3 unchanged sentences
(Dollars in thousands, except share and per share data)
+Added: September 30,
Cash and due from banks
25 unchanged sentences
Preferred stock, par value $ 2.00 per share;
−Removed: authorized 1,000,000 shares as of June 30, 2020 and December 31, 2019;
−Removed: issued 0 as of June 30, 2020 and December 31, 2019
+Added: authorized 1,000,000 shares as of September 30, 2020 and December 31, 2019;
+Added: issued 0 as of September 30, 2020 and December 31, 2019
Common stock, par value $ 2.00 per share;
−Removed: authorized 20,000,000 shares as of June 30, 2020 and December 31, 2019;
−Removed: issued 6,079,854 as of June 30, 2020 and 6,048,506 as of December 31, 2019;
−Removed: outstanding 5,848,242 as of June 30, 2020 and 5,816,894 as of December 31, 2019
+Added: authorized 20,000,000 shares as of September 30, 2020 and December 31, 2019;
+Added: issued 6,097,519 as of September 30, 2020 and 6,048,506 as of December 31, 2019;
+Added: outstanding 5,865,907 as of September 30, 2020 and 5,816,894 as of December 31, 2019
Retained earnings
Accumulated other comprehensive income
−Removed: Treasury stock, at cost, 231,612 shares as of June 30, 2020 and December 31, 2019
+Added: Treasury stock, at cost, 231,612 shares as of September 30, 2020 and December 31, 2019
TOTAL STOCKHOLDERS’ EQUITY
3 unchanged sentences
CONSOLIDATED STATEMENTS OF INCOME
−Removed: THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
+Added: THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Dollars in thousands, except per share data)
Three Months Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
Interest and fees on loans
17 unchanged sentences
Gains on sales of mortgage loans
−Removed: Net securities gains (losses)
+Added: Net securities (losses) gains
Total non-interest income
6 unchanged sentences
Pennsylvania shares tax
−Removed: FDIC insurance
+Added: FDIC insurance, net
ATM and debit card fees
10 unchanged sentences
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
−Removed: THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
+Added: THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Dollars in thousands)
Three Months Ended
+Added: September 30,
Other comprehensive income:
4 unchanged sentences
(Dollars in thousands)
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
Other comprehensive income:
8 unchanged sentences
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
−Removed: SIX MONTHS ENDED JUNE 30, 2020 AND 2019
+Added: NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Dollars in thousands, except per share data)
10 unchanged sentences
Balance at June 30, 2020
+Added: Other comprehensive income, net of taxes
+Added: Issuance of common stock under dividend reinvestment plan
+Added: Dividends - $ 0.27 per share
+Added: Balance at September 30, 2020
+Added: (Dollars in thousands, except per share data)
Comprehensive
10 unchanged sentences
Balance at June 30, 2019
+Added: Other comprehensive income, net of taxes
+Added: Issuance of common stock under dividend reinvestment plan
+Added: Dividends - $ 0.27 per share
+Added: Balance at September 30, 2019
See accompanying notes to consolidated financial statements.
1 unchanged sentence
CONSOLIDATED STATEMENTS OF CASH FLOWS
−Removed: SIX MONTHS ENDED JUNE 30, 2020 AND 2019
+Added: NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Dollars in thousands)
17 unchanged sentences
(Decrease) increase in other liabilities
−Removed: NET CASH PROVIDED BY OPERATING ACTIVITIES
+Added: NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
16 unchanged sentences
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
−Removed: DECREASE IN CASH AND CASH EQUIVALENTS
+Added: INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING
19 unchanged sentences
In the opinion of management, all adjustments considered necessary for fair presentation have been included.
−Removed: Operating results for the three and six months ended June 30, 2020, are not necessarily indicative of the results for the year ending December 31, 2020.
+Added: Operating results for the three and nine months ended September 30, 2020, are not necessarily indicative of the results for the year ending December 31, 2020.
For further information, refer to the consolidated financial statements and notes thereto included in First Keystone Corporation’s Annual Report on Form 10-K for the year ended December 31, 2019.
Subsequent Events
−Removed: The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of June 30, 2020 for items that should potentially be recognized or disclosed in these consolidated financial statements.
+Added: The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2020 for items that should potentially be recognized or disclosed in these consolidated financial statements.
The evaluation was conducted through the date these consolidated financial statements were issued.
1 unchanged sentence
Recently adopted ASUs:
−Removed: In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) :
+Added: In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) :
Simplifying the Test for Goodwill Impairment.
3 unchanged sentences
The update also eliminated the requirements for zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.
−Removed: The amendments are effective for public business entities for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.
+Added: The amendments were effective for public business entities for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.
The adoption of this update on January 1, 2020 did not have a material impact on the Company’s consolidated financial position or results of operations.
7 unchanged sentences
For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.
−Removed: The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years beginning after December 15, 2019.
+Added: The amendments in this update were effective for all entities for fiscal years, and interim periods within those fiscal years beginning after December 15,
The adoption of this update on January 1, 2020 did not have a material impact on the Company's consolidated financial statements and related disclosures.
19 unchanged sentences
Debt securities not classified as Held-to-Maturity are included in the Available-for-Sale category and are carried at fair value.
−Removed: The amount of any unrealized gain or loss, net of the effect of deferred income taxes, is reported as accumulated other comprehensive income (loss) (AOCI) in the consolidated balance sheets and consolidated statements of changes in stockholders’ equity.
+Added: The amount of any unrealized gain or loss, net of the effect of deferred income taxes, is reported as accumulated other comprehensive income (AOCI) in the consolidated balance sheets and consolidated statements of changes in stockholders’ equity.
Management’s decision to sell Available-for-Sale securities is based on changes in economic conditions, controlling the sources and applications of funds, terms, availability of and yield of alternative investments, interest rate risk and the need for liquidity.
5 unchanged sentences
The cost of securities sold, redeemed or matured is based on the specific identification method.
−Removed: The amortized cost, related estimated fair value, and unrealized gains and losses for debt securities classified as “Available-For-Sale” were as follows at June 30, 2020 and December 31, 2019:
+Added: The amortized cost, related estimated fair value, and unrealized gains and losses for debt securities classified as “Available-For-Sale” were as follows at September 30, 2020 and December 31, 2019:
Debt Securities Available-for-Sale
(Dollars in thousands)
−Removed: June 30, 2020:
+Added: September 30, 2020:
Treasury securities
17 unchanged sentences
Corporate debt securities
−Removed: Securities Available-for-Sale with an aggregate fair value of $ 228,837,000 at June 30, 2020 and $ 201,468,000 at December 31, 2019, were pledged to secure public funds, trust funds, securities sold under agreements to repurchase and the Federal Discount Window aggregating $ 153,021,000 at June 30, 2020 and $ 143,546,000 at December 31, 2019.
−Removed: The amortized cost and estimated fair value of debt securities, by contractual maturity, are shown below at June 30, 2020.
+Added: Securities Available-for-Sale with an aggregate fair value of $ 281,172,000 at September 30, 2020 and $ 201,468,000 at December 31, 2019, were pledged to secure public funds, trust funds, securities sold under agreements to repurchase and the Federal Discount Window aggregating $ 223,543,000 at September 30, 2020 and $ 143,546,000 at December 31, 2019.
+Added: The amortized cost and estimated fair value of debt securities, by contractual maturity, are shown below at September 30, 2020.
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
−Removed: June 30, 2020
+Added: September 30, 2020
Debt Securities Available-For-Sale
13 unchanged sentences
Government and U.S.
−Removed: Government Agencies and Corporations) which exceeded ten percent of consolidated stockholders’ equity at June 30, 2020.
+Added: Government Agencies and Corporations) which exceeded ten percent of consolidated stockholders’ equity at September 30, 2020.
The quality rating of the obligations of state and political subdivisions are generally investment grade, as rated by Moody’s, Standard and Poor’s or Fitch.
The typical exceptions are local issues which are not rated, but are secured by the full faith and credit obligations of the communities that issued these securities.
−Removed: Proceeds from sales of investments in Debt Securities Available-For-Sale for the three months ended June 30, 2020 and 2019 were $ 2,370,000 and $ 0 , respectively.
+Added: Proceeds from sales of investments in Debt Securities Available-For-Sale for the three months ended September 30, 2020 and 2019 were $ 8,140,000 and $ 39,651,000 , respectively.
Gross gains realized on these sales were $ 142,000 and $ 718,000 , respectively.
−Removed: There were no gross losses realized on these sales for the three months ended June 30, 2020 or 2019.
−Removed: There were no impairment losses realized on Debt Securities Available-For-Sale during the three months ended June 30, 2020 or 2019.
−Removed: Proceeds from sales of investments in Debt Securities Available-For-Sale for the six months ended June 30, 2020 and 2019 were $ 13,552,000 and $ 32,374,000 , respectively.
+Added: Gross losses on these sales were $ 81,000 and $ 47,000 , respectively.
+Added: There were no impairment losses realized on Debt Securities Available-For-Sale during the three months ended September 30, 2020 or 2019.
+Added: Proceeds from sales of investments in Debt Securities Available-For-Sale for the nine months ended September 30, 2020 and 2019 were $ 21,692,000 and $ 72,025,000 , respectively.
Gross gains realized on these sales were $ 414,000 and $ 905,000 , respectively.
Gross losses realized on these sales were $ 186,000 and $ 149,000 , respectively.
−Removed: There were no impairment losses realized on Debt Securities Available-For-Sale during the six months ended June 30, 2020 or 2019.
−Removed: At June 30, 2020 and December 31, 2019, the Company had $ 1,463,000 and $ 1,933,000 , respectively, in equity securities recorded at fair value.
−Removed: The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the six months ended June 30, 2020 and 2019:
+Added: There were no impairment losses realized on Debt Securities Available-For-Sale during the nine months ended September 30, 2020 or 2019.
+Added: At September 30, 2020 and December 31, 2019, the Company had $ 1,393,000 and $ 1,933,000 , respectively, in equity securities recorded at fair value.
+Added: The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the nine months ended September 30, 2020 and 2019:
(Dollars in thousands)
−Removed: Six months ended
−Removed: Six months ended
−Removed: June 30, 2020
−Removed: June 30, 2019
+Added: Nine months ended
+Added: Nine months ended
+Added: September 30, 2020
+Added: September 30, 2019
Net (losses) and gains recognized during the period on equity securities
1 unchanged sentence
Net (losses) and gains recognized during the reporting period on equity securities still held at the reporting date
−Removed: There were no proceeds from sales of investments in Held-to-Maturity debt securities during the six months ended June 30, 2020 or 2019.
+Added: There were no proceeds from sales of investments in Held-to-Maturity debt securities during the nine months ended September 30, 2020 or 2019.
Therefore, there were no gains or losses realized during these periods.
10 unchanged sentences
The Company and its investment advisors monitor the entire portfolio monthly with particular attention given to securities in a continuous loss position of at least ten percent for over twelve months.
−Removed: Based on the factors described above, management did not consider any securities to be other-than-temporarily impaired at June 30, 2020 or December 31, 2019.
+Added: Based on the factors described above, management did not consider any securities to be other-than-temporarily impaired at September 30, 2020 or December 31, 2019.
The summary below shows the gross unrealized losses and fair value of the Company’s debt securities.
−Removed: Totals are aggregated by investment category where individual securities have been in a continuous loss position for less than 12 months or 12 months or more as of June 30, 2020 and December 31, 2019:
−Removed: June 30, 2020
+Added: Totals are aggregated by investment category where individual securities have been in a continuous loss position for less than 12 months or 12 months or more as of September 30, 2020 and December 31, 2019:
+Added: September 30, 2020
(Dollars in thousands)
26 unchanged sentences
The municipal securities consist of general obligations and revenue bonds.
+Added: Corporate debt securities consist of senior debt and subordinated debt holdings.
The fair market value of the above securities is influenced by market interest rates, prepayment speeds on mortgage securities, bid-offer spreads in the market place and credit premiums for various types of agency debt.
These factors change continuously and therefore the market value of these securities may be higher or lower than the Company’s carrying value at any measurement date.
−Removed: Management does not believe any of their 22 debt securities with a less than one year unrealized loss position, or any of their 13 debt securities with a one year or greater unrealized loss position as of June 30, 2020, represent an other-than-temporary impairment, as the unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.
−Removed: The Company expects to collect all principal and interest payments defined under the original terms as all contracted payments on securities in the portfolio are current as of June 30, 2020.
+Added: Management does not believe any of their 18 debt securities with a less than one year unrealized loss position, or any of their 15 debt securities with a one year or greater unrealized loss position as of September 30, 2020, represent an other-than-temporary impairment, as the unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.
+Added: The Company expects to collect all principal and interest payments defined under the original terms as all contracted payments on securities in the portfolio are current as of September 30, 2020.
NOTE 4 — LOANS AND ALLOWANCE FOR LOAN LOSSES
4 unchanged sentences
These loans are sold without recourse.
−Removed: Loans held for sale amounted to $ 3,836,000 and $ 2,292,000 at June 30, 2020 and December 31, 2019, respectively.
+Added: Loans held for sale amounted to $ 12,274,000 and $ 2,292,000 at September 30, 2020 and December 31, 2019, respectively.
As an addition to the commercial loans receivable portfolio, the Company may purchase the guaranteed portion of loans secured by the U.S.
4 unchanged sentences
Government) on all principal and the balance of interest accruing through ninety days beyond the date that demand is made to the originating bank for repurchase of the loan.
−Removed: As of June 30, 2020, the Company's balance of GGLs amounted to $ 5,926,000 , compared to $ 6,150,000 at December 31, 2019.
−Removed: As a result of the economic impact of the COVID-19 coronavirus pandemic, the Coronavirus Aid Relief, and Economic Security (“CARES Act”) was enacted in the United States on March 27, 2020.
+Added: As of September 30, 2020, the Company's balance of GGLs amounted to $ 5,215,000 , compared to $ 6,150,000 at December 31, 2019.
+Added: As a result of the economic impact of the COVID-19 coronavirus pandemic, the Coronavirus Aid Relief, and Economic Security Act (“CARES Act”) was enacted in the United States on March 27, 2020.
The Company is approved by the SBA to fund loans under the SBA’s Paycheck Protection Program (“PPP”) created as part of the CARES Act.
3 unchanged sentences
All PPP loans are carried in the Company’s Commercial and Industrial loan portfolio.
−Removed: As of June 30, 2020, the Company had funded 471 PPP loans, which carried a balance of $ 31,396,000 .
−Removed: An additional provision of the CARES Act, Section 4013 provides financial institutions the option to suspend requirements to categorize certain loan modifications as TDRs, as long as specific criteria are met.
−Removed: To qualify, the loan modifications must be short-term (granted for temporary relief, ex.
−Removed: six months), made on a good-faith basis in response to the COVID-19 pandemic, and the contractual payments of the loan must have been paid current (less than 30 days past due prior to any relief) at the time a modification was implemented.
+Added: As of September 30, 2020, the Company had funded 490 PPP loans, which carried a balance of $ 31,729,000 .
+Added: An additional provision of the CARES Act, Section 4013 provides financial institutions the option to suspend requirements to categorize certain loan modifications as troubled debt restructurings (“TDRs”), as long as specific criteria are met.
+Added: To qualify, the loan modifications must be made on a good-faith basis in response to the COVID-19 pandemic, must occur between March 1, 2020 and the earlier of December 31, 2020 or the 60th day after the end of the COVID-19 pandemic is declared by the President of the United States, and the loans must have been paid current (less than 30 days past due prior to any relief) as of December 31, 2019.
In compliance with Section 4013 of the CARES Act, the Company has granted modification requests to defer principal and/or interest payments or modify interest rates on various loans across all portfolio segments.
−Removed: As of June 30, 2020, 489 modifications carrying a balance of $ 163,795,000 had been granted in compliance with Section 4013 of the CARES Act.
−Removed: See page 23 for additional information and discussion of the Section 4013 CARES Act modifications.
+Added: Of the loan modifications that have been granted in compliance with Section 4013 of the CARES Act, there were 189 loan modifications still actively on deferral carrying an aggregate balance of $ 74,935,000 as of September 30, 2020.
+Added: See page 26 for additional information regarding the Section 4013 CARES Act modifications.
The loans receivable portfolio is segmented into commercial, residential and consumer loans.
4 unchanged sentences
These loans are used for various business purposes, which include short-term loans and lines of credit to finance machinery and equipment, inventory and accounts receivable.
−Removed: Generally, the maximum term for loans extended on machinery and equipment is based on the projected useful life of such machinery and equipment.
+Added: Generally, the maximum term for
+Added: loans extended on machinery and equipment is based on the projected useful life of such machinery and equipment.
Most business lines of credit are written on demand and are reviewed annually.
29 unchanged sentences
In underwriting one-to-four family residential mortgage loans, the Company evaluates the borrower’s ability to make monthly payments, the borrower’s repayment history and the value of the property securing the loan.
−Removed: and willingness to repay is assessed based upon the borrower’s employment history, current financial conditions and credit background.
+Added: The ability and willingness to repay is assessed based upon the borrower’s employment history, current financial conditions and credit background.
A majority of the properties securing residential real estate loans made by the Company are appraised by independent appraisers.
49 unchanged sentences
Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception.
−Removed: If a troubled debt restructuring is considered to be a collateral dependent loan, the loans may be reported, net, at the fair value of the collateral.
+Added: If a troubled debt restructuring is considered to be a collateral dependent loan, the loan may be reported, net, at the fair value of the collateral.
For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.
3 unchanged sentences
delinquency trends, loan volume trends, Bank policy changes, management processes and oversight, economic trends (including change in consumer and business disposable incomes, unemployment and under-employment levels, and other conditions), concentrations by industry or product, internal and external loan review processes, collateral value and market conditions, and external factors including regulatory issues and competition.
−Removed: In response to the COVID-19 pandemic and its impact on the current economy, the qualitative factors across all loan segments were increased by two basis points during the first quarter of 2020.
−Removed: Qualitative factors across all loan segments were increased by an additional basis point during the second quarter of 2020, as there is still economic uncertainty related to the COVID-19 pandemic.
+Added: In response to the COVID-19 pandemic and its impact on the current economy, the qualitative factors across all loan segments were increased by two basis points during the first quarter of 2020 and again by an additional basis point across all loan segments during the second quarter of 2020.
+Added: The qualitative factor for the Commercial Real Estate portfolio segment was increased by an additional basis point during the third quarter of 2020, as there is still economic uncertainty related to the COVID-19 pandemic, especially in relation to this segment of the Company’s loan portfolio.
+Added: Modifications granted in compliance with Section 4013 of the CARES Act are highest in the Commercial Real Estate portfolio segment, the long-term effects of which are still very unclear.
Government Guaranteed Loans do not require an associated allowance for loan losses due to the underlying irrevocable and unconditional guarantee, which is supported by the full faith and credit of the U.S.
5 unchanged sentences
The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and, if necessary, is recorded in other liabilities on the consolidated balance sheets.
−Removed: As of June 30, 2020 and December 31, 2019, the amount of the reserve for unfunded lending commitments was $ 213,000 and $ 117,000 , respectively.
+Added: As of September 30, 2020 and December 31, 2019, the amount of the reserve for unfunded lending commitments was $ 138,000 and $ 117,000 , respectively.
The Company is subject to periodic examination by its federal and state examiners, and may be required by such regulators to recognize additions to the allowance for loan losses based on their assessment of credit information available to them at the time of their examinations.
12 unchanged sentences
See page 26 for further discussion of the Section 4013 CARES Act modifications.
−Removed: The Company utilizes a risk grading matrix as a tool for managing credit risk in the loan portfolio and assigns an asset quality rating (risk grade) to all Commercial and Industrial, Commercial Real Estate, Residential Real Estate
−Removed: and Consumer borrowings.
+Added: The Company utilizes a risk grading matrix as a tool for managing credit risk in the loan portfolio and assigns an asset quality rating (risk grade) to all Commercial and Industrial, Commercial Real Estate, Residential Real Estate and Consumer borrowings.
An asset quality rating is assigned using the guidance provided in the Company’s loan policy.
37 unchanged sentences
Loans are graded doubtful if they contain weaknesses so serious that collection or liquidation in full is questionable.
−Removed: The following table presents the classes of the loan portfolio summarized by risk rating as of June 30, 2020 and December 31, 2019:
+Added: The following table presents the classes of the loan portfolio summarized by risk rating as of September 30, 2020 and December 31, 2019:
Commercial and
1 unchanged sentence
Commercial Real Estate
+Added: September 30,
+Added: September 30,
7 Special Mention
5 unchanged sentences
Including Home Equity
+Added: September 30,
+Added: September 30,
7 Special Mention
3 unchanged sentences
Net deferred loan fees and costs
+Added: September 30,
7 Special Mention
3 unchanged sentences
Net deferred loan fees and costs
−Removed: Commercial and Industrial and Commercial Real Estate include loans categorized as tax-free in the amounts of $ 7,395,000 and $ 1,925,000 at June 30, 2020 and $ 17,848,000 and $ 2,007,000 at December 31, 2019.
−Removed: Commercial and Industrial loans also included $ 5,926,000 and $ 6,150,000 of Government Guaranteed Loans and $ 31,396,000 and $ 0 of
−Removed: Paycheck Protection Program loans as of June 30, 2020 and December 31, 2019, respectively.
−Removed: Loans held for sale amounted to $ 3,836,000 at June 30, 2020 and $ 2,292,000 at December 31, 2019.
+Added: Commercial and Industrial and Commercial Real Estate include loans categorized as tax-free in the amounts of $ 7,322,000 and $ 1,885,000 at September 30, 2020 and $ 17,848,000 and $ 2,007,000 at December 31, 2019.
+Added: Commercial and Industrial loans also included $ 5,215,000 and $ 6,150,000 of Government Guaranteed Loans and $ 31,729,000 and $ 0 of Paycheck Protection Program loans as of September 30, 2020 and December 31, 2019, respectively.
+Added: Loans held for sale amounted to $ 12,274,000 at September 30, 2020 and $ 2,292,000 at December 31, 2019.
The activity in the allowance for loan losses, by loan class, is summarized below for the periods indicated.
1 unchanged sentence
and Industrial
−Removed: As of and for the three month period ended June 30, 2020:
+Added: As of and for the three month period ended September 30, 2020:
Allowance for Loan Losses:
4 unchanged sentences
and Industrial
−Removed: As of and for the six month period ended June 30, 2020:
+Added: As of and for the nine months ended September 30, 2020:
Allowance for Loan Losses:
14 unchanged sentences
and Industrial
−Removed: As of and for the three month period ended June 30, 2019:
+Added: As of and for the three month period ended September 30, 2019:
Allowance for Loan Losses:
4 unchanged sentences
and Industrial
−Removed: As of and for the six month period ended June 30, 2019:
+Added: As of and for the nine months ended September 30, 2019:
Allowance for Loan Losses:
29 unchanged sentences
evaluated for impairment
−Removed: Of the $ 169,000 in foreclosed assets held for resale at June 30, 2020, $ 38,000 was represented by land, $ 50,000 was represented by residential real estate, and $ 81,000 was represented by commercial real estate.
+Added: Of the $ 88,000 in foreclosed assets held for resale at September 30, 2020, $ 38,000 was represented by land and $ 50,000 was represented by residential real estate.
Of the $ 119,000 in foreclosed assets held for resale at December 31, 2019, $ 38,000 was represented by land and $ 81,000 was represented by commercial real estate.
−Removed: At June 30, 2020 and December 31, 2019, all foreclosed assets were held as the result of obtaining physical possession.
−Removed: Consumer mortgage loans secured by residential real estate for which the Bank has entered into formal foreclosure proceedings but for which physical possession of the property has yet to be obtained amounted to $ 993,000 at June 30, 2020 and $ 617,000 at December 31, 2019.
−Removed: These balances were not included in foreclosed assets held for resale at June 30, 2020 or December 31, 2019.
−Removed: The outstanding recorded investment of TDRs as of June 30, 2020 and December 31, 2019 was $ 8,506,000 and $ 8,678,000 , respectively.
−Removed: The decrease in TDRs at June 30, 2020 as compared to December 31, 2019 is mainly attributable to payments, payoffs, and charge-offs on existing TDRs that were completed during the six months ended June 30, 2020, net against three small loans that were modified as TDRs during the three months ended June 30, 2020.
−Removed: There were no unfunded commitments on TDRs at June 30, 2020 and December 31, 2019.
−Removed: During the three months ended June 30, 2020, three Commercial Real Estate loans with a combined post modification balance of $ 159,000 were modified as TDRs.
−Removed: No loans were modified as TDRs during the first three months of 2020 or during the three or six months ended June 30, 2019.
+Added: At September 30, 2020 and December 31, 2019, all foreclosed assets were held as the result of obtaining physical possession.
+Added: Consumer mortgage loans secured by residential real estate for which the Bank has entered into formal foreclosure proceedings but for which physical possession of the property has yet to be obtained amounted to $ 971,000 at September 30, 2020 and $ 617,000 at December 31, 2019.
+Added: These balances were not included in foreclosed assets held for resale at September 30, 2020 or December 31, 2019.
+Added: The outstanding recorded investment of TDRs as of September 30, 2020 and December 31, 2019 was $ 8,807,000 and $ 8,678,000 , respectively.
+Added: The increase in TDRs at September 30, 2020 as compared to December 31, 2019 is mainly attributable to seven loans that were modified as TDRs during the nine months ended September 30, 2020, net against payments, payoffs, and charge-offs on existing TDRs that were completed during the nine months ended September 30, 2020.
+Added: There were no unfunded commitments on TDRs at September 30, 2020 and December 31, 2019.
+Added: During the three months ended September 30, 2020, four loans with a combined post modification balance of $ 366,000 were modified as TDRs.
+Added: No loans were modified as TDRs during the three months ended September 30, 2019.
+Added: The loan modifications for the three months ended September 30, 2020 consisted of one term modification and three payment modifications.
+Added: During the nine months ended September 30, 2020, seven loans with a combined post modification balance of $ 525,000 were modified as TDRs.
+Added: No loans were modified as TDRs during the nine months ended September 30, 2019.
+Added: The loan modifications for the nine months ended September 30, 2020 consisted of one term modification and six payment modifications.
The following table presents the outstanding recorded investment of TDRs at the dates indicated:
(Dollars in thousands)
+Added: September 30,
Non-accrual TDRs
Accruing TDRs
−Removed: At June 30, 2020, eight Commercial Real Estate loans classified as TDRs with a combined recorded investment of $ 1,108,000 and three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $ 752,000 were not in compliance with the terms of their restructure, compared to June 30, 2019 when six Commercial Real Estate loans classified as TDRs with a combined recorded investment of $ 486,000 and one Commercial and Industrial loan classified as a TDR with a recorded investment of $ 4,000 were not in compliance with the terms of their restructure.
−Removed: Of the loans that were modified as TDRs during the twelve months preceding June 30, 2020, two Commercial Real Estate loans totaling $ 62,000 experienced payment defaults during the three months ended June 30, 2020.
−Removed: No loans that were modified as TDRs during the twelve months preceding June 30, 2020 experienced payment defaults during the first three months of 2020.
−Removed: No loans that were modified as TDRs during the twelve months preceding June 30, 2019 experienced payment defaults during the three or six months ended June 30, 2019.
−Removed: The following table presents information regarding the loan modifications categorized as TDRs during the three and six months ended June 30, 2020.
−Removed: No loans were modified as TDRs during the three or six months ended June 30, 2019.
+Added: At September 30, 2020, nine Commercial Real Estate loans classified as TDRs with a combined recorded investment of $ 1,288,000 and three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $ 751,000 were not in compliance with the terms of their restructure, compared to September 30, 2019 when nine Commercial Real Estate loans classified as TDRs with a combined recorded investment of $ 661,000 and one Commercial and Industrial loan classified as a TDR with a recorded investment of $ 3,000 were not in compliance with the terms of their restructure.
+Added: No loans that were modified as TDRs during the twelve months preceding September 30, 2020 experienced payment defaults during the three months ended September 30, 2020.
+Added: Of the loans that were modified as TDRs during the twelve months preceding September 30, 2020, two Commercial Real Estate loans totaling $ 62,000 experienced payment defaults during the nine months ended September 30, 2020.
+Added: No loans that were modified as TDRs during the twelve months preceding September 30, 2019 experienced payment defaults during the three or nine months ended September 30, 2019.
+Added: The following table presents information regarding the loan modifications categorized as TDRs during the three and nine months ended September 30, 2020.
+Added: No loans were modified as TDRs during the three and nine months ended September 30, 2019.
(Dollars in thousands)
−Removed: For the Three Months Ended June 30, 2020
+Added: For the Three Months Ended September 30, 2020
Pre-Modification
Post-Modification
+Added: Commercial and Industrial
Commercial Real Estate
(Dollars in thousands)
−Removed: For the Six Months Ended June 30, 2020
+Added: For the Nine Months Ended September 30, 2020
Pre-Modification
Post-Modification
+Added: Commercial and Industrial
Commercial Real Estate
−Removed: The following table provides detail regarding the types of loan modifications made for loans categorized as TDRs during the three and six months ended June 30, 2020 with the total number of each type of modification performed.
−Removed: No loans were modified as TDRs during the three or six months ended June 30, 2019.
−Removed: For the Three Months Ended June 30, 2020
+Added: The following table provides detail regarding the types of loan modifications made for loans categorized as TDRs during the three and nine months ended September 30, 2020 with the total number of each type of modification performed.
+Added: No loans were modified as TDRs during the three or the nine months ended September 30, 2020.
+Added: For the Three Months Ended September 30, 2020
+Added: Commercial and Industrial
Commercial Real Estate
−Removed: For the Six Months Ended June 30, 2020
+Added: For the Nine Months Ended September 30, 2020
+Added: Commercial and Industrial
Commercial Real Estate
1 unchanged sentence
These loans are not classified as TDRs according to Section 4013 of the CARES Act, as long as the specific criteria set forth in the Act are met.
−Removed: The table below presents information related to loan modifications made in compliance with Section 4013 of the CARES Act as of June 30, 2020:
+Added: The table below presents information related to loan modifications made in compliance with Section 4013 of the CARES Act for the three month period ended September 30, 2020:
(Dollars in thousands)
−Removed: Total Section
−Removed: Count Returned
−Removed: Investment as of
−Removed: June 30, 2020
−Removed: Act Modifications
−Removed: Payment Status
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
−Removed: Residential Real Estate
−Removed: As of June 30, 2020, there were no subsequent modifications beyond the original agreed upon modification terms for loans modified in compliance with Section 4013 of the CARES Act.
−Removed: The recorded investment, unpaid principal balance, and the related allowance of the Company’s impaired loans are summarized below at June 30, 2020 and December 31, 2019.
+Added: Commercial and
+Added: Balance at June 30, 2020
+Added: Additional modifications granted for the three months ended September 30,2020
+Added: Section 4013 CARES Act modifications returned to normal payment status (a)
+Added: Principal payments net of draws on active deferred loans for the three months ended September 30, 2020 (b)
+Added: Balance at September 30, 2020
+Added: Percent of Total Section 4013 CARES Act modifications
+Added: Percent of Total Section 4013 CARES Act modifications to Total Loans
+Added: Subsequent modifications granted for active deferred loans
+Added: ( a) Includes payments made prior to return to normal payment status during the quarter ended September 30, 2020
+Added: (b) Draws include those made on lines of credit and other loans contractually allowing draws of principal.
+Added: No construction loans have experienced a Section 4013 CARES Act modification at the dates indicated
+Added: The recorded investment, unpaid principal balance, and the related allowance of the Company’s impaired loans are summarized below at September 30, 2020 and December 31, 2019.
(Dollars in thousands)
−Removed: June 30, 2020
+Added: September 30, 2020
December 31, 2019
11 unchanged sentences
Residential Real Estate
−Removed: At June 30, 2020 and December 31, 2019, $ 8,506,000 and $ 8,678,000 of loans classified as TDRs were included in impaired loans with a total allocated allowance of $ 4,000 and $ 1,000 , respectively.
+Added: At September 30, 2020 and December 31, 2019, $ 8,807,000 and $ 8,678,000 of loans classified as TDRs were included in impaired loans with a total allocated allowance of $ 0 and $ 1,000 , respectively.
The recorded investment represents the loan balance reflected on the consolidated balance sheets net of any charge-offs.
The unpaid balance is equal to the gross amount due on the loan.
−Removed: The average recorded investment and interest income recognized for the Company’s impaired loans are summarized below for the three and six months ended June 30, 2020 and 2019.
+Added: The average recorded investment and interest income recognized for the Company’s impaired loans are summarized below for the three and nine months ended September 30, 2020 and 2019.
(Dollars in thousands)
1 unchanged sentence
For the Three Months Ended
−Removed: June 30, 2020
−Removed: June 30, 2019
+Added: September 30, 2020
+Added: September 30, 2019
With no related allowance recorded:
10 unchanged sentences
Residential Real Estate
−Removed: Of the $ 81,000 and $ 119,000 in interest income recognized on impaired loans for the three months ended June 30, 2020 and 2019, respectively, $ 0 and $ 5,000 in interest income was recognized with respect to non-accrual loans .
+Added: Of the $ 97,000 and $ 108,000 in interest income recognized on impaired loans for the three months ended September 30, 2020 and 2019, respectively, $ 0 in interest income was recognized with respect to non-accrual loans for each respective period.
(Dollars in thousands)
−Removed: For the Six Months Ended
−Removed: For the Six Months Ended
−Removed: June 30, 2020
−Removed: June 30, 2019
+Added: For the Nine Months Ended
+Added: For the Nine Months Ended
+Added: September 30, 2020
+Added: September 30, 2019
With no related allowance recorded:
10 unchanged sentences
Residential Real Estate
−Removed: Of the $ 165,000 and $ 285,000 in interest income recognized on impaired loans for the six months ended June 30, 2020 and 2019, $ 5,000 in interest income was recognized with respect to non-accrual loans for each respective period.
−Removed: Total non-performing assets (which includes loans receivable on non-accrual status, foreclosed assets held for resale and loans past-due 90 days or more and still accruing interest) as of June 30, 2020 and December 31, 2019 were as follows:
+Added: Of the $ 262,000 and $ 393,000 in interest income recognized on impaired loans for the nine months ended September 30, 2020 and 2019, $ 5,000 in interest income was recognized with respect to non-accrual loans for each respective period.
+Added: Total non-performing assets (which includes loans receivable on non-accrual status, foreclosed assets held for resale and loans past-due 90 days or more and still accruing interest) as of September 30, 2020 and December 31, 2019 were as follows:
(Dollars in thousands)
+Added: September 30,
Commercial and Industrial
5 unchanged sentences
Total non-performing assets
−Removed: The following tables present the classes of the loan portfolio summarized by past-due status at June 30, 2020 and December 31, 2019:
+Added: The following tables present the classes of the loan portfolio summarized by past-due status at September 30, 2020 and December 31, 2019:
(Dollars in thousands)
−Removed: June 30, 2020:
+Added: September 30, 2020:
Commercial and Industrial
7 unchanged sentences
At this time, there have been no material fluctuations in past-due loans as a result of the COVID-19 pandemic.
−Removed: At June 30, 2020 and December 31, 2019, commitments to lend additional funds with respect to impaired loans consisted of one irrevocable letter of credit totaling $ 1,249,000 that was associated with a loan to a developer of a residential sub-division.
+Added: At September 30, 2020 and December 31, 2019, commitments to lend additional funds with respect to impaired loans consisted of one irrevocable letter of credit totaling $ 1,249,000 that was associated with a loan to a developer of a residential sub-division.
NOTE 5 — DEPOSITS
−Removed: Major classifications of deposits at June 30, 2020 and December 31, 2019 consisted of:
+Added: Major classifications of deposits at September 30, 2020 and December 31, 2019 consisted of:
(Dollars in thousands)
+Added: September 30,
Non-interest bearing demand
3 unchanged sentences
Total deposits
−Removed: Total deposits increased $ 83,098,000 to $ 844,726,000 as of June 30, 2020 due to increases in non-interest bearing, interest bearing and savings deposits.
−Removed: The increase in deposits was the result of many different factors including the deposit of at least $ 19,000,000 in stimulus funds, via check or ACH, and $ 31,396,000 in PPP loan proceeds.
+Added: Total deposits increased $ 157,591,000 to $ 919,219,000 as of September 30, 2020 due to increases in non-interest bearing, interest bearing and savings deposits.
+Added: The increase in deposits was the result of many different factors including the deposit of at least $ 19,000,000 in stimulus funds, via check or ACH, $ 31,729,000 in PPP loan proceeds, higher levels of saving, a $ 58,000,000 increase in highly rate sensitive deposits and other normal fluctuations in deposits during the nine months ended September 30, 2020.
NOTE 6 — BORROWINGS
1 unchanged sentence
Short-term borrowings include federal funds purchased, securities sold under agreements to repurchase, the Federal Discount Window, and Federal Home Loan Bank of Pittsburgh (“FHLB”) advances, which generally represent overnight or less than 30-day borrowings.
−Removed: Short-term borrowings and weighted–average interest rates at June 30, 2020 and December 31, 2019 are as follows:
+Added: Short-term borrowings and weighted–average interest rates at September 30, 2020 and December 31, 2019 are as follows:
(Dollars in thousands)
−Removed: June 30, 2020
+Added: September 30, 2020
December 31, 2019
14 unchanged sentences
The counterparty has the right to sell or repledge the investment securities.
−Removed: The following table presents the short-term borrowings subject to an enforceable master netting arrangement or repurchase agreements as of June 30, 2020 and December 31, 2019.
+Added: The following table presents the short-term borrowings subject to an enforceable master netting arrangement or repurchase agreements as of September 30, 2020 and December 31, 2019.
(Dollars in thousands)
of Liabilities
−Removed: June 30, 2020
+Added: September 30, 2020
Repurchase agreements (a)
1 unchanged sentence
Repurchase agreements (a)
−Removed: (a) As of June 30, 2020 and December 31, 2019, the fair value of securities pledged in connection with repurchase agreements was $ 23,185,000 and $ 22,413,000 , respectively.
−Removed: The following table presents the remaining contractual maturity of the master netting arrangement or repurchase agreements as of June 30, 2020:
+Added: (a) As of September 30, 2020 and December 31, 2019, the fair value of securities pledged in connection with repurchase agreements was $ 25,750,000 and $ 22,413,000 , respectively.
+Added: The following table presents the remaining contractual maturity of the master netting arrangement or repurchase agreements as of September 30, 2020:
(Dollars in thousands)
Remaining Contractual Maturity of the Agreements
−Removed: June 30, 2020:
+Added: September 30, 2020:
Repurchase agreements and repurchase-to-maturity transactions:
8 unchanged sentences
The Bank currently leases three branch banking facilities and one parcel of land under operating leases.
−Removed: At June 30, 2020, right-of-use assets and lease liabilities were recorded related to these operating leases totaling $ 1,218,000 and $ 1,556,000 , respectively.
+Added: At September 30, 2020, right-of-use assets and lease liabilities were recorded related to these operating leases totaling $ 1,125,000 and $ 1,535,000 , respectively.
At December 31, 2019, right-of-use assets and lease liabilities stood at $ 1,470,000 and $ 1,663,000 , respectively.
3 unchanged sentences
therefore, our incremental borrowing rate was used for each of the leases.
−Removed: The Bank recognized total operating lease costs for the six months ended June 30, 2020 and 2019 of $ 221,000 and $ 96,000 , respectively.
−Removed: Cash payments totaled $ 77,000 for the six months ended June 30, 2020 and 2019.
−Removed: The following table displays the weighted-average term and discount rates for operating leases outstanding as of June 30, 2020 and December 31, 2019.
+Added: The Bank recognized total operating lease costs for the nine months ended September 30, 2020 and 2019 of $ 332,000 and $ 144,000 , respectively.
+Added: Cash payments totaled $ 116,000 for the nine months ended September 30, 2020 and 2019.
+Added: The Bank currently has two finance leases for equipment.
+Added: At September 30, 2020, right-of-use assets and lease liabilities were recorded related to these finance leases totaling $ 54,000 and $ 48,000 , respectively.
+Added: Amounts recognized as right-of-use assets and lease liabilities related to finance leases are included in Premises and equipment, net and Other liabilities , respectively, in the accompanying balance sheet.
+Added: Further options to extend or terminate the lease are not applicable for any of the two leases.
+Added: No significant assumptions or judgements were made in determining whether a contract contained a lease or in the consideration of lease versus non-lease components.
+Added: Neither of the leases contained an implicit rate;
+Added: therefore, our incremental borrowing rate was used for each of the leases.
+Added: Total finance lease costs that were recognized by the Bank for the nine months ended September 30, 2020 were immaterial.
+Added: No cash payments were made as of September 30, 2020.
+Added: The following table displays the weighted-average term and discount rates for operating and finance leases outstanding as of September 30, 2020 and December 31, 2019.
+Added: September 30,
+Added: September 30,
Weighted-average term (years)
Weighted-average discount rate
−Removed: A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liability is as follows:
+Added: A maturity analysis of operating and finance lease liabilities and reconciliation of the undiscounted cash flows to the total operating or finance lease liability is as follows:
(Dollars in thousands)
+Added: September 30,
+Added: September 30,
Minimum Lease Payments due:
18 unchanged sentences
The Company may require collateral or other security to support financial instruments with off-balance sheet credit risk.
−Removed: The contract or notional amounts at June 30, 2020 and December 31, 2019 were as follows:
+Added: The contract or notional amounts at September 30, 2020 and December 31, 2019 were as follows:
(Dollars in thousands)
−Removed: June 30, 2020
+Added: September 30, 2020
December 31, 2019
15 unchanged sentences
The ability of the majority of the Company’s customers to honor their contractual loan obligations is dependent on the economy and real estate market in this area.
−Removed: At June 30, 2020, the Company had $ 571,274,000 in loans secured by real estate, which represented 84.4 % of total loans.
+Added: At September 30, 2020, the Company had $ 598,634,000 in loans secured by real estate, which represented 85.0 % of total loans.
The real estate loan portfolio is largely secured by lessors of residential buildings and dwellings, lessors of non-residential buildings, and lessors of hotels/motels.
−Removed: As of June 30, 2020 and December 31, 2019, management is of the opinion that there were no concentrations exceeding 10 % of total loans with regard to loans to borrowers who were engaged in similar activities that were similarly impacted by economic or other conditions.
+Added: As of September 30, 2020 and December 31, 2019, management is of the opinion that there were no concentrations exceeding 10 % of total loans with regard to loans to borrowers who were engaged in similar activities that were similarly impacted by economic or other conditions.
As all financial instruments are subject to some level of credit risk, the Company requires collateral and/or guarantees for all loans.
7 unchanged sentences
Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability.
−Removed: When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from
−Removed: that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with the fair value measurement and disclosure guidance.
+Added: When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with the fair value measurement and disclosure guidance.
This guidance clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly.
4 unchanged sentences
Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability.
−Removed: Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own belief about the assumptions market participants would use in pricing the asset or liability based upon the best information available in the circumstances.
+Added: Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own belief about the assumptions market participants would use in pricing the asset or liability based upon the best information available.
Fair value measurement and disclosure guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
8 unchanged sentences
Financial Assets Measured at Fair Value on a Recurring Basis
−Removed: At June 30, 2020 and December 31, 2019, securities measured at fair value on a recurring basis and the valuation methods used are as follows:
+Added: At September 30, 2020 and December 31, 2019, securities measured at fair value on a recurring basis and the valuation methods used are as follows:
(Dollars in thousands)
−Removed: June 30, 2020
+Added: September 30, 2020
Debt Securities Available-for-Sale:
32 unchanged sentences
Financial Assets Measured at Fair Value on a Nonrecurring Basis
−Removed: At June 30, 2020 and December 31, 2019, impaired loans measured at fair value on a nonrecurring basis are as follows:
+Added: At September 30, 2020 and December 31, 2019, impaired loans measured at fair value on a nonrecurring basis are as follows:
(Dollars in thousands)
−Removed: Assets at June 30, 2020
+Added: Assets at September 30, 2020
Impaired loans:
12 unchanged sentences
Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis
−Removed: At June 30, 2020 and December 31, 2019, foreclosed assets held for resale measured at fair value on a nonrecurring basis are as follows:
+Added: At September 30, 2020 and December 31, 2019, foreclosed assets held for resale measured at fair value on a nonrecurring basis are as follows:
(Dollars in thousands)
−Removed: Assets at June 30, 2020
+Added: Assets at September 30, 2020
Foreclosed assets held for resale:
11 unchanged sentences
Quantitative Information about Level 3 Fair Value Measurements
−Removed: June 30, 2020
+Added: September 30, 2020
Valuation Technique
13 unchanged sentences
December 31, 2019
−Removed: Impaired loans - collater dependent
+Added: Impaired loans - collateral dependent
Appraisal of collateral 1,3
15 unchanged sentences
(Dollars in thousands)
−Removed: Fair Value Measurements at June 30, 2020
+Added: Fair Value Measurements at September 30, 2020
FINANCIAL ASSETS:
31 unchanged sentences
Deposits related fees and service charges
−Removed: Service charges and fees on deposits, which are included as liabilities in the consolidated balance sheets, consist of fees related to monthly fees for various retail and business checking accounts, automated teller machine (“ATM”) fees
−Removed: (charged for withdrawals by our deposit customers from other bank ATMs) and insufficient funds fees (“NSF”) (which are charged when customers overdraw their accounts beyond available funds).
+Added: Service charges and fees on deposits, which are included as liabilities in the consolidated balance sheets, consist of fees related to monthly fees for various retail and business checking accounts, automated teller machine (“ATM”) fees (charged for withdrawals by our deposit customers from other bank ATMs) and insufficient funds fees (“NSF”) (which are charged when customers overdraw their accounts beyond available funds).
All deposit liabilities are considered to have one-day terms and therefore related fees are recognized in income at the time when the services are provided to the customers.
9 unchanged sentences
Wealth management fees are included within non-interest income in the consolidated statements of income.
−Removed: As of June 30, 2020 and December 31, 2019, the fair value of trust assets under management was $ 111,320,000 and $ 111,160,000 , respectively.
−Removed: The costs of acquiring asset management customers are incremental and recognized within non-interest expense in the consolidated statements of income.
+Added: As of September 30, 2020 and December 31, 2019, the fair value of trust assets under management was $ 111,381,000 and $ 111,160,000 , respectively.
+Added: The costs of acquiring asset
+Added: management customers are incremental and recognized within non-interest expense in the consolidated statements of income.
Interchange Fees and Surcharges
8 unchanged sentences
Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.
−Removed: At June 30, 2020 and 2019, there were no potential common shares outstanding.
+Added: At September 30, 2020 and 2019, there were no potential common shares outstanding.
The following table sets forth the computation of basic and diluted earnings per share.
1 unchanged sentence
Three Months Ended
+Added: September 30,
Weighted-average common shares outstanding
1 unchanged sentence
(In thousands, except earnings per share)
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
Weighted-average common shares outstanding
Basic and diluted earnings per share
+Added: NOTE 12 — GOODWILL
+Added: Management notes that the emergence of COVID-19 as a global pandemic during the first nine months of 2020 has resulted in significant deterioration in general economic conditions and has caused a deterioration in the environment in which the Corporation operates.
+Added: This uncertainty has resulted in significant decreases in the market prices for the stock of institutions in the financial services industry, including the Corporation.
+Added: Based on the totality of the circumstances and the impact of the economic conditions on the stock price, the events more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill.
+Added: As such, a quantitative analysis of the fair value of the Corporation as of September 30, 2020 was performed.
+Added: We utilized an independent third party in our analysis which considered both income and market approaches.
+Added: The income approach used a discounted cash flow analysis based on a five-year forecast of results, including potential cost synergies a buyer would consider.
+Added: The market approaches took into account the fair value of comparable companies (public guideline companies) as well as the Corporation’s current stock price adjusted for a control premium.
+Added: We assigned weightings of 40 % to the income approach, 10 % to the public guideline companies’ result and 50 % to the Corporation’s stock price with control premium result.
+Added: The results indicated the Corporation’s fair value exceeded its carrying value by approximately 2 % and no impairment was recognized.
+Added: The assumptions used in the impairment test of goodwill are susceptible to change based on changes in economic conditions and other factors, including our stock price.
+Added: Any change in the assumptions which we utilize to determine the carrying value of goodwill could adversely impact our results of operations.
First Keystone Corporation Management’s Discussion and Analysis of Financial Condition and Results of Operation
8 unchanged sentences
RESULTS OF OPERATIONS
−Removed: Quarter ended June 30, 2020 compared to quarter ended June 30, 2019
−Removed: First Keystone Corporation realized earnings for the second quarter of 2020 of $3,381,000, an increase of $851,000, or 33.6% from the second quarter of 2019.
−Removed: The increase in net income for the three months ended June 30, 2020 was primarily due to a decrease in interest expense on deposits and short-term borrowings, plus an increase in interest and fee income on loans.
−Removed: On a per share basis, for the three months ended June 30, 2020, net income was $0.58 versus $0.44 for the second quarter of 2019.
−Removed: Cash dividends amounted to $0.27 per share for the the three months ended June 30, 2020 and 2019.
+Added: Quarter ended September 30, 2020 compared to quarter ended September 30, 2019
+Added: First Keystone Corporation realized earnings for the third quarter of 2020 of $3,137,000, an increase of $214,000, or 7.3% from the third quarter of 2019.
+Added: The increase in net income for the three months ended September 30, 2020 was primarily due to a decrease in interest expense on deposits and short-term borrowings, plus an increase in interest and fee income on loans.
+Added: On a per share basis, for the three months ended September 30, 2020, net income was $0.54 versus $0.50 for the third quarter of 2019.
+Added: Cash dividends amounted to $0.27 per share for the the three months ended September 30, 2020 and 2019.
NET INTEREST INCOME
The major source of operating income for the Company is net interest income, defined as interest income less interest expense.
−Removed: In the the three months ended June 30, 2020, interest income amounted to $9,631,000, an increase of $152,000 or 1.6% from the three months ended June 30, 2019, while interest expense amounted to $1,513,000 in the three months ended June 30, 2020, a decrease of $1,084,000 or 41.7% from the three months ended June 30, 2019.
+Added: In the three months ended September 30, 2020, interest income amounted to $9,852,000, an increase of $124,000 or 1.3% from the three months ended September 30, 2019, while interest expense amounted to $1,231,000 in the three months ended September 30, 2020, a decrease of $1,358,000 or 52.5% from the three months ended September 30, 2019.
As a result, net interest income increased $1,482,000 or 20.8% to $8,621,000 from $7,139,000 for the same period in 2019.
−Removed: The Company’s net interest margin for the three months ended June 30, 2020 was 3.48% compared to 3.19% for same period in 2019.
−Removed: The increase in net interest margin was primarily a result of a decrease in yield on short-term borrowings as a result of the continuing low interest rate environment.
+Added: The Company’s net interest margin for the three months ended September 30, 2020 was 3.59% compared to 3.26% for same period in 2019.
+Added: The increase in net interest margin was primarily a result of a decrease in yield on short-term borrowings as a result of deposit growth and the continuing low interest rate environment.
PROVISION FOR LOAN LOSSES
−Removed: The provision for loan losses for the three months ended June 30, 2020 and 2019 was $194,000 and $46,000, respectively.
+Added: The provision for loan losses for the three months ended September 30, 2020 and 2019 was $294,000 and $175,000, respectively.
The increase in the provision for loan losses resulted from the Company’s analysis of the current loan portfolio, including historic losses, past-due trends, current economic conditions, loan portfolio growth, and other relevant factors.
−Removed: The provision for loan losses for the three months ended June 30, 2020 is also reflective of management’s assessment of the increased credit risk associated with the economic uncertainty surrounding the COVID-19 pandemic.
+Added: The provision for loan losses for the three months ended September 30, 2020 is also reflective of management’s assessment of the increased credit risk associated with the economic uncertainty surrounding the COVID-19 pandemic.
Charge-off and recovery activity in the allowance for loan losses resulted in net charge-offs of $49,000
−Removed: and $36,000 for the the three months ended June 30, 2020 and 2019, respectively.
+Added: and $27,000 for the the three months ended September 30, 2020 and 2019, respectively.
See Allowance for Loan Losses on page 47 for further discussion.
NON-INTEREST INCOME
−Removed: Total non-interest income was $1,621,000 for the three months ended June 30, 2020, as compared to $1,616,000 for the same period in 2019, an increase of $5,000, or 0.3%.
−Removed: The increase was mainly due to increased gains on the sales of mortgage loans and securities, offset by lower service charge and fee income.
−Removed: Net securities gains increased $72,000 to $164,000 for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019.
−Removed: This increase was due to the Bank taking $96,000 in net gains on the sales of securities in the second quarter of 2020.
−Removed: Trust department income decreased $30,000 or 11.4% to $234,000 for the three months ended June 30, 2020 as compared to the same period in 2019.
−Removed: This decrease was the result of higher income from trust estate fees earned in the second quarter of 2019.
+Added: Total non-interest income was $1,515,000 for the three months ended September 30, 2020, as compared to $2,226,000 for the same period in 2019, a decrease of $711,000, or 31.9%.
+Added: The decrease was mainly due to decreased gains on securities and lower service charge and fee income.
+Added: Net securities gains decreased $651,000 to $(9,000) for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.
+Added: This decrease was due to the Bank taking $671,000 in net gains on sold securities in the third quarter of 2019 as compared to taking $61,000 in net gains on sold securities in the third quarter of 2020.
+Added: Trust department income increased $1,000 or 0.5% to $222,000 for the three months ended September 30, 2020 as compared to the same period in 2019.
Service charges and fee income decreased $220,000 or 35.0%.
−Removed: The decrease was mainly due to lower fees earned on deposit accounts as overdraft fees and several other deposit account service charges were waived during the second quarter of 2020 due to the COVID-19 pandemic.
−Removed: ATM fees and debit card income increased $45,000 or 10.7% to $464,000 for the three months ended June 30, 2020.
−Removed: Gains on sales of mortgage loans increased $129,000 or 172.0% to $204,000 due to more than twice as many sold loans with higher average gains in the second quarter of 2020 as compared to 2019.
+Added: The decrease was mainly due to lower fees earned on deposit accounts as there have been fewer customers in overdraft status during the third quarter of 2020 as compared to 2019.
+Added: In addition, there were larger prepayment penalties earned on commercial loan payoffs in the third quarter of 2019.
+Added: ATM fees and debit card income increased $74,000 or 17.3% to $501,000 for the three months ended September 30, 2020 as a result of increased transaction volume.
+Added: Gains on sales of mortgage loans increased $87,000 or 100.0% to $174,000 due to higher average gains on individual sold loans in the third quarter of 2020 as compared to 2019.
NON-INTEREST EXPENSE
−Removed: Total non-interest expense was $5,655,000 for the three months ended June 30, 2020, the same as compared to the three months ended June 30, 2019.
+Added: Total non-interest expense was $6,256,000 for the three months ended September 30, 2020, as compared to $5,859,000 for the three months ended September 30, 2019, an increase of $397,000 or 6.8%.
+Added: The increase was mainly due to increased salaries and employee benefits and higher FDIC insurance expense.
Expenses associated with employees (salaries and employee benefits) continue to be the largest category of non-interest expense.
−Removed: Salaries and benefits amounted to $2,959,000 or 52.3% of total non-interest expense for the three months ended June 30, 2020, as compared to $2,953,000 or 52.2% for the three months ended June 30, 2019.
−Removed: Net occupancy, furniture and equipment, and computer expense amounted to $903,000 for the three months ended June 30, 2020, an increase of $22,000 or 2.5%.
−Removed: Professional services increased $15,000 or 7.2% to $223,000 as of June 30, 2020.
−Removed: Pennsylvania shares tax expense amounted to $225,000 for the three months ended June 30, 2020, an increase of $33,000 or 17.2% as compared to the three months ended June 30, 2019.
+Added: Salaries and benefits amounted to $3,554,000 or 56.8% of total non-interest expense for the three months ended September 30, 2020, as compared to $3,287,000 or 56.1% for the three months ended September 30, 2019.
+Added: The increase was due to increased commissions associated with loan growth and bonuses paid to all employees for working through the COVID-19 pandemic.
+Added: Net occupancy, furniture and equipment, and computer expense amounted to $907,000 for the three months ended September 30, 2020, an increase of $58,000 or 6.8%.
+Added: The increase is mainly the result of increased rent expense associated with the new leasing standard.
+Added: Professional services increased $2,000 or 0.9% to $220,000 as of September 30, 2020.
+Added: Pennsylvania shares tax expense amounted to $231,000 for the three months ended September 30, 2020, an increase of $4,000 or 1.8% as compared to the three months ended September 30, 2019.
The increase was the result of an increase in total equity.
−Removed: FDIC insurance expense decreased $51,000 or 70.8% for the three months ended June 30, 2020.
−Removed: This decrease was due to small bank assessment credits received from the FDIC for the first quarter of 2020 effectively reducing the expense for the second quarter of 2020.
+Added: FDIC insurance expense increased $148,000 or 197.3% for the three months ended September 30, 2020.
+Added: This increase was due to small bank assessment credits received from the FDIC for the third quarter of 2019 effectively reducing the expense for the third quarter of 2019.
FDIC insurance expense varies with changes in net asset size, risk ratings, and FDIC derived assessment rates.
−Removed: ATM and debit card fees expense amounted to $214,000 for the three months ended June 30, 2020, a decrease of $7,000 or 3.2% as compared to the three months ended June 30, 2019.
−Removed: Data processing expenses amounted to $307,000 for the three months ended June 30, 2020, an increase of $2,000 or 0.7% as compared to the three months ended June 30, 2019.
−Removed: Foreclosed assets held for resale expense amounted to $5,000 for the three months ended June 30, 2020, the same as compared to the three months ended June 30, 2019.
−Removed: Advertising expense decreased $88,000 or 55.0% during the three months ended June 30, 2020.
−Removed: This decrease was due to a less aggressive advertising approach in 2020 due to the COVID-19 pandemic, as the second quarter of 2020 saw less newspaper advertising and civic advertising.
+Added: ATM and debit card fees expense amounted to $253,000 for the three months ended September 30, 2020, an increase of $21,000 or 9.1% as compared to the three months ended September 30, 2019.
+Added: Data processing expenses amounted to $283,000 for the three months ended September 30, 2020, an increase of $9,000 or 3.3% as compared to the three months ended September 30, 2019.
+Added: Foreclosed assets held for resale expense increased $27,000 to $30,000 for the three months ended September 30, 2020.
+Added: This increase was due to a loss incurred on the sale of a foreclosed property during the third quarter
+Added: Advertising expense decreased $81,000 or 49.7% during the three months ended September 30, 2020.
+Added: This decrease was due to a less aggressive advertising approach in 2020 due to the COVID-19 pandemic, as the third quarter of 2020 saw less newspaper advertising and civic advertising.
Civic advertising was affected by the COVID-19 pandemic as many events that the Bank would normally sponsor were canceled.
−Removed: Other non-interest expense amounted to $726,000 for the three months ended June 30, 2020, an increase of $68,000 or 10.3% as compared to the three months ended June 30, 2019.
−Removed: The increase was due to an increase in the
−Removed: provision for unfunded commitments due to higher officer commitment balances requiring a reserve, as well as an increase in loan collections expense resulting from a right of setoff taken from a customer’s account in the prior year to cover various expenses paid by the Bank.
−Removed: Income tax expense amounted to $509,000 for the three months ended June 30, 2020, as compared to $267,000 for the three months ended June 30, 2019, an increase of $242,000.
−Removed: The effective total income tax rate was 13.1% for the three months ended June 30, 2020 as compared to 9.5% for the three months ended June 30, 2019.
+Added: Other non-interest expense amounted to $623,000 for the three months ended September 30, 2020, a decrease of $58,000 or 8.5% as compared to the three months ended September 30, 2019.
+Added: The decrease was due to a decrease in the provision for unfunded commitments due to increased utilization of commercial and industrial lines of credit and a decrease in commercial real estate commitments in the third quarter of 2020.
+Added: Income tax expense amounted to $449,000 for the three months ended September 30, 2020, as compared to $408,000 for the three months ended September 30, 2019, an increase of $41,000.
+Added: The effective total income tax rate was 12.5% for the three months ended September 30, 2020 as compared to 12.2% for the three months ended September 30, 2019.
The increase in the effective tax rate was mainly due to a net decrease in tax-exempt income from investments in and loans to state and local units of government.
−Removed: The Company recognized $101,000 of tax credits from low-income housing partnerships in the three months ended June 30, 2020.
−Removed: Six months ended June 30, 2020 compared to six months ended June 30, 2019
−Removed: First Keystone Corporation realized earnings for the six months ended June 30, 2020 of $5,434,000, an increase of $661,000, or 13.8% from the same period in 2019.
−Removed: The increase in net income for the six months ended June 30, 2020 was primarily due to an increase in net interest income, offset by a decrease in net securities gains.
−Removed: On a per share basis, net income was $0.93 for the six months ended June 30, 2020 versus $0.83 for the same period in 2019.
−Removed: Cash dividends amounted to $0.54 per share for the six months ended June 30, 2020 and 2019.
+Added: The Company recognized $101,000 of tax credits from low-income housing partnerships in the three months ended September 30, 2020.
+Added: Nine months ended September 30, 2020 compared to nine months ended September 30, 2019
+Added: First Keystone Corporation realized earnings for the nine months ended September 30, 2020 of $8,571,000, an increase of $875,000, or 11.4% from the same period in 2019.
+Added: The increase in net income for the nine months ended September 30, 2020 was primarily due to an increase in net interest income, offset by a decrease in net securities gains.
+Added: On a per share basis, net income was $1.47 for the nine months ended September 30, 2020 versus $1.33 for the same period in 2019.
+Added: Cash dividends amounted to $0.81 per share for the nine months ended September 30, 2020 and 2019.
NET INTEREST INCOME
The major source of operating income for the Company is net interest income, defined as interest income less interest expense.
−Removed: For the six months ended June 30, 2020, interest income amounted to $19,399,000, an increase of $406,000 or 2.1% from the six months ended June 30, 2019, while interest expense amounted to $3,905,000 in the six months ended June 30, 2020, a decrease of $1,385,000 or 26.2% from the six months ended June 30, 2019.
+Added: For the nine months ended September 30, 2020, interest income amounted to $29,251,000, an increase of $530,000 or 1.8% from the nine months ended September 30, 2019, while interest expense amounted to $5,136,000 in the nine months ended September 30, 2020, a decrease of $2,743,000 or 34.8% from the nine months ended September 30, 2019.
As a result, net interest income increased $3,273,000 or 15.7% to $24,115,000 from $20,842,000 for the same period in 2019.
−Removed: The Company’s net interest margin for the six months ended June 30, 2020 was 3.39% compared to 3.17% for same period in 2019.
−Removed: The increase in net interest margin was a result of a decrease in yield on short-term borrowings as a result of the continuing low interest rate environment.
+Added: The Company’s net interest margin for the nine months ended September 30, 2020 was 3.45% compared to 3.19% for same period in 2019.
+Added: The increase in net interest margin was a result of a decrease in yield on short-term borrowings as a result of deposit growth and the continuing low interest rate environment.
PROVISION FOR LOAN LOSSES
−Removed: The provision for loan losses for the six months ended June 30, 2020 and 2019 was $388,000 and $138,000, respectively.
+Added: The provision for loan losses for the nine months ended September 30, 2020 and 2019 was $682,000 and $313,000, respectively.
The increase in the provision for loan losses resulted from the Company’s analysis of the current loan portfolio, including historic losses, past-due trends, current economic conditions, loan portfolio growth, and other relevant factors.
−Removed: The provision for loan losses for the six months ended June 30, 2020 is also reflective of management’s assessment of the increased credit risk associated with the economic uncertainty surrounding the COVID-19 pandemic.Charge-off and recovery activity in the allowance for loan losses resulted in net charge-offs of $59,000 and $111,000 for the six months ended June 30, 2020 and 2019, respectively.
+Added: The provision for loan losses for the nine months ended September 30, 2020 is also reflective of management’s assessment of the increased credit risk associated with the economic uncertainty surrounding the COVID-19 pandemic.
+Added: Charge-off and recovery activity in the allowance for loan losses resulted in net charge-offs of $108,000 and $138,000 for the nine months ended September 30, 2020 and 2019, respectively.
See Allowance for Loan Losses on page 47 for further discussion.
NON-INTEREST INCOME
−Removed: Total non-interest income was $2,604,000 for the six months ended June 30, 2020, as compared to $3,123,000 for the same period in 2019, a decrease of $519,000, or 16.6%.
−Removed: The decrease was mainly the result of net losses on held equity securities in the first half of 2020.
−Removed: ATM fees and debit card income increased $67,000 or 8.4% to $863,000 for the six months ended June 30, 2020.
−Removed: Service charges and fee income decreased $206,000 for the six months ended June 30, 2020.
−Removed: The decrease was mainly due to lower fees earned on deposit accounts as overdraft fees and several other deposit account
−Removed: service charges were waived during the second quarter of 2020 due to the COVID-19 pandemic.
−Removed: Gains on sales of mortgage loans increased $182,000 or 158.3% due to twice as many sold loans with higher average gains in the first half of 2020 as compared to the first half of 2019.
−Removed: Trust department income decreased $70,000 or 13.3% to $455,000 for the six months ended June 30, 2020 as compared to the same period in 2019.
−Removed: The decrease was the result of higher income earned from trust estate fees in the first half of 2019.
−Removed: Net securities gains decreased $498,000 or 255.4% to $(303,000) for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019.
−Removed: The decrease was due to the Company recognizing $470,000 in net losses on equity securities held during the first half of 2020.
+Added: Total non-interest income was $4,119,000 for the nine months ended September 30, 2020, as compared to $5,349,000 for the same period in 2019, a decrease of $1,230,000, or 23.0%.
+Added: The decrease was mainly the result of a decrease in net gains on the sales of securities and net losses on held equity securities in the nine months ended September, 30 2020, plus a decrease in service charges and fees offset by an increase in gains on the sales of mortgage loans.
+Added: ATM fees and debit card income increased $141,000 or 11.5% to $1,364,000 for the nine months ended September 30, 2020 due to an increase in transaction volume.
+Added: Service charges and fee income decreased $426,000 for the nine months ended September 30, 2020.
+Added: The decrease was mainly due to lower fees earned on deposit accounts as overdraft fees and several other deposit account service charges were waived during the second quarter of 2020 due to the COVID-19 pandemic.
+Added: In addition, there were fewer prepayment penalties earned on commercial loan payoffs during the nine months ended September 30, 2020.
+Added: Gains on sales of mortgage loans increased $269,000 or 133.2% due to higher average gains on individual sold loans in 2020 as compared to 2019.
+Added: Trust department income decreased $69,000 or 9.2% to $677,000 for the nine months ended September 30, 2020 as compared to the same period in 2019.
+Added: The decrease was mainly the result of higher income earned from estate fees in the nine months ended September 30, 2019.
+Added: Net securities gains decreased $1,149,000 or 137.3% to $(312,000) for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.
+Added: The decrease was due to the Company recognizing $540,000 in net losses on held equity securities in the nine months ended September 30, 2020 and the Company recognizing $528,000 less in gains on the sales of securities during the same period in 2020 as compared to the same period in 2019.
NON-INTEREST EXPENSE
−Removed: Total non-interest expense was $11,570,000 for the six months ended June 30, 2020, as compared to $11,510,000 for the six months ended June 30, 2019.
+Added: Total non-interest expense was $17,826,000 for the nine months ended September 30, 2020, as compared to $17,369,000 for the nine months ended September 30, 2019.
Non-interest expense increased $457,000 or 2.6%.
Expenses associated with employees (salaries and employee benefits) continue to be the largest category of non-interest expense.
−Removed: Salaries and benefits amounted to $6,178,000 or 53.4% of total non-interest expense for the six months ended June 30, 2020, as compared to $6,085,000 or 52.9% for the six months ended June 30, 2019.
−Removed: Net occupancy, furniture and equipment, and computer expense amounted to $1,815,000 for the six months ended June 30, 2020, an increase of $50,000 or 2.8%.
−Removed: Professional services decreased $13,000 or 2.7% to $465,000 for the six months ended June 30, 2020.
−Removed: Pennsylvania shares tax expense amounted to $449,000 for the six months ended June 30, 2020, an increase of $65,000 or 16.9% as compared to the six months ended June 30, 2019.
+Added: Salaries and benefits amounted to $9,732,000 or 54.6% of total non-interest expense for the nine months ended September 30, 2020, as compared to $9,372,000 or 54.0% for the nine months ended September 30, 2019.
+Added: The increase was due to increased commissions associated with loan growth and bonuses paid to all employees for working through the COVID-19 pandemic.
+Added: Net occupancy, furniture and equipment, and computer expense amounted to $2,722,000 for the nine months ended September 30, 2020, an increase of $108,000 or 4.1%.
+Added: The increase is mainly the result of increased rent expense associated with the new leasing standard.
+Added: Professional services decreased $11,000 or 1.6% to $685,000 for the nine months ended September 30, 2020.
+Added: Pennsylvania shares tax expense amounted to $680,000 for the nine months ended September 30, 2020, an increase of $69,000 or 11.3% as compared to the nine months ended September 30, 2019.
The increase was the result of an increase in total equity.
−Removed: FDIC insurance expense decreased $116,000 or 84.7% for the six months ended June 30, 2020.
−Removed: This decrease was due to small bank assessment credits received from the FDIC effectively reducing the expense in 2020.
+Added: FDIC insurance expense increased $32,000 or 51.6% for the nine months ended September 30, 2020.
+Added: This increase was due to small bank assessment credits received from the FDIC effectively reducing the expense in 2019.
FDIC insurance expense varies with changes in net asset size, risk ratings, and FDIC derived assessment rates.
−Removed: ATM and debit card fees expense amounted to $423,000 for the six months ended June 30, 2020, a decrease of $9,000 or 2.1% as compared to the six months ended June 30, 2019.
−Removed: Data processing expenses amounted to $601,000 for the six months ended June 30, 2020, an increase of $29,000 or 5.1% as compared to the six months ended June 30, 2019.
−Removed: Foreclosed assets held for resale expense decreased $29,000 for the six months ended June 30, 2020.
−Removed: There were additional expenses incurred on foreclosed property purchases in the first half of 2019 along with less general expenses on foreclosed assets in 2020 due to fewer properties owned and maintained.
−Removed: Advertising expense decreased $150,000 or 47.9% during the six months ended June 30, 2020.
−Removed: The decrease was due to a less aggressive advertising approach in the first half of 2020 due to the COVID-19 pandemic, as the first half of 2020 saw less newspaper advertising and civic advertising.
+Added: ATM and debit card fees expense amounted to $676,000 for the nine months ended September 30, 2020, an increase of $12,000 or 1.8% as compared to the nine months ended September 30, 2019.
+Added: Data processing expenses amounted to $884,000 for the nine months ended September 30, 2020, an increase of $38,000 or 4.5% as compared to the nine months ended September 30, 2019.
+Added: The increase was the result of annual contracted pricing increases from our main third-party data processor.
+Added: Foreclosed assets held for resale expense decreased $2,000 for the nine months ended September 30, 2020.
+Added: Advertising expense decreased $231,000 or 48.5% during the nine months ended September 30, 2020.
+Added: The decrease was
+Added: due to a less aggressive advertising approach in the first nine months of 2020 due to the COVID-19 pandemic, as this period in 2020 saw less newspaper, billboard, digital and civic advertising.
Civic advertising was affected by the COVID-19 pandemic as many events that the Bank would normally sponsor were canceled.
−Removed: Other non-interest expense amounted to $1,441,000 for the six months ended June 30, 2020, an increase of $140,000 or 10.8% as compared to the six months ended June 30, 2019.
+Added: Other non-interest expense amounted to $2,064,000 for the nine months ended September 30, 2020, an increase of $82,000 or 4.1% as compared to the nine months ended September 30, 2019.
The increase was due to several factors.
−Removed: There was an increase in the provision for unfunded commitments due to higher officer commitment balances requiring a reserve, an increase in loan collections expense resulting from a right of setoff taken from a customer’s account in the prior year to cover various expenses paid by the Bank and higher promotional expenses for free appraisals given by the Bank.
−Removed: Income tax expense amounted to $706,000 for the six months ended June 30, 2020, as compared to $405,000 for the six months ended June 30, 2019, an increase of $301,000.
−Removed: The effective total income tax rate was 11.5% for the six months ended June 30, 2020 as compared to 7.8% for the six months ended June 30, 2019.
+Added: There was an increase in the provision for unfunded commitments due to higher commitment balances requiring a reserve, an increase in loan collections expense resulting from a right of setoff taken from a customer’s account in the prior year to cover various expenses paid by the Bank and higher promotional expenses for free appraisals given by the Bank.
+Added: This was offset by lower travel and entertainment expenses in 2020 as the result of the COVID-19 pandemic.
+Added: Income tax expense amounted to $1,155,000 for the nine months ended September 30, 2020, as compared to $813,000 for the nine months ended September 30, 2019, an increase of $342,000.
+Added: The effective total income tax rate was 11.9% for the nine months ended September 30, 2020 as compared to 9.6% for the nine months ended September 30, 2019.
The increase in the effective tax rate was mainly due to a net decrease in tax-exempt income from investments in and loans to state and local units of government.
−Removed: The Company recognized $202,000 of tax credits from low-income housing partnerships in the six months ended June 30, 2020.
+Added: The Company recognized $303,000 of tax credits from low-income housing partnerships in the nine months ended September 30, 2020.
FINANCIAL CONDITION
−Removed: Total assets increased to $1,068,719,000 as of June 30, 2020, an increase of $61,493,000 from year-end 2019.
+Added: Total assets increased to $1,134,735,000 as of September 30, 2020, an increase of $127,509,000 from year-end 2019.
Total assets as of December 31, 2019 amounted to $1,007,226,000.
−Removed: Total debt securities available-for-sale increased $34,761,000 or 12.5% to $312,689,000 as of June 30, 2020 from December 31, 2019.
−Removed: Total loans increased $29,182,000 or 4.5% to $676,914,000 as of June 30, 2020 from December 31, 2019.
−Removed: Loan demand grew in the six months ended June 30, 2020 as the Bank has realized an increase in loan originations, primarily in the commercial real estate and commercial and industrial portfolios.
+Added: Total debt securities available-for-sale increased $38,593,000 or 13.9% to $316,521,000 as of September 30, 2020 from December 31, 2019.
+Added: In the third quarter of 2020, the Company purchased $3,500,000 in subordinated debt from other financial institutions.
+Added: Total loans increased $56,308,000 or 8.7% to $704,040,000 as of September 30, 2020 from December 31, 2019.
+Added: Loan demand grew in the nine months ended September 30, 2020 as the Bank has realized an increase in loan originations, primarily in the commercial real estate and commercial and industrial portfolios.
The increase was mainly due the origination of $31,729,000 in PPP loans.
−Removed: Interest receivable increased $1,175,000 or 34.5% to $4,580,000 as of June 30, 2020 from December 31, 2019.
−Removed: The increase was mainly due to the full payment deferrals of several loans that were modified in response to the COVID-19 panedmic under Section 4013 of the CARES Act.
−Removed: Total deposits increased $83,098,000 or 10.9% to $844,726,000 as of June 30, 2020 from December 31, 2019.
−Removed: The increase was mainly due to the deposit of customer stimulus funds issued in accordance with the CARES Act, the deposit of PPP loan proceeds and an increase in deposits associated with municipal customers.
+Added: Interest receivable increased $1,325,000 or 38.9% to $4,730,000 as of September 30, 2020 from December 31, 2019.
+Added: The increase was mainly due to the full payment deferrals of several loans that were modified in response to the COVID-19 pandemic under Section 4013 of the CARES Act.
+Added: Total deposits increased $157,591,000 or 20.7% to $919,219,000 as of September 30, 2020 from December 31, 2019.
+Added: The increase was mainly due to the deposit of customer stimulus funds issued in accordance with the CARES Act, the deposit of PPP loan proceeds, higher levels of saving and an increase in deposits associated with municipal customers.
The Company continues to maintain and manage its asset growth.
The Company’s strong equity capital position provides an opportunity to further leverage its asset growth.
−Removed: Total borrowings decreased in the six months ended June 30, 2020 by $31,348,000 to $78,315,000 from $109,663,000 as of December 31, 2019.
+Added: Total borrowings decreased in the nine months ended September 30, 2020 by $41,540,000 to $68,123,000 from $109,663,000 as of December 31, 2019.
Borrowings decreased mainly due to increased deposit balances.
−Removed: Total stockholders’ equity increased to $137,532,000 at June 30, 2020, an increase of $8,780,000 or 6.8% from December 31, 2019 due to an increase in accumulated other comprehensive income and retained earnings.
+Added: Total stockholders’ equity increased to $140,469,000 at September 30, 2020, an increase of $11,717,000 or 9.1% from December 31, 2019 primarily due to an increase in accumulated other comprehensive income and retained earnings.
SEGMENT REPORTING
3 unchanged sentences
By maintaining a healthy asset utilization rate, i.e., the volume of earning assets as a percentage of total assets, the Company maximizes income.
−Removed: The earning asset ratio (average interest earning assets divided by average total assets) equaled 92.9% at June 30, 2020 and 92.4% at June 30, 2019.
+Added: The earning asset ratio (average interest earning assets divided by average total assets) equaled 93.0% at September 30, 2020 and 92.4% at September 30, 2019.
This indicates that the management of earning assets is a priority and non-earning assets, primarily cash and due from banks, fixed assets and other assets, are maintained at minimal levels.
The primary earning assets are loans and investment securities.
−Removed: Our primary earning asset, total loans, increased to $676,914,000 as of June 30, 2020, up $29,182,000, or 4.5% since year-end 2019.
+Added: Our primary earning asset, total loans, increased to $704,040,000 as of September 30, 2020, up $56,308,000, or 8.7% since year-end 2019.
The loan portfolio continues to be well diversified.
Non-performing assets increased since year-end 2019, but overall asset quality has remained consistent.
−Removed: Total non-performing assets were $7,919,000 as of June 30, 2020, an increase of $3,312,000, or 71.9% from $4,607,000 reported in non-performing assets as of December 31, 2019.
−Removed: Total allowance for loan losses to total non-performing assets was 92.61% as of June 30, 2020 and 152.05% at December 31, 2019.
−Removed: The increase in non-performing assets during the six months ended June 30, 2020 was mainly due to several loans that were moved to non-accrual status during the first quarter of 2020.
+Added: Total non-performing assets were $7,470,000 as of September 30, 2020, an increase of $2,863,000, or 62.1% from $4,607,000 reported in non-performing assets as of December 31, 2019.
+Added: Total allowance for loan losses to total non-performing assets was 101.46% as of September 30, 2020 and 152.05% at December 31, 2019.
+Added: The increase in non-performing assets during the third quarter of 2020 was mainly due to several loans that were moved to non-accrual status during the first quarter of 2020.
See the Non-Performing Assets section on page 48 for more information.
−Removed: In addition to loans, another primary earning asset is our overall investment portfolio, which increased in size from December 31, 2019 to June 30, 2020.
−Removed: Debt securities available-for-sale amounted to $312,689,000 as of June 30, 2020, an increase of $34,761,000 from year-end 2019.
−Removed: Interest-bearing deposits in other banks increased as of June 30, 2020, to $588,000 from $473,000 at year-end 2019.
−Removed: Time deposits with other banks were $247,000 at June 30, 2020 and December 31, 2019.
−Removed: Total loans increased to $676,914,000 as of June 30, 2020 as compared to $647,732,000 as of December 31, 2019.
+Added: In addition to loans, another primary earning asset is our overall investment portfolio, which increased in size from December 31, 2019 to September 30, 2020.
+Added: Debt securities available-for-sale amounted to $316,521,000 as of September 30, 2020, an increase of $38,593,000 from year-end 2019.
+Added: Interest-bearing deposits in other banks increased as of September 30, 2020, to $36,349,000 from $473,000 at year-end 2019 due to increased cash held at the Federal Reserve Bank.
+Added: Time deposits with other banks were $247,000 at September 30, 2020 and December 31, 2019.
+Added: Total loans increased to $704,040,000 as of September 30, 2020 as compared to $647,732,000 as of December 31, 2019.
The table on page 21 provides data relating to the composition of the Company’s loan portfolio on the dates indicated.
Total loans increased by $56,308,000 or 8.7%.
−Removed: Steady demand for borrowing by businesses (including loans issued through the Bank’s participation in the SBA’s Paycheck Protection Program) accounted for the 4.5% increase in the loan portfolio from December 31, 2019 to June 30, 2020.
−Removed: Overall, the Commercial and Industrial portfolio (which includes tax-free Commercial and Industrial loans) increased $13,581,000 to $100,293,000 at June 30, 2020 compared to $86,712,000 at December 31, 2019.
−Removed: The increase in the Commercial and Industrial portfolio was mainly attributable to originations of Paycheck Protection Program loans which amounted to $31,396,000.
−Removed: The portion of the Commercial and Industrial portfolio not attributable to the Paycheck Protection Program loans decreased $17,815,000 during the six months ended June 30, 2020.
+Added: Steady demand for borrowing by businesses (including loans issued through the Bank’s participation in the SBA’s Paycheck Protection Program) accounted for the 8.7% increase in the loan portfolio from December 31, 2019 to September 30, 2020.
+Added: Overall, the Commercial and Industrial portfolio (which includes tax-free Commercial and Industrial loans) increased $13,585,000 to $100,297,000 at September 30, 2020 compared to $86,712,000 at December 31, 2019.
+Added: The increase in the Commercial and Industrial portfolio was mainly attributable to originations of PPP loans which amounted to $31,729,000.
+Added: The portion of the Commercial and Industrial portfolio not attributable to the Paycheck Protection Program loans decreased $18,144,000 during the nine months ended September 30, 2020.
The decrease was mainly attributable to $4,975,000 in new loan originations offset by a $3,566,000 decrease in utilization of existing Commercial and Industrial lines of credit and loan payoffs of $15,673,000, as well as regular principal payments and other typical fluctuations in the Commercial and Industrial portfolio.
−Removed: The Commercial Real Estate portfolio (which includes tax-free Commercial Real Estate loans) increased $20,679,000 to $416,480,000 at June 30, 2020 compared to $395,801,000 at December 31, 2019.
+Added: The Commercial Real Estate portfolio (which includes tax-free Commercial Real Estate loans) increased $45,294,000 to $441,095,000 at September 30, 2020 compared to $395,801,000 at December 31, 2019.
The increase was mainly the result of $78,368,000 in new loan originations net against a $742,000 decrease in utilization of existing Commercial Real Estate lines of credit and $27,538,000 in loan payoffs, in addition to regular principal payments and other typical amortization in the Commercial Real Estate portfolio.
−Removed: Residential Real Estate loans decreased $4,556,000 to $154,794,000 at June 30, 2020, as compared to $159,350,000 at December 31, 2019.
−Removed: The decrease was the result of $9,695,000 in new loan originations, offset by a $137,000 decrease in utilization of existing Residential Real Estate (Home Equity) lines of credit, loan payoffs of $7,752,000, net loans sold of $2,541,000 and regular principal payments and other typical amortization in the Residential Real Estate portfolio.
−Removed: Net loans sold in the six months ended June 30, 2020 consisted of total loans sold during the six months ended June 30, 2020 of $8,328,000, offset with loans opened and sold in the same quarter during the first two quarters of 2020 which amounted to $5,787,000.
+Added: Residential Real Estate loans decreased $1,811,000 to $157,539,000 at September 30, 2020 compared to $159,350,000 at December 31, 2019.
+Added: The decrease was the result of $22,949,000 in new loan originations, offset by a $1,262,000 decrease in utilization of existing Residential Real Estate (Home Equity) lines of credit, loan
+Added: payoffs of $16,182,000, net loans sold of $4,855,000 and regular principal payments and other typical amortization in the Residential Real Estate portfolio.
+Added: Net loans sold in the nine months ended September 30, 2020 consisted of total loans sold during the nine months ended September 30, 2020 of $11,962,000, offset with loans opened and sold in the same quarter during the first three quarters of 2020 which amounted to $7,107,000.
The Company continues to originate and sell certain long-term fixed rate residential mortgage loans which conform to secondary market requirements.
2 unchanged sentences
Management believes that the loan portfolio is well diversified.
−Removed: The total commercial portfolio was $516,773,000 at June 30, 2020.
+Added: The total commercial portfolio was $541,392,000 at September 30, 2020.
Of total loans, $441,095,000 or 62.7% were secured by commercial real estate, primarily lessors of residential buildings and dwellings and lessors of non-residential buildings.
1 unchanged sentence
Overall, the portfolio risk profile as measured by loan grade is considered low risk, as $679,800,000 or 96.6% of gross loans are graded Pass;
−Removed: $0 are graded Special Mention;
+Added: $11,774,000 or 1.7% are graded Special Mention;
$11,954,000 or 1.7% are graded Substandard;
2 unchanged sentences
See Note 4 — Loans and Allowance for Loan Losses for risk grading tables.
−Removed: Overall, non-pass grades decreased to $11,777,000 at June 30, 2020, as compared to $14,887,000 at December 31, 2019.
−Removed: Commercial and Industrial non-pass grades decreased to $901,000 as of June 30, 2020 as compared to $1,070,000 as of December 31, 2019.
−Removed: Commercial Real Estate non-pass grades decreased to $9,781,000 as of June 30, 2020 as compared to $12,534,000 as of December 31, 2019.
−Removed: The Residential Real Estate and Consumer loan non-pass grades decreased to $1,095,000 as of June 30, 2020 as compared to $1,283,000 as of December 31, 2019.
−Removed: decrease in Commercial Real Estate non-pass grades at June 30, 2020 as compared to December 31, 2019 is mainly due to one loan to the owner of a recreation facility that carried a balance of $2,640,000 as of December 31, 2019, which was paid off during the three months ended June 30, 2020.
+Added: Overall, non-pass grades increased to $23,728,000 at September 30, 2020, as compared to $14,887,000 at December 31, 2019.
+Added: Commercial and Industrial non-pass grades decreased to $983,000 as of September 30, 2020 as compared to $1,070,000 as of December 31, 2019.
+Added: Commercial Real Estate non-pass grades increased to $21,370,000 as of September 30, 2020 as compared to $12,534,000 as of December 31, 2019.
+Added: The Residential Real Estate and Consumer loan non-pass grades increased to $1,375,000 as of September 30, 2020 as compared to $1,283,000 as of December 31, 2019.
+Added: The increase in Commercial Real Estate non-pass grades at September 30, 2020 as compared to December 31, 2019 is mainly due to various large loans/loan relationships that were downgraded to Special Mention status during the three months ended September 30, 2020.
+Added: One Commercial Real Estate loan to the owner/operator of a hotel that carried a balance of $9,423,000 was downgraded to Special Mention during the three months ended September 30, 2020, as occupancy levels have been adversely impacted by the COVID-19 coronavirus pandemic, but the business remains operational.
+Added: One Commercial Real Estate loan to a real estate developer that carried a balance of $1,328,000 was downgraded to Special Mention during the three months ended September 30, 2020, as the borrower was unable to pay off the loan or refinance through another institution at maturity;
+Added: the Bank has agreed to extend the maturity date of the loan for one year in conjunction with a principal paydown financed by partial release of the mortgaged premises.
+Added: Four Commercial Real Estate loans to the owners/operators of an indoor family entertainment complex that carried a balance of $792,000 were downgraded to Special Mention during the three months ended September 30, 2020, as the business was adversely impacted by the COVID-19 coronavirus pandemic and has ceased operations.
+Added: Net against the large additions to Special Mention status, there was also one Commercial Real Estate loan to the owner of a recreation facility that was classified as Substandard and carried a balance of $2,640,000 as of December 31, 2019 which was paid off during the second quarter of 2020.
The Company continues to internally underwrite each of its loans to comply with prescribed policies and approval levels established by its Board of Directors.
(Dollars in thousands)
+Added: September 30,
Commercial and Industrial
3 unchanged sentences
The allowance for loan losses constitutes the amount available to absorb losses within the loan portfolio.
−Removed: As of June 30, 2020, the allowance for loan losses was $7,334,000 as compared to $7,005,000 as of December 31, 2019.
+Added: As of September 30, 2020, the allowance for loan losses was $7,579,000 as compared to $7,005,000 as of December 31, 2019.
The allowance for loan losses is established through a provision for loan losses charged to expenses.
8 unchanged sentences
However, there can be no assurance that the allowance for loan losses will be adequate to cover significant losses, if any, that might be incurred in the future.
−Removed: In response to the COVID-19 pandemic and its impact on the current economy, the qualitative factors across all loan segments were increased by two basis points during the first quarter of 2020.
−Removed: Qualitative factors across all loan segments were increased by an additional basis point during the second quarter of 2020, as there is still economic uncertainty related to the COVID-19 pandemic.
−Removed: The Analysis of Allowance for Loan Losses table contains an analysis of the allowance for loan losses indicating charge-offs and recoveries for the six months ended June 30, 2020 and 2019.
−Removed: For the six months ended June 30, 2020 and 2019, net charge-offs as a percentage of average loans was 0.01% and 0.02%, respectively.
−Removed: Net charge-offs amounted to $59,000 the six months ended June 30, 2020 as compared to $111,000 for the the six months ended June 30, 2019.
−Removed: The decrease in net charge-offs during the six months ended June 30, 2020 as compared to the the six months ended June 30, 2019 is mainly due to one charge-off that was completed during the first quarter of 2020 on a Commercial Real Estate loan to a landscaping company in the amount of $51,000.
−Removed: For the six months ended June 30, 2020, the provision for loan losses was $388,000 as compared to $138,000 for the six months ended June 30, 2019.
+Added: In response to the COVID-19 pandemic and its impact on the current economy, the qualitative factors across all loan segments were increased by two basis points during the first quarter of 2020 and again by an additional basis point across all loan segments during the second quarter of 2020.
+Added: The qualitative factor for the Commercial Real Estate portfolio segment was increased by an additional basis point during the third quarter of 2020, as there is still economic uncertainty related to the COVID-19 pandemic, especially in relation to this segment of the Company’s loan portfolio.
+Added: See Allowance for Loan Losses on page 17 for further discussion.
+Added: The Analysis of Allowance for Loan Losses table contains an analysis of the allowance for loan losses indicating charge-offs and recoveries for the nine months ended September 30, 2020 and 2019.
+Added: For the nine months ended September 30, 2020 and 2019, net charge-offs as a percentage of average loans was 0.02% for each respective period.
+Added: Net charge-offs amounted to $108,000 for the nine months ended September 30, 2020 as compared to $138,000 for the the nine months ended September 30, 2019.
+Added: The decrease in net charge-offs during the nine months ended September 30, 2020 as compared to the the nine months ended September 30, 2019 is mainly due to one charge-off that was completed during the first quarter of 2019 on a Commercial Real Estate loan to a landscaping company in the amount of $51,000.
+Added: For the nine months ended September 30, 2020, the provision for loan losses was $682,000 as compared to $313,000 for the nine months ended September 30, 2019.
The provision, net of charge-offs and recoveries, resulted in the quarter end allowance for loan losses of $7,579,000 of which 11.0% was attributed to the Commercial and Industrial component;
2 unchanged sentences
1.4% attributed to the Consumer component;
−Removed: and 7.9% being the unallocated component (refer to the activity in Note 4 –
−Removed: Loans and Allowance for Loan Losses on page 13).
−Removed: The Company determined that the provision for loan losses made during the current quarter was sufficient to maintain the allowance for loan losses at a level necessary for the probable losses inherent in the loan portfolio as of June 30, 2020.
+Added: and 7.2% being the unallocated component (refer to the activity in Note 4 – Loans and Allowance for Loan Losses on page 14).
+Added: The Company determined that the provision for loan losses made during the current quarter was sufficient to maintain the allowance for loan losses at a level necessary for the probable losses inherent in the loan portfolio as of September 30, 2020.
Analysis of Allowance for Loan Losses
(Dollars in thousands)
+Added: September 30,
+Added: September 30,
Balance at beginning of period
15 unchanged sentences
A detailed quarterly analysis to determine the adequacy of the Company’s allowance for loan losses is reviewed by the Board of Directors.
−Removed: With the Bank’s manageable level of net charge-offs and the additions to the reserve from the provision out of operations, the allowance for loan losses as a percentage of average loans amounted to 1.10% at June 30, 2020 and 2019, respectively.
+Added: With the Bank’s manageable level of net charge-offs and the additions to the reserve from the provision out of operations, the allowance for loan losses as a percentage of average loans amounted to 1.13% at September 30, 2020 and 1.12% at September 30, 2019, respectively.
NON-PERFORMING ASSETS
3 unchanged sentences
When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against current period income.
−Removed: A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification constitutes a concession that the Company would not otherwise consider.
−Removed: Modifications to loans classified as TDRs generally include reductions in contractual interest rates,
−Removed: principal deferments and extensions of maturity dates at a stated interest rate lower than the current market for a new loan with similar risk characteristics.
+Added: A modification of a loan constitutes a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession that the Company would not otherwise consider.
+Added: Modifications to loans classified as TDRs generally include reductions in contractual interest rates, principal deferments and extensions of maturity dates at a stated interest rate lower than the current market for a new loan with similar risk characteristics.
While unusual, there may be instances of loan principal forgiveness.
−Removed: Any loan modifications made in response to the COVID-19 pandemic are not considered troubled debt restructurings as long as the criteria set forth in Section 4013 of the CARES Act are met.
+Added: Any loan modifications made in response to the COVID-19 pandemic are not considered troubled debt restructurings as long as the criteria set forth in
+Added: Section 4013 of the CARES Act are met.
Foreclosed assets held for resale represent property acquired through foreclosure, or considered to be an in-substance foreclosure.
−Removed: Total non-performing assets amounted to $7,919,000 as of June 30, 2020, as compared to $4,607,000 as of December 31, 2019.
−Removed: The economy, in particular, the political unrest both domestic and abroad, the looming presidential election, the various tariffs both imposed and threatened, the recession resulting from the COVID-19 pandemic, the recent rate cuts by the Fed, and the continued slowness in the housing industries in our market areas has had a direct effect on the Company’s non-performing assets.
+Added: Total non-performing assets amounted to $7,470,000 as of September 30, 2020, as compared to $4,607,000 as of December 31, 2019.
+Added: The economy, in particular, the political unrest both domestic and abroad, the looming presidential election, the partial and full shutdowns of various government offices, the recession resulting from the COVID-19 pandemic, the large unemployment totals, and the continued slowness in the housing industries in our market areas has had a direct effect on the Company’s non-performing assets.
The Company is closely monitoring its Commercial Real Estate portfolio because of the current uncertain economic environment.
−Removed: Non-accrual loans totaled $6,884,000 as of June 30, 2020, as compared to $4,388,000 as of December 31, 2019.
−Removed: Foreclosed assets held for resale increased to $169,000 as of June 30, 2020, compared to $119,000 as of December 31, 2019.
−Removed: Loans past-due 90 days or more and still accruing interest amounted to $866,000 at June 30, 2020, as compared to $100,000 as of December 31, 2019.
−Removed: At June 30, 2020, loans past-due 90 days or more and still accruing interest consisted of one Commercial and Industrial loan and one Commercial Real Estate loan which were both well secured and in the process of collection.
−Removed: The increase in non-accrual loans at June 30, 2020, as compared to December 31, 2019 is mainly due to the addition of several large loans/loan relationships to non-accrual status during the first quarter of 2020.
+Added: Non-accrual loans totaled $6,840,000 as of September 30, 2020, as compared to $4,388,000 as of December 31, 2019.
+Added: Foreclosed assets held for resale decreased to $88,000 as of September 30, 2020, compared to $119,000 as of December 31, 2019.
+Added: Loans past-due 90 days or more and still accruing interest amounted to $542,000 at September 30, 2020, as compared to $100,000 as of December 31, 2019.
+Added: At September 30, 2020, loans past-due 90 days or more and still accruing interest consisted of two Commercial Real Estate loans which were both well secured and in the process of collection.
+Added: The increase in non-accrual loans at September 30, 2020, as compared to December 31, 2019 is mainly due to the addition of several large loans/loan relationships to non-accrual status during the first quarter of 2020.
Five loans to a plastic processing company focused on non-post-consumer recycling totaling $1,275,000 were moved to non-accrual status during the first quarter of 2020 due to strained liquidity and the borrower’s inability to make required payments, as the owner has decreased the level of operations and is exploring options to obtain an additional investor or liquidate the business.
1 unchanged sentence
A residential mortgage in the amount of $356,000 to the owner of a manufacturing company was also moved to non-accrual status during the first quarter of 2020, as poor payment performance has led to foreclosure proceedings related to the associated property.
−Removed: Non-performing assets to total loans was 1.17% at June 30, 2020 and 0.71% at December 31, 2019.
−Removed: Non-performing assets to total assets was 0.74% at June 30, 2020 and 0.46% at December 31, 2019.
−Removed: The allowance for loan losses to total non-performing assets was 92.61% as of June 30, 2020 as compared to 152.05% as of December 31, 2019.
+Added: Non-performing assets to total loans was 1.06% at September 30, 2020 and 0.71% at December 31, 2019.
+Added: Non-performing assets to total assets was 0.66% at September 30, 2020 and 0.46% at December 31, 2019.
+Added: The allowance for loan losses to total non-performing assets was 101.46% as of September 30, 2020 as compared to 152.05% as of December 31, 2019.
Additional detail can be found on page 51 in the Non-Performing Assets and Impaired Loans table and page 28 in the Non-Performing Assets table.
−Removed: Asset quality is a priority and the Company retains a full-time loan review officer to closely track and monitor overall loan quality, along with a full-time workout department to manage collection and liquidation efforts.
+Added: Asset quality is a priority and the Company retains a full-time loan review officer to closely track and monitor overall loan quality, along with a full-time loan workout department to manage collection and liquidation efforts.
Potential problem loans are defined as performing substandard loans which are not deemed to be impaired.
These loans have characteristics that cause management to have doubts regarding the ability of the borrower to perform under present loan repayment terms and which may result in reporting these loans as non-performing loans in the future.
−Removed: Potential problem loans amounted to $405,000 at June 30, 2020, compared to $4,074,000 at December 31, 2019.
−Removed: Impaired loans were $13,700,000 at June 30, 2020 and $12,954,000 at December 31, 2019.
−Removed: The largest impaired loan relationship at June 30, 2020 consisted of a non-performing loan to a student housing holding company which was secured by commercial real estate.
−Removed: At June 30, 2020, the loan carried a balance of $3,176,000, net of $1,904,000 that had been charged off to date.
−Removed: The second largest impaired loan relationship at June 30, 2020 consisted of one performing loan to a student housing holding company, which was classified as a TDR.
−Removed: The loan was secured by commercial real estate and carried a balance of $2,961,000 as of June 30, 2020, net of $943,000 that had been charged off to date.
−Removed: The third largest impaired loan relationship at June 30, 2020 consisted of a substandard performing loan to a developer of a residential sub-division in the amount of $1,432,000, which was secured by commercial real estate and classified as a TDR.
+Added: Potential problem loans amounted to $645,000 at September 30, 2020, compared to $4,074,000 at December 31, 2019.
+Added: Impaired loans were $13,972,000 at September 30, 2020 and $12,954,000 at December 31, 2019.
+Added: The largest impaired loan relationship at September 30, 2020 consisted of a non-performing loan to a student housing holding company which was secured by commercial real estate.
+Added: At September 30, 2020, the loan carried a balance of $3,176,000, net of $1,904,000 that had been charged off to date.
+Added: The second largest impaired loan relationship at September 30, 2020 consisted of one performing loan to a student housing holding company, which was classified as a TDR.
+Added: The loan was secured by commercial real estate and carried a balance of $2,946,000 as of September 30, 2020, net of $943,000 that had been charged off to date.
+Added: The third largest impaired loan relationship at September 30, 2020 consisted of a substandard performing loan to a developer of a residential sub-division in the amount of $1,432,000, which was secured by commercial real estate and classified as a TDR.
The Company estimates impairment based on its analysis of the cash flows or collateral estimated at fair value less cost to sell.
−Removed: For collateral dependent loans, the estimated appraisal adjustments and cost to sell percentages are
−Removed: determined based on the market area in which the real estate securing the loan is located, among other factors, and therefore, can differ from one loan to another.
−Removed: Of the $13,700,000 in impaired loans at June 30, 2020, none were located outside of the Company’s primary market area.
−Removed: The outstanding recorded investment of TDRs as of June 30, 2020 and December 31, 2019 was $8,506,000 and $8,678,000, respectively.
−Removed: The decrease in TDRs at June 30, 2020 as compared to December 31, 2019 is mainly attributable to payments, payoffs, and charge-offs on existing TDRs that were completed during the six months ended June 30, 2020, net against three small loans that were modified as TDRs during the three months ended June 30, 2020.
−Removed: Of the twenty-nine restructured loans at June 30, 2020, six loans were classified in the Commercial and Industrial portfolio, twenty-two loans were classified in the Commercial Real Estate portfolio, and one loan was classified in the Residential Real Estate portfolio.
−Removed: Troubled debt restructurings at June 30, 2020 consisted of eleven term modifications beyond the original stated term, three rate modifications, and fourteen payment modifications.
+Added: For collateral dependent loans, the estimated appraisal adjustments and cost to sell percentages are determined based on the market area in which the real estate securing the loan is located, among other factors, and therefore, can differ from one loan to another.
+Added: Of the $13,972,000 in impaired loans at September 30, 2020, none were located outside of the Company’s primary market area.
+Added: The outstanding recorded investment of TDRs as of September 30, 2020 and December 31, 2019 was $8,807,000 and $8,678,000, respectively.
+Added: The increase in TDRs at September 30, 2020 as compared to December 31, 2019 is mainly attributable to seven loans that were modified as TDRs during the nine months ended September 30, 2020, net against payments, payoffs, and charge-offs on existing TDRs that were completed during the nine months ended September 30, 2020.
+Added: Of the thirty-three restructured loans at September 30, 2020, eight loans were classified in the Commercial and Industrial portfolio, twenty-four loans were classified in the Commercial Real Estate portfolio, and one loan was classified in the Residential Real Estate portfolio.
+Added: Troubled debt restructurings at September 30, 2020 consisted of twelve term modifications beyond the original stated term, three rate modifications, and seventeen payment modifications.
There was also one troubled debt restructuring that experienced all three types of modifications—payment, rate, and term.
TDRs are separately evaluated for payment disclosures, and if necessary, a specific allocation is established.
−Removed: There were specific allocations of $4,000 and $1,000 attributable to the TDRs at June 30, 2020 and December 31, 2019, respectively.
−Removed: There were no unfunded commitments attributable to TDRs at June 30, 2020 and December 31, 2019.
−Removed: At June 30, 2020, eight Commercial Real Estate loans classified as TDRs with a combined recorded investment of $1,108,000 and three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $752,000 were not in compliance with the terms of their restructure, compared to June 30, 2019 when six Commercial Real Estate loans classified as TDRs with a combined recorded investment of $486,000 and one Commercial and Industrial loan classified as a TDR with a recorded investment of $4,000 were not in compliance with the terms of their restructure.
−Removed: Of the loans that were modified as TDRs during the twelve months preceding June 30, 2020, two Commercial Real Estate loans totaling $62,000 experienced payment defaults during the three months ended June 30, 2020.
−Removed: No loans that were modified as TDRs during the twelve months preceding June 30, 2020 experienced payment defaults during the first three months of 2020.
−Removed: No loans that were modified as TDRs during the twelve months preceding June 30, 2019 experienced payment defaults during the three or six months ended June 30, 2019.
+Added: There were no specific allocations attributable to the TDRs at September 30, 2020, compared to December 31, 2019 when there were specific allocations of $1,000 attributable to the TDRs.
+Added: There were no unfunded commitments attributable to the TDRs at September 30, 2020 and December 31, 2019.
+Added: At September 30, 2020, nine Commercial Real Estate loans classified as TDRs with a combined recorded investment of $1,288,000 and three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $751,000 were not in compliance with the terms of their restructure, compared to September 30, 2019 when nine Commercial Real Estate loans classified as TDRs with a combined recorded investment of $661,000 and one Commercial and Industrial loan classified as a TDR with a recorded investment of $3,000 were not in compliance with the terms of their restructure.
+Added: No loans that were modified as TDRs during the twelve months preceding September 30, 2020 experienced payment defaults during the three months ended September 30, 2020.
+Added: Of the loans that were modified as TDRs during the twelve months preceding September 30, 2020, two Commercial Real Estate loans totaling $62,000 experienced payment defaults during the nine months ended September 30, 2020.
+Added: No loans that were modified as TDRs during the twelve months preceding September 30, 2019 experienced payment defaults during the three or nine months ended September 30, 2019.
The Company’s non-accrual loan valuation procedure for any loans greater than $250,000 requires an appraisal to be obtained and reviewed annually at year end.
10 unchanged sentences
The Company may experience difficulties collecting monthly payments on time from its borrowers, property values may decline, and certain types of loans may need to be modified, which could cause a rise in the level of impaired loans, non-performing assets, charge-offs, and delinquencies.
−Removed: Should increases occur in these areas,
−Removed: additions to the balance of the Company’s allowance for loan losses could be required.
−Removed: The extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on certain developments including the duration and spread of the outbreak.
+Added: Should increases occur in these areas, additions to the balance of the Company’s allowance for loan losses could be required.
+Added: The extent of the impact of the
+Added: COVID-19 pandemic on the Company’s operational and financial performance will depend on certain developments including the duration and spread of the outbreak.
A concentration of credit exists when the total amount of loans to borrowers, who are engaged in similar activities that are similarly impacted by economic or other conditions, exceed 10% of total loans.
−Removed: As of June 30, 2020 and December 31, 2019, management is of the opinion that there were no loan concentrations exceeding 10% of total loans.
+Added: As of September 30, 2020 and December 31, 2019, management is of the opinion that there were no loan concentrations exceeding 10% of total loans.
Non-Performing Assets and Impaired Loans
(Dollars in thousands)
+Added: September 30,
Non-performing assets
18 unchanged sentences
Allowance for loan losses to total non-performing assets
−Removed: Real estate mortgages comprise 84.4% of the loan portfolio as of June 30, 2020, as compared to 85.7% as of December 31, 2019.
+Added: Real estate mortgages comprise 85.0% of the loan portfolio as of September 30, 2020, as compared to 85.7% as of December 31, 2019.
Real estate mortgages consist of both residential and commercial real estate loans.
6 unchanged sentences
The collateral values are determined by recent appraisals, but are generally discounted by management based on historical dispositions, changes in market conditions since the last valuation and management’s expertise and knowledge of the borrower and the borrower’s business.
+Added: The Corporation performs its annual goodwill assessment each December.
+Added: However, management notes that the emergence of COVID-19 as a global pandemic during the first nine months of 2020 has resulted in significant deterioration in the general economic conditions and has caused a deterioration in the environment in which the Corporation operates.
+Added: The reduction in interest rates and the resultant impact to margin, the impact of full and partial
+Added: closures on business clients leading to loss of jobs for consumers and reduced cash flow for businesses, the execution of Paycheck Protection Program (“PPP”) loans and modifications, and the inflow of deposits as customers flock to safety are all signs indicative of the economic and industry stress.
+Added: While the Corporation’s core income has remained strong year to date due to PPP fees, mortgage banking and steady net interest income, the provision expense has increased as the risk inherent in the loan portfolio has been recognized through changing qualitative factors.
+Added: The full impact to earnings in the banking industry and to the Corporation specifically, remains uncertain as there have been a multitude of government plans implemented during the second quarter of 2020 aimed at providing financial assistance to businesses.
+Added: However, the stock price for the Corporation has been negatively impacted, as has been the case with stock prices of the Corporation’s peers.
+Added: Based on the totality of the circumstances and the impact of the economic conditions on the stock price, management concluded that it is more likely than not that the fair value of a reporting unit is less than its carrying amount and engaged an independent third party to perform the quantitative analysis of comparing the fair value of the Corporation to its carrying value, including goodwill.
+Added: The quantitative assessment of goodwill was performed utilizing a discounted cash flow analysis (“income approach”) and estimates of selected market information (“market approach”).
+Added: The income approach measures the fair value of an interest in a business by discounting expected future cash flows to present value.
+Added: One market approach takes into consideration the fair values of comparable companies operating in similar lines of business that are potentially subject to similar economic and environmental factors and could be considered reasonable investment alternatives.
+Added: The second market approach considered the Corporation’s current stock price adjusted for a control premium.
+Added: The results of the income approach were weighted at 40% while the results of the market approaches were weighted 10% and 50%, respectively.
+Added: The results of the quantitative impairment analysis indicated that the Corporation’s fair value exceeded the carrying value by approximately 2%.
+Added: The assumptions used in the impairment test of goodwill are susceptible to change based on changes in economic conditions and other factors, including our stock price.
+Added: Any change in the assumptions which we utilize to determine the carrying value of goodwill could adversely impact our results of operations.
DEPOSITS AND OTHER BORROWED FUNDS
Consumer and commercial retail deposits are attracted primarily by the Bank’s eighteen full service office locations, one loan production office and through its internet banking presence.
−Removed: The Bank offers a broad selection of
−Removed: deposit products and continually evaluates its interest rates and fees on deposit products.
+Added: The Bank offers a broad selection of deposit products and continually evaluates its interest rates and fees on deposit products.
The Bank regularly reviews competing financial institutions’ interest rates, especially when establishing interest rates on certificates of deposit.
−Removed: Total deposits increased $83,098,000 to $844,726,000 as of June 30, 2020 as non-interest bearing deposits increased by $51,187,000 and interest bearing deposits increased by $31,911,000 from year-end 2019.
−Removed: The increase in deposits was the result of many different factors including the deposit of at least $19,000,000 in stimulus funds, via check or ACH, and $31,396,000 in PPP loan proceeds.
−Removed: Total short-term and long-term borrowings decreased to $78,315,000 as of June 30, 2020, from $109,663,000 at year-end 2019, a decrease of $31,348,000 or 28.6%.
+Added: Total deposits increased $157,591,000 to $919,219,000 as of September 30, 2020 as non-interest bearing deposits increased by $67,248,000 and interest bearing deposits increased by $90,343,000 from year-end 2019.
+Added: The increase in deposits was the result of many different factors including the deposit of at least $19,000,000 in stimulus funds, via check or ACH, $31,729,000 in PPP loan proceeds, less consumer spending, a $58,000,000 increase in highly rate sensitive deposits and other normal fluctuations in deposits during the nine months ended September 30, 2020.
+Added: Total short-term and long-term borrowings decreased to $68,123,000 as of September 30, 2020, from $109,663,000 at year-end 2019, a decrease of $41,540,000 or 37.9%.
The decrease in total borrowings was mainly the result of increasing deposit balances in 2020.
1 unchanged sentence
Normal increases in capital are generated by net income, less dividends paid out.
−Removed: During the six months ended June 30, 2020, net income less dividends paid increased capital by $2,289,000.
+Added: During the nine months ended September 30, 2020, net income less dividends paid increased capital by $3,847,000.
Accumulated other comprehensive income (loss) derived from net unrealized gains on debt securities available-for-sale also impacts capital.
At December 31, 2019 accumulated other comprehensive income was $4,221,000.
−Removed: Accumulated other comprehensive income stood at $10,071,000 at June 30, 2020, an increase of $5,850,000.
+Added: Accumulated other comprehensive income stood at $11,115,000 at September 30, 2020, an increase of $6,894,000.
Fluctuations in interest rates have regularly impacted the gain/loss position in the Bank’s investment portfolio, as well as its decision to sell securities at a gain or loss.
−Removed: In order to protect the Bank from market risk in the event of further interest rate increases, the Bank chose to sell a portion of its securities during the six months ended June 30, 2020 at an overall net gain of $167,000.
+Added: In order to protect the Bank from market risk in the event of further interest rate increases, the Bank chose to sell a portion of its securities during the nine months ended September 30, 2020 at an overall net gain of $228,000.
The fluctuations from net unrealized gains on debt securities available-for-sale do not affect regulatory capital, as the Bank elected to opt-out of the inclusion of this item with the filing of the March 31, 2015 Call Report.
−Removed: The Company held 231,612 shares of common stock as treasury stock at June 30, 2020 and December 31, 2019, respectively.
−Removed: This had an effect of reducing our total stockholders’ equity by $5,709,000 as of June 30, 2020 and December 31, 2019, respectively.
−Removed: Total stockholders’ equity was $137,532,000 as of June 30, 2020, and $128,752,000 as of December 31, 2019.
−Removed: At June 30, 2020 the Bank met the definition of a “well-capitalized” institution under the regulatory framework for prompt corrective action and the minimum capital requirements under Basel III.
−Removed: The following table presents the Bank’s capital ratios as of June 30, 2020 and December 31, 2019:
+Added: The Company held 231,612 shares of common stock as treasury stock at September 30, 2020 and December 31, 2019, respectively.
+Added: This had an effect of reducing our total stockholders’ equity by $5,709,000 as of September 30, 2020 and December 31, 2019, respectively.
+Added: Total stockholders’ equity was $140,469,000 as of September 30, 2020, and $128,752,000 as of December 31, 2019.
+Added: At September 30, 2020 the Bank met the definition of a “well-capitalized” institution under the regulatory framework for prompt corrective action and the minimum capital requirements under Basel III.
+Added: The following table presents the Bank’s capital ratios as of September 30, 2020 and December 31, 2019:
+Added: September 30,
Corrective Action
7 unchanged sentences
The capital buffer requirement effectively raises the minimum required common equity Tier 1 capital ratio to 7.0%, the Tier 1 capital ratio to 8.5%, and the total capital ratio to 10.5% on a fully phased-in basis as of January 1, 2019.
−Removed: As of June 30, 2020, the Bank meets all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis.
+Added: As of September 30, 2020, the Bank meets all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis.
The Corporation’s capital ratios are not materially different than those of the Bank.
8 unchanged sentences
● Brokered CDs.
−Removed: At June 30, 2020, the Company had $381,369,000 in available borrowing capacity at FHLB (which takes into account FHLB long-term notes and FHLB short-term borrowings);
+Added: At September 30, 2020, the Company had $382,155,000 in available borrowing capacity at FHLB (which takes into account FHLB long-term notes and FHLB short-term borrowings);
the maximum borrowing capacity at ACBB was $15,000,000 and the maximum borrowing capacity of the Federal Discount Window was $4,449,000.
2 unchanged sentences
As a result, the repurchase agreements are accounted for as collateralized financing agreements (secured borrowings) and act as an additional source of liquidity.
−Removed: Securities sold under agreements to repurchase were $20,660,000 at June 30, 2020.
+Added: Securities sold under agreements to repurchase were $23,123,000 at September 30, 2020.
Asset liquidity is provided by investment securities maturing in one year or less, other short-term investments, federal funds sold, and cash and due from banks.
2 unchanged sentences
Also, short-term borrowings provide funds to meet liquidity needs.
−Removed: Net cash flows provided by operating activities were $4,846,000 and $6,112,000 at June 30, 2020 and 2019, respectively.
−Removed: Net income amounted to $5,434,000 for the six months ended June 30, 2020 and $4,773,000 for the six months ended June 30, 2019.
−Removed: During the six months ended June 30, 2020 and 2019, net premium amortization on investment securities amounted to $982,000 and $1,398,000, respectively.
−Removed: Originations of mortgage loans originated for resale exceeded proceeds (including gains) from sales of mortgage loans originated for resale by $1,408,000 and $192,000 for the six months ended June 30, 2020 and 2019, respectively.
−Removed: Net securities losses were $303,000 for the six months ended June 30, 2020, compared to net securities gains of $195,000 for the six months ended June 30, 2019.
−Removed: Accrued interest receivable increased by $1,175,000 during the six months ended June 30, 2020 and decreased by $107,000 during the six months ended June 30, 2019.
−Removed: Other assets decreased by $715,000 during the six months ended June 30, 2020 and increased by $1,862,000 during the six months ended June 30, 2019.
−Removed: Other liabilities decreased by $28,000 during the six months ended June 30, 2020, compared to an increase of $1,583,000 during the six months ended June 30, 2019
−Removed: Investing activities used cash of $55,050,000 during the six months ended June 30, 2020 and provided cash of $14,228,000 during the six months ended June 30, 2019.
−Removed: Net activity in the available-for-sale securities portfolio (including proceeds from sale, maturities, and redemptions net against purchases) used cash of $28,171,000 during the six months ended June 30, 2020 and provided cash of $17,642,000 during the six months ended June 30, 2019.
−Removed: Net cash used to originate loans amounted to $27,544,000 and $5,450,000 during the six months ended June 30, 2020 and 2019, respectively.
−Removed: Financing activities provided cash of $49,230,000 during the six months ended June 30, 2020 and used cash of $21,643,000 during the six months ended June 30, 2019.
−Removed: Deposits increased by $83,098,000 and $35,172,000 during the six months ended June 30, 2020 and 2019, respectively.
−Removed: Short-term borrowings decreased by $21,348,000 and $54,294,000 during the six months ended June 30, 2020 and 2019, respectively.
−Removed: There were no proceeds from long-term borrowings during the six months ended June 30, 2020, compared to $10,000,000 for the six months ended June 30, 2019.
−Removed: Repayment of long-term borrowings amounted to $10,000,000 for the six months ended June 30, 2020 and $10,000,000 for the six months ended June 30, 2019.
−Removed: Dividends paid amounted to $3,145,000 and $3,117,000 during the six months ended June 30, 2020 and 2019, respectively.
+Added: Net cash flows used in operating activities were $1,468,000 as of September 30, 2020, compared to net cash flows provided by operating activities of $8,297,000 as of September 30, 2019.
+Added: Net income amounted to $8,571,000 for the nine months ended September 30, 2020 and $7,696,000 for the nine months ended September 30, 2019.
+Added: During the nine months ended September 30, 2020 and 2019, net premium amortization on investment securities amounted to $1,484,000 and $2,054,000, respectively.
+Added: Originations of mortgage loans originated for resale exceeded proceeds (including gains) from sales of mortgage loans originated for resale by $9,714,000 and $1,105,000 for the nine months ended September 30, 2020 and 2019, respectively.
+Added: Net securities losses were $312,000 for the nine months ended September 30, 2020, compared to net securities gains of $837,000 for the nine months ended September 30, 2019.
+Added: Accrued interest receivable increased by $1,325,000 during the nine months ended September 30, 2020 and decreased by $566,000 during the nine months ended September 30, 2019.
+Added: Other assets decreased by $388,000 during the nine months ended September 30, 2020 and increased by $1,964,000 during the nine months ended September 30, 2019.
+Added: Other liabilities decreased by $1,310,000 during the nine months ended September 30, 2020, compared to an increase of $1,097,000 during the nine months ended September 30, 2019.
+Added: Investing activities used cash of $75,567,000 during the nine months ended September 30, 2020 and provided cash of $6,268,000 during the nine months ended September 30, 2019.
+Added: Net activity in the available-for-sale securities portfolio (including proceeds from sale, maturities, and redemptions net against purchases) used cash of $31,122,000 during the nine months ended September 30, 2020 and provided cash of $27,012,000 during the nine months ended September 30, 2019.
+Added: Net cash used to originate loans amounted to $46,218,000 and $23,560,000 during the nine months ended September 30, 2020 and 2019, respectively.
+Added: Financing activities provided cash of $112,287,000 during the nine months ended September 30, 2020 and used cash of $8,615,000 during the nine months ended September 30, 2019.
+Added: Deposits increased by $157,591,000 and $69,425,000 during the nine months ended September 30, 2020 and 2019, respectively.
+Added: Short-term borrowings decreased by $31,540,000 and $84,257,000 during the nine months ended September 30, 2020 and 2019, respectively.
+Added: There were no proceeds from long-term borrowings during the nine months ended September 30, 2020, compared to proceeds from long-term borrowings of $30,000,000 for the nine months ended September 30, 2019.
+Added: Repayment of long-term borrowings amounted to $10,000,000 for the nine months ended September 30, 2020 and $20,000,000 for the nine months ended September 30, 2019.
+Added: Dividends paid amounted to $4,724,000 and $4,680,000 during the nine months ended September 30, 2020 and 2019, respectively.
Managing liquidity remains an important segment of asset/liability management.
3 unchanged sentences
These measurements indicate that liquidity generally remains stable and exceeds the Company’s minimum defined levels of adequacy.
−Removed: Other than the trends of continued competitive pressures and volatile interest rates, there are no known demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, liquidity increasing or decreasing in any material way.
+Added: Other than the trends of continued competitive pressures and volatile interest rates, there are no known demands, commitments, events or uncertainties that will result in, or that
+Added: are reasonably likely to result in, liquidity increasing or decreasing in any material way.
Given our financial strength, we expect to be able to maintain adequate liquidity as we manage through the current environment, utilizing current funding options and possibly utilizing new options, such as the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”).
16 unchanged sentences
This position would contribute positively to net interest income in a falling rate environment.
−Removed: The Company’s cumulative gap at one year indicates the Company is liability sensitive at June 30, 2020.
+Added: The Company’s cumulative gap at one year indicates the Company is liability sensitive at September 30, 2020.
Earnings at Risk
2 unchanged sentences
The Company recognizes that more sophisticated tools exist for measuring the interest rate risk in the balance sheet beyond interest rate sensitivity gap.
−Removed: Although the Company
−Removed: continues to measure its interest rate sensitivity gap, the Company utilizes additional modeling for interest rate risk in the overall balance sheet.
+Added: Although the Company continues to measure its interest rate sensitivity gap, the Company utilizes additional modeling for interest rate risk in the overall balance sheet.
Earnings at risk and economic values at risk are analyzed.
17 unchanged sentences
However, the Company’s interest-sensitive assets are able to decline by these amounts.
−Removed: For the six months ended June 30, 2020, the cost of interest-bearing liabilities averaged 1.06%, and the yield on interest-earning assets, on a fully taxable equivalent basis, averaged 4.20%.
+Added: For the nine months ended September 30, 2020, the cost of interest-bearing liabilities averaged 0.93%, and the yield on interest-earning assets, on a fully taxable equivalent basis, averaged 4.14%.
Net Present Value Estimation
1 unchanged sentence
The net present value of the balance sheet is defined as the discounted present value of asset cash flows minus the discounted present value of liability cash flows.
−Removed: At June 30, 2020, the 100 and 200 basis point immediate decreases in rates are estimated to affect net present value with decreases of 125.39% and 308.55%, respectively.
+Added: At September 30, 2020, the 100 and 200 basis point immediate decreases in rates are estimated to affect net present value with decreases of 98.80% and 242.28%, respectively.
Additionally, net present value is projected to increase 63.73%, 102.81%, and 123.45% in the 100, 200, and 300 basis point immediate increase scenarios, respectively.
23 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.