Company Quick10K Filing
Quick10K
Summit Financial Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$26.10 13 $331
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 2019-05-21 Shareholder Vote
8-K 2019-04-25 Earnings, Exhibits
8-K 2019-02-07 Officers, Exhibits
8-K 2019-01-29 Earnings, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-09-18 Other Events, Exhibits
8-K 2018-07-26 Earnings, Other Events, Exhibits
8-K 2018-07-24 Enter Agreement, Officers, Other Events, Exhibits
8-K 2018-05-16 Shareholder Vote
8-K 2018-04-26 Earnings, Exhibits
8-K 2018-02-08 Officers, Exhibits
8-K 2018-01-25 Earnings, Officers, Exhibits
8-K 2018-01-12 Other Events
SYKE Sykes Enterprises 1,120
ARQL Arqule 680
BZH Beazer Homes 336
GCBC Greene County Bancorp 261
ALT Altimmune 38
SNGX Soligenix 13
SHIP Seanergy Maritime 5
PRAN Prana Biotechnology 0
BLGO Biolargo 0
ZGSI Zero Gravity Solutions 0
SMMF 2019-03-31
Item 1. Financial Statements
Note 1. Basis of Presentation
Note 2. Significant New Authoritative Accounting Guidance
Note 3. Fair Value Measurements
Note 4. Earnings per Share
Note 5. Debt Securities
Note 6. Loans
Note 7. Allowance for Loan Losses
Note 8. Goodwill and Other Intangible Assets
Note 9. Deposits
Note 10. Borrowed Funds
Note 11. Share-Based Compensation
Note 12. Commitments and Contingencies
Note 13. Regulatory Matters
Note 14. Derivative Financial Instruments
Note 15. Acquisitions
Note 16. Accumulated Other Comprehensive Income (Loss)
Note 17. Income Taxes
Note 18. Revenue From Contracts with Customers
Note 19. Subsequent Event
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 6. Exhibits
EX-31.1 smmf-20190331xexh311.htm
EX-31.2 smmf-20190331xexh312.htm
EX-32.1 smmf-20190331xexh321.htm
EX-32.2 smmf-20190331xexh322.htm

Summit Financial Group Earnings 2019-03-31

SMMF 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 smmf-20190331x10q.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10 – Q

[X]         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 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 0-16587 
sfglogousethisone.jpg
Summit Financial Group, Inc.
(Exact name of registrant as specified in its charter)
West Virginia
55-0672148
(State or other jurisdiction of
(IRS Employer
incorporation or organization)
Identification No.)
300 North Main Street
 
Moorefield, West Virginia
26836
(Address of principal executive offices)
(Zip Code)
(304) 530-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities and 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 þ
No o

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 þ
No o

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 o               Accelerated filer þ    Non-accelerated filer o
                  Smaller reporting company o     Emerging growth company o
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o
No þ

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date.
Common Stock, $2.50 par value
12,672,167 shares outstanding as of April 23, 2019



Table of Contents


 
 
 
Page
PART  I.
FINANCIAL INFORMATION
 
 
 
 
 
 
Item 1.
Financial Statements
 
 
 
 
 
 
 
Consolidated balance sheets March 31, 2019 (unaudited) and
December 31, 2018
 
 
 
 
 
 
Consolidated statements of income
for the three months ended March 31, 2019 and 2018 (unaudited)
 
 
 
 
 
 
Consolidated statements of comprehensive income
for the three months ended March 31, 2019 and 2018 (unaudited)
 
 
 
 
 
 
Consolidated statements of shareholders’ equity
for the three months ended
March 31, 2019 and 2018 (unaudited)
 
 
 
 
 
 
Consolidated statements of cash flows
for the three months ended
March 31, 2019 and 2018 (unaudited)
 
 
 
 
 
 
Notes to consolidated financial statements (unaudited)
 
 
 
 
 
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
None
 
 
 
 
 
Item 3.
Defaults upon Senior Securities
None
 
 
 
 
 
Item 4.
Mine Safety Disclosures
None
 
 
 
 
 
Item 5.
Other Information
None
 
 
 
 
 
Item 6.
Exhibits
 
 
 
 
EXHIBIT INDEX
 
 
 
 
 
SIGNATURES
 

2


Item 1. Financial Statements



Consolidated Balance Sheets (unaudited)

 
March 31,
2019
 
December 31,
2018
Dollars in thousands, except per share amounts
(unaudited)
 
(*)
ASSETS
 
 
 

Cash and due from banks
$
14,265

 
$
23,061

Interest bearing deposits with other banks
43,689

 
36,479

Cash and cash equivalents
57,954

 
59,540

Debt securities available for sale
297,126

 
293,147

Other investments
12,597

 
16,635

Loans held for sale
433

 
400

Loans, net of unearned income
1,738,196

 
1,695,052

    Less: allowance for loan losses
(13,132
)
 
(13,047
)
         Loans, net
1,725,064

 
1,682,005

Property held for sale
24,393

 
21,432

Premises and equipment, net
38,475

 
37,553

Accrued interest receivable
8,828

 
8,708

Goodwill and other intangible assets
29,349

 
25,842

Cash surrender value of life insurance policies
42,714

 
42,386

Other assets
12,708

 
12,938

Total assets
$
2,249,641

 
$
2,200,586

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 

 
 

Liabilities
 

 
 

Deposits
 

 
 

Non interest bearing
$
258,680

 
$
222,120

Interest bearing
1,530,352

 
1,412,706

Total deposits
1,789,032

 
1,634,826

Short-term borrowings
186,292

 
309,084

Long-term borrowings
730

 
735

Subordinated debentures owed to unconsolidated subsidiary trusts
19,589

 
19,589

Other liabilities
20,368

 
16,522

Total liabilities
2,016,011

 
1,980,756

 
 
 
 
Commitments and Contingencies


 


 
 
 
 
Shareholders' Equity
 

 
 

Preferred stock, $1.00 par value, authorized 250,000 shares

 

Common stock and related surplus, $2.50 par value; authorized 20,000,000 shares; issued: 2019 - 12,743,367 shares and 2018 - 12,399,887 shares; outstanding: 2019 - 12,661,528 shares and 2018 - 12,312,933
86,729

 
80,431

Unallocated common stock held by Employee Stock Ownership Plan - 2019 - 81,839 shares and 2018 - 86,954 shares
(884
)
 
(939
)
Retained earnings
146,671

 
141,354

Accumulated other comprehensive income (loss)
1,114

 
(1,016
)
Total shareholders' equity
233,630

 
219,830

 
 
 
 
Total liabilities and shareholders' equity
$
2,249,641

 
$
2,200,586


(*) - Derived from audited consolidated financial statements


See Notes to Consolidated Financial Statements



Consolidated Statements of Income (unaudited)


 
 
For the Three Months Ended March 31,
Dollars in thousands, except per share amounts
 
2019
 
2018
Interest income
 
 
 
 
Interest and fees on loans
 
 
 
 
Taxable
 
$
22,906

 
$
20,222

Tax-exempt
 
145

 
144

Interest and dividends on securities
 
 

 
 

Taxable
 
1,686

 
1,372

Tax-exempt
 
900

 
1,019

Interest on interest bearing deposits with other banks
 
231

 
140

Total interest income
 
25,868

 
22,897

Interest expense
 
 

 
 

Interest on deposits
 
5,564

 
3,549

Interest on short-term borrowings
 
1,472

 
1,405

Interest on long-term borrowings and subordinated debentures
 
259

 
686

Total interest expense
 
7,295

 
5,640

Net interest income
 
18,573

 
17,257

Provision for loan losses
 
250

 
500

Net interest income after provision for loan losses
 
18,323

 
16,757

Noninterest income
 
 

 
 

Insurance commissions
 
1,174

 
1,113

Trust and wealth management fees
 
586

 
667

Service charges on deposit accounts
 
1,180

 
1,091

Bank card revenue
 
814

 
749

Realized securities (losses) gains, net
 
(3
)
 
732

Bank owned life insurance income
 
238

 
275

Other
 
241

 
249

Total noninterest income
 
4,230

 
4,876

Noninterest expenses
 
 

 
 

Salaries, commissions and employee benefits
 
7,347

 
6,821

Net occupancy expense
 
924

 
832

Equipment expense
 
1,179

 
1,083

Professional fees
 
403

 
333

Advertising and public relations
 
153

 
103

Amortization of intangibles
 
476

 
436

FDIC premiums
 

 
240

Bank card expense
 
439

 
335

Foreclosed properties expense, net of losses
 
384

 
325

Merger-related expenses
 
63

 

Other
 
2,492

 
1,806

Total noninterest expenses
 
13,860

 
12,314

Income before income tax expense
 
8,693

 
9,319

Income tax expense
 
1,601

 
1,876

Net income
 
$
7,092

 
$
7,443

 
 
 
 
 
Basic earnings per common share
 
$
0.56

 
$
0.60

Diluted earnings per common share
 
$
0.56

 
$
0.60



See Notes to Consolidated Financial Statements 



Consolidated Statements of Comprehensive Income (unaudited)


 
For the Three Months Ended 
 March 31,
Dollars in thousands
2019
 
2018
Net income
$
7,092

 
$
7,443

Other comprehensive income (loss):
 

 
 

Net unrealized (loss) gain on cashflow hedge of:
2019 - ($12), net of deferred taxes of ($3); 2018 - $941, net of deferred taxes of $226
(9
)
 
715

Net unrealized gain (loss) on securities available for sale of:
2019 - $3,246, net of deferred taxes of $779 and reclassification adjustment for net realized losses included in net income of ($3), net of tax of ($1); 2018 - ($4,388), net of deferred taxes of ($1,053) and reclassification adjustment for net realized gains included in net income of $732, net of tax of $176
2,467

 
(3,335
)
Net unrealized loss on pension plan of:
2019 - ($432), net of deferred taxes of ($104)
(328
)
 

Total other comprehensive income (loss)
2,130

 
(2,620
)
Total comprehensive income
$
9,222

 
$
4,823








































See Notes to Consolidated Financial Statements



Consolidated Statements of Shareholders’ Equity (unaudited)


Dollars in thousands, except per share amounts
Common
Stock and
Related
Surplus
 
Unallocated Common Stock Held by ESOP
 
Retained
Earnings
 
Accumulated
Other
Compre-
hensive
Income
(Loss)
 
Total
Share-
holders'
Equity
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018
$
80,431

 
$
(939
)
 
$
141,354

 
$
(1,016
)
 
$
219,830

 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 

 
 
 
 

 
 

 
 

Net income

 

 
7,092

 

 
7,092

Other comprehensive income

 

 

 
2,130

 
2,130

Share-based compensation expense
132

 

 

 

 
132

Unallocated ESOP shares committed to be released - 5,115 shares
65

 
55

 

 

 
120

Retirement of 125,200 shares of common stock
(2,876
)
 

 

 

 
(2,876
)
Acquisition of Peoples Bankshares, Inc. - 465,931 shares, net of issuance costs
8,918

 

 

 

 
8,918

Common stock issuances from reinvested dividends - 2,309 shares
59

 

 

 

 
59

Common stock cash dividends declared ($0.14 per share)

 

 
(1,775
)
 

 
(1,775
)
Balance, March 31, 2019
$
86,729

 
$
(884
)
 
$
146,671

 
$
1,114

 
$
233,630

 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2017
$
81,098

 
$
(1,152
)
 
$
119,827

 
$
1,732

 
$
201,505

 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 

 
 
 
 

 
 

 
 

Net income

 

 
7,443

 

 
7,443

Other comprehensive loss

 

 

 
(2,620
)
 
(2,620
)
Exercise of stock options - 200 shares
4

 

 

 

 
4

Share-based compensation expense
94

 

 

 

 
94

Unallocated ESOP shares committed to be released - 5,081 shares
73

 
54

 

 

 
127

Common stock issuances from reinvested dividends - 2,517 shares
63

 

 

 

 
63

Common stock cash dividends declared ($0.13 per share)

 

 
(1,607
)
 

 
(1,607
)
Balance, March 31, 2018
$
81,332

 
$
(1,098
)
 
$
125,663

 
$
(888
)
 
$
205,009


















See Notes to Consolidated Financial Statements



Consolidated Statements of Cash Flows (unaudited)


 
 
Three Months Ended
Dollars in thousands
 
March 31,
2019
 
March 31,
2018
Cash Flows from Operating Activities
 
 
 
 
Net income
 
$
7,092

 
$
7,443

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

 
 

Depreciation
 
601

 
527

Provision for loan losses
 
250

 
500

Share-based compensation expense
 
132

 
94

Deferred income tax benefit
 
(313
)
 
(155
)
Loans originated for sale
 
(3,946
)
 
(4,122
)
Proceeds from sale of loans
 
3,980

 
3,984

Gains on loans held for sale
 
(67
)
 
(83
)
Realized securities losses (gains), net
 
3

 
(732
)
Gain on disposal of assets
 
(2
)
 
(72
)
Write-downs of foreclosed properties
 
249

 
257

Amortization of securities premiums, net
 
655

 
990

Accretion related to acquisitions, net
 
(76
)
 
(204
)
Amortization of intangibles
 
476

 
436

Earnings on bank owned life insurance
 
(328
)
 
(309
)
Decrease (increase) in accrued interest receivable
 
311

 
(17
)
Decrease in other assets
 
69

 
117

Increase in other liabilities
 
2,140

 
2,043

Net cash provided by operating activities
 
11,226

 
10,697

Cash Flows from Investing Activities
 
 

 
 

Proceeds from maturities and calls of securities available for sale
 
1,100

 
55

Proceeds from sales of securities available for sale
 
79,776

 
39,267

Principal payments received on securities available for sale
 
4,684

 
6,690

Purchases of securities available for sale
 
(31,839
)
 
(18,825
)
Purchases of other investments
 
(1,348
)
 
(2,765
)
Proceeds from redemptions of other investments
 
5,330

 
4,378

Net loan originations
 
(5,295
)
 
(38,854
)
Purchases of premises and equipment
 
(708
)
 
(1,872
)
Proceeds from disposal of premises and equipment
 
3

 
9

Improvements to property held for sale
 
(1
)
 
(101
)
Proceeds from sales of repossessed assets & property held for sale
 
451

 
644

Cash and cash equivalents acquired in acquisition, net of $12,740 cash consideration paid
 
20,589

 

Net cash provided by (used in) investing activities
 
72,742

 
(11,374
)
Cash Flows from Financing Activities
 
 

 
 

Net increase in demand deposit, NOW and savings accounts
 
25,880

 
27,160

Net increase in time deposits
 
16,032

 
26,824

Net decrease in short-term borrowings
 
(122,791
)
 
(56,987
)
Repayment of long-term borrowings
 
(4
)
 
(4
)
Proceeds from issuance of common stock, net of issuance costs
 
(20
)
 
63

Purchase and retirement of common stock
 
(2,876
)
 

Exercise of stock options
 

 
4

Dividends paid on common stock
 
(1,775
)
 
(1,607
)
Net cash used in financing activities
 
(85,554
)
 
(4,547
)
Decrease in cash and cash equivalents
 
(1,586
)
 
(5,224
)
Cash and cash equivalents:
 
 

 
 

Beginning
 
59,540

 
52,631

Ending
 
$
57,954

 
$
47,407

 
(Continued)
 
 
 
 
 
See Notes to Consolidated Financial Statements
 
 
 
 



Consolidated Statements of Cash Flows (unaudited) - continued


 
 
Three Months Ended
Dollars in thousands
 
March 31,
2019
 
March 31,
2018
Supplemental Disclosures of Cash Flow Information
 
 
 
 
Cash payments for:
 
 
 
 
Interest
 
$
7,134

 
$
5,574

Income taxes
 
$

 
$

 
 
 
 
 
Supplemental Disclosures of Noncash Investing and Financing Activities
 
 
 
 

Real property and other assets acquired in settlement of loans
 
$
3,691

 
$
641

Supplemental Disclosures of Noncash Transactions Included in Acquisition
 
 
 
 
Assets acquired
 
$
100,377

 
$

Liabilities assumed
 
$
114,151

 
$





















































See Notes to Consolidated Financial Statements




NOTE 1.  BASIS OF PRESENTATION

We, Summit Financial Group, Inc. and subsidiaries, prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Regulation S-X.  Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual year end financial statements.  In our opinion, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature.

The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us 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 materially from these estimates.

The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the full year.  The consolidated financial statements and notes included herein should be read in conjunction with our 2018 audited financial statements and Annual Report on Form 10-K. 

NOTE 2.  SIGNIFICANT NEW AUTHORITATIVE ACCOUNTING GUIDANCE

Recently Adopted
We adopted ASU No. 2016-02, Leases (Topic 842) and its related amendments on its required effective date of January 1, 2019 utilizing the modified retrospective approach. Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary. The impact, deemed insignificant, to our consolidated financial position upon adoption was the recognition, on a discounted basis, of our minimum commitments under non-cancellable operating leases on our consolidated balance sheets resulting in the recording of right of use assets and lease obligations of approximately $870,000 which is related to long-term operating leases of premises and leases of equipment used in operations. The right-of-use assets and lease liabilities are included in other assets and other liabilities in the Consolidated Balance Sheets. Our current minimum commitments under long-term operating leases are disclosed in Note 12, Commitments and Contingencies.
We adopted ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities on its required effective date of January 1, 2019. This guidance shortens the amortization period for premiums on certain callable debt securities to the earliest call date (with an explicit, noncontingent call feature that is callable at a fixed price and on a preset date), rather than contractual maturity date as currently required under GAAP. The ASU does not impact instruments without preset call dates such as mortgage-backed securities.  For instruments with contingent call features, once the contingency is resolved and the security is callable at a fixed price and preset date, the security is within the scope of the ASU.  The adoption of the new pronouncement did not have a significant impact on our consolidated financial statements.
 
Pending Adoption

During June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments. The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendments in this ASU are effective for SEC filers for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. We will adopt the guidance by the first quarter of 2020 with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. In this regard, we have a cross-functional implementation team comprised of personnel from risk management, operations and information technology, loan administration and finance and engaged a third-party to assist us. The team has developed a project plan, identified key decision points and prepared a readiness assessment and gap analysis relative to required data which serves to direct our areas of focus. In addition, we have collected applicable historical data and made preliminary decisions regarding methodology and loan pool structures. We will continue to evaluate the impact the new standard will have on our consolidated financial



statements as the final impact will be dependent, among other items, upon the loan portfolio composition and credit quality at the adoption date, as well as economic conditions, financial models used and forecasts at that time.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendments modify the disclosure requirements in Topic 820 to add disclosures regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty. Certain disclosure requirements in Topic 820 are also removed or modified. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain of the amendments are to be applied prospectively while others are to be applied retrospectively. Early adoption is permitted. We do not expect the adoption of ASU 2018-13 to have a material impact on our consolidated financial statements.

NOTE 3.  FAIR VALUE MEASUREMENTS

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.
 
Balance at
 
Fair Value Measurements Using:
Dollars in thousands
March 31, 2019
 
Level 1
 
Level 2
 
Level 3
Securities available for sale
 
 
 
 
 
 
 
U.S. Government sponsored agencies
$
25,046

 
$

 
$
25,046

 
$

Mortgage backed securities:
 

 
 

 
 

 
 

Government sponsored agencies
82,458

 

 
82,458

 

Nongovernment sponsored entities
7,729

 

 
7,729

 

State and political subdivisions
20,547

 

 
20,547

 

Corporate debt securities
15,450

 

 
15,450

 

Asset-backed securities
33,834

 

 
33,834

 

Tax-exempt state and political subdivisions
112,062

 

 
112,062

 

Total securities available for sale
$
297,126

 
$

 
$
297,126

 
$

 
 
 
 
 
 
 
 
Derivative financial assets
 
 
 
 
 
 
 
Interest rate swaps
$
240

 
$

 
$
240

 
$

 
 
 
 
 
 
 
 
Derivative financial liabilities
 

 
 

 
 

 
 

Interest rate swaps
$
423

 
$

 
$
423

 
$



 
Balance at
 
Fair Value Measurements Using:
Dollars in thousands
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
Securities available for sale
 
 
 
 
 
 
 
U.S. Government sponsored agencies
$
26,140

 
$

 
$
26,140

 
$

Mortgage backed securities:
 

 
 

 
 

 
 

Government sponsored agencies
80,309

 

 
80,309

 

Nongovernment sponsored entities
614

 

 
614

 

State and political subdivisions
19,243

 

 
19,243

 

Corporate debt securities
14,512

 

 
14,512

 

Asset-backed securities
25,175

 

 
25,175

 

Tax-exempt state and political subdivisions
127,154

 

 
127,154

 

Total securities available for sale
$
293,147

 
$

 
$
293,147

 
$

 
 
 
 
 
 
 
 
Derivative financial assets
 
 
 
 
 
 
 
Interest rate swaps
$
555

 
$

 
$
555

 
$

 
 
 
 
 
 
 
 
Derivative financial liabilities
 

 
 

 
 

 
 

Interest rate swaps
$
411

 
$

 
$
411

 
$




10


We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles.  These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.  Assets measured at fair value on a nonrecurring basis are included in the table below.
 
Balance at
 
Fair Value Measurements Using:
Dollars in thousands
March 31, 2019
 
Level 1
 
Level 2
 
Level 3
Residential mortgage loans held for sale
$
433

 
$

 
$
433

 
$

 
 
 
 
 
 
 
 
Collateral-dependent impaired loans
 

 
 

 
 

 
 

Commercial
$
57

 
$

 
$
8

 
$
49

Commercial real estate
420

 
$

 
420

 

Construction and development
758

 
$

 
758

 

Residential real estate
799

 

 
799

 

Total collateral-dependent impaired loans
$
2,034

 
$

 
$
1,985

 
$
49

 
 
 
 
 
 
 
 
Property held for sale
 

 
 

 
 

 
 

Commercial real estate
$
1,627

 
$

 
$
1,627

 
$

Construction and development
16,522

 

 
16,522

 

Residential real estate
643

 

 
643

 

Total property held for sale
$
18,792

 
$

 
$
18,792

 
$



 
Balance at
 
Fair Value Measurements Using:
Dollars in thousands
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
Residential mortgage loans held for sale
$
400

 
$

 
$
400

 
$

 
 
 
 
 
 
 
 
Collateral-dependent impaired loans
 

 
 

 
 

 
 

Commercial
$
2,660

 
$

 
$
2,611

 
$
49

Commercial real estate
420

 

 
420

 

Construction and development
759

 

 
759

 

Residential real estate
763

 

 
763

 

Total collateral-dependent impaired loans
$
4,602

 
$

 
$
4,553

 
$
49

 
 
 
 
 
 
 
 
Property held for sale
 

 
 

 
 

 
 

Commercial real estate
$
1,677

 
$

 
$
1,677

 
$

Construction and development
16,363

 

 
16,363

 

Residential real estate
403

 

 
403

 

Total property held for sale
$
18,443

 
$

 
$
18,443

 
$






The carrying values and estimated fair values of our financial instruments are summarized below:
 
 
March 31, 2019
 
Fair Value Measurements Using:
Dollars in thousands
 
Carrying
Value
 
Estimated
Fair
Value
 
Level 1
Level 2
Level 3
Financial assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
57,954

 
$
57,954

 
$

$
57,954

$

Securities available for sale
 
297,126

 
297,126

 

297,126


Other investments
 
12,597

 
12,597

 

12,597


Loans held for sale, net
 
433

 
433

 

433


Loans, net
 
1,725,064

 
1,729,204

 

1,985

1,727,219

Accrued interest receivable
 
8,828

 
8,828

 

8,828


Derivative financial assets
 
240

 
240

 

240


 
 
$
2,102,242

 
$
2,106,382

 
$

$
379,163

$
1,727,219

Financial liabilities
 
 

 
 

 
 

 

 
Deposits
 
$
1,789,032

 
$
1,785,991

 
$

$
1,785,991

$

Short-term borrowings
 
186,292

 
186,292

 

186,292


Long-term borrowings
 
730

 
854

 

854


Subordinated debentures owed to unconsolidated subsidiary trusts
 
19,589

 
19,589

 

19,589


Accrued interest payable
 
1,262

 
1,262

 

1,262


Derivative financial liabilities
 
423

 
423

 

423


 
 
$
1,997,328

 
$
1,994,411

 
$

$
1,994,411

$


 
 
December 31, 2018
 
Fair Value Measurements Using:
Dollars in thousands
 
Carrying
Value
 
Estimated
Fair
Value
 
Level 1
Level 2
Level 3
Financial assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
59,540

 
$
59,540

 
$

$
59,540

$

Securities available for sale
 
293,147

 
293,147

 

293,147


Other investments
 
16,635

 
16,635

 

16,635


Loans held for sale, net
 
400

 
400

 

400


Loans, net
 
1,682,005

 
1,666,834

 

4,553

1,662,281

Accrued interest receivable
 
8,708

 
8,708

 

8,708


Derivative financial assets
 
555

 
555

 

555


 
 
$
2,060,990

 
$
2,045,819

 
$

$
383,538

$
1,662,281

Financial liabilities
 
 

 
 

 
 

 

 
Deposits
 
$
1,634,826

 
$
1,631,456

 
$

$
1,631,456

$

Short-term borrowings
 
309,084

 
309,084

 

309,084


Long-term borrowings
 
735

 
843

 

843


Subordinated debentures owed to unconsolidated subsidiary trusts
 
19,589

 
19,589

 

19,589


Accrued interest payable
 
1,102

 
1,102

 

1,102


Derivative financial liabilities
 
411

 
411

 

411


 
 
$
1,965,747

 
$
1,962,485

 
$

$
1,962,485

$






NOTE 4.  EARNINGS PER SHARE

The computations of basic and diluted earnings per share follow:
 
 
For the Three Months Ended March 31,
 
 
2019
 
2018
Dollars in thousands,except per share amounts
 
Net Income
(Numerator)
 
Common
Shares
(Denominator)
 
Per
Share
 
Net Income
(Numerator)
 
Common
Shares
(Denominator)
 
Per
Share
Net income
 
$
7,092

 
 
 
 
 
$
7,443

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
7,092

 
12,717,501

 
$
0.56

 
$
7,443

 
12,358,849

 
$
0.60

 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of dilutive securities:
 
 
 
 
 
 

 
 
 
 
 
 

Stock options
 
 
 
5,313

 
 

 
 
 
7,521

 
 

Stock appreciation rights (SARs)
 
 
 
55,831

 
 
 
 
 
17,387

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
7,092

 
12,778,644

 
$
0.56

 
$
7,443

 
12,383,757

 
$
0.60


Stock option and stock appreciation right (SAR) grants are disregarded in this computation if they are determined to be anti-dilutive.  Our anti-dilutive stock options for the quarters ended March 31, 2019 and March 31, 2018 were 7,700 shares and 15,600 shares respectively. Our anti-dilutive SARs for the quarters ended March 31, 2019 and March 31, 2018 were 222,740 and 87,615, respectively .

NOTE 5.  DEBT SECURITIES

The amortized cost, unrealized gains, unrealized losses and estimated fair values of securities at March 31, 2019 and December 31, 2018 are summarized as follows:
 
March 31, 2019
 
Amortized
 
Unrealized
 
Estimated
Dollars in thousands
Cost
 
Gains
 
Losses
 
Fair Value
Available for Sale
 
 
 
 
 
 
 
Taxable debt securities
 
 
 
 
 
 
 
U.S. Government and agencies and corporations
$
25,185

 
$
213

 
$
352

 
$
25,046

Residential mortgage-backed securities:
 

 
 

 
 

 
 

Government-sponsored agencies
82,661

 
674

 
877

 
82,458

Nongovernment-sponsored entities
7,818

 
4

 
93

 
7,729

State and political subdivisions
 

 
 

 
 

 
 

General obligations
7,071

 
13

 
27

 
7,057

Other revenues
13,450

 
70

 
30

 
13,490

Corporate debt securities
15,740

 
10

 
300

 
15,450

Asset-backed securities
34,194

 

 
360

 
33,834

Total taxable debt securities
186,119

 
984

 
2,039

 
185,064

Tax-exempt debt securities
 

 
 

 
 

 
 

State and political subdivisions
 

 
 

 
 

 
 

General obligations
57,027

 
1,921

 
23

 
58,925

Water and sewer revenues
15,776

 
435

 
5

 
16,206

Lease revenues
11,545

 
419

 

 
11,964

Other revenues
24,518

 
474

 
25

 
24,967

Total tax-exempt debt securities
108,866

 
3,249

 
53

 
112,062

Total securities available for sale
$
294,985

 
$
4,233

 
$
2,092

 
$
297,126





 
December 31, 2018
 
Amortized
 
Unrealized
 
Estimated
Dollars in thousands
Cost
 
Gains
 
Losses
 
Fair Value
Available for Sale
 
 
 
 
 
 
 
Taxable debt securities
 
 
 
 
 
 
 
U.S. Government and agencies and corporations
$
26,303

 
$
203

 
$
366

 
$
26,140

Residential mortgage-backed securities:
 

 
 

 
 

 
 

Government-sponsored agencies
80,883

 
603

 
1,177

 
80,309

Nongovernment-sponsored entities
611

 
4

 
1

 
614

State and political subdivisions
 

 
 

 
 

 
 

General obligations
6,081

 

 
126

 
5,955

Other revenues
13,457

 
17

 
186

 
13,288

Corporate debt securities
14,807

 
9

 
304

 
14,512

          Asset-backed securities
25,288

 
10

 
123

 
25,175

Total taxable debt securities
167,430

 
846

 
2,283

 
165,993

Tax-exempt debt securities
 

 
 

 
 

 
 

State and political subdivisions
 

 
 

 
 

 
 

General obligations
65,626

 
624

 
344

 
65,906

Water and sewer revenues
20,018

 
225

 
98

 
20,145

Lease revenues
10,980

 
135

 
7

 
11,108

Other revenues
30,197

 
77

 
279

 
29,995

Total tax-exempt debt securities
126,821

 
1,061

 
728

 
127,154

Total securities available for sale
$
294,251

 
$
1,907

 
$
3,011

 
$
293,147


The below information is relative to the five states where issuers with the highest volume of state and political subdivision securities held in our portfolio are located.  We own no such securities of any single issuer which we deem to be a concentration.
 
March 31, 2019
 
Amortized
 
Unrealized
 
Estimated
Dollars in thousands
Cost
 
Gains
 
Losses
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
California
$
20,546

 
$
823

 
$
6

 
$
21,363

Michigan
14,287

 
375

 
12

 
14,650

Texas
12,137

 
379

 
10

 
12,506

Illinois
12,226

 
263

 
9

 
12,480

West Virginia
10,882

 
172

 
25

 
11,029


Management performs pre-purchase and ongoing analysis to confirm that all investment securities meet applicable credit quality standards.  

The maturities, amortized cost and estimated fair values of securities at March 31, 2019, are summarized as follows:
Dollars in thousands
 
Amortized
Cost
 
Estimated
Fair Value
Due in one year or less
 
$
36,384

 
$
36,351

Due from one to five years
 
81,630

 
81,384

Due from five to ten years
 
57,935

 
57,352

Due after ten years
 
119,036

 
122,039

 
 
$
294,985

 
$
297,126


The proceeds from sales, calls and maturities of securities available for sale, including principal payments received on mortgage-backed obligations, and the related gross gains and losses realized, for the three months ended March 31, 2019 and 2018 are as follows:



 
 
Proceeds from
 
Gross realized
Dollars in thousands
Sales
 
Calls and
Maturities
 
Principal
Payments
 
Gains
 
Losses
For the Three Months Ended 
 March 31,
 
 
 
 
 
 
 
 
 
2019
 
 
 
 
 
 
 
 
 
 
Securities available for sale
$
79,776

 
$
1,100

 
$
4,684

 
$
105

 
$
108

 
 
 
 
 
 
 
 
 
 
 
2018
 
 
 
 
 
 
 
 
 
 
Securities available for sale
$
39,267

 
$
55

 
$
6,690

 
$
1,474

 
$
742


We held 93 available for sale securities having an unrealized loss at March 31, 2019.  We do not intend to sell these securities, and it is more likely than not that we will not be required to sell these securities before recovery of their amortized cost bases.  We believe that this decline in value is primarily attributable to the lack of market liquidity and to changes in market interest rates and is not due to credit quality.  Accordingly, no other-than-temporary impairment charge to earnings is warranted at this time.

Provided below is a summary of securities available for sale which were in an unrealized loss position at March 31, 2019 and December 31, 2018.

 
March 31, 2019
 
 
 
Less than 12 months
 
12 months or more
 
Total
Dollars in thousands
# of securities in loss position
 
Estimated
Fair Value
 
Unrealized
Loss
 
Estimated
Fair Value
 
Unrealized
Loss
 
Estimated
Fair Value
 
Unrealized
Loss
Taxable debt securities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government agencies and corporations
15
 
$
1,925

 
$
30

 
$
16,576

 
$
322

 
$
18,501

 
$
352

Residential mortgage-backed securities:
 
 
 

 
 

 
 

 
 

 
 

 
 

Government-sponsored agencies
32
 
17,412

 
230

 
26,153

 
647

 
43,565

 
877

Nongovernment-sponsored entities
3
 
5,804

 
92

 
327

 
1

 
6,131

 
93

State and political subdivisions:
 
 
 

 
 

 
 

 
 

 
 

 
 

General obligations
8