What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-05 · 153 added, 159 removed, 667 unchanged (32% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

June 30, 2022 and December 31, 2021

September 30, 2022 and December 31, 2021

(Dollars in thousands)

September 30,

Cash and due from banks, including reserve requirements of $ 0 at both 9/30/22 and 12/31/21

26 unchanged sentences

authorized 20,000,000 shares;

issued and outstanding 5,641,030 shares at June 30, 2022 and 5,661,569 shares at December 31, 2021

issued and outstanding 5,641,030 shares at September 30, 2022 and 5,661,569 shares at December 31, 2021

Common stock held by deferred compensation trust, at cost;

165,984 shares at June 30, 2022 and 162,193 shares at December 31, 2021

167,889 shares at September 30, 2022 and 162,193 shares at December 31, 2021

Deferred compensation

6 unchanged sentences

Consolidated Statements of Earnings

Three and Six Months Ended June 30, 2022 and 2021

Three and Nine Months Ended September 30, 2022 and 2021

(Dollars in thousands, except per share amounts)

Three months ended

Six months ended

Nine months ended

September 30,

Interest income:

19 unchanged sentences

Appraisal management fee income

Gain on sale of other assets

Gain on sale of other real estate

17 unchanged sentences

Consolidated Statements of Comprehensive Income (Loss)

Three and Six Months Ended June 30, 2022 and 2021

Three and Nine Months Ended September 30, 2022 and 2021

(Dollars in thousands)

Three months ended

Six months ended

Other comprehensive income (loss):

Unrealized holding gains (losses) on securities available for sale

Income tax expense (benefit) related to other comprehensive income:

Unrealized holding gains (losses) on securities available for sale

Total other comprehensive income (loss), net of tax

Nine months ended

September 30,

Other comprehensive loss:

Unrealized holding losses on securities

available for sale

Income tax benefit related to other

comprehensive loss:

Unrealized holding losses on securities

available for sale

Total other comprehensive loss,

Total comprehensive income (loss)

2 unchanged sentences

Consolidated Statements of Changes in Shareholders' Equity

Three and Six Months Ended June 30, 2022 and 2021

Three and Nine Months Ended September 30, 2022 and 2021

(Dollars in thousands)

3 unchanged sentences

Common stock repurchase

Cash dividends declared on common stock

Cash dividends declared on

Restricted stock units exercised

Equity incentive plan, net

Change in accumulated other comprehensive loss, net of tax

Change in accumulated other

comprehensive loss, net of tax

Balance, March 31, 2022

Common stock repurchase

Cash dividends declared on common stock

Cash dividends declared on

Equity incentive plan, net

Change in accumulated other comprehensive loss, net of tax

Change in accumulated other

comprehensive loss, net of tax

Balance, June 30, 2022

Cash dividends declared on

Equity incentive plan, net

Change in accumulated other

comprehensive loss, net of tax

Balance, September 30, 2022

Balance, December 31, 2020

Common stock repurchase

Cash dividends declared on common stock

Cash dividends declared on

Restricted stock units exercised

Equity incentive plan, net

Change in accumulated other comprehensive loss, net of tax

Change in accumulated other

comprehensive loss, net of tax

Balance, March 31, 2021

Cash dividends declared on common stock

Cash dividends declared on

Equity incentive plan, net

Change in accumulated other comprehensive income, net of tax

Change in accumulated other

comprehensive income, net of tax

Balance, June 30, 2021

Common stock repurchase

Cash dividends declared on

Equity incentive plan, net

Change in accumulated other

comprehensive loss, net of tax

Balance, September 30, 2021

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2022 and 2021

Nine Months Ended September 30, 2022 and 2021

(Dollars in thousands)

Cash flows from operating activities:

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

Adjustments to reconcile net earnings to

net cash provided by operating activities:

Depreciation, amortization and accretion

2 unchanged sentences

Gain on sale of other real estate

Gain on sale of other assets

Restricted stock expense

8 unchanged sentences

Purchases of investment securities available for sale

Proceeds from sales, calls and maturities of investment securities available for sale

Proceeds from sales, calls and maturities of investment securities

available for sale

Proceeds from paydowns of investment securities available for sale

3 unchanged sentences

Purchases of premises and equipment

Proceeds from sale of other real estate and repossessions

Proceeds from sale of other assets

Proceeds from sale of other real estate

Proceeds from bank owned life insurance

11 unchanged sentences

Consolidated Statements of Cash Flows, continued

Six Months Ended June 30, 2022 and 2021

Nine Months Ended September 30, 2022 and 2021

(Dollars in thousands)

2 unchanged sentences

Noncash investing and financing activities:

Change in unrealized gain on investment securities available for sale, net

Change in unrealized loss on investment securities

available for sale, net

Issuance of accrued restricted stock units

23 unchanged sentences

Recent Accounting Pronouncements

The following table provides a summary of Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”) that the Company has not adopted as of June 30, 2022, which may impact the Company’s financial statements.

The following table provides a summary of Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”) that the Company has not adopted as of September 30, 2022, which may impact the Company’s financial statements.

Recently Issued Accounting Guidance Not Yet Adopted

7 unchanged sentences

The Company has formed a Current Expected Credit Losses (“CECL”) committee and implemented a model from a third-party vendor for running CECL calculations.

The Company is currently developing CECL model assumptions and comparing results to current allowance for loan loss calculations.

The Company plans to run parallel calculations leading up to the effective date of this guidance to ensure it is prepared for implementation by the effective date.

In addition to the Company’s allowance for loan losses, it will also record an allowance for credit losses on debt securities instead of applying the impairment model currently utilized.

The Company has developed CECL model assumptions and is comparing results to current allowance for loan loss calculations.

Parallel processing of the existing allowance for loan losses model with the CECL model will occur during the fourth quarter of 2022.

The Company is currently evaluating the impact of this adoption on its financial statements and disclosures and currently expects to record a one-time adjustment to retained earnings to increase the allowance for loan losses.

In addition to the Company’s allowance for loan losses, it will also review an allowance for credit losses on debt securities instead of applying the impairment model currently utilized.

The amount of the adjustments will be impacted by each portfolio’s composition and credit quality at the adoption date as well as economic conditions and forecasts at that time.

Based on implementation progress to date, the Company believes the capital adequacy requirements to which it and the Bank are subject to, and its business strategies and practices, will not be materially impacted following the adoption on January 1, 2023.

Effective Date

45 unchanged sentences

Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies are not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

Reclassification

Certain amounts in the 2021 Consolidated Financial Statements have been reclassified to conform to the 2022 presentation.

These reclassifications did not have any impact on shareholders’ equity or net earnings.

(2) Investment Securities

Investment securities available for sale at June 30, 2022 and December 31, 2021 are as follows:

Investment securities available for sale at September 30, 2022 and December 31, 2021 are as follows:

(Dollars in thousands)

June 30, 2022

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

U.S Treasuries

Government sponsored enterprises

September 30, 2022

sponsored enterprises

Mortgage-backed securities

2 unchanged sentences

December 31, 2021

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

U.S Treasuries

Government sponsored enterprises

sponsored enterprises

Mortgage-backed securities

State and political subdivisions

The current fair value and associated unrealized losses on investments in securities with unrealized losses at June 30, 2022 and December 31, 2021 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.

The current fair value and associated unrealized losses on investments in securities with unrealized losses at September 30, 2022 and December 31, 2021 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.

(Dollars in thousands)

June 30, 2022

September 30, 2022

Less than 12 Months

3 unchanged sentences

Unrealized Losses

Government sponsored enterprises

sponsored enterprises

Mortgage-backed securities

7 unchanged sentences

Unrealized Losses

Government sponsored enterprises

sponsored enterprises

Mortgage-backed securities

State and political subdivisions

At June 30, 2022, unrealized losses in the investment securities portfolio relating to debt securities totaled $ 43.6 million.

At September 30, 2022, unrealized losses in the investment securities portfolio relating to debt securities totaled $ 59.8 million.

The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary.

From the June 30, 2022 tables above, all three U.S.

From the September 30, 2022 tables above, all three U.S.

Treasury securities, 152 out of 166 securities issued by state and political subdivisions and 127 out of 139 securities issued by U.S.

9 unchanged sentences

Government sponsored enterprises, including mortgage-backed securities, are government backed.

The amortized cost and estimated fair value of investment securities available for sale at June 30, 2022, by contractual maturity, are shown below.

The amortized cost and estimated fair value of investment securities available for sale at September 30, 2022, by contractual maturity, are shown below.

Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

June 30, 2022

September 30, 2022

(Dollars in thousands)

5 unchanged sentences

Mortgage-backed securities

No securities available for sale were sold during the three and six months ended June 30, 2022 and 2021.

Securities with a fair value of approximately $ 98.5 million and $ 98.6 million at June 30, 2022 and December 31, 2021, respectively, were pledged to secure public deposits and for other purposes as required by law.

Major classifications of loans at June 30, 2022 and December 31, 2021 are summarized as follows:

No securities available for sale were sold during the three and nine months ended September 30, 2022 and 2021.

Securities with a fair value of approximately $ 101.8 million and $ 98.6 million at September 30, 2022 and December 31, 2021, respectively, were pledged to secure public deposits and for other purposes as required by law.

Major classifications of loans at September 30, 2022 and December 31, 2021 are summarized as follows:

(Dollars in thousands)

June 30, 2022

September 30, 2022

December 31, 2021

31 unchanged sentences

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The following tables present an age analysis of past due loans, by loan type, as of June 30, 2022 and December 31, 2021:

June 30, 2022

The following tables present an age analysis of past due loans, by loan type, as of September 30, 2022 and December 31, 2021:

September 30, 2022

(Dollars in thousands)

3 unchanged sentences

Total Current Loans

Accruing Loans 90 or More Days Past Due

28 unchanged sentences

All other loans

The following table presents non-accrual loans as of June 30, 2022 and December 31, 2021:

The following table presents non-accrual loans as of September 30, 2022 and December 31, 2021:

(Dollars in thousands)

June 30, 2022

September 30, 2022

December 31, 2021

19 unchanged sentences

Impaired loans under $ 250,000 are not individually evaluated for impairment with the exception of the Bank’s Troubled Debt Restructurings (“TDR”) loans in the residential mortgage loan portfolio, which are individually evaluated for impairment.

Impaired loans were $ 16.5 million, $ 18.3 million and $ 19.7 million at June 30, 2022, December 31, 2021 and June 30, 2021, respectively.

Interest income recognized on accruing impaired loans was $ 433,000 , $ 1.0 million, and $ 536,000 for the six months ended June 30, 2022, the year ended December 31, 2021 and the six months ended June 30, 2021, respectively.

Interest income recognized on accruing impaired loans was $ 217,000 and $ 253,000 for the three months ended June 30, 2022 and the three months ended June 30, 2021, respectively.

Impaired loans were $ 15.7 million and $ 18.3 million at September 30, 2022 and December 31, 2021, respectively.

Interest income recognized on accruing impaired loans was $ 649,000 and $ 754,000 for the nine months ended September 30, 2022 and 2021, respectively.

Interest income recognized on accruing impaired loans was $ 217,000 and $253,000 for the three months ended September 30, 2022 and the three months ended September 30, 2021, respectively.

No interest income is recognized on non-accrual impaired loans subsequent to their classification as non-accrual.

The following table presents impaired loans as of June 30, 2022:

June 30, 2022

The following table presents impaired loans as of September 30, 2022:

September 30, 2022

(Dollars in thousands)

Unpaid Contractual Principal Balance

Recorded Investment With No Allowance

Recorded Investment With Allowance

Recorded Investment in Impaired Loans

Related Allowance

Investment in

Real estate loans:

9 unchanged sentences

Total impaired loans

The following table presents the average impaired loan balance and the interest income recognized by loan class for the three and six months ended June 30, 2022 and 2021.

The following table presents impaired loans as of and for the year ended December 31, 2021:

December 31, 2021

(Dollars in thousands)

Three months ended

Six months ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Average Balance

Interest Income Recognized

Average Balance

Interest Income Recognized

Average Balance

Interest Income Recognized

Average Balance

Interest Income Recognized

Investment in

Real estate loans:

2 unchanged sentences

Single-family residential -

Banco de la Gente stated income

Banco de la Gente non-traditional

Multifamily and farmland

2 unchanged sentences

Commercial loans

Farm loans (non RE)

Consumer loans

Total impaired loans

The following table presents impaired loans as of and for the year ended December 31, 2021:

December 31, 2021

The following table presents the average impaired loan balance and the interest income recognized by loan class for the three and nine months ended September 30, 2022 and 2021.

(Dollars in thousands)

Unpaid Contractual Principal Balance

Recorded Investment With No Allowance

Recorded Investment With Allowance

Recorded Investment in Impaired Loans

Related Allowance

Average Outstanding Impaired Loans

YTD Interest Income Recognized

Three months ended

Nine months ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Average Balance

Interest Income Recognized

Average Balance

Interest Income Recognized

Average Balance

Interest Income Recognized

Average Balance

Interest Income Recognized

Real estate loans:

2 unchanged sentences

Single-family residential -

Banco de la Gente non-traditional

Banco de la Gente stated income

Multifamily and farmland

2 unchanged sentences

Commercial loans

Farm loans (non RE)

Consumer loans

Total impaired loans

Impaired loans collectively evaluated for impairment totaled $ 5.1 million at June 30, 2022 and December 31, 2021 and are included in the tables above.

Allowance on impaired loans collectively evaluated for impairment totaled $ 44,000 and $ 52,000 at June 30, 2022 and December 31, 2021, respectively.

The following tables present changes in the allowance for loan losses for the three and six months ended June 30, 2022 and 2021.

Impaired loans collectively evaluated for impairment totaled $ 5.1 million at September 30, 2022 and December 31, 2021 and are included in the tables above.

Allowance on impaired loans collectively evaluated for impairment totaled $ 44,000 and $ 52,000 at September 30, 2022 and December 31, 2021, respectively.

The following tables present changes in the allowance for loan losses for the three and nine months ended September 30, 2022 and 2021.

Unallocated balances in the following tables include allowance for loan losses based on qualitative factors such as economic outlook, concentrations of credit, interest rate risk and loan volume trends.

7 unchanged sentences

Consumer and All Other

Six months ended June 30, 2022:

Nine months ended September 30, 2022:

Allowance for loan losses:

1 unchanged sentence

Ending balance

Three months ended June 30, 2022:

Three months ended September 30, 2022:

Allowance for loan losses:

1 unchanged sentence

Ending balance

Allowance for loan losses at June 30, 2022:

Allowance for loan losses at September 30, 2022:

Ending balance:

3 unchanged sentences

Ending balance

Loans at June 30, 2022:

Loans at September 30, 2022:

Ending balance

10 unchanged sentences

Consumer and All Other

Six months ended June 30, 2021:

Nine months ended September 30, 2021:

Allowance for loan losses:

1 unchanged sentence

Ending balance

Three months ended June 30, 2021:

Three months ended September 30, 2021:

Allowance for loan losses:

1 unchanged sentence

Ending balance

Allowance for loan losses at June 30, 2021:

Allowance for loan losses at September 30, 2021:

Ending balance:

3 unchanged sentences

Ending balance

Loans at June 30, 2021:

Loans at September 30, 2021:

Ending balance

36 unchanged sentences

Loss is a temporary grade until the appropriate authority is obtained to charge the loan off.

The following tables present the credit risk profile of each loan type based on internally assigned risk grades as of June 30, 2022 and December 31, 2021:

June 30, 2022

The following tables present the credit risk profile of each loan type based on internally assigned risk grades as of September 30, 2022 and December 31, 2021:

September 30, 2022

(Dollars in thousands)

9 unchanged sentences

6- Substandard

There were no new TDR modifications during the three and six months ended June 30, 2022 and 2021.

December 31, 2021

10 unchanged sentences

6- Substandard

There were no loans modified as TDR loans that defaulted during the six months ended June 30, 2022 and 2021, which were within 12 months of their modification date.

There were no new TDR modifications during the three and nine months ended September 30, 2022 and 2021.

There were no loans modified as TDR loans that defaulted during the nine months ended September 30, 2022 and 2021, which were within 12 months of their modification date.

On March 27, 2020, President Trump signed the CARES Act, which established a $2 trillion economic stimulus package, including cash payments to individuals, supplemental unemployment insurance benefits and a $349 billion loan program administered through the PPP .

3 unchanged sentences

Total PPP loans originated during the years ended December 31, 2020 and 2021 amounted to $ 128.1 million.

The outstanding balance of PPP loans was $ 1.4 million and $ 18.0 million at June 30, 2022 and December 31, 2021, respectively, classified as commercial loans in the tables above.

The Bank recognized $ 293,000 and $ 1.5 million of PPP loan fee income for the three months ended June 30, 2022 and the three months ended June 30, 2021, respectively.

The Bank recognized $ 893,000 and $ 2.5 million of PPP loan fee income for the six months ended June 30, 2022 and six months ended June 30, 2021, respectively.

The outstanding balance of PPP loans was $ 103,000 and $ 18.0 million at September 30, 2022 and December 31, 2021, respectively.

These loans are classified as commercial loans in the tables above.

The Bank recognized $ 54,000 and $ 489,000 of PPP loan fee income for the three months ended September 30, 2022 and the three months ended September 30, 2021, respectively.

The Bank recognized $ 948,000 and $ 3.0 million of PPP loan fee income for the nine months ended September 30, 2022 and nine months ended September 30, 2021, respectively.

(4) Net Earnings Per Share

1 unchanged sentence

The average market price during the applicable period is used to compute equivalent shares.

The reconciliation of the amounts used in the computation of both “basic earnings per share” and “diluted earnings per share” for the three and six months ended June 30, 2022 and 2021 is as follows:

For the three months ended June 30, 2022

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

Per Share Amount

The reconciliation of the amounts used in the computation of both “basic earnings per share” and “diluted earnings per share” for the three and nine months ended September 30, 2022 and 2021 is as follows:

For the three months ended September 30, 2022

Basic earnings per share

4 unchanged sentences

Diluted earnings per share

For the six months ended June 30, 2022

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

Per Share Amount

For the nine months ended September 30, 2022

Basic earnings per share

4 unchanged sentences

Diluted earnings per share

For the three months ended June 30, 2021

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

Per Share Amount

For the three months ended September 30, 2021

Basic earnings per share

4 unchanged sentences

Diluted earnings per share

For the six months ended June 30, 2021

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

Per Share Amount

For the nine months ended September 30, 2021

Basic earnings per share

61 unchanged sentences

In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

The tables below present all financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy, as of June 30, 2022 and December 31, 2021.

The tables below present all financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy, as of September 30, 2022 and December 31, 2021.

(Dollars in thousands)

June 30, 2022

September 30, 2022

Level 1 Valuation

1 unchanged sentence

Level 3 Valuation

Government sponsored enterprises

sponsored enterprises

Mortgage-backed securities

6 unchanged sentences

Level 3 Valuation

Government sponsored enterprises

sponsored enterprises

Mortgage-backed securities

1 unchanged sentence

Mutual funds held in deferred compensation trust

The fair value measurements for mortgage loans held for sale and impaired loans on a non-recurring basis at June 30, 2022 and December 31, 2021 are presented below.

The fair value measurements for mortgage loans held for sale and impaired loans on a non-recurring basis at September 30, 2022 and December 31, 2021 are presented below.

The fair value measurement process uses certified appraisals and other market-based information;

2 unchanged sentences

(Dollars in thousands)

Fair Value Measurements June 30, 2022

Level 1 Valuation

Level 2 Valuation

Level 3 Valuation

Fair Value Measurements September 30, 2022

Mortgage loans held for sale

2 unchanged sentences

Fair Value Measurements December 31, 2021

Level 1 Valuation

Level 2 Valuation

Level 3 Valuation

Mortgage loans held for sale

1 unchanged sentence

(Dollars in thousands)

Fair Value June 30, 2022

September 30, 2022

December 31, 2021

Valuation Technique

Significant Unobservable Inputs

Significant Unobservable

General Range of Significant Unobservable Input Values

4 unchanged sentences

Discounts to reflect current market conditions and ultimate collectability

The carrying amount and estimated fair value of financial instruments at June 30, 2022 and December 31, 2021 are as follows:

The carrying amount and estimated fair value of financial instruments at September 30, 2022 and December 31, 2021 are as follows:

(Dollars in thousands)

Fair Value Measurements at June 30, 2022

Fair Value Measurements at September 30, 2022

Carrying Amount

17 unchanged sentences

compensation trust

Securities sold under agreements to repurchase

Securities sold under agreements

to repurchase

Junior subordinated debentures

As of June 30, 2022, the Bank had operating right of use assets of $ 6.0 million and operating lease liabilities of $ 6.0 million.

As of September 30, 2022, the Bank had operating right of use assets of $ 5.8 million and operating lease liabilities of $ 5.8 million.

The Bank maintains operating leases on land and buildings for some of the Bank’s branch facilities and loan production offices.

3 unchanged sentences

Leases with a term of 12 months or less are not recorded on the balance sheet and instead are recognized in lease expense on a straight-line basis over the lease term.

The following table presents lease cost and other lease information as of June 30, 2022 and 2021.

The following table presents lease cost and other lease information as of September 30, 2022 and 2021.

(Dollars in thousands)

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

Operating lease cost

1 unchanged sentence

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

Right-of-use assets obtained in exchange for new lease liabilities - operating leases

1 unchanged sentence

Weighted-average discount rate - operating leases

The following table presents lease maturities as of June 30, 2022 and December 31, 2021.

The following table presents lease maturities as of September 30, 2022 and December 31, 2021.

(Dollars in thousands)

Maturity Analysis of Operating Lease Liabilities:

June 30, 2022

December 31, 2021

September 30,2022

Imputed Interest

4 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements