Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
March 31,
2022 December 31,
2021
(Unaudited)
ASSETS
Cash and due from banks $ 71,669 $ 51,830
Short-term investments 403,355 631,410
Total cash and cash equivalents 475,024 683,240
Securities available-for-sale (carried at fair value) 1,522,535 1,398,558
Real estate mortgage loans held-for-sale 2,234 7,470
Loans, net of allowance for credit losses of $ 67,526 and $ 67,773
4,286,188 4,220,068
Land, premises and equipment, net 58,883 59,309
Bank owned life insurance 97,722 97,652
Federal Reserve and Federal Home Loan Bank stock 12,840 13,772
Accrued interest receivable 19,448 17,674
Goodwill 4,970 4,970
Other assets 92,415 54,610
Total assets $ 6,572,259 $ 6,557,323
LIABILITIES
Noninterest bearing deposits $ 1,880,418 $ 1,895,481
Interest bearing deposits 3,940,205 3,839,926
Total deposits 5,820,623 5,735,407
Borrowings - Federal Home Loan Bank advances 75,000 75,000
Accrued interest payable 2,303 2,619
Other liabilities 65,231 39,391
Total liabilities 5,963,157 5,852,417
STOCKHOLDERS’ EQUITY
Common stock: 90,000,000 shares authorized, no par value
25,816,997 shares issued and 25,346,149 outstanding as of March 31, 2022
25,777,609 shares issued and 25,300,793 outstanding as of December 31, 2021
121,138 120,615
Retained earnings 596,578 583,134
Accumulated other comprehensive income (loss) ( 93,687 ) 16,093
Treasury stock at cost ( 470,848 shares as of March 31, 2022, 476,816 shares as of December 31, 2021)
( 15,016 ) ( 15,025 )
Total stockholders’ equity 609,013 704,817
Noncontrolling interest 89 89
Total equity 609,102 704,906
Total liabilities and equity $ 6,572,259 $ 6,557,323
The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data)
Three Months Ended
March 31,
2022 2021
NET INTEREST INCOME
Interest and fees on loans
Taxable $ 39,735 $ 43,461
Tax exempt 169 104
Interest and dividends on securities
Taxable 3,278 1,835
Tax exempt 4,606 2,489
Other interest income 246 88
Total interest income 48,034 47,977
Interest on deposits 3,081 4,218
Interest on borrowings
Short-term 0 7
Long-term 73 73
Total interest expense 3,154 4,298
NET INTEREST INCOME 44,880 43,679
`
Provision for credit losses 417 1,477
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 44,463 42,202
NONINTEREST INCOME
Wealth advisory fees 2,287 2,178
Investment brokerage fees 519 464
Service charges on deposit accounts 2,809 2,491
Loan and service fees 2,889 2,776
Merchant card fee income 815 622
Bank owned life insurance income (loss) ( 83 ) 756
Interest rate swap fee income 50 249
Mortgage banking income 509 1,373
Net securities gains 0 753
Other income 892 895
Total noninterest income 10,687 12,557
NONINTEREST EXPENSE
Salaries and employee benefits 14,392 14,385
Net occupancy expense 1,629 1,503
Equipment costs 1,411 1,445
Data processing fees and supplies 3,081 3,319
Corporate and business development 1,219 1,509
FDIC insurance and other regulatory fees 439 464
Professional fees 1,559 1,877
Other expense 3,239 2,244
Total noninterest expense 26,969 26,746
INCOME BEFORE INCOME TAX EXPENSE 28,181 28,013
Income tax expense 4,539 5,030
NET INCOME $ 23,642 $ 22,983
BASIC WEIGHTED AVERAGE COMMON SHARES 25,515,271 25,457,659
BASIC EARNINGS PER COMMON SHARE $ 0.93 $ 0.90
DILUTED WEIGHTED AVERAGE COMMON SHARES 25,690,372 25,550,111
DILUTED EARNINGS PER COMMON SHARE $ 0.92 $ 0.90
The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited - in thousands)
Three months ended March 31,
2022 2021
Net income $ 23,642 $ 22,983
Other comprehensive income (loss)
Change in securities available-for-sale:
Unrealized holding gain (loss) on securities available-for-sale arising during the period ( 138,995 ) ( 15,297 )
Reclassification adjustment for gains included in net income 0 ( 753 )
Net securities gain (loss) activity during the period ( 138,995 ) ( 16,050 )
Tax effect 29,188 3,371
Net of tax amount ( 109,807 ) ( 12,679 )
Defined benefit pension plans:
Amortization of net actuarial loss 36 60
Net gain activity during the period 36 60
Tax effect ( 9 ) ( 15 )
Net of tax amount 27 45
Total other comprehensive income (loss), net of tax ( 109,780 ) ( 12,634 )
Comprehensive income (loss) $ ( 86,138 ) $ 10,349
The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited - in thousands, except share and per share data)
Three Months Ended
Common Stock Retained
Earnings Accumulated Other Comprehensive
Income (Loss) Treasury
Stock Total Stockholders’
Equity Noncontrolling
Interest Total
Equity
Shares Stock
Balance at January 1, 2021
25,239,748 $ 114,927 $ 529,005 $ 27,744 $ ( 14,581 ) $ 657,095 $ 89 $ 657,184
Adoption of ASU 2016-13 ( 6,951 ) ( 6,951 ) $ ( 6,951 )
Comprehensive income:
Net income 22,983 22,983 22,983
Other comprehensive income (loss), net of tax ( 12,634 ) ( 12,634 ) ( 12,634 )
Cash dividends declared and paid, $ 0.34 per share
( 8,647 ) ( 8,647 ) ( 8,647 )
Treasury shares purchased under deferred directors' plan ( 3,634 ) 219 ( 219 ) 0 0
Treasury shares sold and distributed under deferred directors' plan 5,664 ( 115 ) 115 0 0
Stock activity under equity compensation plans 49,130 ( 1,648 ) ( 1,648 ) ( 1,648 )
Stock based compensation expense 1,381 1,381 1,381
Balance at March 31, 2021 25,290,908 $ 114,764 $ 536,390 $ 15,110 $ ( 14,685 ) $ 651,579 $ 89 $ 651,668
Balance at January 1, 2022
25,300,793 $ 120,615 $ 583,134 $ 16,093 $ ( 15,025 ) $ 704,817 $ 89 $ 704,906
Comprehensive loss:
Net income 23,642 23,642 23,642
Other comprehensive income (loss), net of tax ( 109,780 ) ( 109,780 ) ( 109,780 )
Cash dividends declared and paid, $ 0.40 per share
( 10,198 ) ( 10,198 ) ( 10,198 )
Treasury shares purchased under deferred directors' plan ( 2,587 ) 212 ( 212 ) 0 0
Treasury shares sold and distributed under deferred directors' plan 8,555 ( 221 ) 221 0 0
Stock activity under equity compensation plans 39,388 ( 1,728 ) ( 1,728 ) ( 1,728 )
Stock based compensation expense 2,260 2,260 2,260
Balance at March 31, 2022 25,346,149 $ 121,138 $ 596,578 $ ( 93,687 ) $ ( 15,016 ) $ 609,013 $ 89 $ 609,102
The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited - in thousands)
Three Months Ended March 31, 2022 2021
Cash flows from operating activities:
Net income $ 23,642 $ 22,983
Adjustments to reconcile net income to net cash from operating activities:
Depreciation 1,516 1,575
Provision for credit losses 417 1,477
Amortization of loan servicing rights 223 198
Net change in loan servicing rights valuation allowance ( 360 ) ( 197 )
Loans originated for sale, including participations ( 12,468 ) ( 32,629 )
Net gain on sales of loans ( 513 ) ( 1,233 )
Proceeds from sale of loans, including participations 18,058 25,692
Net (gain) loss on sales of premises and equipment 1 ( 1 )
Net gain on sales and calls of securities available-for-sale 0 ( 753 )
Net securities amortization 1,654 958
Stock based compensation expense 2,260 1,381
Losses (earnings) on life insurance 83 ( 756 )
Gain on life insurance 0 ( 202 )
Tax benefit of stock award issuances ( 500 ) ( 266 )
Net change:
Interest receivable and other assets ( 2,822 ) ( 1,415 )
Interest payable and other liabilities 16,513 6,980
Total adjustments 24,062 809
Net cash from operating activities 47,704 23,792
Cash flows from investing activities:
Proceeds from sale of securities available- for-sale 0 13,506
Proceeds from maturities, calls and principal paydowns of securities available-for-sale 29,647 31,734
Purchases of securities available-for-sale ( 292,127 ) ( 161,224 )
Purchase of life insurance ( 43 ) ( 528 )
Net (increase) decrease in total loans ( 66,537 ) 174,303
Proceeds from sales of land, premises and equipment 0 2
Purchases of land, premises and equipment ( 1,091 ) ( 2,162 )
Proceeds from redemption of Federal Home Loan Bank stock 932 0
Proceeds from life insurance 0 329
Net cash from investing activities ( 329,219 ) 55,960
Cash flows from financing activities:
Net increase in total deposits 85,216 193,165
Net increase (decrease) in short-term borrowings 0 ( 10,500 )
Common dividends paid ( 10,198 ) ( 8,647 )
Payments related to equity incentive plans ( 1,728 ) ( 1,648 )
Purchase of treasury stock ( 212 ) ( 219 )
Sale of treasury stock 221 115
Net cash from financing activities 73,299 172,266
Net change in cash and cash equivalents ( 208,216 ) 252,018
Cash and cash equivalents at beginning of the period 683,240 249,927
Cash and cash equivalents at end of the period 475,024 501,945
Cash paid during the period for:
Interest $ 3,470 $ 5,973
Supplemental non-cash disclosures:
Loans transferred to other real estate owned 0 131
Securities purchases payable 2,146 5,855
Right-of-use assets obtained in exchange for lease liabilities 1,612 0
The accompanying notes are an integral part of these consolidated financial statements.
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NOTE 1. BASIS OF PRESENTATION
This report is filed for Lakeland Financial Corporation (the "Company"), which has two wholly owned subsidiaries, Lake City Bank (the "Bank") and LCB Risk Management, a captive insurance company. Also included in this report are results for the Bank’s wholly owned subsidiary, LCB Investments II, Inc. ("LCB Investments"), which manages the Bank’s investment portfolio. LCB Investments owns LCB Funding, Inc. ("LCB Funding"), a real estate investment trust. All significant inter-company balances and transactions have been eliminated in consolidation.
The unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and are unaudited. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for any subsequent reporting periods, including the year ending December 31, 2022. The Company’s 2021 Annual Report on Form 10-K should be read in conjunction with these statements.
Newly Issued But Not Yet Effective Accounting Standards
On March 12, 2020, the FASB issued Accounting Standards Update (ASU) 2020-04, " Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. " ASC 848 contains optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The Company has formed a cross-functional project team to lead the transition from LIBOR to a planned adoption of reference rates which could include Secured Overnight Financing Rate (“SOFR”), amongst others. The Company has identified loans that renewed prior to 2021 and obtained updated reference rate language at the time of renewal. Additionally, management is utilizing the timeline guidance published by the Alternative Reference Rates Committee to develop and achieve internal milestones during this transitional period. The Company has adhered to the International Swaps and Derivatives Association 2020 IBOR Fallbacks Protocol that was released on October 23, 2020.
The Company discontinued the use of new LIBOR-based loans by December 31, 2021, according to regulatory guidelines. Legacy LIBOR-based loans will be transitioned to an alternative reference rate on or before June 30, 2023. The guidance under ASC 848 will be available for a limited time, generally through December 31, 2022. The Company expects to adopt the LIBOR transition relief allowed under this standard, and does note expect such adoption to have a material impact on the consolidated financial statements.
In March 2022, the FASB issued ASU 2022-01, " Derivatives and Hedging (ASC 815): Fair Value Hedging - Portfolio Layer Method. " ASC 815 currently permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio. The amendments in this Update allow nonprepayable financial assets to also be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and nonpreapayble financial assets, thereby allowing consistent accounting for similar hedges. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements.
In March 2022, the FASB issued ASU 2022-02, " Financial Instruments - Credit Losses (ASC 326): Troubled Debt Restructurings (TDRs) and Vintage Disclosures. " The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of existing loan. These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the amendments to ASC 326 require that an entity disclose current-period gross writeoffs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The guidance is only for entities that have adopted the amendments in Update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption using prospective application, including adoption in an interim period where the guidance should be applied as of the beginning of the fiscal year. The Company is currently assessing the impact of ASU 2022-02 on its disclosures and control structure; however, the Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements.
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Reclassification
Certain amounts appearing in the consolidated financial statements and notes thereto for prior periods have been reclassified to conform with the current presentation. The reclassifications had no effect on net income or stockholders' equity as previously reported.
NOTE 2. SECURITIES
Information related to the amortized cost, fair value and allowance for credit losses of securities available-for-sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income is provided in the tables below.
(dollars in thousands) Amortized
Cost Gross Unrealized Gain Gross Unrealized Losses Allowance for Credit Losses Fair Value
March 31, 2022
U.S. Treasury securities $ 2,250 $ 0 $ ( 4 ) $ 0 $ 2,246
U.S. government sponsored agencies 164,514 0 ( 11,622 ) 0 152,892
Mortgage-backed securities: residential 634,654 680 ( 39,013 ) 0 596,321
Mortgage-backed securities: commercial 96 0 0 0 96
State and municipal securities 838,427 4,608 ( 72,055 ) 0 770,980
Total $ 1,639,941 $ 5,288 $ ( 122,694 ) $ 0 $ 1,522,535
December 31, 2021
U.S. Treasury securities $ 900 $ 0 $ 0 $ 0 $ 900
U.S. government sponsored agencies 145,858 39 ( 2,445 ) 0 143,452
Mortgage-backed securities: residential 487,157 4,455 ( 4,936 ) 0 486,676
Mortgage-backed securities: commercial 522 1 0 0 523
State and municipal securities 742,532 25,749 ( 1,274 ) 0 767,007
Total $ 1,376,969 $ 30,244 $ ( 8,655 ) $ 0 $ 1,398,558
Information regarding the fair value and amortized cost of available-for-sale debt securities by maturity as of March 31, 2022 is presented below. Maturity information is based on contractual maturity for all securities other than mortgage-backed securities. Actual maturities of securities may differ from contractual maturities because borrowers may have the right to prepay the obligation without a prepayment penalty.
(dollars in thousands) Amortized Cost Fair
Value
Due in one year or less $ 3,356 $ 3,357
Due after one year through five years 11,031 11,140
Due after five years through ten years 54,556 54,559
Due after ten years 936,248 857,062
1,005,191 926,118
Mortgage-backed securities 634,750 596,417
Total debt securities $ 1,639,941 $ 1,522,535
Securities proceeds, gross gains and gross losses are presented below.
Three Months Ended March 31,
(dollars in thousands) 2022 2021
Sales of securities available-for-sale
Proceeds $ 0 $ 13,506
Gross gains 0 753
Gross losses 0 0
Number of securities 0 7
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In accordance with ASU No. 2017-8, purchase premiums for callable securities are amortized to the earliest call date and premiums on non-callable securities as well as discounts are recognized in interest income using the interest method over the terms of the securities or over the estimated lives of mortgage-backed securities. Gains and losses on sales are based on the amortized cost of the security sold and recorded on the trade date.
Securities with carrying values of $ 272.6 million and $ 300.8 million were pledged as of March 31, 2022 and December 31, 2021, respectively, as collateral for borrowings from the Federal Home Loan Bank and Federal Reserve Bank and for other purposes as permitted or required by law.
Information regarding securities with unrealized losses as of March 31, 2022 and December 31, 2021 is presented below. The tables divide the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.
Less than 12 months 12 months or more Total
(dollars in thousands) Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
March 31, 2022
U.S. Treasury securities $ 2,246 $ 4 $ 0 $ 0 $ 2,246 $ 4
U.S. government sponsored agencies 126,338 8,757 26,554 2,865 152,892 11,622
Mortgage-backed securities: residential 441,367 26,752 109,331 12,261 550,698 39,013
Mortgage-backed securities: commercial 96 0 0 0 96 0
State and municipal securities 560,210 71,480 3,497 575 563,707 72,055
Total temporarily impaired $ 1,130,257 $ 106,993 $ 139,382 $ 15,701 $ 1,269,639 $ 122,694
December 31, 2021
U.S. government sponsored agencies $ 85,968 $ 1,364 $ 28,676 $ 1,081 $ 114,644 $ 2,445
Mortgage-backed securities: residential 272,264 4,076 22,792 860 295,056 4,936
State and municipal securities 138,659 1,274 0 0 138,659 1,274
Total temporarily impaired $ 496,891 $ 6,714 $ 51,468 $ 1,941 $ 548,359 $ 8,655
The total number of securities with unrealized losses as of March 31, 2022 and December 31, 2021 is presented below.
Less than
12 months 12 months
or more Total
March 31, 2022
U.S. Treasury securities 6 0 6
U.S. government sponsored agencies 12 5 17
Mortgage-backed securities: residential 90 15 105
Mortgage-backed securities: commercial 1 0 1
State and municipal securities 376 3 379
Total temporarily impaired 485 23 508
December 31, 2021
U.S. government sponsored agencies 8 5 13
Mortgage-backed securities: residential 29 3 32
State and municipal securities 80 0 80
Total temporarily impaired 117 8 125
Available-for-sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. For available-for sale debt securities in an unrealized loss position, management first assesses whether it intends to sell, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through the consolidated income statement. For available-for sale debt securities that do not meet the criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this
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assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors. If this assessment indicates that a credit loss exists, management compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss), net of applicable taxes. No allowance for credit losses for available-for-sale debt securities was needed at March 31, 2022. Accrued interest receivable on available-for-sale debt securities totaled $ 8.8 million and $ 7.4 million at March 31, 2022 and December 31, 2021, respectively, and is excluded from the estimate of credit losses.
The U.S. government sponsored agencies and mortgage-backed securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major credit rating agencies, and have a long history of no credit losses. Therefore, for those securities, we do not record expected credit losses.
NOTE 3. LOANS
(dollars in thousands) March 31,
2022 December 31,
2021
Commercial and industrial loans:
Working capital lines of credit loans $ 678,567 15.6 % $ 652,861 15.2 %
Non-working capital loans 784,890 18.0 736,608 17.2
Total commercial and industrial loans 1,463,457 33.6 1,389,469 32.4
Commercial real estate and multi-family residential loans:
Construction and land development loans 399,618 9.2 379,813 8.9
Owner occupied loans 724,588 16.6 739,371 17.2
Nonowner occupied loans 619,163 14.2 588,458 13.7
Multifamily loans 214,003 4.9 247,204 5.8
Total commercial real estate and multi-family residential loans 1,957,372 44.9 1,954,846 45.6
Agri-business and agricultural loans:
Loans secured by farmland 164,252 3.8 206,331 4.8
Loans for agricultural production 259,417 6.0 239,494 5.6
Total agri-business and agricultural loans 423,669 9.8 445,825 10.4
Other commercial loans 78,412 1.8 73,490 1.7
Total commercial loans 3,922,910 90.1 3,863,630 90.1
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 180,448 4.1 176,561 4.1
Open end and junior lien loans 158,583 3.6 156,238 3.6
Residential construction and land development loans 11,135 0.3 11,921 0.3
Total consumer 1-4 family mortgage loans 350,166 8.0 344,720 8.0
Other consumer loans 83,395 1.9 82,755 1.9
Total consumer loans 433,561 9.9 427,475 9.9
Subtotal 4,356,471 100.0 % 4,291,105 100.0 %
Less: Allowance for credit losses ( 67,526 ) ( 67,773 )
Net deferred loan fees ( 2,757 ) ( 3,264 )
Loans, net $ 4,286,188 $ 4,220,068
The recorded investment in loans does not include accrued interest, which totaled $ 10.3 million and $ 10.0 million at March 31, 2022 and December 31, 2021, respectively.
The Company h ad $ 239,000 and $ 350,000 in residential real estate loans in the process of foreclosure as of March 31, 2022 and December 31, 2021, respectively.
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NOTE 4. ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY
The Company maintains an allowance for credit losses to provide for expected credit losses. Losses are charged against the allowance when management believes that the principal is uncollectable. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance are made for specific loans and for pools of similar types of loans, although the entire allowance is available for any loan that, in management’s judgment, should be charged against the allowance. A provision for credit losses is taken based on management’s ongoing evaluation of the appropriate allowance balance. A formal evaluation of the adequacy of the credit loss allowance is conducted monthly. The ultimate recovery of all loans is susceptible to future market factors beyond the Company’s control.
The level of credit loss provision is influenced by growth in the overall loan portfolio, emerging market risk, emerging concentration risk, commercial loan focus and large credit concentration, new industry lending activity, general economic conditions and historical loss analysis. In addition, management gives consideration to changes in the facts and circumstances of watch list credits, which includes the security position of the borrower, in determining the appropriate level of the credit loss provision. Furthermore, management’s overall view on credit quality is a factor in the determination of the provision.
The determination of the appropriate allowance is inherently subjective, as it requires significant estimates by management. The Company has an established process to determine the adequacy of the allowance for credit losses that generally includes consideration of changes in the nature and volume of the loan portfolio and overall portfolio quality, along with current and forecasted economic conditions that may affect borrowers’ ability to repay. Consideration is not limited to these factors although they represent the most commonly cited factors. To determine the specific allocation levels for individual credits, management considers the current valuation of collateral and the amounts and timing of expected future cash flows as the primary measures. Management also considers trends in adversely classified loans based upon an ongoing review of those credits. With respect to pools of similar loans, an appropriate level of general allowance is determined by portfolio segment using a probability of default-loss given default (“PD/LGD”) model, subject to a floor. A default can be triggered by one of several different asset quality factors, including past due status, nonaccrual status, TDR status or if the loan has had a charge-off. This PD is then combined with a LGD derived from historical charge-off data to construct a default rate. This loss rate is then supplemented with adjustments for reasonable and supportable forecasts of relevant economic indicators, particularly the unemployment rate forecast from the Federal Open Market Committee’s Summary of Economic Projections, and other environmental factors based on the risks present for each portfolio segment. These environmental factors include consideration of the following: levels of, and trends in, delinquencies and nonperforming loans; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedure, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. It is also possible that these factors could include social, political, economic, and terrorist events or activities. All of these factors are susceptible to change, which may be significant. As a result of this detailed process, the allowance results in two forms of allocations, specific and general. These two components represent the total allowance for credit losses deemed adequate to cover probable losses inherent in the loan portfolio.
Commercial loans are subject to a dual standardized grading process administered by the credit administration function. These grade assignments are performed independent of each other and a consensus is reached by credit administration and the loan review officer. Specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that indicate it should be evaluated on an individual basis. Considerations with respect to specific allocations for these individual credits include, but are not limited to, the following: (a) the sufficiency of the customer’s cash flow or net worth to repay the loan; (b) the adequacy of the discounted value of collateral relative to the loan balance; (c) whether the loan has been criticized in a regulatory examination; (d) whether the loan is nonperforming; (e) any other reasons the ultimate collectability of the loan may be in question; or (f) any unique loan characteristics that require special monitoring.
Allocations are also applied to categories of loans considered not to be individually analyzed, but for which the rate of loss is expected to be consistent with or greater than historical averages. Such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values. These general pooled loan allocations are performed for portfolio segments of commercial and industrial; commercial real estate, multi-family, and construction; agri-business and agricultural; other commercial loans; and consumer 1-4 family mortgage and other consumer loans. General allocations of the allowance are determined by a historical loss rate based on the calculation of each pool’s probability of default-loss given default, subject to a floor. The length of the historical period for each pool is based on the average life of the pool. The historical loss rates are supplemented with consideration of economic conditions and portfolio trends.
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Due to the imprecise nature of estimating the allowance for credit losses, the Company’s allowance for credit losses includes an unallocated component. The unallocated component of the allowance for credit losses incorporates the Company’s judgmental determination of potential expected losses that may not be fully reflected in other allocations, including factors such as the level of classified credits, economic uncertainties, industry trends impacting specific portfolio segments, broad portfolio quality trends, and trends in the composition of the Company’s large commercial loan portfolio and related large dollar exposures to individual borrowers. As a practical expedient, the Company has elected to disclose accrued interest separately from loan principal balances on the consolidated balance sheet. Additionally, when a loan is placed on non-accrual, interest payments are reversed through interest income.
For off balance sheet credit exposures outlined in the ASU at 326-20-30-11, it is the Company’s position that nearly all of the unfunded amounts on lines of credit are unconditionally cancellable, and therefore not subject to having a liability recorded.
The following tables present the activity in the allowance for credit losses by portfolio segment for the periods ended:
(dollars in thousands) Commercial and Industrial Commercial Real Estate and Multifamily Residential Agri-business and Agricultural Other Commercial Consumer 1-4 Family Mortgage Other Consumer Unallocated Total
Three Months Ended March 31, 2022
Beginning balance, January 1 $ 30,595 $ 26,535 $ 5,034 $ 1,146 $ 2,866 $ 1,147 $ 450 $ 67,773
Provision for credit losses 730 319 ( 273 ) ( 88 ) ( 248 ) ( 55 ) 32 417
Loans charged-off ( 19 ) ( 597 ) 0 0 ( 22 ) ( 102 ) 0 ( 740 )
Recoveries 16 0 0 0 10 50 0 76
Net loans (charged-off) recovered ( 3 ) ( 597 ) 0 0 ( 12 ) ( 52 ) 0 ( 664 )
Ending balance $ 31,322 $ 26,257 $ 4,761 $ 1,058 $ 2,606 $ 1,040 $ 482 $ 67,526
(dollars in thousands) Commercial and Industrial Commercial Real Estate and Multifamily Residential Agri-business and Agricultural Other Commercial Consumer 1-4 Family Mortgage Other Consumer Unallocated Total
Three Months Ended March 31, 2021
Beginning balance, January 1 $ 28,333 $ 22,907 $ 3,043 $ 416 $ 2,619 $ 951 $ 3,139 $ 61,408
Impact of adopting ASC 326 4,312 4,316 1,060 941 953 349 ( 2,881 ) 9,050
Provision for credit losses ( 540 ) 2,285 ( 202 ) ( 185 ) ( 233 ) 13 339 1,477
Loans charged-off ( 87 ) ( 71 ) 0 0 ( 6 ) ( 72 ) 0 ( 236 )
Recoveries 34 8 0 0 51 52 0 145
Net loans (charged-off) recovered ( 53 ) ( 63 ) 0 0 45 ( 20 ) 0 ( 91 )
Ending balance $ 32,052 $ 29,445 $ 3,901 $ 1,172 $ 3,384 $ 1,293 $ 597 $ 71,844
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Credit Quality Indicators:
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis for Special Mention, Substandard and Doubtful grade loans and annually on Pass grade loans over $ 250,000 .
The Company uses the following definitions for risk ratings:
Special Mention. Loans classified as Special Mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard. Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Loans are considered to be "Pass" rated when they are reviewed as part of the previously described process and do not meet the criteria above with the exception of consumer troubled debt restructurings, which are evaluated and listed with Substandard commercial grade loans and consumer nonaccrual loans which are evaluated individually and listed with “Not Rated” loans. Loans listed as Not Rated are consumer loans or commercial loans with consumer characteristics included in groups of homogenous loans which are analyzed for credit quality indicators utilizing delinquency status.
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The following table summarizes the risk category of loans by loan segment and origination date as of March 31, 2022:
(dollars in thousands) 2022 2021 2020 2019 2018 Prior Term Total Revolving Total
Commercial and industrial loans:
Working capital lines of credit loans:
Pass $ 0 $ 3,082 $ 764 $ 3,045 $ 0 $ 0 $ 6,891 $ 593,938 $ 600,829
Special Mention 0 0 0 0 0 0 0 59,209 59,209
Substandard 0 0 74 0 0 0 74 18,542 18,616
Total 0 3,082 838 3,045 0 0 6,965 671,689 678,654
Non-working capital loans:
Pass 63,830 165,396 123,800 71,707 23,723 31,231 479,687 256,462 736,149
Special Mention 209 16,535 0 216 635 3,657 21,252 79 21,331
Substandard 0 2,937 6,380 862 2,370 5,217 17,766 3,835 21,601
Not Rated 399 2,105 1,627 710 417 96 5,354 0 5,354
Total 64,438 186,973 131,807 73,495 27,145 40,201 524,059 260,376 784,435
Commercial real estate and multi-family residential loans:
Construction and land development loans:
Pass 9,322 37,819 20,870 542 573 0 69,126 328,593 397,719
Special Mention 0 0 0 0 0 0 0 56 56
Total 9,322 37,819 20,870 542 573 0 69,126 328,649 397,775
Owner occupied loans:
Pass 20,705 166,777 174,001 108,181 78,260 126,142 674,066 28,228 702,294
Special Mention 0 6,277 0 865 909 9,180 17,231 0 17,231
Substandard 0 473 1,679 894 1,161 236 4,443 0 4,443
Total 20,705 173,527 175,680 109,940 80,330 135,558 695,740 28,228 723,968
Nonowner occupied loans:
Pass 41,921 142,070 146,588 105,635 21,701 87,080 544,995 47,604 592,599
Special Mention 0 11,667 307 0 0 14,120 26,094 0 26,094
Total 41,921 153,737 146,895 105,635 21,701 101,200 571,089 47,604 618,693
Multifamily loans:
Pass 2,665 67,930 37,909 36,337 17,105 11,969 21,061 177,871 13,605 191,476
Special Mention 22,178 0 0 0 0 0 22,178 0 22,178
Total 24,843 67,930 37,909 36,337 11,969 21,061 200,049 13,605 213,654
Agri-business and agricultural loans:
Loans secured by farmland:
Pass 4,748 46,921 35,089 12,005 10,034 25,189 133,986 24,532 158,518
Special Mention 0 0 1,985 2,278 0 210 4,473 899 5,372
Substandard 0 0 0 0 190 145 335 0 335
Total 4,748 46,921 37,074 14,283 10,224 25,544 138,794 25,431 164,225
Loans for agricultural production:
Pass 1,573 31,444 24,820 3,985 10,372 5,356 77,550 166,721 244,271
Special Mention 0 432 7,727 1,160 0 0 9,319 5,905 15,224
Total 1,573 31,876 32,547 5,145 10,372 5,356 86,869 172,626 259,495
Other commercial loans:
Pass 2,964 6,417 20,425 3,082 1,175 15,043 49,106 25,363 74,469
Special Mention 0 0 0 0 0 3,649 3,649 0 3,649
Total 2,964 6,417 20,425 3,082 1,175 18,692 52,755 25,363 78,118
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans
Pass 1,360 13,558 15,386 5,197 5,722 4,604 45,827 6,191 52,018
Substandard 0 0 0 0 88 3,050 3,138 0 3,138
Not Rated 8,079 47,296 24,338 8,764 4,069 32,489 125,035 0 125,035
Total 9,439 60,854 39,724 13,961 9,879 40,143 174,000 6,191 180,191
Open end and junior lien loans
Pass 0 453 662 374 115 103 0 1,254 4,900 6,154
Substandard 0 0 0 0 0 2 2 26 28
Not Rated 14,626 18,637 4,667 4,967 2,976 3,304 49,177 104,879 154,056
Total 14,626 19,299 5,041 5,082 3,079 3,306 50,433 109,805 160,238
Residential construction loans
Not Rated 1,420 4,756 6,189 1,158 892 136 1,278 11,073 0 11,073
Total 1,420 6,189 1,158 892 136 1,278 11,073 0 11,073
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Other consumer loans
Pass 78 2,302 787 1,167 0 1,088 5,422 17,046 22,468
Substandard 0 0 22 219 0 0 241 41 282
Not Rated 5,320 19,432 13,237 6,122 4,878 2,509 51,498 8,947 60,445
Total 5,398 21,734 14,046 7,508 4,878 3,597 57,161 26,034 83,195
TOTAL $ 201,397 $ 816,358 $ 664,014 $ 378,947 $ 181,461 $ 395,936 $ 2,638,113 $ 1,715,601 $ 4,353,714
As of March 31, 2022, $ 12.5 million in PPP loans were included in the "Pass" category of non-working capital commercial and industrial loans. These loans were included in this risk rating category because they are fully guaranteed by the SBA.
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The following table summarizes the risk category of loans by loan segment and origination date as of December 31, 2021:
(dollars in thousands) 2021 2020 2019 2018 2017 Prior Term Total Revolving Total
Commercial and industrial loans:
Working capital lines of credit loans:
Pass $ 3,699 $ 830 $ 3,360 $ 0 $ 0 $ 0 $ 7,889 $ 558,634 $ 566,523
Special Mention 0 0 0 0 0 0 0 60,441 60,441
Substandard 0 0 35 0 0 0 35 25,928 25,963
Total 3,699 830 3,395 0 0 0 7,924 645,003 652,927
Non-working capital loans:
Pass 185,374 139,157 79,477 38,899 19,415 18,489 480,811 203,794 684,605
Special Mention 17,728 0 225 979 2,350 1,426 22,708 0 22,708
Substandard 2,996 6,948 1,091 2,534 5,465 426 19,460 3,321 22,781
Not Rated 2,265 1,758 837 563 128 14 5,565 0 5,565
Total 208,363 147,863 81,630 42,975 27,358 20,355 528,544 207,115 735,659
Commercial real estate and multi-family residential loans:
Construction and land development loans:
Pass 35,136 30,224 1,276 998 0 0 67,634 310,396 378,030
Total 35,136 30,224 1,276 998 0 0 67,634 310,396 378,030
Owner occupied loans:
Pass 135,861 169,404 124,117 85,070 78,155 93,925 686,532 29,611 716,143
Special Mention 6,555 0 880 933 7,387 1,235 16,990 0 16,990
Substandard 489 1,570 909 1,758 694 238 5,658 0 5,658
Total 142,905 170,974 125,906 87,761 86,236 95,398 709,180 29,611 738,791
Nonowner occupied loans:
Pass 146,342 154,433 107,262 19,054 31,023 59,154 517,268 44,362 561,630
Special Mention 11,825 331 0 0 0 14,253 26,409 0 26,409
Total 158,167 154,764 107,262 19,054 31,023 73,407 543,677 44,362 588,039
Multifamily loans:
Pass 84,678 53,195 36,575 12,286 17,105 14,574 9,793 211,101 13,434 224,535
Special Mention 0 0 0 0 22,252 0 22,252 0 22,252
Total 84,678 53,195 36,575 12,286 36,826 9,793 233,353 13,434 246,787
Agri-business and agricultural loans:
Loans secured by farmland:
Pass 47,532 37,035 16,249 10,469 10,454 17,021 138,760 61,774 200,534
Special Mention 0 1,985 2,303 0 180 30 4,498 918 5,416
Substandard 207 0 0 0 0 145 352 0 352
Total 47,739 39,020 18,552 10,469 10,634 17,196 143,610 62,692 206,302
Loans for agricultural production:
Pass 36,238 25,855 4,224 11,072 1,331 4,178 82,898 138,142 221,040
Special Mention 448 8,642 1,171 0 0 0 10,261 8,272 18,533
Total 36,686 34,497 5,395 11,072 1,331 4,178 93,159 146,414 239,573
Other commercial loans:
Pass 6,556 21,111 3,243 1,273 8,592 7,460 48,235 21,145 69,380
Special Mention 0 0 0 0 0 3,798 3,798 0 3,798
Total 6,556 21,111 3,243 1,273 8,592 11,258 52,033 21,145 73,178
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans
Pass 14,635 16,173 5,312 5,903 3,049 3,221 48,293 5,005 53,298
Special Mention 0 0 0 0 0 1,274 1,274 0 1,274
Not Rated 45,089 27,738 9,248 5,217 7,628 26,321 121,241 482 121,723
Total 59,724 43,911 14,560 11,120 10,677 30,816 170,808 5,487 176,295
Open end and junior lien loans
Pass 679 453 379 159 313 0 0 1,530 5,074 6,604
Substandard 0 0 0 0 0 0 0 98 98
Not Rated 21,945 5,624 5,987 3,899 1,653 1,526 40,634 110,523 151,157
Total 22,624 6,003 6,146 4,212 1,653 1,526 42,164 115,695 157,859
Residential construction loans
Not Rated 7,926 4,756 1,537 960 138 171 1,125 11,857 0 11,857
Total 7,926 1,537 960 138 171 1,125 11,857 0 11,857
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Other consumer loans
Pass 3,401 957 1,523 0 1,155 0 7,036 12,998 20,034
Substandard 36 23 230 0 0 0 289 0 289
Not Rated 21,652 14,931 7,474 5,844 1,890 1,203 52,994 9,227 62,221
Total 25,089 15,911 9,227 5,844 3,045 1,203 60,319 22,225 82,544
TOTAL $ 839,292 $ 719,840 $ 414,127 $ 207,202 $ 217,546 $ 266,255 $ 2,664,262 $ 1,623,579 $ 4,287,841
As of December 31, 2021, $ 26.2 million in PPP loans were included in the "Pass" category of non-working capital commercial and industrial loans. These loans were included in this risk rating category because they are fully guaranteed by the SBA.
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Nonaccrual and Past Due Loans:
The Company does not record interest on nonaccrual loans until principal is recovered. For all loan classes, a loan is generally placed on nonaccrual status when principal or interest becomes 90 days past due unless it is well secured and in the process of collection, or earlier when concern exists as to the ultimate collectability of principal or interest. Interest accrued but not received is reversed against earnings. Cash interest received on these loans is applied to the principal balance until the principal is recovered or until the loan returns to accrual status. Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current, remain current for a prescribed period, and future payments are reasonably assured.
The following table presents the aging of the amortized cost basis in past due loans as of March 31, 2022 by class of loans and loans past due 90 days or more and still accruing by class of loan:
(dollars in thousands) Loans Not Past Due 30-89 Days Past Due Greater than 89 Days Past Due and Accruing Total Accruing Total Nonaccrual Nonaccrual With No Allowance For Credit Loss Total
Commercial and industrial loans:
Working capital lines of credit loans $ 678,654 $ 0 $ 0 $ 674,338 $ 4,316 $ 238 $ 678,654
Non-working capital loans 781,306 3,129 0 778,863 5,572 4,546 784,435
Commercial real estate and multi-family residential loans:
Construction and land development loans 397,775 0 0 397,775 0 0 397,775
Owner occupied loans 723,968 0 0 720,812 3,156 1,516 723,968
Nonowner occupied loans 618,693 0 0 618,693 0 0 618,693
Multifamily loans 213,654 0 0 213,654 0 0 213,654
Agri-business and agricultural loans:
Loans secured by farmland 164,225 0 0 163,890 335 0 164,225
Loans for agricultural production 259,495 0 0 259,495 0 0 259,495
Other commercial loans 78,118 0 0 78,118 0 0 78,118
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans 179,872 301 18 179,980 211 140 180,191
Open end and junior lien loans 160,043 195 0 160,210 28 28 160,238
Residential construction loans 11,073 0 0 11,073 0 0 11,073
Other consumer loans 83,150 45 0 82,913 282 0 83,195
Total $ 4,350,026 $ 3,670 $ 18 $ 4,339,814 $ 13,900 $ 6,468 $ 4,353,714
As of March 31, 2022 there were an insignificant number of loans 30-89 days past due or greater than 89 days past due on nonaccrual. Additionally, interest income recognized on nonaccrual loans was insignificant during the three month period ended March 31, 2022.
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The following table presents the aging of the amortized cost basis in past due loans as of December 31, 2021 by class of loans and loans past due 90 days or more and still accruing by class of loan:
(dollars in thousands) Loans Not Past Due 30-89 Days Past Due Greater than 89 Days Past Due and Accruing Total Accruing Total Nonaccrual Nonaccrual With No Allowance For Credit Loss Total
Commercial and industrial loans:
Working capital lines of credit loans $ 652,903 $ 24 $ 0 $ 646,961 $ 5,966 $ 5,200 $ 652,927
Non-working capital loans 735,658 1 0 731,063 4,596 229 735,659
Commercial real estate and multi-family residential loans:
Construction and land development loans 378,030 0 0 378,030 0 0 378,030
Owner occupied loans 738,791 0 0 735,157 3,634 2,129 738,791
Nonowner occupied loans 588,039 0 0 588,039 0 0 588,039
Multifamily loans 246,787 0 0 246,787 0 0 246,787
Agri-business and agricultural loans:
Loans secured by farmland 206,302 0 0 205,967 335 0 206,302
Loans for agricultural production 239,573 0 0 239,573 0 0 239,573
Other commercial loans 73,178 0 0 73,178 0 0 73,178
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans 175,678 500 117 176,240 55 55 176,295
Open end and junior lien loans 157,729 130 0 157,761 98 98 157,859
Residential construction loans 11,857 0 0 11,857 0 0 11,857
Other consumer loans 82,472 72 0 82,255 289 0 82,544
Total $ 4,286,997 $ 727 $ 117 $ 4,272,868 $ 14,973 $ 7,711 $ 4,287,841
As of December 31, 2021 there were an insignificant number of loans 30-89 days past due or greater than 89 days past due on nonaccrual. Additionally, interest income recognized on nonaccrual loans was insignificant during the year ended December 31, 2021.
When management determines that foreclosure is probable, expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. A loan is considered collateral dependent when the borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of the collateral. The class of loan represents the primary collateral type associated with the loan. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value.
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The following tables present the amortized cost basis of collateral dependent loans by class of loan as of:
March 31, 2022
(dollars in thousands) Real Estate General
Business
Assets Other Total
Commercial and industrial loans:
Working capital lines of credit loans $ 74 $ 5,497 $ 0 $ 5,571
Non-working capital loans 1,581 9,525 229 11,335
Commercial real estate and multi-family residential loans:
Owner occupied loans 960 1,500 1,161 3,621
Agri-business and agricultural loans:
Loans secured by farmland 190 145 0 335
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 3,141 0 0 3,141
Open end and junior lien loans 28 0 0 28
Other consumer loans 0 0 63 63
Total $ 5,974 $ 16,667 $ 1,453 $ 24,094
December 31, 2021
(dollars in thousands) Real Estate General
Business
Assets Other Total
Commercial and industrial loans:
Working capital lines of credit loans $ 0 $ 5,966 $ 0 $ 5,966
Non-working capital loans 1,606 9,475 229 11,310
Commercial real estate and multi-family residential loans:
Owner occupied loans 1,435 1,505 1,161 4,101
Agri-business and agricultural loans:
Loans secured by farmland 190 145 0 335
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 3,081 0 0 3,081
Open end and junior lien loans 98 0 0 98
Other consumer loans 0 0 59 59
Total $ 6,312 $ 17,091 $ 1,449 $ 24,950
Troubled Debt Restructurings:
Troubled debt restructured loans are included in the totals for individually analyzed loans. The Company has allocated $ 6.0 million and $ 5.8 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2022 and December 31, 2021, respectively. The Company is not committed to lend additional funds to debtors whose loans have been modified in a troubled debt restructuring.
(dollars in thousands) March 31,
2022 December 31,
2021
Accruing troubled debt restructured loans $ 4,976 $ 5,121
Nonaccrual troubled debt restructured loans 6,443 6,218
Total troubled debt restructured loans $ 11,419 $ 11,339
During the three months ended March 31, 2022, one loan was identified as a troubled debt restructuring. This loan was an over line of credit extended to an existing borrower with other previously modified loans as a result of financial difficulty to assist with cash flow needs. No additional credit enhancements were obtained in conjunction with the extension of this over line of credit.
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(dollars in thousands) Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial and industrial loans:
Working capital lines of credit loans 1 $ 226 $ 226
Total 1 $ 226 $ 226
For the three month period ended March 31, 2022, the troubled debt restructuring described above did not increase the allowance for credit losses, and no charge-offs were recorded.
During the three months ended March 31, 2021, no loans were modified as troubled debt restructurings.
NOTE 5. BORROWINGS
For the periods ended March 31, 2022 and December 31, 2021, the Company had an advance outstanding from the Federal Home Loan Bank (“FHLB”) in the amount of $ 75.0 million. The outstanding FHLB advance is a ten-year fixed-rate putable advance with a rate of 0.39 % and is due on March 4, 2030. The advance may not be prepaid by the Company without penalty. The note requires monthly interest payments and is secured by residential real estate loans and securities.
On August 2, 2019 the Company entered into an unsecured revolving credit agreement with another financial institution allowing the Company to borrow up to $ 30.0 million; this credit agreement was subsequently amended and renewed on July 30, 2021. Funds provided under the agreement may be used to repurchase shares of the Company’s common stock under the share repurchase program, which was reauthorized by the Company’s board of directors on April 13, 2021, and for general operations. The credit agreement includes a negative pledge agreement whereby the Company agrees not to pledge or otherwise encumber the stock of the Bank. The credit agreement has a one year term which may be amended, extended, modified or renewed. There were no outstanding borrowings on the credit agreement at March 31, 2022 and December 31, 2021.
NOTE 6. FAIR VALUE DISCLOSURES
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:
Securities: Securities available-for-sale are valued primarily by a third party pricing service. The fair values of securities available-for-sale are determined on a recurring basis by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or pricing models which utilize significant observable inputs such as matrix pricing. This is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). These models utilize the market approach with standard inputs that include, but are not limited to benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain municipal securities that are not rated and observable inputs about the specific issuer are not available, fair values are estimated
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using observable data from other municipal securities presumed to be similar or other market data on other non-rated municipal securities (Level 3 inputs).
The Company’s Finance Department, which is responsible for all accounting and SEC disclosure compliance, and the Company’s Treasury Department, which is responsible for investment portfolio management and asset/liability modeling, are the two areas that determine the Company’s valuation policies and procedures. Both of these areas report directly to the Executive Vice President and Chief Financial Officer of the Company. For assets or liabilities that may be considered for Level 3 fair value measurement on a recurring basis, these two departments and the Executive Vice President and Chief Financial Officer determine the appropriate level of the assets or liabilities under consideration. If there are new assets or liabilities that are determined to be Level 3 by this group, the Risk Management Committee of the Company and the Audit Committee of the Board are made aware of such assets at their next scheduled meeting.
Securities pricing is obtained on securities from a third party pricing service and all security prices are tested annually against prices from another third party provider and reviewed with a market value price tolerance variance that varies by sector: municipal securities +/- 5 %, government MBS/CMO +/- 3 % and U.S. treasuries +/- 1 %. If any securities fall outside the tolerance threshold and have a variance of $ 100,000 or more, a determination of materiality is made for the amount over the threshold. Any security that would have a material threshold difference would be further investigated to determine why the variance exists and if any action is needed concerning the security pricing for that individual security. Changes in market value are reviewed monthly in aggregate by security type and any material changes are reviewed to determine why they exist. At least annually, the pricing methodology of the pricing service is received and reviewed to support the fair value levels used by the Company. A detailed pricing evaluation is requested and reviewed on any security determined to be fair valued using unobservable inputs by the pricing service.
Mortgage banking derivative: The fair values of mortgage banking derivatives are based on observable market data as of the measurement date (Level 2).
Interest rate swap derivatives: Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. The fair value of interest rate swap derivatives is determined by pricing or valuation models using observable market data as of the measurement date (Level 2).
Collateral dependent loans: Collateral dependent loans with specific allocations of the allowance for credit losses are generally based on the fair value of the underlying collateral when repayment is expected solely from the collateral. Fair value is determined using several methods. Generally, the fair value of real estate is based on appraisals by qualified third party appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and result in a Level 3 classification of the inputs for determining fair value. In addition, the Company’s management routinely applies internal discount factors to the value of appraisals used in the fair value evaluation of collateral dependent loans. The deductions to the appraisals take into account changing business factors and market conditions, as well as value impairment in cases where the appraisal date predates a likely change in market conditions. Commercial real estate is generally discounted from its appraised value by 0 - 50 % with the higher discounts applied to real estate that is determined to have a thin trading market or to be specialized collateral. In addition to real estate, the Company’s management evaluates other types of collateral as follows: (a) raw and finished inventory is discounted from its cost or book value by 35 - 65 %, depending on the marketability of the goods (b) finished goods are generally discounted by 30 - 60 %, depending on the ease of marketability, cost of transportation or scope of use of the finished good (c) work in process inventory is typically discounted by 50 %- 100 %, depending on the length of manufacturing time, types of components used in the completion process, and the breadth of the user base (d) equipment is valued at a percentage of depreciated book value or recent appraised value, if available, and is typically discounted at 30 - 70 % after various considerations including age and condition of the equipment, marketability, breadth of use, and whether the equipment includes unique components or add-ons; and (e) marketable securities are discounted by 10 %- 30 %, depending on the type of investment, age of valuation report and general market conditions. This methodology is based on a market approach and typically results in a Level 3 classification of the inputs for determining fair value.
Mortgage servicing rights: As of March 31, 2022, the fair value of the Company’s Level 3 servicing assets for residential mortgage loans (“MSRs”) was $ 2.7 million, carried at amortized cost of $ 3.0 million less a $ 355,000 valuation reserve. These residential mortgage loans have a weighted average interest rate of 3.39 %, a weighted average maturity of 21 years and are
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secured by homes generally within the Company’s market area of Northern Indiana and Indianapolis. A third-party valuation is used to estimate fair value by stratifying the portfolios on the basis of certain risk characteristics, including loan type and interest rate. Impairment is estimated based on an income approach. The inputs used include estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, ancillary income, late fees and float income. The most significant assumption used to value MSRs is prepayment rate. Prepayment rates are estimated based on published industry consensus prepayment rates. The most significant unobservable assumption is the discount rate. At March 31, 2022, the constant prepayment speed (“PSA”) used was 228 and discount rate used was 9.5 %. At December 31, 2021, the PSA used was 249 and the discount rate used was 9.5 %.
Other real estate owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value less costs to sell. Fair values are generally based on third party appraisals of the property and are reviewed by the Company’s internal appraisal officer. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable properties used to determine value. Such adjustments are usually significant and result in a Level 3 classification. In addition, the Company’s management may apply discount factors to the appraisals to take into account changing business factors and market conditions, as well as value impairment in cases where the appraisal date predates a likely change in market conditions. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.
Real estate mortgage loans held-for-sale : Real estate mortgage loans held-for-sale are carried at the lower of cost or fair value, as determined by outstanding commitments, from third party investors, and result in a Level 2 classification.
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The tables below presents the balances of assets measured at fair value on a recurring basis:
March 31, 2022
Fair Value Measurements Using Assets
at Fair Value
(dollars in thousands) Level 1 Level 2 Level 3
Assets:
U.S. Treasury securities $ 2,246 $ 0 $ 0 $ 2,246
U.S. government sponsored agency securities 0 152,892 0 152,892
Mortgage-backed securities: residential 0 596,321 0 596,321
Mortgage-backed securities: commercial 0 96 0 96
State and municipal securities 0 768,663 2,317 770,980
Total Securities 2,246 1,517,972 2,317 1,522,535
Mortgage banking derivative 0 257 0 257
Interest rate swap derivative 0 19,485 0 19,485
Total assets $ 2,246 $ 1,537,714 $ 2,317 $ 1,542,277
Liabilities:
Mortgage banking derivative $ 0 $ 3 $ 0 $ 3
Interest rate swap derivative 0 19,499 0 19,499
Total liabilities $ 0 $ 19,502 $ 0 $ 19,502
December 31, 2021
Fair Value Measurements Using Assets
at Fair Value
(dollars in thousands) Level 1 Level 2 Level 3
Assets:
U.S. Treasury securities $ 900 $ 0 $ 0 $ 900
U.S. government sponsored agency securities 0 143,452 0 143,452
Mortgage-backed securities: residential 0 486,676 0 486,676
Mortgage-backed securities: commercial 0 523 0 523
State and municipal securities 0 764,964 2,043 767,007
Total Securities 900 1,395,615 2,043 1,398,558
Mortgage banking derivative 0 398 0 398
Interest rate swap derivative 0 14,309 0 14,309
Total assets $ 900 $ 1,410,322 $ 2,043 $ 1,413,265
Liabilities:
Mortgage banking derivative $ 0 $ 2 $ 0 $ 2
Interest rate swap derivative 0 14,329 0 14,329
Total liabilities $ 0 $ 14,331 $ 0 $ 14,331
The fair value of Level 3 available-for-sale securities was immaterial and thus did not require additional recurring fair value disclosure.
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The tables below presents the balances of assets measured at fair value on a nonrecurring basis:
March 31, 2022
Fair Value Measurements Using Assets
at Fair Value
(dollars in thousands) Level 1 Level 2 Level 3
Assets
Collateral dependent loans:
Commercial and industrial loans:
Working capital lines of credit loans $ 0 $ 0 $ 353 $ 353
Non-working capital loans 0 0 4,716 4,716
Commercial real estate and multi-family residential loans:
Owner occupied loans 0 0 880 880
Agri-business and agricultural loans:
Loans secured by farmland 0 0 231 231
Total collateral dependent loans 0 0 6,180 6,180
Other real estate owned 0 0 196 196
Total assets $ 0 $ 0 $ 6,376 $ 6,376
December 31, 2021
Fair Value Measurements Using Assets
at Fair Value
(dollars in thousands) Level 1 Level 2 Level 3
Assets
Collateral dependent loans:
Commercial and industrial loans:
Working capital lines of credit loans $ 0 $ 0 $ 247 $ 247
Non-working capital loans 0 0 5,095 5,095
Commercial real estate and multi-family residential loans:
Owner occupied loans 0 0 791 791
Agri-business and agricultural loans:
Loans secured by farmland 0 0 231 231
Total collateral dependent loans 0 0 6,364 6,364
Other real estate owned 0 0 196 196
Total assets $ 0 $ 0 $ 6,560 $ 6,560
The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at March 31, 2022:
(dollars in thousands) Fair Value Valuation Methodology Unobservable Inputs Average Range of Inputs
Collateral dependent loans:
Commercial and industrial $ 5,069 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 65 % 21 %- 99 %
Collateral dependent loans:
Commercial real estate and multi-family residential loans 880 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 46 % 34 %- 68 %
Collateral dependent loans:
Agribusiness and agricultural 231 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 36 % 3 %- 68 %
Other real estate owned 196 Appraisals Discount to reflect current market conditions and ultimate collectability 38 %
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The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at December 31, 2021:
(dollars in thousands) Fair Value Valuation Methodology Unobservable Inputs Average Range of Inputs
Collateral dependent loans:
Commercial and industrial $ 5,342 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 65 % 22 %- 99 %
Collateral dependent loans:
Commercial real estate and multi-family residential loans 791 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 51 % 34 %- 68 %
Collateral dependent loans:
Agribusiness and agricultural 231 Collateral based measurements Discount to reflect current market conditions and ultimate collectability 35 % 3 %- 68 %
Other real estate owned 196 Appraisals Discount to reflect current market conditions and ultimate collectability 38 %
The following tables contain the estimated fair values and the related carrying values of the Company’s financial instruments. Items which are not financial instruments are not included.
March 31, 2022
Carrying
Value Estimated Fair Value
(dollars in thousands) Level 1 Level 2 Level 3 Total
Financial Assets:
Cash and cash equivalents $ 475,024 $ 473,561 $ 1,463 $ 0 $ 475,024
Securities available-for-sale 1,522,535 2,246 1,517,972 2,317 1,522,535
Real estate mortgages held-for-sale 2,234 0 2,270 0 2,270
Loans, net 4,286,188 0 0 4,169,000 4,169,000
Mortgage banking derivative 257 0 257 0 257
Interest rate swap derivative 19,485 0 19,485 0 19,485
Federal Reserve and Federal Home Loan Bank Stock 12,840 N/A N/A N/A N/A
Accrued interest receivable 19,448 0 9,162 10,286 19,448
Financial Liabilities:
Certificates of deposit ( 814,263 ) 0 ( 817,622 ) 0 ( 817,622 )
All other deposits ( 5,006,360 ) ( 5,006,360 ) 0 0 ( 5,006,360 )
Federal Home Loan Bank advances ( 75,000 ) 0 ( 61,200 ) 0 ( 61,200 )
Mortgage banking derivative ( 3 ) 0 ( 3 ) 0 ( 3 )
Interest rate swap derivative ( 19,499 ) 0 ( 19,499 ) 0 ( 19,499 )
Standby letters of credit ( 202 ) 0 0 ( 202 ) ( 202 )
Accrued interest payable ( 2,303 ) ( 88 ) ( 2,215 ) 0 ( 2,303 )
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December 31, 2021
Carrying
Value Estimated Fair Value
(dollars in thousands) Level 1 Level 2 Level 3 Total
Financial Assets:
Cash and cash equivalents $ 683,240 $ 681,286 $ 1,954 $ 0 $ 683,240
Securities available-for-sale 1,398,558 900 1,395,615 2,043 1,398,558
Real estate mortgages held-for-sale 7,470 0 7,634 0 7,634
Loans, net 4,220,068 0 0 4,144,000 4,144,000
Mortgage banking derivative 398 0 398 0 398
Interest rate swap derivative 14,309 0 14,309 0 14,309
Federal Reserve and Federal Home Loan Bank Stock 13,772 N/A N/A N/A N/A
Accrued interest receivable 17,674 0 7,689 9,985 17,674
Financial Liabilities:
Certificates of deposit ( 829,518 ) 0 ( 833,617 ) 0 ( 833,617 )
All other deposits ( 4,905,889 ) ( 4,905,889 ) 0 0 ( 4,905,889 )
Federal Home Loan Bank advances ( 75,000 ) 0 ( 66,118 ) 0 ( 66,118 )
Mortgage banking derivative ( 2 ) 0 ( 2 ) 0 ( 2 )
Interest rate swap derivative ( 14,329 ) 0 ( 14,329 ) 0 ( 14,329 )
Standby letters of credit ( 272 ) 0 0 ( 272 ) ( 272 )
Accrued interest payable ( 2,619 ) ( 84 ) ( 2,535 ) 0 ( 2,619 )
NOTE 7. OFFSETTING ASSETS AND LIABILITIES
The following tables summarize gross and net information about financial instruments and derivative instruments that are offset in the statement of financial position or that are subject to an enforceable master netting arrangement at March 31, 2022 and December 31, 2021.
March 31, 2022
Gross Amounts of Recognized Assets/Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts presented in the Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position Net Amount
(dollars in thousands) Financial Instruments Cash Collateral Position
Assets
Interest Rate Swap Derivatives $ 19,485 $ 0 $ 19,485 $ 0 $ ( 15,415 ) $ 4,070
Total Assets $ 19,485 $ 0 $ 19,485 $ 0 $ ( 15,415 ) $ 4,070
Liabilities
Interest Rate Swap Derivatives $ 19,499 $ 0 $ 19,499 $ 0 $ ( 90 ) $ 19,409
Total Liabilities $ 19,499 $ 0 $ 19,499 $ 0 $ ( 90 ) $ 19,409
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December 31, 2021
Gross Amounts of Recognized Assets/Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts presented in the Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position Net Amount
(dollars in thousands) Financial Instruments Cash Collateral Position
Assets
Interest Rate Swap Derivatives $ 14,309 $ 0 $ 14,309 $ 0 $ ( 2,255 ) $ 12,054
Total Assets $ 14,309 $ 0 $ 14,309 $ 0 $ ( 2,255 ) $ 12,054
Liabilities
Interest Rate Swap Derivatives $ 14,329 $ 0 $ 14,329 $ 0 $ ( 7,995 ) $ 6,334
Total Liabilities $ 14,329 $ 0 $ 14,329 $ 0 $ ( 7,995 ) $ 6,334
If an event of default occurs causing an early termination of an interest rate swap derivative, any early termination amount payable to one party by the other party may be reduced by set-off against any other amount payable by the one party to the other party. If a default in performance of any obligation of a repurchase agreement occurs, each party will set-off property held in respect of transactions against obligations owing in respect of any other transactions.
NOTE 8. EARNINGS PER SHARE
Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period, which includes shares held in treasury on behalf of participants in the Company’s Directors Fee Deferral Plan, and share repurchases. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock based awards and warrants, none of which were antidilutive.
Three Months Ended March 31,
2022 2021
Weighted average shares outstanding for basic earnings per common share 25,515,271 25,457,659
Dilutive effect of stock based awards 175,101 92,452
Weighted average shares outstanding for diluted earnings per common share 25,690,372 25,550,111
Basic earnings per common share $ 0.93 $ 0.90
Diluted earnings per common share $ 0.92 $ 0.90
NOTE 9. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the three months ended March 31, 2022 and 2021, all shown net of tax:
(dollars in thousands) Unrealized Gains and Losses on Available-
for-Sales Securities Defined Benefit Pension Items Total
Balance at January 1, 2022
$ 17,056 $ ( 963 ) $ 16,093
Other comprehensive loss before reclassification ( 109,807 ) 0 ( 109,807 )
Amounts reclassified from accumulated other comprehensive loss 0 27 27
Net current period other comprehensive income (loss) ( 109,807 ) 27 ( 109,780 )
Balance at March 31, 2022 $ ( 92,751 ) $ ( 936 ) $ ( 93,687 )
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(dollars in thousands) Unrealized Gains and Losses on Available-
for-Sales Securities Defined Benefit Pension Items Total
Balance at January 1, 2021
$ 29,182 $ ( 1,438 ) $ 27,744
Other comprehensive loss before reclassification ( 12,084 ) 0 ( 12,084 )
Amounts reclassified from accumulated other comprehensive income ( 595 ) 45 ( 550 )
Net current period other comprehensive income (loss) ( 12,679 ) 45 ( 12,634 )
Balance at March 31, 2021 $ 16,503 $ ( 1,393 ) $ 15,110
Reclassifications out of other accumulated comprehensive loss for the three months ended March 31, 2022 are as follows:
Details about
Accumulated Other
Comprehensive
Income Components Amount
Reclassified From Accumulated Other Comprehensive Income Affected Line Item
in the Statement Where Net Income is Presented
(dollars in thousands)
Amortization of defined benefit pension items $ ( 36 ) Other expense
Tax effect 9 Income tax expense
( 27 ) Net of tax
Total reclassifications for the period $ ( 27 ) Net income
Reclassifications out of other accumulated comprehensive income for the three months ended March 31, 2021 are as follows:
Details about
Accumulated Other
Comprehensive
Income Components Amount
Reclassified From Accumulated Other Comprehensive Income Affected Line Item
in the Statement Where Net Income is Presented
(dollars in thousands)
Realized gains and losses on available-for-sale securities $ 753 Net securities gains
Tax effect ( 158 ) Income tax expense
595 Net of tax
Amortization of defined benefit pension items ( 60 ) Other expense
Tax effect 15 Income tax expense
( 45 ) Net of tax
Total reclassifications for the period $ 550 Net income
NOTE 10. LEASES
The Company leases certain office facilities under long-term operating lease agreements. The leases expire at various dates through 2037 and some include renewal options. Many of these leases require the payment of property taxes, insurance premiums, maintenance, utilities and other costs. In many cases, rentals are subject to increase in relation to a cost-of-living index. The Company accounts for lease and non-lease components together as a single lease component. The Company determines if an arrangement is a lease at inception. Operating leases are recorded as a right-of-use ("ROU") lease assets and are included in other assets on the consolidated balance sheet. The Company's corresponding lease obligations are included in other liabilities on the consolidated balance sheet. ROU lease assets represent the Company's right to use an underlying asset for the lease term and lease obligations represent the Company's obligation to make lease payments arising from the lease. Operating ROU lease assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The ROU lease asset also includes any lease payments made and excludes lease incentives. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
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Lease expense for lease payments is recognized on a straight-line basis over the lease term. Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases, as allowed as practical expedient of the standard.
The following is a maturity analysis of the operating lease liabilities as of March 31, 2022:
Years ending December 31, (in thousands) Operating Lease Obligation
2022 $ 530
2023 717
2024 734
2025 752
2026 731
2027 and thereafter
2,938
Total undiscounted lease payments 6,402
Less imputed interest ( 703 )
Lease liability $ 5,699
Right-of-use asset $ 5,699
Three months ended March 31,
2022 2021
Lease cost
Operating lease cost $ 170 $ 135
Short-term lease cost 6 6
Total lease cost $ 176 $ 141
Other information
Operating cash outflows from operating leases $ 170 $ 135
Weighted-average remaining lease term - operating leases 8.9 years 8.6 years
Weighted average discount rate - operating leases 2.5 % 2.8 %
NOTE 11. CONTINGENCIES
Lakeland Financial Corporation and its subsidiaries are defendants in various legal proceedings arising in the normal course of business. In the opinion of management, based on present information including advice of legal counsel, the ultimate resolution of these proceedings is not expected to have a material effect on the Company's consolidated financial position or results of operations.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.