What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-06 compared with 2020-08-07 · 199 added, 151 removed, 810 unchanged (30% of the section changed)

3 unchanged sentences

(Dollars in thousands, except per share amounts)

(In thousands, except share and per share data)

September 30,

Cash and due from banks

14 unchanged sentences

Total deposits

Short-term borrowings

Long-term borrowings

Securities sold under retail repurchase agreements

Advances from FHLB - long-term

Subordinated debt

Total borrowings

Lease liabilities

16 unchanged sentences

For Three Months Ended

For Six Months Ended

(In thousands, except per share data)

For Nine Months Ended

September 30,

INTEREST INCOME

36 unchanged sentences

Loss from discontinued operations

SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Continued)

(Dollars in thousands, except per share amounts)

Earnings per common share - Basic

Income from continuing operations

Loss from discontinued operations

Earnings per common share - Diluted

Earnings per common share - Basic and diluted

Income from continuing operations

6 unchanged sentences

For Three Months Ended

For Six Months Ended

(Dollars in thousands)

Other comprehensive income:

For Nine Months Ended

September 30,

Other comprehensive (loss) income:

Investment securities:

Unrealized holding gains on available-for-sale-securities

Unrealized holding (losses) gains on available-for-sale-securities

Reclassification of (gains) recognized in net income

Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity

Total other comprehensive income

Total other comprehensive (loss) income

Comprehensive income

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

For the Three and Six months Ended June 30, 2020 and 2019

For the Three and Nine months Ended September 30, 2020 and 2019

(Dollars in thousands)

11 unchanged sentences

Balances, June 30, 2020

Other comprehensive (loss)

Retirement of common stock

Stock-based compensation

Cash dividends declared

Balances, September 30, 2020

Comprehensive

Stockholders’

Income (Loss)

Balances, January 1, 2019

8 unchanged sentences

Balances, June 30, 2019

Other comprehensive income

Retirement of Common Stock

Stock-based compensation

Cash dividends declared

Balances, September 30, 2019

See accompanying notes to Consolidated Financial Statements.

2 unchanged sentences

(Dollars in thousands)

For Six Months Ended

(Dollars in thousands)

For Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

4 unchanged sentences

Net amortization of securities

Amortization of debt issuance costs

Stock-based compensation expense

Deferred income tax (benefit) expense

Deferred income (benefit) tax expense

(Gains) on sales and calls of securities

11 unchanged sentences

Proceeds from sales and calls of investment securities available for sale

Purchases of investment securities available for sale

Proceeds from maturities and principal payments of investment securities held to maturity

6 unchanged sentences

Net redemption of restricted securities

Purchases of bank owned life insurance

Net cash (used in) investing activities

5 unchanged sentences

Long-term borrowings

Proceeds from the issuance of subordinated debt, net of issuance costs

Common stock dividends paid

Retirement of common stock

Repurchase of shares for tax withholding on exercised options and vested restricted stock

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net increase in cash and cash equivalents

10 unchanged sentences

Notes to Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2020 and 2019

For the Three and Nine Months Ended September 30, 2020 and 2019

Note 1 – Basis of Presentation

3 unchanged sentences

The accompanying interim financial statements are unaudited;

however, in the opinion of management all adjustments necessary to present fairly the consolidated financial position at June 30, 2020, the consolidated results of income and comprehensive income for the three and six months ended June 30, 2020 and 2019, changes in stockholders’ equity for the three and six months ended June 30, 2020 and 2019 and cash flows for the six months ended June 30, 2020 and 2019, have been included.

however, in the opinion of management all adjustments necessary to present fairly the consolidated financial position at September 30, 2020, the consolidated results of income and comprehensive income for the three and nine months ended September 30, 2020 and 2019, changes in stockholders’ equity for the three and nine months ended September 30, 2020 and 2019 and cash flows for the nine months ended September 30, 2020 and 2019, have been included.

All such adjustments are of a normal recurring nature.

The amounts as of December 31, 2019 were derived from the 2019 audited financial statements.

The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for any other interim period or for the full year.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for any other interim period or for the full year.

This Quarterly Report on Form 10-Q should be read in conjunction with the Annual Report of Shore Bancshares, Inc.

21 unchanged sentences

At the FASB’s October 16, 2019 meeting, the Board affirmed its decision to amend the effective date of this ASU for many companies.

Public business entities that are SEC filers, excluding those meeting the smaller reporting company definition, will retain the initial required implementation date of fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

All other entities will be

required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022 .

Public business entities that are SEC filers, excluding those meeting the smaller reporting company definition, will retain the initial required implementation date of

fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

All other entities will be required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022 .

At this time, the Company has established a project management team which meets periodically to discuss and assign roles and responsibilities, key tasks to complete, and a general timeline to be followed for implementation.

32 unchanged sentences

On March 12, 2020, the SEC finalized amendments to its “accelerated filer” and “large accelerated filer” definitions.

The amendments increase the threshold criteria for meeting these filer classifications and are effective on April 27, 2020.

changes in filer status are to be applied beginning with the filer’s first annual report filed with the SEC subsequent to the effective date.

The amendments increase the threshold criteria for meeting these filer classifications and were effective on April 27, 2020.

Any changes in filer status are to be applied beginning with the filer’s first annual report filed with the SEC subsequent to the effective date.

Prior to these changes, the Company was required to comply with section 404(b) of the Sarbanes Oxley Act concerning auditor attestation over internal control over financial reporting as an “accelerated filer” as it had more than $75 million in public float but less than $700 million at the end of the Company’s most recent second quarter.

7 unchanged sentences

As such, other than the additional time provided to file quarterly and annual financial statements, this change does not significantly change the Company’s annual reporting and audit requirements.

In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable fees and Other Costs.” This ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period.

For public business entities, the ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.

Early adoption is not permitted.

All entities should apply ASU No.

2020-08 on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities.

The Company does not expect the adoption of ASU 2020-08 to have a material impact on its consolidated financial statements.

Recently Adopted Accounting Developments

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”).

ASU 2017-04 simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test.

Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference.

The impairment charge will be limited to the amount of goodwill allocated to that reporting unit.

The standard eliminates the prior requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount.

ASU 2017-04 was effective for the Company on January 1, 2020.

There was no material impact on the Company’s consolidated financial statements.

In March 2020, (Revised in April 2020) various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, (“the agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19.

4 unchanged sentences

Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

As of June 30, 2020, the Company has offered payment deferrals for commercial and consumer customers for up to six months.

During the nine months ended September 30, 2020, the Company has offered payment deferrals for commercial and consumer customers for up to six months.

The loan modifications offered to specific loan types are as follows:

23 unchanged sentences

All of the remaining assets and liabilities of discontinued operations were settled prior to December 31, 2019.

There were no assets or liabilities of discontinued operations at June 30, 2020 or December 31, 2019.

There were no assets or liabilities of discontinued operations at September 30, 2020 or December 31, 2019.

The following table presents the financial information of discontinued operations for the periods indicated:

For Six Months Ended

For Nine Months Ended

September 30,

($ in thousands)

18 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

(In thousands, except per share data)

10 unchanged sentences

Loss from discontinued operations

There were no weighted average common stock equivalents excluded from the calculation of diluted earnings per share for the three and six months ended June 30, 2020 and 2019.

There were no weighted average common stock equivalents excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2020 and 2019.

Note 4 – Investment Securities

2 unchanged sentences

Available-for-sale securities:

June 30, 2020

September 30, 2020

Government agencies

3 unchanged sentences

Mortgage-backed

During the three and six months ended, the Company sold available for sale securities for proceeds of $ 13.0 million and recognized gross gains of $ 347 thousand.

No available for sale securities were sold during the three and six months ended June 30, 2019.

During the three months ended September 30, 2020, no available for sale securities were sold.

During the nine months ended September 30, 2020, the Company sold available for sale securities for proceeds of $ 13.0 million and recognized gross gains of $ 347 thousand in the second quarter of 2020.

No available for sale securities were sold during the three and nine months ended September 30, 2019.

(Dollars in thousands)

Held-to-maturity securities:

June 30, 2020

September 30, 2020

Government agencies

5 unchanged sentences

Other debt securities

Equity securities with an aggregate fair value of $ 1.4 million at June 30, 2020 and $ 1.3 million at December 31, 2019 are presented separately on the balance sheet.

The fair value adjustment recorded through earnings totaled $ 32 thousand for the six months ended June 30, 2020 and $ 41 thousand for the six months ended June 30, 2019, respectively.

The following tables provide information about gross unrealized losses and fair value by length of time that the individual securities have been in a continuous unrealized loss position at June 30, 2020 and December 31, 2019.

Equity securities with an aggregate fair value of $ 1.4 million at September 30, 2020 and $ 1.3 million at December 31, 2019 are presented separately on the balance sheet.

The fair value adjustment recorded through earnings totaled $ 34 thousand for the nine months ended September 30, 2020 and $ 47 thousand for the nine months ended September 30, 2019, respectively.

(Dollars in thousands)

June 30, 2020

September 30, 2020

Available-for-sale securities:

12 unchanged sentences

All of the securities with unrealized losses in the portfolio have modest duration risk, low credit risk, and minimal losses when compared to total amortized cost.

The unrealized losses on debt securities that exist are the result of market changes in interest rates since original purchase.

Because the Company does not intend to sell these securities and it is not more

likely than not that the Company will be required to sell these securities before recovery of their amortized cost bases, which may be at maturity for debt securities, the Company considers the unrealized losses to be temporary.

There were three available-for-sale securities and two held-to-maturity security in an unrealized loss position at June 30, 2020.

The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at June 30, 2020.

The unrealized losses on debt securities that exist are the result of market changes

in interest rates since original purchase.

Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost bases, which may be at maturity for debt securities, the Company considers the unrealized losses to be temporary.

There were twelve available-for-sale securities and two held-to-maturity securities in an unrealized loss position at September 30, 2020.

The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at September 30, 2020.

Available for sale

8 unchanged sentences

The Company makes residential mortgage, commercial and consumer loans to customers primarily in Talbot County, Queen Anne’s County, Kent County, Caroline County, Dorchester County, Wicomico County, Baltimore County and Howard County in Maryland, Kent County, Delaware and Accomack County, Virginia.

The following table provides information about the principal classes of the loan portfolio at June 30, 2020 and December 31, 2019.

The following table provides information about the principal classes of the loan portfolio at September 30, 2020 and December 31, 2019.

(Dollars in thousands)

June 30, 2020

September 30, 2020

December 31, 2019

4 unchanged sentences

Loans are stated at their principal amount outstanding net of any purchase premiums/discounts, deferred fees and costs.

Loans included deferred costs, net of deferred fees, of $ 470 thousand and discounts on acquired loans of $ 912 thousand at June 30, 2020.

Loans included deferred fees, net of costs, of $ 12 thousand and discounts on acquired loans of $ 825 thousand at September 30, 2020.

Loans included deferred costs, net of deferred fees, of $ 1.8 million and discounts on acquired loans of $ 1.1 million at December 31, 2019.

At June 30, 2020 and December 31, 2019, included in total loans were $ 72.9 million and $ 79.2 million in loans, respectively, acquired as part of the NWBI branch acquisition in 2017.

At September 30, 2020 and December 31, 2019, included in total loans were $ 60.2 million and $ 79.2 million in loans, respectively, acquired as part of the NWBI branch acquisition in 2017.

Interest income on loans is accrued at the contractual rate based on the principal amount outstanding.

16 unchanged sentences

Reserves for probable credit losses related to these loans are based on historical loss ratios and are included in the formula portion of the allowance for credit losses.

See additional discussion under the caption “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

A loan is considered a TDR if a borrower is experiencing financial difficulties and a creditor has granted a concession.

21 unchanged sentences

Credit risk associated with owner occupied properties arises from the borrower’s financial stability and the ability of the borrower and the business to repay the loan.

Non-owner occupied properties carry the risk of a tenant’s deteriorating credit strength, lease expirations in soft markets and sustained vacancies which can adversely impact cash flow.

occupied properties carry the risk of a tenant’s deteriorating credit strength, lease expirations in soft markets and sustained vacancies which can adversely impact cash flow.

Commercial – Commercial loans are secured or unsecured loans for business purposes.

3 unchanged sentences

Credit risk is similar to residential real estate loans above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan.

The following tables include impairment information relating to loans and the allowance for credit losses as of June 30, 2020 and December 31, 2019.

The following tables include impairment information relating to loans and the allowance for credit losses as of September 30, 2020 and December 31, 2019.

(Dollars in thousands)

June 30, 2020

September 30, 2020

Loans individually evaluated for impairment

14 unchanged sentences

Prior to the adoption of the new model, the Company ran both models parallel for multiple periods to confirm the reasonableness of the new model's output as compared to the old.

The primary motivation for the change was to increase efficiencies in the calculation of the allowance estimate under the current incurred loss standard and also allow for a more seamless transition for the Company's eventual adoption of the Current Expected Credit Loss standard in 2023.

Company's eventual adoption of the Current Expected Credit Loss standard in 2023.

The Company's processes for loan segmentation, assessing qualitative factors, and determining specific reserves for impaired loans remained substantially unchanged when comparing the models.

As part of the new model, more precise averages are utilized in the calculation

of the net charge-off ratios used in the historical loss analysis and the historical loss rates are applied to all pools of loans accounted for under ASC 450.

As part of the new model, more precise averages are utilized in the calculation of the net charge-off ratios used in the historical loss analysis and the historical loss rates are applied to all pools of loans accounted for under ASC 450.

Additionally, the historical look-back periods for retail loan pools were adjusted to four years in the new model as compared to two years under the prior in-house model.

While there were some variances between loan pools when comparing the two models, the Company's ending recorded allowance and provision for loan losses during the first and second quarter of 2020 were not materially impacted as a result of the transition.

The following tables provide information on impaired loans and any related allowance by loan class as of June 30, 2020 and December 31, 2019.

While there were some variances between loan pools when comparing the two models, the Company's ending recorded allowance and provision for loan losses during the first three quarters of 2020 were not materially impacted as a result of the transition.

The following tables provide information on impaired loans and any related allowance by loan class as of September 30, 2020 and December 31, 2019.

The difference between the unpaid principal balance and the recorded investment is the amount of partial charge-offs that have been taken and interest paid on nonaccrual loans that has been applied to principal.

June 30, 2020

September 30, 2020

Quarter-to-date

2 unchanged sentences

(Dollars in thousands)

June 30, 2020

September 30, 2020

Impaired nonaccrual loans:

10 unchanged sentences

Commercial real estate

June 30, 2019

September 30, 2019

Quarter-to-date

15 unchanged sentences

Commercial real estate

The following tables provide a roll-forward for TDRs as of June 30, 2020 and June 30, 2019.

The following tables provide a roll-forward for TDRs as of September 30, 2020 and September 30, 2019.

Disbursements

2 unchanged sentences

Transfer In/(Out)

For six months ended

June 30, 2020

For nine months ended

September 30, 2020

Accruing TDRs

8 unchanged sentences

Transfer In/(Out)

For six months ended

June 30, 2019

For nine months ended

September 30, 2019

Accruing TDRs

4 unchanged sentences

Commercial real estate

There were no loans modified and considered TDRs during the three months ended June 30, 2020 and 2019.

The following tables provide information on loans that were modified and considered TDRs during the six months ended June 30, 2020 and June 30, 2019.

There were no loans modified and considered TDRs during the three months ended September 30, 2020 and 2019.

The following tables provide information on loans that were modified and considered TDRs during the nine months ended September 30, 2020 and September 30, 2019.

Premodification

1 unchanged sentence

(Dollars in thousands)

For six months ended

June 30, 2020

For nine months ended

September 30, 2020

Residential real estate

Commercial real estate

For six months ended

June 30, 2019

For nine months ended

September 30, 2019

Residential real estate

Commercial real estate

As of June 30, 2020, the Company had executed principal and/or interest deferrals on outstanding loan balances of $ 221.1 million.

For the nine months ended September 30, 2020, the Company had executed principal and/or interest deferrals on outstanding loan balances of $ 221.1 million, of which only $ 12.9 million remained on deferral as of September 30, 2020.

These deferrals were no more than six months in duration and were for loans not more than 30 days past due as of December 31, 2019.

As such, they were not considered TDRs based on the relief provisions of the CARES Act and recent interagency regulatory guidance.

There were no TDRs which subsequently defaulted within 12 months of modification for the three and six months ended June 30, 2020 and 2019.

There were no TDRs which subsequently defaulted within 12 months of modification for the three and nine months ended September 30, 2020 and 2019.

Generally, a loan is considered in default when principal or interest is past due 90 days or more, the loan is placed on nonaccrual, the loan is charged off, or there is a transfer to OREO or repossessed assets.

2 unchanged sentences

These loans and the pass/watch loans are assigned higher qualitative factors than favorably rated loans in the calculation of the formula portion of the allowance for credit losses.

At June 30, 2020, there were no nonaccrual loans classified as special mention or doubtful and $ 11.6 million of nonaccrual loans were classified as substandard.

At September 30, 2020, there were no nonaccrual loans classified as special mention or doubtful and $ 7.0 million of nonaccrual loans were classified as substandard.

Similarly, at December 31, 2019, there were no nonaccrual loans classified as special mention or doubtful and $ 10.6 million of nonaccrual loans were classified as substandard.

The following tables provide information on loan risk ratings as of June 30, 2020 and December 31, 2019.

The following tables provide information on loan risk ratings as of September 30, 2020 and December 31, 2019.

(Dollars in thousands)

Pass/Performing

June 30, 2020

September 30, 2020

Residential real estate

5 unchanged sentences

Commercial real estate

The following tables provide information on the aging of the loan portfolio as of June 30, 2020 and December 31, 2019.

The following tables provide information on the aging of the loan portfolio as of September 30, 2020 and December 31, 2019.

(Dollars in thousands)

June 30, 2020

September 30, 2020

Residential real estate

6 unchanged sentences

Percent of total loans

The following tables provide a summary of the activity in the allowance for credit losses allocated by loan class for the three and six months ended June 30, 2020 and June 30, 2019.

The following tables provide a summary of the activity in the allowance for credit losses allocated by loan class for the three and nine months ended September 30, 2020 and September 30, 2019.

Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses in other loan classes.

1 unchanged sentence

For three months ended

June 30, 2020

September 30, 2020

Allowance for credit losses:

Beginning Balance

Net charge-offs

Net (charge-offs) recoveries

Ending Balance

1 unchanged sentence

For three months ended

June 30, 2019

September 30, 2019

Allowance for credit losses:

Beginning Balance

Net charge-offs

Net (charge-offs) recoveries

Ending Balance

(Dollars in thousands)

For six months ended

June 30, 2020

For nine months ended

September 30, 2020

Allowance for credit losses:

Beginning Balance

Net charge-offs

Net (charge-offs) recoveries

Ending Balance

(Dollars in thousands)

For six months ended

June 30, 2019

For nine months ended

September 30, 2019

Allowance for credit losses:

Beginning Balance

Net charge-offs

Net (charge-offs) recoveries

Ending Balance

Foreclosure Proceedings

Consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure totaled $ 23 thousand as of June 30, 2020 and December 31, 2019, respectively.

There were no residential real estate properties included in the balance of other real estate owned at June 30, 2020 and December 31, 2019.

Consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure totaled $ 23 thousand as of September 30, 2020 and December 31, 2019, respectively.

There were no residential real estate properties included in the balance of other real estate owned at September 30, 2020 and December 31, 2019.

All accruing TDRs were in compliance with their modified terms.

Both performing and non-performing TDRs had no further commitments associated with them as of June 30, 2020 and December 31, 2019.

Both performing and non-performing TDRs had no further commitments associated with them as of September 30, 2020 and December 31, 2019.

Note 6 – Leases

11 unchanged sentences

The Company’s long-term lease agreements are classified as operating leases.

Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised.

Certain leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised.

The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

1 unchanged sentence

(Dollars in thousands)

June 30, 2020

September 30, 2020

December 31, 2019

4 unchanged sentences

For the three months ended

For the six months ended

For the nine months ended

Lease cost (in thousands)

June 30, 2020

September 30, 2020

Operating lease cost

4 unchanged sentences

Lease payments due (in thousands)

June 30, 2020

Nine months ending December 31, 2020

September 30, 2020

Three months ending December 31, 2020

Twelve months ending December 31, 2021

6 unchanged sentences

Note 7 – Goodwill and Other Intangibles

Due to the COVID-19 pandemic and its impact on market conditions, the Company performed a qualitative assessment of goodwill as of June 30, 2020.

As a result of management’s qualitative evaluation of relevant events and circumstances at June 30, 2020, the Company concluded that it was not more likely than not that fair value was less than carrying value.

Due to the COVID-19 pandemic and its impact on market conditions, the Company performed a qualitative assessment of goodwill as of September 30, 2020.

As a result of management’s qualitative evaluation of relevant events and circumstances as of September 30, 2020, the Company concluded that it was not more likely than not that fair value was less than carrying value.

In addition, the Company will complete a full annual assessment of goodwill in the fourth quarter of 2020.

Changes in the economic environment, operations, or other adverse events could result in future impairment charges which could have a material adverse impact on the Company's operating results.

The following table provides information on the significant components of goodwill and other acquired intangible assets at June 30, 2020 and December 31, 2019.

June 30, 2020

The following table provides information on the significant components of goodwill and other acquired intangible assets at September 30, 2020 and December 31, 2019.

September 30, 2020

Remaining Life

9 unchanged sentences

Total other intangible assets

The aggregate amortization expense included in continuing operations was $ 282 thousand for the six months ended June 30, 2020 and $ 317 thousand for the six months ended June 30, 2019.

At June 30, 2020, estimated future remaining amortization for amortizing intangibles within the years ending December 31, is as follows:

The aggregate amortization expense included in continuing operations was $ 407 thousand for the nine months ended September 30, 2020 and $ 461 thousand for the nine months ended September 30, 2019.

At September 30, 2020, estimated future remaining amortization for amortizing intangibles within the years ending December 31, is as follows:

(Dollars in thousands)

1 unchanged sentence

Note 8 – Other Assets

The Company had the following other assets at June 30, 2020 and December 31, 2019.

The Company had the following other assets at September 30, 2020 and December 31, 2019.

September 30,

(Dollars in thousands)

4 unchanged sentences

Income taxes receivable

The following table provides information on significant components of the Company’s deferred tax assets and liabilities as of June 30, 2020 and December 31, 2019.

The following table provides information on significant components of the Company’s deferred tax assets and liabilities as of September 30, 2020 and December 31, 2019.

September 30,

(Dollars in thousands)

13 unchanged sentences

Net deferred tax assets

Note 9 - Subordinated Debt

On August 25, 2020, the Company entered into Subordinated Note Purchase Agreements with certain Purchasers pursuant to which the Company issued and sold $ 25.0 million in aggregate principal amount with an initial interest rate of 5.375 % Fixed-to-Floating Rate Subordinated Notes due September 1, 2030.

The Company plans to use the net proceeds of this offering for general corporate purposes, organic growth and to support the Bank’s regulatory capital ratios.

The Notes were structured to qualify as Tier 2 capital for regulatory capital purposes and bear an initial interest rate of 5.375 % until September 1, 2025, with interest during this period payable semi-annually in arrears.

From and including September 1, 2025, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an annual floating rate equal to three-month SOFR, plus 526.5 basis points, with interest during this period payable quarterly in arrears.

The Notes are redeemable by the Company at its option, in whole or in part, on or after September 1, 2025.

Initial debt issuance costs were $ 611 thousand.

The debt balance of $ 24.4 million is presented net of unamortized issuance costs of $ 601 thousand at September 30, 2020.

Note 10 – Other Liabilities

The Company had the following other liabilities at June 30, 2020 and December 31, 2019.

The Company had the following other liabilities at September 30, 2020 and December 31, 2019.

(Dollars in thousands)

June 30, 2020

September 30, 2020

December 31, 2019

8 unchanged sentences

The Company may issue shares of common stock or grant other equity-based awards pursuant to the 2016 Equity Plan.

Stock-based awards granted to date generally are time-based, vest in equal installments on each anniversary

of the grant date and range over a one - to five-year period of time, and, in the case of stock options, expire 10 years from the grant date.

Stock-based awards granted to date generally are time-based, vest in equal installments on each anniversary of the grant date and range over a one - to five-year period of time, and, in the case of stock options, expire 10 years from the grant date.

As part of the 2016 Equity Plan, a performance equity incentive award program, known as the “Long-term incentive plan” allows participating officers of the Company to earn incentive awards of performance share/restricted stock units if certain pre-determined targets are achieved at the end of a three-year performance cycle.

Stock-based compensation expense based on the grant date fair value is recognized ratably over the requisite service period for all awards and reflects forfeitures as they occur.

The 2016 Equity Plan originally reserved 750,000 shares of common stock for grant, and 614,298 shares remained available for grant at June 30, 2020.

The following tables provide information on stock-based compensation expense for the three and six months ended June 30, 2020 and 2019.

The 2016 Equity Plan originally reserved 750,000 shares of common stock for grant, and 611,664 shares remained available for grant at September 30, 2020.

The following tables provide information on stock-based compensation expense for the three and nine months ended September 30, 2020 and 2019.

For Three Months Ended

For Six Months Ended

For Nine Months Ended

September 30,

(Dollars in thousands)

1 unchanged sentence

Excess tax benefits related to stock-based compensation

September 30,

(Dollars in thousands)

1 unchanged sentence

Weighted average period unrecognized expense is expected to be recognized

The following table summarizes restricted stock award activity for the Company under the 2016 Equity Plan for the six months ended June 30, 2020.

Six Months Ended June 30, 2020

The following table summarizes restricted stock award activity for the Company under the 2016 Equity Plan for the nine months ended September 30, 2020.

Nine Months Ended September 30, 2020

Weighted Average

1 unchanged sentence

Nonvested at end of period

The fair value of restricted stock awards that vested during the first six months of 2020 and 2019 was $ 254 and $ 0 thousand, respectively.

The fair value of restricted stock awards that vested during the first nine months of 2020 and 2019 was $ 254 thousand and $ 0 , respectively.

Restricted stock units (“RSUs”) are similar to restricted stock, except the recipient does not receive the stock immediately, but instead receives it upon the terms and conditions of the Company’s long-term incentive plans which are subject to performance milestones achieved at the end of a three-year period.

3 unchanged sentences

Based on the results for the year ended December 31, 2019, 6,451 shares were vested.

The following table summarizes restricted stock units activity at the end of the performance cycle for the Company under the 2016 Equity Plan for the six months ended June 30, 2020.

Six Months Ended June 30, 2020

The following table summarizes restricted stock units activity at the end of the performance cycle for the Company under the 2016 Equity Plan for the nine months ended September 30, 2020.

Nine Months Ended September 30, 2020

Weighted Average

1 unchanged sentence

Outstanding at end of period

The fair value of restricted stock units that vested during the first six months of 2020 and 2019 was $ 107 thousand and $ 237 thousand, respectively.

The following table summarizes stock option activity for the Company under the 2016 Equity Plan for the six months ended June 30, 2020.

Six Months Ended June 30, 2020

The fair value of restricted stock units that vested during the first nine months of 2020 and 2019 was $ 107 thousand and $ 241 thousand, respectively.

The following table summarizes stock option activity for the Company under the 2016 Equity Plan for the nine months ended September 30, 2020.

Nine Months Ended September 30, 2020

Weighted Average

4 unchanged sentences

Exercisable at end of period

There were no stock options granted during the three and six months ended June 30, 2020 and June 30, 2019.

At the end of the second quarter of 2020, the aggregate intrinsic value of the options outstanding under the 2016 Equity Plan was $ 22 thousand based on the $ 11.09 market value per share of the Company’s common stock at June 30, 2020.

Similarly, the aggregate intrinsic value of the options exercisable was $ 22 thousand at June 30, 2020.

At June 30, 2020, the weighted average remaining contract life of options outstanding and exercisable was 4.3 years.

There were no stock options granted during the three and nine months ended September 30, 2020 and September 30, 2019.

At the end of the third quarter of 2020, the aggregate intrinsic value of the options outstanding under the 2016 Equity Plan was $ 20 thousand based on the $ 10.98 market value per share of the Company’s common stock at September 30, 2020.

Similarly, the aggregate intrinsic value of the options exercisable was $ 20 thousand at September 30, 2020.

At September 30, 2020, the weighted average remaining contract life of options outstanding and exercisable was 4.1 years.

Note 12 – Accumulated Other Comprehensive Income

The Company records unrealized holding gains (losses), net of tax, on investment securities available for sale as accumulated other comprehensive income (loss), a separate component of stockholders’ equity.

The following table provides information on the changes in the components of accumulated other comprehensive income (loss) for the six months ended June 30, 2020 and 2019.

The following table provides information on the changes in the components of accumulated other comprehensive income (loss) for the nine months ended September 30, 2020 and 2019.

Unrealized gains

11 unchanged sentences

Reclassification of gains recognized

Balance, June 30, 2020

Balance, September 30, 2020

Balance, December 31, 2018

Other comprehensive income

Balances, June 30, 2019

Balances, September 30, 2019

Note 13 – Fair Value Measurements

22 unchanged sentences

Although these securities have readily available fair market values, the Company determined that they should be classified as level 2 investments in the fair value hierarchy due to not being considered traded in a highly active market.

The tables below present the recorded amount of assets measured at fair value on a recurring basis at June 30, 2020 and December 31, 2019.

No assets were transferred from one hierarchy level to another during the first six months of 2020 or 2019.

The tables below present the recorded amount of assets measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019.

No assets were transferred from one hierarchy level to another during the first nine months of 2020 or 2019.

(Dollars in thousands)

June 30, 2020

September 30, 2020

Securities available for sale:

9 unchanged sentences

Loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts according to the contractual terms of the loan agreement when due.

Loan impairment is measured using the present value of expected cash flows, the loan’s observable market price or the fair value of the collateral (less selling costs) if the loans are collateral dependent and these are considered Level 3 in the fair value

Loan impairment is

measured using the present value of expected cash flows, the loan’s observable market price or the fair value of the collateral (less selling costs) if the loans are collateral dependent and these are considered Level 3 in the fair value hierarchy.

Collateral may be real estate and/or business assets including equipment, inventory and/or accounts receivable.

9 unchanged sentences

Valuation techniques are consistent with those techniques applied in prior periods.

The following tables set forth the Company’s financial assets subject to fair value adjustments (impairment) on a nonrecurring basis at June 30, 2020 and December 31, 2019, that are valued at the lower of cost or market.

The following tables set forth the Company’s financial and nonfinancial assets subject to fair value adjustments (impairment) on a nonrecurring basis at September 30, 2020 and December 31, 2019, that are valued at the lower of cost or market.

Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

3 unchanged sentences

Unobservable Input

June 30, 2020

September 30, 2020

Nonrecurring measurements:

29 unchanged sentences

The carrying amounts and estimated fair values of the Company’s financial instruments not carried at fair value on the Company’s Consolidated Balance Sheets are presented in the following table.

Fair values for June 30, 2020 and December 31, 2019 were estimated using an exit price notion.

June 30, 2020

Fair values for September 30, 2020 and December 31, 2019 were estimated using an exit price notion.

September 30, 2020

December 31, 2019

13 unchanged sentences

Certificates of deposit, $100,000 or more

Short-term borrowings

Long-term borrowings

Securities sold under retail repurchase agreement

Advances from FHLB - long-term

Subordinated debt

Note 14 – Financial Instruments with Off-Balance Sheet Risk

5 unchanged sentences

Because many of the letters of credit and commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

The following table provides information on commitments outstanding at June 30, 2020 and December 31, 2019.

The following table provides information on commitments outstanding at September 30, 2020 and December 31, 2019.

(Dollars in thousands)

June 30, 2020

September 30, 2020

December 31, 2019

24 unchanged sentences

ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM.

Merchant services income mainly represents fees charged to merchants to

process their debit and credit card transactions, in addition to account management fees.

Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees.

Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services.

The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion.

The Company’s performance

obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion.

Payment is typically received immediately or in the following month.

1 unchanged sentence

The Company determined that rentals and renewals of safe deposit boxes will be recognized on a monthly basis consistent with the duration of the performance obligation.

The following presents noninterest income from continuing operations, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2020 and 2019.

The following presents noninterest income from continuing operations, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and nine months ended September 30, 2020 and 2019.

For Three Months Ended

For Six Months Ended

For Nine Months Ended

September 30,

(Dollars in thousands)

14 unchanged sentences

The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances.

As of June 30, 2020, and December 31, 2019, the Company did not have any significant contract balances.

As of September 30, 2020, and December 31, 2019, the Company did not have any significant contract balances.

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