Company Quick10K Filing
Quick10K
Home Bancorp
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$36.35 9 $344
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-10-01 Accountant, Exhibits
8-K 2019-09-04 Regulation FD, Exhibits
8-K 2019-08-28 Regulation FD, Exhibits
8-K 2019-07-30 Officers
8-K 2019-07-23 Earnings, Other Events, Exhibits
8-K 2019-05-20 Officers, Exhibits
8-K 2019-05-03 Officers, Shareholder Vote, Regulation FD, Exhibits
8-K 2019-04-26 Regulation FD, Exhibits
8-K 2019-04-23 Earnings, Other Events, Exhibits
8-K 2019-03-28 Officers, Exhibits
8-K 2019-01-29 Earnings, Other Events, Exhibits
8-K 2018-10-23 Earnings, Other Events, Exhibits
8-K 2018-09-05 Regulation FD, Exhibits
8-K 2018-07-24 Earnings, Other Events, Exhibits
8-K 2018-06-07
8-K 2018-05-21 Officers, Exhibits
8-K 2018-05-09 Shareholder Vote
8-K 2018-04-27 Regulation FD, Exhibits
8-K 2018-04-24 Earnings, Other Events, Exhibits
8-K 2018-01-30 Earnings, Regulation FD, Other Events, Exhibits
HFWA Heritage Financial 955
UCFC United Community Financial 478
SMBC Southern Missouri Bancorp 316
FSBW FS Bancorp 224
ENFC Entegra Financial 207
TSBK Timberland Bancorp 206
ESSA Essa Bancorp 179
FNWB First Northwest Bancorp 177
RBKB Rhinebeck Bancorp 122
WEBK Wellesley Bancorp 78
HBCP 2019-06-30
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 The Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits and Financial Statement Schedules.
EX-31.1 d775685dex311.htm
EX-31.2 d775685dex312.htm
EX-32.0 d775685dex320.htm

Home Bancorp Earnings 2019-06-30

HBCP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 d775685d10q.htm 10-Q 10-Q
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: June 30, 2019

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: 001-34190

 

 

HOME BANCORP, INC.

(Exact name of Registrant as specified in its charter)

 

 

 

Louisiana   71-1051785

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

503 Kaliste Saloom Road, Lafayette, Louisiana   70508
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (337) 237-1960

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if changed since last report)

 

 

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 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 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.

 

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  ☒

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

 

Title of each class

 

Trading

symbol(s)

 

Name of each exchange

on which registered

Common Stock   HBCP   Nasdaq Stock Market

At August 2, 2019, the registrant had 9,407,142 shares of common stock, $0.01 par value, outstanding.

 

 

 


Table of Contents

HOME BANCORP, INC. and SUBSIDIARY

TABLE OF CONTENTS

 

          Page  
PART I

 

Item 1.

  

Financial Statements (unaudited)

  
  

Consolidated Statements of Financial Condition

     1  
  

Consolidated Statements of Income

     2  
  

Consolidated Statements of Comprehensive Income

     3  
  

Consolidated Statements of Changes in Shareholders’ Equity

     4  
  

Consolidated Statements of Cash Flows

     6  
  

Notes to Unaudited Consolidated Financial Statements

     7  

Item 2.

  

Managements’ Discussion and Analysis of Financial Condition and Results of Operations

     27  

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

     39  

Item 4.

  

Controls and Procedures

     39  
PART II

 

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  

 

i


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

(Dollars in thousands)

   (Unaudited)
June 30,
2019
    (Audited)
December 31,
2018
 

Assets

    

Cash and cash equivalents

   $ 71,325     $ 59,618  

Interest-bearing deposits in banks

     694       939  

Investment securities available for sale, at fair value

     261,626       260,131  

Investment securities held to maturity (fair values of $8,207 and $10,841, respectively)

     8,163       10,872  

Mortgage loans held for sale

     4,501       2,086  

Loans, net of unearned income

     1,692,948       1,649,754  

Allowance for loan losses

     (17,239     (16,348
  

 

 

   

 

 

 

Total loans, net of unearned income and allowance for loan losses

     1,675,709       1,633,406  
  

 

 

   

 

 

 

Office properties and equipment, net

     47,698       47,124  

Cash surrender value of bank-owned life insurance

     39,927       29,560  

Goodwill and core deposit intangibles

     65,247       66,055  

Accrued interest receivable and other assets

     45,496       43,867  
  

 

 

   

 

 

 

Total Assets

     2,220,386       2,153,658  
  

 

 

   

 

 

 

Liabilities

    

Deposits:

    

Noninterest-bearing

     449,402       438,146  

Interest-bearing

     1,379,767       1,335,071  
  

 

 

   

 

 

 

Total Deposits

     1,829,169       1,773,217  

Other borrowings

     5,539       5,539  

Long-term Federal Home Loan Bank advances

     54,615       58,698  

Accrued interest payable and other liabilities

     17,569       12,164  
  

 

 

   

 

 

 

Total Liabilities

     1,906,892       1,849,618  
  

 

 

   

 

 

 

Shareholders’ Equity

    

Preferred stock, $0.01 par value - 10,000,000 shares authorized; none issued

     —         —    

Common stock, $0.01 par value - 40,000,000 shares authorized; 9,441,800 and 9,459,050
shares issued and outstanding, respectively

     94       95  

Additional paid-in capital

     169,233       168,243  

Unallocated common stock held by:

    

Employee Stock Ownership Plan (ESOP)

     (3,303     (3,481

Recognition and Retention Plan (RRP)

     (48     (58

Retained earnings

     146,348       141,447  

Accumulated other comprehensive income (loss)

     1,170       (2,206
  

 

 

   

 

 

 

Total Shareholders’ Equity

     313,494       304,040  
  

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 2,220,386     $ 2,153,658  
  

 

 

   

 

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

1


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     For the Three Months Ended      For the Six Months Ended  
     June 30,      June 30,  

(Dollars in thousands)

   2019     2018      2019     2018  

Interest Income

         

Loans, including fees

   $ 23,812     $ 23,527      $ 47,010     $ 46,331  

Investment securities:

         

Taxable interest

     1,601       1,531        3,254       2,839  

Tax-exempt interest

     128       179        283       365  

Other investments and deposits

     380       338        743       765  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total interest income

     25,921       25,575        51,290       50,300  
  

 

 

   

 

 

    

 

 

   

 

 

 

Interest Expense

         

Deposits

     3,735       1,927        7,066       3,829  

Other borrowings expense

     53       —          106       —    

Short-term Federal Home Loan Bank advances

     —         16        —         33  

Long-term Federal Home Loan Bank advances

     258       296        521       597  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total interest expense

     4,046       2,239        7,693       4,459  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net interest income

     21,875       23,336        43,597       45,841  

Provision for loan losses

     765       581        1,155       1,545  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net interest income after provision for loan losses

     21,110       22,755        42,442       44,296  
  

 

 

   

 

 

    

 

 

   

 

 

 

Noninterest Income

         

Service fees and charges

     1,413       1,520        2,880       3,174  

Bank card fees

     1,212       1,196        2,273       2,295  

Gain on sale of loans, net

     248       201        403       408  

Income from bank-owned life insurance

     202       164        367       324  

(Loss) gain on sale of assets, net

     (327     —          (328     145  

Other income

     229       264        547       481  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total noninterest income

     2,977       3,345        6,142       6,827  
  

 

 

   

 

 

    

 

 

   

 

 

 

Noninterest Expense

         

Compensation and benefits

     9,613       9,222        18,711       18,164  

Occupancy

     2,008       1,719        3,614       3,394  

Marketing and advertising

     308       329        579       610  

Data processing and communication

     1,596       2,344        3,018       4,023  

Professional services

     218       306        457       592  

Forms, printing and supplies

     181       274        342       631  

Franchise and shares tax

     398       363        797       729  

Regulatory fees

     283       343        590       722  

Foreclosed assets, net

     40       87        281       190  

Amortization of acquisition intangible

     398       455        808       957  

Other expenses

     909       880        2,046       1,900  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total noninterest expense

     15,952       16,322        31,243       31,912  
  

 

 

   

 

 

    

 

 

   

 

 

 

Income before income tax expense

     8,135       9,778        17,341       19,211  

Income tax expense

     1,555       2,002        2,871       3,972  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net Income

   $ 6,580     $ 7,776      $ 14,470     $ 15,239  
  

 

 

   

 

 

    

 

 

   

 

 

 

Earnings per share:

         

Basic

   $ 0.72     $ 0.85      $ 1.58     $ 1.68  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted

   $ 0.71     $ 0.83      $ 1.56     $ 1.64  
  

 

 

   

 

 

    

 

 

   

 

 

 

Cash dividends declared per common share

   $ 0.21     $ 0.17      $ 0.41     $ 0.32  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

2


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     For the Three Months Ended     For the Six Months Ended  
     June 30,     June 30,  

(Dollars in thousands)

   2019     2018     2019     2018  

Net Income

   $ 6,580     $ 7,776     $ 14,470     $ 15,239  

Other Comprehensive Income (Loss)

        

Unrealized gains (losses) on investment securities

     2,502       (1,013     4,274       (3,009

Tax effect

     (526     213       (898     632  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of taxes

     1,976       (800     3,376       (2,377
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive Income

   $ 8,556     $ 6,976     $ 17,846     $ 12,862  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

3


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(Dollars in thousands)

   Common
stock
    Additional
Paid-in
capital
    Unallocated
Common Stock
Held by ESOP
    Unallocated
Common Stock
Held by RRP
    Retained
Earnings
    Accumulated
Other
Comprehensive
(Loss) Income
    Total  

Balance, December 31, 2017

   $ 94     $ 165,341     $ (3,838   $ (84   $ 117,313     $ (955   $ 277,871  

Net income

             15,239         15,239  

Other comprehensive loss

               (2,377     (2,377

Reclassification of stranded tax effects in accumulated other comprehensive income(1)

             206       (206     —    

Purchase of Company’s common stock at cost, 1,077 shares

     —         (11         (38       (49

Cash dividends declared, $0.32 per share

             (3,011       (3,011

Common Stock issued under incentive plans, net of shares surrendered in payment, including tax tax benefit, 16,528 shares

     —         170           (64       106  

Exercise of stock options

     —         339               339  

RRP shares released for allocation

       (4       7           3  

ESOP shares released for allocation

       719       178             897  

Share-based compensation cost

       343               343  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2018

   $ 94     $ 166,897     $ (3,660   $ (77   $ 129,645     $ (3,538   $ 289,361  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2018

   $ 95     $ 168,243     $ (3,481   $ (58   $ 141,447     $ (2,206   $ 304,040  

Net income

             14,470         14,470  

Other comprehensive income

               3,376       3,376  

Purchase of Company’s common stock at cost, 217,193 shares

     (2     (2,170         (5,623       (7,795

Cash dividends declared, $0.41 per share

             (3,882       (3,882

Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 19,321 shares

     —         103           (64       39  

Exercise of stock options

     1       2,085               2,086  

RRP shares released for allocation

       (10       10           —    

ESOP shares released for allocation

       604       178             782  

Share-based compensation cost

       378               378  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2019

   $ 94     $ 169,233     $ (3,303   $ (48   $ 146,348     $ 1,170     $ 313,494  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

4


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - CONTINUED

(Unaudited)

 

(Dollars in thousands)

   Common
stock
    Additional
Paid-in
capital
    Unallocated
Common Stock
Held by ESOP
    Unallocated
Common Stock
Held by RRP
    Retained
Earnings
    Accumulated
Other
Comprehensive
(Loss) Income
    Total  

Balance, March 31, 2018

   $ 94     $ 165,991     $ (3,749   $ (80   $ 123,571     $ (2,738   $ 283,089  

Net income

             7,776         7,776  

Other comprehensive loss

               (800     (800

Purchase of Company’s common stock at cost, 1,036 shares

     —         (11         (36       (47

Cash dividends declared, $0.17 per share

             (1,602       (1,602

Common Stock issued under incentive plans, net of shares surrendered in payment, including tax tax benefit, 15,814 shares

     —         152           (64       88  

Exercise of stock options

     —         186               186  

RRP shares released for allocation

       (1       3           2  

ESOP shares released for allocation

       375       89             464  

Share-based compensation cost

       205               205  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2018

   $ 94     $ 166,897     $ (3,660   $ (77   $ 129,645     $ (3,538   $ 289,361  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2019

   $ 95     $ 169,091     $ (3,392   $ (51   $ 143,998     $ (806   $ 308,935  

Net income

             6,580         6,580  

Other comprehensive income

               1,976       1,976  

Purchase of Company’s common stock at cost, 83,188 shares

     (1     (831         (2,178       (3,010

Cash dividends declared, $0.21 per share

             (1,988       (1,988

Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 17,881 shares

     —         68           (64       4  

Exercise of stock options

     —         409               409  

RRP shares released for allocation

       (3       3           —    

ESOP shares released for allocation

       307       89             396  

Share-based compensation cost

       192               192  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2019

   $ 94     $ 169,233     $ (3,303   $ (48   $ 146,348     $ 1,170     $ 313,494  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

5


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

    

For the Six Months Ended

June 30,

 

(Dollars in thousands)

   2019     2018  

Cash flows from operating activities:

    

Net income

   $ 14,470     $ 15,239  

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

    

Provision for loan losses

     1,155       1,545  

Depreciation

     1,375       1,200  

Amortization and accretion of purchase accounting valuations and intangibles

     3,254       4,212  

Net amortization of mortgage servicing asset

     55       75  

Federal Home Loan Bank stock dividends

     (78     (56

Net amortization of discount on investments

     962       983  

Gain on loans sold, net

     (403     (408

Proceeds, including principal payments, from loans held for sale

     42,246       43,425  

Originations of loans held for sale

     (44,258     (46,855

Non-cash compensation

     1,160       1,240  

Deferred income tax expense

     213       318  

Increase in accrued interest receivable and other assets

     (2,100     (3,183

Increase in cash surrender value of bank-owned life insurance

     (367     (324

Change in accrued interest payable and other liabilities

     5,405       (157
  

 

 

   

 

 

 

Net cash provided by operating activities

     23,089       17,254  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of securities available for sale

     (31,332     (58,268

Proceeds from maturities, prepayments and calls on securities available for sale

     33,266       25,174  

Proceeds from maturities, prepayments and calls on securities held to maturity

     2,593       —    

(Increase) decrease in loans, net

     (47,074     27,288  

Reimbursement from FDIC for covered assets

     142       —    

Decrease in interest-bearing deposits in banks

     245       992  

Proceeds from sale of repossessed assets

     801       540  

Purchases of office properties and equipment

     (2,300     (1,500

Purchase of bank-owned life insurance

     (10,000     —    

Proceeds from sale of office properties and equipment

     24       839  
  

 

 

   

 

 

 

Net cash used in investing activities

     (53,635     (4,935
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Increase (decrease) in deposits, net

     55,925       (77,728

Borrowings on Federal Home Loan Bank advances

     4,010       —    

Repayments of Federal Home Loan Bank advances

     (8,130     (1,905

Proceeds from exercise of stock options

     2,086       339  

Issuance of stock under incentive plans

     39       106  

Dividends paid to shareholders

     (3,882     (3,011

Purchase of Company’s common stock

     (7,795     (49
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     42,253       (82,248
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     11,707       (69,929

Cash and cash equivalents at beginning of year

     59,618       150,418  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 71,325     $ 80,489  
  

 

 

   

 

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

6


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Home Bancorp, Inc. (the “Company”) were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in shareholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. Certain reclassifications have been made to prior period balances to conform to the current period presentation. The results of operations for the three- and six-month periods ended June 30, 2019 and 2018 are not necessarily indicative of the results which may be expected for the entire fiscal year. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2018.

Critical Accounting Policies and Estimates

There were no material changes or developments during the reporting period with respect to methodologies the Company uses when applying critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2018.

In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.    

2. Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, “Conforming Amendments Related to Leases”. This ASU amends the codification regarding leases in order to increase transparency and comparability. Under former GAAP, the recognition of lease assets and lease liabilities by lessees was not required if the terms of the lease qualify it as an operating lease. ASU No. 2016-02 requires companies to recognize lease assets and liabilities on the statement of condition and disclose key information about leasing arrangements, for both operating and capital or finance leases. A lessee must recognize a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. The ASU is effective for annual and interim periods beginning after December 15, 2018. The Company implemented an accounting policy election to keep leases with an initial term of 12 months or less off the Company’s consolidated balance sheet. As of June 30, 2019, the Company’s right-of-use assets and liabilities, net of amortization, was $5.5 million. The Company reports its right-of-use assets and liabilities within accrued interest receivable and other assets and accrued interest payable and other liabilities on the Consolidated Statements of Financial Condition. The ASU did not have material impact on the consolidated income statement.

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments”. The standard introduces a new impairment model known as CECL (Current Expected Credit Losses). The ASU requires a financial asset (or a group of financial assets) measured on an amortized cost basis to be presented at an amount net of an allowance for credit losses, which reflects expected losses for the full life of the financial asset. Under current GAAP, credit losses are not recognized until the occurrence of the loss is probable and entities, in general, only consider past events and current conditions when measuring incurred losses. ASU No. 2016-13 will require entities to recognize a current estimate of all expected credit losses, thus eliminating the “probable” recognition threshold. To produce a current estimate of expected credit losses, the standard will require entities to incorporate forecasted information along with relevant information about past events, including historical experience, and current conditions that affect the collectability of the reported amount of financial assets. The ASU also amends the accounting model for purchased financial assets with a more-than-insignificant

 

7


Table of Contents

amount of credit deterioration since origination. The initial estimate of expected credit losses for the related purchased financial assets will be recognized through the allowance for credit losses with an offset to the cost basis of the purchased asset. Off-balance-sheet arrangements, such as commitments to extend credit, guarantees and standby letters of credit that are not unconditionally cancellable, are also within the scope of this amendment. In addition, ASU 2016-13 will require expected credit related losses for debt securities to be recorded through an allowance for credit losses, while non-credit related losses will continue to be recognized through Other Comprehensive Income (“OCI”). This ASU is effective for fiscal years beginning after December 31, 2019. An entity will apply the amendments in this update on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is testing several models to determine the potential impact to our Consolidated Financial Statements upon the implementation of CECL. Currently, the Company expects the adoption of the ASU to increase the allowance for loan losses and the provision for loan losses. The extent of the impact upon adoption is not known and will depend on the characteristics of the Company’s loan portfolio and economic conditions on that date as well as forecasted conditions thereafter.

In January 2017, FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other, Simplifying the Test for Goodwill Impairment”. The amendment in this ASU eliminates the requirement to calculate the implied fair value of goodwill in order to measure a goodwill impairment charge. An entity will record an impairment charge based on the excess of the carrying amount over its fair value. This ASU is effective for fiscal and interim testing periods beginning after December 15, 2019. The Company does not anticipate it will have a material impact on our Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” The ASU removes, modifies and adds certain disclosure requirements for fair value measurements. For example, public entities will no longer be required to disclose the valuation processes for Level 3 fair value measurements, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019. In addition, entities may early adopt the modified or eliminated disclosure requirements and delay adoption of the additional disclosure requirements until their effective date. The Company does not believe ASU No. 2018-13 will have a material impact on our Consolidated Financial Statements, as the update only revises disclosure requirements.

3. Investment Securities

Summary information regarding the Company’s investment securities classified as available for sale and held to maturity as of June 30, 2019 and December 31, 2018 is as follows.

 

(dollars in thousands)

   Amortized
Cost
     Gross
Unrealized
Gains
     Gross Unrealized Losses      Fair Value  
                   Less Than
1 Year
     Over 1
Year
        

June 30, 2019

              

Available for sale:

              

U.S. agency mortgage-backed

   $ 79,789      $ 1,101      $ 2      $ 131      $ 80,757  

Collateralized mortgage obligations

     158,181        941        54        551        158,517  

Municipal bonds

     13,892        171        —          —          14,063  

U.S. government agency

     8,282        23        —          16        8,289  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total available for sale

   $ 260,144      $ 2,236      $ 56      $ 698      $ 261,626  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Held to maturity:

              

Municipal bonds

   $ 8,163      $ 50      $ —        $ 6      $ 8,207  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total held to maturity

   $ 8,163      $ 50      $ —        $ 6      $ 8,207  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

8


Table of Contents

(dollars in thousands)

   Amortized
Cost
     Gross
Unrealized
Gains
     Gross Unrealized Losses      Fair Value  
                   Less Than
1 Year
     Over 1
Year
        

December 31, 2018

              

Available for sale:

              

U.S. agency mortgage-backed

   $ 86,487      $ 485      $ 171      $ 892      $ 85,909  

Collateralized mortgage obligations

     145,814        129        161        2,191        143,591  

Municipal bonds

     21,453        52        16        12        21,477  

U.S. government agency

     9,169        29        19        25        9,154  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total available for sale

   $ 262,923      $ 695      $ 367      $ 3,120      $ 260,131  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Held to maturity:

              

Municipal bonds

   $ 10,872      $ 11      $ 5      $ 37      $ 10,841  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total held to maturity

   $ 10,872      $ 11      $ 5      $ 37      $ 10,841  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The estimated fair value and amortized cost by contractual maturity of the Company’s investment securities as of June 30, 2019 are shown in the following tables. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. The expected maturity of a security may differ from its contractual maturity because of prepayments or the exercise of call options. Accordingly, actual maturities may differ from contractual maturities.

 

(dollars in thousands)

   One Year
or Less
     After One
Year through
Five Years
     After Five
Years
through Ten
Years
     After Ten
Years
     Total  

Fair Value

              

Securities available for sale:

              

U.S. agency mortgage-backed

   $ 46      $ 17,460      $ 34,000      $ 29,251      $ 80,757  

Collateralized mortgage obligations

     —          4,898        29,837        123,782        158,517  

Municipal bonds

     1,520        7,740        3,396        1,407        14,063  

U.S. government agency

     3,998        —          3,515        776        8,289  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities available for sale

   $ 5,564      $ 30,098      $ 70,748      $ 155,216      $ 261,626  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities held to maturity:

              

Municipal bonds

   $ —        $ 3,943      $ 4,264      $ —        $ 8,207  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities held to maturity

   $ —        $ 3,943      $ 4,264      $ —        $ 8,207  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(dollars in thousands)

   One Year
or Less
     After One
Year through
Five Years
     After Five
Years
through Ten
Years
     After Ten
Years
     Total  

Amortized Cost

              

Securities available for sale:

              

U.S. agency mortgage-backed

   $ 45      $ 17,360      $ 33,759      $ 28,625      $ 79,789  

Collateralized mortgage obligations

     —          4,864        29,446        123,871        158,181  

Municipal bonds

     1,515        7,691        3,325        1,361        13,892  

U.S. government agency

     4,000        —          3,491        791        8,282  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities available for sale

   $ 5,560      $ 29,915      $ 70,021      $ 154,648      $ 260,144  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities held to maturity:

              

Municipal bonds

   $ —        $ 3,927      $ 4,236      $ —        $ 8,163  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities held to maturity

   $ —        $ 3,927      $ 4,236      $ —        $ 8,163  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic and market conditions warrant such evaluations. Consideration is given to (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; and (3) the Company’s intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost, which may extend to maturity.

The Company performs a process to identify securities that could potentially have a credit impairment that is other-than-temporary. This process involves evaluating each security for impairment by monitoring credit performance, collateral type, collateral geography, bond credit support, loan-to-value ratios, credit scores, loss severity levels, pricing levels, downgrades by rating agencies, cash flow projections and other factors as indicators of potential credit issues. When the Company determines that a security is deemed other-than-temporarily impaired, an impairment loss is recognized.

As of June 30, 2019, 76 of the Company’s investment securities had unrealized losses totaling 0.8% of the individual securities’ amortized cost basis and 0.3% of the Company’s total amortized cost basis of the investment securities portfolio. At such date, 68 of the 76 securities had been in a continuous loss position for over 12 months. The 68 securities had an aggregate amortized cost basis of $87,398,000 and an unrealized loss of $704,000 at June 30, 2019. Management has the intent and ability to hold these securities until maturity, or until anticipated recovery; hence, no declines in these securities were deemed other-than-temporary at June 30, 2019.

As of June 30, 2019 and December 31, 2018, the Company had $182,310,000 and $157,198,000, respectively, of securities pledged to secure public deposits.

4. Earnings Per Share

Earnings per common share were computed based on the following:

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  

(in thousands, except per share data)

   2019      2018      2019      2018  

Numerator:

           

Net income available to common shareholders

   $ 6,580      $ 7,776      $ 14,470      $ 15,239  

Denominator:

           

Weighted average common shares outstanding

     9,155        9,048        9,143        9,030  

Effect of dilutive securities:

           

Restricted stock

     11        20        13        22  

Stock options

     42        231        75        232  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding – assuming dilution

     9,208        9,299        9,231        9,284  
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic earnings per common share

   $ 0.72      $ 0.85      $ 1.58      $ 1.68  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per common share

   $ 0.71      $ 0.83      $ 1.56      $ 1.64  
  

 

 

    

 

 

    

 

 

    

 

 

 

Options on 96,110 and 19,172 shares of common stock were not included in the computation of diluted earnings per share for the three months ended June 30, 2019 and 2018, respectively, because the effect of these shares was anti-dilutive. Options on 85,623 and 9,808 shares of common stock were not included in the computation of diluted earnings per share for the six months ended June 30, 2019 and 2018, respectively, because the effect of these shares was anti-dilutive.

 

10


Table of Contents

5. Credit Quality and Allowance for Loan Losses

The following briefly describes the distinction between originated and acquired loans and certain significant accounting policies relevant to each category.

Originated Loans

Loans originated for investment are reported at the principal balance outstanding net of unearned income. Interest on loans and accretion of unearned income are computed in a manner that approximates a level yield on recorded principal. Interest on loans is recorded as income is earned. The accrual of interest on an originated loan is discontinued when it is probable the borrower will not be able to meet payment obligations as they become due. The Company maintains an allowance for loan losses on originated loans that represents management’s estimate of probable losses incurred in this portfolio category.

Acquired Loans

Loans that were acquired as a result of business combinations are referred to as “acquired loans.” Acquired loans were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The acquired loans were segregated between those considered to be performing (“acquired performing”) and those with evidence of credit deterioration (“acquired impaired”), and then further segregated into loan pools designed to facilitate the estimation of expected cash flows. The fair value estimate for each pool of acquired performing and acquired impaired loans was based on the estimate of expected cash flows, both principal and interest, from that pool, discounted at prevailing market interest rates.

The difference between the fair value of an acquired performing loan pool and the contractual amounts due at the acquisition date (the “fair value discount”) is accreted into income over the estimated life of the pool. Management estimates an allowance for loan losses for acquired performing loans using a methodology similar to that used for originated loans. The allowance determined for each loan pool is compared to the remaining fair value discount for that pool. If the allowance amount calculated under the Company’s methodology is greater than the Company’s remaining discount, the additional amount called for is added to the reported allowance through a provision for loan losses. If the allowance amount calculated under the Company’s methodology is less than the Company’s recorded discount, no additional allowance or provision is recognized. Actual losses first reduce any remaining nonaccretable discount for the loan pool. Once the nonaccretable discount is fully depleted, losses are applied against the allowance established for that pool. Acquired performing loans are placed on nonaccrual status and considered and reported as nonperforming or past due using the same criteria applied to the originated portfolio.

The excess of cash flows expected to be collected from an acquired impaired loan pool over the pool’s estimated fair value at acquisition is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the pool. Each pool of acquired impaired loans is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

Management recasts the estimate of cash flows expected to be collected on each acquired impaired loan pool periodically. If the present value of expected cash flows for a pool is less than its carrying value, an impairment is recognized by an increase in the allowance for loan losses and a charge to the provision for loan losses. If the present value of expected cash flows for a pool is greater than its carrying value, any previously established allowance for loan losses is reversed and any remaining difference increases the accretable yield, which will be taken into interest income over the remaining life of the loan pool. Acquired impaired loans are generally not subject to individual evaluation for impairment and are not reported with impaired loans, even if they would otherwise qualify for such treatment.

 

11


Table of Contents

The Company’s loans, net of unearned income, consisted of the following as of the dates indicated.

 

(dollars in thousands)

   June 30,
2019
     December 31,
2018
 

Real estate loans:

     

One- to four-family first mortgage

   $ 442,896      $ 450,363  

Home equity loans and lines

     81,794        83,976  

Commercial real estate

     691,939        640,575  

Construction and land

     200,153        193,597  

Multi-family residential

     47,827        54,455  
  

 

 

    

 

 

 

Total real estate loans

     1,464,609        1,422,966  
  

 

 

    

 

 

 

Other loans:

     

Commercial and industrial

     179,394        172,934  

Consumer

     48,945        53,854  
  

 

 

    

 

 

 

Total other loans

     228,339        226,788  
  

 

 

    

 

 

 

Total loans

   $ 1,692,948      $ 1,649,754  
  

 

 

    

 

 

 

The net discount on the Company’s loans was $15,293,000 and $18,811,000 at June 30, 2019 and December 31, 2018, respectively, of which $6,679,000 and $7,865,000 for the same time periods, respectively, were related to impaired loans. In addition, loan balances as of June 30, 2019 and December 31, 2018 are reported net of unearned income of $2,832,000 and $2,716,000, respectively.

Allowance for Loan Losses

The allowance for loan losses and recorded investment in loans as of the dates indicated are as follows.

 

     As of June 30, 2019  
     Originated Loans                

(dollars in thousands)

   Collectively
Evaluated
for
Impairment
     Individually
Evaluated
for
Impairment
     Acquired
Loans
     Total  

Allowance for loan losses:

           

One- to four-family first mortgage

   $ 2,056      $ —        $ 368      $ 2,424  

Home equity loans and lines

     678        348        47        1,073  

Commercial real estate

     5,768        361        646        6,775  

Construction and land

     2,384        —          4        2,388  

Multi-family residential

     492        —          —          492  

Commercial and industrial

     2,795        301        252        3,348  

Consumer

     452        —          287        739  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $ 14,625      $ 1,010      $ 1,604      $ 17,239  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

12


Table of Contents
     As of June 30, 2019  
     Originated Loans                

(dollars in thousands)

   Collectively
Evaluated
for
Impairment
     Individually
Evaluated
for
Impairment
     Acquired
Loans(1)
     Total  

Loans:

           

One- to four-family first mortgage

   $ 242,332      $ 188      $ 200,376      $ 442,896  

Home equity loans and lines

     53,948        821        27,025        81,794  

Commercial real estate

     480,838        6,855        204,246        691,939  

Construction and land

     173,486        —          26,667        200,153  

Multi-family residential

     37,020        —          10,807        47,827  

Commercial and industrial

     144,163        1,897        33,334        179,394  

Consumer

     36,082        —          12,863        48,945  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,167,869      $ 9,761      $ 515,318      $ 1,692,948  
  

 

 

    

 

 

    

 

 

    

 

 

 
     As of December 31, 2018  
     Originated Loans                

(dollars in thousands)

   Collectively
Evaluated
for
Impairment
     Individually
Evaluated
for
Impairment
     Acquired
Loans
     Total  

Allowance for loan losses:

           

One- to four-family first mortgage

   $ 1,937      $ —        $ 199      $ 2,136  

Home equity loans and lines

     682        349        48        1,079  

Commercial real estate

     5,272        484        369        6,125  

Construction and land

     2,280        —          5        2,285  

Multi-family residential

     522        —          28        550  

Commercial and industrial

     2,541        321        366        3,228  

Consumer

     472        —          473        945  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $ 13,706      $ 1,154      $ 1,488      $ 16,348  
  

 

 

    

 

 

    

 

 

    

 

 

 
     As of December 31, 2018  
     Originated Loans                

(dollars in thousands)

   Collectively
Evaluated
for
Impairment
     Individually
Evaluated
for
Impairment
     Acquired
Loans(1)
     Total  

Loans:

           

One- to four-family first mortgage

   $ 227,602      $ —        $ 222,761      $ 450,363  

Home equity loans and lines

     53,049        866        30,061        83,976  

Commercial real estate

     432,217        7,059        201,299        640,575  

Construction and land

     161,232        —          32,365        193,597  

Multi-family residential

     42,222        —          12,233        54,455  

Commercial and industrial

     131,250        1,952        39,732        172,934  

Consumer

     37,711        —          16,143        53,854  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,085,283      $ 9,877      $ 554,594      $ 1,649,754  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

$9.2 million and $10.0 million in Acquired Loans were deemed to be acquired impaired loans and were accounted for under ASC 310-30 at June 30, 2019 and December 31, 2018, respectively.

 

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A summary of activity in the allowance for loan losses for the six months ended June 30, 2019 and June 30, 2018 follows.

 

     For the Six Months Ended June 30, 2019  

(dollars in thousands)

   Beginning
Balance
     Charge-offs     Recoveries      Provision     Ending
Balance
 

Originated loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 1,937      $ (4   $ —        $ 123     $ 2,056  

Home equity loans and lines

     1,031        (12     4        3       1,026  

Commercial real estate

     5,756        (128     —          501       6,129  

Construction and land

     2,280        —         —          104       2,384  

Multi-family residential

     522        —         —          (30     492  

Commercial and industrial

     2,862        (85     8        311       3,096  

Consumer

     472        (59     12        27       452  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 14,860      $ (288     24      $ 1,039     $ 15,635  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Acquired loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 199      $ —       $ —        $ 169     $ 368  

Home equity loans and lines

     48        —         —          (1     47  

Commercial real estate

     369        —         —          277       646  

Construction and land

     5        —         —          (1     4  

Multi-family residential

     28        —         —          (28     —    

Commercial and industrial

     366        —         —          (114     252  

Consumer

     473        —         —          (186     287  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 1,488      $ —       $ —        $ 116     $ 1,604  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 2,136      $ (4   $ —        $ 292     $ 2,424  

Home equity loans and lines

     1,079        (12     4        2       1,073  

Commercial real estate

     6,125        (128     —          778       6,775  

Construction and land

     2,285        —         —          103       2,388  

Multi-family residential

     550        —         —          (58     492  

Commercial and industrial

     3,228        (85     8        197       3,348  

Consumer

     945        (59     12        (159     739  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 16,348      $ (288   $ 24      $ 1,155     $ 17,239  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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Table of Contents
     For the Six Months Ended June 30, 2018  

(dollars in thousands)

   Beginning
Balance
     Charge-offs     Recoveries      Provision     Ending
Balance
 

Originated loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 1,574      $ —       $ —        $ 189     $ 1,763  

Home equity loans and lines

     1,024        —         3        22       1,049  

Commercial real estate

     4,766        —         —          407       5,173  

Construction and land

     1,742        —         —          228       1,970  

Multi-family residential

     355        —         —          68       423  

Commercial and industrial

     4,346        (1,500     152        (38     2,960  

Consumer

     496        (45     11        28       490  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 14,303      $ (1,545   $ 166      $ 904     $ 13,828  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Acquired loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 89      $ —       $ —        $ (64   $ 25  

Home equity loans and lines

     78        —         —          (7     71  

Commercial real estate

     140        —         —          69       209  

Construction and land

     7        —         —          1       8  

Multi-family residential

     —          —         —          111       111  

Commercial and industrial

     184        —         —          391       575  

Consumer

     6        —         —          140       146  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 504      $ —       $ —        $ 641     $ 1,145  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 1,663      $ —       $ —        $ 125     $ 1,788  

Home equity loans and lines

     1,102        —         3        15       1,120  

Commercial real estate

     4,906        —         —          476       5,382  

Construction and land

     1,749        —         —          229       1,978  

Multi-family residential

     355        —         —          179       534  

Commercial and industrial

     4,530        (1,500     152        353       3,535  

Consumer

     502        (45     11        168       636  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 14,807      $ (1,545   $ 166      $ 1,545     $ 14,973  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Credit Quality

The following tables present the Company’s loan portfolio by credit quality classification as of the dates indicated.

 

     June 30, 2019  

(dollars in thousands)

   Pass      Special
Mention
     Substandard      Doubtful      Total  

Originated loans:

              

One- to four-family first mortgage

   $ 237,709      $ 1,482      $ 3,329      $ —        $ 242,520  

Home equity loans and lines

     53,539        43        1,187        —          54,769  

Commercial real estate

     479,609        191        7,893        —          487,693  

Construction and land

     172,047        —          1,439        —          173,486  

Multi-family residential

     37,020        —          —          —          37,020  

Commercial and industrial

     140,414        495        5,151        —          146,060  

Consumer

     35,613        231        238        —          36,082  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

   $ 1,155,951      $ 2,442      $ 19,237      $ —        $ 1,177,630  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

              

One- to four-family first mortgage

   $ 192,856      $ 1,680      $ 5,840      $ —        $ 200,376  

Home equity loans and lines

     26,403        434        188        —          27,025  

Commercial real estate

     186,858        4,863        12,525        —          204,246  

Construction and land

     24,155        1,117        1,395        —          26,667  

Multi-family residential

     10,040        531        236        —          10,807  

Commercial and industrial

     27,809        1,062        4,463        —          33,334  

Consumer

     12,390        224        249        —          12,863  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

   $ 480,511      $ 9,911      $ 24,896      $ —        $ 515,318  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

              

One- to four-family first mortgage

   $ 430,565      $ 3,162      $ 9,169      $ —        $ 442,896  

Home equity loans and lines

     79,942        477        1,375        —          81,794  

Commercial real estate

     666,467        5,054        20,418        —          691,939  

Construction and land

     196,202        1,117        2,834        —          200,153  

Multi-family residential

     47,060        531        236        —          47,827  

Commercial and industrial

     168,223        1,557        9,614        —          179,394  

Consumer

     48,003        455        487        —          48,945  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,636,462      $ 12,353      $ 44,133      $ —        $ 1,692,948  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     December 31, 2018  

(dollars in thousands)

   Pass      Special
Mention
     Substandard      Doubtful      Total  

Originated loans:

              

One- to four-family first mortgage

   $ 221,930      $ 1,852      $ 3,820      $ —        $ 227,602  

Home equity loans and lines

     52,344        69        1,502        —          53,915  

Commercial real estate

     425,851        4,463        8,962        —          439,276  

Construction and land

     159,428        —          1,804        —          161,232  

Multi-family residential

     42,222        —          —          —          42,222  

Commercial and industrial

     126,126        1,717        5,359        —          133,202  

Consumer

     37,312        126        273        —          37,711  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

   $ 1,065,213      $ 8,227      $ 21,720      $ —        $ 1,095,160  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

              

One- to four-family first mortgage

   $ 213,199      $ 2,474      $ 7,088      $ —        $ 222,761  

Home equity loans and lines

     29,451        270        340        —          30,061  

Commercial real estate

     183,514        5,189        12,596        —          201,299  

Construction and land

     30,005        917        1,443        —          32,365  

Multi-family residential

     11,401        582        250        —          12,233  

Commercial and industrial

     35,918        1,376        2,438        —          39,732  

Consumer

     15,521        262        360        —          16,143  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

   $ 519,009      $ 11,070      $ 24,515      $ —        $ 554,594  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

              

One- to four-family first mortgage

   $ 435,129      $ 4,326      $ 10,908      $ —        $ 450,363  

Home equity loans and lines

     81,795        339        1,842        —          83,976  

Commercial real estate

     609,365        9,652        21,558        —          640,575  

Construction and land

     189,433        917        3,247        —          193,597  

Multi-family residential

     53,623        582        250        —          54,455  

Commercial and industrial

     162,044        3,093        7,797        —          172,934  

Consumer

     52,833        388        633        —          53,854  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,584,222      $ 19,297      $ 46,235      $ —        $ 1,649,754  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The above classifications follow regulatory guidelines and can generally be described as follows:

 

   

Pass loans are of satisfactory quality.

 

   

Special mention loans have an existing weakness that could cause future impairment, including the deterioration of financial ratios, past due status, questionable management capabilities and possible reduction in the collateral values.

 

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Table of Contents
   

Substandard loans have an existing specific and well-defined weakness that may include poor liquidity and deterioration of financial performance. Such loans may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.

 

   

Doubtful loans have specific weaknesses that are severe enough to make collection or liquidation in full highly questionable and improbable.

In addition, residential loans are classified using an inter-agency regulatory methodology that incorporates, among other factors, the extent of delinquencies and loan-to-value ratios. These classifications were the most current available as of the dates indicated and were generally updated within the quarter.

Age analysis of past due loans as of the dates indicated are as follows.

 

     June 30, 2019  

(dollars in thousands)

   30-59
Days
Past
Due
     60-89
Days
Past
Due
     Greater
Than
90 Days

Past
Due
     Total
Past
Due
     Current
Loans
     Total
Loans
 

Originated loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 2,241      $ 35      $ 955      $ 3,231      $ 239,289      $ 242,520  

Home equity loans and lines

     19        100        76        195        54,574        54,769  

Commercial real estate

     1,392        193        6,846        8,431        479,262        487,693  

Construction and land

     621        —          684        1,305        172,181        173,486  

Multi-family residential

     —          —          —          —          37,020        37,020  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     4,273        328        8,561        13,162        982,326        995,488  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     137        22        2,131        2,290        143,770        146,060  

Consumer

     366        2        178        546        35,536        36,082  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     503        24        2,309        2,836        179,306        182,142  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

   $ 4,776      $ 352      $ 10,870      $ 15,998      $ 1,161,632      $ 1,177,630  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 4,781      $ 1,049      $ 1,858      $ 7,688      $ 192,688      $ 200,376  

Home equity loans and lines

     39        59        125        223        26,802        27,025  

Commercial real estate

     188        1,236        2,173        3,597        200,649        204,246  

Construction and land

     571        15        1,094        1,680        24,987        26,667  

Multi-family residential

     —          —          —          —          10,807        10,807  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     5,579        2,359        5,250        13,188        455,933        469,121  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     87        65        1,252        1,404        31,930        33,334  

Consumer

     228        44        177        449        12,414        12,863  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     315        109        1,429        1,853        44,344        46,197  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

   $ 5,894      $ 2,468      $ 6,679      $ 15,041      $ 500,277      $ 515,318  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 7,022      $ 1,084      $ 2,813      $ 10,919      $ 431,977      $ 442,896  

Home equity loans and lines

     58        159        201        418        81,376        81,794  

Commercial real estate

     1,580        1,429        9,019        12,028        679,911        691,939  

Construction and land

     1,192        15        1,778        2,985        197,168        200,153  

Multi-family residential

     —          —          —          —          47,827        47,827  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     9,852        2,687        13,811        26,350        1,438,259        1,464,609  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     224        87        3,383        3,694        175,700        179,394  

Consumer

     594        46        355        995        47,950        48,945  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     818        133        3,738        4,689        223,650        228,339  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 10,670      $ 2,820      $ 17,549      $ 31,039      $ 1,661,909      $ 1,692,948  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     December 31, 2018  

(dollars in thousands)

   30-59
Days
Past
Due
     60-89
Days
Past
Due
     Greater
Than
90 Days

Past
Due
     Total
Past
Due
     Current
Loans
     Total
Loans
 

Originated loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 3,913      $ 270      $ 64      $ 4,247      $ 223,355      $ 227,602  

Home equity loans and lines

     326        61        41        428        53,487        53,915  

Commercial real estate

     714        34        168        916        438,360        439,276  

Construction and land

     576        —          740        1,316        159,916        161,232  

Multi-family residential

     —          —          —          —          42,222        42,222  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     5,529        365        1,013        6,907        917,340        924,247  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     362        1,369        265        1,996        131,206        133,202  

Consumer

     319        131        196        646        37,065        37,711  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     681        1,500        461        2,642        168,271        170,913  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

   $ 6,210      $ 1,865      $ 1,474      $ 9,549      $ 1,085,611      $ 1,095,160  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 4,196      $ 1,258      $ 3,702      $ 9,156      $ 213,605      $ 222,761  

Home equity loans and lines

     462        116        163        741        29,320        30,061  

Commercial real estate

     3,104        265        1,143        4,512        196,787        201,299  

Construction and land

     1,050        488        813        2,351        30,014        32,365  

Multi-family residential

     84        —          —          84        12,149        12,233  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     8,896        2,127        5,821        16,844        481,875        498,719  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     4,315        109        329        4,753        34,979        39,732  

Consumer

     357        277        262        896        15,247        16,143  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     4,672        386        591        5,649        50,226        55,875  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

   $ 13,568      $ 2,513      $ 6,412      $ 22,493      $ 532,101      $ 554,594  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 8,109      $ 1,528      $ 3,766      $ 13,403      $ 436,960      $ 450,363  

Home equity loans and lines

     788        177        204        1,169        82,807        83,976  

Commercial real estate

     3,818        299        1,311        5,428        635,147        640,575  

Construction and land

     1,626        488        1,553        3,667        189,930        193,597  

Multi-family residential

     84        —          —          84        54,371        54,455  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     14,425        2,492        6,834        23,751        1,399,215        1,422,966  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     4,677        1,478        594        6,749        166,185        172,934  

Consumer

     676        408        458        1,542        52,312        53,854  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     5,353        1,886        1,052        8,291        218,497        226,788  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 19,778      $ 4,378      $ 7,886      $ 32,042      $ 1,617,712      $ 1,649,754  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Excluding Acquired Loans with deteriorated credit quality, the Company did not have any loans greater than 90 days past due and accruing as of June 30, 2019 or December 31, 2018.

The following table summarizes the accretable discount on loans accounted for under ASC 310-30 as of the dates indicated.

 

     For the Six Months Ended  

(dollars in thousands)

   June 30,
2019
     June 30,
2018
 

Balance at beginning of period

   $ (9,147    $ (9,303

Accretion

     1,854        1,222  

Transfers from nonaccretable difference to accretable discount

     (44      (1,880
  

 

 

    

 

 

 

Balance at end of period

   $ (7,337    $ (9,961
  

 

 

    

 

 

 

The following table summarizes information pertaining to originated loans, which were deemed impaired loans as of the dates indicated.

 

     For the Period Ended June 30, 2019  

(dollars in thousands)

   Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

With no related allowance recorded:

              

One- to four-family first mortgage

   $ 188      $ 187      $ —        $ 31      $ —    

Home equity loans and lines

     419        459        —          428        —    

Commercial real estate

     20        22        —          63        —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     1,526        1,800        —          1,532        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,153      $ 2,468      $ —        $ 2,054      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With an allowance recorded:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     402        441        348        412        —    

Commercial real estate

     6,835        6,909        361        6,848        —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     371        407        301        386        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 7,608      $ 7,757      $ 1,010      $ 7,646      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans:

              

One- to four-family first mortgage

   $ 188      $ 187      $ —        $ 31      $ —    

Home equity loans and lines

     821        900        348        840        —    

Commercial real estate

     6,855        6,931        361        6,911        —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     1,897        2,207        301        1,918        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,761      $ 10,225      $ 1,010      $ 9,700      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     For the Period Ended December 31, 2018  

(dollars in thousands)

   Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

With no related allowance recorded:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     441        476        —          454        —    

Commercial real estate

     149        161        —          32        7  

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     1,540        1,904        —          438        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,130      $ 2,541      $ —        $ 924      $ 7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With an allowance recorded:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     425        457        349        440        —    

Commercial real estate

     6,910        6,910        484        2,057        38  

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     412        442        321        1,367        1  

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 7,747      $ 7,809      $ 1,154      $ 3,864      $ 39  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     866        933        349        894        —    

Commercial real estate

     7,059        7,071        484        2,089        45  

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     1,952        2,346        321        1,805        1  

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,877      $ 10,350      $ 1,154      $ 4,788      $ 46  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     For the Period Ended June 30, 2018  

(dollars in thousands)

   Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

With no related allowance recorded:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     455        476        —          461        —    

Commercial real estate

     22        23        —          22        —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     413        607        —          357        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 890      $ 1,106      $ —        $ 840      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With an allowance recorded:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     441        460        348        446        —    

Commercial real estate

     —          —          —          —          —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     533        554        346        1,161        1  

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 974      $ 1,014      $ 694      $ 1,607      $ 1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     896        936        348        907        —    

Commercial real estate

     22        23        —          22        —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     946        1,161        346        1,518        1  

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,864      $ 2,120      $ 694      $ 2,447      $ 1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

The following table summarizes information pertaining to nonaccrual loans as of dates indicated.

 

     June 30, 2019      December 31, 2018  

(dollars in thousands)

   Originated      Acquired(1)      Total      Originated      Acquired(1)      Total  

Nonaccrual loans:

                 

One- to four-family first mortgage

   $ 2,707      $ 2,653      $ 5,360      $ 1,984      $ 3,188      $ 5,172  

Home equity loans and lines

     1,131        176        1,307        1,457        242        1,699  

Commercial real estate

     7,289        4,894        12,183        7,940        3,403        11,343  

Construction and land

     684        1,239        1,923        740        854        1,594  

Multi-family residential

     —          —          —          —          —          —    

Commercial and industrial

     2,978        1,734        4,712        2,986        1,002        3,988  

Consumer

     238        249        487        273        343        616  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 15,027      $ 10,945      $ 25,972      $ 15,380      $ 9,032      $ 24,412  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Table excludes Acquired Loans which were being accounted for under ASC 310-30 because they continue to earn interest from accretable yield regardless of their status as past due or otherwise not in compliance with their contractual terms. Acquired Loans with deteriorated credit quality which were being accounted for under ASC 310-30 and which were 90 days or more past due totaled $2.4 million and $1.7 million as of June 30, 2019 and December 31, 2018, respectively.

As of June 30, 2019, the Company had no outstanding commitments to lend additional funds to any customer whose loan was classified as impaired.

Troubled Debt Restructurings

During the course of its lending operations, the Company periodically grants concessions to its customers in an attempt to protect as much of its investment as possible and to minimize risk of loss. These concessions may include restructuring the terms of a customer loan to alleviate the burden of the customer’s near-term cash requirements. Loans are considered troubled debt restructurings (“TDR”) when the Company agrees to restructure a loan to a borrower who is experiencing financial difficulties in a manner that is deemed to be a “concession”. The Company defines a concession as a modification of existing terms granted to a borrower for economic or legal reasons related to the borrower’s financial difficulties that the Company would otherwise not consider. The concession either is granted through an agreement with the customer or is imposed by a court or by law. Concessions include modifying original loan terms to reduce or defer cash payments required as part of the loan agreement, including but not limited to:

 

 

a reduction of the stated interest rate for the remaining original life of the debt,

 

 

an extension of the maturity date or dates at an interest rate lower than the current market rate for new debt with similar risk characteristics,

 

 

a reduction of the face amount or maturity amount of the debt or

 

 

a reduction of accrued interest receivable on the debt.

 

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In its determination of whether the customer is experiencing financial difficulties, the Company considers numerous indicators, including, but not limited to:

 

 

whether the customer is currently in default on its existing loan, or is in an economic position where it is probable the customer will be in default on its loan in the foreseeable future without a modification,

 

 

whether the customer has declared or is in the process of declaring bankruptcy,

 

 

whether there is substantial doubt about the customer’s ability to continue as a going concern,

 

 

whether, based on its projections of the customer’s current capabilities, the Company believes the customer’s future cash flows will be insufficient to service the debt, including interest, in accordance with the contractual terms of the existing agreement for the foreseeable future and

 

 

whether, without modification, the customer cannot obtain sufficient funds from other sources at an effective interest rate equal to the current market rate for similar debt for a non-troubled debtor.

If the Company concludes that both a concession has been granted and the concession was granted to a customer experiencing financial difficulties, the Company identifies the loan as a TDR. For purposes of the determination of an allowance for loan losses on TDRs, such loans are reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology. If it is determined that losses are probable on such TDRs, either because of delinquency or other credit quality indicators, the Company specifically allocates a portion of the allowance for loan losses to these loans.

The following table summarizes information pertaining to TDRs modified during the periods indicated.

 

     For the Six Months Ended June 30,  
     2019      2018  

(dollars in thousands)

   Number of
Contracts
     Pre-
modification
Outstanding
Recorded
Investment
     Post-
modification
Outstanding
Recorded
Investment
     Number of
Contracts
     Pre-
modification
Outstanding
Recorded
Investment
     Post-
modification
Outstanding
Recorded
Investment
 

Troubled debt restructurings:

                 

One- to four-family first mortgage

     5      $ 710      $ 705        2      $ 1,146      $ 1,146  

Home equity loans and lines

     —          —          —          —          —          —    

Commercial real estate

     1        91        91        2        6,461        5,950  

Construction and land

     —          —          —          —          —          —    

Multi-family residential

     —          —          —          —          —          —    

Commercial and industrial

     —          —          —          2        775        713  

Other consumer

     2        13        12        1        8        8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     8      $ 814      $ 808        7      $ 8,390      $ 7,817  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

None of the performing troubled debt restructurings as of June 30, 2019 had defaulted subsequent to the restructuring through the date the financial statements were available to be issued.

6. Fair Value Measurements and Disclosures

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Company groups assets and liabilities measured or disclosed at fair value in three levels as required by ASC 820, Fair Value Measurements and Disclosures. Under this guidance, fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the inputs used to develop those assumptions and measure fair value. The hierarchy requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels used to measure fair value are as follows:

 

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

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Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

An asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level that is significant to the fair value measurement. Management reviews and updates the fair value hierarchy classifications of the Company’s assets and liabilities quarterly.

Recurring Basis

Investment Securities Available for Sale

Fair values of investment securities available for sale are primarily measured using information from a third-party pricing service. This pricing service provides pricing information by utilizing pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities bids, offers and other reference data from market research publications. If quoted prices are available in an active market, investment securities are classified as Level 1 measurements. If quoted prices are not available in an active market, fair values are estimated primarily by the use of pricing models. Level 2 investment securities are primarily comprised of mortgage-backed securities issued by government agencies and U.S. government-sponsored enterprises. In certain cases, where there is limited or less transparent information provided by the Company’s third-party pricing service, fair value is estimated by the use of secondary pricing services or through the use of non-binding third-party broker quotes. Investment securities are classified within Level 3 when little or no market activity supports the fair value.

Management primarily identifies investment securities which may have traded in illiquid or inactive markets, by identifying instances of a significant decrease in the volume and frequency of trades, relative to historical levels, as well as instances of a significant widening of the bid-ask spread in the brokered markets. Investment securities that are deemed to have been trading in illiquid or inactive markets may require the use of significant unobservable inputs. For example, management may use quoted prices for similar investment securities in the absence of a liquid and active market for the investment securities being valued. As of June 30, 2019, management did not make adjustments to prices provided by the third-party pricing service as a result of illiquid or inactive markets.

The following tables present the balances of assets measured for fair value on a recurring basis as of June 30, 2019 and December 31, 2018.

 

(dollars in thousands)

   June 30, 2019      Level 1      Level 2      Level 3  

Available for sale securities:

           

U.S. agency mortgage-backed

   $ 80,757      $ —        $ 80,757      $ —    

Collateralized mortgage obligations

     158,517        —          158,517        —    

Municipal bonds

     14,063        —          14,063        —    

U.S. government agency

     8,289        —          8,289        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 261,626      $ —        $ 261,626      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

 

23


Table of Contents

(dollars in thousands)

   December 31, 2018      Level 1      Level 2      Level 3  

Available for sale securities:

           

U.S. agency mortgage-backed

   $ 85,909      $  —        $ 85,909      $  —    

Collateralized mortgage obligations

     143,591        —          143,591        —    

Municipal bonds

     21,477        —          21,477        —    

U.S. government agency

     9,154        —          9,154        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 260,131      $ —        $ 260,131      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company did not record any liabilities at fair value for which measurement of the fair value was made on a recurring basis.

Nonrecurring Basis

In accordance with the provisions of ASC 310, Receivables, the Company records loans considered impaired at fair value. A loan is considered impaired if it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Fair value is measured at the fair value of the collateral for collateral-dependent loans. For non-collateral-dependent loans, fair value is measured by present valuing expected future cash flows. Impaired loans are classified as Level 3 assets when measured using appraisals from third parties of the collateral less any prior liens and when there is no observable market price. Repossessed assets are initially recorded at fair value less estimated costs to sell. The fair value of repossessed assets is based on property appraisals and an analysis of similar properties available. As such, the Company classifies repossessed assets as Level 3 assets.

The Company has segregated all financial assets that are measured at fair value on a nonrecurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date as reflected in the table below.

 

          Fair Value Measurements Using  

(dollars in thousands)

  June 30, 2019     Level 1      Level 2      Level 3  

Assets

         

Impaired loans

  $ 8,751     $ —        $ —        $ 8,751  

Repossessed assets

    1,980       —          —          1,980  
 

 

 

   

 

 

    

 

 

    

 

 

 

Total

  $ 10,731     $ —        $ —        $ 10,731  
 

 

 

   

 

 

    

 

 

    

 

 

 
          Fair Value Measurements Using  

(dollars in thousands)

  December 31, 2018     Level 1      Level 2      Level 3  

Assets

         

Impaired loans

  $ 8,723     $  —        $  —        $ 8,723  

Repossessed assets

    1,558       —          —          1,558  
 

 

 

   

 

 

    

 

 

    

 

 

 

Total

  $ 10,281     $ —        $ —        $ 10,281  
 

 

 

   

 

 

    

 

 

    

 

 

 

 

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The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets.

 

(dollars in thousands)

   Fair
Value
    

Valuation Technique

  

Unobservable

Inputs

   Range of
Discounts
    Weighted
Average
Discount
 

As of June 30, 2019:

             

Impaired loans

   $ 8,751      Third party appraisals and discounted cash flows    Collateral values, market discounts and estimated costs to sell      0% - 87     10

Repossessed assets

   $ 1,980      Third party appraisals, sales contracts, broker price opinions    Collateral values, market discounts and estimated costs to sell      6% - 79     20

(dollars in thousands)

   Fair
Value
    

Valuation Technique

  

Unobservable

Inputs

   Range of
Discounts
    Weighted
Average
Discount
 

As of December 31, 2018:

             

Impaired loans

   $ 8,723      Third party appraisals and discounted cash flows    Collateral values, market discounts and estimated costs to sell      0% - 100     12

Repossessed assets

   $ 1,558      Third party appraisals, sales contracts, broker price opinions    Collateral values, market discounts and estimated costs to sell      6% - 68     20

ASC 820, Fair Value Measurements and Disclosures, requires the disclosure of each class of financial instruments for which it is practicable to estimate. The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. ASC 820 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statements. These estimates are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates included herein are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the fair value of assets and liabilities that are not required to be recorded or disclosed at fair value like premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

The carrying value of cash and cash equivalents and interest-bearing deposits in banks approximate their fair value.

 

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The fair value for investment securities is determined from quoted market prices when available. If a quoted market price is not available, fair value is estimated using third party pricing services or quoted market prices of securities with similar characteristics.

The carrying value of mortgage loans held for sale approximates their fair value.

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturity.

The cash surrender value of bank-owned life insurance (“BOLI”) approximates its fair value.

The fair value of customer deposits, excluding certificates of deposit, is the amount payable on demand. The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

The fair value of long-term FHLB advances is estimated by discounting the future cash flows using the rates currently offered for advances of similar maturities.

The following table presents estimated fair values of the Company’s financial instruments as of the dates indicated.

 

            Fair Value Measurements at June 30, 2019  

(dollars in thousands)

   Carrying
Amount
     Total      Level 1      Level 2      Level 3  

Financial Assets

              

Cash and cash equivalents

   $ 71,325      $ 71,325      $ 71,325      $ —        $ —    

Interest-bearing deposits in banks

     694        694        694        —          —    

Investment securities available for sale

     261,626        261,626        —          261,626        —    

Investment securities held to maturity

     8,163        8,207        —          8,207        —    

Mortgage loans held for sale

     4,501        4,501        —          4,501        —    

Loans, net

     1,675,709        1,664,617        —          1,655,866        8,751  

Cash surrender value of BOLI

     39,927        39,927        39,927        —          —    

Financial Liabilities

              

Deposits

   $ 1,829,169      $ 1,829,578      $ —        $ 1,829,578      $ —    

Other borrowings

     5,539        5,856        —          5,856        —    

Long-term FHLB advances

     54,615        54,378        —          54,378        —    
            Fair Value Measurements at December 31, 2018  

(dollars in thousands)

   Carrying
Amount