Company Quick10K Filing
Meridian
Price17.69 EPS1
Shares6 P/E15
MCap113 P/FCF26
Net Debt-41 EBIT24
TEV73 TEV/EBIT3
TTM 2019-09-30, in MM, except price, ratios
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8-K 2019-01-25

MRBK 10Q Quarterly Report

Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part Ii–Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 mrbk-20200331ex3115e4faf.htm
EX-31.2 mrbk-20200331ex312684031.htm
EX-32 mrbk-20200331xex32.htm

Meridian Earnings 2020-03-31

Balance SheetIncome StatementCash Flow

10-Q 1 mrbk-20200331x10q.htm 10-Q mrbk_Current_Folio_10Q

 

 

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 March 31, 2020

Or

 

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

For the transition period from                to               

 

Commission File Number: 000-55983

 

Picture 1

 

(Exact name of registrant as specified in its charter)

 

Pennsylvania

83-1561918

(State or other jurisdiction of

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

incorporation or organization)

 

 

9 Old Lincoln Highway, Malvern, Pennsylvania 19355

(Address of principal executive offices) (Zip Code)

 

(484) 568‑5000

(Registrant’s telephone number, including area code)

 

 

 

 

Title of class

Trading Symbol

Name of exchange on which registered

Common Stock, $1 par value

MRBK

The NASDAQ Stock Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 11, 2020 there were 6,094,341 outstanding shares of the issuer’s common stock, par value $1.00 per share.

 

 

 

 

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION 

 

 

 

Item 1 Financial Statements (Unaudited) 

3

 

 

Consolidated Balance Sheets – March 31, 2020 and December 31, 2019 

3

 

 

Consolidated Statements of Income – Three Months Ended March 31, 2020 and 2019 

4

 

 

Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2020 and 2019 

5

 

 

Consolidated Statements of Stockholders’ Equity – Three Months Ended March  31, 2020 and 2019 

6

 

 

Consolidated Statements of Cash Flows – Three Ended March  31, 2020 and 2019 

7

 

 

Notes to Consolidated Financial Statements (Unaudited) 

8

 

 

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 

34

 

 

Item 3 Quantitative and Qualitative Disclosures about Market Risk 

51

 

 

Item 4 Controls and Procedures 

51

 

 

PART II OTHER INFORMATION 

 

 

 

Item 1 Legal Proceedings 

52

 

 

Item 1A Risk Factors 

52

 

 

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 

54

 

 

Item 3 Defaults Upon Senior Securities 

54

 

 

Item 4 Mine Safety Disclosures 

54

 

 

Item 5 Other Information 

54

 

 

Item 6 Exhibits 

54

 

 

Signatures 

55

 

 

 

 

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

(dollars in thousands, except per share data)

    

2020

    

2019

Cash and due from banks

 

$

12,172

 

19,106

Federal funds sold

 

 

25,350

 

20,265

Cash and cash equivalents

 

 

37,522

 

39,371

Securities available-for-sale (amortized cost of $90,039 and $58,874 as of March 31, 2020 and December 31, 2019)

 

 

90,552

 

58,856

Securities held-to-maturity (fair value of $7,946 and $9,003 as of March 31, 2020 and December 31, 2019)

 

 

7,747

 

8,780

Equity Investments

 

 

1,025

 

1,009

Mortgage loans held for sale (amortized cost of $106,301 and $33,363 as of March 31, 2020 and December 31, 2019), at fair value

 

 

107,506

 

33,704

Loans, net of fees and costs (includes $10,553 and $10,546 of loans at fair value, amortized cost of $10,272 and $10,186 as of March 31, 2020 and December 31, 2019)

 

 

1,021,561

 

964,710

Allowance for loan and lease losses

 

 

(11,098)

 

(9,513)

Loans, net of the allowance for loan and lease losses

 

 

1,010,463

 

955,197

Restricted investment in bank stock

 

 

8,347

 

8,072

Bank premises and equipment, net

 

 

8,410

 

8,636

Bank owned life insurance

 

 

11,930

 

11,859

Accrued interest receivable

 

 

3,283

 

3,148

Other real estate owned

 

 

 —

 

120

Deferred income taxes

 

 

1,581

 

2,115

Goodwill  

 

 

899

 

899

Intangible assets

 

 

3,805

 

3,874

Other assets

 

 

10,372

 

14,379

Total assets

 

$

1,303,442

 

1,150,019

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Deposits:

 

 

 

 

 

Noninterest bearing

 

$

140,826

 

139,450

Interest bearing

 

 

852,927

 

711,718

Total deposits

 

 

993,753

 

851,168

Short-term borrowings

 

 

129,707

 

123,676

Long-term debt

 

 

5,023

 

3,123

Subordinated debentures

 

 

40,885

 

40,962

Accrued interest payable

 

 

1,578

 

1,088

Other liabilities

 

 

14,463

 

9,307

Total liabilities

 

 

1,185,409

 

1,029,324

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $1 par value. Authorized 10,000,000 shares; issued 6,414,341 and 6,407,685 as of March 31, 2020 and December 31, 2019

 

 

6,414

 

6,408

Surplus

 

 

80,286

 

80,196

Treasury stock - 320,000 and 3,375 shares at March 31, 2020 and December 31, 2019, respectively

 

 

(5,706)

 

(3)

Retained earnings

 

 

36,613

 

34,097

Accumulated other comprehensive income (loss)

 

 

426

 

(3)

Total stockholders’ equity

 

 

118,033

 

120,695

Total liabilities and stockholders’ equity

 

$

1,303,442

 

1,150,019

See accompanying notes to the unaudited consolidated financial statements. 

3

 

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

 

 

 

Three months ended

 

 

March 31, 

(dollars in thousands, except per share data)

    

2020

    

2019

Interest income:

 

 

 

 

Loans, including fees

$

13,270

 

11,887

Securities:

 

 

 

 

Taxable

 

364

 

278

Tax-exempt

 

102

 

109

Cash and cash equivalents

 

58

 

50

Total interest income

 

13,794

 

12,324

Interest expense:

 

 

 

 

Deposits

 

3,254

 

3,236

Borrowings

 

874

 

611

Total interest expense

 

4,128

 

3,847

Net interest income

 

9,666

 

8,477

Provision for loan losses

 

1,552

 

219

Net interest income after provision for loan losses

 

8,114

 

8,258

Non-interest income:

 

 

 

 

Mortgage banking income

 

7,902

 

4,908

Wealth management income

 

1,021

 

864

SBA loan income

 

569

 

 —

Earnings on investment in life insurance

 

70

 

72

Net change in the fair value of derivative instruments

 

954

 

16

Net change in the fair value of loans held-for-sale

 

860

 

90

Net change in the fair value of loans held-for-investment

 

(62)

 

324

Net gain (loss) on hedging activity

 

(1,425)

 

(275)

Service charges

 

28

 

27

Other

 

438

 

421

Total non-interest income

 

10,355

 

6,447

Non-interest expenses:

 

 

 

 

Salaries and employee benefits

 

9,884

 

7,727

Occupancy and equipment

 

924

 

963

Loan expenses

 

1,075

 

468

Professional fees

 

667

 

472

Advertising and promotion

 

609

 

465

Data processing

 

344

 

324

Information technology

 

318

 

266

Communications

 

130

 

192

Other

 

1,247

 

1,240

Total non-interest expenses

 

15,198

 

12,117

Income before income taxes

 

3,271

 

2,588

Income tax expense

 

755

 

582

Net income

$

2,516

 

2,006

 

 

 

 

 

Basic earnings per common share

$

0.39

 

0.31

 

 

 

 

 

Diluted earnings per common share

$

0.39

 

0.31

 

See accompanying notes to the unaudited consolidated financial statements.

4

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31, 

(dollars in thousands)

    

 

2020

    

2019

Net income:

 

$

2,516

 

2,006

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

Net change in unrealized gains on investment securities available for sale:

 

 

 

 

 

Net unrealized gains arising during the period, net of tax expense of $102, and $108, respectively

 

 

429

 

373

Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $0, and $0, respectively

 

 

 —

 

 —

Unrealized investment gains, net of tax expense of $102, and $108, respectively

 

 

429

 

373

Total other comprehensive income

 

 

429

 

373

Total comprehensive income

 

$

2,945

 

2,379

 

See accompanying notes to the unaudited consolidated financial statements.

5

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

Common

 

 

 

Treasury

 

Retained

 

Comprehensive

 

 

(dollars in thousands)

    

Stock

    

Surplus

    

Stock

    

Earnings

    

Income (Loss)

    

Total

Balance, January 1, 2019

$

6,407

 

79,919

 

 

 

23,616

 

(390)

 

109,552

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

2,006

 

 

 

2,006

Change in unrealized gains on securities available-for-sale, net of tax

 

 

 

 

 

 

 

 

 

373

 

373

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

2,379

Share-based awards and exercises

 

 —

 

 —

 

 

 

 

 

 

 

 —

Compensation expense related to stock option grants

 

 

 

61

 

 

 

 

 

 

 

61

Balance, March 31, 2019

$

6,407

 

79,980

 

 —

 

25,622

 

(17)

 

111,992

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2020

 

6,408

 

80,196

 

(3)

 

34,097

 

(3)

 

120,695

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

2,516

 

 

 

2,516

Change in unrealized gains on securities available-for-sale, net of tax

 

 

 

 

 

 

 

 

 

429

 

429

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

2,945

Share-based awards and exercises

 

 6

 

90

 

 

 

 

 

 

 

96

Net purchase of treasury stock through publicly announced plans

 

 

 

 

 

(5,703)

 

 

 

 

 

(5,703)

Balance, March 31, 2020

$

6,414

 

80,286

 

(5,706)

 

36,613

 

426

 

118,033

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

6

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

Three months ended

 

 

March 31, 

(dollars in thousands)

    

2020

    

2019

Net income

 

$

2,516

 

2,006

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

 

 

 

 

 

Depreciation and amortization

 

 

160

 

239

Net amortization of investment premiums and discounts

 

 

58

 

52

Provision for loan losses

 

 

1,552

 

219

Amortization of issuance costs on Subordinated Debt

 

 

24

 

 —

Compensation expense for stock options

 

 

 —

 

61

Net change in fair value of loans held for investment

 

 

62

 

(324)

Net change in fair value of loans held for sale

 

 

(860)

 

(90)

Net change in fair value of derivative instruments

 

 

(954)

 

(16)

Gain on sale of OREO

 

 

(6)

 

 —

SBA loan income

 

 

(569)

 

 —

Proceeds from sale of loans

 

 

189,561

 

112,948

Loans originated for sale

 

 

(254,601)

 

(96,265)

Mortgage banking income

 

 

(7,902)

 

(4,908)

Increase in accrued interest receivable

 

 

(135)

 

(112)

Increase in other assets

 

 

8,244

 

(161)

Earnings from investment in life insurance

 

 

(70)

 

(72)

Deferred income tax

 

 

412

 

45

Increase in accrued interest payable

 

 

490

 

129

Increase in other liabilities

 

 

(660)

 

1,064

Net cash (used) provided by operating activities

 

 

(62,678)

 

14,815

Cash flows from investing activities:

 

 

 

 

 

Activity in available-for-sale securities:

 

 

 

 

 

Maturities, repayments and calls

 

 

1,559

 

2,390

Purchases

 

 

(30,006)

 

(1,944)

Activity in held-to-maturity securities:

 

 

 

 

 

Maturities, repayments and calls

 

 

1,000

 

 —

Proceeds from sale of OREO

 

 

126

 

 —

Settlement of forward contracts

 

 

 —

 

(36)

(Increase) decrease in restricted stock

 

 

(275)

 

823

Net increase in loans

 

 

(56,197)

 

(27,283)

Purchases of premises and equipment

 

 

(186)

 

(86)

Net cash used in investing activities

 

 

(83,979)

 

(26,136)

Cash flows from financing activities:

 

 

 

 

 

Net increase in deposits

 

 

142,585

 

58,583

Increase (decrease) in short term borrowings

 

 

(18,169)

 

(32,068)

Increase (decrease) in short term borrowings with original maturity > 90 days

 

 

24,200

 

 —

Repayment of long term debt (Acquisition note)

 

 

 —

 

(206)

Proceeds from long term debt (FHLB advances)

 

 

1,900

 

 —

Issuance costs on Subordinated debt

 

 

(101)

 

 —

Net purchase of treasury stock through publicly announced plans

 

 

(5,703)

 

 —

Share based awards and exercises

 

 

96

 

 —

Net cash provided by financing activities

 

 

144,808

 

26,309

Net change in cash and cash equivalents 

 

 

(1,849)

 

14,988

Cash and cash equivalents at beginning of period

 

 

39,371

 

23,952

Cash and cash equivalents at end of period

 

$

37,522

 

38,940

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

3,638

 

3,718

Income taxes

 

 

145

 

2,735

Supplemental disclosure of cash flow information:

 

 

 

 

 

Transfers from loans and leases to real estate owned

 

 

 —

 

120

Transfers from loans held for sale to loans held for investment

 

 

 —

 

3,602

Net loans sold, not settled

 

 

(206)

 

 —

Investment security purchases, not settled

 

 

(2,757)

 

 —

 

See accompanying notes to the unaudited consolidated financial statements.

7

MERIDIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(1)      Basis of Presentation

Meridian Corporation (the “Corporation”)  was incorporated on June 8, 2009, by and at the direction of the board of directors of Meridian Bank (the “Bank”) for the sole purpose of acquiring the Bank and serving as the Bank’s parent bank holding company.  On August 24, 2018, the Corporation acquired the Bank in a merger and reorganization effected under Pennsylvania law and in accordance with the terms of a Plan of Merger and Reorganization dated April 26, 2018 (the “Agreement”).  Pursuant to the Agreement, on August 24, 2018 at 5:00 p.m. all of the outstanding shares of the Bank’s $1.00 par value common stock formerly held by its shareholders was converted into and exchanged for one newly issued share of the Corporation’s par value common stock, and the Bank became a subsidiary of the Corporation. Because the Bank and the Corporation were entities under common control, this exchange of shares between entities under common control resulted in the retrospective combination of the Bank and the Corporation for all periods presented as if the combination had been in effect since inception of common control.  As the Corporation had no assets, liabilities, revenues, expenses or operations prior to August 24, 2018, the historical financial statements of the Bank are the historical financial statements of the combined entity. 

The Corporation’s unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial position and the results of operations for the interim periods presented have been included.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Amounts subject to significant estimates are items such as the allowance for loan losses and lending related commitments, the fair value of financial instruments, other-than-temporary impairments of investment securities, and the valuations of goodwill and intangible assets, and servicing assets. 

In December 2019, a novel coronavirus (COVID-19) was reported in China, and, in March 2020, the World Health Organization declared it a pandemic. The outbreak of COVID-19 has adversely impacted a broad range of industries in which the Corporation’s customers operate and could impair their ability to fulfill their financial obligations to the Corporation.  The World Health Organization has declared COVID-19 to be a global pandemic indicating that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections. The spread of the outbreak has caused significant disruptions in the U.S. economy and has disrupted banking and other financial activity in the areas in which the Corporation operates.

 

Although the Corporation’s current estimates contemplate current conditions and how we expect them to change in the future, due to the impact that the COVID-19 has had on financial markets and the economy both locally and nationally, it is reasonably possible that this could materially affect these significant estimates and the Corporation’s results of operations and financial condition. 

 

The Corporation is working with customers directly affected by COVID-19.  The Corporation is prepared to offer short-term assistance in accordance with regulator guidelines.  Should economic conditions worsen, the Corporation could experience further increases in its required allowance for loan loss and record additional provision for loan loss expense. It is possible that the Corporation’s asset quality measures could worsen at future measurement periods if the effects of COVID-19 are prolonged.

 

COVID-19 could cause a further and sustained decline in the Corporation’s stock price or the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause us to perform goodwill and intangible asset impairment tests and result in an impairment charge being recorded for that period.

8

In the event that the Corporation concludes that all or a portion of its goodwill or intangible assets are impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital or regulatory capital. 

 

These unaudited consolidated financial statements should be read in conjunction with the Corporation’s filings with the Securities and Exchange Commission (including our Annual Report on Form 10-K for the year ended December 31, 2019) and, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K that update or provide information in addition to the information included in Form 10-K and Form 10-Q filings, if any.   For periods prior to the completion of the holding company reorganization, the Bank’s filings with the FDIC, including the Bank’s annual report on Form 10-K for the year ended December 31, 2017.  Certain prior period amounts have been reclassified to conform with current period presentation. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results for the year ending December 31, 2020 or for any other period.

 

 

 

 

(2)      Earnings per Common Share

Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per common share takes into account the potential dilution computed pursuant to the treasury stock method that could occur if stock options were exercised and converted into common stock. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be anti-dilutive.

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

(dollars in thousands, except per share data)

    

2020

    

2019

Numerator:

 

 

 

 

 

 

Net income available to common stockholders

 

$

2,516

 

 

2,006

Denominator for basic earnings per share - weighted average shares outstanding

 

 

6,383

 

 

6,407

Effect of dilutive common shares

 

 

37

 

 

29

Denominator for diluted earnings per share - adjusted weighted average shares outstanding

 

 

6,420

 

 

6,436

Basic earnings per share

 

$

0.39

 

 

0.31

Diluted earnings per share

 

$

0.39

 

 

0.31

Antidilutive shares excluded from computation of average dilutive earnings per share

 

 

202

 

 

126

 

 

(3)      Goodwill and Other Intangibles

The Corporation’s goodwill and intangible assets are detailed below:

 

 

 

 

 

 

 

 

 

 

 

 

Balance

 

 

 

Balance

 

Amortization

 

 

December 31, 

 

Amortization

 

March 31, 

 

Period

(dollars in thousands)

    

2019

    

Expense

    

2020

    

(in years)

Goodwill - Wealth

 

$

899

 

 —

 

899

 

Indefinite

Total Goodwill

 

 

899

 

 —

 

899

 

 

 

 

 

 

 

 

 

 

 

 

Intangible assets - trade name

 

 

266

 

 —

 

266

 

Indefinite

Intangible assets - customer relationships

 

 

3,523

 

(52)

 

3,471

 

20

Intangible assets - non competition agreements

 

 

85

 

(17)

 

68

 

4

Total Intangible Assets

 

 

3,874

 

(69)

 

3,805

 

 

Total 

 

$

4,773

 

(69)

 

4,704

 

 

 

Accumulated amortization on intangible assets was $819 thousand and $750 thousand as of March 31, 2020 and December 31, 2019, respectively.

9

The Corporation performs an evaluation annually, or more frequently if a triggering event occurs, of whether any impairment of the goodwill and other intangible assets had occurred in accordance with ASC 350, “Intangibles - Goodwill and Other”. For the period from January 1, 2020 through March 31, 2020, the Corporation determined that no impairment existed.

 

(4)      Securities

The amortized cost and fair value of securities as of March 31, 2020 and December 31, 2019 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

 

 

 

Gross

 

Gross

 

 

 

 

Amortized

 

unrealized

 

unrealized

 

Fair

(dollars in thousands)

    

cost

    

gains

    

losses

    

value

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

U.S. asset backed securities

 

$

21,224

 

11

 

(574)

 

20,661

U.S. government agency mortgage-backed securities

 

 

7,888

 

245

 

(1)

 

8,132

U.S. government agency collateralized mortgage obligations

 

 

36,953

 

682

 

(293)

 

37,342

State and municipal securities

 

 

23,974

 

459

 

(16)

 

24,417

Total securities available-for-sale

 

$

90,039

 

1,397

 

(884)

 

90,552

Securities held to maturity:

 

 

 

 

 

 

 

 

 

State and municipal securities

 

 

7,747

 

199

 

 —

 

7,946

Total securities held-to-maturity

 

$

7,747

 

199

 

 —

 

7,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

Gross

 

Gross

 

 

 

 

Amortized

 

unrealized

 

unrealized

 

Fair

(dollars in thousands)

    

cost

    

gains

    

losses

    

value

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

U.S. asset backed securities

 

$

11,967

 

— 

 

(101)

 

11,866

U.S. government agency mortgage-backed securities

 

 

5,457

 

66

 

(26)

 

5,497

U.S. government agency collateralized mortgage obligations

 

 

35,096

 

300

 

(173)

 

35,223

State and municipal securities

 

 

6,354

 

 —

 

(84)

 

6,270

Total securities available-for-sale

 

$

58,874

 

366

 

(384)

 

58,856

Securities held to maturity:

 

 

 

 

 

 

 

 

 

State and municipal securities

 

 

8,780

 

223

 

 —

 

9,003

Total securities held-to-maturity

 

$

8,780

 

223

 

 —

 

9,003

 

At March 31, 2020, the Corporation had one U.S. government sponsored agency mortgage‑backed security,  eleven U.S. government sponsored agency collateralized mortgage obligations, fifteen U.S. asset backed securities, and five State and municipal securities in unrealized loss positions.  At December 31, 2019, the Corporation had nine U.S. asset backed securities, one U.S. Government sponsored agency mortgage‑backed security, fifteen U.S. Government sponsored agency collateralized mortgage obligations, and six State and municipal securities in unrealized loss positions.  Although the Corporation’s investment portfolio overall is in a net unrealized gain position at March 31, 2020, the temporary impairment in the above noted securities is primarily the result of changes in market interest rates subsequent to purchase and the Corporation does not intend to sell these securities prior to recovery and it is more likely than not that the Corporation will not be required to sell these securities prior to recovery to satisfy liquidity needs, and therefore, no securities are deemed to be other‑than‑temporarily impaired.

10

The following table shows the Corporation’s investment gross unrealized losses and fair value aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position at March 31, 2020 and December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

Less than 12 Months

 

12 Months or more

 

Total

 

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

(dollars in thousands)

    

value

    

losses

    

value

    

losses

    

value

    

losses

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. asset backed securities

 

$

19,304

 

(574)

 

— 

 

 —

 

19,304

 

(574)

U.S. government agency mortgage-backed securities

 

 

43

 

(1)

 

— 

 

 —

 

43

 

(1)

U.S. government agency collateralized mortgage obligations

 

 

11,944

 

(205)

 

2,890

 

(88)

 

14,834

 

(293)

State and municipal securities

 

 

5,156

 

(16)

 

 —

 

 —

 

5,156

 

(16)

Total securities available-for-sale

 

$

36,447

 

(796)

 

2,890

 

(88)

 

39,337

 

(884)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

Less than 12 Months

 

12 Months or more

 

Total

 

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

(dollars in thousands)

    

value

    

losses

    

value

    

losses

    

value

    

losses

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. asset backed securities

 

$

11,866

 

(101)

 

— 

 

— 

 

11,866

 

(101)

U.S. government agency mortgage-backed securities

 

 

 —

 

 —

 

1,636

 

(26)

 

1,636

 

(26)

U.S. government agency collateralized mortgage obligations

 

 

16,283

 

(116)

 

3,108

 

(57)

 

19,391

 

(173)

State and municipal securities

 

 

6,270

 

(84)

 

 —

 

 —

 

6,270

 

(84)

Total securities available-for-sale

 

$

34,419

 

(301)

 

4,744

 

(83)

 

39,163

 

(384)

 

The amortized cost and carrying value of securities at March 31, 2020 and December 31, 2019 are shown below by contractual maturities. Actual maturities may differ from contractual maturities as issuers may have the right to call or repay obligations with or without call or prepayment penalties.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

December 31, 2019

 

 

Available-for-sale

 

Held-to-maturity

 

Available-for-sale

 

Held-to-maturity

 

 

Amortized

 

Fair

 

Amortized

 

Fair

 

Amortized

 

Fair

 

Amortized

 

Fair

(dollars in thousands)

    

cost

    

value

    

cost

    

value

    

cost

    

value

    

cost

    

value

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Due in one year or less

 

$

 —

 

 —

 

 —

 

 —

 

$

 —

 

 —

 

 —

 

 —

 Due after one year through five years

 

 

 —

 

 —

 

3,227

 

3,285

 

 

 —

 

 —

 

4,242

 

4,311

 Due after five years through ten years

 

 

2,299

 

2,288

 

4,520

 

4,661

 

 

1,329

 

1,324

 

4,538

 

4,692

 Due after ten years

 

 

42,899

 

42,790

 

 —

 

 —

 

 

16,992

 

16,812

 

 —

 

 —

    Subtotal

 

 

45,198

 

45,078

 

7,747

 

7,946

 

 

18,321

 

18,136

 

8,780