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Section 1: 10-Q (10-Q)

pub-10q_20200331.htm

 

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 March 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                

Commission file number 001-37416

 

PEOPLE’S UTAH BANCORP

(Exact name of registrant as specified in its charter)

 

 

Utah

 

87-0622021

(State or other jurisdiction of

 

(IRS Employer

incorporation or organization)

 

Identification No.)

 

1 East Main Street

American Fork, Utah

 

84003

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (801) 642-3998

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

PUB

 

The Nasdaq Stock Market LLC

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 every Interactive Data File required to be submitted 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 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.

 

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 checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes    No  

As of April 30, 2020, the registrant had 18,787,970 shares of common stock $0.01 par value per share, outstanding. No preferred shares are issued or outstanding.

 


TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1 – Financial Statements

 

Unaudited Consolidated Balance Sheets

3

Unaudited Consolidated Statements of Income

4

Unaudited Consolidated Statements of Comprehensive Income

5

Unaudited Consolidated Statements of Changes in Shareholders’ Equity

6

Unaudited Consolidated Statements of Cash Flows

7

Notes to Unaudited Consolidated Financial Statements

8

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

47

Item 4 – Controls and Procedures

47

PART II. OTHER INFORMATION

 

Item 1 – Legal Proceedings

48

Item 1A – Risk Factors

48

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3 – Defaults upon Senior Securities

49

Item 4 – Mine Safety Disclosures

49

Item 5 – Other Information

49

Item 6 – Exhibits

50

Signatures

51

 

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

PEOPLE’S UTAH BANCORP AND SUBSIDIARY

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

 

December 31,

 

(Dollars in thousands, except share amounts)

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

36,203

 

 

$

38,987

 

Interest-bearing deposits

 

 

120,176

 

 

 

171,955

 

Federal funds sold

 

 

1,248

 

 

 

1,039

 

Total cash and cash equivalents

 

 

157,627

 

 

 

211,981

 

Investment securities - available for sale, at fair value

 

 

577,000

 

 

 

405,995

 

Non-marketable equity securities

 

 

2,890

 

 

 

2,623

 

Loans held for sale

 

 

21,572

 

 

 

18,669

 

Loans:

 

 

 

 

 

 

 

 

Loans held for investment

 

 

1,642,516

 

 

 

1,680,918

 

Allowance for credit losses

 

 

(41,253

)

 

 

(31,426

)

Total loans held for investment, net

 

 

1,601,263

 

 

 

1,649,492

 

Premises and equipment, net

 

 

39,492

 

 

 

39,474

 

Goodwill

 

 

25,673

 

 

 

25,673

 

Bank-owned life insurance

 

 

27,184

 

 

 

27,037

 

Deferred income tax assets, net

 

 

8,003

 

 

 

9,716

 

Accrued interest receivable

 

 

8,464

 

 

 

7,904

 

Other intangibles

 

 

2,859

 

 

 

2,970

 

Other real estate owned

 

 

-

 

 

 

-

 

Other assets

 

 

4,985

 

 

 

4,800

 

Total assets

 

$

2,477,012

 

 

$

2,406,334

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Non-interest bearing deposits

 

$

737,001

 

 

$

719,410

 

Interest bearing deposits

 

 

1,385,017

 

 

 

1,336,957

 

Total deposits

 

 

2,122,018

 

 

 

2,056,367

 

Short-term borrowings

 

 

-

 

 

 

-

 

Accrued interest payable

 

 

503

 

 

 

546

 

Other liabilities

 

 

14,354

 

 

 

17,059

 

Total liabilities

 

 

2,136,875

 

 

 

2,073,972

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Preferred shares, $0.01 par value: 3,000,000 shares authorized; no shares issued

 

 

-

 

 

 

-

 

Common shares, $0.01 par value: 30,000,000 shares authorized; 18,787,810

 

 

 

 

 

 

 

 

and 18,870,498 shares issued and outstanding as of March 31, 2020

 

 

 

 

 

 

 

 

and December 31, 2019, respectively

 

 

188

 

 

 

189

 

Additional paid-in capital

 

 

86,318

 

 

 

87,913

 

Retained earnings

 

 

244,325

 

 

 

242,878

 

Accumulated other comprehensive income

 

 

9,306

 

 

 

1,382

 

Total shareholders’ equity

 

 

340,137

 

 

 

332,362

 

Total liabilities and shareholders’ equity

 

$

2,477,012

 

 

$

2,406,334

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

3


 

PEOPLE’S UTAH BANCORP AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 

 

 

Three Months Ended

 

 

 

March 31,

 

(Dollars in thousands, except share and per share amounts)

 

2020

 

 

2019

 

Interest income

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

25,925

 

 

$

26,980

 

Interest and dividends on investments

 

 

3,459

 

 

 

2,172

 

Total interest income

 

 

29,384

 

 

 

29,152

 

Interest expense

 

 

2,163

 

 

 

2,245

 

Net interest income

 

 

27,221

 

 

 

26,907

 

Provision for credit losses

 

 

650

 

 

 

1,550

 

Net interest income after provision for credit losses

 

 

26,571

 

 

 

25,357

 

Non-interest income

 

 

 

 

 

 

 

 

Mortgage banking

 

 

1,710

 

 

 

1,417

 

Card processing

 

 

707

 

 

 

615

 

Service charges on deposit accounts

 

 

780

 

 

 

657

 

Other

 

 

543

 

 

 

648

 

Total non-interest income

 

 

3,740

 

 

 

3,337

 

Non-interest expense

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

10,844

 

 

 

9,886

 

Occupancy, equipment and depreciation

 

 

1,539

 

 

 

1,456

 

Data processing

 

 

1,136

 

 

 

1,045

 

Marketing and advertising

 

 

432

 

 

 

116

 

FDIC premiums

 

 

-

 

 

 

90

 

Other

 

 

2,210

 

 

 

2,323

 

Total non-interest expense

 

 

16,161

 

 

 

14,916

 

Income before income tax expense

 

 

14,150

 

 

 

13,778

 

Income tax expense

 

 

3,377

 

 

 

3,273

 

Net income

 

$

10,773

 

 

$

10,505

 

Earnings per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.57

 

 

$

0.56

 

Diluted

 

$

0.57

 

 

$

0.55

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

18,884,857

 

 

 

18,781,210

 

Diluted

 

 

19,038,127

 

 

 

18,989,565

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

4


 

PEOPLE’S UTAH BANCORP AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

Three Months Ended

 

 

 

March 31,

 

(Dollars in thousands)

 

2020

 

 

2019

 

Net income

 

$

10,773

 

 

$

10,505

 

Other comprehensive income

 

 

 

 

 

 

 

 

Unrealized holding gains on securities available for sale

 

 

10,567

 

 

 

2,856

 

Income tax expense

 

 

(2,643

)

 

 

(713

)

 

 

 

 

 

 

 

 

 

Unrealized holding gains on securities available for sale, net of tax

 

 

7,924

 

 

 

2,143

 

Total comprehensive income

 

$

18,697

 

 

$

12,648

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

5


 

PEOPLE’S UTAH BANCORP AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

(Dollars in thousands, except share and per share

 

Common

 

 

Common

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

    amounts)

 

Shares

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Total

 

Balance as of January 1, 2019

 

 

18,728,823

 

 

$

187

 

 

$

86,308

 

 

$

207,779

 

 

$

(4,112

)

 

$

290,162

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,505

 

 

 

-

 

 

 

10,505

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,143

 

 

 

2,143

 

Cash dividends ($0.11 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,068

)

 

 

-

 

 

 

(2,068

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

191

 

 

 

-

 

 

 

-

 

 

 

191

 

Issuance of shares under stock incentive plans

 

 

68,457

 

 

 

1

 

 

 

393

 

 

 

-

 

 

 

-

 

 

 

394

 

Balance as of March 31, 2019

 

 

18,797,280

 

 

$

188

 

 

$

86,892

 

 

$

216,216

 

 

$

(1,969

)

 

$

301,327

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2020

 

 

18,870,498

 

 

$

189

 

 

$

87,913

 

 

$

242,878

 

 

$

1,382

 

 

$

332,362

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,773

 

 

 

-

 

 

 

10,773

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,924

 

 

 

7,924

 

Cash dividends ($0.14 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,646

)

 

 

-

 

 

 

(2,646

)

Reclass related to ASC 326 adoption (CECL)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,680

)

 

 

-

 

 

 

(6,680

)

Shares repurchased

 

 

(120,906

)

 

 

(1

)

 

 

(2,139

)

 

 

-

 

 

 

-

 

 

 

(2,140

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

385

 

 

 

-

 

 

 

-

 

 

 

385

 

Issuance of shares under stock incentive plans

 

 

38,218

 

 

 

-

 

 

 

159

 

 

 

-

 

 

 

-

 

 

 

159

 

Balance as of March 31, 2020

 

 

18,787,810

 

 

$

188

 

 

$

86,318

 

 

$

244,325

 

 

$

9,306

 

 

$

340,137

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

 

6


 

PEOPLE’S UTAH BANCORP AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Three Months Ended

 

 

 

March 31,

 

(Dollars in thousands)

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

10,773

 

 

$

10,505

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

650

 

 

 

1,550

 

Depreciation and amortization

 

 

876

 

 

 

974

 

Deferred income taxes

 

 

1,187

 

 

 

446

 

Net amortization of securities discounts and premiums

 

 

501

 

 

 

574

 

Increase in cash surrender value of bank-owned life insurance

 

 

(147

)

 

 

(148

)

Share-based compensation

 

 

385

 

 

 

191

 

Gain on sale of loans held for sale

 

 

(1,243

)

 

 

(942

)

Originations of loans held for sale

 

 

(53,046

)

 

 

(40,237

)

Proceeds from sale of loans held for sale

 

 

51,386

 

 

 

44,262

 

Net changes in:

 

 

 

 

 

 

 

 

Accrued interest receivable

 

 

(560

)

 

 

(311

)

Other assets

 

 

(865

)

 

 

4,423

 

Accrued interest payable

 

 

(43

)

 

 

38

 

Other liabilities

 

 

(2,538

)

 

 

(1,129

)

Net cash provided by operating activities

 

 

7,316

 

 

 

20,196

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Net change in loans held for investment

 

 

39,573

 

 

 

1,141

 

Purchase of available for sale securities

 

 

(192,849

)

 

 

(10,260

)

Proceeds from maturities/sales of available for sale securities

 

 

31,910

 

 

 

10,475

 

Proceeds from maturities of held to maturity securities

 

 

-

 

 

 

1,370

 

Purchase of premises and equipment

 

 

(1,061

)

 

 

(2,154

)

Proceeds from sale of other real estate owned, net of improvements

 

 

-

 

 

 

2,183

 

Purchase of non-marketable equity securities

 

 

(267

)

 

 

(4,032

)

Proceeds from sale of non-marketable equity securities

 

 

-

 

 

 

3,960

 

Net cash (used in) provided by investing activities

 

 

(122,694

)

 

 

2,683

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net increase in deposits

 

 

65,651

 

 

 

74,270

 

Proceeds related to exercise of stock options

 

 

159

 

 

 

394

 

Net cash used in share repurchase program

 

 

(2,140

)

 

 

-

 

Cash dividends paid

 

 

(2,646

)

 

 

(2,068

)

Net cash provided by financing activities

 

 

61,024

 

 

 

72,596

 

Net change in cash and cash equivalents

 

 

(54,354

)

 

 

95,475

 

Cash and cash equivalents, beginning of period

 

 

211,981

 

 

 

48,547

 

Cash and cash equivalents, end of period

 

$

157,627

 

 

$

144,022

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

2,206

 

 

$

2,207

 

Income taxes paid

 

$

-

 

 

$

-

 

Supplemental disclosures of non-cash investing transactions:

 

 

 

 

 

 

 

 

Unrealized gains on securities available for sale

 

$

10,567

 

 

$

2,856

 

Transfer of HTM securities to AFS

 

$

-

 

 

$

64,648

 

See accompanying notes to the unaudited consolidated financial statements.

 

 

7


 

PEOPLE’S UTAH BANCORP AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 — Basis of Presentation and Significant Accounting Policies

Nature of operations and basis of consolidation — People’s Utah Bancorp, Inc. (“PUB” or the “Company”) is a Utah corporation headquartered in American Fork, Utah. The Company operates all business activities through its wholly-owned banking subsidiary, AltabankTM (the “Bank”), which was organized in 1913.  AltabankTM is a Utah state-chartered bank.  AltabankTM operates under the jurisdiction of the Utah Department of Financial Institutions (“UDFI”), and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). AltabankTM is not a member of the Federal Reserve System; however, PUB is operated as a bank holding company under the Federal Bank Holding Company Act of 1956 and is the sole shareholder of AltabankTM. Both PUB and AltabankTM are subject to periodic examination by all of the applicable federal and state regulatory agencies and file periodic reports and other information with the agencies.  The Company considers AltabankTM to be its sole operating segment.

AltabankTM is a community bank that provides highly personalized retail and commercial banking products and services to small-to-medium sized businesses and to individuals.  Products and services are offered primarily through 26 retail branches located throughout Utah and southern Idaho.  AltabankTM offers a full range of short-term to long-term commercial, personal and mortgage loans. Commercial loans include both secured and unsecured loans for working capital (including inventory and accounts receivable), business expansion (including acquisition of real estate and improvements), and purchase of equipment and machinery. Consumer loans include secured and unsecured loans to finance automobiles, home improvements, education, and personal investments. AltabankTM also offers mortgage loans secured by single family residences. AltabankTM offers a full range of deposit services typically available in most financial institutions, including checking accounts, savings accounts, and time deposits. AltabankTM solicits these accounts from individuals, businesses, associations and organizations, and governmental entities.

The accompanying unaudited interim consolidated financial statements include the accounts of the Company together with its subsidiary Bank. All intercompany transactions and balances have been eliminated.  These unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (SEC). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements.

Use of estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions.  These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses (“ACL”), the determination of the fair value of certain financial instruments, the valuation of real estate acquired through foreclosure, deferred income tax assets, and share-based compensation.

 

Reclassifications — Certain reclassifications have been made to the 2019 Consolidated Financial Statements and/or schedules to conform to the 2020 presentation. These reclassifications may have affected certain ratios for the prior periods. The effect of these reclassifications is considered immaterial.

Business combinations — Business combinations are accounted for using the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed, both tangible and intangible, and consideration exchanged are recorded at fair value on the acquisition date.  The excess purchase consideration over fair value of net assets acquired is recorded as goodwill.  Expenses incurred in connection with a business combination are expensed as incurred. Changes in deferred tax asset valuation allowances related to acquired tax uncertainties are recognized in net income after the measurement period.

8


 

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

Cash and cash equivalents — Cash and cash equivalents consist of cash on hand, amounts due from banks, interest bearing deposits, and federal funds sold, all of which have original maturities of three months or less. The Company places its cash with high credit quality institutions. The amounts on deposit fluctuate and, at times, exceed the insured limit by the FDIC, which potentially subjects the Company to credit risk.

 

Investment securities — Investment securities are classified as held to maturity (“HTM”) when the Company has the positive intent and ability to hold the securities to maturity.  Investment securities are classified as available for sale (“AFS”) when the Company has the intent of holding the security for an indefinite period of time, but not necessarily to maturity.  The Company determines the appropriate classification at the time of purchase, and periodically thereafter.  Investment securities classified as HTM are carried at amortized cost.  Investment securities classified as AFS are reported at fair value.  As the fair value of AFS securities changes, the changes are reported (net of tax, if applicable) in comprehensive income and as an element of accumulated other comprehensive income/loss (“AOCI”) in shareholder’s equity.

 

Interest income includes amortization of purchase premium or discount.  Premiums and discounts on securities are generally amortized on the level-yield method without anticipating prepayments, except for callable debt securities.  Premiums on callable debt securities are amortized to the earliest call date.  When AFS securities, specifically identified, are sold, the unrealized gain or loss is reclassified from AOCI to non-interest income.

 

A debt security is placed on nonaccrual status at the time any principal or interest payments become greater than 90 days delinquent.  Delinquent interest accrued but not received for a security placed on nonaccrual is reversed against interest income.  The Company did not have any accrued interest reversed against interest income for the three months ended March 31, 2020.

 

Allowance for credit losses – AFS securities—For AFS debt securities in an unrealized loss position, management assesses whether the Company intends to sell or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either criterion regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to the fair value through non-interest income.  For AFS debt securities that do not meet the aforementioned criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors.  In making this assessment, management considers the extent to which the fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the security, among other factors.  If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security.  If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, which is limited by the amount that the fair value is less than the amortized cost basis.  Any impairment that has not been recorded through an allowance for credit losses is recognized in AOCI.

 

Changes in the allowance for credit losses are recorded as a Provision for Credit Losses (“PCL”).  Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criterion regarding intent or requirement to sell is met.

Non-marketable equity securities — Non-marketable equity securities primarily consist of Federal Home Loan Bank (“FHLB”) stock. FHLB stock is restricted because such stock may only be sold to FHLB at its par value. Due to the restrictive terms, and the lack of a readily determinable market value, FHLB stock is carried at cost. The investments in FHLB stock are required investments related to the Bank’s borrowings from FHLB. FHLB obtains its funding primarily through issuance of consolidated obligations of the FHLB system. The U.S. government does not guarantee these obligations, and each of the regional FHLBs is jointly and severally liable for repayment of each other’s debt.

9


 

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

Loans held for sale —Single-family residential mortgage loans originated with the intent to be sold in the secondary market are considered held for sale. Loans with best effort delivery commitments are carried at the lower of aggregate cost or estimated fair value.  Loans under mandatory delivery commitments are carried at fair value in order to match changes in the value of the loans with the value of the economic hedges on the loans.  Fair values for loans held for sale are determined by comparing actual loan rates to current secondary market prices for similar loans.  Net unrealized losses on loans held for sale that are carried at lower of cost or market are recognized through the valuation allowance by charges to income.  Mortgage loans held for sale are generally sold with the mortgage servicing rights. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold. Substantially all of the residential mortgage loans originated are sold to larger financial institutions.

Loans held for investment — Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at amortized cost, net of the allowance for credit losses.  Amortized cost includes the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs.  Accrued interest is reported as a separate line item on the unaudited consolidated balance sheets.  Interest income is accrued on the unpaid principal balance.  Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the effective interest method without anticipating prepayments.

Interest income on mortgage and commercial loans is discontinued and placed on nonaccrual status at the time the loan 90 days delinquent, unless the loan is well secured and in process of collection.  Mortgage loans are charged off at 180 days past due, and commercial loan are charged-off to the extent principal or interest is deemed uncollectible.  Consumer and credit card loans continue to accrue interest until they are charged-off no later than 120 days past due unless the loan is in the process of collection.  Past-due status is based on the contractual terms of the loan.  In all cases, loans are placed on nonaccrual or charge-off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.  Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero.  Under the cash-basis method, interest income is recorded when the payment is received in cash.  Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

 

Troubled debt restructurings (“TDR”)—A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR.  TDRs are then evaluated to determine if the TDR loan has impairment using the same methodology used for other individually evaluated loans as described in the next section.  With the recent COVID 19 pandemic, the number of loans that have been modified has significantly increased.  To the extent that the borrower was not experiencing financial difficulties prior to the pandemic, such modifications have not been classified as TDRs.

 

Individually evaluated loans — The Company considers loans individually evaluated when, based on current information and events, it is probable the Company will be unable to collect all principal and interest payments due according to the contractual terms of the loan agreement. Such loans are generally classified as Substandard or Doubtful loans (see Note 3). Individually evaluated loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral, adjusted for selling costs, if the loan is collateral dependent. Changes in these values are recorded to the ACL through the PCL.

Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as individually evaluated . 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.

10


 

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

Acquired loans Loans acquired through purchase or through a business combination are recorded at their fair value at the acquisition date, including estimates of current expected credit losses.  Some acquired loans have experienced more than insignificant credit deterioration since origination.  Such loans are defined as Purchased Credit Deteriorated (“PCD”). The Company makes the determination if a loan is PCD by considering past due and/or nonaccrual status, prior designation of a troubled debt restructuring, or other factors that may suggest the Company will not be able to collect all contractual payments due.  Subsequent to acquisition, the amount of expected credit losses as of the acquisition date is added to the purchase price of PCD loans with an offsetting entry to ACL.  Any difference between the unpaid principal balance and the amortized cost basis of the PCD loan as of the acquisition date is the non-credit discount or premium. The non-credit discount recorded at acquisition is amortized or accreted into interest income over the remaining life of the PCD loan on an effective interest method.  To the extent that management changes the Company’s estimate of expected credit losses on PCD loans, the ACL will be increased or decreased with a corresponding entry to PCL.

Some acquired loans may not have experienced more than insignificant credit deterioration since origination.  Such loans are defined as Purchased non-Credit Deteriorated (“Non-PCD”) loans.  Non-PCD loans are also recorded at fair value at the time of acquisition, including estimates of current expected credit losses.  However, any current expected credit losses estimated as of the acquisition date are not added to the purchase price with an offsetting entry to ACL, but rather such estimate is included in the difference between the unpaid principal balance and the amortized cost basis of the Non-PCD loan.  This credit and non-credit discount is amortized or accreted into interest income over the remaining life of the Non-PCD loan on an effective interest method.  In addition, an allowance for credit losses is determined for Non-PCD loans using the same methodology as loans held for investment with an offset recorded to PCL.  

An acquired loan previously classified by the seller as a TDR is no longer classified as such at the date of acquisition. Past due status is reported based on contractual payment status.  Changes to the ACL for acquired loans are recorded through PCL after adoption.

Allowance for credit losses – Loans — Credit risk is inherent in the business of extending loans and leases to borrowers.  Normally, this credit risk is addressed through a valuation allowance termed allowance for credit losses.  The ACL represents management’s estimate of current expected credit losses (“CECL”) inherent in the loan portfolio at each balance sheet date.  Netted against the outstanding loan balance, this ACL reduces the balance to the Company’s estimate of what will be collected from borrowers.  The ACL is established through charges to current period earnings by recording a PCL.  When losses become specifically identifiable and quantifiable, the loan balance is reduced through recording a charge-off against the ACL.  Should payments be received on a charged-off loan, the payment is credited to the ACL as a recovery.

Management estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.  Historical credit loss experience, either internal or peer information, provides the basis for the estimation of expected credit losses.  Adjustments to historical loss information are made, using qualitative factors, when management expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed for the period over which historical information was evaluated. Management must exercise significant judgment when evaluating the effect of qualitative factors on the amount of the ACL because data may not be reasonably available or directly applicable for management to determine the precise impact of a factor on the collectability of the loan portfolio as of the evaluation date.  

Management considers qualitative or environmental factors that are likely to cause estimated credit losses associated with our existing portfolio to differ from historical loss experience, including but not limited to: i) changes in lending policies and procedures; ii) changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses; iii) changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments; iv) changes in the nature and volume of the portfolio and in the terms of loans; v) changes in the experience, ability, and depth of lending management and other relevant staff; iv) changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans; vi) changes in the quality of the institution’s loan review system; and vii) changes in the value of underlying collateral for collateral-dependent loans. The existence and effect of any concentrations of credit, and changes in the level of such concentrations.  The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution’s existing portfolio.  This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision, as more information becomes available.

11


 

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

The Company used the weighted average remaining maturity (or “WARM”) approach, adjusted for prepayments, to calculate CECL at March 31, 2020 and segmented its loan portfolio into seventeen loan segments based on similar risk characteristics.  Management may change the approach used to calculated current expected credit losses or loan segments from time-to-time as the Company improves credit loss estimation techniques.  The Company has elected to exclude accrued interest receivable and net deferred fees from its calculation of the ACL.

Off-balance sheet credit related financial instruments — In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.

Allowance for credit losses on off-balance sheet credit exposures — The Company estimates expected credit losses on off-balance sheet credit exposures using the same CECL historical loss rates applied to loans held for investment over the contractual period in which the Company is exposed to credit risk through a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company, adjusted for funding factors.  The allowance for credit losses on off-balance sheet credit exposures is reported in other liabilities on the unaudited consolidated balance sheets with an offset to other non-interest expense.  The estimate of CECL includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimate life.

Premises and equipment — Land is carried at cost. Premises and equipment are carried at cost, net of accumulated depreciation and amortization. Depreciation and amortization expense is computed using the straight-line method based on the estimated useful lives of the related assets below:

 

Building and building improvements

 

15 to 40 years

Leasehold improvements

 

  3 to 15 years

Furniture and equipment

 

  3 to 15 years

Computers, software and equipment

 

  3 to 5 years

 

Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized.

Bank-owned life insurance (“BOLI”) The Bank has purchased life insurance policies. These policies provide protection against the adverse financial effects that could result from the death of a key employee and provide tax-exempt income to offset expenses associated with the plans. It is the Bank’s intent to hold these policies as a long-term investment; however, there may be an income tax impact if the Bank chooses to surrender certain policies. Although the lives of individual current or former management-level employees are insured, the Bank is the owner and sole or partial beneficiary. BOLI is carried at the cash surrender value (“CSV”) of the underlying insurance contract. Changes in the CSV and any death benefits received in excess of the CSV are recognized as non-interest income.

Goodwill — Goodwill represents the excess of the purchase considerations paid over the fair value of the assets acquired, net of the fair values of liabilities assumed in a business combination and is not amortized but is reviewed annually, or more frequently as current circumstances and conditions warrant, for impairment. An assessment of qualitative factors is completed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative analysis concludes that further analysis is required, then a quantitative impairment test would be completed. The quantitative goodwill impairment compares the reporting unit's estimated fair values, including goodwill, to its carrying amount. If the carrying amount exceeds its reporting unit’s fair value, then an impairment loss would be recognized as a charge to earnings but is limited by the amount of goodwill allocated to that reporting unit.

Other intangible assets — Other intangible assets consist primarily of core deposit intangibles (“CDI”), which are amounts recorded in business combinations or deposit purchase transactions related to the value of transaction-related deposits and the value of the client relationships associated with the deposits. Core deposit intangibles are amortized over the estimated useful life of such deposits. These assets are reviewed at least annually for events or circumstances that could affect their recoverability. These events could include loss of the underlying core deposits, increased competition or adverse changes in the economy. To the extent other identifiable intangible assets are deemed unrecoverable; impairment losses are recorded in other non-interest expense to reduce the carrying amount of the assets.

12


 

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

Mortgage and other servicing rights — Mortgage and other servicing rights are recognized as separate assets when rights are acquired through purchase of such rights or through the sale of loans. Generally, purchased servicing rights are capitalized at the cost to acquire the rights. For loans sold, the fair value of the servicing rights are estimated and capitalized. Fair value is based on market prices for comparable servicing rights contracts. Capitalized servicing rights are reported in other assets and are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

 

Other real estate owned — Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of the carrying amount of the foreclosed loan or the fair value of the foreclosed asset, less costs to sell, at the date of foreclosure. Subsequent to foreclosure, management periodically performs valuations and the assets are carried at the lower of carrying amount or fair value, less selling costs. Revenues and expenses from operations and changes in the valuation allowance are included in other real estate owned expense.

Transfers of financial assets — Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Income taxes — Deferred income tax assets and deferred income tax liabilities represent the tax effect of temporary differences between financial reporting and tax reporting measured at enacted tax rates in effect for the year in which the differences are expected to reverse.  The Company recognizes only the impact of tax positions that, based on their technical merits, are more likely than not to be sustained upon an audit by the taxing authority.

Developing the provision for income taxes, including the effective tax rate and analysis of potential tax exposure items, if any, requires significant judgment and expertise in federal and state income tax laws, regulations and strategies, including the determination of deferred income tax assets and liabilities and any estimated valuation allowances deemed necessary to value deferred income tax assets.  Judgments and tax strategies are subject to audit by various taxing authorities.  While the Company believes it has no significant uncertain income tax positions in the consolidated financial statements, adverse determinations by these taxing authorities could have a material adverse effect on the consolidated financial positions, result of operations, or cash flows.

Share-based compensation plans — The fair value of incentive share-based awards is recorded as compensation expense over the vesting period of the award. Compensation expense for stock options is estimated at the date of grant using the Black-Scholes option-pricing model. Compensation expense for RSUs is based on the fair value of the Company’s common shares at the date of grant. RSU awards generally vest in thirds over three years from date of grant.

Earnings per share — Basic earnings per common share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares include shares that may be issued by the Company for outstanding stock options determined using the treasury stock method and for all outstanding RSUs.

Earnings per common share have been computed based on the following:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(Dollars in thousands, except share and per share data)

 

2020

 

 

2019

 

Numerator

 

 

 

 

 

 

 

 

Net income

 

$

10,773

 

 

$

10,505

 

Denominator

 

 

 

 

 

 

 

 

Weighted-average number of common shares outstanding

 

 

18,884,857

 

 

 

18,781,210

 

Incremental shares assumed for stock options and RSUs

 

 

153,270

 

 

 

208,355

 

Weighted-average number of dilutive shares outstanding

 

 

19,038,127

 

 

 

18,989,565

 

Basic earnings per common share

 

$

0.57

 

 

$

0.56

 

Diluted earnings per common share

 

$

0.57

 

 

$

0.55

 

13


 

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

Comprehensive income — U.S. GAAP generally requires that recognized revenues, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, net of the related income tax effect, are reported as a separate component of the equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income.

Impact of recent authoritative accounting guidance — The Accounting Standards Codification™ (“ASC”) is the Financial Accounting Standards Board’s (“FASB”) officially recognized source of authoritative GAAP applicable to all public and non-public non-governmental entities.  Periodically, the FASB will issue Accounting Standard updates (“ASU”) to its ASC.  Rules and interpretive releases of the SEC under the authority of the federal securities laws are also sources of authoritative GAAP for us as an SEC registrant. All other accounting literature is non-authoritative.

In December 2019, FASB issued ASU 2019-12, Income Taxes.  The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.  For public business entities, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted, including adoption in any interim period for (1) public business entities for periods for which financial statements have not yet been issued and (2) all other entities for periods for which financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. Adoption of ASU 2019-12 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In August 2018, FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU broaden the scope of ASC Subtopic 350-40 to include costs incurred to implement a hosting arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The costs are capitalized or expensed depending on the nature of the costs and the project stage during which they are incurred, consistent with the accounting for costs for internal-use software. The amendments in this ASU result in consistent capitalization of implementation costs of a hosting arrangement that is a service contract and implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The amendments in this ASU were applied prospectively to all implementation costs incurred after the date of adoption. Adoption of ASU 2018-15 did not have a material impact on the Company’s Consolidated Financial Statements.

In August 2018, FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The ASU removes, modifies and adds disclosure requirements in Topic 820. The following disclosure requirements were removed: 1) the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, 2) the policy for timing of transfers between levels, and 3) the valuation processes for Level 3 fair value measurements. This ASU modified disclosure requirements by requiring that the measurement uncertainty disclosure communicates information about the uncertainty in measurement as of the reporting date. The following disclosure requirements were added: 1) changes in unrealized gains and losses for the period included in other comprehensive income for the recurring Level 3 fair value measurements held at the end of the reporting period, and 2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Adoption of ASU 2018-13 did not have a material impact on the Company’s Consolidated Financial Statements.

 

14


 

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

In June 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU significantly changes the accounting for credit loss measurement on loans and debt securities. For loans and held-to-maturity debt securities, the ASU requires a current expected credit loss measurement to estimate the allowance for credit losses for the remaining estimated life of the financial asset (including off-balance sheet credit exposures) using historical experience, current conditions, and reasonable and supportable forecasts. The ASU eliminates the existing guidance for purchased credit impaired (“PCI”) loans but requires an allowance for purchased financial assets with more than an insignificant deterioration since origination, otherwise known as purchased credit deteriorated assets. In addition, the ASU modifies the other-than-temporary impairment model for available-for-sale debt securities to require an allowance for credit impairment instead of a direct write-down, which allows for reversal of credit impairments in future periods based on an improvement in credit. This ASU was effective for interim and annual reporting periods beginning after December 15, 2019.

 

On October 16, 2019, the FASB voted to delay the adoption of CECL by two years to January 2023 for private companies, not-for-profit companies, and certain small public companies that meet the definition of a smaller reporting company (“SRC”), as defined by the Securities and Exchange Commission. To meet the requirements of an SRC, an entity must be an issuer as defined by the SEC and have public float of less than $250 million, or public float of less than $700 million and annual revenues of less than $100 million. As of June 30, 2019, our public float was $466 million and annual revenues for 2018 were $130 million.  As a result, we are not an SRC and, therefore, were required to adopt the ASU effective January 1, 2020.

On January 1, 2020, the Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures.  Results for reporting periods beginning after January 1, 2020, are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.  The Company adopted ASC 326 using the prospective transition approach for financial assets purchased through an acquisition or business combination.  Loans that were previously classified as PCI and accounted for under ASC 310-30 were reclassified as PCD loans.  In accordance with the new standard, management did not reassess whether PCI loans met the criteria of PCD loan as of the date of adoption.  On January 1, 2020 the amortized cost basis for PCD loans was increased by $1.5 million to reflect the addition of credit discounts to ACL.  The remaining noncredit discount will be accreted into interest income over the remaining life of the portfolio.  For Non-PCD loans, the Company increased its ACL by $2.6 million using the same methodology used for loans held for investment.  The remaining credit and noncredit discount will be accreted into interest income over the remaining life of the portfolio.  The Company further increased its ACL by $5.4 million to reflect the change in accounting methodology for CECL.

The following table illustrates the impact of the adoption of ASC 326:

 

 

 

January 1, 2020

 

 

(Dollars in thousands)

 

Reported

Under ASC

326

 

 

Reported

Pre

Adoption

 

 

Impact of

ASC 326

Adoption

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for investment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate term

 

$

12,683

 

 

$

12,275

 

 

$

408

 

 

Construction and land development

 

 

13,393

 

 

 

6,990

 

 

 

6,403

 

 

Total commercial real estate

 

 

26,076

 

 

 

19,265

 

 

 

6,811

 

 

Commercial and industrial

 

 

11,541

 

 

 

10,892

 

 

 

649

 

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential and home equity

 

 

2,635

 

 

 

1,118

 

 

 

1,517

 

 

Consumer and other

 

 

640

 

 

 

151

 

 

 

489

 

 

Total consumer

 

 

3,275

 

 

 

1,269

 

 

 

2,006

 

 

Total allowance for credit losses on loans

 

$

40,892

 

 

$

31,426

 

 

$

9,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Reserve for off-balance sheet obligations

 

 

1,669

 

 

 

880

 

 

 

789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

325,682

 

 

 

332,362

 

 

 

(6,680

)

 

15


 

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

The Company expects greater volatility in its earnings and those of other banks after adoption due to the nature and time horizon used to calculate CECL. In addition, the Company expects a potential negative impact to credit availability and reduced loan terms to borrowers as this ASU is adopted by financial institutions. Lastly, the Company expects a lack of comparability with financial performance to many of its peers as it adopts this ASU, due to delayed adoption for public companies with total assets similar in size to us and the recent option to delay implementation.

Subsequent events — The Company has evaluated events occurring subsequent to March 31, 2020 for disclosure in the consolidated financial statements.

Note 2 — Investment Securities

Amortized cost and estimated fair value of investment securities available for sale are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

Gross Unrealized Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less

 

 

12

 

 

 

 

 

 

 

 

 

 

 

Gross

 

 

Than

 

 

Months

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

12

 

 

or

 

 

Fair

 

(Dollars in thousands)

 

Cost

 

 

Gains

 

 

Months

 

 

Longer

 

 

Value

 

As of March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government-sponsored securities

 

$

10,049

 

 

$

331

 

 

$

-

 

 

$

-

 

 

$

10,380

 

Municipal securities

 

 

53,076

 

 

 

592

 

 

 

(19

)

 

 

(1

)

 

 

53,648

 

Mortgage-backed securities

 

 

496,466

 

 

 

12,288

 

 

 

(28

)

 

 

(51

)

 

 

508,675

 

Corporate securities

 

 

5,000

 

 

 

-

 

 

 

(73

)

 

 

(630

)

 

 

4,297

 

 

 

$

564,591

 

 

$

13,211

 

 

$

(120

)

 

$

(682

)

 

$

577,000

 

As of December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government-sponsored securities

 

$

20,957

 

 

$

235

 

 

$

-

 

 

$

(2

)

 

$

21,190

 

Municipal securities

 

 

56,252

 

 

 

670

 

 

 

(1

)

 

 

(9

)

 

 

56,912

 

Mortgage-backed securities

 

 

321,944

 

 

 

2,188

 

 

 

(481

)

 

 

(543

)

 

 

323,108

 

Corporate securities

 

 

5,000

 

 

 

-

 

 

 

-

 

 

 

(215

)