What changed in this filing

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Item 1. Financial Statements

2020-08-13 compared with 2020-05-15 · 139 added, 101 removed, 599 unchanged (29% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

March 31, 2020

June 30, 2020

December 31, 2019

4 unchanged sentences

Investment securities - held to maturity

Loans and leases, net of allowance for losses of $7,306,000 and

$7,089,000, respectively

Loans and leases, net of allowance for losses of $ 8,521,000

and $ 7,089,000 , respectively

Premises and equipment, net

21 unchanged sentences

Unearned employee stock ownership plan (ESOP)

( 14,400,386 )

Accumulated other comprehensive income (loss)

5 unchanged sentences

Condensed Consolidated Statements of Income

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Interest Income

6 unchanged sentences

Provision for losses on loans and leases

Net Interest Income After Provision for Losses

on Loans and Leases

Net Interest Income After Provision for Losses on Loans and Leases

Non-Interest Income

2 unchanged sentences

Loan and lease servicing fees

Net gains on securities (includes $69,139 and

$24,806 for the three months

ended March 31, 2020 and 2019, respectively,

related to accumulated other comprehensive

loss reclassifications)

Net gains on securities (includes $ 9,874 , $ 36,426 ,

$ 79,013 and $ 61,232 , respectively, related to accumulated

other comprehensive loss reclassifications)

Net gains on loan and lease sales

12 unchanged sentences

Real estate owned expense

Loss on sale of real estate owned

Other expenses

Total non- interest expenses

Income Before Income Tax Expense

Provision for income taxes (includes $17,522 and

$6,483 for the three months ended March 31,

Income Before Income Tax Expense (Benefit)

Provision (benefit) for income taxes (includes $ 2,503 ,

$ 9,520 , $ 20,026 and $ 16,003 , respectively, related to income

4 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended March 31,

Three Months Ended

Six Months Ended

Other Comprehensive Income

Unrealized gain on available-for-sale securities,

net of tax expense of $957,976 and $677,903 for

the three months ended March 31, 2020 and 2019, respectively.

reclassification adjustment for realized gains included in

net income, net of tax expense of $17,523 and $6,483 for the three

months ended March 31, 2020 and 2019, respectively.

Unrealized gain on available-for-sale securities, net of tax expense of $ 312,821 , $ 559,911 , $ 1,270,737 and $ 1,237,814 , respectively.

reclassification adjustment for realized gains

included in net income, net of tax expense of $ 2,503 ,

$ 9,520 , $ 20,026 and $ 16,003 , respectively.

Comprehensive Income

3 unchanged sentences

Comprehensive

Income/(Loss)

Balances, March 31, 2020

Other comprehensive income

ESOP shares earned

Common stock dividends ($0.05 per share)

Balances, June 30, 2020

Comprehensive

Income/(Loss)

Balances, December 31, 2019

1 unchanged sentence

ESOP shares earned

Common stock dividends ($0.05 per share)

Balances, June 30, 2020

Comprehensive

Income/(Loss)

Balances, March 31, 2019

Other comprehensive income

Balances, June 30, 2019

Comprehensive

Income/(Loss)

Balances, December 31, 2018

Other comprehensive income

Balances, March 31, 2019

Balances, June 30, 2019

See Notes to Condensed Consolidated Statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

Operating Activities

6 unchanged sentences

Gain on sale of loans and leases held for sale

Loss on sale of real estate owned

Accretion of loan origination fees

25 unchanged sentences

Repayment of FHLB advances

Dividends paid

Net cash provided by financing activities

18 unchanged sentences

The costs of the corporate reorganization and the issuance of the common stock have been deducted from the sales proceeds of the offering.

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or note disclosures necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles.

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or note disclosures necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles.

Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on March 30, 2020 (SEC File No.

1 unchanged sentence

Those adjustments consist only of normal recurring adjustments.

The interim consolidated financial statements at and for the three months ended March 31, 2020 and 2019 have not been audited by independent accountants, but in the opinion of management, reflect all adjustments necessary to present fairly the financial position, results of operations and cash flows for such periods.

The results of operations for the period are not necessarily indicative of the results to be expected for the full year.

9 unchanged sentences

The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.

Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of

the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal.

Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal.

The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

23 unchanged sentences

This ASU clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments.

The amendments in these ASUs are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, assuming the adoption of an ASU implementing the FASB board decision in November 2019 extending the adoption date for certain registrants, including the Company, with early adoption permitted.

In October 2019, the FASB voted to extend the implementation of ASU No.

2016-13 for certain financial institutions including smaller reporting companies.

As a result, ASU 2016-13 will be effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

The Company is evaluating its current expected loss methodology on the loan and investment portfolios to identify the necessary modifications in accordance with this standard.

15 unchanged sentences

Technical changes to eliminate exceptions to Topic 740 related to intra-period tax allocations for entities with losses from continuing operations, deferred tax liabilities related to change in ownership of foreign entities, and interim-period tax allocations for businesses with losses where the losses are expected to be realized.

amendments in ASU 2019-12 are effective for public business entities with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

The Company does not expect ASU 2019-12 to have a material impact on its consolidated financial statement.

The amendments in ASU 2019-12 are effective for public business entities with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

The Company does not expect ASU 2019-12 to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No.

5 unchanged sentences

The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

The amendments in this ASU broaden the scope of ASC Subtopic 350-40 to include costs incurred to implement a hosting arrangement that is a service contract.

The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

The costs are capitalized or expensed depending on the nature of the costs and the project stage during which they are incurred, consistent with the accounting for costs for internal-use software.

The amendments in this ASU result in consistent capitalization of implementation costs of a hosting arrangement that is a service contract and implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU.

The Company adopted this ASU on January 1, 2020, with no material impact on its consolidated financial statements.

The FASB has issued ASU No.

In February 2016, the FASB has issued ASU No.

2016-02, Leases (Topic 842).

12 unchanged sentences

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

March 31, 2020

June 30, 2020

Available for sale

20 unchanged sentences

Total investment securities

The amortized cost and fair value of securities at March 31, 2020, by contractual maturity, are shown below.

The amortized cost and fair value of securities at June 30, 2020, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

8 unchanged sentences

Equity securities

Securities with a carrying value of $149,743,000 and $114,907,000 were pledged at March 31, 2020 and December 31, 2019, respectively, to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale for the three months ended March 31, 2020 and 2019 were $11,461,388 and $11,467,522, respectively.

Gross gains were recognized on the sale of securities available-for-sale for the three months ended March 31, 2020 and 2019 of $74,000 and $25,000, respectively.

Gross losses were recognized on the sale of securities available for sale for the three months ended March 31, 2020 and 2019 of $5,000 and $0, respectively.

Certain investments in debt securities are reported in the consolidated financial statements and notes at an amount less than their historical cost.

Total fair value of these investments at March 31, 2020 and December 31, 2019 and was $54,643,000 and $138,391,000, which is approximately 21% and 63%, respectively, of the Company’s available-for-sale and held-to-maturity investment portfolio.

Securities with a carrying value of $ 119,773 ,000 and $ 114,907 ,000 were pledged at June 30, 2020 and December 31, 2019, respectively, to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale for the three and six months ended June 30, 2020 were $ 10,716 ,000 and $ 22,178 ,000, respectively.

For the three and six months ended June 30, 2019, proceeds from sales of securities were $ 10,989 ,000 and $ 22,457 ,000 respectively.

Gross gains were recognized on the sale of securities available-for-sale for the three and six months ended June 30, 2020 and 2019 of $ 66 ,000, $ 136 ,000, $ 37 ,000 and $ 62 ,000, respectively.

Gross losses were recognized on the sale of securities available for sale for the three and six months ended June 30, 2020 of $ 56 ,000.

There were no gross losses realized from sales of securities available for sale for the three and six months ended June 30, 2019.

Certain investments in debt securities, as reflected in the table below, are reported in the condensed consolidated financial statements and notes at an amount less than their historical cost.

Total fair value of these investments at June 30, 2020 and December 31, 2019 was $ 40,703 ,000 and $ 138,391 ,000, respectively, which is approximately 17 % and 63 % of the Company’s aggregated available-for-sale and held-to-maturity investment portfolio at those dates, respectively.

These declines primarily resulted from changes in market interest rates since their purchase.

1 unchanged sentence

Should the impairment of any other securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following tables show the Company’s investments by gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2020 and December 31, 2019:

March 31, 2020

June 30, 2020

Less Than 12 Months

30 unchanged sentences

The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.

Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2020.

Mortgage-Backed Securities – GSE Residential and SBA Pools.

1 unchanged sentence

The Company expects to recover the amortized cost basis over the term of the securities.

Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2020.

State and Municipal Obligations.

1 unchanged sentence

The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.

Loans, Leases and Allowance

Categories of loans at March 31, 2020 and December 31, 2019 include:

Categories of loans at June 30, 2020 and December 31, 2019 include:

Commercial mortgage

5 unchanged sentences

Deferred loan fees

The following tables present the activity in the allowance for loan and lease losses for the three months ended March 31, 2020 and 2019.

Three Months Ended March 31, 2020:

The following tables present the activity in the allowance for loan and lease losses for the three and six months ended June 30, 2020 and 2019.

Three Months Ended June 30, 2020:

Balance, beginning of period

1 unchanged sentence

Balance, end of period

Three Months Ended March 31, 2019:

Six Months Ended June 30, 2020:

Balance, beginning of period

1 unchanged sentence

Balance, end of period

The following tables present the balance in the allowance for loan and lease losses and the recorded investment in loans and leases based on portfolio segment and impairment method as of March 31, 2020 and December 31, 2019:

March 31, 2020

(1) Commercial mortgage includes commercial and multifamily real estate loans.

(2) Residential mortgage includes one- to four-family and home equity loans.

Three Months Ended June 30, 2019:

Balance, beginning of period

Provision (credit) for losses

Balance, end of period

Six Months Ended June 30, 2019:

Balance, beginning of period

Provision (credit) for losses

Balance, end of period

(1) Commercial mortgage includes commercial and multifamily real estate loans.

(2) Residential mortgage includes one- to four-family and home equity loans

June 30, 2020

Allowance for loan and lease losses:

3 unchanged sentences

for impairment

Balance, March 31

Balance, June 30

Loans and leases:

4 unchanged sentences

Ending balance:

(1) Commercial mortgage includes commercial and multifamily real estate loans.

(2) Residential mortgage includes one- to four-family and home equity loans

December 31, 2019

11 unchanged sentences

Ending balance:

(1) Commercial mortgage includes commercial and multifamily real estate loans.

(2) Residential mortgage includes one- to four-family and home equity loans.

The Company rates all loans by credit quality using the following designations:

41 unchanged sentences

The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value.

Most commercial loans are secured by the assets being financed or other

business assets, such as accounts receivable or inventory, and may include a personal guarantee.

Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include a personal guarantee.

Short-term loans may be made on an unsecured basis.

28 unchanged sentences

A determination is made as to the applicant’s financial condition and ability to repay in accordance with the proposed terms as well as an overall assessment of the risks involved.

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category and payment activity as of March 31, 2020 and December 31, 2019:

March 31, 2020

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category and payment activity as of June 30, 2020 and December 31, 2019:

June 30, 2020

5 Special Mention

3 unchanged sentences

6 Substandard

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of March 31, 2020 and December 31, 2019:

March 31, 2020

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of June 30, 2020 and December 31, 2019:

June 30, 2020

Delinquent Loans

9 unchanged sentences

Residential mortgage

The following tables present the Company’s impaired loans and specific valuation allowance at March 31, 2020 and December 31, 2019:

March 31, 2020

The following tables present the Company’s impaired loans and specific valuation allowance at June 30, 2020 and December 31, 2019:

June 30, 2020

Loans without a specific

5 unchanged sentences

valuation allowance

Commercial mortgage

Commercial and industrial

18 unchanged sentences

Total impaired loans

The following tables present the Company’s average investment in impaired loans and interest income recognized for the three months ended March 31, 2020 and 2019.

The following tables present the Company’s average investment in impaired loans and interest income recognized for the three and six months ended June 30, 2020 and 2019.

Investment in

Three Months Ended March 31, 2020:

Three Months Ended June 30, 2020:

Total impaired loans

4 unchanged sentences

Investment in

Three Months Ended March 31, 2019:

Six Months Ended June 30, 2020:

Total impaired loans

3 unchanged sentences

Total impaired loans

The following table presents the Company’s nonaccrual loans and leases at March 31, 2020 and December 31, 2019:

Investment in

Three Months Ended June 30, 2019:

Total impaired loans

Commercial mortgage

1 unchanged sentence

Residential mortgage

During the three months ended March 31, 2020 and 2019, there were no newly classified troubled debt restructured loans or leases (“TDRs”).

For the three months ended March 31, 2020 and 2019, the Company recorded no charge-offs related to TDRs.

As of March 31, 2020 and December 31, 2019, TDRs had a related allowance of $52,000.

During the three months ended March 31, 2020, there were no TDRs for which there was a payment default within the first 12 months of the modification.

Total impaired loans

Investment in

Six Months Ended June 30, 2019:

Total impaired loans

Commercial mortgage

Commercial and industrial

Residential mortgage

Total impaired loans

The following table presents the Company’s nonaccrual loans and leases at June 30, 2020 and December 31, 2019:

Commercial mortgage

Commercial and industrial

Residential mortgage

During the three and six months ended June 30, 2020 and 2019, there were no newly classified troubled debt restructured loans or leases (“TDRs”).

For the three and six months ended June 30, 2020 and 2019, the Company recorded no charge-offs related to TDRs.

As of both June 30, 2020 and December 31, 2019, TDRs had a related allowance of $ 52,000 .

During the three and six months ended June 30, 2020, there were no TDRs for which there was a payment default within the first 12 months of the modification.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs.

2 unchanged sentences

Borrowers are considered current under the CARES Act if they are less than 30 days past due on their contractual payments at the time a modification program is implemented.

At March 31, 2020 and December 31, 2019, the balance of real estate owned includes $32,000 and $0, respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

At March 31, 2020 and December 31, 2019, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $159,000 and $190,000, respectively.

In March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic.

As of June 30, 2020, the Company had approved 752 loan and lease modifications related to the COVID-19 pandemic with an outstanding loan balance totaling $175.1 million in accordance with the CARES Act.

Accordingly, the Company does not account for such loan modifications as TDRs.

Loan modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation in regard to determining whether or not a loan is deemed to be impaired.

At June 30, 2020 and December 31, 2019, the balance of real estate owned includes $ 32,000 and $ 0 , respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

At June 30, 2020 and December 31, 2019, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $ 283,000 and $ 190,000 , respectively.

The following lists the components of the net investment in direct financing leases:

3 unchanged sentences

Net investment in direct finance leases

The amount of leases serviced by First Bank Richmond for the benefit of others was approximately $507,000 and $715,000 at March 31, 2020 and December 31, 2019, respectively.

The amount of leases serviced by First Bank Richmond for the benefit of others was approximately $ 336,000 and $ 715,000 at June 30, 2020 and December 31, 2019, respectively.

Additionally, certain leases have been sold with partial recourse.

First Bank Richmond estimates and records its obligation based upon historical loss percentages.

At March 31, 2020 and December 31, 2019, First Bank Richmond has recorded a recourse obligation on leases sold with recourse of $0, and has a maximum exposure of $411,000 and $411,000, respectively, for these leases.

The following table summarizes the future minimum lease payments receivable subsequent to March 31, 2020:

At June 30, 2020 and December 31, 2019, First Bank Richmond has recorded a recourse obligation on leases sold with recourse of $ 0 , and has a maximum exposure of $ 411,000 for these leases.

The following table summarizes the future minimum lease payments receivable subsequent to June 30, 2020:

Fair Value of Financial Instruments

8 unchanged sentences

Recurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2020 and December 31, 2019:

Fair Value Measurements Using

Quoted Prices

March 31, 2020

June 30, 2020

Available-for-sale securities

15 unchanged sentences

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

There have been no significant changes in the valuation techniques during the three months ended March 31, 2020.

There have been no significant changes in the valuation techniques during the six months ended June 30, 2020.

Available-for-Sale Securities

5 unchanged sentences

Nonrecurring Measurements

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2020 and December 31, 2019:

Fair Value Measurements Using

Quoted Prices

March 31, 2020

June 30, 2020

Impaired loans, collateral dependent

23 unchanged sentences

Unobservable (Level 3) Inputs

The following tables present the fair value measurement of assets recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2020 and December 31, 2019:

Fair Value at

3 unchanged sentences

Mortgage-servicing rights

Discounted cash flow

Discount rate

4 unchanged sentences

Mortgage-servicing rights

Discounted cash flow

Discount rate

Fair Value of Financial Instruments

The following tables present estimated fair values of the Company’s financial instruments at March 31, 2020 and December 31, 2019.

The following tables present estimated fair values of the Company’s financial instruments at June 30, 2020 and December 31, 2019.

Fair Value Measurements Using

Quoted Prices

March 31, 2020

June 30, 2020

Financial assets

27 unchanged sentences

Three Months Ended

March 31, 2020

Six Months Ended

June 30, 2020

Shares outstanding for Basic EPS:

7 unchanged sentences

Employee Stock Ownership Plan

As part of the reorganization and related stock offering, the Company established an Employee Stock Ownership Plan (ESOP) covering substantially all employees.

As part of the corporate reorganization and related stock offering, the Company established an Employee Stock Ownership Plan (ESOP) covering substantially all employees.

The ESOP acquired 1,082,130 shares of Company common stock at an average of $13.59 per share on the open market with funds provided by a loan from the Company.

Accordingly, $14,706,000 of common stock

acquired by the ESOP was shown as a reduction of stockholders’ equity.

Accordingly, $14,706,000 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity.

Shares are released to participants proportionately as the loan is repaid.

ESOP expense for the three months ended March 31, 2020 was $187,000.

March 31, 2020

ESOP expense for the three and six months ended June 30, 2020 was $143,000 and $329,000, respectively.

June 30, 2020

Earned ESOP shares

5 unchanged sentences

Subsequent Event

The spread of COVID-19 and the ensuing pandemic has caused significant economic disruption throughout the global economy, including the states and municipalities which constitute the Company’s market area.

The potential financial impact is unknown at this time.

Prolonged economic disruption will likely affect the ability of the Company’s customers to make timely payments on their loans.

It may also have an adverse effect on the collateral values securing customers’ loan obligations.

This may negatively impact the Company’s operations, results of operations, and financial condition.

On July 8, 2020, the Company announced that its Board of Directors authorized a stock repurchase program for up to 676,331 shares, or approximately 5% of its currently outstanding shares.

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