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Section 1: 10-Q (Q2 2018 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
or
¨  TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
 
Commission File Number: 000-50567
 
394416793_mvbfinanciallogoa25.jpg
 
MVB Financial Corp.
(Exact name of registrant as specified in its charter)
 
 
 
West Virginia
 
20-0034461
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
301 Virginia Avenue, Fairmont, WV
 
26554
(Address of principal executive offices)
 
(Zip Code)
 
(304) 363-4800
Registrant's telephone number, including area code
 
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

As of July 29, 2018, the Registrant had 11,337,625 shares of common stock outstanding with a par value of $1.00 per share.

Table of Contents

TABLE OF CONTENTS

 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2
Table of Contents

PART I – FINANCIAL INFORMATION
Item 1 – Financial Statements
MVB Financial Corp. and Subsidiaries
Consolidated Balance Sheets
(Unaudited) (Dollars in thousands except per share data)
 
 
June 30, 2018
 
December 31, 2017
 
 
(Unaudited)
 
(Note 1)
ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
     Cash and due from banks
 
$
20,316

 
$
16,345

     Interest bearing balances with banks
 
3,634

 
3,960

     Total cash and cash equivalents
 
23,950

 
20,305

Certificates of deposit with other banks
 
14,778

 
14,778

Investment Securities:
 
 
 
 
     Securities available-for-sale
 
222,085

 
231,507

     Equity securities
 
6,969

 
—

Loans held for sale
 
98,799

 
66,794

Loans:
 
1,215,072

 
1,105,941

     Less: Allowance for loan losses
 
(10,651
)
 
(9,878
)
     Net Loans
 
1,204,421

 
1,096,063

Premises and equipment
 
26,418

 
26,686

Bank owned life insurance
 
33,104

 
32,666

Accrued interest receivable and other assets
 
36,415

 
27,023

Goodwill
 
18,480

 
18,480

TOTAL ASSETS
 
$
1,685,419

 
$
1,534,302

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Deposits:
 
 
 
 
     Noninterest bearing
 
$
163,986

 
$
125,963

     Interest bearing
 
1,031,882

 
1,033,617

     Total deposits
 
1,195,868

 
1,159,580

 
 
 
 
 
Accrued interest payable and other liabilities
 
15,890

 
16,434

Repurchase agreements
 
20,240

 
22,403

FHLB and other borrowings
 
266,830

 
152,169

Subordinated debt
 
20,796

 
33,524

     Total liabilities
 
1,519,624

 
1,384,110

 
 
 
 
 
STOCKHOLDERS’ EQUITY
 
 
 
 
Preferred stock, par value $1,000; 20,000 authorized; 783 issued in 2018 and 2017, respectively (See Footnote 7)
 
7,834

 
7,834

Common stock, par value $1; 20,000,000 shares authorized; 11,388,702 shares issued and 11,337,625 shares outstanding in 2018 and 10,495,704 shares issued and 10,444,627 shares outstanding in 2017
 
11,389

 
10,496

Additional paid-in capital
 
112,321

 
98,698

Retained earnings
 
42,636

 
37,236

Accumulated other comprehensive loss
 
(7,301
)
 
(2,988
)
Treasury stock, 51,077 shares, at cost
 
(1,084
)
 
(1,084
)
     Total stockholders’ equity
 
165,795

 
150,192

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
1,685,419

 
$
1,534,302


See accompanying notes to unaudited consolidated financial statements.

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Table of Contents

MVB Financial Corp. and Subsidiaries
Consolidated Statements of Income
(Unaudited) (Dollars in thousands except per share data)
 
 
Six Months Ended June 30,
 
Three Months Ended June 30,
 
 
2018

2017
 
2018
 
2017
INTEREST INCOME
 
 
 
 
 
 
 
 
     Interest and fees on loans
 
$
28,413

 
$
24,420

 
$
15,122

 
$
12,538

     Interest on deposits with other banks
 
181

 
161

 
91

 
82

     Interest on investment securities - taxable
 
1,786

 
1,191

 
891

 
645

     Interest on tax exempt loans and securities
 
1,618

 
1,110

 
840

 
549

     Total interest income
 
31,998

 
26,882

 
16,944

 
13,814

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
     Interest on deposits
 
4,828

 
3,869

 
2,530

 
1,963

     Interest on repurchase agreements
 
39

 
36

 
20

 
19

     Interest on FHLB and other borrowings
 
1,911

 
668

 
1,197

 
380

     Interest on subordinated debt
 
1,100

 
1,109

 
542

 
558

     Total interest expense
 
7,878

 
5,682

 
4,289

 
2,920

 
 
 
 
 
 
 
 
 
NET INTEREST INCOME
 
24,120

 
21,200

 
12,655

 
10,894

     Provision for loan losses
 
1,079

 
1,041

 
605

 
523

     Net interest income after provision for loan losses
 
23,041

 
20,159

 
12,050

 
10,371

 
 
 
 
 
 
 
 
 
NONINTEREST INCOME
 
 
 
 
 
 
 
 
     Service charges on deposit accounts
 
466

 
352

 
281

 
165

     Income on bank owned life insurance
 
438

 
302

 
220

 
155

     Interchange and debit card transaction fees
 
292

 
613

 
142

 
318

     Mortgage fee income
 
15,626

 
18,586

 
9,063

 
8,952

     Gain on sale of portfolio loans
 
212

 
212

 
—

 
203

     Insurance and investment services income
 
341

 
248

 
177

 
124

     Gain on sale of securities, net
 
326

 
350

 
—

 
167

     Gain (loss) on derivatives, net
 
1,237

 
(910
)
 
653

 
1,037

     Commercial swap fee income
 
413

 
270

 
—

 
270

     Other operating income
 
483

 
368

 
259

 
176

     Total noninterest income
 
19,834

 
20,391

 
10,795

 
11,567

 
 
 
 
 
 
 
 
 
NONINTEREST EXPENSES
 
 
 
 
 
 
 
 
     Salary and employee benefits
 
22,967

 
21,760

 
12,494

 
11,798

     Occupancy expense
 
2,129

 
2,041

 
1,080

 
1,047

     Equipment depreciation and maintenance
 
1,605

 
1,431

 
821

 
742

     Data processing and communications
 
1,797

 
2,694

 
962

 
1,480

     Mortgage processing
 
1,884

 
1,637

 
992

 
743

     Marketing, contributions, and sponsorships
 
695

 
604

 
348

 
277

     Professional fees
 
1,533

 
1,413

 
788

 
736

     Printing, postage, and supplies
 
399

 
463

 
234

 
246

     Insurance, tax, and assessment expense
 
846

 
928

 
456

 
467

     Travel, entertainment, dues, and subscriptions
 
1,279

 
1,059

 
631

 
558

     Other operating expenses
 
854

 
790

 
443

 
409

     Total noninterest expense
 
35,988

 
34,820

 
19,249

 
18,503

Income before income taxes
 
6,887

 
5,730

 
3,596

 
3,435

Income tax expense
 
1,462

 
1,896

 
765

 
1,175

Net income
 
$
5,425

 
$
3,834

 
$
2,831

 
$
2,260

Preferred dividends
 
243

 
251

 
122

 
122

Net income available to common shareholders
 
$
5,182

 
$
3,583

 
$
2,709

 
$
2,138

 
 
 
 
 
 
 
 
 
Earnings per share - basic
 
$
0.49

 
$
0.35

 
$
0.25

 
$
0.21

Earnings per share - diluted
 
$
0.47

 
$
0.35

 
$
0.25

 
$
0.20

Cash dividends declared
 
$
0.050

 
$
0.050

 
$
0.025

 
$
0.025

Weighted average shares outstanding - basic
 
10,554,916

 
10,171,198

 
10,634,805

 
10,343,933

Weighted average shares outstanding - diluted
 
10,941,671

 
10,172,254

 
11,502,148

 
12,181,433


See accompanying notes to unaudited consolidated financial statements.

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Table of Contents

MVB Financial Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited) (Dollars in thousands)
 
 
Six Months Ended June 30,
 
Three Months Ended June 30,
 
 
2018

2017
 
2018
 
2017
Net Income
 
$
5,425

 
$
3,834

 
$
2,831

 
$
2,260

 
 
 
 
 
 
 
 
 
     Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Unrealized holding gains (losses) on securities available-for-sale
 
(5,336
)
 
2,997

 
(887
)
 
2,549

 
 
 
 
 
 
 
 
 
     Income tax effect
 
1,441

 
(1,198
)
 
239

 
(1,019
)
 
 
 
 
 
 
 
 
 
     Reclassification adjustment for gain recognized in income
 
(326
)
 
(350
)
 
—

 
(167
)
 
 
 
 
 
 
 
 
 
     Income tax effect
 
88

 
140

 
—

 
67

 
 
 
 
 
 
 
 
 
     Change in defined benefit pension plan
 
772

 
(336
)
 
772

 
(500
)
 
 
 
 
 
 
 
 
 
     Income tax effect
 
(208
)
 
134

 
(208
)
 
200

 
 
 
 
 
 
 
 
 
Total other comprehensive income (loss)
 
(3,569
)
 
1,387

 
(84
)
 
1,130

 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
 
$
1,856

 
$
5,221

 
$
2,747

 
$
3,390


See accompanying notes to unaudited consolidated financial statements.


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Table of Contents

MVB Financial Corp. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited) (Dollars in thousands except per share data)
 
 
Preferred Stock
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive (Loss)
 
Treasury Stock
 
Total Stockholders' Equity
Balance December 31, 2016
 
$
16,334

 
$
10,048

 
$
93,412

 
$
31,192

 
$
(4,277
)
 
$
(1,084
)
 
$
145,625

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
—

 
—

 
—

 
3,834

 
—

 
—

 
3,834

Other comprehensive income
 
—

 
—

 
—

 
—

 
1,387

 
—

 
1,387

Cash dividends paid ($0.05 per share)
 
—

 
—

 
—

 
(511
)
 
—

 
—

 
(511
)
Dividends on preferred stock
 
—

 
—

 
—

 
(251
)
 
—

 
—

 
(251
)
Common stock issuance, net of issuance costs
 
—

 
444

 
4,487

 
—

 
—

 
—

 
4,931

Stock based compensation
 
—

 
—

 
327

 
—

 
—

 
—

 
327

Common stock options exercised
 
—

 
2

 
(10
)
 
—

 
—

 
—

 
(8
)
Redemption of preferred stock
 
(8,500
)
 
—

 
—

 
—

 
—

 
—

 
(8,500
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance June 30, 2017
 
$
7,834

 
$
10,494

 
$
98,216

 
$
34,264

 
$
(2,890
)
 
$
(1,084
)
 
$
146,834

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2017
 
7,834

 
10,496

 
98,698

 
37,236

 
(2,988
)
 
(1,084
)
 
150,192

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
$
—

 
$
—

 
$
—

 
$
5,425

 
$
—

 
$
—

 
$
5,425

Other comprehensive loss
 
—

 
—

 
—

 
—

 
(3,569
)
 
—

 
(3,569
)
Cash dividends paid ($0.05 per share)
 
—

 
—

 
—

 
(526
)
 
—

 
—

 
(526
)
Dividends on preferred stock
 
—

 
—

 
—

 
(243
)
 
—

 
—

 
(243
)
Stock based compensation
 
—

 
—

 
526

 
—

 
—

 
—

 
526

Common stock options exercised
 
—

 
97

 
1,200

 
—

 
—

 
—

 
1,297

Stranded AOCI (See Footnote 2)
 
—

 
—

 
—

 
646

 
(646
)
 
—

 
—

Mark to Market on equity positions held at December 31, 2017 (See Footnote 2)
 
—

 
—

 
—

 
98

 
(98
)
 
—

 
—

Common stock issued from subordinated debt conversion, net of costs
 
—

 
796

 
11,897

 
—

 
—

 
—

 
12,693

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance June 30, 2018
 
$
7,834

 
$
11,389

 
$
112,321

 
$
42,636

 
$
(7,301
)
 
$
(1,084
)
 
$
165,795


See accompanying notes to unaudited consolidated financial statements.


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Table of Contents

MVB Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited) (Dollars in thousands)
 
 
Six Months Ended June 30,
 
 
2018
 
2017
OPERATING ACTIVITIES
 
 
 
 
Net Income
 
$
5,425

 
$
3,834

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
     Net amortization and accretion of investments
 
694

 
620

     Net amortization of deferred loan costs
 
(14
)
 
54

     Provision for loan losses
 
1,079

 
1,041

     Depreciation and amortization
 
1,483

 
1,292

     Stock based compensation
 
526

 
327

     Loans originated for sale
 
(619,884
)
 
(702,136
)
     Proceeds of loans sold
 
603,505

 
703,071

     Mortgage fee income
 
(15,626
)
 
(18,586
)
     Gain on sale of securities
 
(326
)
 
(716
)
     Loss on sale of securities
 
—

 
366

     Gain on sale of portfolio loans
 
(212
)
 
(212
)
     Income on bank owned life insurance
 
(438
)
 
(302
)
     Deferred taxes
 
(118
)
 
178

     Other, net
 
(2,859
)
 
(5,008
)
     Net cash used in operating activities
 
(26,765
)
 
(16,177
)
INVESTING ACTIVITIES
 
 
 
 
     Purchases of investment securities available-for-sale
 
(15,981
)
 
(51,026
)
     Maturities/paydowns of investment securities available-for-sale
 
11,685

 
7,587

     Sales of investment securities available-for-sale
 
680

 
33,075

     Purchases of premises and equipment
 
(1,163
)
 
(3,619
)
     Net increase in loans
 
(109,209
)
 
(49,749
)
     Purchases of restricted bank stock
 
(13,315
)
 
(12,257
)
     Redemptions of restricted bank stock
 
8,074

 
8,932

     Proceeds from sale of certificates of deposit with banks
 
—

 
1,733

     Purchases of certificates of deposit with banks
 
—

 
(1,733
)
     Proceeds from sale of other real estate owned
 
360

 
—

     Purchase of bank owned life insurance
 
—

 
(50
)
     Net cash used in investing activities
 
(118,869
)
 
(67,107
)
FINANCING ACTIVITIES
 
 
 
 
     Net increase (decrease) in deposits
 
36,288

 
(7,409
)
     Net decrease in repurchase agreements
 
(2,163
)
 
(2,966
)
     Net change in short-term FHLB borrowings
 
76,900

 
72,357

     Principal payments on FHLB borrowings
 
(12,239
)
 
(576
)
     Proceeds from new FHLB borrowings
 
50,000

 
26,682

     Subordinated debt conversion costs
 
(35
)
 
—

     Proceeds from stock offering
 
—

 
4,931

     Preferred stock redemption
 
—

 
(8,500
)
     Common stock options exercised
 
1,297

 
(8
)
     Cash dividends paid on common stock
 
(526
)
 
(511
)
     Cash dividends paid on preferred stock
 
(243
)
 
(251
)
     Net cash provided by financing activities
 
149,279

 
83,749

Increase in cash and cash equivalents
 
3,645

 
465

Cash and cash equivalents at beginning of period
 
20,305

 
17,340

Cash and cash equivalents at end of period
 
$
23,950

 
$
17,805

Supplemental disclosure of cash flow information:
 
 
 
 
     Loans transferred to other real estate owned
 
$
720

 
$
709

     Cashless stock options exercised
 
$
93

 
$
2

     Common stock converted from subordinated debt
 
$
12.728

 
$
—

Cash payments for:
 
 
 
 
     Interest on deposits, repurchase agreements and borrowings
 
$
7,833

 
$
5,895

     Income taxes
 
$
87

 
$
4,977


See accompanying notes to unaudited consolidated financial statements.

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Table of Contents

Notes to the Consolidated Financial Statements

Note 1 – Summary of Significant Accounting Policies

Nature of Operations

MVB Financial Corp. (“the Company”) is a financial holding company and was organized in 2003. MVB operates principally through its wholly-owned subsidiary, MVB Bank, Inc. (“MVB Bank”). MVB Bank’s operating subsidiaries include MVB Mortgage, MVB Insurance, LLC (“MVB Insurance”), and MVB Community Development Corporation (“CDC”).

Principles of Consolidation and Basis of Presentation

These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with instructions to Form 10‑Q. Accordingly, they do not include all the information and footnotes required by GAAP for annual year-end 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, 2017 has been derived from audited financial statements included in the Company’s 2017 filing on Form 10-K. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States and practices in the banking industry. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates, such as the allowance for loan losses, are based upon known facts and circumstances. Estimates are revised by management in the period such facts and circumstances change. Actual results could differ from those estimates. All significant inter-company accounts and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States 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 December 31, 2017, Form 10-K filed with the Securities and Exchange Commission (the "SEC").

In certain instances, amounts reported in prior periods’ consolidated financial statements have been reclassified to conform to the current presentation.

Information is presented in these notes with dollars expressed in thousands, unless otherwise noted or specified.

Note 2 – Recent Accounting Pronouncements

In February 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This update requires a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate in the Tax Reform Act, which was enacted on December 22, 2017. The Tax Reform Act included a reduction to the corporate income tax rate from 34 percent to 21 percent effective January 1, 2018. The amendments in the ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company elected to early adopt ASU 2018-02 during the first quarter of 2018 and elected to reclassify the income tax effects of the Tax Reform Act from AOCI to retained earnings. The amount of the reclassification is the difference between the historical corporate income tax rate and the newly enacted 21 percent corporate income tax rate, which amounted to $646 thousand.

In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. This ASU amends guidance on the amortization period of premiums on certain purchased callable debt securities. Specifically, the amendments shorten the amortization period of premiums on certain purchased callable debt securities to the earliest call date. The amendments affect all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date (that is, at a premium). For public companies, this update will be effective for fiscal years effective for fiscal years beginning after December 15, 2018, including all interim periods within those fiscal years. The adoption of this guidance is not expected to be material to the consolidated financial statements, as it is our current policy to amortize premiums of investment securities to the earliest call date.

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In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. Topic 350, Intangibles – Goodwill and Other (Topic 350), currently requires an entity that has not elected the private company alternative for goodwill to perform a two-step test to determine the amount, if any, of goodwill impairment. In Step 1, an entity compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the entity performs Step 2 and compares the implied fair value of goodwill with the carrying amount of that goodwill for that reporting unit. An impairment charge equal to the amount by which the carrying amount of goodwill for the reporting unit exceeds the implied fair value of that goodwill is recorded, limited to the amount of goodwill allocated to that reporting unit to address concerns over the cost and complexity of the two-step goodwill impairment test, the amendments in this Update remove the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. For public companies, this update will be effective for fiscal years effective for fiscal years beginning after December 15, 2019, including all interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, to improve such definition and, as a result, assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or as business combinations. The definition of a business impacts many areas of accounting including acquisitions, disposals, goodwill, and consolidation. ASU 2017-01 was effective for the Company on January 1, 2018 and is to be applied under a prospective approach. The Company expects the adoption of this new guidance to impact the determination of whether future acquisitions are considered business combinations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance replaces the incurred loss impairment methodology in current 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. Purchased credit impaired 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 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company's project management team and Management Loan Committee ("MLC") engaged a third party to assist with a data gap analysis and will utilize the data to determine the impact of the pronouncement. Additionally, the Company has researched and acquired software to assist with implementation that will be tested throughout 2018.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:(1) A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company established a project management team, which is currently evaluating the impact of the new standard, and expects an increase to the Consolidated Balance Sheets for right-of-use assets and associated lease liabilities, as well as resulting depreciation expense of the right-of-use assets and interest expense of the lease liabilities in the Consolidated Statements of Income, for arrangements previously accounted for as operating leases.

In January 2016, the FASB issued ASU 2016-01, Accounting for Financial Instruments - Overall: Classification and Measurement (Subtopic 825-10). Amendments within ASU 2016-01 that relate to non-public entities have been excluded from this presentation. The amendments in this ASU 2016-01 address the following: 1) require equity investments to be measured at fair value with changes in fair value recognized in net income; 2) simplify the impairment assessment of equity investments without readily-determinable fair values by requiring a qualitative assessment to identify impairment; 3) eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; 4) require entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; 5) require separate presentation in other comprehensive income for the portion of the total change in the fair

9
Table of Contents

value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; 6) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and 7) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted this guidance in the first quarter of 2018. The adoption of ASU 2016-01 on January 1, 2018 did not have a material impact on the Company's Consolidated Financial Statements. In accordance with (5) above, the Company measured the fair value of its loan portfolio as of March 31, 2018 using an exit price notion. See Note 6 "Fair Value of Financial Instruments" of the Notes to Consolidated Financial Statements for further information.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The new revenue pronouncement creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. The pronouncement provides a five-step model for a company to recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The five steps are: (1) identify the contract with the customer, (2) identify the separate performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the separate performance obligations and (5) recognize revenue when each performance obligation is satisfied. The Company evaluated the impact of this standard on individual customer contracts, while management evaluated the impact of this standard on the broad categories of its customer contracts and revenue streams. The Company determined that this standard did not have a material impact on its consolidated financial statements because revenue related to financial instruments, including loans and investment securities are not in scope of these updates. Loan interest income, investment interest income, insurance services revenue and BOLI are accounted for under other U.S. GAAP standards and out of scope of ASC 606 revenue standard. The Company evaluated the impact of this standard on individual customer contracts, while management evaluated the impact of this standard on the broad categories of its customer contracts and revenue streams. The Company adopted the revenue recognition standard as of January 1, 2018 and it did not have a material effect on the consolidated financial statements. See Note 1 "Summary of Significant Policies" of the Notes to the Consolidated Financial Statements for further information.

Note 3 – Investment Securities

There were no held-to-maturity securities at June 30, 2018 or December 31, 2017.

Amortized cost and fair values of investment securities available-for-sale at June 30, 2018 are summarized as follows:
(Dollars in thousands)
 
Amortized Cost
 
Unrealized Gain
 
Unrealized Loss
 
Fair Value
U. S. Agency securities
 
$
81,180

 
$
4

 
$
(2,284
)
 
$
78,900

U.S. Sponsored Mortgage-backed securities
 
56,342

 
—

 
(2,616
)
 
53,726

Municipal securities
 
80,970

 
678

 
(1,607
)
 
80,041

Total debt securities
 
218,492

 
682

 
(6,507
)
 
212,667

Other securities
 
9,394

 
76

 
(52
)
 
9,418

Total investment securities available-for-sale
 
$
227,886

 
$
758

 
$
(6,559
)
 
$
222,085


Amortized cost and fair values of investment securities available-for-sale at December 31, 2017 are summarized as follows:
(Dollars in thousands)
 
Amortized Cost
 
Unrealized Gain
 
Unrealized Loss
 
Fair Value
U. S. Agency securities
 
$
81,705

 
$
81

 
$
(841
)
 
$
80,945

U.S. Sponsored Mortgage-backed securities
 
59,387

 
31

 
(1,264
)
 
58,154

Municipal securities
 
74,482

 
1,733

 
(373
)
 
75,842

Total debt securities
 
215,574

 
1,845

 
(2,478
)
 
214,941

Equity and other securities
 
15,940

 
644

 
(18
)
 
16,566

Total investment securities available-for-sale
 
$
231,514

 
$
2,489

 
$
(2,496
)
 
$
231,507



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Table of Contents

The following table summarizes amortized cost and fair values of debt securities by maturity:
 
 
June 30, 2018
 
 
Available for sale
(Dollars in thousands)
 
Amortized Cost
 
Fair Value
Within one year
 
$
525

 
$
528

After one year, but within five
 
48,810

 
47,901

After five years, but within ten
 
23,140

 
22,150

After ten years
 
146,017

 
142,088

Total
 
$
218,492

 
$
212,667


Investment securities with a carrying value of $69.2 million at June 30, 2018, 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 June 30, 2018, the details of which are included in the following table. Although these securities, if sold at June 30, 2018 would result in a pretax loss of $6.6 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. Management does not intend to sell these securities and it is unlikely that the Company will be required to sell these securities before recovery of their amortized cost basis. 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 June 30, 2018, 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 temporary decline in fair value.

The following table discloses investments in an unrealized loss position at June 30, 2018:
(Dollars in thousands)
 
Less than 12 months
 
12 months or more
Description and number of positions
 
Fair Value
 
Unrealized Loss
 
Fair Value
 
Unrealized Loss
U.S. Agency securities (54)
 
$
59,528

 
$
(1,570
)
 
$
16,626

 
$
(714
)
U.S. Sponsored Mortgage-backed securities (42)
 
17,490

 
(555
)
 
36,236

 
(2,061
)
Municipal securities (86)
 
27,811

 
(703
)
 
17,588

 
(904
)
Other securities (3)
 
$
2,493

 
$
(52
)
 
$
—

 
$
—

 
 
$
107,322

 
$
(2,880
)
 
$
70,450

 
$
(3,679
)

The following table discloses investments in an unrealized loss position at December 31, 2017:
(Dollars in thousands)
 
Less than 12 months
 
12 months or more
Description and number of positions
 
Fair Value
 
Unrealized Loss
 
Fair Value
 
Unrealized Loss
U.S. Agency securities (45)
 
$
61,834

 
$
(659
)
 
$
7,709

 
$
(182
)
U.S. Sponsored Mortgage-backed securities (39)
 
16,825

 
(159
)
 
37,427

 
(1,105
)
Municipal securities (47)
 
8,826

 
(48
)
 
16,781

 
(325
)
Equity and other securities (2)
 
1,034

 
(18
)
 
—

 
—

 
 
$
88,519

 
$
(884
)
 
$
61,917

 
$
(1,612
)

For the three-month periods ended June 30, 2018 and 2017, the Company sold investments available-for-sale of $0 and $10.1 million, respectively. These sales resulted in gross gains of $0 and $167 thousand and gross losses of $0 and $0, respectively.


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Table of Contents

For the six-month periods ended June 30, 2018 and 2017, the Company sold investments available-for-sale of $680 thousand and $33.1 million, respectively. These sales resulted in gross gains of $326 thousand and $716 thousand and gross losses of $0 and $366 thousand, respectively.

For the three and six months ended June 30, 2018, the Company recognized an unrealized loss of $11 thousand and $40 thousand, respectively, on equity securities held as of June 30, 2018, which was recorded in noninterest income in the consolidated statements of income.

Note 4 – Loans and Allowance for Loan Losses

The components of loans in the Consolidated Balance Sheet at June 30, 2018 and December 31, 2017, were as follows:
(Dollars in thousands)
 
June 30, 2018
 
December 31, 2017
Commercial and Non-Residential Real Estate
 
$
884,067

 
$
783,909

Residential Real Estate
 
260,842

 
246,214

Home Equity
 
58,399

 
62,400

Consumer
 
11,380

 
12,783

Total Loans
 
$
1,214,688

 
$
1,105,306

Deferred loan origination fees and costs, net
 
384

 
635

Loans receivable
 
$
1,215,072

 
$
1,105,941


All loan origination fees and direct loan origination costs are deferred and recognized over the life of the loan.

An allowance for loan losses ("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 (discussed above) 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 were $1.9 million and $1.3 million, while the related reserves were $201 thousand and $169 thousand as of June 30, 2018 and December 31, 2017.

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 below in the impaired loans by class table, which are based on the Federal call code assigned to each loan, provide the starting point for the ALL analysis. Company and bank management tracks 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, conclusion of loan reviews, audits, and exams,

12
Table of Contents

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 June 30, 2018 and December 31, 2017, the liability for unfunded commitments related to loans held for investment was $284 thousand.

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 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.

The following tables summarize 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 as of June 30, 2018:
(Dollars in thousands)
 
Commercial
 
Residential
 
Home Equity
 
Consumer
 
Total
ALL balance at December 31, 2017
 
$
7,804

 
$
1,119

 
$
705

 
$
250

 
$
9,878

     Charge-offs
 
(324
)
 
(11
)
 
—

 
(50
)
 
(385
)
     Recoveries
 
10

 
9

 
56

 
4

 
79

     Provision (recovery)
 
1,174

 
55

 
(159
)
 
9

 
1,079

ALL balance at June 30, 2018
 
$
8,664

 
$
1,172

 
$
602

 
$
213

 
$
10,651

Individually evaluated for impairment
 
$
1,049

 
$
—

 
$
—

 
$
—

 
$
1,049

Collectively evaluated for impairment
 
$
7,615

 
$
1,172

 
$
602

 
$
213

 
$
9,602

(Dollars in thousands)
 
Commercial
 
Residential
 
Home Equity
 
Consumer
 
Total
ALL balance at March 31, 2018
 
$
7,998

 
$
1,177

 
$
693

 
$
199

 
$
10,067

     Charge-offs
 
—

 
—

 
—

 
(29
)
 
(29
)
     Recoveries
 
8

 
—

 
—

 
—

 
8

     Provision (recovery)
 
658

 
(5
)
 
(91
)
 
43

 
605

ALL balance at June 30, 2018
 
$
8,664

 
$
1,172

 
$
602

 
$
213

 
$
10,651


The following table summarizes the primary segments of the Company loan portfolio as of June 30, 2018:
(Dollars in thousands)
 
Commercial
 
Residential
 
Home Equity
 
Consumer
 
Total
     Individually evaluated for impairment
 
$
12,072

 
$
3,096

 
$
39

 
$
39

 
$
15,246

     Collectively evaluated for impairment
 
871,995

 
257,746

 
58,360

 
11,341

 
1,199,442

Total Loans
 
$
884,067

 
$
260,842

 
$
58,399

 
$
11,380

 
$
1,214,688


13
Table of Contents


The following tables summarize 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 as of June 30, 2017:
(Dollars in thousands)
 
Commercial
 
Residential
 
Home Equity
 
Consumer
 
Total
ALL balance at December 31, 2016
 
$
7,181

 
$
990

 
$
728

 
$
202

 
$
9,101

     Charge-offs
 
(263
)
 
(141
)
 
(33
)
 
(16
)
 
(453
)
     Recoveries
 
21

 
34

 
2

 
2

 
59

     Provision
 
784

 
109

 
80

 
68

 
1,041

ALL balance at June 30, 2017
 
$
7,723

 
$
992

 
$
777

 
$
256

 
$
9,748

Individually evaluated for impairment
 
$
265

 
$
14

 
$
36

 
$
71

 
$
386

Collectively evaluated for impairment
 
$
7,458

 
$
978

 
$
741

 
$
185

 
$
9,362

(Dollars in thousands)
 
Commercial
 
Residential
 
Home Equity
 
Consumer
 
Total
ALL balance at March 31, 2017
 
$
7,285

 
$
1,085

 
$
790

 
$
212

 
$
9,372

     Charge-offs
 
(150
)
 
—

 
—

 
(13
)
 
(163
)
     Recoveries
 
12

 
2

 
1

 
1

 
16

     Provision (recovery)
 
576

 
(95
)
 
(14
)
 
56

 
523

ALL balance at June 30, 2017
 
$
7,723

 
$
992

 
$
777

 
$
256

 
$
9,748


The following table summarizes the primary segments of the Company loan portfolio as of June 30, 2017:
(Dollars in thousands)
 
Commercial
 
Residential
 
Home Equity
 
Consumer
 
Total
     Individually evaluated for impairment
 
$
9,369

 
$
1,051

 
$
643

 
$
267

 
$
11,330

     Collectively evaluated for impairment
 
772,901

 
241,121

 
63,679

 
13,347

 
1,091,048

Total Loans
 
$
782,270

 
$
242,172

 
$
64,322

 
$
13,614

 
$
1,102,378


Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company evaluates residential mortgage loans, home equity lines of credit, and consumer loans in homogeneous pools, rather than on an individual basis, when each of those loans are below specific thresholds based on outstanding principal balance. Such loans that individually exceed these thresholds are evaluated individually for impairment. The Chief Credit Officer identifies these loans individually by monitoring the delinquency status of the Bank’s portfolio. Once identified, the Bank’s ongoing communications with the borrower allow Management to evaluate the significance of the payment delays and the circumstances surrounding the loan and the borrower.

Once the determination has been made that a loan is impaired, the amount of the impairment is measured using one of three valuation methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis.


14
Table of Contents

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of June 30, 2018 and December 31, 2017:
 
 
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
June 30, 2018
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
     Commercial Business
 
$
3,486

 
$
145

 
$
681

 
$
4,167

 
$
4,192

     Commercial Real Estate
 
5,138

 
905

 
1,610

 
6,748

 
7,560

     Acquisition & Development
 
—

 
—

 
1,157

 
1,157

 
3,437

          Total Commercial
 
8,624

 
1,050

 
3,448

 
12,072

 
15,189

Residential
 
—

 
—

 
3,096

 
3,096

 
3,144

Home Equity
 
—

 
—

 
39

 
39

 
39

Consumer
 
—

 
—

 
39

 
39

 
40

          Total Impaired Loans
 
$
8,624

 
$
1,050

 
$
6,622

 
$
15,246

 
$
18,412

 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
     Commercial Business
 
$
3,283

 
$
22

 
$
979

 
$
4,262

 
$
4,275

     Commercial Real Estate
 
4,603

 
1,150

 
2,814

 
7,417

 
7,921

     Acquisition & Development
 
—

 
—

 
2,117

 
2,117

 
4,090

          Total Commercial
 
7,886

 
1,172

 
5,910

 
13,796

 
16,286

Residential
 
—

 
—

 
1,569

 
1,569

 
1,601

Home Equity
 
—

 
—

 
13

 
13

 
13

Consumer
 
69

 
16

 
109

 
178

 
475

          Total Impaired Loans
 
$
7,955

 
$
1,188

 
$
7,601

 
$
15,556

 
$
18,375


Impaired loans have decreased by $310 thousand, or 2%, during 2018. This change is the net effect of multiple factors, including the identification of $2.0 million of impaired loans, principal curtailments of $796 thousand, partial charge-offs of $362 thousand, the foreclosure of a commercial development loan which required the reclassification of $720 thousand to other real estate owned, the classification of $293 thousand to performing loans based on improved repayment performance, and normal loan amortization.

The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods indicated:
 
 
Six Months Ended June 30, 2018
 
Three Months Ended June 30, 2018
(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
 
$
4,329

 
$
76

 
$
51

 
$
4,132

 
$
38

 
$
51

  Commercial Real Estate
 
7,173

 
48

 
22

 
6,915

 
24

 
22

  Acquisition & Development
 
1,520

 
—

 
—

 
1,203

 
—

 
—

    Total Commercial
 
13,022

 
124

 
73

 
12,250

 
62

 
73

Residential
 
1,973

 
10

 
3

 
2,200

 
5

 
3

Home Equity
 
79

 
—

 
—

 
93

 
—

 
—

Consumer
 
93

 
—

 
—

 
53

 
—

 
—

Total
 
$
15,167

 
$
134

 
$
76

 
$
14,596

 
$
67

 
$
76


15
Table of Contents

 
 
Six Months Ended June 30, 2017
 
Three Months Ended June 30, 2017
(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
 
$
3,358

 
$
78

 
$
59

 
$
3,368

 
$
34

 
$
46