U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
(State of Incorporation) | (IRS Employer Identification No) |
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
The |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| 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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common stock, $1.00 par value, 21,736,437 shares issued and
Auditor Firm PCAOB ID: 686 | Auditor Name: BKD, LLP | Auditor Location: Jackson, MS |
The First Bancshares, Inc.
Form 10-Q
Quarter Ended March 31, 2022
Index
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Consolidated Statements of Changes in Shareholders’ Equity - Unaudited | 6 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 30 | |
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2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FIRST BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands)
(Unaudited) | ||||||
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
ASSETS | ||||||
Cash and due from banks | $ | | $ | | ||
Interest-bearing deposits with banks |
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Total cash and cash equivalents |
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Securities available-for-sale, at fair value (amortized cost: $ |
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Securities held to maturity, net of allowance for credit losses of $ |
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Other securities |
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Total securities |
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Loans held for sale |
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Loans held for investment |
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Allowance for credit losses | ( | ( | ||||
Net loans held for investment | | | ||||
Interest receivable |
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Premises and equipment |
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Operating lease right-of-use assets |
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Finance lease right-of-use assets |
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Cash surrender value of bank-owned life insurance |
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Goodwill |
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Other real estate owned | | | ||||
Other assets | | | ||||
Total assets | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS' EQUITY |
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Liabilities: |
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Deposits: |
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Noninterest-bearing |
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Interest-bearing |
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Total deposits |
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Interest payable |
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Subordinated debentures |
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Operating lease liabilities | | | ||||
Finance lease liabilities | | | ||||
Allowance for credit losses on off-balance sheet credit exposures | | | ||||
Other liabilities |
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Total liabilities |
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Shareholders’ equity: |
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Common stock, par value $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive (loss) income |
| ( |
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Treasury stock, at cost, |
| ( |
| ( | ||
Total shareholders’ equity |
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Total liabilities and shareholders’ equity | $ | | $ | | ||
See Notes to Consolidated Financial Statements
3
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except earnings and dividends per share)
(Unaudited) | ||||||
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Interest and dividend income: | ||||||
Interest and fees on loans | $ | | $ | | ||
Interest and dividends on securities: |
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Taxable interest and dividends |
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Tax exempt interest |
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Interest on federal funds sold and interest-bearing deposits in other banks | | | ||||
Total interest income |
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Interest expense: |
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Interest on deposits |
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Interest on borrowed funds |
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Total interest expense |
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Net interest income |
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Provision for credit losses, LHFI | | | ||||
Provision for credit losses, OBSC exposures | | | ||||
Net interest income after provision for credit losses |
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Non-interest income: |
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Service charges on deposit accounts |
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(Loss) gain on securities | ( | | ||||
Government awards/grants | | | ||||
BOLI death proceeds | | | ||||
Gain (loss) on sale of premises and equipment | | ( | ||||
Other |
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Total non-interest income |
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Non-interest expense: |
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Salaries and employee benefits | | | ||||
Occupancy and equipment | | | ||||
Acquisition expense/charter conversion | | | ||||
Other |
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Total non-interest expense | | | ||||
Income before income taxes | | | ||||
Income tax expense | | | ||||
Net income | $ | | $ | | ||
Basic earnings per share | $ | | $ | | ||
Diluted earnings per share | | | ||||
See Notes to Consolidated Financial Statements
4
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands)
(Unaudited) | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2022 | 2021 | |||||
Net income | $ | | $ | | ||
Other comprehensive income: |
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Unrealized holding losses arising during the period on available-for-sale securities |
| ( |
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Reclassification adjustment for losses (gains) included in net income |
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Unrealized holding losses arising during the period on available-for-sale securities |
| ( |
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Income tax benefit |
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Other comprehensive loss |
| ( |
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Comprehensive (loss) income | $ | ( | $ | | ||
See Notes to Consolidated Financial Statements
5
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
($ in thousands except per share data, unaudited)
Accumulated | ||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||
Common Stock | Paid-in | Retained | Comprehensive | Treasury Stock | ||||||||||||||||||
| Shares | Amount |
| Capital |
| Earnings |
| Income (Loss) |
| Shares |
| Amount |
| Total | ||||||||
Balance, January 1, 2021 | | $ | | $ | | $ | | $ | | ( | $ | ( | $ | | ||||||||
Net income | — | — | — | | — | — | — | | ||||||||||||||
Common Stock repurchased | — | — | — | — | — | ( | ( | ( | ||||||||||||||
Other comprehensive loss | — | — | — | — | ( | — | — | ( | ||||||||||||||
Dividends on common stock, $ | — | — | — | ( | — | — | — | ( | ||||||||||||||
Issuance of restricted stock grants | | | ( | — | — | — | — | — | ||||||||||||||
Restricted stock grants forfeited | ( | ( | | — | — | — | — | — | ||||||||||||||
Repurchase of restricted stock for payment of taxes | ( | ( | ( | — | — | — | — | ( | ||||||||||||||
Compensation expense | — | — | | — | — | — | — | | ||||||||||||||
Balance, March 31, 2021 | | $ | | $ | | $ | | $ | | ( | $ | ( | $ | | ||||||||
Balance, January 1, 2022 | | $ | | $ | | $ | | $ | | ( | $ | ( | $ | | ||||||||
Net income | — | — | — | | — | — | — | | ||||||||||||||
Common stock repurchased | — | — | — | — | — | ( | ( | ( | ||||||||||||||
Other comprehensive loss | — | — | — | — | ( | — | — | ( | ||||||||||||||
Dividends on common stock, $ | — | — | — | ( | — | — | — | ( | ||||||||||||||
Issuance of restricted stock grants | | | ( | — | — | — | — | — | ||||||||||||||
Restricted stock grants forfeited | ( | ( | | — | — | — | — | — | ||||||||||||||
Repurchase of restricted stock for payment of taxes | ( | ( | ( | — | — | — | — | ( | ||||||||||||||
Compensation expense | — | — | | — | — | — | — | | ||||||||||||||
Balance, March 31, 2022 | | $ | | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||||
See Notes to Consolidated Financial Statements
6
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited) | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2022 |
| 2021 | ||||
Cash flows from operating activities: | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation, amortization and accretion |
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Gain on sale or writedown of ORE | ( | ( | ||||
Securities loss (gain) | | ( | ||||
(Gain) loss on disposal of premises and equipment | ( | | ||||
Restricted stock expense |
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Increase in cash value of life insurance |
| ( |
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Federal Home Loan Bank stock dividends | ( | |||||
Residential loans originated and held for sale | ( | ( | ||||
Proceeds from sale of residential loans held for sale | | | ||||
Changes in: |
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Interest receivable |
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Interest payable |
| ( |
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Operating lease liability | ( | ( | ||||
Other, net |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Maturities, calls and paydowns of available-for-sale and held-to-maturity securities | | | ||||
Purchases of available-for-sale and held-to-maturity securities |
| ( |
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Redemptions of other securities, net |
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Net (increase) decrease in loans |
| ( |
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Net changes in premises and equipment |
| ( |
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Proceeds from sale of other real estate owned |
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Bank-owned life insurance – death proceeds | | | ||||
Purchase of bank-owned life insurance | | ( | ||||
Net cash used in investing activities |
| ( |
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Cash flows from financing activities: |
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Increase in deposits |
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Net decrease in borrowed funds |
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Principal payments on finance lease liabilities | ( | ( | ||||
Dividends paid on common stock |
| ( |
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Cash paid to repurchase common stock | ( | ( | ||||
Payment of subordinated debt issuance costs |
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Repurchase of restricted stock for payment of taxes |
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Net cash provided by financing activities |
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Net change in cash and cash equivalents |
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Beginning cash and cash equivalents |
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Ending cash and cash equivalents | $ | $ | ||||
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Supplemental disclosures: |
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Loans transferred to other real estate |
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Issuance of restricted stock grants |
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Dividends on restricted stock grants | | | ||||
See Notes to Consolidated Financial Statements
7
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2022
NOTE 1 – BASIS OF PRESENTATION
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and the instructions to Form 10-Q of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2021.
NOTE 2 – SUMMARY OF ORGANIZATION
The First Bancshares, Inc., Hattiesburg, Mississippi (the “Company”), was incorporated June 23, 1995, under the laws of the State of Mississippi for the purpose of operating as a bank holding company. The Company’s primary asset is its interest in its wholly-owned subsidiary, The First Bank (the “Bank” or “The First”).
On January 15, 2022, the Bank, then named The First, A National Banking Association, converted from a national banking association to a Mississippi state-chartered bank and changed its name to The First Bank. The First Bank is a member of the Federal Reserve System through the Federal Reserve Bank of Atlanta. The charter conversion and name change are expected to have only a minimal impact on the Bank’s clients, and deposits will continue to be insured by the Federal Deposit Insurance Corporation up to the applicable limits.
At March 31, 2022, the Company had approximately $
On February 25, 2022, the Company paid a cash dividend in the amount of $
NOTE 3 – ACCOUNTING STANDARDS
Effect of Recently Adopted Accounting Standards
In November 2021, FASB issued Accounting Standard Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): “Disclosures by Business Entities about Government Assistance.” These amendments are expected to increase transparency in financial reporting by requiring business entities to disclose information about certain types of government assistance they receive. The Company adopted ASU 2021-10 effective January 1, 2022. Adoption of ASU 2021-10 did not have a material impact to the Company’s consolidated financial statements.
New Accounting Standards That Have Not Yet Been Adopted
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (ASC 848): “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is assessing ASU 2020-04 and its impact on the Company’s transition away from LIBOR for its loan and other financial instruments.
8
In October 2021, FASB issued ASU No. 2021-08, Business Combination (Topic 805): “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendment improves comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. This ASU is effective for the Company after December 15, 2022. The Company is assessing ASU 2021-08 and its impact on the Company’s consolidated financial statements.
In March 2022, FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” These amendments eliminate the TDR recognition and measurement guidance and instead require that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. For public business entities, these amendments require that an entity disclose current period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. This ASU is effective for the Company after December 15, 2022. The Company is assessing ASU 2022-02 and its impact on the Company’s consolidated financial statements.
NOTE 4 – BUSINESS COMBINATIONS
Acquisitions
Cadence Bank Branches
On December 3, 2021, The First completed its acquisition of
In connection with the acquisition of the Cadence Branches, the Company recorded a $
Expenses associated with the branch acquisition of the Cadence Branches were $
The assets acquired and liabilities assumed and consideration paid in the acquisition of the Cadence Branches were recorded at their estimated fair values based on management’s best estimates using information available at the date of the acquisition and are subject to adjustment for up to one year after the closing date of the acquisition. While the fair values are not expected to be materially different from the estimates, accounting guidance provides that an acquirer must recognize adjustments to provisional amounts that are identified during the measurement period, which will run through December 3, 2022 in respect of the Cadence Branches, in the measurement period in which the adjustment amounts are determined. The acquirer must record in the financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of changes to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The items most susceptible to adjustment are the credit fair value adjustments on loans, core deposit intangible and the deferred income tax assets resulting from the acquisition.
9
The following table summarizes the provisional fair values of the assets acquired and liabilities assumed and the goodwill (bargain purchase gain) generated from the transaction ($ in thousands):
Purchase price: |
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Cash | $ | | |
Total purchase price |
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Identifiable assets: |
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Cash | $ | | |
Loans |
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Core deposit intangible |
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Personal and real property |
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Other assets |
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Total assets |
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Liabilities and equity: |
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Deposits |
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Other liabilities |
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Total liabilities |
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Net assets acquired |
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Bargain purchase gain | $ | ( |
Southwest Georgia Financial Corporation
On April 3, 2020, the Company completed its acquisition of Southwest Georgia Financial Corporation (“SWG”), and immediately thereafter merged its wholly-owned subsidiary, Southwest Georgia Bank with and into The First. The Company paid a total consideration of $
In connection with the acquisition, the Company recorded a $
The Company acquired the $
Expenses associated with the SWG acquisition were $
The outstanding principal balance and the carrying amount of these loans included in the consolidated balance sheet at December 31, 2020, are as follows ($ in thousands):
| December 31, 2020 | ||
Outstanding principal balance | $ | | |
Carrying amount |
| | |
10
Supplemental Pro Forma Information
The following table presents certain supplemental pro forma information, for illustrative purposes only, for the three months ended March 31, 2022 and 2021 as if the SWG and Cadence Branches acquisitions had occurred on January 1, 2021. The pro forma financial information is not necessarily indicative of the results of operations had the acquisitions been effective as of this date.
($in thousands) |
| Pro-Forma |
| Pro-Forma | ||
Three months ended | Three months ended | |||||
March 31, 2022 | March 31, 2021 | |||||
(unaudited) | (unaudited) | |||||
Net interest income | $ | | $ | | ||
Non-interest income |
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Total revenue |
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Income before income taxes |
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Supplemental pro-forma earnings were adjusted to exclude acquisition costs incurred. The Company’s operating results for the three months ended March 31, 2022, include the operating results of the acquired assets and assumed liabilities of the Cadence Branches subsequent to the acquisition date. Due to the timing of the data conversion and the integration of operations of the branches onto the Company’s existing operations, historical reporting of the acquired branches is impracticable, and therefore, disclosure of the amounts of revenue and expenses attributable to the acquired branches since the acquisition date are not available.
NOTE 5 – EARNINGS APPLICABLE TO COMMON SHAREHOLDERS
Basic per share data is calculated based on the weighted-average number of common shares outstanding during the reporting period. Diluted per share data includes any dilution from potential common stock outstanding, such as restricted stock grants. There were no anti-dilutive common stock equivalents excluded in the calculations.
The following tables disclose the reconciliation of the numerators and denominators of the basic and diluted computations applicable to common shareholders ($ in thousands, except per share amount):
For the Three Months Ended |
| For the Three Months Ended | ||||||||||||||
March 31, 2022 |
| March 31, 2021 | ||||||||||||||
Net Income | Shares | Per |
| Net Income | Shares | Per | ||||||||||
| (Numerator) |
| (Denominator) |
| Share Data |
| (Numerator) |
| (Denominator) |
| Share Data | |||||
Basic earnings per share | $ | |
| | $ | | $ | | | $ | | |||||
Effect of dilutive shares: |
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Restricted stock grants |
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Diluted earnings per share | $ | |
| | $ | | $ | | | $ | | |||||
The Company granted
NOTE 6 – COMPREHENSIVE INCOME
As presented in the Consolidated Statements of Comprehensive Income, comprehensive income includes net income and other comprehensive income. The Company’s sources of other comprehensive income are unrealized gains and losses on available-for-sale securities, which are also recognized as separate components of equity.
11
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. At March 31, 2022, and December 31, 2021 these financial instruments consisted of the following:
($ in thousands) | March 31, 2022 | December 31, 2021 | ||||||||||
| Fixed Rate |
| Variable Rate |
| Fixed Rate |
| Variable Rate | |||||
Commitments to make loans | $ | | $ | | $ | | $ | | ||||
Unused lines of credit | | | | | ||||||||
Standby letters of credit |
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Commitments to make loans are generally made for periods of 90 days or less. The fixed rate loan commitments have interest rates ranging from
ALLOWANCE FOR CREDIT LOSSES (“ACL”) ON OFF BALANCE SHEET CREDIT (“OBSC”) Exposures
The Company maintains a separate ACL on OBSC exposures, including unfunded commitments and letters of credit, which is included on the accompanying consolidated balance sheet as of March 31, 2022 and December 31, 2021. The ACL on OBSC exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
Changes in the ACL on OBSC exposures were as follows for the presented periods ($ in thousands):
| Three Months Ended |
| Three Months Ended | |||
March 31, 2022 | March 31, 2021 | |||||
Balance at beginning of period | $ | | $ | — | ||
Adoption of ASU 326 |
| — |
| | ||
Credit loss expense related to OBSC exposures |
| — |
| — | ||
Balance at end of period | $ | | $ | | ||
Adjustments to the ACL on OBSC exposures are recorded to provision for credit losses OBSC exposures.
No credit loss estimate is reported for OBSC exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation on the arrangement.
NOTE 8 – FAIR VALUE DISCLOSURES AND REPORTING, THE FAIR VALUE OPTION AND FAIR VALUE MEASUREMENTS
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the assets or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the factors that market participants would likely consider in pricing an asset or liability.
12
The following methods and assumptions were used by the Company to estimate its financial instrument fair values disclosed at March 31, 2022 and December 31, 2021:
| ● | Investment Securities: The fair value for investment securities are determined by quoted market prices, if available (Level 1). For securities where, quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, valuing debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where, quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). |
| ● | Loans Held for Sale: Since loans designated by the Company as available-for-sale are typically sold shortly after making the decision to sell them, realized gains or losses are usually recognized within the same period and fluctuations in fair values are not relevant for reporting purposes. If available-for-sale loans are held on our books for an extended period of time, the fair value of those loans is determined using quoted secondary-market prices. |
| ● | Collateral Dependent Loans: Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Such adjustments, if any, result in a Level 3 classification of the inputs for determining fair value. The Company generally adjusts the appraisal down by approximately |
| ● | Other Real Estate Owned: Other real estate owned consists of properties obtained through foreclosure. The adjustment at the time of foreclosure is recorded through the allowance for credit losses. Fair value of other real estate owned is based on current independent appraisals of the collateral less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals, which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach with data from comparable properties. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments, if any, result in a Level 3 classification of the inputs for determining fair value. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as changes in market conditions from the time of valuation and anticipated sales values considering plans for disposition, which could result in an adjustment to lower the collateral value estimates indicated in the appraisals. The Company generally adjusts the appraisal down by approximately |
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Estimated fair values for the Company’s financial instruments are as follows, as of the dates noted:
March 31, 2022 | Fair Value Measurements | ||||||||||||||
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Carrying | Estimated | Quoted Prices | Inputs | Inputs | |||||||||||
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Financial Instruments: | |||||||||||||||
Assets: |
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Cash and cash equivalents | $ | | $ | | $ | | $ | | $ | | |||||
Securities available-for-sale: |
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Obligations of U.S. government agencies and sponsored entities |
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Municipal securities |
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Mortgage-backed securities |
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Corporate obligations |
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Securities held- to-maturity |
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Loans, net |
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Accrued interest receivable |
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Liabilities: |
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