|
—
|
|
|
3,149
|
|
Total Loans
|
|
$
|
1,530,446
|
|
|
$
|
72,018
|
|
|
$
|
55,202
|
|
|
$
|
3,375
|
|
|
$
|
1,661,041
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
496,222
|
|
|
$
|
9,529
|
|
|
$
|
17,045
|
|
|
$
|
1,095
|
|
|
$
|
523,891
|
|
Commercial real estate
|
|
356,544
|
|
|
32,044
|
|
|
34,001
|
|
|
533
|
|
|
423,122
|
|
Acquisition and development
|
|
80,771
|
|
|
25,001
|
|
|
4,184
|
|
|
2,170
|
|
|
112,126
|
|
SBA PPP
|
|
81,975
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
81,975
|
|
Total commercial
|
|
1,015,512
|
|
|
66,574
|
|
|
55,230
|
|
|
3,798
|
|
|
1,141,114
|
|
Residential
|
|
236,250
|
|
|
948
|
|
|
2,896
|
|
|
170
|
|
|
240,264
|
|
Home equity
|
|
30,277
|
|
|
381
|
|
|
144
|
|
|
26
|
|
|
30,828
|
|
Consumer
|
|
3,124
|
|
|
32
|
|
|
—
|
|
|
—
|
|
|
3,156
|
|
Total Loans
|
|
$
|
1,285,163
|
|
|
$
|
67,935
|
|
|
$
|
58,270
|
|
|
$
|
3,994
|
|
|
$
|
1,415,362
|
|
Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.
A loan that has deteriorated and requires additional collection efforts by the Bank could warrant non-accrual status. A thorough review is presented to the Chief Credit Officer and/or the SARC, as required with respect to any loan which is in a collection process and to make a determination as to whether the loan should be placed on non-accrual status. The placement of loans on non-accrual status is subject to applicable regulatory restrictions and guidelines. Generally, loans should be placed in non-accrual status when the loan reaches 90 days past due, when it becomes likely the borrower cannot or will not make scheduled principal or interest payments, when full repayment of principal and interest is not expected or when the loan displays potential loss characteristics. Normally, all accrued interest is charged off when a loan is placed in non-accrual status, unless the Company believes it is likely the accrued interest will be collected. Any payments subsequently received are applied to principal. To remove a loan from non-accrual status, all principal and interest due must be paid up to date and the Bank is reasonably sure of future satisfactory payment performance. Usually, this requires the receipt of six consecutive months of regular, on-time payments. Removal of a loan from non-accrual status will require the approval of the Chief Credit Officer and/or SARC.
The following table presents the classes of the loan portfolio, excluding PCI loans, summarized by aging categories of performing loans and non-accrual loans as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Current
|
|
30-59 Days Past Due
|
|
60-89 Days Past Due
|
|
90+ Days Past Due
|
|
Total Past Due
|
|
Total Loans
|
|
Non-Accrual
|
|
90+ Days Still Accruing
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
551,150
|
|
|
$
|
23
|
|
|
$
|
244
|
|
|
$
|
994
|
|
|
$
|
1,261
|
|
|
$
|
552,411
|
|
|
$
|
6,938
|
|
|
$
|
—
|
|
Commercial real estate
|
|
490,992
|
|
|
69
|
|
|
42
|
|
|
548
|
|
|
659
|
|
|
491,651
|
|
|
956
|
|
|
—
|
|
Acquisition and development
|
|
116,190
|
|
|
578
|
|
|
—
|
|
|
1,948
|
|
|
2,526
|
|
|
118,716
|
|
|
2,036
|
|
|
—
|
|
SBA PPP
|
|
190,561
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
190,561
|
|
|
—
|
|
|
—
|
|
Total commercial
|
|
1,348,893
|
|
|
670
|
|
|
286
|
|
|
3,490
|
|
|
4,446
|
|
|
1,353,339
|
|
|
9,930
|
|
|
—
|
|
Residential
|
|
267,500
|
|
|
1,740
|
|
|
5,767
|
|
|
703
|
|
|
8,210
|
|
|
275,710
|
|
|
1,549
|
|
|
—
|
|
Home equity
|
|
28,657
|
|
|
75
|
|
|
16
|
|
|
95
|
|
|
186
|
|
|
28,843
|
|
|
95
|
|
|
—
|
|
Consumer
|
|
3,145
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
3,149
|
|
|
3
|
|
|
—
|
|
Total Loans
|
|
$
|
1,648,195
|
|
|
$
|
2,485
|
|
|
$
|
6,069
|
|
|
$
|
4,292
|
|
|
$
|
12,846
|
|
|
$
|
1,661,041
|
|
|
$
|
11,577
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
521,799
|
|
|
$
|
1,040
|
|
|
$
|
33
|
|
|
$
|
1,019
|
|
|
$
|
2,092
|
|
|
$
|
523,891
|
|
|
$
|
8,601
|
|
|
$
|
—
|
|
Commercial real estate
|
|
422,343
|
|
|
34
|
|
|
212
|
|
|
533
|
|
|
779
|
|
|
423,122
|
|
|
944
|
|
|
—
|
|
Acquisition and development
|
|
109,686
|
|
|
—
|
|
|
—
|
|
|
2,440
|
|
|
2,440
|
|
|
112,126
|
|
|
2534
|
|
|
—
|
|
SBA PPP
|
|
81,975
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
81,975
|
|
|
—
|
|
|
—
|
|
Total commercial
|
|
1,135,803
|
|
|
1,074
|
|
|
245
|
|
|
3,992
|
|
|
5,311
|
|
|
1,141,114
|
|
|
12,079
|
|
|
—
|
|
Residential
|
|
235,420
|
|
|
2,058
|
|
|
1,969
|
|
|
817
|
|
|
4,844
|
|
|
240,264
|
|
|
1,534
|
|
|
—
|
|
Home equity
|
|
30,369
|
|
|
289
|
|
|
75
|
|
|
95
|
|
|
459
|
|
|
30,828
|
|
|
95
|
|
|
—
|
|
Consumer
|
|
3,156
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,156
|
|
|
5
|
|
|
—
|
|
Total Loans
|
|
$
|
1,404,748
|
|
|
$
|
3,421
|
|
|
$
|
2,289
|
|
|
$
|
4,904
|
|
|
$
|
10,614
|
|
|
$
|
1,415,362
|
|
|
$
|
13,713
|
|
|
$
|
—
|
|
An ALL is maintained to absorb losses from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience and the amount of non-performing loans.
The Bank’s methodology for determining the ALL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the two components represents the Bank’s ALL. The Bank’s methodology allows for the analysis of certain impaired loans in homogeneous pools, rather than on an individual basis, when those loans are below specific thresholds based on outstanding principal balance. More specifically, residential mortgage loans, home equity lines of credit and consumer loans, when considered impaired, are evaluated collectively for impairment by applying allocation rates derived from the Bank’s historical losses specific to impaired loans. Total collectively evaluated impaired loans, excluding the PCI loans acquired from First State, were $2.0 million and $2.0 million, while the related reserves were $0.1 million and $0.1 million as of March 31, 2021 and December 31, 2020. Such collectively evaluated impaired loans are included in total loans individually evaluated for impairment and in total impaired loans.
Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by qualified factors.
The segments described above, which are based on the federal call code assigned to each loan, provide the starting point for the ALL analysis. Company and Bank management track the historical net charge-off activity at the call code level. A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters. All pools currently utilize a rolling 12 quarters.
“Pass” rated credits are segregated from “Criticized” credits for the application of qualitative factors. Loans in the criticized pools, which possess certain qualities or characteristics that may lead to collection and loss issues, are closely monitored by management and subject to additional qualitative factors.
Company and Bank management have identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory and governmental sources are: lending policies and procedures, nature and volume of the portfolio, experience and ability of lending management and staff, volume and severity of problem credits, quality of the loan review system, changes in the value of underlying collateral, effect of concentrations of credit from a loan type, industry and/or geographic standpoint, changes in economic and business conditions, consumer sentiment and other external factors. The combination of historical charge-off and qualitative factors are then weighted for each risk grade. These weightings are determined internally based upon the likelihood of loss as a loan risk grading deteriorates.
To estimate the liability for off-balance sheet credit exposures, Bank management analyzed the portfolios of letters of credit, non-revolving lines of credit and revolving lines of credit and based its calculation on the expectation of future advances of each loan category. Letters of credit were determined to be highly unlikely to advance since they are generally in place only to ensure various forms of performance of the borrowers. In the Bank’s history, there have been no letters of credit drawn upon. In addition, many of the letters of credit are cash secured and do not warrant an allocation. Non-revolving lines of credit were determined to be highly likely to advance as these are typically construction lines. Meanwhile, the likelihood of revolving lines of credit advancing varies with each individual borrower. Therefore, the future usage of each line was estimated based on the average line utilization of the revolving line of credit portfolio as a whole.
Once the estimated future advances were calculated, an allocation rate, which was derived from the Bank’s historical losses and qualitative environmental factors, was applied in the similar manner as those used for the allowance for loan loss calculation. The resulting estimated loss allocations were totaled to determine the liability for unfunded commitments related to these loans, which management considers necessary to anticipate potential losses on those commitments that have a reasonable probability of funding. As of March 31, 2021 and December 31, 2020, the liability for unfunded commitments related to loans held for investment, excluding loans acquired from First State, was $0.6 million.
Bank management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.
The following table presents the primary segments of the ALL, excluding PCI loans, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Commercial
|
|
Residential
|
|
Home Equity
|
|
Consumer
|
|
Total
|
ALL balance at December 31, 2020
|
|
$
|
24,033
|
|
|
$
|
1,378
|
|
|
$
|
298
|
|
|
$
|
51
|
|
|
$
|
25,760
|
|
Charge-offs
|
|
(265)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(265)
|
|
Recoveries
|
|
10
|
|
|
—
|
|
|
4
|
|
|
3
|
|
|
17
|
|
Provision
|
|
501
|
|
|
135
|
|
|
(19)
|
|
|
(5)
|
|
|
612
|
|
|
|
|
|
|
|
|
|
|
|
|
ALL balance at March 31, 2021
|
|
$
|
24,279
|
|
|
$
|
1,513
|
|
|
$
|
283
|
|
|
$
|
49
|
|
|
$
|
26,124
|
|
Individually evaluated for impairment
|
|
$
|
1,008
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,008
|
|
Collectively evaluated for impairment
|
|
$
|
23,271
|
|
|
$
|
1,513
|
|
|
$
|
283
|
|
|
$
|
49
|
|
|
$
|
25,116
|
|
The following table presents the primary segments of the Company's loan portfolio, excluding PCI loans, as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Commercial
|
|
Residential
|
|
Home Equity
|
|
Consumer
|
|
Total
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
11,086
|
|
|
$
|
1,927
|
|
|
$
|
95
|
|
|
$
|
3
|
|
|
$
|
13,111
|
|
Collectively evaluated for impairment
|
|
1,342,253
|
|
|
273,783
|
|
|
28,748
|
|
|
3,146
|
|
|
1,647,930
|
|
Total Loans
|
|
$
|
1,353,339
|
|
|
$
|
275,710
|
|
|
$
|
28,843
|
|
|
$
|
3,149
|
|
|
$
|
1,661,041
|
|
The following table presents the primary segments of the ALL, excluding PCI loans, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Commercial
|
|
Residential
|
|
Home Equity
|
|
Consumer
|
|
Total
|
ALL balance at December 31, 2019
|
|
$
|
10,098
|
|
|
$
|
1,272
|
|
|
$
|
327
|
|
|
$
|
78
|
|
|
$
|
11,775
|
|
Charge-offs
|
|
(1,756)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,756)
|
|
Recoveries
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
4
|
|
Provision
|
|
1,255
|
|
|
—
|
|
|
(93)
|
|
|
(24)
|
|
|
1,138
|
|
ALL balance at March 31, 2020
|
|
$
|
9,597
|
|
|
$
|
1,272
|
|
|
$
|
236
|
|
|
$
|
56
|
|
|
$
|
11,161
|
|
Individually evaluated for impairment
|
|
$
|
532
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
532
|
|
Collectively evaluated for impairment
|
|
$
|
9,065
|
|
|
$
|
1,272
|
|
|
$
|
236
|
|
|
$
|
56
|
|
|
$
|
10,629
|
|
The following table presents the primary segments of the Company's loan portfolio, excluding PCI loans, as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Commercial
|
|
Residential
|
|
Home Equity
|
|
Consumer
|
|
Total
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
7,737
|
|
|
$
|
2,385
|
|
|
$
|
104
|
|
|
$
|
—
|
|
|
$
|
10,226
|
|
Collectively evaluated for impairment
|
|
1,086,757
|
|
|
259,108
|
|
|
36,752
|
|
|
3,763
|
|
|
1,386,380
|
|
Total Loans
|
|
$
|
1,094,494
|
|
|
$
|
261,493
|
|
|
$
|
36,856
|
|
|
$
|
3,763
|
|
|
$
|
1,396,606
|
|
The ALL is based on estimates and actual losses will vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.
Troubled Debt Restructurings
At both March 31, 2021 and December 31, 2020, the Bank had specific reserve allocations for troubled debt restructurings (“TDRs”) of $0.6 million. Loans considered to be troubled debt restructured loans totaled $8.3 million and $10.2 million as of March 31, 2021 and December 31, 2020, respectively. Of these totals, $1.5 million and $1.6 million, respectively, represent accruing troubled debt restructured loans and represent 11% and 10%, respectively, of total impaired loans. Meanwhile, as of March 31, 2021, $2.8 million represent four loans to two borrowers that have defaulted under the restructured terms. The largest of these loans, $2.2 million, is a commercial loan and the other three of these loans, totaling $0.6 million, are commercial acquisition and development loans that were considered TDRs due to extended interest only periods and/or unsatisfactory repayment structures once transitioned to principal and interest payments. These borrowers have experienced continued financial difficulty and are considered non-performing loans as of March 31, 2021 and December 31, 2020.
During the quarter ended March 31, 2021, no additional loans were classified as TDRs and no restructured loan defaulted under their modified terms that were not already classified as non-performing for having previously defaulted under their modified terms. The following table presents the new TDRs as of the period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Contracts
|
|
Pre-Modification Outstanding Recorded Investment
|
|
Post-Modification Outstanding Recorded Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
$
|
154
|
|
|
$
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
159
|
|
|
159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
313
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
$
|
313
|
|
|
$
|
308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The pre-modification and post-modification balances represent the balances outstanding immediately before and after modification of the loan.
Purchased Credit Impaired Loans
As a result of the acquisition of First State, the Company has PCI loans. The following table presents the carrying amount of the PCI loan portfolio as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
Commercial
|
|
$
|
19,834
|
|
|
$
|
21,008
|
|
Residential
|
|
14,306
|
|
|
16,943
|
|
|
|
|
|
|
Consumer
|
|
1,284
|
|
|
1,488
|
|
Outstanding balance
|
|
$
|
35,424
|
|
|
$
|
39,439
|
|
Carrying amount, net of allowance
|
|
$
|
35,334
|
|
|
$
|
39,355
|
|
The following table presents the accretable yield, or income expected to be collected, as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
Beginning balance
|
|
$
|
8,313
|
|
|
$
|
—
|
|
New loans purchased
|
|
—
|
|
|
11,746
|
|
Accretion of income
|
|
(1,021)
|
|
|
(2,945)
|
|
Other changes in expected cash flows
|
|
955
|
|
|
(488)
|
|
|
|
|
|
|
Ending balance
|
|
$
|
8,247
|
|
|
$
|
8,313
|
|
There were no PCI loans purchased during the three months ended March 31, 2021. Income is not recognized on PCI loans if the Company cannot reasonably estimate cash flows expected to be collected and, as of March 31, 2021, the Company held no such loans.
The following table summarizes the primary segments of the ALL, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment for the PCI loan portfolio as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Commercial
|
|
Residential
|
|
|
|
|
|
Total
|
December 31, 2020
|
|
$
|
—
|
|
|
$
|
84
|
|
|
|
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
|
|
90
|
|
|
(84)
|
|
|
|
|
|
|
6
|
|
ALL balance at March 31, 2021
|
|
$
|
90
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
$
|
90
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
90
|
|
For the PCI loan portfolio disclosed above, the Company increased the ALL by $0.01 million during the three months ended March 31, 2021.
There were no PCI as of March 31, 2020 and, accordingly, there was no ALL related to PCI loans for the three months ended March 31, 2020.
As of March 31, 2021, the loans in the Company's PCI portfolio were all collectively evaluated for impairment and are segmented into three categories: commercial loans totaling $19.8 million, residential loans totaling $14.3 million, and consumer loans totaling $1.3 million, for a portfolio total of $35.4 million.
The following table presents the classes of the PCI loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
14,678
|
|
|
$
|
35
|
|
|
$
|
466
|
|
|
$
|
2,411
|
|
|
$
|
17,590
|
|
Commercial real estate
|
|
1,220
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
1,222
|
|
Acquisition and development
|
|
1,022
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,022
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
16,920
|
|
|
37
|
|
|
466
|
|
|
2,411
|
|
|
19,834
|
|
Residential
|
|
11,864
|
|
|
327
|
|
|
861
|
|
|
1,254
|
|
|
14,306
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
1,278
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
1,284
|
|
Total Loans
|
|
$
|
30,062
|
|
|
$
|
364
|
|
|
$
|
1,327
|
|
|
$
|
3,671
|
|
|
$
|
35,424
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
12,263
|
|
|
$
|
136
|
|
|
$
|
345
|
|
|
$
|
4,860
|
|
|
$
|
17,604
|
|
Commercial real estate
|
|
982
|
|
|
3
|
|
|
263
|
|
|
21
|
|
|
1,269
|
|
Acquisition and development
|
|
1,900
|
|
|
—
|
|
|
—
|
|
|
235
|
|
|
2,135
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
15,145
|
|
|
139
|
|
|
608
|
|
|
5,116
|
|
|
21,008
|
|
Residential
|
|
15,157
|
|
|
—
|
|
|
1,665
|
|
|
121
|
|
|
16,943
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
1,256
|
|
|
—
|
|
|
—
|
|
|
232
|
|
|
1,488
|
|
Total Loans
|
|
$
|
31,558
|
|
|
$
|
139
|
|
|
$
|
2,273
|
|
|
$
|
5,469
|
|
|
$
|
39,439
|
|
The following table presents the classes of the PCI loan portfolio summarized by aging categories of performing loans and non-accrual loans as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Current
|
|
30-59 Days Past Due
|
|
60-89 Days Past Due
|
|
90+ Days Past Due
|
|
Total Past Due
|
|
Total Loans
|
|
|
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
15,907
|
|
|
$
|
296
|
|
|
$
|
111
|
|
|
$
|
1,276
|
|
|
$
|
1,683
|
|
|
$
|
17,590
|
|
|
|
|
|
Commercial real estate
|
|
1,197
|
|
|
—
|
|
|
23
|
|
|
2
|
|
|
25
|
|
|
1,222
|
|
|
|
|
|
Acquisition and development
|
|
784
|
|
|
238
|
|
|
—
|
|
|
—
|
|
|
238
|
|
|
1,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
17,888
|
|
|
534
|
|
|
134
|
|
|
1,278
|
|
|
1,946
|
|
|
19,834
|
|
|
|
|
|
Residential
|
|
11,806
|
|
|
204
|
|
|
493
|
|
|
1,803
|
|
|
2,500
|
|
|
14,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
1,278
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
|
1,284
|
|
|
|
|
|
Total Loans
|
|
$
|
30,972
|
|
|
$
|
738
|
|
|
$
|
627
|
|
|
$
|
3,087
|
|
|
$
|
4,452
|
|
|
$
|
35,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
16,264
|
|
|
$
|
71
|
|
|
$
|
65
|
|
|
$
|
1,204
|
|
|
$
|
1,340
|
|
|
$
|
17,604
|
|
|
|
|
|
Commercial real estate
|
|
1,157
|
|
|
—
|
|
|
—
|
|
|
112
|
|
|
112
|
|
|
1,269
|
|
|
|
|
|
Acquisition and development
|
|
2,135
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
19,556
|
|
|
71
|
|
|
65
|
|
|
1,316
|
|
|
1,452
|
|
|
21,008
|
|
|
|
|
|
Residential
|
|
13,714
|
|
|
710
|
|
|
145
|
|
|
2,374
|
|
|
3,229
|
|
|
16,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
1,245
|
|
|
3
|
|
|
1
|
|
|
239
|
|
|
243
|
|
|
1,488
|
|
|
|
|
|
Total Loans
|
|
$
|
34,515
|
|
|
$
|
784
|
|
|
$
|
211
|
|
|
$
|
3,929
|
|
|
$
|
4,924
|
|
|
$
|
39,439
|
|
|
|
|
|
None of the PCI loans are considered non-accrual as they are all currently accreting interest income under PCI accounting.
As the Company's PCI loan portfolio is accounted for in pools with similar risk characteristics in accordance with ASC 310-30,
this portfolio is not subject to the impaired loan and TDR guidance. Rather, the revised estimated future cash flows of the individually modified loans are included in the estimated future cash flows of the pool.
PPP Loans and CARES Act Deferrals
The Company is actively participating in the PPP as a lender, evaluating other programs available to assist its clients and providing deferrals consistent with GSE guidelines. The Company originated 634 PPP loans with outstanding balances of $88.5 million through our internal commercial team and originated PPP loans totaling $102.1 million through our partnership with a Fintech company as of March 31, 2021.
As of March 31, 2021, commercial loans totaling $34.7 million and mortgage loans totaling $9.0 million were approved for modifications, such as interest-only payments and payment deferrals. These modifications were not considered to be troubled debt restructurings in reliance on guidance issued by banking regulators titled the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus.”
Note 4 – Premises and Equipment
The following table presents the components of premises and equipment as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
Land
|
|
$
|
3,936
|
|
|
$
|
3,936
|
|
Buildings and improvements
|
|
14,350
|
|
|
14,350
|
|
Furniture, fixtures and equipment
|
|
17,705
|
|
|
17,451
|
|
Software
|
|
3,191
|
|
|
1,548
|
|
Construction in progress
|
|
53
|
|
|
28
|
|
Leasehold improvements
|
|
3,079
|
|
|
3,079
|
|
|
|
42,314
|
|
|
40,392
|
|
Accumulated depreciation
|
|
(15,024)
|
|
|
(14,189)
|
|
Net premises and equipment
|
|
$
|
27,290
|
|
|
$
|
26,203
|
|
The Company leases certain premises and equipment under operating and finance leases. At March 31, 2021, the Company had lease liabilities totaling $18.2 million, of which $18.1 million was related to operating leases and $0.1 million was related to finance leases, and right-of-use assets totaling $17.5 million, of which $17.3 million was related to operating leases and $0.2 million was related to finance leases, related to these leases. Lease liabilities and right-of-use assets are reflected in other liabilities and other assets, respectively. At March 31, 2021, the weighted-average remaining lease term for finance leases was 2.1 years and the weighted-average discount rate used in the measurement of finance lease liabilities was 2.3%. At March 31, 2021, the weighted-average remaining lease term for operating leases was 12.7 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 2.9%.
At December 31, 2020, the Company had lease liabilities totaling $18.4 million, of which $18.3 million was related to operating leases and $0.2 million was related to finance leases, and right-of-use assets totaling $17.7 million, of which $17.5 million was related to operating leases and $0.2 million was related to finance leases, related to these leases. Lease liabilities and right-of-use assets are reflected in other liabilities and other assets, respectively. For the year ended December 31, 2020, the weighted-average remaining lease term for finance leases was 2.3 years and the weighted-average discount rate used in the measurement of finance lease liabilities was 2.4%. At December 31, 2020, the weighted-average remaining lease term for operating leases was 12.9 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 2.9%.
The following table presents lease costs for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(Dollars in thousands)
|
|
|
|
2021
|
|
|
|
2020
|
Amortization of right-of-use assets, finance leases
|
|
|
|
$
|
14
|
|
|
|
|
$
|
18
|
|
Interest on lease liabilities, finance leases
|
|
|
|
1
|
|
|
|
1
|
Operating lease cost
|
|
|
|
477
|
|
|
|
544
|
Short-term lease cost
|
|
|
|
1
|
|
|
|
|
14
|
Variable lease cost
|
|
|
|
10
|
|
|
|
10
|
Total lease cost
|
|
|
|
$
|
503
|
|
|
|
|
$
|
587
|
|
The following table presents future minimum payments for finance leases and operating leases with initial or remaining terms of one year or more as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Finance Leases
|
|
Operating Leases
|
2021
|
|
$
|
44
|
|
|
$
|
1,285
|
|
2022
|
|
41
|
|
|
1,825
|
|
2023
|
|
5
|
|
|
1,779
|
|
2024
|
|
5
|
|
|
1,709
|
|
2025
|
|
4
|
|
|
1,708
|
|
2026 and thereafter
|
|
—
|
|
|
13,863
|
|
Total future minimum lease payments
|
|
$
|
99
|
|
|
$
|
22,169
|
|
Less: Amounts representing interest
|
|
(2)
|
|
|
(4,045)
|
|
Present value of net future minimum lease payments
|
|
$
|
97
|
|
|
$
|
18,124
|
|
Note 5 – Equity Method Investment
In the third quarter of 2020, the Company acquired a portion of ICM and recognizes its ownership as an equity method investment initially recorded at fair value and subsequently adjusted for the Company's share of ICM's earnings. In accordance with Rule 8-03(b)(3) of Regulation S-X, the Company must assess whether its equity method investment is a significant equity method investment. In evaluating the significance of this investment, the Company performed the income, asset and investment tests described in S-X 3-05 and S-X 1-02(w). Rule 8-03(b)(3) of Regulation S-X requires summarized financial information in a quarterly report if any of the three tests exceeds 20%. Under the income test, the Company’s proportionate share of its equity method investee's aggregated net income exceeded the applicable threshold of 20%, and accordingly it is required to provide summarized income statement information for this investee for all periods presented. The Company's share of net income from its equity method investment totaled $6.5 million for the three months ended March 31, 2021.
The following table presents summarized income statement information for the Company's equity method investment for the period indicated. As ICM did not exist prior to July 1, 2020, no historical financial information is presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
(Dollars in thousands)
|
|
2021
|
|
|
|
|
|
|
Total revenues
|
|
$
|
50,797
|
|
|
|
|
|
|
|
Net income
|
|
$
|
15,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of loans
|
|
$
|
47,594
|
|
|
|
|
|
|
|
Volume of loans sold
|
|
$
|
1,778,090
|
|
|
|
|
|
|
|
As of March 31, 2021 and December 31, 2021, the locked mortgage pipeline was $1.43 billion and $1.54 billion, respectively.
Note 6 – Deposits
The following table presents the components of deposits as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
Noninterest-bearing demand
|
|
$
|
837,221
|
|
|
$
|
715,791
|
|
Interest-bearing demand
|
|
698,218
|
|
|
496,502
|
|
Savings and money markets
|
|
520,998
|
|
|
545,501
|
|
Time deposits, including CDs and IRAs
|
|
160,116
|
|
|
224,595
|
|
Total deposits
|
|
$
|
2,216,553
|
|
|
$
|
1,982,389
|
|
|
|
|
|
|
Time deposits that meet or exceed the FDIC insurance limit
|
|
$
|
14,829
|
|
|
$
|
16,955
|
|
The following table presents the maturities of time deposits as of the period indicated:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
March 31, 2021
|
2021
|
|
$
|
56,037
|
|
2022
|
|
66,154
|
|
2023
|
|
22,254
|
|
2024
|
|
12,479
|
|
2025
|
|
3,192
|
|
Total
|
|
$
|
160,116
|
|
As of March 31, 2021, overdrawn deposit accounts totaling $0.01 million were reclassified as loan balances.
Note 7 – Borrowed Funds
The Bank is a member of the FHLB of Pittsburgh, Pennsylvania. As of March 31, 2021, the Bank's maximum borrowing capacity with the FHLB was $451.7 million and the remaining borrowing capacity was $440.4 million, with the difference being deposit letters of credit.
The Bank also maintains borrowing capacity with the Federal Reserve Bank under the discount window program and with the Federal Reserve Board under the Federal Reserve's Paycheck Protection Program Liquidity Facility (“PPPLF”) program in the amount of the outstanding pledged PPP loans. As of March 31, 2021 the Bank had borrowed $102.2 million under the PPPLF. As of December 31, 2020, no amounts were outstanding.
Short-term borrowings
The following table presents information related to short-term borrowings as of and for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Three Months Ended March 31, 2021
|
|
Year Ended December 31, 2020
|
Balance at end of period
|
|
$
|
102,185
|
|
|
$
|
—
|
|
Average balance during the period
|
|
46,349
|
|
|
68,407
|
|
Maximum month-end balance
|
|
102,185
|
|
|
154,248
|
|
Weighted-average rate during the period
|
|
0.35
|
%
|
|
0.58
|
%
|
Weighted-average rate at end of period
|
|
0.28
|
%
|
|
—
|
%
|
Long-term borrowings
As of March 31, 2021 and December 31, 2020, the Bank had no long-term borrowings with the FHLB or the Federal Reserve.
Repurchase agreements
Along with traditional deposits, the Bank has access to securities sold under agreements to repurchase (“repurchase agreements”) with clients representing funds deposited by clients, on an overnight basis, that are collateralized by investment securities owned by the Company. Repurchase agreements with clients are included in borrowings section on the consolidated balance sheets. All
repurchase agreements are subject to terms and conditions of repurchase/security agreements between the Company and the client and are accounted for as secured borrowings. The Company’s repurchase agreements reflected in liabilities consist of client accounts and securities which are pledged on an individual security basis.
The Company monitors the fair value of the underlying securities on a monthly basis. Repurchase agreements are reflected at the amount of cash received in connection with the transaction. The primary risk with the Company’s repurchase agreements is market risk associated with the investments securing the transactions, as we may be required to provide additional collateral based on fair value changes of the underlying investments. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents.
All of the Company’s repurchase agreements were overnight agreements at March 31, 2021 and December 31, 2020. These borrowings were collateralized with investment securities with a carrying value of $11.0 million and $10.7 million at March 31, 2021 and December 31, 2020, respectively, and were comprised of United States government agency securities and United States sponsored mortgage-backed securities. Declines in the value of the collateral would require the Company to increase the amounts of securities pledged.
The following table presents information related to repurchase agreements as of and for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Three Months Ended March 31, 2021
|
|
Year Ended December 31, 2020
|
Balance at end of period
|
|
$
|
10,613
|
|
|
$
|
10,266
|
|
Average balance during the period
|
|
10,249
|
|
|
9,856
|
|
Maximum month-end balance
|
|
10,613
|
|
|
10,505
|
|
Weighted-average rate during the period
|
|
0.13
|
%
|
|
0.23
|
%
|
Weighted-average rate at end of period
|
|
0.13
|
%
|
|
0.14
|
%
|
Subordinated Debt
The following table presents information related to subordinated debt as of and for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Three Months Ended March 31, 2021
|
|
Year Ended December 31, 2020
|
Balance at end of period
|
|
$
|
43,443
|
|
|
$
|
43,407
|
|
Average balance during the period
|
|
43,425
|
|
|
7,568
|
|
Maximum month-end balance
|
|
43,443
|
|
|
43,524
|
|
Weighted-average rate during the period
|
|
4.29
|
%
|
|
3.45
|
%
|
Weighted-average rate at end of period
|
|
4.02
|
%
|
|
4.02
|
%
|
In November 2020, the Company completed the private placement of $40 million fixed-to-floating rate subordinated notes to certain qualified institutional investors. These notes are unsecured and have a ten-year term, maturing December 1, 2030 and will bear interest at a fixed rate of 4.25%, payable semi-annually in arrears, for the first five years of the term. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR, plus 401 basis points, payable quarterly in arrears. These notes have been structured to qualify as Tier 2 capital for regulatory capital purposes.
In March 2007, the Company completed the private placement of $4 million Floating Rate, Trust Preferred Securities through its MVB Financial Statutory Trust I subsidiary (the “Trust”). The Company established the Trust for the sole purpose of issuing the Trust Preferred Securities pursuant to an Amended and Restated Declaration of Trust. The proceeds from the sale of the Trust Preferred Securities will be loaned to the Company under subordinated Debentures (the “Debentures”) issued to the Trust pursuant to an Indenture. The Debentures are the only asset of the Trust. The Trust Preferred Securities have been issued to a pooling vehicle that will use the distributions on the Trust Preferred Securities to securitize note obligations. The securities issued by the Trust are includable for regulatory purposes as a component of the Company’s Tier 1 capital. The Trust Preferred Securities and the Debentures mature in 2037 and have been redeemable by the Company since 2012. Interest payments are due in March, June, September and December and are adjusted at the interest due dates at a rate of 1.6% over the three-month LIBOR Rate. The obligations of the Company with respect to the issuance of the trust preferred securities constitute a full and unconditional guarantee by the Company of the Trust’s obligations with respect to the trust preferred securities to the extent set forth in the related guarantees.
All borrowings and subordinated debt mature after 2025.
Note 8 – Pension and Supplemental Executive Retirement Plans
The Company participates in a trusteed pension plan known as the Allegheny Group Retirement Plan covering virtually all full-time employees. Benefits are based on years of service and the employee’s compensation. Accruals under the Plan were frozen as of May 31, 2014. Freezing the plan resulted in a re-measurement of the pension obligations and plan assets as of the freeze date. The pension obligation was re-measured using the discount rate based on the Citigroup Above Median Pension Discount Curve in effect on May 31, 2014 of 4.5%.
On June 19, 2017, the Company and MVB Mortgage approved a Supplemental Executive Retirement Plan (“SERP”), pursuant to which the Chief Executive Officer of MVB Mortgage is entitled to receive certain supplemental nonqualified retirement benefits. The SERP took effect on December 31, 2017. As the executive completed three years of continuous employment with MVB Mortgage prior to retirement date (which shall be no earlier than the date he attains age 55) he will, upon retirement, be entitled to receive $1.8 million payable in 180 equal consecutive monthly installments of $10 thousand. The liability is calculated by discounting the anticipated future cash flows at 4.0%. The liability accrued for this obligation was $1.2 million as of both March 31, 2021 and December 31, 2020. Service cost was $0.01 million and $0.1 million for each of the three months ended March 31, 2021 and 2020.
The following table presents information pertaining to the activity in the Company’s defined benefit plan, using the latest available actuarial valuations with a measurement date of March 31, 2021 and 2020 for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(Dollars in thousands)
|
|
|
|
|
|
2021
|
|
2020
|
Service cost
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
|
|
|
|
78
|
|
|
91
|
|
Expected return on plan assets
|
|
|
|
|
|
(118)
|
|
|
(109)
|
|
Amortization of net actuarial loss
|
|
|
|
|
|
127
|
|
|
105
|
|
Amortization of prior service cost
|
|
|
|
|
|
—
|
|
|
—
|
|
Net periodic benefit cost
|
|
|
|
|
|
$
|
87
|
|
|
$
|
87
|
|
Contributions paid
|
|
|
|
|
|
$
|
3,835
|
|
|
$
|
349
|
|
Note 9 – Stock Offerings
In December 2020, the Company issued a notice of redemption to redeem all of the Company’s outstanding shares of Convertible Noncumulative Perpetual Preferred Stock, Series B, par value $1.00 per share, with a liquidation preference of $1,000 per share (the “Series B Preferred Stock”) and all of the Company’s outstanding shares of Convertible Noncumulative Perpetual Preferred Stock, Series C, par value $1.00 per share, with a liquidation preference of $1,000 per share (the “Series C Preferred Stock, together with the Series B Preferred Stock, referred to herein as the “Preferred Stock”), at a redemption price per share equal to $10,000, plus declared and unpaid dividends of $46.03 per share of Series B Preferred Stock, and $49.86 per share of Series C Preferred Stock, for the period from and including December 31, 2020, to but excluding January 28, 2021 (the “Preferred Stock Redemption”). The Preferred Stock Redemption is in accordance with the terms of the Company’s Articles of Incorporation, as amended. All outstanding shares of the Company's preferred stock were redeemed in January 2021.
Note 10 – Fair Value of Financial Instruments
The following table presents the carrying values and estimated fair values of the Company’s financial instruments are summarized as follows as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets (Level I)
|
|
Significant Other Observable Inputs (Level II)
|
|
Significant Unobservable Inputs (Level III)
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
339,616
|
|
|
$
|
339,616
|
|
|
$
|
339,616
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit with banks
|
|
11,803
|
|
|
11,986
|
|
|
—
|
|
|
11,986
|
|
|
—
|
|
Securities available-for-sale
|
|
423,122
|
|
|
423,122
|
|
|
—
|
|
|
382,850
|
|
|
40,272
|
|
Equity securities
|
|
28,200
|
|
|
28,200
|
|
|
543
|
|
|
—
|
|
|
27,657
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
1,668,171
|
|
|
1,675,631
|
|
|
—
|
|
|
—
|
|
|
1,675,631
|
|
Mortgage servicing rights
|
|
2,886
|
|
|
2,886
|
|
|
—
|
|
|
—
|
|
|
2,886
|
|
Interest rate swap
|
|
8,367
|
|
|
8,367
|
|
|
—
|
|
|
8,367
|
|
|
—
|
|
Fair value hedge
|
|
1,750
|
|
|
1,750
|
|
|
—
|
|
|
1,750
|
|
|
—
|
|
Accrued interest receivable
|
|
8,513
|
|
|
8,513
|
|
|
—
|
|
|
2,819
|
|
|
5,694
|
|
Bank-owned life insurance
|
|
41,512
|
|
|
41,512
|
|
|
—
|
|
|
41,512
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
2,216,553
|
|
|
$
|
2,196,951
|
|
|
$
|
—
|
|
|
$
|
2,196,951
|
|
|
$
|
—
|
|
Repurchase agreements
|
|
10,613
|
|
|
10,613
|
|
|
—
|
|
|
10,613
|
|
|
—
|
|
FHLB and other borrowings
|
|
102,185
|
|
|
102,185
|
|
|
—
|
|
|
102,185
|
|
|
—
|
|
Interest rate swap
|
|
8,367
|
|
|
8,367
|
|
|
—
|
|
|
8,367
|
|
|
—
|
|
Fair value hedge
|
|
1,427
|
|
|
1,427
|
|
|
—
|
|
|
1,427
|
|
|
—
|
|
Accrued interest payable
|
|
869
|
|
|
869
|
|
|
—
|
|
|
869
|
|
|
—
|
|
Subordinated debt
|
|
43,443
|
|
|
45,798
|
|
|
—
|
|
|
45,798
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
263,893
|
|
|
$
|
263,893
|
|
|
$
|
263,893
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposits with banks
|
|
11,803
|
|
|
11,986
|
|
|
—
|
|
|
11,986
|
|
|
—
|
|
Securities available-for-sale
|
|
410,624
|
|
|
410,624
|
|
|
—
|
|
|
366,945
|
|
|
43,679
|
|
Equity securities
|
|
27,585
|
|
|
27,585
|
|
|
472
|
|
|
—
|
|
|
27,113
|
|
Loans held-for-sale
|
|
1,062
|
|
|
1,062
|
|
|
—
|
|
|
1,062
|
|
|
—
|
|
Loans receivable, net
|
|
1,427,900
|
|
|
1,434,275
|
|
|
—
|
|
|
—
|
|
|
1,434,275
|
|
Mortgage servicing rights
|
|
2,942
|
|
|
2,942
|
|
|
—
|
|
|
—
|
|
|
2,942
|
|
Interest rate swap
|
|
13,822
|
|
|
13,822
|
|
|
—
|
|
|
13,822
|
|
|
—
|
|
Fair value hedge
|
|
2,215
|
|
|
2,215
|
|
|
—
|
|
|
2,215
|
|
|
|
Accrued interest receivable
|
|
7,793
|
|
|
7,793
|
|
|
—
|
|
|
2,770
|
|
|
5,023
|
|
Bank-owned life insurance
|
|
41,262
|
|
|
41,262
|
|
|
—
|
|
|
41,262
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,982,389
|
|
|
$
|
1,964,860
|
|
|
$
|
—
|
|
|
$
|
1,964,860
|
|
|
$
|
—
|
|
Repurchase agreements
|
|
10,266
|
|
|
10,266
|
|
|
—
|
|
|
10,266
|
|
|
—
|
|
Interest rate swap
|
|
13,822
|
|
|
13,822
|
|
|
—
|
|
|
13,822
|
|
|
—
|
|
Fair value hedge
|
|
2,141
|
|
|
2,141
|
|
|
—
|
|
|
2,141
|
|
|
—
|
|
Accrued interest payable
|
|
572
|
|
|
572
|
|
|
—
|
|
|
572
|
|
|
—
|
|
Subordinated debt
|
|
43,407
|
|
|
45,536
|
|
|
—
|
|
|
45,536
|
|
|
—
|
|
Note 11 – Fair Value Measurements
Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions,
risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.
The methods of determining the fair value of assets and liabilities presented in this footnote are consistent with our methodologies disclosed in Note 1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of the Company’s 2020 Annual Report on Form 10-K.
Assets Measured on a Recurring Basis
As required by accounting standards, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company classified investments in government securities as Level II instruments and valued them using the market approach. The following measurements are made on a recurring basis.
Available-for-sale investment securities – Available-for-sale investment securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level I securities include those traded on an active exchange, such as the New York Stock Exchange, United States Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level II securities include mortgage-backed securities issued by government sponsored entities and private label entities, municipal bonds and corporate debt securities. There have been no changes in valuation techniques for the three months ended March 31, 2021. Valuation techniques are consistent with techniques used in prior periods. Certain local municipal securities related to tax increment financing (“TIF”) are independently valued and classified as Level III instruments. The Company classified investments in government securities as Level II instruments and valued them using the market approach.
Equity securities – Certain equity securities are recorded at fair value on both a recurring and nonrecurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. The valuation methodologies utilized may include significant unobservable inputs. There have been no changes in valuation techniques for the three months ended March 31, 2021. Valuation techniques are consistent with techniques used in prior periods.
Loans held-for-sale – The fair value of mortgage loans held-for-sale is determined, when possible, using quoted secondary-market prices or investor commitments. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan, which would be used by other market participants.
Interest rate swap – Interest rate swaps are recorded at fair value based on third party vendors who compile prices from various sources and may determine fair value of identical or similar instruments by using pricing models that consider observable market data.
Fair value hedge – Treated like an interest rate swap, fair value hedges are recorded at fair value based on third party vendors who compile prices from various sources and may determine fair value of identical or similar instruments by using pricing models that consider observable market data.
The following tables present assets and liabilities reported on the consolidated statements of financial condition at their fair value on a recurring basis as of the periods indicated by level within the fair value hierarchy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(Dollars in thousands)
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
United States government agency securities
|
|
$
|
—
|
|
|
$
|
48,104
|
|
|
$
|
—
|
|
|
$
|
48,104
|
|
United States sponsored mortgage-backed securities
|
|
—
|
|
|
89,207
|
|
|
—
|
|
|
89,207
|
|
United States treasury securities
|
|
56,970
|
|
|
—
|
|
|
—
|
|
|
56,970
|
|
Municipal securities
|
|
—
|
|
|
169,462
|
|
|
40,272
|
|
|
209,734
|
|
|
|
|
|
|
|
|
|
|
Other securities
|
|
—
|
|
|
11,607
|
|
|
—
|
|
|
11,607
|
|
Equity securities
|
|
543
|
|
|
—
|
|
|
—
|
|
|
543
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
—
|
|
|
8,367
|
|
|
—
|
|
|
8,367
|
|
Fair value hedge
|
|
—
|
|
|
1,750
|
|
|
—
|
|
|
1,750
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
—
|
|
|
8,367
|
|
|
—
|
|
|
8,367
|
|
Fair value hedge
|
|
—
|
|
|
1,427
|
|
|
—
|
|
|
1,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
(Dollars in thousands)
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
United States government agency securities
|
|
$
|
—
|
|
|
$
|
56,992
|
|
|
$
|
—
|
|
|
$
|
56,992
|
|
United States sponsored mortgage-backed securities
|
|
—
|
|
|
95,769
|
|
|
—
|
|
|
95,769
|
|
Municipal securities
|
|
—
|
|
|
188,208
|
|
|
43,679
|
|
|
231,887
|
|
|
|
|
|
|
|
|
|
|
Other securities
|
|
—
|
|
|
18,476
|
|
|
—
|
|
|
18,476
|
|
Equity securities
|
|
472
|
|
|
—
|
|
|
—
|
|
|
472
|
|
Loans held-for-sale
|
|
—
|
|
|
1,062
|
|
|
—
|
|
|
1,062
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
—
|
|
|
13,822
|
|
|
—
|
|
|
13,822
|
|
Fair value hedge
|
|
—
|
|
|
2,215
|
|
|
—
|
|
|
2,215
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
—
|
|
|
13,822
|
|
|
—
|
|
|
13,822
|
|
Fair value hedge
|
|
—
|
|
|
2,141
|
|
|
—
|
|
|
2,141
|
|
|
|
|
|
|
|
|
|
|
The following table represents recurring level III assets as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Interest Rate Lock Commitments
|
|
Municipal Securities
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
$
|
—
|
|
|
$
|
43,679
|
|
|
|
|
$
|
43,679
|
|
Realized and unrealized gains included in earnings
|
|
—
|
|
|
19
|
|
|
|
|
19
|
|
Purchase of securities
|
|
—
|
|
|
1,191
|
|
|
|
|
1,191
|
|
Maturities/calls
|
|
—
|
|
|
(3,933)
|
|
|
|
|
(3,933)
|
|
Unrealized gain included in other comprehensive income (loss)
|
|
—
|
|
|
1,127
|
|
|
|
|
1,127
|
|
Unrealized loss included in other comprehensive income (loss)
|
|
$
|
—
|
|
|
$
|
(1,811)
|
|
|
|
|
$
|
(1,811)
|
|
Balance at March 31, 2021
|
|
$
|
—
|
|
|
$
|
40,272
|
|
|
|
|
$
|
40,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
$
|
1,660
|
|
|
$
|
37,259
|
|
|
|
|
$
|
38,919
|
|
Realized and unrealized losses included in earnings
|
|
4,131
|
|
|
—
|
|
|
|
|
4,131
|
|
Purchase of securities
|
|
—
|
|
|
522
|
|
|
|
|
522
|
|
Unrealized gain included in other comprehensive income (loss)
|
|
—
|
|
|
(1,155)
|
|
|
|
|
(1,155)
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020
|
|
$
|
5,791
|
|
|
$
|
36,626
|
|
|
|
|
$
|
42,417
|
|
Assets Measured on a Nonrecurring Basis
The Company may be required, from time to time, to measure certain financial assets, financial liabilities, non-financial assets and non-financial liabilities at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. Certain non-financial assets measured at fair value on a nonrecurring basis include foreclosed assets (upon initial recognition or subsequent impairment), non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test and intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment. Non-financial assets measured at fair value on a nonrecurring basis during 2021 and 2020 include certain foreclosed assets which, upon initial recognition, were remeasured and reported at fair value through a charge-off to the allowance for possible loan losses and certain foreclosed assets which, subsequent to their initial recognition, were remeasured at fair value through a write-down included in other noninterest expense.
Impaired loans – Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including collateral value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Collateral values are estimated using Level II inputs based on observable market data or Level III inputs based on customized discounting criteria. For a majority of impaired real estate related loans, the Company obtains a current external appraisal. Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information.
Other real estate owned – Other real estate owned, which is obtained through the Bank’s foreclosure process is valued utilizing the appraised collateral value. Collateral values are estimated using Level II inputs based on observable market data or Level III inputs based on customized discounting criteria. At the time, the foreclosure is completed, the Company obtains a current external appraisal.
Other debt securities – Certain debt securities are recorded at fair value on a nonrecurring basis. These other debt securities, which include preferred member interest in an equity method investment, are securities without a readily determinable fair value and are measured at cost minus impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions, as defined, for identical or similar investments of the same issuer.
Equity securities – Certain equity securities are recorded at fair value on a nonrecurring basis. Equity securities without a readily determinable fair value are measured at cost minus impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions, as defined, for identical or similar investments of the same issuer.
The following table presents the fair value of these assets as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(Dollars in thousands)
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
Impaired loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,103
|
|
|
$
|
12,103
|
|
Other real estate owned
|
|
—
|
|
|
—
|
|
|
5,183
|
|
|
5,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
(Dollars in thousands)
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
Impaired loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,098
|
|
|
$
|
14,098
|
|
Other real estate owned
|
|
—
|
|
|
—
|
|
|
5,730
|
|
|
5,730
|
|
Other debt securities
|
|
—
|
|
|
—
|
|
|
7,500
|
|
|
7,500
|
|
Equity securities
|
|
—
|
|
|
—
|
|
|
27,113
|
|
|
27,113
|
|
There were no changes to the fair value of other debt securities or equity securities measured on a non-recurring basis as of March 31, 2021.
The following tables present quantitative information about the Level III significant unobservable inputs for assets and liabilities measured at fair value as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantitative Information about Level III Fair Value Measurements
|
(Dollars in thousands)
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range
|
March 31, 2021
|
|
|
|
|
|
|
|
|
Nonrecurring measurements:
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
12,103
|
|
|
Appraisal of collateral 1
|
|
Appraisal adjustments 2
|
|
20% - 62%
|
|
|
|
|
|
|
Liquidation expense 2
|
|
5% - 10%
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
5,183
|
|
|
Appraisal of collateral 1
|
|
Appraisal adjustments 2
|
|
20% - 30%
|
|
|
|
|
|
|
Liquidation expense 2
|
|
5% - 10%
|
|
|
|
|
|
|
|
|
|
Other debt securities
|
|
$
|
7,500
|
|
|
Net asset value
|
|
Cost minus impairment
|
|
—%
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
27,657
|
|
|
Net asset value
|
|
Cost minus impairment
|
|
—%
|
|
|
|
|
|
|
|
|
|
Recurring measurements:
|
|
|
|
|
|
|
|
|
Municipal securities 5
|
|
$
|
40,272
|
|
|
Appraisal of bond 3
|
|
Bond appraisal adjustment 4
|
|
5% - 15%
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
Nonrecurring measurements:
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
14,098
|
|
|
Appraisal of collateral 1
|
|
Appraisal adjustments 2
|
|
20% - 62%
|
|
|
|
|
|
|
Liquidation expense 2
|
|
5% - 10%
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
5,730
|
|
|
Appraisal of collateral 1
|
|
Appraisal adjustments 2
|
|
20% - 30%
|
|
|
|
|
|
|
Liquidation expense 2
|
|
5% - 10%
|
|
|
|
|
|
|
|
|
|
Other debt securities
|
|
$
|
7,500
|
|
|
Net asset value
|
|
Cost minus impairment
|
|
—%
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
27,113
|
|
|
Net asset value
|
|
Cost minus impairment
|
|
—%
|
|
|
|
|
|
|
|
|
|
Recurring measurements:
|
|
|
|
|
|
|
|
|
Municipal securities 5
|
|
$
|
43,679
|
|
|
Appraisal of bond 3
|
|
Bond appraisal adjustment 4
|
|
5% - 15%
|
1 Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level III inputs which are not identifiable.
2 Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.
3 Fair value determined through independent analysis of liquidity, rating, yield and duration.
4 Appraisals may be adjusted for qualitative factors such as local economic conditions.
5 Municipal securities classified as Level III instruments are comprised of TIF bonds related to certain local municipal securities.
Note 12 – Earnings per Share
The Company determines basic earnings per share (“EPS”) by dividing net income less preferred stock dividends by the weighted-average number of common shares outstanding during the period. Diluted EPS is determined by dividing net income less dividends on convertible preferred stock plus interest on convertible subordinated debt by the weighted-average number of shares outstanding, increased by both the number of shares that would be issued assuming the exercise of stock options under the Company’s 2003 and 2013 Stock Incentive Plans and the conversion of preferred stock and subordinated debt, if dilutive.
The following table presents the Company's calculation of EPS for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(Dollars in thousands except shares and per share data)
|
|
|
|
|
|
2021
|
|
2020
|
Numerator for basic earnings per share:
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
$
|
8,085
|
|
|
$
|
1,048
|
|
Less: Dividends on preferred stock
|
|
|
|
|
|
35
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders - basic
|
|
|
|
|
|
$
|
8,050
|
|
|
$
|
934
|
|
|
|
|
|
|
|
|
|
|
Numerator for diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders - diluted
|
|
|
|
|
|
$
|
8,050
|
|
|
$
|
934
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Total weighted-average shares outstanding
|
|
|
|
|
|
11,530,279
|
|
|
11,942,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive stock options and restricted stock units
|
|
|
|
|
|
756,452
|
|
|
355,325
|
|
Total diluted weighted-average shares outstanding
|
|
|
|
|
|
12,286,731
|
|
|
12,298,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic
|
|
|
|
|
|
$
|
0.70
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - diluted
|
|
|
|
|
|
$
|
0.66
|
|
|
$
|
0.08
|
|
For the three months ended March 31, 2021 and 2020, approximately 12 thousand and 366 thousand, respectively, options to purchase shares of common stock were not included in the computation of diluted EPS because the effect would be antidilutive.
Note 13 – Comprehensive Income
The following tables present the components of accumulated other comprehensive income (“AOCI”) as of and for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
Details about AOCI components
|
|
|
|
|
|
Amount reclassified from AOCI
|
|
Amount reclassified from AOCI
|
|
Affected income statement line item
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains
|
|
|
|
|
|
$
|
1,143
|
|
|
$
|
276
|
|
|
Gain (loss) on sale of available-for-sale securities
|
|
|
|
|
|
|
1,143
|
|
|
276
|
|
|
Total before tax
|
|
|
|
|
|
|
(268)
|
|
|
(75)
|
|
|
Income tax expense
|
|
|
|
|
|
|
875
|
|
|
201
|
|
|
Net of tax
|
Defined benefit pension plan items
|
|
|
|
|
|
|
|
|
|
|
Amortization of net actuarial loss
|
|
|
|
|
|
(127)
|
|
|
(105)
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
(127)
|
|
|
(105)
|
|
|
Total before tax
|
|
|
|
|
|
|
30
|
|
|
28
|
|
|
Income tax expense
|
|
|
|
|
|
|
(97)
|
|
|
(77)
|
|
|
Net of tax
|
Investment hedge
|
|
|
|
|
|
|
|
|
|
|
Carrying value adjustment
|
|
|
|
|
|
(264)
|
|
|
1,793
|
|
|
Interest on investment securities
|
|
|
|
|
|
|
(264)
|
|
|
1,793
|
|
|
Total before tax
|
|
|
|
|
|
|
62
|
|
|
(484)
|
|
|
Income tax expense
|
|
|
|
|
|
|
(202)
|
|
|
1,309
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications
|
|
|
|
|
|
$
|
576
|
|
|
$
|
1,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Unrealized gains (losses) on available for-sale securities
|
|
Defined benefit pension plan items
|
|
Investment hedge
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2021
|
|
$
|
7,586
|
|
|
$
|
(5,047)
|
|
|
$
|
(313)
|
|
|
$
|
2,226
|
|
Other comprehensive income (loss) before reclassification
|
|
(4,848)
|
|
|
1,306
|
|
|
—
|
|
|
(3,542)
|
|
Amounts reclassified from AOCI
|
|
(875)
|
|
|
97
|
|
|
202
|
|
|
(576)
|
|
Net current period OCI
|
|
(5,723)
|
|
|
1,403
|
|
|
202
|
|
|
(4,118)
|
|
Balance at March 31, 2021
|
|
$
|
1,863
|
|
|
$
|
(3,644)
|
|
|
$
|
(111)
|
|
|
$
|
(1,892)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2020
|
|
$
|
2,942
|
|
|
$
|
(4,295)
|
|
|
$
|
32
|
|
|
$
|
(1,321)
|
|
Other comprehensive income (loss) before reclassification
|
|
1,032
|
|
|
(516)
|
|
|
—
|
|
|
516
|
|
Amounts reclassified from AOCI
|
|
(201)
|
|
|
77
|
|
|
(1,309)
|
|
|
(1,433)
|
|
Net current period OCI
|
|
831
|
|
|
(439)
|
|
|
(1,309)
|
|
|
(917)
|
|
Balance at March 31, 2020
|
|
$
|
3,773
|
|
|
$
|
(4,734)
|
|
|
$
|
(1,277)
|
|
|
$
|
(2,238)
|
|
Note 14 – Segment Reporting
The Company has identified three reportable segments: CoRe banking; mortgage banking; and financial holding company. Revenue from CoRe banking activities consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. The Fintech division, Chartwell and Paladin Fraud reside in the CoRe banking segment. Revenue from the mortgage banking activities is comprised of interest earned on loans and fees received as a result of the mortgage loan origination process. Prior to July 1, 2020, the mortgage banking services were conducted by PMG. In July 2020, the Company announced the completion of PMG’s combination with Intercoastal to form ICM. The Company has recognized its ownership as an equity method investment, initially recorded at fair value. Income related to this equity method investment is included in the Mortgage Banking segment. Revenue from financial holding company activities is mainly comprised of intercompany service income and dividends.
The following tables present information about the reportable segments and reconciliation to the consolidated financial statements for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
CoRe Banking
|
|
Mortgage Banking
|
|
Financial Holding Company
|
|
Intercompany Eliminations
|
|
Consolidated
|
(Dollars in thousands)
|
|
|
|
|
|
Interest income
|
|
$
|
18,959
|
|
|
$
|
104
|
|
|
$
|
1
|
|
|
$
|
(1)
|
|
|
$
|
19,063
|
|
Interest expense
|
|
1,092
|
|
|
—
|
|
|
466
|
|
|
—
|
|
|
1,558
|
|
Net interest income
|
|
17,867
|
|
|
104
|
|
|
(465)
|
|
|
(1)
|
|
|
17,505
|
|
Provision for loan losses
|
|
620
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
618
|
|
Net interest income after provision for loan losses
|
|
17,247
|
|
|
106
|
|
|
(465)
|
|
|
(1)
|
|
|
16,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
6,437
|
|
|
6,407
|
|
|
1,581
|
|
|
(1,967)
|
|
|
12,458
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expenses:
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
8,842
|
|
|
—
|
|
|
3,069
|
|
|
—
|
|
|
11,911
|
|
Other expense
|
|
8,029
|
|
|
63
|
|
|
1,083
|
|
|
(1,968)
|
|
|
7,207
|
|
Total noninterest expenses
|
|
16,871
|
|
|
63
|
|
|
4,152
|
|
|
(1,968)
|
|
|
19,118
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
6,813
|
|
|
6,450
|
|
|
(3,036)
|
|
|
—
|
|
|
10,227
|
|
Income tax expense (benefit)
|
|
1,149
|
|
|
1,564
|
|
|
(544)
|
|
|
—
|
|
|
2,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before noncontrolling interest
|
|
5,664
|
|
|
4,886
|
|
|
(2,492)
|
|
|
—
|
|
|
8,058
|
|
Net loss attributable to noncontrolling interest
|
|
27
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
Net income attributable to parent
|
|
$
|
5,691
|
|
|
$
|
4,886
|
|
|
$
|
(2,492)
|
|
|
$
|
—
|
|
|
$
|
8,085
|
|
Preferred stock dividends
|
|
—
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
35
|
|
Net income (loss) available to common shareholders
|
|
$
|
5,691
|
|
|
$
|
4,886
|
|
|
$
|
(2,527)
|
|
|
$
|
—
|
|
|
$
|
8,050
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for the three months ended March 31, 2021
|
|
$
|
1,936
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,936
|
|
Total assets as of March 31, 2021
|
|
2,669,092
|
|
|
57,205
|
|
|
280,152
|
|
|
(360,360)
|
|
|
2,646,089
|
|
Total assets as of December 31, 2020
|
|
2,343,556
|
|
|
58,140
|
|
|
284,943
|
|
|
(355,163)
|
|
|
2,331,476
|
|
Goodwill as of March 31, 2021
|
|
2,350
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,350
|
|
Goodwill as of December 31, 2020
|
|
2,350
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
CoRe Banking
|
|
Mortgage Banking
|
|
Financial Holding Company
|
|
Intercompany Eliminations
|
|
Consolidated
|
(Dollars in thousands)
|
|
|
|
|
|
Interest income
|
|
$
|
18,774
|
|
|
$
|
2,418
|
|
|
$
|
1
|
|
|
$
|
(494)
|
|
|
$
|
20,699
|
|
Interest expense
|
|
3,838
|
|
|
1,387
|
|
|
35
|
|
|
(732)
|
|
|
4,528
|
|
Net interest income
|
|
14,936
|
|
|
1,031
|
|
|
(34)
|
|
|
238
|
|
|
16,171
|
|
Provision for loan losses
|
|
1,132
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
1,138
|
|
Net interest income after provision for loan losses
|
|
13,804
|
|
|
1,025
|
|
|
(34)
|
|
|
238
|
|
|
15,033
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
Mortgage fee income
|
|
110
|
|
|
11,347
|
|
|
—
|
|
|
(238)
|
|
|
11,219
|
|
Other income
|
|
3,346
|
|
|
(3,562)
|
|
|
1,504
|
|
|
(1,657)
|
|
|
(369)
|
|
Total noninterest income
|
|
3,456
|
|
|
7,785
|
|
|
1,504
|
|
|
(1,895)
|
|
|
10,850
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense:
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
5,866
|
|
|
7,884
|
|
|
2,432
|
|
|
—
|
|
|
16,182
|
|
Other expense
|
|
6,659
|
|
|
2,397
|
|
|
1,075
|
|
|
(1,657)
|
|
|
8,474
|
|
Total noninterest expenses
|
|
12,525
|
|
|
10,281
|
|
|
3,507
|
|
|
(1,657)
|
|
|
24,656
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
4,735
|
|
|
(1,471)
|
|
|
(2,037)
|
|
|
—
|
|
|
1,227
|
|
Income tax expense (benefit)
|
|
1,012
|
|
|
(349)
|
|
|
(484)
|
|
|
—
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before noncontrolling interest
|
|
3,723
|
|
|
(1,122)
|
|
|
(1,553)
|
|
|
—
|
|
|
1,048
|
|
Preferred stock dividends
|
|
—
|
|
|
—
|
|
|
114
|
|
|
—
|
|
|
114
|
|
Net income (loss) available to common shareholders
|
|
$
|
3,723
|
|
|
$
|
(1,122)
|
|
|
$
|
(1,667)
|
|
|
$
|
—
|
|
|
$
|
934
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for the three months ended March 31, 2020
|
|
$
|
1,295
|
|
|
$
|
69
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
1,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 15 – Acquisition
Flexia Payments, LLC Acquisition
In February 2021, the Bank entered into an agreement to acquire an 80% interest in Flexia. The Bank invested approximately $2.5 million for the 80% interest. At the time of acquisition, Flexia had no assets or liabilities. Soon after the Bank's investment, Flexia purchased a license for technology which allows users to access a reloadable account that combines a debit card account and casino gaming accounts into one card, allowing them for non-cash transactions at participating casinos, for approximately $1 million for exclusive use in the United States and Canada. On the acquisition date, $0.5 million was recorded on the consolidated balance sheet for the 20% noncontrolling interest.
Note 16 – Subsequent Event
In April 2021, the Bank entered into a Stock Purchase Agreement with Trabian Technology, Inc. (“Trabian”), a leading software development firm servicing financial institutions. Per the agreement, the Bank acquired a majority interest in Trabian for 17,597 unregistered shares of MVB common stock and an undisclosed amount of cash.
In April 2021, the Bank entered into a Purchase and Assumption Agreement with Summit Community Bank, Inc. (“Summit”) pursuant to which Summit will purchase certain assets and assume certain liabilities of four branch locations in West Virginia. Per the agreement, Summit will assume approximately $193 million in deposits and will acquire approximately $57 million in loans, as well as cash, real property, personal property and other fixed assets. The purchase price will be calculated at closing and includes a 6% premium on the deposits assumed. The Bank expects to close the purchase early in the third quarter of 2021.