Company Quick10K Filing
Emclaire Financial
Price32.39 EPS2
Shares3 P/E14
MCap88 P/FCF11
Net Debt-18 EBIT14
TEV71 TEV/EBIT5
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-06
10-Q 2020-06-30 Filed 2020-08-11
10-Q 2020-03-31 Filed 2020-05-12
10-K 2019-12-31 Filed 2020-03-20
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-12
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-03-22
10-Q 2018-09-30 Filed 2018-11-09
10-Q 2018-06-30 Filed 2018-08-10
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-03-21
10-Q 2017-09-30 Filed 2017-11-13
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-12
10-K 2016-12-31 Filed 2017-03-24
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-12
10-Q 2016-03-31 Filed 2016-05-13
10-K 2015-12-31 Filed 2016-03-24
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-20
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-05-13
10-K 2013-12-31 Filed 2014-03-21
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-12
10-Q 2013-03-31 Filed 2013-05-10
10-K 2012-12-31 Filed 2013-03-22
10-Q 2012-09-30 Filed 2012-11-13
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-14
10-K 2011-12-31 Filed 2012-03-23
10-Q 2011-09-30 Filed 2011-11-10
10-Q 2011-06-30 Filed 2011-08-12
10-Q 2011-03-31 Filed 2011-05-13
10-K 2010-12-31 Filed 2011-03-23
10-Q 2010-09-30 Filed 2010-11-12
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-22
8-K 2021-01-29 Earnings, Exhibits
8-K 2021-01-20 Accountant, Exhibits
8-K 2020-12-16
8-K 2020-10-23
8-K 2020-07-17
8-K 2020-04-22
8-K 2020-04-22
8-K 2020-04-22
8-K 2020-01-31
8-K 2019-10-18
8-K 2019-09-04
8-K 2019-07-19
8-K 2019-04-24
8-K 2019-04-24
8-K 2019-03-31
8-K 2019-02-08
8-K 2018-12-31
8-K 2018-10-24
8-K 2018-10-01
8-K 2018-09-21
8-K 2018-07-26
8-K 2018-07-20
8-K 2018-05-24
8-K 2018-04-27
8-K 2018-04-25
8-K 2018-04-24
8-K 2018-01-26

EMCF 10Q Quarterly Report

Part I - Financial Information
Item 1. Interim Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex_205489.htm
EX-31.2 ex_205490.htm
EX-32.1 ex_205491.htm
EX-32.2 ex_205492.htm

Emclaire Financial Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
1.00.80.60.40.20.02012201420172020
Assets, Equity
0.10.10.10.00.00.02016201720182020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12012201420172020
Ops, Inv, Fin

10-Q 1 emcf20200930_10q.htm FORM 10-Q emcf20190331_10q.htm
 

 

Table of Contents


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to _____________

 

Commission File Number: 001-34527

 

 

EMCLAIRE FINANCIAL CORP

(Exact name of registrant as specified in its charter)

 

Pennsylvania

25-1606091

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

 

 

612 Main Street, Emlenton, Pennsylvania

16373

(Address of principal executive offices)

(Zip Code)

 

(844) 767-2311

(Registrant’s telephone number)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Common Stock, par value $1.25 per share

EMCF

NASDAQ Capital Market (NASDAQ)

(Title of Class)

(Trading Symbol)

(Name of exchange on which registered)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐                Accelerated filer ☐                      Non-accelerated filer ☐

Smaller reporting company ☒        Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes ☐ No ☒

 

The number of shares outstanding of the Registrant’s common stock was 2,708,712 at November 6, 2020.

 


 

 

 

EMCLAIRE FINANCIAL CORP

 

INDEX TO QUARTERLY REPORT ON FORM 10-Q

  

PART I – FINANCIAL INFORMATION

 

 

 

Item 1.

Interim Financial Statements (Unaudited)

 

 

 

 

 

Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

1

 

 

 

 

Consolidated Statements of Net Income for the three and nine months ended September 30, 2020 and 2019

2

 

 

 

 

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019

3

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

4

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019

5

 

 

 

 

Notes to Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

 

 

 

Item 4.

Controls and Procedures

39

 

 

 

PART II – OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

40

 

 

 

Item 1A.

Risk Factors

40

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

 

 

 

Item 3.

Defaults Upon Senior Securities

40

 

 

 

Item 4.

Mine Safety Disclosures

40

 

 

 

Item 5.

Other Information

40

 

 

 

Item 6.

Exhibits

40

 

 

 

Signatures

41

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Interim Financial Statements

 

 
Emclaire Financial Corp
Consolidated Balance Sheets (Unaudited)
As of September 30, 2020 and December 31, 2019
(Dollar amounts in thousands, except share and per share data)

 

   

September 30, 2020

 

December 31, 2019

Assets

               

Cash and due from banks

  $ 3,821     $ 3,750  

Interest earning deposits with banks

    18,082       11,236  

Total cash and cash equivalents

    21,903       14,986  

Interest earning time deposits

    6,412       9,698  

Securities - available-for-sale

    99,652       120,107  

Securities - equity investments

    12       19  
Loans held for sale     314        

Loans receivable, net of allowance for loan losses of $8,905 and $6,556

    831,386       695,348  

Federal bank stocks, at cost

    5,799       5,790  

Bank-owned life insurance

    15,372       15,287  

Accrued interest receivable

    4,231       2,600  

Premises and equipment, net

    18,734       19,041  

Goodwill

    19,460       19,460  

Core deposit intangible, net

    1,123       1,247  

Prepaid expenses and other assets

    11,101       11,713  

Total Assets

  $ 1,035,499     $ 915,296  

Liabilities and Stockholders' Equity

               

Liabilities

               

Deposits:

               

Non-interest bearing

  $ 185,936     $ 148,842  

Interest bearing

    713,580       638,282  

Total deposits

    899,516       787,124  

Short-term borrowed funds

    2,050       2,050  

Long-term borrowed funds

    30,000       26,500  

Accrued interest payable

    534       616  

Accrued expenses and other liabilities

    13,704       13,148  

Total Liabilities

    945,804       829,438  
                 

Stockholders' Equity

               

Preferred stock, $1.00 par value, 3,000,000 shares authorized; Series C, non-cumulative preferred stock, $2.9 million liquidation value, 286,888 shares issued and outstanding; Series D, non-cumulative preferred stock, $1.3 million liquidation value, 133,705 shares issued and outstanding

    4,206       4,206  

Common stock, $1.25 par value, 12,000,000 shares authorized; 2,810,729 shares issued; 2,708,712 shares outstanding

    3,513       3,513  

Additional paid-in capital

    47,093       46,757  

Treasury stock, at cost; 102,017 shares

    (2,114 )     (2,114 )

Retained earnings

    40,584       38,831  

Accumulated other comprehensive loss

    (3,587 )     (5,335 )

Total Stockholders' Equity

    89,695       85,858  

Total Liabilities and Stockholders' Equity

  $ 1,035,499     $ 915,296  

 

See accompanying notes to consolidated financial statements.

 

 

 

 
Emclaire Financial Corp
Consolidated Statements of Net Income (Unaudited)
For the three and nine months ended September 30, 2020 and 2019
(Dollar amounts in thousands, except share and per share data) 

 

    For the three months ended September 30,   For the nine months ended September 30,
   

2020

 

2019

 

2020

 

2019

Interest and dividend income:

                               

Loans receivable, including fees

  $ 8,489     $ 8,170     $ 24,767     $ 24,514  

Securities:

                               

Taxable

    414       583       1,636       1,606  

Exempt from federal income tax

    136       79       310       301  

Federal bank stocks

    94       104       287       316  

Interest earning deposits with banks

    39       251       156       397  

Total interest and dividend income

    9,172       9,187       27,156       27,134  

Interest expense:

                               

Deposits

    1,753       1,938       5,594       5,045  

Borrowed funds

    182       233       714       769  

Total interest expense

    1,935       2,171       6,308       5,814  

Net interest income

    7,237       7,016       20,848       21,320  

Provision for (recovery of) loan losses

    750       (145 )     2,642       305  

Net interest income after provision for loan losses

    6,487       7,161       18,206       21,015  

Noninterest income:

                               

Fees and service charges

    362       531       1,100       1,622  

Net realized gain on sales of securities

          42       635       43  

Net gain on sales of loans

    181       77       181       129  

Earnings on bank-owned life insurance

    96       96       305       313  

Other

    501       463       1,322       1,289  

Total noninterest income

    1,140       1,209       3,543       3,396  

Noninterest expense:

                               

Compensation and employee benefits

    2,750       3,187       8,503       8,892  

Premises and equipment

    837       810       2,433       2,536  

Intangible asset amortization

    41       44       124       134  

Professional fees

    211       278       616       664  

Federal deposit insurance

    144             328       267  

Other

    1,462       1,439       4,571       4,155  

Total noninterest expense

    5,445       5,758       16,575       16,648  

Income before provision for income taxes

    2,182       2,612       5,174       7,763  

Provision for income taxes

    384       444       892       1,372  

Net income

    1,798       2,168       4,282       6,391  
Preferred stock dividends                 91       91  
Net income available to common stockholders   $ 1,798     $ 2,168     $ 4,191     $ 6,300  

Basic earnings per common share

  $ 0.66     $ 0.80     $ 1.55     $ 2.33  

Diluted earnings per common share

    0.66       0.80       1.54       2.32  

Average common shares outstanding - basic

    2,708,712       2,698,712       2,708,712       2,698,712  

Average common shares outstanding - diluted

    2,725,574       2,719,528       2,723,555       2,715,957  

 

See accompanying notes to consolidated financial statements.

 

 

 
Emclaire Financial Corp
Consolidated Statements of Comprehensive Income (Unaudited)
For the three and nine months ended September 30, 2020 and 2019
(Dollar amounts in thousands)

 

    For the three months ended September 30,   For the nine months ended September 30,
   

2020

 

2019

 

2020

 

2019

Net income

  $ 1,798     $ 2,168     $ 4,282     $ 6,391  

Other comprehensive income (loss)

                               

Unrealized gains/(losses) on securities available-for-sale:

                               

Unrealized holding gain (loss) arising during the period

    68       165       2,848       2,424  

Reclassification adjustment for (gains) losses included in net income

          (42 )     (635 )     (43 )

Net period change

    68       123       2,213       2,381  

Tax effect

    (14 )     (26 )     (465 )     (500 )

Net of tax

    54       97       1,748       1,881  

Comprehensive income

  $ 1,852     $ 2,265     $ 6,030     $ 8,272  

 

See accompanying notes to consolidated financial statements.

 

 

 
Emclaire Financial Corp
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the nine months ended September 30, 2020 and 2019
(Dollar amounts in thousands)

 

    For the nine months ended September 30,
   

2020

 

2019

Cash flows from operating activities

               

Net income

  $ 4,282     $ 6,391  

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

               

Depreciation and amortization of premises and equipment

    1,058       1,022  

Provision for loan losses

    2,642       305  

Amortization/accretion of premiums, discounts and deferred costs and fees, net

    427       235  

Amortization of operating lease right-of-use assets

    102       98  

Amortization of intangible assets and mortgage servicing rights

    199       182  

Realized gain on sales of debt securities, net

    (635 )     (43 )

Change in fair value of equity securities, including realized gain

    7       (16 )

Net gain on sales of loans

    (181 )     (129 )

Net loss on foreclosed real estate

    14       32  
Net gain on sale of premises and equipment           (11 )

Loans originated for sale

          (5,173 )

Proceeds from the sale of loans originated for sale

          5,148  

Write-down of foreclosed real estate

    56       35  

Stock compensation expense

    336       271  

Increase in bank-owned life insurance

    (305 )     (313 )
Proceeds from surrender of bank-owned life insurance     220        

Decrease in accrued interest receivable

    (1,631 )     (184 )

Decrease (increase) in prepaid expenses and other assets

    (162 )     154  

Increase (decrease) in accrued interest payable

    (82 )     157  

Increase (decrease) in accrued expenses and other liabilities

    556       (277 )

Net cash provided by operating activities

    6,903       7,884  

Cash flows from investing activities

               

Loan originations and principal collections, net

    (143,273 )     19,327  
Proceeds from sales of loans held for sale previously classified as portfolio loans     3,994        

Available-for-sale securities:

               

Sales

    40,011       21,035  

Maturities, repayments and calls

    17,179       12,946  

Purchases

    (34,125 )     (51,871 )

Purchase of federal bank stocks

    (2,840 )     (1,905 )
Redemption of federal bank stocks     2,831       2,400  

Net change in interest earning time deposits

    3,286       (3,460 )

Proceeds from the sale of bank premises and equipment

          251  

Purchases of premises and equipment

    (751 )     (1,492 )

Proceeds from the sale of foreclosed real estate

    339       742  

Net cash used in investing activities

    (113,349 )     (2,027 )

Cash flows from financing activities

               

Net increase in deposits

    112,392       46,479  

Proceeds from long-term debt

    20,000        

Repayments on long-term debt

    (16,500 )     (750 )

Net change in short-term borrowings

          (10,800 )

Dividends paid

    (2,529 )     (2,439 )

Net cash provided by financing activities

    113,363       32,490  

Net increase in cash and cash equivalents

    6,917       38,347  

Cash and cash equivalents at beginning of period

    14,986       10,955  

Cash and cash equivalents at end of period

  $ 21,903     $ 49,302  

Supplemental information:

               

Interest paid

  $ 6,390     $ 5,657  
Income taxes paid     600       910  

Supplemental noncash disclosure:

               

Transfers from loans to foreclosed real estate

    277       324  

Initial recognition of operating lease right-of-use assets

          1,642  

Initial recognition of operating lease liabilities

          1,858  
Transfers from portfolio loans to loans held for sale     4,127        

 

See accompanying notes to consolidated financial statements.

 

 

 
Emclaire Financial Corp
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
For the three and nine months ended September 30, 2020 and 2019
(Dollar amounts in thousands, except per share data)

 

    Preferred Stock   Additional Paid-in Capital - Preferred  

Common Stock

 

Additional Paid-in Capital - Common

 

Treasury Stock

 

Retained Earnings

 

Accumulated Other Comprehensive Loss

 

Total Stockholders' Equity

Balance at January 1, 2019, as previously presented

  $ 421     $ 3,785     $ 3,501     $ 46,401     $ (2,114 )   $ 34,371     $ (6,357 )   $ 80,008  

Cumulative effect of change in accounting principle for leases and security premiums, net of tax

                                  (181 )           (181 )

Balance at January 1, 2019, as adjusted

  $ 421     $ 3,785     $ 3,501     $ 46,401     $ (2,114 )   $ 34,190     $ (6,357 )   $ 79,827  

Net income

                                  2,082             2,082  

Other comprehensive income

                                        873       873  

Stock compensation expense

                      90                         90  

Cash dividends declared on common stock ($0.29 per share)

                                  (783 )           (783 )
Balance at March 31, 2019     421       3,785       3,501       46,491       (2,114 )     35,489       (5,484 )     82,089  
Net income                                   2,140             2,140  
Other comprehensive income                                         911       911  
Cash dividends declared on preferred stock                                   (91 )           (91 )

Stock compensation expense

                      90                         90  
Cash dividends declared on common stock ($0.29 per share)                                   (782 )           (782 )
Balance at June 30, 2019     421       3,785       3,501       46,581       (2,114 )     36,756       (4,573 )     84,357  
Net income                                   2,168             2,168  

Other comprehensive income

                                        97       97  
Stock compensation expense                       91                         91  
Cash dividends declared on common stock ($0.29 per share)                                   (782 )           (782 )
Balance at September 30, 2019   $ 421     $ 3,785     $ 3,501     $ 46,672     $ (2,114 )   $ 38,142     $ (4,476 )   $ 85,931  
                                                                 

Balance at January 1, 2020

  $ 421     $ 3,785     $ 3,513     $ 46,757     $ (2,114 )   $ 38,831     $ (5,335 )   $ 85,858  

Net income

                                  1,190             1,190  
Other comprehensive income                                         1,197       1,197  
Stock compensation expense                       112                         112  
Cash dividends declared on common stock ($0.30 per share)                                   (812 )           (812 )

Balance at March 31, 2020

    421       3,785       3,513       46,869       (2,114 )     39,209       (4,138 )     87,545  
Net income                                   1,294             1,294  
Other comprehensive income                                         497       497  
Cash dividends declared on preferred stock                                   (91 )           (91 )
Stock compensation expense                       112                         112  
Cash dividends declared on common stock ($0.30 per share)                                   (813 )           (813 )
Balance at June 30, 2020     421       3,785       3,513       46,981       (2,114 )     39,599       (3,641 )     88,544  
Net income                                   1,798             1,798  
Other comprehensive income                                         54       54  
Stock compensation expense                       112                         112  
Cash dividends declared on common stock ($0.30 per share)                                   (813 )           (813 )
Balance at September 30, 2020   $ 421     $ 3,785     $ 3,513     $ 47,093     $ (2,114 )   $ 40,584     $ (3,587 )   $ 89,695  

 

See accompanying notes to consolidated financial statements.

 

 

Emclaire Financial Corp

Notes to Consolidated Financial Statements (Unaudited)

 

 

1.

Nature of Operations and Basis of Presentation

 

Emclaire Financial Corp (the Corporation) is a Pennsylvania corporation and the holding company of The Farmers National Bank of Emlenton (the Bank). The Corporation provides a variety of financial services to individuals and businesses through its offices in western Pennsylvania and northern West Virginia. Its primary deposit products are checking, savings and term certificate accounts and its primary lending products are residential and commercial mortgages, commercial business loans and consumer loans.

 

The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiary, the Bank. All significant intercompany transactions and balances have been eliminated in preparing the consolidated financial statements.

 

The accompanying unaudited consolidated financial statements for the interim periods include all adjustments, consisting of normal recurring accruals, which are necessary, in the opinion of management, to fairly reflect the Corporation’s consolidated financial position and results of operations. Additionally, these consolidated financial statements for the interim periods have been prepared in accordance with instructions for the Securities and Exchange Commission’s (SEC’s) Form 10-Q and Article 10 of Regulation S-X and therefore do not include all information or footnotes necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (GAAP). For further information, refer to the audited consolidated financial statements and footnotes thereto for the year ended December 31, 2019, as contained in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC.

 

The balance sheet at December 31, 2019 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements.

 

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim quarterly or year-to-date periods are not necessarily indicative of the results that may be expected for the entire year or any other period. Certain amounts previously reported may have been reclassified to conform to the current year’s financial statement presentation.

 

The coronavirus (COVID-19) pandemic has negatively impacted the global economy, disrupted global supply chains and increased unemployment levels. Although the temporary closure of many businesses and shelter-in place policies have eased, restrictions and social distancing continue to impact many of the Corporation’s customers. While the full effects of the pandemic still remain unknown, the Corporation is committed to supporting its customers, employees and communities during this difficult time. The Corporation has given hardship relief assistance to customers, including the consideration of various loan payment deferral and fee waiver options, and encourages customers to reach out for assistance to support their individual circumstances.  The pandemic could result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain closed, the impact on the global economy worsens, or more customers draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions, we may be required to recognize impairments on securities, goodwill or other significant estimates.  The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed by the President of the United States. Certain provisions within the CARES Act encourage financial institutions to practice prudent efforts to work with borrowers impacted by COVID-19. Under these provisions, loan modifications deemed to be COVID-19-related would not be considered a troubled debt restructuring (TDR) if the loan was not more than 30 days past due as of December 31, 2019 and the deferral was executed between March 1, 2020 and the earlier of 60 days after the date of termination of the COVID-19 national emergency or December 31, 2020. The banking regulators issued similar guidance, which also clarified that a COVID-19-related modification should not be considered a TDR if the borrower was current on payments at the time the underlying loan modification program was implemented and if the modification is considered to be short-term. Under these terms, as of September 30, 2020, the Corporation had processed payment deferrals for 420 loans with an aggregate balance of $110.9 million. Through November 2, 2020, 35 loans with an aggregate balance of $28.6 million remained on deferral while 385 loans with an aggregate balance of $82.3 million have resumed normal repayment or paid off. The majority of these deferrals were generally 30 to 90 days in duration.  Included in the aggregate balance of loans remaining on deferral as of November 2, 2020, are 29 loans with an aggregate balance of $28.1 million for which the Corporation had granted a second deferral of up to 90 days in duration due to the uncertainty surrounding the COVID-19 pandemic.

 

Additionally, the Bank is a lender for the Small Business Administration's (SBA) Paycheck Protection Program (PPP), a program under the CARES Act, and other SBA, Federal Reserve or United States Treasury programs that have been created in response to the pandemic, and may be a lender for programs created in the future. These programs are new and their effects on the Corporation’s business are uncertain. Through September 30, 2020, the Bank had closed 685 PPP loans amounting to $54.9 million under the allocation approved by Congress.

 

 

 

2.

Earnings per Common Share

 

Basic earnings per common share (EPS) excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS includes the dilutive effect of additional potential common shares for assumed issuance of restricted stock.

 

The factors used in the Corporation’s earnings per common share computation follow:

 

(Dollar amounts in thousands, except for per share amounts)

  For the three months ended September 30,   For the nine months ended September 30,
   

2020

 

2019

 

2020

 

2019

Net income

  $ 1,798     $ 2,168     $ 4,282     $ 6,391  

Less: Preferred stock dividends

                91       91  

Net income available to common stockholders

  $ 1,798     $ 2,168     $ 4,191     $ 6,300  

Average common shares outstanding

    2,708,712       2,698,712       2,708,712       2,698,712  

Add: Dilutive effects of restricted stock awards

    16,862       20,816       14,843       17,245  

Average shares and dilutive potential common shares

    2,725,574       2,719,528       2,723,555       2,715,957  

Basic earnings per common share

  $ 0.66     $ 0.80     $ 1.55     $ 2.33  

Diluted earnings per common share

  $ 0.66     $ 0.80     $ 1.54     $ 2.32  

 

 

 

3.

Securities

 

Equity Securities

 

The Corporation held equity securities with fair values of $12,000 and $19,000 at September 30, 2020 and December 31, 2019, respectively. Beginning January 1, 2018, with the adoption of ASU 2016-01, changes in the fair value of these securities are included in other income on the consolidated statements of net income as opposed to accumulated other comprehensive loss on the consolidated balance sheets. During the three and nine months ended September 30, 2020, the Corporation recognized a loss of $2,000 and $7,000, respectively, on equity securities held at September 30, 2020, compared to a gain of $6,000 and $16,000, respectively, for the same periods in 2019. During the three and nine months ended September 30, 2020 and 2019, the Corporation did not sell any equity securities.

 

Debt Securities - Available-for-Sale

 

The following table summarizes the Corporation’s debt securities as of September 30, 2020 and December 31, 2019:

 

(Dollar amounts in thousands)

 

Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

September 30, 2020:

                               

U.S. government sponsored entities and agencies

  $ 1,000     $ 17     $     $ 1,017  

U.S. agency mortgage-backed securities: residential

    19,185       518       (11 )     19,692  
U.S. agency collateralized mortgage obligations: residential     20,542       331       (14 )     20,859  

State and political subdivisions

    44,414       1,307       (160 )     45,561  

Corporate debt securities

    12,436       344       (257 )     12,523  
Total securities available-for-sale   $ 97,577     $ 2,517     $ (442 )   $ 99,652  
                                 

December 31, 2019:

                               

U.S. government sponsored entities and agencies

  $ 7,069     $ 14     $ (6 )   $ 7,077  

U.S. agency mortgage-backed securities: residential

    40,868       291       (84 )     41,075  

U.S. agency collateralized mortgage obligations: residential

    33,001       71       (235 )     32,837  

State and political subdivisions

    27,848       217       (269 )     27,796  

Corporate debt securities

    11,459       93       (230 )     11,322  

Total securities available-for-sale

  $ 120,245     $ 686     $ (824 )   $ 120,107  

 

The following table summarizes scheduled maturities of the Corporation’s debt securities as of September 30, 2020. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities and collateralized mortgage obligations are not due at a single maturity and are shown separately.

 

(Dollar amounts in thousands)

 

Available-for-sale

   

Amortized Cost

 

Fair Value

Due in one year or less

  $ 494     $ 501  

Due after one year through five years

    2,296       2,341  

Due after five years through ten years

    17,091       17,353  

Due after ten years

    37,969       38,906  

Mortgage-backed securities: residential

    19,185       19,692  
Collateralized mortgage obligations: residential     20,542       20,859  
Total securities available-for-sale   $ 97,577     $ 99,652  

 

 

3.

Securities (continued)

 

Information pertaining to debt securities with gross unrealized losses at September 30, 2020 and December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous loss position are included in the table below:

 

(Dollar amounts in thousands)

 

Less than 12 Months

 

12 Months or More

 

Total

   

Fair Value

 

Unrealized Loss

 

Fair Value

 

Unrealized Loss

 

Fair Value

 

Unrealized Loss

September 30, 2020:

                                               

U.S. agency mortgage-backed securities: residential

  $ 3,425     $ (11 )   $     $     $ 3,425     $ (11 )

U.S. agency collateralized mortgage obligations: residential

    2,973       (8 )     5,175       (6 )     8,148       (14 )

State and political subdivisions

    6,725       (128 )     1,641       (32 )     8,366       (160 )

Corporate debt securities

    4,519       (232 )     475       (25 )     4,994       (257 )

Total

  $ 17,642     $ (379 )   $ 7,291     $ (63 )   $ 24,933     $ (442 )
                                                 

December 31, 2019:

                                               

U.S. government sponsored entities and agencies

  $     $     $ 2,032     $ (6 )   $ 2,032     $ (6 )

U.S. agency mortgage-backed securities: residential

    14,578       (76 )     2,325       (8 )     16,903       (84 )

U.S. agency collateralized mortgage obligations: residential

    12,319       (32 )     11,621       (203 )     23,940       (235 )

State and political subdivisions

    15,636       (269 )                 15,636       (269 )

Corporate debt securities

    4,031       (229 )     499       (1 )     4,530       (230 )

Total

  $ 46,564     $ (606 )   $ 16,477     $ (218 )   $ 63,041     $ (824 )

 

Gains and losses on sales of securities for the three and nine months ended September 30, 2020 were as follows:

 

(Dollar amounts in thousands)

 

For the three months ended September 30,

 

For the nine months ended September 30,

   

2020

 

2019

 

2020

 

2019

Proceeds

  $     $ 8,153     $ 40,011     $ 21,035  

Gains

          45       640       80  

Losses

          (3 )     (5 )     (37 )

Tax provision related to gains (losses)

          9       133       9  

 

Management evaluates debt securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic, market or other conditions warrant such evaluation. Consideration is given to: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions and (4) whether the Corporation has the intent to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis. If the Corporation intends to sell an impaired security, or if it is more likely than not the Corporation will be required to sell the security before its anticipated recovery, the Corporation records an other-than-temporary loss in an amount equal to the entire difference between fair value and amortized cost. Otherwise, only the credit portion of the estimated loss on debt securities is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

 

There were 36 debt securities in an unrealized loss position as of September 30, 2020, six of which were in an unrealized loss position for more than 12 months. Of these 36 securities, 16 were state and political subdivision securities, 11 were corporate securities, six were collateralized mortgage obligations (issued by U.S. government sponsored entities) and three were mortgage-backed securities. The unrealized losses associated with these securities were not due to the deterioration in the credit quality of the issuer that would likely result in the non-collection of contractual principal and interest, but rather have been caused by a rise in interest rates from the time the securities were purchased. Based on that evaluation and other general considerations, and given that the Corporation’s current intention is not to sell any impaired securities and it is more likely than not it will not be required to sell these securities before the recovery of their amortized cost basis, the Corporation does not consider these debt securities with unrealized losses as of September 30, 2020 to be other-than-temporarily impaired.

 

 

 

4.

Loans Receivable and Related Allowance for Loan Losses

 

The Corporation’s loans receivable as of the respective dates are summarized as follows:

 

(Dollar amounts in thousands)

  September 30, 2020   December 31, 2019

Mortgage loans on real estate:

               

Residential first mortgages

  $ 305,824     $ 293,170  

Home equity loans and lines of credit

    90,764       97,541  

Commercial real estate

    285,448       229,951  

Total real estate loans

    682,036       620,662  

Other loans:

               

Commercial business

    120,535       66,603  

Consumer

    37,720       14,639  

Total other loans

    158,255       81,242  

Total loans, gross

    840,291       701,904  

Less allowance for loan losses

    8,905       6,556  

Total loans, net

  $ 831,386     $ 695,348  

 

Included in total loans above are net deferred costs of $1.6 million and $2.6 million at September 30, 2020 and December 31, 2019, respectively.

 

An allowance for loan losses (ALL) is maintained to absorb probable incurred losses from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience and the amount of nonperforming loans.  While the Corporation has historically experienced strong trends in asset quality, as a result of the situation regarding the COVID-19 pandemic, management has recognized the need to incorporate factors into the allowance evaluation to help compensate for the effects of any credit deterioration due to the current economic situation.

 

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.

 

The allowance for loan losses is based on estimates and actual losses may vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.

 

At September 30, 2020, there was no allowance for loan losses allocated to loans acquired from United American Savings Bank (2016), Northern Hancock Bank and Trust Co. (2017) or Community First Bancorp, Inc. (2018).

 

 

4.

Loans Receivable and Related Allowance for Loan Losses (continued)

 

The following table details activity in the ALL and the recorded investment by portfolio segment based on impairment method:

 

(Dollar amounts in thousands)

  Residential Mortgages   Home Equity & Lines of Credit  

Commercial Real Estate

  Commercial Business  

Consumer

 

Total

Three months ended September 30, 2020:

                                               

Allowance for loan losses:

                                               

Beginning Balance

  $ 2,582     $ 654     $ 3,901     $ 803     $ 219     $ 8,159  

Charge-offs

          (51 )     (1 )           (28 )     (80 )

Recoveries

    5       1       1       36       33       76  

Provision

    111       57       578       (81 )     85       750  

Ending Balance

  $ 2,698     $ 661     $ 4,479     $ 758     $ 309     $ 8,905  
                                                 
Nine months ended September 30, 2020:                                                
Allowance for loan losses:                                                
Beginning Balance   $ 2,309     $ 626     $ 2,898     $ 636     $ 87     $ 6,556  
Charge-offs     (11 )     (89 )     (75 )     (147 )     (82 )     (404 )
Recoveries     6       12       6       37       50       111  
Provision     394       112       1,650       232       254       2,642  
Ending Balance   $ 2,698     $ 661     $ 4,479     $ 758     $ 309     $ 8,905  
                                                 

At September 30, 2020:

                                               

Ending ALL balance attributable to loans:

                                               

Individually evaluated for impairment

  $     $     $     $ 15     $     $ 15  

Acquired loans collectively evaluated for impairment

                                   

Originated loans collectively evaluated for impairment

    2,698       661       4,479       743       309       8,890  

Total

  $ 2,698     $ 661     $ 4,479     $ 758     $ 309     $ 8,905  

Total loans:

                                               

Individually evaluated for impairment

  $ 225     $ 4     $ 1,694     $ 182     $     $ 2,105  

Acquired loans collectively evaluated for impairment

    48,614       8,713       32,840       5,766       1,126       97,059  

Originated loans collectively evaluated for impairment

    256,985       82,047       250,914       114,587       36,594       741,127  

Total

  $ 305,824     $ 90,764     $ 285,448     $ 120,535     $ 37,720     $ 840,291  
                                                 

At December 31, 2019:

                                               

Ending ALL balance attributable to loans:

                                               

Individually evaluated for impairment

  $ 5     $     $     $     $     $ 5  

Acquired loans collectively evaluated for impairment

                                   

Originated loans collectively evaluated for impairment

    2,304       626       2,898       636       87       6,551  

Total

  $ 2,309     $ 626     $ 2,898     $ 636     $ 87     $ 6,556  
Total loans:                                                

Individually evaluated for impairment

  $ 358     $ 4     $ 81     $ 40     $     $ 483  

Acquired loans collectively evaluated for impairment

    60,523       10,901       41,993       7,930       1,982       123,329  

Originated loans collectively evaluated for impairment

    232,289       86,636       187,877       58,633       12,657       578,092  

Total

  $ 293,170     $ 97,541     $ 229,951     $ 66,603     $ 14,639     $ 701,904  
                                                 

Three months ended September 30, 2019:

                                               

Allowance for loan losses:

                                               

Beginning Balance

  $ 2,225     $ 642     $ 3,043     $ 615     $ 55     $ 6,580  

Charge-offs

          (22 )     (8 )