Company Quick10K Filing
First United
Price22.33 EPS1
Shares7 P/E15
MCap159 P/FCF26
Net Debt17 EBIT21
TEV175 TEV/EBIT8
TTM 2019-09-30, in MM, except price, ratios
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FUNC 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 – Basis of Presentation
Note 2 – Significant Event
Note 3 – Earnings per Common Share
Note 4 – Net Gains
Note 5 – Investments
Note 6 – Loans and Related Allowance for Loan Losses
Note 7 - Other Real Estate Owned, Net
Note 8 – Fair Value of Financial Instruments
Note 9 – Accumulated Other Comprehensive Loss
Note 10 – Borrowed Funds
Note 11 – Employee Benefit Plans
Note 12 - Equity Compensation Plan Information
Note 13 – Derivative Financial Instruments
Note 14 – Assets and Liabilities Subject To Enforceable Master Netting Arrangements
Note 15 - Goodwill
Note 16 – Adoption of New Accounting Standards and Effects of New Accounting Pronouncements
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 func-20200331xex31_1.htm
EX-31.2 func-20200331xex31_2.htm
EX-32 func-20200331xex32.htm

First United Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.51.20.90.60.30.02012201420172020
Assets, Equity
0.10.10.10.00.00.02017201720182019
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12012201420172020
Ops, Inv, Fin

10-Q 1 func-20200331x10q.htm 10-Q 20200331 10Q Q1

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



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



        For quarterly period ended March 31, 2020



    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT



        For the transition period from _______________ to ________________



Commission file number 0-14237



First United Corporation

(Exact name of registrant as specified in its charter)



Maryland

 

52-1380770

(State or other jurisdiction of
incorporation or organization)

 

(I. R. S. Employer Identification No.)



 

 

19 South Second Street,  Oakland,  Maryland

 

21550-0009

(Address of principal executive offices)

 

(Zip Code)



(800)  470-4356

(Registrant's telephone number, including area code)



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



Title of each class

Trading Symbols

Name of each exchange on which registered

Common Stock

FUNC

Nasdaq Stock Market



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 periods 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 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).  Yes    No 



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.  (Check one): 





 

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 standard 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 



Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,966,898 shares of common stock, par value $.01 per share, as of April 30, 2020.



 


 

 



INDEX TO QUARTERLY REPORT

FIRST UNITED CORPORATION 





 

Page

PART I.  FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)



Consolidated Statement of Financial Condition – March 31, 2020 and December 31, 2019



Consolidated Statement of Operations – for the three months ended March 31, 2020 and 2019



Consolidated Statement of Comprehensive (Loss)/Income – for the three months ended March 31, 2020 and 2019



Consolidated Statement of Changes in Shareholders’ Equity – for three months ended March 31, 2020 and 2019



Consolidated Statement of Cash Flows – for the three months ended March 31, 2020 and 2019



Notes to Consolidated Financial Statements

Item 2.

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

33 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

54 

Item 4.

Controls and Procedures

54 



 

 

PART II. OTHER INFORMATION

55 

Item 1.

Legal Proceedings

55 

Item 1A.  

Risk Factors

55 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

55 

Item 3.

Defaults upon Senior Securities

55 

Item 4.

Mine Safety Disclosures

55 

Item 5.

Other Information

55 

Item 6.

Exhibits

56 

SIGNATURES

57 



 

2


 

 

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements



FIRST UNITED CORPORATION

Consolidated Statement of Financial Condition

(In thousands, except per share data)







 

 

 

 

 

 



 

 

 

 

 

 



 

March 31,
2020

 

December 31,
2019



 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Cash and due from banks

 

$

69,008 

 

$

48,512 

Interest bearing deposits in banks

 

 

3,000 

 

 

1,467 

Cash and cash equivalents

 

 

72,008 

 

 

49,979 

Investment securities – available for sale (at fair value)

 

 

130,792 

 

 

131,305 

Investment securities – held to maturity (fair value $98,311 at March 31, 2020 and $100,656 at December 31, 2019)

 

 

91,399 

 

 

93,979 

Restricted investment in bank stock, at cost

 

 

4,468 

 

 

4,415 

Loans

 

 

1,053,732 

 

 

1,052,118 

Unearned fees

 

 

(662)

 

 

(687)

Allowance for loan losses

 

 

(15,012)

 

 

(12,537)

Net loans

 

 

1,038,058 

 

 

1,038,894 

Premises and equipment, net

 

 

38,662 

 

 

38,710 

Goodwill, net

 

 

11,004 

 

 

11,004 

Bank owned life insurance

 

 

43,752 

 

 

43,449 

Deferred tax assets

 

 

9,500 

 

 

7,441 

Other real estate owned, net

 

 

4,040 

 

 

4,127 

Operating lease asset

 

 

2,590 

 

 

2,661 

Accrued interest receivable and other assets

 

 

15,240 

 

 

16,063 

Total Assets

 

$

1,461,513 

 

$

1,442,027 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Non-interest bearing deposits

 

$

299,961 

 

$

294,649 

Interest bearing deposits

 

 

872,433 

 

 

847,382 

Total deposits

 

 

1,172,394 

 

 

1,142,031 

Short-term borrowings

 

 

39,418 

 

 

48,728 

Long-term borrowings

 

 

100,929 

 

 

100,929 

Operating lease liability

 

 

3,164 

 

 

3,239 

Accrued interest payable and other liabilities

 

 

26,149 

 

 

20,235 

Dividends payable

 

 

910 

 

 

925 

Total Liabilities

 

 

1,342,964 

 

 

1,316,087 

Shareholders’ Equity: 

 

 

 

 

 

 

Common Stock – par value $.01 per share;

Authorized 25,000,000 shares; issued and outstanding

6,966,898 shares at March 31, 2020 and 7,110,022 at December 31, 2019

 

 

70 

 

 

71 

Surplus

 

 

29,756 

 

 

32,359 

Retained earnings

 

 

120,326 

 

 

119,481 

Accumulated other comprehensive loss

 

 

(31,603)

 

 

(25,971)

Total Shareholders’ Equity

 

 

118,549 

 

 

125,940 

Total Liabilities and Shareholders’ Equity

 

$

1,461,513 

 

$

1,442,027 



See accompanying notes to the consolidated financial statements



 

3


 

 

FIRST UNITED CORPORATION

Consolidated Statement of Operations

(In thousands, except per share data)





 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,



 

2020

 

2019



 

(Unaudited)

Interest income

 

 

 

 

 

 

Interest and fees on loans

 

$

12,839 

 

$

12,190 

Interest on investment securities

 

 

 

 

 

 

Taxable

 

 

1,308 

 

 

1,467 

Exempt from federal income tax

 

 

260 

 

 

280 

Total investment income

 

 

1,568 

 

 

1,747 

Other

 

 

209 

 

 

135 

Total interest income

 

 

14,616 

 

 

14,072 

Interest expense

 

 

 

 

 

 

Interest on deposits

 

 

1,870 

 

 

1,771 

Interest on short-term borrowings

 

 

28 

 

 

103 

Interest on long-term borrowings

 

 

831 

 

 

852 

Total interest expense

 

 

2,729 

 

 

2,726 

Net interest income

 

 

11,887 

 

 

11,346 

Provision for loan losses

 

 

2,654 

 

 

349 

Net interest income after provision for loan losses

 

 

9,233 

 

 

10,997 

Other operating income

 

 

 

 

 

 

Net gains

 

 

41 

 

 

14 

Service charges on deposit accounts

 

 

615 

 

 

519 

Other service charges

 

 

290 

 

 

208 

Trust department

 

 

1,753 

 

 

1,715 

Debit card income

 

 

634 

 

 

600 

Bank owned life insurance

 

 

303 

 

 

303 

Brokerage commissions

 

 

277 

 

 

238 

Other

 

 

136 

 

 

124 

Total other income

 

 

4,008 

 

 

3,707 

Total other operating income

 

 

4,049 

 

 

3,721 

Other operating expenses

 

 

 

 

 

 

Salaries and employee benefits

 

 

5,923 

 

 

6,218 

FDIC premiums

 

 

43 

 

 

111 

Equipment

 

 

926 

 

 

883 

Occupancy

 

 

747 

 

 

712 

Data processing

 

 

1,052 

 

 

941 

Marketing

 

 

130 

 

 

68 

Professional services

 

 

723 

 

 

204 

Contract labor

 

 

151 

 

 

156 

Line rentals

 

 

217 

 

 

217 

Other real estate owned

 

 

 —

 

 

143 

Other

 

 

1,093 

 

 

1,037 

Total other operating expenses

 

 

11,005 

 

 

10,690 

Income before income tax expense

 

 

2,277 

 

 

4,028 

Provision for income tax expense

 

 

522 

 

 

877 

Net Income

 

$

1,755 

 

$

3,151 

Basic net income per share

 

$

0.25 

 

$

0.44 

Diluted net income per share

 

$

0.25 

 

$

0.44 

Weighted average number of basic shares outstanding

 

 

7,063 

 

 

7,088 

Weighted average number of diluted shares outstanding

 

 

7,071 

 

 

7,088 

Dividends declared per common share

 

$

0.13 

 

$

0.09 

See accompanying notes to the consolidated financial statements



 

4


 

 

FIRST UNITED CORPORATION

Consolidated Statement of Comprehensive (Loss)/Income

(In thousands)





 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,



 

2020

 

2019

Comprehensive (Loss)/Income

 

(Unaudited)

Net Income

 

$

1,755 

 

$

3,151 

Other comprehensive (loss)/income, net of tax and reclassification adjustments:

 

 

 

 

 

 

Net unrealized losses on investments with OTTI

 

 

(1,225)

 

 

(80)

Net unrealized gains on all other AFS securities

 

 

1,384 

 

 

905 

Net unrealized gains on HTM securities

 

 

53 

 

 

55 

Net unrealized losses on cash flow hedges

 

 

(963)

 

 

(315)

Net unrealized (losses)/gains on pension

 

 

(4,915)

 

 

2,129 

Net unrealized gains on SERP

 

 

34 

 

 

21 

Other comprehensive (loss)/income, net of tax

 

 

(5,632)

 

 

2,715 

Comprehensive (loss)/income

 

$

(3,877)

 

$

5,866 



See accompanying notes to the consolidated financial statements

 

5


 

 



FIRST UNITED CORPORATION

Consolidated Statement of Changes in Shareholders’ Equity

(In thousands, except per share data)







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Common
Stock

 

Surplus

 

Retained

Earnings

 

Accumulated
Other
Comprehensive
Loss

 

Total
Shareholders'
Equity

Balance at January 1, 2020

 

$

71 

 

$

32,359 

 

$

119,481 

 

$

(25,971)

 

$

125,940 

Net income

 

 

 

 

 

 

 

 

1,755 

 

 

 

 

 

1,755 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(5,632)

 

 

(5,632)

Stock based compensation

 

 

 

 

 

98 

 

 

 

 

 

 

 

 

98 

Common stock issued

 

 

 

 

 

52 

 

 

 

 

 

 

 

 

52 

Stock repurchase

 

 

(1)

 

 

(2,753)

 

 

 

 

 

 

 

 

(2,754)

Common stock dividend declared -
$.13 per share

 

 

 

 

 

 

 

 

(910)

 

 

 

 

 

(910)

Balance at March 31, 2020

 

$

70 

 

$

29,756 

 

$

120,326 

 

$

(31,603)

 

$

118,549 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Common
Stock

 

Surplus

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Loss

 

Total
Shareholders'
Equity

Balance at January 1, 2019

 

$

71 

 

$

31,921 

 

$

109,477 

 

$

(24,403)

 

$

117,066 

Net income

 

 

 

 

 

 

 

 

3,151 

 

 

 

 

 

3,151 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

2,715 

 

 

2,715 

Stock based compensation

 

 

 

 

 

67 

 

 

 

 

 

 

 

 

67 

Common stock issued

 

 

 

 

 

39 

 

 

 

 

 

 

 

 

39 

Common stock dividend declared -
$.09 per share

 

 

 

 

 

 

 

 

(639)

 

 

 

 

 

(639)

Balance at March 31, 2019

 

$

71 

 

$

32,027 

 

$

111,989 

 

$

(21,688)

 

$

122,399 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 







See accompanying notes to the consolidated financial statements

 

6


 

 

FIRST UNITED CORPORATION

Consolidated Statement of Cash Flows

(In thousands)



 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,



 

2020

 

2019



 

(Unaudited)

Operating activities

 

 

 

 

 

 

Net income

 

$

1,755 

 

$

3,151 

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

 

 

           

 

 

           

Provision for loan losses

 

 

2,654 

 

 

349 

Depreciation

 

 

813 

 

 

756 

Stock compensation

 

 

98 

 

 

67 

Gains on sales of other real estate owned

 

 

(10)

 

 

(30)

Write-downs of other real estate owned

 

 

26 

 

 

117 

Originations of loans held for sale

 

 

(8,476)

 

 

(2,630)

Proceeds from sale of loans held for sale

 

 

8,539 

 

 

2,627 

Gains from sale of loans held for sale

 

 

(59)

 

 

(20)

Losses on disposal of fixed assets

 

 

18 

 

 

 —

Net amortization of investment securities discounts and premiums- AFS

 

 

 

 

Net amortization/(accretion) of investment securities discounts and premiums- HTM

 

 

45 

 

 

(12)

Losses on sales/calls of investment securities – available-for-sale

 

 

 —

 

 

Earnings on bank owned life insurance

 

 

(303)

 

 

(303)

Amortization of deferred loan fees

 

 

(318)

 

 

(141)

Amortization of operating lease asset

 

 

71 

 

 

65 

Increase in accrued interest receivable and other assets

 

 

(6,956)

 

 

(1,824)

Deferred tax expense/(benefit)

 

 

 

 

(1)

Operating lease liability

 

 

(75)

 

 

(67)

Increase/(decrease) in accrued interest payable and other liabilities

 

 

5,842 

 

 

(1,116)

Net cash provided by operating activities

 

 

3,669 

 

 

997 

Investing activities

 

 

 

 

 

         

Proceeds from maturities/calls of investment securities available-for-sale

 

 

18,089 

 

 

2,249 

Proceeds from maturities/calls of investment securities held-to-maturity

 

 

2,535 

 

 

1,238 

Purchases of investment securities available-for-sale

 

 

(17,421)

 

 

 —

Purchases of investment securities held-to-maturity

 

 

 —

 

 

(2,754)

Proceeds from sales of other real estate owned

 

 

92 

 

 

859 

Net (increase)/decrease in restricted stock

 

 

(53)

 

 

1,021 

Net (increase)/decrease in loans

 

 

(1,525)

 

 

2,897 

Purchases of premises and equipment

 

 

(783)

 

 

(517)

Net cash provided by investing activities

 

 

934 

 

 

4,993 

Financing activities

 

 

 

 

 

 

Net increase in deposits

 

 

30,363 

 

 

63,085 

Issuance of common stock

 

 

52 

 

 

39 

Cash dividends on common stock

 

 

(925)

 

 

(639)

Net decrease in short-term borrowings

 

 

(9,310)

 

 

(38,012)

Stock repurchase

 

 

(2,754)

 

 

 —

Net cash provided by financing activities

 

 

17,426 

 

 

24,473 

Increase in cash and cash equivalents

 

 

22,029 

 

 

30,463 

Cash and cash equivalents at beginning of the year

 

 

49,979 

 

 

23,541 

Cash and cash equivalents at end of period

 

$

72,008 

 

$

54,004 

Supplemental information

 

 

 

 

 

 

Interest paid

 

$

2,723 

 

$

2,691 

Taxes paid

 

$

74 

 

$

100 

Non-cash investing activities:

 

 

 

 

 

 

Transfers from loans to other real estate owned

 

$

21 

 

$

515 

  Recognition of operating lease right-of-use assets

 

$

 —

 

$

2,730 

  Recognition of operating lease liabilities

 

$

 —

 

$

3,317 



See accompanying notes to the consolidated financial statements

 

7


 

 

FIRST UNITED CORPORATION

NoteS to Consolidated Financial Statements (UNAUDITED)





Note 1 – Basis of Presentation



The accompanying unaudited consolidated financial statements of First United Corporation and its consolidated subsidiaries, including First United Bank & Trust (the “Bank”), have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, as required by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270, Interim Reporting, and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.  Accordingly, they do not include all the information and footnotes required for annual financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring items, have been included.  Operating results for the three-month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for the full year or for any future interim period.  These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in First United Corporation’s Annual Report on Form 10-K for the year ended December 31, 2019



As used in these notes, the terms “the Corporation” “we”, “us”, and “our” refer to First United Corporation and, unless the context clearly requires otherwise, its consolidated subsidiaries.



The Corporation has evaluated events and transactions occurring subsequent to the statement of financial condition date of March 31, 2020 for items that should potentially be recognized or disclosed in these financial statements.

 

Note 2 – Significant Event



On March 11, 2020, the World Health Organization declared a pandemic as a result of the global spread of the coronavirus, commonly referred to as COVID-19.  The spread of the disease quickly accelerated in the United States and to date, all 50 states have reported cases.  The U.S. and state governments reacted to the pandemic by issuing shelter at home orders and requiring that non-essential businesses be closed to prevent spread of the virus.  The health crisis quickly turned into a financial crisis resulting in guidance and mandates regarding foreclosures and repossessions and accounting and regulatory changes designed to encourage banks to work with customers suffering detrimental financial impact.



As a result of the pandemic effecting the states and local markets in which it operates, the Corporation successfully implemented its Business Continuity Plan with the goal of protecting the health, safety and financial well-being of its associates and customers.   As part of its plan to protect the financial well-being of its customers, the Corporation chose to participate and educate its customers on the government sponsored plans established to provide financial assistance to businesses.



The U.S. Government’s Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) established the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) which provides small businesses with resources to maintain payroll, hire back employees who may have been laid off, and to cover applicable overhead expenses.  We acted expeditiously to prepare our associates so they could guide our customers on the proper procedures necessary to enable them to take advantage of this program.  We developed an SBA PPP specific information site within our website that provided detailed information, links and materials for eligible customers to access.  Internally, we reallocated resources to review, process and enter customer applications, working tirelessly over extended hours to provide access to as many local business owners as possible.   We were able to fund 428 loan applications for approximately $111.0 million from the first tranche of PPP designated funds.  Congress allocated additional funding to the PPP on April 23, 2020.  Due to our advance preparation and software implementation, we were able to quickly gain approval for an additional 492 loan applications for approximately $29.0 million thru May 1, 2020.  In total, we have gained approval for over $140 million dollars to 920 small businesses.  Approximately 73% of the loans were under $100,000 in size and approximately 65% of the businesses receiving the loans employed less than 10 employees.  We will continue to provide access to the PPP and process applications, for as long as the PPP is open and funds are available, so that we can assist as many small business owners in our markets as possible.  These loans are 100% guaranteed by the SBA, have up to a two-year maturity, provide for a six-month deferral period, and have an interest rate of 1%.  These loans may be forgiven by the SBA if the borrower meets certain conditions, including by using at least 75% of the loan proceeds for payroll costs.  The SBA also established processing fees from 1% to 5%, depending on the loan amount.  We anticipate to receive approximately $3.5 million in fees. 



In April 2020, the Bank established eligibility to participate in the Paycheck Protection Program Liquidity Facility (“PPPLF”) which was established by Congress and administered by the Federal Reserve Bank.  This facility uses the SBA guaranteed PPP loans as collateral, offering 100% collateral coverage with no recourse to the Bank.   The majority of the PPP loan disbursements, which were all subsequent to quarter end, have been to internal, non-interest-bearing accounts awaiting use by borrowers.  As a result, we have not yet accessed the PPPLF, but are prepared to utilize the fund when management determines the timing is appropriate.



 

8


 

 

The Corporation’s allowance for loan losses increased $2.5 million to $15.0 million at March 31, 2020 compared to $12.5 million at December 31, 2019.  The allowance for loan losses (the “ALL”) to total loans was 1.42% and 1.19% at March 31, 2020 and December 31, 2019, respectively.  This increase was driven by the increased provision expense which was adjusted for qualitative factors related to the economic uncertainty and increased unemployment rates related to the COVID-19 pandemic.



While the pandemic has had an impact on most industries, some have been more impacted than others.  The following chart includes data on our consumer and commercial loan portfolios, including a breakdown by industry, the percentage of the portfolio that has been modified through May 6, 2020 as a result of COVID-19 and the corresponding allowance for loan losses for each category as of March 31, 2020.  Modifications include either deferrals of principal and interest or interest only periods of three months.  Residential mortgage deferrals result in extensions of the maturity date of the loans and commercial modifications result in either an extension of the maturity payment or a balloon payment at maturity.









 

 

 

 

 

 

 

 

 



Total Loans at 3/31/20

 

COVID Modifications through            May 6, 2020

Industry Category

# of Loans

 

Balance (000s)

Balance as % of Total Portfolio

 

# of Loans

 

Balance (000s)

Balance as % of Category

RE/Rental/Leasing - Non-Owner Occupied

84 

$

119,047  11.3% 

 

14 

$

31,069  26.1% 

RE/Rental/Leasing - All Other

289 

 

92,908  8.8% 

 

32 

 

15,934  17.2% 

Construction - Developers

21 

 

57,171  5.4% 

 

 -

 

 —

0.0% 

Accommodations

24 

 

47,169  4.5% 

 

10 

 

22,050  46.7% 

Services

186 

 

44,185  4.2% 

 

21 

 

11,187  25.3% 

Health Care/Social Assistance

94 

 

32,663  3.1% 

 

25 

 

11,598  35.5% 

RE/Rental/Leasing - Multifamily

50 

 

30,770  2.9% 

 

10 

 

4,652  15.1% 

RE/Rental/Leasing - Developers

21 

 

27,760  2.6% 

 

 

18  0.1% 

Manufacturing

46 

 

26,080  2.5% 

 

 

4,394  16.8% 

Construction - All Other

228 

 

22,739  2.2% 

 

20 

 

2,841  12.5% 

Prof/Scientific/Technical

90 

 

19,871  1.9% 

 

 

5,863  29.5% 

Trade

255 

 

17,376  1.6% 

 

 

1,036  6.0% 

Transportation/Warehousing

94 

 

15,175  1.4% 

 

 

194  1.3% 

Food Service

39 

 

9,350  0.9% 

 

11 

 

2,943  31.5% 

Public Administration

26 

 

9,258  0.9% 

 

 -

 

 —

0.0% 

Entertainment/Recreation

21 

 

5,217  0.5% 

 

 

983  18.8% 

Agriculture

43 

 

4,111  0.4% 

 

 

508  12.4% 

Energy

10 

 

1,681  0.2% 

 

 -

 

 —

0.0% 

Total Commercial

1,621 

$

582,532  55.3% 

 

173 

$

115,270  19.8% 

Total Mortgage and Consumer

7,447 

 

471,200  44.7% 

 

335 

 

45,955  9.8% 

Total Loans at March 31, 2020

9,068 

$

1,053,732  100.0% 

 

508 

$

161,225  15.3% 

 





On March 16, 2020, in response to the COVID-19 outbreak, the Federal Reserve Board reduced the federal funds rate by 150 basis points to a target range of  0% to .25%, and the yields on 10-year and 30-year treasury notes have declined to historic lows.  As a result of this decline, the Corporation’s future net interest margin and spread may be reduced.



Note 3 – Earnings Per Common Share



Basic earnings per common share is derived by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period and does not include the effect of any potentially dilutive common stock equivalents.  Diluted earnings per share is derived by dividing net income available to common shareholders by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents, such as restricted stock units (“RSUs”)At March 31, 2020, there were RSUs relating to 25,004 shares of common stock outstanding.  

 

9


 

 

The following table sets forth the calculation of basic and diluted earnings per common share for the three-month periods ended March 31, 2020 and 2019:  







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three months ended March 31,



 

2020

 

2019



 

 

 

 

Average

 

Per Share

 

 

 

 

Average

 

Per Share

(in thousands, except for per share amount)

 

Income

 

Shares

 

Amount

 

Income

 

Shares

 

Amount

Basic Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

1,755 

 

7,063 

 

$

0.25 

 

$

3,151 

 

7,088 

 

$

0.44 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

1,755 

 

7,071 

 

$

0.25 

 

$

3,151 

 

7,088 

 

$

0.44 





 

Note 4 – Net Gains



The following table summarizes the gain/(loss) activity for the three-month periods ended March 31, 2020 and 2019:











 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,

(in thousands)

 

2020

 

2019

Net gains/(losses):

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

    Realized losses

 

 

 —

 

 

(6)

Gains on sale of consumer loans

 

 

59 

 

 

20 

Losses on disposal of fixed assets

 

 

(18)

 

 

 —

Net gains

 

$

41 

 

$

14 

 

 

10


 

 

Note 5 – Investments



The following table shows a comparison of amortized cost and fair values of investment securities at March 31, 2020 and December 31, 2019:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair
Value

 

OTTI
in AOCL

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies

 

$

34,580 

 

$

688 

 

$

 —

 

$

35,268 

 

$

 —

Residential mortgage-backed agencies

 

 

9,945 

 

 

202 

 

 

 —

 

 

10,147 

 

 

 —

Commercial mortgage-backed agencies

 

 

29,210 

 

 

497 

 

 

37 

 

 

29,670 

 

 

 —

Collateralized mortgage obligations

 

 

28,023 

 

 

792 

 

 

 —

 

 

28,815 

 

 

 —

Obligations of states and political subdivisions

 

 

14,108 

 

 

404 

 

 

 —

 

 

14,512 

 

 

 —

Collateralized debt obligations

 

 

18,470 

 

 

 —

 

 

6,090 

 

 

12,380 

 

 

(4,507)

Total available for sale

 

$

134,336 

 

$

2,583 

 

$

6,127 

 

$

130,792 

 

$

(4,507)

Held to Maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies

 

$

16,202 

 

$

655 

 

$

 —

 

$

16,857 

 

$

 —

Residential mortgage-backed agencies

 

 

40,666 

 

 

1,249 

 

 

 

 

41,911 

 

 

 —

Commercial mortgage-backed agencies

 

 

15,443 

 

 

799 

 

 

 —

 

 

16,242 

 

 

 —

Collateralized mortgage obligations

 

 

2,873 

 

 

171 

 

 

 —

 

 

3,044 

 

 

 —

Obligations of states and political subdivisions

 

 

16,215 

 

 

4,042 

 

 

 —

 

 

20,257 

 

 

 —

Total held to maturity

 

$

91,399 

 

$

6,916 

 

$

 

$

98,311 

 

$

 —

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale: