What changed in this filing

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Item 1. Financial Statements

2020-10-30 compared with 2020-08-06 · 114 added, 95 removed, 685 unchanged (23% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

September 30,

(Dollars in thousands, except share data)

25 unchanged sentences

Accumulated other comprehensive income, net

Less treasury stock, at cost - 390,959 shares and 390,989 at June 30, 2020

Less treasury stock, at cost - 390,859 shares and 390,989 at September 30, 2020

and December 31, 2019, respectively

5 unchanged sentences

Consolidated Statements of Earnings

Quarter ended June 30,

Six months ended June 30,

(In thousands, except share and per share data)

Quarter ended September 30,

Nine months ended September 30,

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

Interest income:

29 unchanged sentences

Consolidated Statements of Comprehensive Income

Quarter ended June 30,

Six months ended June 30,

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

Other comprehensive income, net of tax:

Unrealized net holding gain on securities

Other comprehensive income (loss), net of tax:

Unrealized net holding (loss) gain on securities

Reclassification adjustment for net gain on securities

recognized in net earnings

Other comprehensive income

Other comprehensive (loss) income

Comprehensive income

6 unchanged sentences

income (loss)

Quarter ended June 30, 2020

Balance, March 31, 2020

Other comprehensive income

Quarter ended September 30, 2020

Balance, June 30, 2020

Other comprehensive loss

Cash dividends paid ($ .255 per share)

Sale of treasury stock

Balance, September 30, 2020

Quarter ended September 30, 2019

Balance, June 30, 2019

Quarter ended June 30, 2019

Balance, March 31, 2019

Other comprehensive income

2 unchanged sentences

Sale of treasury stock

Balance, June 30, 2019

Six months ended June 30, 2020

Balance, September 30, 2019

Nine months ended September 30, 2020

Balance, December 31, 2019

2 unchanged sentences

Sale of treasury stock

Balance, June 30, 2020

Six months ended June 30, 2019

Balance, September 30, 2020

Nine months ended September 30, 2019

Balance, December 31, 2018

3 unchanged sentences

Sale of treasury stock

Balance, June 30, 2019

Balance, September 30, 2019

See accompanying notes to consolidated financial statements

2 unchanged sentences

Consolidated Statements of Cash Flows

Six months ended June 30,

(In thousands)

Nine months ended September 30,

(Dollars in thousands)

Cash flows from operating activities:

23 unchanged sentences

Proceeds from sale of other real estate owned

Net cash used in investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Net increase in noninterest-bearing deposits

Net increase in interest-bearing deposits

Net increase (decrease) in interest-bearing deposits

Net increase (decrease) in federal funds purchased and securities sold

3 unchanged sentences

Dividends paid

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Net change in cash and cash equivalents

45 unchanged sentences

Subsequent Events

The Company has evaluated the effects of events and transactions through the date of this filing that have occurred subsequent to June 30, 2020.

The Company has evaluated the effects of events and transactions through the date of this filing that have occurred subsequent to September 30, 2020.

The Company does not believe there were any material subsequent events during this period that would have required further recognition or disclosure in the unaudited consolidated financial statements included in this report.

Accounting Developments

In the first six months of 2020 , the Company adopted new guidance related to the following ASUs:

In the first nine months of 2020, the Company adopted new guidance related to the following ASUs:

 ASU 2018-13, Fair Value Measurement (Topic 820):

27 unchanged sentences

Diluted net earnings per share reflect the potential dilution that could occur upon exercise of securities or other rights for, or convertible into, shares of the Company’s common stock.

At June 30, 2020 and 2019 , respectively, the Company had no such securities or rights issued or outstanding, and therefore, no dilutive effect to consider for the diluted net earnings per share calculation.

At September 30, 2020 and 2019, respectively, the Company had no such securities or rights issued or outstanding, and therefore, no dilutive effect to consider for the diluted net earnings per share calculation.

The basic and diluted net earnings per share computations for the respective periods are presented below.

Quarter ended June 30,

Six months ended June 30,

(In thousands, except share and per share data)

Quarter ended September 30,

Nine months ended September 30,

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

Basic and diluted:

1 unchanged sentence

Net earnings per share

At June 30, 2020 and December 31, 2019 , respectively, all securities within the scope of ASC 320, Investments – Debt and Equity Securities, were classified as available-for-sale.

The fair value and amortized cost for securities available-for-sale by contractual maturity at June 30, 2020 and December 31, 2019 , respectively, are presented below.

At September 30, 2020 and December 31, 2019, respectively, all securities within the scope of ASC 320, Investments – Debt and Equity Securities, were classified as available-for-sale.

The fair value and amortized cost for securities available-for-sale by contractual maturity at September 30, 2020 and December 31, 2019, respectively, are presented below.

Gross Unrealized

(Dollars in thousands)

June 30, 2020

September 30, 2020

Agency obligations (a)

9 unchanged sentences

government agencies or government-sponsored entities.

Securities with aggregate fair values of $ 150.3 million and $ 147.8 million at June 30, 2020 and December 31, 2019 , respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, Federal Home Loan Bank (“FHLB”) advances, and for other purposes required or permitted by law.

Securities with aggregate fair values of $ 162.4 million and $ 147.8 million at September 30, 2020 and December 31, 2019, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, Federal Home Loan Bank (“FHLB”) advances, and for other purposes required or permitted by law.

Included in other assets on the accompanying consolidated balance sheets are non-marketable equity investments.

The carrying amounts of non-marketable equity investments were $ 1.4 million at June 30, 2020 and December 31, 2019 , respectively.

The carrying amounts of non-marketable equity investments were $ 1.4 million at September 30, 2020 and December 31, 2019, respectively.

Non-marketable equity investments include FHLB of Atlanta Stock, Federal Reserve Bank (“FRB”) stock, and stock in a privately held financial institution.

Gross Unrealized Losses and Fair Value

The fair values and gross unrealized losses on securities at June 30, 2020 and December 31, 2019 , respectively, segregated by those securities that have been in an unrealized loss position for less than 12 months and 12 months or longer, are presented below.

The fair values and gross unrealized losses on securities at September 30, 2020 and December 31, 2019, respectively, segregated by those securities that have been in an unrealized loss position for less than 12 months and 12 months or longer, are presented below.

Less than 12 Months

1 unchanged sentence

(Dollars in thousands)

June 30, 2020:

September 30, 2020:

Agency obligations

15 unchanged sentences

Agency obligations

The unrealized losses associated with agency obligations were primarily driven by increases in interest rates and not due to the credit quality of the securities.

The unrealized losses associated with agency obligations were primarily driven by declines in interest rates and not due to the credit quality of the securities.

These securities were issued by U.S.

government agencies or government-sponsored entities and did not have any credit losses given the explicit government guarantee or other government support.

The unrealized losses associated with agency residential mortgage-backed securities (“RMBS”) were primarily driven by increases in interest rates and not due to the credit quality of the securities.

The unrealized losses associated with agency residential mortgage-backed securities (“RMBS”) were primarily driven by declines in interest rates and not due to the credit quality of the securities.

These securities were issued by U.S.

3 unchanged sentences

The unrealized losses associated with securities of U.S.

states and political subdivisions were primarily driven by increases in interest rates and were not due to the credit quality of the securities.

states and political subdivisions were primarily driven by declines in interest rates and were not due to the credit quality of the securities.

Some of these securities are guaranteed by a bond insurer, but management did not rely on the guarantee in making its investment decision.

5 unchanged sentences

Credit-impaired debt securities are debt securities where the Company has written down the amortized cost basis of a security for other-than-temporary impairment and the credit component of the loss is recognized in earnings.

At June 30, 2020 and December 31, 2019, the Company had no credit-impaired debt securities and there were no additions or reductions in the credit loss component of credit-impaired debt securities during the six months ended June 30, 2020 and 2019, respectively.

At September 30, 2020 and December 31, 2019, the Company had no credit-impaired debt securities and there were no additions or reductions in the credit loss component of credit-impaired debt securities during the nine months ended September 30, 2020 and 2019, respectively.

Realized Gains and Losses

The following table presents the gross realized gains and losses on sales of securities.

Quarter ended June 30,

Six months ended June 30,

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

3 unchanged sentences

LOANS AND ALLOWANCE FOR LOAN LOSSES

(In thousands)

September 30,

(Dollars in thousands)

Commercial and industrial

10 unchanged sentences

Loans, net of unearned income

Loans secured by real estate were approximately 79.3% of the Company’s total loan portfolio at June 30, 2020 .

At June 30, 2020 , the Company’s geographic loan distribution was concentrated primarily in Lee County, Alabama, and surrounding areas.

Loans secured by real estate were approximately 77.6% of the Company’s total loan portfolio at September 30, 2020.

At September 30, 2020, the Company’s geographic loan distribution was concentrated primarily in Lee County, Alabama, and surrounding areas.

In accordance with ASC 310, a portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for loan losses.

7 unchanged sentences

Generally, the primary source of repayment is the cash flow from business operations and activities of the borrower.

We are a participating lender in the Paycheck Protection Program (“PPP”).

PPP loans are forgivable in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP.

As of September 30, 2020, the Company has 422 PPP loans with an aggregate outstanding principal balance of $36.5 million included in this category.

Construction and land development (“C&D”) — includes both loans and credit lines for the purpose of purchasing, carrying, and developing land into commercial developments or residential subdivisions.

26 unchanged sentences

These loans are underwritten in accordance with the Bank’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and, if applicable, property value.

The following is a summary of current, accruing past due, and nonaccrual loans by portfolio segment and class as of June 30, 2020 and December 31, 2019 .

(In thousands)

June 30, 2020:

The following is a summary of current, accruing past due, and nonaccrual loans by portfolio segment and class as of September 30, 2020 and December 31, 2019.

(Dollars in thousands)

September 30, 2020:

Commercial and industrial

43 unchanged sentences

For loan segments where the Company believes it does not have sufficient historical loss data, the Company may make adjustments based, in part, on loss rates of peer bank groups.

At June 30, 2020 and December 31, 2019 , and for the periods then ended, the Company adjusted its historical loss rates for the commercial real estate portfolio segment based, in part, on loss rates of peer bank groups.

At September 30, 2020 and December 31, 2019, and for the periods then ended, the Company adjusted its historical loss rates for the commercial real estate portfolio segment based, in part, on loss rates of peer bank groups.

The estimated loan loss allocation for all five loan portfolio segments is then adjusted for management’s estimate of probable losses for several “qualitative and environmental” factors.

6 unchanged sentences

Absent this extension, the early cycle periods in which the Company experienced significant losses would be excluded from the determination of the allowance for loan losses and its balance would decrease.

For the quarter ended June 30, 2020, the Company increased its look-back period to 45 quarters to continue to include losses incurred by the Company beginning with the first quarter of 2009.

For the quarter ended September 30, 2020, the Company increased its look-back period to 46 quarters to continue to include losses incurred by the Company beginning with the first quarter of 2009.

The Company will likely continue to increase its look-back period to incorporate the effects of at least one economic downturn in its loss history.

During the first six months of 2020, the Company adjusted certain qualitative and economic factors related to changes in economic conditions driven by the impact of the novel strain of coronavirus (“COVID-19 pandemic”) and resulting adverse economic conditions, including higher unemployment in our primary market area.

During the first nine months of 2020, the Company adjusted certain qualitative and economic factors related to changes in economic conditions driven by the impact of the novel strain of coronavirus (“COVID-19 pandemic”) and resulting adverse economic conditions, including higher unemployment in our primary market area.

The following table details the changes in the allowance for loan losses by portfolio segment for the respective periods.

June 30, 2020

(In thousands)

September 30, 2020

(Dollars in thousands)

Commercial and industrial

5 unchanged sentences

Beginning balance

Net (charge-offs) recoveries

Net recoveries

Provision for loan losses

Ending balance

Six months ended:

Nine months ended:

Beginning balance

2 unchanged sentences

Ending balance

June 30, 2019

(In thousands)

September 30, 2019

(Dollars in thousands)

Commercial and industrial

5 unchanged sentences

Beginning balance

Net recoveries (charge-offs)

Net (charge-offs) recoveries

Provision for loan losses

Ending balance

Six months ended:

Nine months ended:

Beginning balance

Net recoveries (charge-offs)

Net (charge-offs) recoveries

Provision for loan losses

Ending balance

The following table presents an analysis of the allowance for loan losses and recorded investment in loans by portfolio segment and impairment methodology as of June 30, 2020 and 2019 .

The following table presents an analysis of the allowance for loan losses and recorded investment in loans by portfolio segment and impairment methodology as of September 30, 2020 and 2019.

Collectively evaluated (1)

Individually evaluated (2)

(In thousands)

June 30, 2020:

(Dollars in thousands)

September 30, 2020:

Commercial and industrial (3)

3 unchanged sentences

Consumer installment

June 30, 2019:

September 30, 2019:

Commercial and industrial

7 unchanged sentences

pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.

Includes $36.5 million of PPP loans for which no loan loss reserve was allocated due to 100% SBA guarantee

Credit Quality Indicators

8 unchanged sentences

 Nonaccrual – includes loans where management has determined that full payment of principal and interest is not expected.

(In thousands)

(Dollars in thousands)

Special Mention

Substandard Accruing

June 30, 2020:

September 30, 2020:

Commercial and industrial

25 unchanged sentences

 Individually evaluated impaired loans equal to or greater than $250,000 not secured by real estate (nonaccrual commercial and industrial and consumer installment loans).

The following tables set forth certain information regarding the Company’s impaired loans that were individually evaluated for impairment at June 30, 2020 and December 31, 2019 .

June 30, 2020

(In thousands)

The following tables set forth certain information regarding the Company’s impaired loans that were individually evaluated for impairment at September 30, 2020 and December 31, 2019.

September 30, 2020

(Dollars in thousands)

Unpaid principal balance (1)

16 unchanged sentences

December 31, 2019

(In thousands)

(Dollars in thousands)

Unpaid principal balance (1)

12 unchanged sentences

The following table provides the average recorded investment in impaired loans, if any, by portfolio segment, and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class during the respective periods.

Quarter ended June 30, 2020

Six months ended June 30, 2020

Quarter ended September 30, 2020

Nine months ended September 30, 2020

Total interest

(In thousands)

(Dollars in thousands)

Impaired loans:

4 unchanged sentences

Total residential real estate

Quarter ended June 30, 2019

Six months ended June 30, 2019

Quarter ended September 30, 2019

Nine months ended September 30, 2019

Total interest

(In thousands)

(Dollars in thousands)

Impaired loans:

7 unchanged sentences

On April 7, 2020, the Federal Reserve and the other banking agencies and regulators issued a statement, “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised)” (the “Interagency Statement on COVID-19 Loan Modifications”), to encourage banks to work prudently with borrowers and to describe the agencies’ interpretation of how accounting rules under ASC 310-40, “Troubled Debt Restructurings by Creditors,” apply to certain COVID-19-related modifications.

The Interagency Statement on COVID-19 Loan Modifications was supplemented on June 23, 2020 by the Interagency Examiner Guidance for Assessing Safety and Soundness Considering the Effect of the COVID-19 Pandemic on Institutions.

If a loan modification is eligible, a bank may elect to account for the loan under section 4013 of the CARES Act.

10 unchanged sentences

In periods subsequent to the modification, all TDRs are individually evaluated for possible impairment.

The following is a summary of accruing and nonaccrual TDRs, which are included in the impaired loan totals, and the related allowance for loan losses, by portfolio segment and class as of September 30, 2020.

The company had no TDRs as of December 31, 2019.

There were no loans modified in a TDR during the quarter and six months ended June 30, 2020 and 2019, respectively.

For the same periods, the Company had no loans modified in a TDR within the previous 12 months for which there was a payment default.

(In thousands)

June 30, 2020

(Dollars in thousands)

September 30, 2020

Commercial real estate:

3 unchanged sentences

Total residential real estate

At September 30, 2020, there were no significant outstanding commitments to advance additional funds to customers whose loans had been restructured.

The following table summarizes loans modified in a TDR during the respective periods both before and after their modification.

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

Commercial real estate:

Total commercial real estate

Residential real estate:

Investment property

Total residential real estate

Four loans were modified in a TDR during the nine months ended September 30, 2020.

The only concession granted by the Company was related to a delay in the required payment of principal and interest.

There were no loans modified in a TDR during the quarter and nine months ended September 30, 2019.

During the quarter and nine months ended September 30, 2020 and 2019, respectively, there were no loans modified in a TDR within the previous 12 months for which there was a payment default (defined as 90 days or more past due).

MORTGAGE SERVICING RIGHTS, NET

12 unchanged sentences

The following table details the changes in amortized MSRs and the related valuation allowance for the respective periods.

Quarter ended June 30,

Six months ended June 30,

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

20 unchanged sentences

The nature of the Company’s financial assets and liabilities generally is such that transfers in and out of any level are expected to be infrequent.

For the six months ended June 30, 2020, there were no transfers between levels and no changes in valuation techniques for the Company’s financial assets and liabilities.

For the nine months ended September 30, 2020, there were no transfers between levels and no changes in valuation techniques for the Company’s financial assets and liabilities.

Assets and liabilities measured at fair value on a recurring basis

7 unchanged sentences

This independent valuation firm will compare the price provided by the third party pricing service with its own price and will review the significant assumptions and valuation methodologies used with management.

The following table presents the balances of the assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019 , respectively, by caption, on the accompanying consolidated balance sheets by ASC 820 valuation hierarchy (as described above).

The following table presents the balances of the assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019, respectively, by caption, on the accompanying consolidated balance sheets by ASC 820 valuation hierarchy (as described above).

Quoted Prices in

2 unchanged sentences

(Dollars in thousands)

June 30, 2020:

September 30, 2020:

Securities available-for-sale:

26 unchanged sentences

Other real estate owned

Other real estate owned (“OREO”), consisting of properties obtained through foreclosure or in satisfaction of loans, are initially recorded at the lower of the loan’s carrying amount or the fair value of collateral less costs to sell upon transfer of the loans to other real estate.

Other real estate owned (“OREO”), consisting of properties obtained through foreclosure or in satisfaction of loans, is initially recorded at the lower of the loan’s carrying amount or the fair value of collateral less costs to sell upon transfer of the loans to other real estate.

Subsequently, OREO is carried at the lower of carrying value or fair value less costs to sell.

11 unchanged sentences

Because the valuation of MSRs requires the use of significant unobservable inputs, all of the Company’s MSRs are classified within Level 3 of the valuation hierarchy.

The following table presents the balances of the assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2020 and December 31, 2019 , respectively, by caption, on the accompanying consolidated balance sheets and by FASB ASC 820 valuation hierarchy (as described above):

The following table presents the balances of the assets and liabilities measured at fair value on a nonrecurring basis as of September 30, 2020 and December 31, 2019, respectively, by caption, on the accompanying consolidated balance sheets and by FASB ASC 820 valuation hierarchy (as described above):

Quoted Prices in

2 unchanged sentences

(Dollars in thousands)

June 30, 2020:

September 30, 2020:

Loans held for sale

12 unchanged sentences

Quantitative Disclosures for Level 3 Fair Value Measurements

At June 30, 2020 , the Company had no Level 3 assets measured at fair value on a recurring basis.

For Level 3 assets measured at fair value on a non-recurring basis at June 30, 2020 , the significant unobservable inputs used in the fair value measurements are presented below.

At September 30, 2020, the Company had no Level 3 assets measured at fair value on a recurring basis.

For Level 3 assets measured at fair value on a non-recurring basis at September 30, 2020, the significant unobservable inputs used in the fair value measurements are presented below.

(Dollars in thousands)

1 unchanged sentence

Unobservable Input

June 30, 2020:

September 30, 2020:

Impaired loans

28 unchanged sentences

The discount rates were based on rates currently offered for deposits with similar remaining maturities.

The carrying value, related estimated fair value, and placement in the fair value hierarchy of the Company’s financial instruments at June 30, 2020 and December 31, 2019 are presented below.

The carrying value, related estimated fair value, and placement in the fair value hierarchy of the Company’s financial instruments at September 30, 2020 and December 31, 2019 are presented below.

This table excludes financial instruments for which the carrying amount approximates fair value.

5 unchanged sentences

(Dollars in thousands)

June 30, 2020:

September 30, 2020:

Financial Assets:

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements