Notes
to Consolidated Financial Statements
Note 1—ORGANIZATION
AND BASIS OF PRESENTATION
The consolidated
financial statements include the accounts of First Community Corporation (the “Company”) and its wholly owned subsidiary,
First Community Bank (the “Bank”). The Company owns all of the common stock of FCC Capital Trust I. All material intercompany
transactions are eliminated in consolidation. The Company was organized on November 2, 1994, as a South Carolina corporation, and was
formed to become a bank holding company. The Bank opened for business on August 17, 1995. FCC Capital Trust I is an unconsolidated special
purpose subsidiary organized for the sole purpose of issuing trust preferred securities.
Note
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The financial
statements are prepared in accordance with accounting principles generally accepted in the United States of America. These principles
require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Material estimates
that are particularly susceptible to significant change relate to the determination of the allowance for loan losses. The estimation
process includes management’s judgment as to future losses on existing loans based on an internal review of the loan portfolio,
including an analysis of the borrower’s current financial position, the consideration of current and anticipated economic conditions
and the effect on specific borrowers. In determining the collectability of loans management also considers the fair value of underlying
collateral. Various regulatory agencies, as an integral part of their examination process, review the Company’s allowance for loan
losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available
to them at the time of their examination. Because of these factors it is possible that the allowance for loan losses could change materially.
Cash and Cash Equivalents
Cash and
cash equivalents consist of cash on hand, due from banks, interest-bearing bank balances, federal funds sold and securities purchased
under agreements to resell. Generally federal funds are sold for a one-day period and securities purchased under agreements to
resell mature in less than 90 days.
Investment Securities
Investment
securities are classified as either held-to-maturity, available-for-sale or trading securities. In determining such classification,
securities that the Company has the positive intent and ability to hold to maturity are classified as held-to maturity and are
carried at amortized cost. Securities classified as available-for-sale are carried at estimated fair values with unrealized gains
and losses included in shareholders’ equity on an after-tax basis. Trading securities are carried at estimated fair value
with unrealized gains and losses included in non-interest income (See Note 4).
Gains
and losses on the sale of available-for-sale securities and trading securities are determined using the specific identification
method. Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are
judged to be other than temporary are written down to fair value and charged to income in the Consolidated Statement of Income.
Premiums and
discounts are recognized in interest income using the interest method over the period to the earliest call date.
Mortgage Loans Held for
Sale
The Company
originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed but not yet settled
with an investor, are carried in the Company’s loans held for sale portfolio. These loans are primarily fixed rate residential
loans that have been originated in the Company’s name and have closed. Virtually all these loans have commitments to
be purchased by investors at a locked in price with the investors on the same day that the loan was locked in with the Company’s
customers. Therefore, these loans present very little market risk for the Company.
Note
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company
usually delivers to, and receives funding from, the investor within 30 days. Commitments to sell these loans to the investor are
considered derivative contracts and are sold to investors on a “best efforts” basis. The Company is not obligated
to deliver a loan or pay a penalty if a loan is not delivered to the investor. As a result of the short-term nature of these derivative
contracts, the fair value of the mortgage loans held for sale in most cases is the same as the value of the loan amount at its
origination. These loans are classified as Level 2.
Loans and Allowance for
Loan Losses
Loan receivables
that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their
outstanding principal balance adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated
loans. Interest is recognized over the term of the loan based on the loan balance outstanding. Fees charged for originating loans,
if any, are deferred and offset by the deferral of certain direct expenses associated with loans originated. The net deferred
fees are recognized as yield adjustments by applying the interest method.
The allowance
for loan losses is maintained at a level believed to be adequate by management to absorb potential losses in the loan portfolio.
Management’s determination of the adequacy of the allowance is based on an evaluation of the portfolio, past loss experience,
economic conditions and volume, growth and composition of the portfolio.
The Company
considers a loan to be impaired when, based upon current information and events, it is believed that the Company will be unable
to collect all amounts due according to the contractual terms of the loan agreement. Loans that are considered impaired are accounted
for at the lower of carrying value or fair value. The accrual of interest on impaired loans is discontinued when, in management’s
opinion, the borrower may be unable to meet payments as they become due, generally when a loan becomes 90 days past due. When
interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to
the extent cash payments are received first to principal and then to interest income.
Property and Equipment
Property
and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the
asset’s estimated useful life. Estimated lives range up to 39 years for buildings and up to 10 years for furniture, fixtures
and equipment.
Goodwill and Other Intangible
Assets
Goodwill represents
the cost in excess of fair value of net assets acquired (including identifiable intangibles) in purchase transactions. Other intangible
assets represent premiums paid for acquisitions of core deposits (core deposit intangibles). Core deposit intangibles are being
amortized on a straight-line basis over seven years. Goodwill and identifiable intangible assets are reviewed for impairment annually
or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The annual valuation
is performed on December 31 of each year.
Other Real Estate Owned
Other real estate
owned includes real estate acquired through foreclosure. Other real estate owned is carried at the lower of cost (principal balance
at date of foreclosure) or fair value minus estimated cost to sell. Any write-downs at the date of foreclosure are charged to
the allowance for loan losses. Expenses to maintain such assets, subsequent changes in the valuation allowance, and gains or losses
on disposal are included in other expenses.
Comprehensive Income (loss)
The Company
reports comprehensive income (loss) in accordance with Accounting Standards Codification (“ASC”) 220, “Comprehensive
Income.” ASC 220 requires that all items that are required to be reported under accounting standards as comprehensive income
(loss) be reported in a financial statement that is displayed with the same prominence as other financial statements. The disclosures
requirements have been included in the Company’s consolidated statements of comprehensive income.
Mortgage Origination Fees
Mortgage
origination fees relate to activities comprised of accepting residential mortgage applications, qualifying borrowers to standards
established by investors and selling the mortgage loans to the investors under pre-existing commitments. The related fees received
by the Company for these services are recognized at the time the loan is closed.
Advertising Expense
Advertising
and public relations costs are generally expensed as incurred. External costs incurred in producing media advertising are expensed
the first time the advertising takes place. External costs relating to direct mailing costs are expensed in the period in which
the direct mailings are sent. Advertising expense totaled $1.2 million, $1.0 million and $1.1 million for the years ended December
31, 2021, 2020, and 2019, respectively.
Note
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
A deferred
income tax liability or asset is recognized for the estimated future effects attributable to differences in the tax bases of assets
or liabilities and their reported amounts in the financial statements as well as operating loss and tax credit carry forwards.
The deferred tax asset or liability is measured using the enacted tax rate expected to apply to taxable income in the period in
which the deferred tax asset or liability is expected to be realized.
In 2006,
the FASB issued guidance related to Accounting for Uncertainty in Income Taxes. This guidance clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements in accordance with FASB ASC Topic 740-10, “Income
Taxes.” It also prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in an
enterprise’s tax return.
Stock Based Compensation
Cost
The Company
accounts for stock-based compensation under the fair value provisions of the accounting literature. Compensation expense is recognized
in salaries and employee benefits.
The fair
value of each grant is estimated on the date of grant using the Black-Sholes option pricing model. No options were granted in
2021, 2020 or 2019.
Earnings Per Common Share
Basic earnings
per common share (“EPS”) excludes dilution and is computed by dividing income available to common shareholders by
the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income available
to common shareholders by the weighted average number of shares of common stock and common stock equivalents. Common stock equivalents
consist of stock options and warrants and are computed using the treasury stock method.
Business Combinations and
Method of Accounting for Loans Acquired
The Company accounts
for its acquisitions under FASB ASC Topic 805, “Business Combinations,” which requires the use of the acquisition
method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for loan losses
related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions
regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in FASB
ASC Topic 820, “Fair Value Measurements and Disclosures.”
Acquired
credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated
credit quality, found in FASB ASC Topic 310-30, “Receivables—Loans and Debt Securities Acquired with Deteriorated
Credit Quality,” formerly American Institute of Certified Public Accountants (“AICPA”) Statement of Position
(“SOP”) 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” and initially
measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. Loans
acquired in business combinations with evidence of credit deterioration since origination and for which it is probable that all
contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration
as of purchase dates may include information such as past-due and nonaccrual status, borrower credit scores and recent loan to
value percentages. The Company considers expected prepayments and estimates the amount and timing of expected principal, interest
and other cash flows for each loan or pool of loans meeting the criteria above, and determines the excess of the loan’s
scheduled contractual principal and contractual interest payments over all cash flows expected to be collected at acquisition
as an amount that should not be accreted (non-accretable difference). The remaining amount, representing the excess of the loan’s
or pool’s cash flows expected to be collected over the fair value for the loan or pool of loans, is accreted into interest
income over the remaining life of the loan or pool (accretable difference). Subsequent to the acquisition date, increases in cash
flows expected to be received in excess of the Company’s initial estimates are reclassified from non-accretable difference
to accretable difference and are accreted into interest income on a level-yield basis over the remaining life of the loan. Decreases
in cash flows expected to be collected are recognized as impairment through the provision for loan losses.
Segment Information
ASC Topic
280-10, “Segment Reporting,” requires selected segment information of operating segments based on a management
approach. The Company’s four reportable segments represent the distinct product lines the Company offers and are viewed
separately for strategic planning by management (see Note 25, Reportable Segments, for further information).
Note
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Issued Accounting
Standards
In June
2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities.
The amendments will be effective for the Company for reporting periods beginning after December 15, 2022. Early adoption is permitted
for all organizations for periods beginning after December 15, 2018. The Company is currently evaluating the effect that implementation
of the new standard will have on its financial position, results of operations, and cash flows.
In
November 2019, the FASB issued guidance to defer the effective dates for private companies, not-for-profit organizations, and
certain smaller reporting companies applying standards on current expected credit losses (CECL), leases, hedging. The new effective
date for CECL will be fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. The
Company is evaluating the impact that this will have on its financial statements.
In
November 2019, the FASB issued guidance that addresses issues raised by stakeholders during the implementation of ASU 2016-13,
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments affect
a variety of topics in the ASC. For entities that have not yet adopted the amendments in ASU 2016-13, the amendments are effective
for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years-all other entities. Early
adoption is permitted in any interim period as long as an entity has adopted the amendments in ASU 2016-13. The Company is evaluating
the impact that this will have on its financial statements.
In
December 2019, the FASB issued guidance to simplify accounting for income taxes by removing specific technical exceptions that
often produce information investors have a hard time understanding. The amendments also improve consistent application of and
simply GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments became effective for the
Company for interim and annual periods beginning after December 15, 2020 and did not have a material impact on the Company’s
financial statements.
In
January 2020, the FASB issued guidance to address accounting for the transition into and out of the equity method and measuring
certain purchased options and forward contracts to acquire investments. The amendments became effective for the Company for interim
and annual periods beginning after December 15, 2020 and did not have a material impact on the Company’s financial statements.
In
March 2020, the FASB issued guidance that makes narrow-scope improvements to various aspects of the financial instrument guidance,
including the CECL guidance issued in 2016. For public business entities, the amendments were effective upon issuance of the final
ASU. For all other entities, the amendments were effective for fiscal years beginning after December 15, 2019, and are effective
for interim periods within those fiscal years beginning after December 15, 2020. The effective date of the amendments to ASU 2016-01
were effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For the
amendments related to ASU 2016-13, public business entities that meet the definition of an SEC filer, excluding eligible smaller
reporting companies (as defined by the SEC), should adopt the amendments in ASU 2016-13 during 2020. All other entities should
adopt the amendments in ASU 2016-13 during 2023. Early adoption is permitted. For entities that have not yet adopted the guidance
in ASU 2016-13, the effective dates and the transition requirements for these amendments are the same as the effective date and
transition requirements in ASU 2016-13. For entities that have adopted the guidance in ASU 2016-13, the amendments were effective
for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For those entities, the
amendments should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to opening retained
earnings in the statement of financial position as of the date that an entity adopted the amendments in ASU 2016-13. During 2021,
the Company established a CECL Team to begin the process of implementing CECL. The Company selected Valuant’s ValuCast as
its CECL solution. In conjunction with Valuant, the Company developed a detailed roadmap and implementation plan; collected and
validated data; and selected loss methodologies. Currently, the Company and Valuant are working on the reasonable and supportable
forecast and qualitative factors. The Company plans to perform mock runs during 2022. Dixon Hughes Goodman, LLP has been engaged
to perform model validation services prior to implementation. The implementation of CECL may have a material effect on the Company’s
financial statements.
In
March 2020, the FASB issued guidance to provide temporary optional guidance to ease the potential burden in accounting for reference
rate reform. The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to
contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference
rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition
period. The amendments are effective through December 31, 2022. The Company does not expect these amendments to have a material
effect on its financial statements.
Note
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In
August 2020, the FASB issued guidance to improve financial reporting associated with accounting for convertible instruments and
contracts in an entity’s own equity. The amendments will be effective the Company for fiscal years beginning after December
15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning
after December 15, 2020. The Company does not expect these amendments to have a material effect on its financial statements.
In
October 2020, the FASB issued guidance to clarify the FASB’s intent that an entity should reevaluate whether a callable
debt security that has multiple call dates is within the scope of FASB Accounting Standards Codification (FASB ASC) 310-20-35-33
for each reporting period. The amendments became effective for the Company for interim and annual periods beginning after December
15, 2020 and did not have a material impact on the Company’s financial statements.
In
October 2020, the FASB issued amendments to clarify the Accounting Standards Codification and make minor improvements that are
not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities.
The amendments became effective for the Company for annual periods beginning after December 15, 2020 and did not have a material
impact on the Company’s financial statements.
In October
2021, the FASB amended the Business Combinations topic in the Accounting Standard Codification to require entities to apply guidance
in the Revenue topic to recognize and measure contract assets and contract liabilities acquired in a business combination. The
amendments are effective for the fiscal years beginning after December 15, 2022, including interim periods within those fiscal
years. The amendments are applied prospectively to business combinations occurring on or after the effective date of the amendments.
Early adoption of the amendments is permitted, including adoption in an interim period. The Company does not expect these amendments
to have a material effect on its financial statements.
In November
2021, the FASB added a topic to the Accounting Standards Codification, Government Assistance, to require certain annual disclosures
about transactions with a government that are accounted for by applying grant or contribution accounting model by analogy to other
accounting guidance. The guidance is effective for financial statements issued for annual periods beginning after December 15,
2021. The Company does not expect these amendments to have a material effect on its financial statements.
Other
accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have
a material impact on the Company’s financial position, results of operations or cash flows.
General Risk and Uncertainties
In the
normal course of business, the Company encounters two significant types of risks: economic and regulatory. There are three main
components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to
the degree that its interest-bearing liabilities mature or reprice at different speeds, or on a different basis, than its interest-earning
assets. Credit risk is the risk of default on the Company’s loan and investment portfolios that results from borrowers’
or issuer’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value
of collateral underlying loans and investments and the valuation of real estate held by the Company.
The Company
is subject to regulations of various governmental agencies (regulatory risk). These regulations can and do change significantly
from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject it to further
changes with respect to asset valuations, amounts of required loan loss allowances and operating restrictions from regulators’
judgments based on information available to them at the time of their examination.
Reclassifications
Certain captions
and amounts in the 2019 and 2020 consolidated financial statements were reclassified to conform to the 2021 presentation.
Note 3—INVESTMENT
SECURITIES
The amortized cost and estimated
fair values of investment securities are summarized below:
AVAILABLE-FOR-SALE:
(Dollars in thousands) | |
Amortized Cost | | |
Gross Unrealized Gains | | |
Gross Unrealized Losses | | |
Fair Value | |
December 31, 2021 | |
| | | |
| | | |
| | | |
| | |
US Treasury securities | |
$ | 15,736 | | |
$ | — | | |
$ | 300 | | |
$ | 15,436 | |
Small Business Administration pools | |
| 30,835 | | |
| 505 | | |
| 67 | | |
| 31,273 | |
State and local government | |
| 105,469 | | |
| 4,918 | | |
| 539 | | |
| 109,848 | |
Corporate and other securities | |
| 8,024 | | |
| 157 | | |
| 129 | | |
| 8,052 | |
Total | |
$ | 560,688 | | |
$ | 9,178 | | |
$ | 5,027 | | |
$ | 564,839 | |
| |
| | | |
| | | |
| | | |
| | |
(Dollars in thousands) | |
Amortized Cost | | |
Gross Unrealized Gains | | |
Gross Unrealized Losses | | |
Fair Value | |
December 31, 2020 | |
| | | |
| | | |
| | | |
| | |
US Treasury securities | |
$ | 1,501 | | |
$ | 1 | | |
$ | — | | |
$ | 1,502 | |
Small Business Administration pools | |
| 34,577 | | |
| 928 | | |
| 7 | | |
| 35,498 | |
State and local government | |
| 82,495 | | |
| 6,184 | | |
| 76 | | |
| 88,603 | |
Corporate and other securities | |
| 3,272 | | |
| 56 | | |
| — | | |
| 3,328 | |
Total | |
$ | 345,580 | | |
$ | 14,554 | | |
$ | 268 | | |
$ | 359,866 | |
At December
31, 2021, corporate and other securities available-for-sale included the following at fair value: corporate fixed-to-float bonds
at $8.0 million, mutual funds at $11.6 thousand and foreign debt of $10.0 thousand. At December 31, 2020, corporate and other
securities available-for-sale included the following at fair value: corporate fixed-to-float bonds at $3.3 million, mutual funds
at $8.0 thousand and foreign debt of $10.0 thousand. Other investments, at cost, include Federal Home Loan Bank (“FHLB”)
stock in the amount of $698.4 thousand, corporate stock in the amount of $1.0 million, and a venture capital fund in the amount of $86.7 thousand at December 31, 2021. The Company held
$1.1 million of FHLB stock and $1.0 million in corporate stock at December 31, 2020.
During the year
ended December 31, 2021, the Company did not receive any proceeds from the sale of investment securities available-for-sale. During
the year ended December 31, 2020, the Company received $1.2 million from the sale of investment securities available-for-sale.
For the year ended December 31, 2021, there were no gross realized gains or losses from the sale of investment securities available-for-sale.
For the year ended December 31, 2020, gross realized gains from the sale of investment securities available-for-sale amounted
to $99.1 thousand and there were no gross realized losses. The tax (benefit) provision applicable to the net realized gain (loss)
was approximately $0, $21 thousand, and $29 thousand for 2021, 2020 and 2019, respectively.
The amortized
cost and fair value of investment securities at December 31, 2021, by expected maturity, follow. Expected maturities differ from
contractual maturities because borrowers may have the right to call or prepay the obligations with or without prepayment penalties.
Mortgage-backed securities are included in the year corresponding with the remaining expected life. There were no Held-to-maturity
securities as of December 31, 2021.
(Dollars in thousands) | |
Available-for-sale | |
| |
Amortized Cost | | |
Fair Value | |
Due in one year or less | |
$ | 20,036 | | |
$ | 20,176 | |
Due after one year through five years | |
| 175,313 | | |
| 177,320 | |
Due after five years through ten years | |
| 237,914 | | |
| 241,008 | |
Due after ten years | |
| 127,425 | | |
| 126,335 | |
| |
$ | 560,688 | | |
$ | 564,839 | |
Securities with
an amortized cost of $128.5 million and fair value of $130.4 million at December 31, 2021 were pledged to secure FHLB advances, public
deposits, and securities sold under agreements to repurchase. Securities with an amortized cost of $155.0 million and fair value of $161.5
million at December 31, 2020 were pledged to secure FHLB advances, public deposits, and securities sold under agreements to repurchase.
Note 3—INVESTMENT
SECURITIES (Continued)
The following
tables show gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities
have been in a continuous loss position at December 31, 2021 and December 31, 2020.
| |
| | |
| | |
| | |
| | |
| | |
| |
| |
Less than 12 months | | |
12 months or more | | |
Total | |
December 31, 2021 (Dollars in thousands) | |
Fair Value | | |
Unrealized Loss | | |
Fair Value | | |
Unrealized Loss | | |
Fair Value | | |
Unrealized Loss | |
Available-for-sale securities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
US Treasury | |
$ | 14,479 | | |
$ | 264 | | |
$ | 958 | | |
$ | 36 | | |
$ | 15,437 | | |
$ | 300 | |
Small Business Administration pools | |
| 7,232 | | |
| 67 | | |
| — | | |
| — | | |
| 7,232 | | |
| 67 | |
State and local government | |
| 21,261 | | |
| 539 | | |
| — | | |
| — | | |
| 21,261 | | |
| 539 | |
Corporate and Other Securities | |
| 3,621 | | |
| 129 | | |
| — | | |
| — | | |
| 3,621 | | |
| 129 | |
Total | |
$ | 246,831 | | |
$ | 4,155 | | |
$ | 49,528 | | |
$ | 872 | | |
$ | 296,359 | | |
$ | 5,027 | |
| |
| | |
| | |
| |
| |
Less than 12 months | | |
12 months or more | | |
Total | |
December 31, 2020 (Dollars in thousands) | |
Fair Value | | |
Unrealized Loss | | |
Fair Value | | |
Unrealized Loss | | |
Fair Value | | |
Unrealized Loss | |
Available-for-sale securities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
US Treasury | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
Small Business Administration pools | |
| — | | |
| — | | |
| 1,323 | | |
| 7 | | |
| 1,323 | | |
| 7 | |
State and local government | |
| 4,930 | | |
| 76 | | |
| — | | |
| — | | |
| 4,930 | | |
| 76 | |
Total | |
$ | 26,228 | | |
$ | 228 | | |
$ | 2,737 | | |
$ | 40 | | |
$ | 28,965 | | |
$ | 268 | |
Government
Sponsored Enterprise, Mortgage-Backed Securities: The Company owned mortgage-backed securities (“MBSs”), including
collateralized mortgage obligations (“CMOs”), issued by government sponsored enterprises (“GSEs”) with
an amortized cost of $429.0 million and $257.3 million and approximate fair value of $429.0 million and $265.4 million at December
31, 2021 and December 31, 2020, respectively. As of December 31, 2021, and December 31, 2020, all of the MBSs issued by GSEs were
classified as “Available for Sale.” Unrealized losses on certain of these investments are not considered to be “other
than temporary,” and we have the intent and ability to hold these until they mature or recover the current book value. The
contractual cash flows of the investments are guaranteed by the GSE. Accordingly, it is expected that the securities would not
be settled at a price less than the amortized cost of the Company’s investment. Because the Company does not intend to sell
these securities and it is more likely than not the Company will not be required sell these securities before a recovery of its
amortized cost, which may be maturity, the Company does not consider the investments to be other-than-temporarily impaired at
December 31, 2021.
Non-agency
Mortgage Backed Securities: The Company holds private label mortgage-backed securities (“PLMBSs”), including CMOs,
at December 31, 2021 with an amortized cost of $48.2 thousand and approximate fair value of $46.4 thousand. The Company held private
label mortgage-backed securities (“PLMBSs”), including CMOs, at December 31, 2020 with an amortized cost of $57.4
thousand and approximate fair value of $54.7 thousand. Management monitors each of these securities on a quarterly basis to identify
any deterioration in the credit quality, collateral values and credit support underlying the investments. Management evaluates
securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic
or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent
and duration of the unrealized loss, the financial condition and near term prospects of the issuer and any collateral underlying
the relevant security. Management also assesses whether it intends to sell, or it is more likely than not that it will be required
to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding
intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment
through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two
components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and (2) OTTI related
to other factors, which is recognized in other comprehensive income (loss). The credit loss is defined as the difference between
the present value of the cash flows expected to be collected and the amortized cost basis.
During the years
ended December 31, 2021, December 31, 2020, and December 31, 2019, no OTTI charges were recorded in earnings for the PLMBS portfolio.
State
and Local Governments and Other: Management monitors these securities on a quarterly basis to identify any deterioration in
the credit quality. Included in the monitoring is a review of the credit rating, a financial analysis and certain demographic
data on the underlying issuer. The Company does not consider these securities to be OTTI at December 31, 2021 and December 31,
2020.
Note 4—LOANS
The following
table summarizes the composition of our loan portfolio. Total loans are recorded net of deferred loan fees and costs, which totaled
$1.4 million and $2.2 million as of December 31, 2021 and December 31, 2020, respectively.
Schedule
of Loan Portfolio
| |
|
|
|
|
|
| |
| |
December 31, | |
(Dollars in thousands) | |
2021 | | |
2020 | |
Commercial, financial and agricultural | |
$ | 69,952 | | |
$ | 96,688 | |
Real estate: | |
| | | |
| | |
Construction | |
| 94,969 | | |
| 95,282 | |
Mortgage-residential | |
| 45,498 | | |
| 43,928 | |
Mortgage-commercial | |
| 617,464 | | |
| 573,258 | |
Consumer: | |
| | | |
| | |
Home equity | |
| 27,116 | | |
| 26,442 | |
Other | |
| 8,703 | | |
| 8,559 | |
Total | |
$ | 863,702 | | |
$ | 844,157 | |
Commercial, financial, and
agricultural category includes $1.5 million and $42.2 million in PPP loans, net of deferred fees and costs, as of December 31,
2021 and December 31, 2020, respectively.
Activity in the allowance
for loan losses was as follows:
| |
| | |
| | |
| |
| |
Years ended December 31, | |
(Dollars in thousands) | |
2021 | | |
2020 | | |
2019 | |
Balance at the beginning of year | |
$ | 10,389 | | |
$ | 6,627 | | |
$ | 6,263 | |
Provision for loan losses | |
| 335 | | |
| 3,663 | | |
| 139 | |
Charged off loans | |
| (182 | ) | |
| (110 | ) | |
| (145 | ) |
Recoveries | |
| 637 | | |
| 209 | | |
| 370 | |
Balance at end of year | |
$ | 11,179 | | |
$ | 10,389 | | |
$ | 6,627 | |
The detailed
activity in the allowance for loan losses and the recorded investment in loans receivable as of and for the years ended December
31, 2021, December 31, 2020 and December 31, 2019 follows:
Schedule
of activity in the allowance for loan losses and the recorded investment in loans receivable
(Dollars in thousands) | |
Commercial | | |
Real estate Construction | | |
Real estate Mortgage Residential | | |
Real estate Mortgage Commercial | | |
Consumer Home equity | | |
Consumer Other | | |
Unallocated | | |
Total | |
2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Allowance for loan losses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Beginning balance | |
$ | 778 | | |
$ | 145 | | |
$ | 541 | | |
$ | 7,855 | | |
$ | 324 | | |
$ | 125 | | |
$ | 621 | | |
$ | 10,389 | |
Charge-offs | |
| — | | |
| — | | |
| — | | |
| (110 | ) | |
| — | | |
| (72 | ) | |
| — | | |
| (182 | ) |
Recoveries | |
| 39 | | |
| — | | |
| 10 | | |
| 473 | | |
| 69 | | |
| 46 | | |
| — | | |
| 637 | |
Provisions | |
| 36 | | |
| (32 | ) | |
| 9 | | |
| 352 | | |
| (60 | ) | |
| 27 | | |
| 3 | | |
| 335 | |
Ending balance | |
$ | 853 | | |
$ | 113 | | |
$ | 560 | | |
$ | 8,570 | | |
$ | 333 | | |
$ | 126 | | |
$ | 624 | | |
$ | 11,179 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balances: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Individually evaluated for impairment | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 1 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Collectively evaluated for impairment | |
| 853 | | |
| 113 | | |
| 560 | | |
| 8,569 | | |
| 333 | | |
| 126 | | |
| 624 | | |
| 11,179 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loans receivable: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance-total | |
$ | 69,952 | | |
$ | 94,969 | | |
$ | 45,498 | | |
$ | 617,464 | | |
$ | 27,116 | | |
$ | 8,703 | | |
$ | — | | |
$ | 863,702 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balances: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Individually evaluated for impairment | |
| — | | |
| — | | |
| 133 | | |
| 1,561 | | |
| — | | |
| — | | |
| — | | |
| 1,694 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Collectively evaluated for impairment | |
| 69,952 | | |
| 94,969 | | |
| 45,365 | | |
| 615,903 | | |
| 27,116 | | |
| 8,703 | | |
| — | | |
| 862,008 | |
Note 4—LOANS (Continued)
(Dollars in thousands) | |
Commercial | | |
Real estate Construction | | |
Real estate Mortgage Residential | | |
Real estate Mortgage Commercial | | |
Consumer Home equity | | |
Consumer Other | | |
Unallocated | | |
Total | |
2020 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Allowance for loan losses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Beginning balance | |
$ | 427 | | |
$ | 111 | | |
$ | 367 | | |
$ | 4,602 | | |
$ | 240 | | |
$ | 97 | | |
$ | 783 | | |
$ | 6,627 | |
Charge-offs | |
| — | | |
| (2 | ) | |
| — | | |
| (1 | ) | |
| — | | |
| (107 | ) | |
| — | | |
| (110 | ) |
Recoveries | |
| 130 | | |
| 2 | | |
| — | | |
| 23 | | |
| 2 | | |
| 52 | | |
| — | | |
| 209 | |
Provisions | |
| 221 | | |
| 34 | | |
| 174 | | |
| 3,231 | | |
| 82 | | |
| 83 | | |
| (162 | ) | |
| 3,663 | |
Ending balance | |
$ | 778 | | |
$ | 145 | | |
$ | 541 | | |
$ | 7,855 | | |
$ | 324 | | |
$ | 125 | | |
$ | 621 | | |
$ | 10,389 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balances: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Individually evaluated for impairment | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 2 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 2 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Collectively evaluated for impairment | |
| 778 | | |
| 145 | | |
| 541 | | |
| 7,853 | | |
| 324 | | |
| 125 | | |
| 621 | | |
| 10,387 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loans receivable: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance-total | |
$ | 96,688 | | |
$ | 95,282 | | |
$ | 43,928 | | |
$ | 573,258 | | |
$ | 26,442 | | |
$ | 8,559 | | |
$ | — | | |
$ | 844,157 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balances: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Individually evaluated for impairment | |
| — | | |
| — | | |
| 440 | | |
| 5,631 | | |
| 42 | | |
| — | | |
| — | | |
| 6,113 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Collectively evaluated for impairment | |
| 96,688 | | |
| 95,282 | | |
| 43,488 | | |
| 567,627 | | |
| 26,400 | | |
| 8,559 | | |
| — | | |
| 838,044 | |
Note 4—LOANS (Continued)
(Dollars in thousands) | |
Commercial | | |
Real estate Construction | | |
Real estate Mortgage Residential | | |
Real estate Mortgage Commercial | | |
Consumer Home equity | | |
Consumer Other | | |
Unallocated | | |
Total | |
2019 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Allowance for loan losses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Beginning balance | |
$ | 430 | | |
$ | 89 | | |
$ | 431 | | |
$ | 4,318 | | |
$ | 261 | | |
$ | 88 | | |
$ | 646 | | |
$ | 6,263 | |
Charge-offs | |
| (12 | ) | |
| — | | |
| (12 | ) | |
| — | | |
| (1 | ) | |
| (120 | ) | |
| — | | |
| (145 | ) |
Recoveries | |
| 3 | | |
| — | | |
| — | | |
| 307 | | |
| 15 | | |
| 45 | | |
| — | | |
| 370 | |
Provisions | |
| 6 | | |
| 22 | | |
| (52 | ) | |
| (23 | ) | |
| (35 | ) | |
| 84 | | |
| 137 | | |
| 139 | |
Ending balance | |
$ | 427 | | |
$ | 111 | | |
$ | 367 | | |
$ | 4,602 | | |
$ | 240 | | |
$ | 97 | | |
$ | 783 | | |
$ | 6,627 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balances: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Individually evaluated for impairment | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 6 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 6 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Collectively evaluated for impairment | |
| 427 | | |
| 111 | | |
| 367 | | |
| 4,596 | | |
| 240 | | |
| 97 | | |
| 783 | | |
| 6,621 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loans receivable: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance-total | |
$ | 51,805 | | |
$ | 73,512 | | |
$ | 45,357 | | |
$ | 527,447 | | |
$ | 28,891 | | |
$ | 10,016 | | |
$ | — | | |
$ | 737,028 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balances: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Individually evaluated for impairment | |
| 400 | | |
| — | | |
| 392 | | |
| 3,135 | | |
| 70 | | |
| — | | |
| — | | |
| 3,997 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Collectively evaluated for impairment | |
| 51,405 | | |
| 73,512 | | |
| 44,965 | | |
| 524,312 | | |
| 28,821 | | |
| 10,016 | | |
| — | | |
| 733,031 | |
At December
31, 2021, $9.5 million of loans acquired in the Cornerstone acquisition were excluded in the evaluation of the adequacy of the
allowance for loan losses. These loans were recorded at fair value at acquisition which included a credit component of approximately
$125.6 thousand at December 31, 2021. Loans acquired prior to 2017 have been included in the evaluation of the allowance for loan
losses.
Note 4—LOANS (Continued)
The following
tables are by loan category and present at December 31, 2021, December 31, 2020 and December 31, 2019 loans individually evaluated
and considered impaired under FASB ASC 310, “Accounting by Creditors for Impairment of a Loan.” Impairment includes
performing troubled debt restructurings.
Schedule of loan category and loans individually evaluated and considered impaired
(Dollars in thousands) | |
| | |
| | |
| | |
| | |
| |
December 31, 2021 | |
Recorded Investment | | |
Unpaid Principal Balance | | |
Related Allowance | | |
Average Recorded Investment | | |
Interest Income Recognized | |
With no allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
Real estate: | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Mortgage-residential | |
| 133 | | |
| 151 | | |
| — | | |
| 131 | | |
| 6 | |
Mortgage-commercial | |
| 1,521 | | |
| 3,514 | | |
| — | | |
| 1,748 | | |
| 223 | |
Consumer: | |
| | | |
| | | |
| | | |
| | | |
| | |
Home Equity | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Other | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
With an allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Real estate: | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Mortgage-residential | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Mortgage-commercial | |
| 40 | | |
| 40 | | |
| 1 | | |
| 39 | | |
| 5 | |
Consumer: | |
| | | |
| | | |
| | | |
| | | |
| | |
Home Equity | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Other | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total: | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Real estate: | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Mortgage-residential | |
| 133 | | |
| 151 | | |
| — | | |
| 131 | | |
| 6 | |
Mortgage-commercial | |
| 1,561 | | |
| 3,554 | | |
| 1 | | |
| 1,787 | | |
| 228 | |
Consumer: | |
| | | |
| | | |
| | | |
| | | |
| | |
Home Equity | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Other | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| |
$ | 1,694 | | |
$ | 3,705 | | |
$ | 1 | | |
$ | 1,918 | | |
$ | 234 | |
Note 4—LOANS (Continued)
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020 |
|
Recorded
Investment |
|
|
Unpaid
Principal
Balance |
|
|
Related
Allowance |
|
|
Average
Recorded
Investment |
|
|
Interest
Income
Recognized |
|
With no allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-residential |
|
|
440 |
|
|
|
499 |
|
|
|
— |
|
|
|
440 |
|
|
|
1 |
|
Mortgage-commercial |
|
|
5,508 |
|
|
|
7,980 |
|
|
|
— |
|
|
|
5,770 |
|
|
|
388 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
42 |
|
|
|
47 |
|
|
|
— |
|
|
|
42 |
|
|
|
3 |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-residential |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-commercial |
|
|
123 |
|
|
|
123 |
|
|
|
2 |
|
|
|
123 |
|
|
|
11 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-residential |
|
|
440 |
|
|
|
499 |
|
|
|
— |
|
|
|
440 |
|
|
|
1 |
|
Mortgage-commercial |
|
|
5,631 |
|
|
|
8,103 |
|
|
|
2 |
|
|
|
5,893 |
|
|
|
399 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
42 |
|
|
|
47 |
|
|
|
— |
|
|
|
42 |
|
|
|
3 |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
$ |
6,113 |
|
|
$ |
8,649 |
|
|
$ |
2 |
|
|
$ |
6,375 |
|
|
$ |
403 |
|
Note 4—LOANS (Continued)
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2019 |
|
Recorded
Investment |
|
|
Unpaid
Principal
Balance |
|
|
Related
Allowance |
|
|
Average
Recorded
Investment |
|
|
Interest
Income
Recognized |
|
With no allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
$ |
400 |
|
|
$ |
400 |
|
|
$ |
— |
|
|
$ |
600 |
|
|
$ |
49 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-residential |
|
|
392 |
|
|
|
460 |
|
|
|
— |
|
|
|
439 |
|
|
|
19 |
|
Mortgage-commercial |
|
|
2,879 |
|
|
|
5,539 |
|
|
|
— |
|
|
|
2,961 |
|
|
|
170 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
70 |
|
|
|
73 |
|
|
|
— |
|
|
|
76 |
|
|
|
2 |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-residential |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-commercial |
|
|
256 |
|
|
|
256 |
|
|
|
6 |
|
|
|
355 |
|
|
|
23 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
400 |
|
|
|
400 |
|
|
|
— |
|
|
|
600 |
|
|
|
49 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-residential |
|
|
392 |
|
|
|
460 |
|
|
|
— |
|
|
|
439 |
|
|
|
19 |
|
Mortgage-commercial |
|
|
3,135 |
|
|
|
5,795 |
|
|
|
6 |
|
|
|
3,316 |
|
|
|
193 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
70 |
|
|
|
73 |
|
|
|
— |
|
|
|
76 |
|
|
|
2 |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
$ |
3,997 |
|
|
$ |
6,728 |
|
|
$ |
6 |
|
|
$ |
4,431 |
|
|
$ |
263 |
|
The Company
categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such
as: current financial information, historical payment experience, credit documentation, public information, and current economic
trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis
is performed on a monthly basis. The Company uses the following definitions for risk ratings:
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected,
these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit
position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient
risk to warrant adverse classification.
Substandard. Loans
classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral
pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They
are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful. Loans
classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that
the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly
questionable and improbable.
Note 4—LOANS (Continued)
Loans
not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “Pass”
rated loans. As of December 31, 2021 and December 31, 2020, and based on the most recent analysis performed, the risk category
of loans by class of loans is shown in the table below. As of December 31, 2021 and December 31, 2020, no loans were classified
as doubtful.
Schedule of loan category and loan by risk categories
(Dollars in thousands) | |
| | |
| | |
| | |
| | |
| |
December 31, 2021 | |
Pass | | |
Special Mention | | |
Substandard | | |
Doubtful | | |
Total | |
Commercial, financial & agricultural | |
$ | 69,833 | | |
$ | 119 | | |
$ | — | | |
$ | — | | |
$ | 69,952 | |
Real estate: | |
| — | | |
| — | | |
| — | | |
| | | |
| | |
Construction | |
| 94,966 | | |
| — | | |
| 3 | | |
| — | | |
| 94,969 | |
Mortgage – residential | |
| 45,049 | | |
| 305 | | |
| 144 | | |
| — | | |
| 45,498 | |
Mortgage – commercial | |
| 610,001 | | |
| 1,009 | | |
| 6,454 | | |
| — | | |
| 617,464 | |
Consumer: | |
| — | | |
| — | | |
| — | | |
| | | |
| | |
Home Equity | |
| 25,751 | | |
| 171 | | |
| 1,194 | | |
| — | | |
| 27,116 | |
Other | |
| 8,604 | | |
| 22 | | |
| 77 | | |
| — | | |
| 8,703 | |
Total | |
$ | 854,204 | | |
$ | 1,626 | | |
$ | 7,872 | | |
$ | — | | |
$ | 863,702 | |
| |
| | |
| | |
| | |
| | |
| |
(Dollars in thousands) | |
| | |
| | |
| | |
| | |
| |
| |
| | |
Special | | |
| | |
| | |
| |
December 31, 2020 | |
Pass | | |
Mention | | |
Substandard | | |
Doubtful | | |
Total | |
Commercial, financial & agricultural | |
$ | 96,507 | | |
$ | 181 | | |
$ | — | | |
$ | — | | |
$ | 96,688 | |
Real estate: | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 95,282 | | |
| — | | |
| — | | |
| — | | |
| 95,282 | |
Mortgage – residential | |
| 43,240 | | |
| 190 | | |
| 498 | | |
| — | | |
| 43,928 | |
Mortgage – commercial | |
| 559,982 | | |
| 7,270 | | |
| 6,006 | | |
| — | | |
| 573,258 | |
Consumer: | |
| | | |
| | | |
| | | |
| | | |
| | |
Home Equity | |
| 25,041 | | |
| 95 | | |
| 1,306 | | |
| — | | |
| 26,442 | |
Other | |
| 8,538 | | |
| 21 | | |
| — | | |
| — | | |
| 8,559 | |
Total | |
$ | 828,590 | | |
$ | 7,757 | | |
$ | 7,810 | | |
$ | — | | |
$ | 844,157 | |
At December
31, 2021 and December 31, 2020, non-accrual loans totaled $250 thousand and $4.7 million, respectively. The gross interest
income which would have been recorded under the original terms of the non-accrual loans amounted to $33.0 thousand and $150.5
thousand in 2021 and 2020, respectively. Interest recorded on non-accrual loans in 2021 and 2020 amounted to $453.3 thousand and
$447.5 thousand, respectively.
TDRs that
are still accruing and included in impaired loans at December 31, 2021 and at December 31, 2020 amounted to $1.4 million
and $1.6 million, respectively. Interest earned during 2021 and 2020 on these loans amounted to $120.4 thousand and $130.1 thousand,
respectively.
Loans
greater than 90 days delinquent and still accruing interest were $0 and $1.3 million at December 31, 2021 and December 31, 2020,
respectively.
The following
tables are by loan category and present loans past due and on non-accrual status as of December 31, 2021 and December 31, 2020:
Schedule
of loan category and present loans past due and on non-accrual status
(Dollars in thousands) December 31, 2021 | |
30-59 Days Past Due | | |
60-89 Days Past Due | | |
Greater than 90 Days and Accruing | | |
Nonaccrual | | |
Total Past Due | | |
Current | | |
Total Loans | |
Commercial | |
$ | 125 | | |
$ | 35 | | |
$ | — | | |
$ | 118 | | |
$ | 278 | | |
$ | 69,674 | | |
$ | 69,952 | |
Real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 94,969 | | |
| 94,969 | |
Mortgage-residential | |
| 8 | | |
| 4 | | |
| — | | |
| 132 | | |
| 144 | | |
| 45,354 | | |
| 45,498 | |
Mortgage-commercial | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 617,464 | | |
| 617,464 | |
Consumer: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| — | | |
| 62 | | |
| — | | |
| — | | |
| 62 | | |
| 27,054 | | |
| 27,116 | |
Other | |
| — | | |
| 1 | | |
| — | | |
| — | | |
| 1 | | |
| 8,702 | | |
| 8,703 | |
Total | |
$ | 133 | | |
$ | 102 | | |
$ | — | | |
$ | 250 | | |
$ | 485 | | |
$ | 863,217 | | |
$ | 863,702 | |
Note 4—LOANS (Continued)
(Dollars in thousands) December 31, 2020 | |
30-59 Days Past Due | | |
60-89 Days Past Due | | |
Greater than 90 Days and Accruing | | |
Nonaccrual | | |
Total Past Due | | |
Current | | |
Total Loans | |
Commercial | |
$ | 165 | | |
$ | 27 | | |
$ | — | | |
$ | 4,080 | | |
$ | 4,272 | | |
$ | 92,416 | | |
$ | 96,688 | |
Real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 424 | | |
| — | | |
| 1,260 | | |
| — | | |
| 1,684 | | |
| 93,598 | | |
| 95,282 | |
Mortgage-residential | |
| 7 | | |
| — | | |
| — | | |
| 440 | | |
| 447 | | |
| 43,481 | | |
| 43,928 | |
Mortgage-commercial | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 573,258 | | |
| 573,258 | |
Consumer: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| — | | |
| — | | |
| — | | |
| 42 | | |
| 42 | | |
| 26,400 | | |
| 26,442 | |
Other | |
| 21 | | |
| 21 | | |
| — | | |
| — | | |
| 42 | | |
| 8,517 | | |
| 8,559 | |
Total | |
$ | 617 | | |
$ | 48 | | |
$ | 1,260 | | |
$ | 4,562 | | |
$ | 6,487 | | |
$ | 837,670 | | |
$ | 844,157 | |
The
CARES Act and Initiatives Related to COVID-19. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act,
or the CARES Act, was signed into law. The CARES Act provided for approximately $2.2 trillion in direct economic relief in response
to the public health and economic impacts of COVID-19. Many of the CARES Act’s programs were dependent upon the direct involvement
of financial institutions like the Bank. These programs were implemented through rules and guidance adopted by federal departments
and agencies, including the U.S. Department of Treasury, the Federal Reserve and other federal bank regulatory authorities, including
those with direct supervisory jurisdiction over the Company and the Bank. The relief period provided in the CARES Act expired
on January 1, 2022.
COVID-19
Related Troubled Debt Restructurings and Loan Modifications for Affected Borrowers. The CARES Act, as extended by certain
provisions of the Consolidated Appropriations Act, 2021, permitted banks to suspend requirements under generally accepted accounting
principles (“GAAP”) for loan modifications to borrowers affected by COVID-19 that may otherwise be characterized as
troubled debt restructurings, or TDRs, and suspend any determination related thereto if (i) the borrower was not more than 30
days past due as of December 31, 2019, (ii) the modifications were related to COVID-19, and (iii) the modification occurred between
March 1, 2020 and the earlier of 60 days after the date of termination of the national emergency or January 1, 2022. Federal bank
regulatory authorities also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19.
Beginning in
March 2020, the Company proactively offered payment deferrals for up to 90 days to its loan customers regardless of the impact
of the pandemic on their business or personal finances. As a result of payments being resumed at the conclusion of their
payment deferral period, loans in which payments were being deferred decreased from the peak of $206.9 million to $175.0 million
at June 30, 2020, to $27.3 million at September 30, 2020, to $16.1 million at December 31, 2020, to $8.7 million at March 31,
2021, $4.5 million at June 30, 2021, $4.1 million at September 30, 2021, and $0 at December 31, 2021.
Troubled
Debt Restructurings. The Company identifies TDRs as impaired under the guidance in ASC 310-10-35. There were no loans determined
to be TDRs that were restructured during the twelve month period ended December 31, 2021 December 31, 2020. Additionally, there
were no loans determined to be TDRs in the previous twelve months that had payment defaults. Defaulted loans are those loans that
are greater than 90 days past due.
In
the determination of the allowance for loan losses, all TDRs are reviewed to ensure that one of the three proper valuation methods
(fair market value of the collateral, present value of cash flows, or observable market price) is adhered to. All non-accrual
loans are written down to its corresponding collateral value. All TDR accruing loans where the loan balance exceeds the present
value of cash flow will have a specific allocation. All nonaccrual loans are considered impaired. Under ASC 310-10, a loan is
impaired when it is probable that the Bank will be unable to collect all amounts due including both principal and interest according
to the contractual terms of the loan agreement.
Acquired credit-impaired
loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality, found
in FASB ASC Topic 310-30, (Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality), and initially
measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. Loans acquired
in business combinations with evidence of credit deterioration are considered impaired. Loans acquired through business combinations
that do not meet the specific criteria of FASB ASC Topic 310-30, but for which a discount is attributable, at least in part to credit
quality, are also accounted for under this guidance. Certain acquired loans, including performing loans and revolving lines of credit
(consumer and commercial), are accounted for in accordance with FASB ASC Topic 310-20, where the discount is accreted through earnings
based on estimated cash flows over the estimated life of the loan.
Note 4—LOANS (Continued)
A summary
of changes in the accretable yield for PCI loans for the years ended December 31, 2021, 2020, and 2019 follows:
Schedule for changes in the accretable yield for PCI loans
(Dollars in thousands) | |
Year Ended December 31, 2021 | | |
Year Ended December 31, 2020 | | |
Year Ended December 31, 2019 | |
Accretable yield, beginning of period | |
$ | 93 | | |
$ | 123 | | |
$ | 153 | |
Additions | |
| — | | |
| — | | |
| — | |
Accretion | |
| (29 | ) | |
| (30 | ) | |
| (30 | ) |
Reclassification of non-accretable difference due to improvement in expected cash flows | |
| — | | |
| — | | |
| — | |
Other changes, net | |
| — | | |
| — | | |
| — | |
Accretable yield, end of period | |
$ | 64 | | |
$ | 93 | | |
$ | 123 | |
At December
31, 2021 and December 31, 2020, the recorded investment in purchased impaired loans was $109 thousand and $110 thousand,
respectively. The unpaid principal balance was $152 thousand and $171 thousand at December 31, 2021 and December 31, 2020,
respectively. At December 31, 2021 and December 31, 2020, these loans were all secured by commercial real estate.
Related
party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with unrelated persons and generally do not involve more than the normal risk of collectability. The
following table presents related party loan transactions for the years ended December 31, 2021 and December 31, 2020.
Schedule of Related Party Loans
| |
| | |
| |
(Dollars in thousands) | |
For the years ended December 31, | |
| |
2021 | | |
2020 | |
Balance, beginning of year | |
$ | 3,297 | | |
$ | 4,108 | |
New Loans | |
| 4 | | |
| 188 | |
Less loan repayments | |
| 492 | | |
| 999 | |
Balance, end of year | |
$ | 2,809 | | |
$ | 3,297 | |
Note 5—FAIR VALUE
MEASUREMENT
The Company
adopted FASB ASC Fair Value Measurement Topic 820, which defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy
which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. The standard describes three levels of inputs that may be used to measure fair value:
Level l |
Quoted prices in active markets
for identical assets or liabilities. |
Level 2 |
Observable inputs other than
Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities. |
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. Level 3
assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow
methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant
management judgment or estimation. |
FASB ASC 825-10-50
“Disclosure about Fair Value of Financial Instruments”, requires the Company to disclose estimated fair values for
its financial instruments. Fair value estimates, methods, and assumptions are set forth below.
Cash and
short term investments—The carrying amount of these financial instruments (cash and due from banks, interest-bearing bank
balances, federal funds sold and securities purchased under agreements to resell) approximates fair value. All mature within 90
days and do not present unanticipated credit concerns and are classified as Level 1.
Investment
Securities—Measurement is on a recurring basis based upon quoted market prices, if available. If quoted market prices are
not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the
present value of future cash flows, adjusted for prepayment assumptions, projected credit losses, and liquidity. Level 1 securities
include those traded on an active exchange, such as the New York Stock Exchange, or by dealers or brokers in active over-the-counter
markets. Level 2 securities include mortgage-backed securities issued both by government sponsored enterprises and private label
mortgage-backed securities. Generally, these fair values are priced from established pricing models. Level 3 securities include
corporate debt obligations and asset–backed securities that are less liquid or for which there is an inactive market.
Note 5—FAIR VALUE
MEASUREMENT (Continued)
Other
investments, at cost—The carrying value of other investments, such as FHLB stock, approximates fair value based on redemption
provisions.
Loans
Held for Sale—The Company originates fixed rate residential loans on a servicing released basis in the secondary market.
Loans closed but not yet settled with an investor, are carried in the Company’s loans held for sale portfolio. These loans
are fixed rate residential loans that have been originated in the Company’s name and have closed. Virtually all of these
loans have commitments to be purchased by investors at a locked in price with the investors on the same day that the loan was
locked in with the Company’s customers. Therefore, these loans present very little market risk for the Company and are classified
as Level 2. The carrying amount of these loans approximates fair value.
Loans—
The valuation of loans receivable is estimated using the exit price notion which incorporates factors, such as enhanced credit
risk, illiquidity risk and market factors that sometimes exist in exit prices in dislocated markets. This credit risk assumption
is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s
loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following
categories: variable rate loans, impaired loans and all other loans. The results are then adjusted to account for credit risk
as described above.
Other
Real Estate Owned (“OREO”)—OREO is carried at the lower of carrying value or fair value on a non-recurring basis.
Fair value is based upon independent appraisals or management’s estimation of the collateral and is considered a Level 3
measurement.
Accrued
Interest Receivable—The fair value approximates the carrying value and is classified as Level 1.
Deposits—The
fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposits is estimated by discounting the future cash flows using rates currently
offered for deposits of similar remaining maturities. Deposits are classified as Level 2.
Federal
Home Loan Bank Advances—Fair value is estimated based on discounted cash flows using current market rates for borrowings
with similar terms and are classified as Level 2.
Short
Term Borrowings—The carrying value of short term borrowings (securities sold under agreements to repurchase and demand notes
to the Treasury) approximates fair value. These are classified as Level 2.
Junior
Subordinated Debentures—The fair values of junior subordinated debentures are estimated by using discounted cash flow analyses
based on incremental borrowing rates for similar types of instruments. These are classified as Level 2.
Accrued
Interest Payable—The fair value approximates the carrying value and is classified as Level 1.
Commitments to
Extend Credit—The fair value of these commitments is immaterial because their underlying interest rates approximate market.
Note 5—FAIR VALUE
MEASUREMENT (Continued)
The carrying amount
and estimated fair value by classification Level of the Company’s financial instruments as of December 31, 2021 and December 31,
2020 are as follows:
Fair Value, by Balance Sheet Grouping
| |
| | |
| | |
| | |
| | |
| |
| |
December 31, 2021 | |
| |
Carrying | | |
Fair Value | |
(Dollars in thousands) | |
Amount | | |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Financial Assets: | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash and short term investments | |
$ | 69,022 | | |
$ | 69,022 | | |
$ | 69,022 | | |
$ | — | | |
$ | — | |
Available-for-sale securities | |
| 564,839 | | |
| 564,839 | | |
| 39,829 | | |
| 525,010 | | |
| — | |
Other investments, at cost | |
| 1,785 | | |
| 1,785 | | |
| — | | |
| — | | |
| 1,785 | |
Loans held for sale | |
| 7,120 | | |
| 7,120 | | |
| — | | |
| 7,120 | | |
| — | |
Net loans receivable | |
| 852,523 | | |
| 851,822 | | |
| — | | |
| — | | |
| 851,822 | |
Accrued interest | |
| 3,927 | | |
| 3,927 | | |
| 3,927 | | |
| — | | |
| — | |
Financial liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | |
Non-interest bearing demand | |
$ | 444,688 | | |
$ | 444,688 | | |
$ | — | | |
$ | 444,688 | | |
$ | — | |
Interest bearing demand deposits and money market accounts | |
| 619,057 | | |
| 619,057 | | |
| — | | |
| 619,057 | | |
| — | |
Savings | |
| 143,765 | | |
| 143,765 | | |
| — | | |
| 143,765 | | |
| — | |
Time deposits | |
| 153,781 | | |
| 154,030 | | |
| — | | |
| 154,030 | | |
| — | |
Total deposits | |
| 1,361,291 | | |
| 1,361,540 | | |
| — | | |
| 1,361,540 | | |
| — | |
Federal Home Loan Bank Advances | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Short term borrowings | |
| 54,216 | | |
| 54,216 | | |
| — | | |
| 54,216 | | |
| — | |
Junior subordinated debentures | |
| 14,964 | | |
| 15,015 | | |
| — | | |
| 15,015 | | |
| — | |
Accrued interest payable | |
| 404 | | |
| 404 | | |
| 404 | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
December 31, 2020 | |
| |
Carrying | | |
Fair Value | |
(Dollars in thousands) | |
Amount | | |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Financial Assets: | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash and short term investments | |
$ | 64,992 | | |
$ | 64,992 | | |
$ | 64,992 | | |
$ | — | | |
$ | — | |
Available-for-sale securities | |
| 359,866 | | |
| 359,866 | | |
| 20,564 | | |
| 339,302 | | |
| — | |
Other investments, at cost | |
| 2,053 | | |
| 2,053 | | |
| — | | |
| — | | |
| 2,053 | |
Loans held for sale | |
| 45,020 | | |
| 45,020 | | |
| — | | |
| 45,020 | | |
| — | |
Net loans receivable | |
| 833,768 | | |
| 829,685 | | |
| — | | |
| — | | |
| 829,685 | |
Accrued interest | |
| 4,167 | | |
| 4,167 | | |
| 4,167 | | |
| — | | |
| — | |
Financial liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | |
Non-interest bearing demand | |
$ | 385,511 | | |
$ | 385,511 | | |
$ | — | | |
$ | 385,511 | | |
$ | — | |
NOW and money market accounts | |
| 520,205 | | |
| 520,205 | | |
| — | | |
| 520,205 | | |
| — | |
Savings | |
| 123,032 | | |
| 123,032 | | |
| — | | |
| 123,032 | | |
| — | |
Time deposits | |
| 160,665 | | |
| 161,505 | | |
| — | | |
| 161,505 | | |
| — | |
Total deposits | |
| 1,189,413 | | |
| 1,190,253 | | |
| — | | |
| 1,190,253 | | |
| — | |
Federal Home Loan Bank Advances | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Short term borrowings | |
| 40,914 | | |
| 40,914 | | |
| — | | |
| 40,914 | | |
| — | |
Junior subordinated debentures | |
| 14,964 | | |
| 11,748 | | |
| — | | |
| 11,748 | | |
| — | |
Accrued interest payable | |
| 667 | | |
| 667 | | |
| 667 | | |
| — | | |
| — | |
Note 5—FAIR VALUE
MEASUREMENT (Continued)
The following
table summarizes quantitative disclosures about the fair value for each category of assets carried at fair value as of December
31, 2021 and December 31, 2020 that are measured on a recurring basis. There were no liabilities carried at fair value as of December
31, 2021 or December 31, 2020 that are measured on a recurring basis.
Fair Value, Assets Measured on Recurring Basis
(Dollars in thousands)
Description | |
December 31, 2021 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Available- for-sale securities | |
| | | |
| | | |
| | | |
| | |
US Treasury Securities | |
$ | 15,436 | | |
$ | — | | |
$ | 15,436 | | |
$ | — | |
Mortgage-backed securities | |
| 397,729 | | |
| 25,934 | | |
| 371,796 | | |
| — | |
Small Business Administration pools | |
| 31,273 | | |
| — | | |
| 31,273 | | |
| — | |
State and local government | |
| 109,848 | | |
| 12,896 | | |
| 96,952 | | |
| — | |
Corporate and other securities | |
| 8,052 | | |
| 1,000 | | |
| 7,052 | | |
| — | |
Total Available-for-sale securities | |
| 564,839 | | |
| 39,830 | | |
| 525,010 | | |
| — | |
Loans held for sale | |
| 7,120 | | |
| — | | |
| 7,120 | | |
| — | |
Total | |
$ | 571,959 | | |
$ | 39,830 | | |
$ | 532,130 | | |
$ | — | |
(Dollars in thousands)
Description | |
December 31, 2020 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Available-for-sale securities | |
| | | |
| | | |
| | | |
| | |
US treasury securities | |
$ | 1,502 | | |
$ | — | | |
$ | 1,502 | | |
$ | — | |
Mortgage-backed securities | |
| 229,929 | | |
| 17,029 | | |
| 212,900 | | |
| — | |
Small Business Administration securities | |
| 35,498 | | |
| — | | |
| 35,498 | | |
| — | |
State and local government | |
| 88,603 | | |
| 3,535 | | |
| 85,068 | | |
| — | |
Corporate and other securities | |
| 3,328 | | |
| — | | |
| 3,328 | | |
| — | |
Total Available-for-sale securities | |
| 359,866 | | |
| 20,564 | | |
| 339,302 | | |
| — | |
Loans held-for-sale | |
| 45,020 | | |
| — | | |
| 45,020 | | |
| — | |
Total | |
$ | 404,886 | | |
$ | 20,564 | | |
$ | 384,322 | | |
$ | — | |
The following
tables summarize quantitative disclosures about the fair value for each category of assets carried at fair value as of December
31, 2021 and December 31, 2020 that are measured on a non-recurring basis. There were no liabilities carried at fair value and
measured on a non-recurring basis at December 31, 2021 and 2020.
Fair Value, Assets Measured on Non-Recurring Basis
(Dollars in thousands) | |
| | |
| | |
| | |
| |
Description | |
December 31, 2021 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Impaired loans: | |
| | | |
| | | |
| | | |
| | |
Commercial & Industrial | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
Real estate: | |
| | | |
| | | |
| | | |
| | |
Mortgage-residential | |
| 133 | | |
| — | | |
| — | | |
| 133 | |
Mortgage-commercial | |
| 1,560 | | |
| — | | |
| — | | |
| 1,560 | |
Consumer: | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| — | | |
| — | | |
| — | | |
| — | |
Other | |
| — | | |
| — | | |
| — | | |
| — | |
Total impaired | |
| 1,693 | | |
| — | | |
| — | | |
| 1,694 | |
Other real estate owned: | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 624 | | |
| — | | |
| — | | |
| 624 | |
Mortgage-commercial | |
| 541 | | |
| — | | |
| — | | |
| 541 | |
Total other real estate owned | |
| 1,165 | | |
| — | | |
| — | | |
| 1,165 | |
Total | |
$ | 2,859 | | |
$ | — | | |
$ | — | | |
$ | 2,859 | |
Note 5—FAIR VALUE
MEASUREMENT (Continued)
(Dollars in thousands) | |
| | |
| | |
| | |
| |
Description | |
December 31, 2020 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Impaired loans: | |
| | | |
| | | |
| | | |
| | |
Commercial & Industrial | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
Real estate: | |
| | | |
| | | |
| | | |
| | |
Mortgage-residential | |
| 440 | | |
| — | | |
| — | | |
| 440 | |
Mortgage-commercial | |
| 5,629 | | |
| — | | |
| — | | |
| 5,629 | |
Consumer: | |
| | | |
| | | |
| | | |
| | |
Home equity | |
| 42 | | |
| — | | |
| — | | |
| 42 | |
Other | |
| — | | |
| — | | |
| — | | |
| — | |
Total impaired | |
| 6,111 | | |
| — | | |
| — | | |
| 6,111 | |
Other real estate owned: | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 600 | | |
| — | | |
| — | | |
| 600 | |
Mortgage-commercial | |
| 594 | | |
| — | | |
| — | | |
| 594 | |
Total other real estate owned | |
| 1,194 | | |
| — | | |
| — | | |
| 1,194 | |
Total | |
$ | 7,305 | | |
$ | — | | |
$ | — | | |
$ | 7,305 | |
The Company has
a large percentage of loans with real estate serving as collateral. Loans which are deemed to be impaired are primarily valued
on a nonrecurring basis at the fair value of the underlying real estate collateral. Such fair values are obtained using independent
appraisals, which the Company considers to be Level 3 inputs. Third party appraisals are generally obtained when a loan is identified
as being impaired or at the time it is transferred to OREO. This internal process would consist of evaluating the underlying collateral
to independently obtained comparable properties. With respect to less complex or smaller credits, an internal evaluation may be
performed. Generally, the independent and internal evaluations are updated annually. Factors considered in determining the fair
value include geographic sales trends, the value of comparable surrounding properties as well as the condition of the property.
The aggregate amount of impaired loans was $1.2 million and $6.1 million for the year ended December 31, 2021, and year ended
December 31, 2020, respectively.
For Level
3 assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2021 and December 31, 2020, the significant
unobservable inputs used in the fair value measurements were as follows:
Fair Value Measurement Inputs and
Valuation Techniques
(Dollars in thousands) | |
Fair Value as of December 31, 2021 | |
Valuation Technique | |
Significant Observable Inputs | |
Significant Unobservable Inputs |
OREO | |
$ | 1,165 | |
Appraisal Value/Comparison
Sales/Other estimates | |
Appraisals and or sales of comparable properties | |
Appraisals discounted 6% to 16% for sales commissions and other holding cost |
Impaired loans | |
$ | 1,694 | |
Appraisal Value | |
Appraisals and or sales of comparable properties | |
Appraisals discounted 6% to 16% for sales commissions and other holding cost |
| |
| | |
| |
| |
|
(Dollars in thousands) | |
Fair Value as of December 31, 2020 | |
Valuation Technique | |
Significant Observable Inputs | |
Significant Unobservable Inputs |
OREO | |
$ | 1,194 | |
Appraisal Value/Comparison
Sales/Other estimates | |
Appraisals and or sales of comparable properties | |
Appraisals discounted 6% to 16% for sales commissions and other holding cost |
Impaired loans | |
$ | 6,111 | |
Appraisal Value | |
Appraisals and or sales of comparable properties | |
Appraisals discounted 6% to 16% for sales commissions and other holding cost |
Note 6—PROPERTY AND
EQUIPMENT
Property
and equipment consisted of the following:
| |
| | |
| |
| |
December 31, | |
(Dollars in thousands) | |
2021 | | |
2020 | |
Land | |
$ | 10,454 | | |
$ | 11,166 | |
Premises | |
| 29,415 | | |
| 29,342 | |
Equipment | |
| 6,855 | | |
| 7,050 | |
Fixed assets in progress | |
| (4 | ) | |
| 62 | |
Property and equipment, gross | |
| 46,720 | | |
| 47,620 | |
Accumulated depreciation | |
| 13,889 | | |
| 13,162 | |
Property and Equipment Net | |
$ | 32,831 | | |
$ | 34,458 | |
Provision for
depreciation included in operating expenses for the years ended December 31, 2021, 2020 and 2019 amounted to $1.7 million, $1.6
million, and $1.6 million, respectively.
Premises
held-for-sale was $0
and $591 thousand
at December 31, 2021, and December 31, 2020, respectively. Gain on premises held-for-sale was $103
thousand and $0
at December 31, 2021, and December 31, 2020, respectively. Gain on sale of fixed assets was $14
thousand and $0 at
December 31, 2021, and December 31, 2020, respectively.
Note 7—GOODWILL,
CORE DEPOSIT INTANGIBLE AND OTHER ASSETS
Intangible
assets (excluding goodwill) consisted of the following:
| |
| | |
| | |
| |
| |
December 31, | |
(Dollars in thousands) | |
2021 | | |
2020 | | |
2019 | |
Core deposit premiums, gross carrying amount | |
$ | 3,358 | | |
$ | 3,358 | | |
$ | 3,358 | |
Other intangibles | |
| 538 | | |
| 538 | | |
| 538 | |
Gross carrying amount | |
| 3,896 | | |
| 3,896 | | |
| 3,896 | |
Accumulated amortization | |
| (2,977 | ) | |
| (2,776 | ) | |
| (2,413 | ) |
Net | |
$ | 919 | | |
$ | 1,120 | | |
$ | 1,483 | |
Based
on the core deposit and other intangibles as of December 31, 2021, the following table presents the aggregate amortization expense
for each of the succeeding years ending December 31:
(Dollars in thousands) | |
Amount | |
2022 | |
$ | 158 | |
2023 | |
| 157 | |
2024 | |
| 158 | |
2025 | |
| 157 | |
2026 and thereafter | |
| 289 | |
Total | |
$ | 919 | |
Amortization
of the intangibles amounted to $201 thousand , $363 thousand and $523 thousand for the years ended December 31, 2021, 2020 and
2019, respectively.
On October
20, 2017, we completed our acquisition of Cornerstone and its wholly-owned subsidiary, Cornerstone National Bank. Under the terms
of the merger agreement, Cornerstone shareholders received either $11.00 in cash or 0.54 shares of the Company’s common
stock, or a combination thereof, for each Cornerstone share they owned immediately prior to the merger, subject to the limitation
that 70% of the outstanding shares of Cornerstone common stock were exchanged for shares of the Company’s common stock and
30% of the outstanding shares of Cornerstone were exchanged for cash. The Company issued 877,384 shares of common stock in the
merger. Total intangibles, including goodwill of $9.5 million and a core deposit premium of $1.8 million, were recorded in conjunction
with the acquisition.
On February
1, 2014, we completed our acquisition of Savannah River Financial Corp. (“Savannah River”) and its wholly-owned subsidiary,
Savannah River Banking Company. Under the terms of the merger agreement, Savannah River shareholders received either $11.00 in
cash or 1.0618 shares of the Company’s common stock, or a combination thereof, for each Savannah River share they owned
immediately prior to the merger, subject to the limitation that 60% of the outstanding shares of Savannah River common stock were
exchanged for cash and 40% of the outstanding shares of Savannah River common stock were exchanged for shares of the Company’s
common stock. The Company issued 1,274,200 shares of common stock in connection with the merger. Total intangibles, including
goodwill of $4.5 million and a core deposit premium of $1.2 million, were recorded in conjunction with the acquisition.
Note 7—GOODWILL,
CORE DEPOSIT INTANGIBLE AND OTHER ASSETS (Continued)
On September
26, 2014, the Bank completed its acquisition and assumption of approximately $40 million in deposits and $8.7 million in loans
from First South Bank. This represented all of the deposits and a portion of the loans at First South Bank’s Columbia, South
Carolina banking office located at 1333 Main Street. The Bank paid a premium of $714 thousand for the deposits and loans acquired.
The deposits and loans from First South Bank have been consolidated into the Bank’s branch located at 1213 Lady Street,
Columbia, South Carolina. The premium paid of $714 thousand plus fair value adjustments recorded on loans and deposits acquired
resulted in a core deposit intangible of $365.9 thousand and other identifiable intangible assets in the amount of $538.6 thousand
being recorded related to this transaction.
As a result
of the acquisition of Palmetto South Mortgage Corp. on July 31, 2011, we have recorded goodwill in the amount of $571 thousand.
Total
goodwill from acquisitions at December 31, 2021 and 2020 totaled $14.6 million. This amount is made up of the Cornerstone, Savannah
River, and Palmetto South Mortgage Corporation acquisitions. The goodwill is tested for impairment annually having identified
none as of December 31, 2021 or 2020.
Bank-owned life
insurance provides benefits to various bank officers. The carrying value of all existing policies at December 31, 2021 and 2020
was $29.2 million and $27.7 million, respectively. During 2021, an additional $850 thousand in Bank-owned life insurance was purchased.
Note 8—OTHER REAL
ESTATE OWNED
The following
summarizes the activity in the other real estate owned for the years ended December 31, 2021 and 2020.
| |
| | |
| |
| |
December 31, | |
(In thousands) | |
2021 | | |
2020 | |
Balance—beginning of year | |
$ | 1,194 | | |
$ | 1,410 | |
Additions—foreclosures | |
| 145 | | |
| 114 | |
Write-downs | |
| (50 | ) | |
| (128 | ) |
Sales | |
| (124 | ) | |
| (202 | ) |
Balance, end of year | |
$ | 1,165 | | |
$ | 1,194 | |
Note 9—DEPOSITS
The Company’s
total deposits are comprised of the following at the dates indicated:
| |
December 31, | | |
December 31, | |
(Dollars in thousands) | |
2021 | | |
2020 | |
Non-interest bearing deposits | |
$ | 444,688 | | |
$ | 385,511 | |
Interest bearing demand deposits and money market accounts | |
| 619,057 | | |
| 520,205 | |
Savings | |
| 143,765 | | |
| 123,032 | |
Time deposits | |
| 153,781 | | |
| 160,665 | |
Total deposits | |
$ | 1,361,291 | | |
$ | 1,189,413 | |
At December 31, 2021,
the scheduled maturities of time deposits are as follows:
(Dollars in thousands) | | |
| |
2022 | | |
$ | 117,612 | |
2023 | | |
| 19,950 | |
2024 | | |
| 8,409 | |
2025 | | |
| 3,673 | |
2026 | | |
| 4,037 | |
2027 | | |
| 100 | |
Time Deposits | | |
$ | 153,781 | |
Note 9—DEPOSITS (Continued)
Interest
paid on time deposits of $100 thousand or more totaled $538 thousand, $993 thousand, and $1.1 million in 2021, 2020, and 2019,
respectively.
Time deposits
that meet or exceed the FDIC insurance limit of $250 thousand at year end 2021 and 2020 were $27.9 million and $28.6 million,
respectively.
Deposits
from directors and executive officers and their related interests at December 31, 2021 and 2020 amounted to approximately $31.9 million and $36.3
million, respectively.
The amount of
overdrafts classified as loans at December 31, 2021 and 2020 were $58 thousand and $61 thousand , respectively.
Note 10—SECURITIES
SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED MONEY
Securities
sold under agreements to repurchase generally mature within one day to four days from the transaction date. The weighted average
interest rate at December 31, 2021 and 2020 was 0.12% and 0.20%, respectively. The maximum month-end balance during 2021 and 2020
was $72.4 million and $73.0 million, respectively. The average outstanding balance during the years ended December 31, 2021 and
2020 amounted to $62.2 million and $49.5 million, respectively, with an average rate paid of 0.14% and 0.38%, respectively. Securities
sold under agreements to repurchase are collateralized by securities with fair market values exceeding the total balance of the
agreement.
At December 31,
2021 and 2020, the Company had unused short-term lines of credit totaling $70.0 million and $70.0 million respectively.
Note 11—ADVANCES
FROM FEDERAL HOME LOAN BANK
As
collateral for its advances, the Company has pledged in the form of blanket liens, eligible loans, in the amount of $22.8 million at December 31, 2021. Securities have been pledged as collateral for advances in the amount of $2.7 million as of
December 31, 2021. As collateral for its advances, the Company has pledged in the form of blanket liens, eligible loans, in the
amount of $22.1
million at December 31, 2020. Securities have been pledged as collateral for advances in the amount of $3.9 million as of
December 31, 2020. Advances are subject to prepayment penalties. The average advances during 2021 and 2020 were $5.0 million
and $2.0
million, respectively. The average interest rate for 2021 and 2020 was 0.18% and 0.39%, respectively. The maximum outstanding
amount at any month end was $0 and $15.0 million for 2021 and 2020, respectively.
During the years
ended December 31, 2021 and December 31, 2020 there were no advances that were prepaid. Accordingly, no losses were realized on
early extinguishment.
Note 12—JUNIOR SUBORDINATED
DEBT
On September 16,
2004, FCC Capital Trust I (“Trust I”), a wholly owned unconsolidated subsidiary of the Company, issued and sold floating
rate securities having an aggregate liquidation amount of $15.0 million. The Trust I securities accrue and pay distributions quarterly
at a rate per annum equal to LIBOR plus 257 basis points. The distributions are cumulative and payable in arrears. The Company has the
right, subject to events of default, to defer payments of interest on the Trust I securities for a period not to exceed 20 consecutive
quarters, provided no extension can extend beyond the maturity date of September 16, 2034. The Trust I securities are mandatorily redeemable
upon maturity at September 16, 2034. If the Trust I securities are redeemed on or after September 16, 2009, the redemption price will
be 100% of the principal amount plus accrued and unpaid interest. The Trust I security were eligible to be redeemed in whole but not
in part, at any time prior to September 16, 2009 following an occurrence of a tax event, a capital treatment event or an investment company
event. Currently, these securities qualify under risk-based capital guidelines as Tier 1 capital, subject to certain limitations. The
Company has no current intention to exercise its right to defer payments of interest on the Trust I securities. In 2015, the Company
redeemed $500 thousand of this Trust I security. This resulted in a gain of $130 thousand received in 2015.
Note 13—LEASES
The
Company has operating leases on three of its facilities. The leases have maturities ranging from September 2024 to December
2028 some of which include extensions of multiple five-year terms. The right-of-use asset and lease liability were $2.8 and $3.0 million, respectively, at December 31, 2021.
During the twelve-month period ended December 31, 2021, the Company made cash payments in the amount of $297.6 thousand for operating
leases and the lease liability was reduced by $164.6 thousand. The lease expense recognized during the twelve-month period ended
December 31, 2021, amounted to $323.0 thousand . The weighted average remaining lease term as of December 31, 2021, is 15.08 years
and the weighted average discount rate used is 4.42%. The following table shows future undiscounted lease payments for operating
leases with initial terms of one year or more as of December 31, 2021 are as follow:
(Dollars in thousands) | |
| |
2022 | |
$ | 303 | |
2023 | |
| 309 | |
2024 | |
| 282 | |
2025 | |
| 222 | |
2026 | |
| 226 | |
Thereafter | |
| 2,751 | |
Total undiscounted lease payments | |
$ | 4,093 | |
Less effect of discounting | |
| (1,143 | ) |
Present value of estimated lease payments (lease liability) | |
| 2,950 | |
Note 14—INCOME TAXES
Income
tax expense for the years ended December 31, 2021, 2020 and 2019 consists of the following:
Reconciliation
from expected federal tax expense to effective income tax expense for the periods indicated are as follows:
Note 14—INCOME TAXES (Continued)
The following
is a summary of the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
deferred tax liabilities:
At December 31,
2021 the Company has approximately $20.1 million in State net operating losses. A valuation allowance is established to fully
offset the deferred tax asset related to these net operating losses of the holding company. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become
deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income and
tax planning strategies in making this assessment. Additional amounts of these deferred tax assets considered to be realizable
could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced. The net deferred
asset is included in other assets on the consolidated balance sheets.
A
portion of the change in the net deferred tax asset relates to unrealized gains on securities available-for-sale. The tax benefit related
to the change in unrealized gain on these securities of $2.1 million has been recorded directly to shareholders equity. The balance
in the change in net deferred tax asset results from the current period deferred tax benefit of $220 thousand. At December 31, 2021,
the Company had no federal net operating loss carryforward.
Tax returns
for 2018 and subsequent years are subject to examination by taxing authorities.
As of December
31, 2021, the Company had no material unrecognized tax benefits or accrued interest and penalties. It is the Company’s policy
to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.
Note 15—COMMITMENTS,
CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES
The Bank
is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the consolidated balance sheets.
The Bank’s
exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend
credit is represented by the contractual amount of these instruments. The Bank uses the same credit policies in making commitments
as for on-balance sheet instruments. At December 31, 2021 and 2020, the Bank had commitments to extend credit including lines
of credit of $137.4 million and $142.6 million, respectively.
Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses and may require a payment of a fee. Since commitments
may expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. The Bank evaluates
each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the
Bank upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies but may include
inventory, property and equipment, residential real estate and income producing commercial properties.
Note 15—COMMITMENTS,
CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES (Continued)
The primary market
areas served by the Bank include the Midlands Region of South Carolina to include Lexington, Richland, Newberry and Kershaw Counties;
the Central Savannah River Region include Aiken County, South Carolina and Richmond and Columbia Counties in Georgia. With the
acquisition of Cornerstone, we also serve Greenville, Anderson and Pickens Counties in South Carolina which we refer to as the
Upstate Region. Management closely monitors its credit concentrations and attempts to diversify the portfolio within its primary
market area. The Company considers concentrations of credit risk to exist when pursuant to regulatory guidelines, the amounts
loaned to multiple borrowers engaged in similar business activities represent 25% or more of the Bank’s risk based capital,
or approximately $36.0 million.
Based on this
criteria, the Bank had five such concentrations at December 31, 2021, including $259.0 million (30.0% of total loans) to lessors
of non-residential property, $120.8 million (14.0% of total loans) to lessors of residential properties, $57.7 million (6.7% of
total loans) to private households, $38.2 million (4.4% of total loans) to other activities related to real estate and $47.2 million
to religious organizations (5.5% of total loans). As reflected above, lessors of non-residential properties and lessors of residential
buildings equate to approximately 179.8% and 83.8% of total regulatory capital, respectively. The risk in these portfolios is
diversified over a large number of loans approximately 455 for lessors of non-residential properties and 420 loans for lessors
of residential buildings. Commercial real estate loans and commercial construction loans represent $703.2 million, or 81.4%, of
the portfolio. Approximately $243.7 million, or 34.7%, of the total commercial real estate loans are owner occupied, which can
tend to reduce the risk associated with these credits. Although the Bank’s loan portfolio, as well as existing commitments,
reflects the diversity of its market areas, a substantial portion of its debtor’s ability to honor their contracts is dependent
upon the economic stability of these areas.
The nature of
the business of the Company and Bank may at times result in a certain amount of litigation. The Bank is involved in certain litigation
that is considered incidental to the normal conduct of business. Management believes that the liabilities, if any, resulting from
the proceedings will not have a material adverse effect on the consolidated financial position, consolidated results of operations
or consolidated cash flows of the Company.
Note 16—REVENUE RECOGNITION
In accordance
with Topic 606, revenues are recognized when control of promised goods or services is transferred to customers in an amount that
reflects the consideration the Company expects to be entitled to in exchange for those goods or services. To determine revenue
recognition for arrangements that an entity determines are within the scope of Topic 606, the Company performs the following five
steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine
the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue
when (or as) the Company satisfies a performance obligation.
The Company only
applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to
in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to
be within the scope of Topic 606, the Company assesses the goods or services that are promised within each contract and identifies
those that contain performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes
as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance
obligation is satisfied.
Deposit Service
Charges: The Bank earns fees from its deposit customers for account maintenance, transaction-based and overdraft services.
Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts on a monthly
basis. The performance obligation is satisfied and the fees are recognized on a monthly basis as the service period is completed.
Transaction-based fees on deposits accounts are charged to deposit customers for specific services provided to the customer, such
as non-sufficient funds fees, overdraft fees, and wire fees. The performance obligation is completed as the transaction occurs
and the fees are recognized at the time each specific service is provided to the customer.
Check Card
Fee Income: Check card fee income represents fees earned when a debit card issued by the Bank is used. The Bank earns interchange
fees from debit cardholder transactions through the Mastercard payment network. Interchange fees from cardholder transactions
represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing
services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction
is charged to the card. Certain expenses directly associated with the debit card are recorded on a net basis with the fee income.
This income is recognized within “Other” below.
Gains/Losses
on OREO Sales: Gains/losses on the sale of OREO are included in non-interest income and are generally recognized when the performance
obligation is complete. This is typically at delivery of control over the property to the buyer at the time of each real estate closing.
Note 16—REVENUE RECOGNITION (Continued)
(Dollars in thousands) | |
December 31, | | |
December 31, | |
Non-Interest Income | |
2021 | | |
2020 | |
Deposit service charges | |
$ | 977 | | |
$ | 1,121 | |
Mortgage banking income (1) | |
| 4,319 | | |
| 5,557 | |
Investment advisory fees and non-deposit commissions (1) | |
| 3,995 | | |
| 2,720 | |
Gain (loss) on sale of securities (1) | |
| — | | |
| 99 | |
Gain on sale of other real estate owned | |
| 77 | | |
| 147 | |
Gain (loss) on sale of other assets | |
| 117 | | |
| — | |
Non-recurring BOLI income | |
| 171 | | |
| 311 | |
Other (2) | |
| 4,248 | | |
| 3,814 | |
Total non-interest income | |
| 13,904 | | |
| 13,769 | |
(1) |
Not within the scope
of ASC 606 |
(2) |
Includes Check Card
Fee income discussed above. No other items are within the scope of ASC 606. |
Note 17—OTHER EXPENSES
A summary
of the components of other non-interest expense is as follows:
| |
| | |
| | |
| |
| |
Year ended December 31, | |
(Dollars in thousands) | |
2021 | | |
2020 | | |
2019 | |
ATM/debit card, bill payment and data processing | |
$ | 3,823 | | |
$ | 3,123 | | |
$ | 2,834 | |
Supplies | |
| 116 | | |
| 138 | | |
| 151 | |
Telephone | |
| 365 | | |
| 350 | | |
| 413 | |
Courier | |
| 181 | | |
| 176 | | |
| 152 | |
Correspondent services | |
| 280 | | |
| 272 | | |
| 248 | |
Insurance | |
| 325 | | |
| 316 | | |
| 263 | |
Postage | |
| 50 | | |
| 36 | | |
| 47 | |
Loss on limited partnership interest | |
| — | | |
| — | | |
| 88 | |
Director fees | |
| 360 | | |
| 336 | | |
| 348 | |
Legal and Professional fees | |
| 878 | | |
| 1,058 | | |
| 959 | |
Shareholder expense | |
| 212 | | |
| 192 | | |
| 171 | |
Other | |
| 1,777 | | |
| 1,554 | | |
| 1,718 | |
Total | |
$ | 8,367 | | |
$ | 7,551 | | |
$ | 7,392 | |
Note 18—STOCK OPTIONS,
RESTRICTED STOCK, AND DEFERRED COMPENSATION
The
Company has adopted a stock option plan whereby shares have been reserved for issuance by the Company upon the grant of stock
options or restricted stock awards. At December 31, 2021 and 2020, the Company had 71,768 and 94,910 shares, respectively, reserved
for future grants. The 350,000 shares reserved were approved by shareholders at the 2011 annual meeting. The plan provides for
the grant of options to key employees and directors as determined by a stock option committee made up of at least two members
of the board of directors. Options are exercisable for a period of ten years from date of grant. There were no stock options outstanding
and exercisable as of December 31, 2021, December 31, 2020 and December 31, 2019.
Note 18—STOCK OPTIONS,
RESTRICTED STOCK, AND DEFERRED COMPENSATION (Continued)
First
Community Corporation 2011 Stock Incentive Plan
In
2011, the Company and its shareholders adopted a stock incentive plan whereby 350,000 shares were reserved for issuance by the
Company upon the grant of stock options or restricted stock awards under the plan (the “2011 Plan”). The 2011 Plan
provided for the grant of options to key employees and directors as determined by a stock option committee made up of at least
two members of the board of directors. Options are exercisable for a period of ten years from the date of grant. There were no
stock options outstanding and exercisable at December 31, 2021, December 31, 2020 and December 31, 2019. At December 31, 2020,
the Company had 94,910 shares reserved for future grants under the 2011 Plan. The 2011 Plan expired on March 15, 2021 and no new
awards may be granted under the 2011 Plan. However, any awards outstanding under the 2011 Plan will continue to be outstanding
and governed by the provisions of the 2011 Plan.
Under
the 2011 Plan, the employee restricted shares and units cliff vest over a three-year period and the non-employee director shares
vest approximately one year after issuance. The unrecognized compensation cost at December 31, 2021 and December 31, 2020 for
non-vested shares amounts to $293.9 thousand and $283.1 thousand , respectively. Each unit is convertible into one share of common
stock at the time the unit vests. The related compensation cost for time-based units is accrued over the vesting period and was
$79.0 thousand and $107.4 thousand at December 31, 2021 and December 31, 2020, respectively.
Historically,
the Company granted time-based equity awards that vested based on continued service. Beginning in 2021 and in addition to time-based
equity awards, the Company began granting performance-based equity awards in the form of performance-based restricted stock units,
with the target number of performance-based restricted stock units for the Company’s Chief Executive Officer and other executive
officers representing 50% of total target equity awards. These performance-based restricted stock units cliff vest over three
years and include conditions based on the following performance measures: total shareholder return, return on average equity,
and non-performing assets. The Company granted 13,302 performance-based restricted stock units with a fair value of $234.0 thousand
during 2021. The Company granted no performance-based restricted stock units in 2020. The related compensation cost for the performance-based
restricted stock units is accrued over the vesting period and was $65.0 thousand during the year ended December 31, 2021. The
total related compensation cost for restricted stock units was $144.0 thousand and $107.4 thousand at December 31, 2021, and December
31, 2020, respectively, including both time-based and performance-based restricted stock units.
First
Community Corporation 2021 Omnibus Equity Incentive Plan
In
2021, the Company and its shareholders adopted an omnibus equity incentive plan whereby 225,000 shares were reserved for issuance
by the Company to help the company attract, retain and motivate directors, officers, employees, consultants and advisors of the
Company and its subsidiaries (the “2021 Plan”). The 2021 Plan replaced the 2011 Plan. No awards have been granted
under the 2021 Plan as of December 31, 2021.
Non-Employee
Director Deferred Compensation Plan
Under the Company’s
Non-Employee Director Deferred Compensation Plan, as amended and restated effective as of January 1, 2021, a director may elect
to defer all or any part of annual retainer and monthly meeting fees payable with respect to service on the board of directors
or a committee of the board. Units of common stock are credited to the director’s account as of the last day of such calendar
quarter during which the compensation is earned and are included in dilutive securities in the table below. The non-employee director’s
account balance is distributed by issuance of common stock within 30 days following such director’s separation from service
from the board of directors. At December 31, 2021 and 2020, there were 85,765 and 88,412 units in the plan, respectively. The
accrued liability related to the plan at December 31, 2021 and 2020 amounted to $1.1 million and $1.1 million, respectively, and
is included in “Other liabilities” on the balance sheet.
The table below
summarizes the common shares of restricted stock granted to each non-employee director in connection with their overall compensation
plan in 2021, 2020 and 2019.
| | |
| | |
| | |
| | |
| |
| | |
Restricted shares granted | | |
| | |
| |
Year | | |
Total | | |
per Director | | |
Value per share | | |
Date shares vest | |
2021 | | |
| 7,959 | | |
| 796 | | |
$ | 17.59 | | |
| 1/1/22 | |
2020 | | |
| 2,662 | | |
| 242 | | |
$ | 20.64 | | |
| 1/1/21 | |
2019 | | |
| 2,976 | | |
| 248 | | |
$ | 20.18 | | |
| 1/1/20 | |
Note 18—STOCK OPTIONS,
RESTRICTED STOCK, AND DEFERRED COMPENSATION (Continued)
In 2021, 2020
and 2019, 13,302, 17,175 and 8,418 restricted shares, respectively, were issued to executive officers in connection with the Bank’s
incentive compensation plan. The related compensation expense was $329.3 thousand , $312.2 thousand , and $143.9 thousand for the
years ended December 31, 2021, 2020, and 2019 respectively. The shares were valued at $17.59, $20.64 and $20.18 per share/unit,
respectively. Restricted shares/units granted to executive officers under the incentive compensation plan cliff vest over a three-year
period from the date of grant. The assumptions used in the calculation of these amounts for the awards granted in 2021, 2020 and
2019 are based on the price of the Company’s common stock on the grant date.
In 2014, 29,228
restricted shares were issued to senior officers of Savannah River and retained by the Company in connection with the merger.
The shares were valued at $10.55 per share. Restricted shares granted to these officers vested in three equal annual installments
beginning on January 31, 2015.
Warrants
to purchase 37,130 shares at $5.90 per share were issued in connection with the issuing of subordinated debt on November 15, 2011
with an expiration date of December 16, 2019. All warrants were exercised by the expiration date. The related subordinated debt
was paid off in November 2012.
Note 19—EMPLOYEE
BENEFIT PLANS
The
Company maintains a 401(k) plan, which covers substantially all employees. Participants may contribute up to the maximum allowed
by the regulations. During the years ended December 31, 2021, 2020 and 2019, the plan expense amounted to $581 thousand , $552 thousand, and $528 thousand , respectively. The Company matches 100% of the employee’s contribution up to 3% and 50% of the
employee’s contribution on the next 2% of the employee’s contribution.
The
Company acquired various single premium life insurance policies from DutchFork Bancshares that are used to indirectly fund fringe
benefits to certain employees and officers. A salary continuation plan was established payable for two key individuals upon attainment
of age 63. The plan provides for monthly benefits of $2,500 each for seventeen years for two individuals.
Other
plans acquired were supplemental life insurance covering certain key employees. In 2006, the Company established a salary continuation
plan which covers six additional key officers. In 2015, the Company established a salary continuation plan to cover additional
key employees. In 2017, 2019, and 2021, the Company established salary continuation plans for three additional key officers. The
plans provide for monthly benefits upon normal retirement age of varying amounts for a period of fifteen years. Single premium
life insurance policies were purchased in 2006, 2015, 2017, 2019, and 2021, in the amount of $3.5 million, $5.2 million, $1.5
million, $1.6 million, and $850 thousand , respectively. These policies are designed to offset the funding of these benefits.
The cash surrender value
at December 31, 2021 and 2020 of all bank owned life insurance was $29.2 million and $27.7 million, respectively. Expenses accrued for
the anticipated benefits under the salary continuation plans for the year ended December 31, 2021, 2020 and 2019 amounted to $516 thousand,
$514 thousand, and $437 thousand, respectively.
Note 20—EARNINGS
PER COMMON SHARE
The following
reconciles the numerator and denominator of the basic and diluted earnings per common share computation:
Schedule
of Earning Per Common Share
| |
| | |
| | |
| |
| |
Year ended December 31, | |
(Amounts in thousands) | |
2021 | | |
2020 | | |
2019 | |
Numerator (Included in basic and diluted earnings per share) | |
$ | 15,465 | | |
$ | 10,099 | | |
$ | 10,971 | |
Denominator | |
| | | |
| | | |
| | |
Weighted average common shares outstanding for: | |
| | | |
| | | |
| | |
Basic earnings per common share | |
| 7,491 | | |
| 7,446 | | |
| 7,510 | |
Dilutive securities: | |
| | | |
| | | |
| | |
Deferred compensation | |
| 58 | | |
| 36 | | |
| 58 | |
Warrants—Treasury stock method | |
| — | | |
| — | | |
| 20 | |
Diluted common shares outstanding | |
| 7,549 | | |
| 7,482 | | |
| 7,588 | |
Basic earnings per common share | |
$ | 2.06 | | |
$ | 1.36 | | |
$ | 1.46 | |
Diluted earnings per common share | |
$ | 2.05 | | |
$ | 1.35 | | |
$ | 1.45 | |
The average market price used in calculating assumed number of shares | |
$ | 19.68 | | |
$ | 15.89 | | |
$ | 19.32 | |
On December 16,
2011 there were 107,500 warrants issued in connection with the issuance of $2.5 million in subordinated debt (See Note 18). As
shown above, the warrants were dilutive for the period ended December 31, 2019. As of December 31, 2021 and December 31, 2020
there were no warrants outstanding.
Note 21—SHAREHOLDERS’
EQUITY, CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS
The Company
and Bank are subject to various federal and state regulatory requirements, including regulatory capital requirements. Failure
to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary, actions that, if undertaken,
could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and Bank must meet specific guidelines that involve quantitative measures
of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.
The Company and Bank capital amounts and classification are also subject to qualitative judgments by the regulators about components,
risk weighting, and other factors. The Bank is required to maintain minimum Tier 1 capital, Common Equity Tier I (CET1) capital,
total risked based capital and Tier 1 leverage ratios of 6%, 4.5%, 8% and 4%, respectively.
Regulatory
capital rules adopted in July 2013 and fully-phased in as of January 1, 2019, which we refer to Basel III, impose minimum capital
requirements for bank holding companies and banks. The Basel III rules apply to all national and state banks and savings associations
regardless of size and bank holding companies and savings and loan holding companies other than “small bank holding companies,”
generally holding companies with consolidated assets of less than $3 billion (such as the Company). In order to avoid restrictions
on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a “capital
conservation buffer” on top of our minimum risk-based capital requirements. This buffer must consist solely of common equity
Tier 1, but the buffer applies to all three measurements (common equity Tier 1, Tier 1 capital and total capital). The capital
conservation buffer consists of an additional amount of CET1 equal to 2.5% of risk-weighted assets.
Based on the
foregoing, as a small bank holding company, we are generally not subject to the capital requirements unless otherwise advised
by the Federal Reserve; however, our Bank remains subject to the capital requirements.
On October 20,
2017, we completed our acquisition of Cornerstone and its wholly-owned subsidiary, Cornerstone National Bank. Under the terms of the
merger agreement, Cornerstone shareholders received either $11.00 in cash or 0.54 shares of the Company’s common stock, or a combination
thereof, for each Cornerstone share they owned immediately prior to the merger, subject to the limitation that 70% of the outstanding
shares of Cornerstone common stock were exchanged for shares of the Company’s common stock and 30% of the outstanding shares of
Cornerstone were exchanged for cash. The Company issued 877,384 shares of common stock in the merger.
Note 21—SHAREHOLDERS’
EQUITY, CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS (Continued)
The Bank exceeded
the minimum regulatory capital ratios at December 31, 2021 and 2020, as set forth in the following table:
Schedule of actual
capital amounts and ratios as well as minimum amounts for each regulatory defined category for the bank and the company
(In thousands) | |
Minimum Required Amount | | |
% | | |
Actual Amount | | |
% | | |
Excess Amount | | |
% | |
The Bank(1)(2): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
December 31, 2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Risk Based Capital | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Tier 1 | |
$ | 57,075 | | |
| 6.0 | % | |
$ | 132,918 | | |
| 14.0 | % | |
$ | 75,843 | | |
| 8.0 | % |
Total Capital | |
$ | 76,101 | | |
| 8.0 | % | |
$ | 144,097 | | |
| 15.2 | % | |
$ | 67,996 | | |
| 7.1 | % |
CET1 | |
$ | 42,807 | | |
| 4.5 | % | |
$ | 132,918 | | |
| 14.0 | % | |
$ | 90,111 | | |
| 9.5 | % |
Tier 1 Leverage | |
$ | 62,897 | | |
| 4.0 | % | |
$ | 132,918 | | |
| 8.5 | % | |
$ | 70,021 | | |
| 4.5 | % |
December 31, 2020 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Risk Based Capital | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Tier 1 | |
$ | 56,288 | | |
| 6.0 | % | |
$ | 120,385 | | |
| 12.8 | % | |
$ | 64,097 | | |
| 6.8 | % |
Total Capital | |
$ | 75,051 | | |
| 8.0 | % | |
$ | 130,774 | | |
| 13.9 | % | |
$ | 55,723 | | |
| 5.9 | % |
CET1 | |
$ | 42,216 | | |
| 4.5 | % | |
$ | 120,385 | | |
| 12.8 | % | |
$ | 78,169 | | |
| 8.3 | % |
Tier 1 Leverage | |
$ | 54,492 | | |
| 4.0 | % | |
$ | 120,385 | | |
| 8.8 | % | |
$ | 65,893 | | |
| 4.8 | % |
(1) |
As a small bank holding company, we are
generally not subject to the capital requirements unless otherwise advised by the Federal Reserve. |
(2) |
Ratios do not include the capital conservation
buffer of 2.5%. |
The Federal
Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the Federal Reserve’s
policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention
by the bank holding company appears consistent with the organization’s capital needs asset quality and overall financial
condition. The Federal Reserve’s policies also require that a bank holding company serve as a source of financial strength
to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods
of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional
resources for assisting its subsidiary banks where necessary. In addition, under the prompt corrective action regulations, the
ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory
policies could affect the ability of the Company to pay dividends or otherwise engage in capital distributions.
The Company’s
principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends it receives from the Bank.
Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company. As a South Carolina chartered
bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay. Unless otherwise instructed by
the S.C. Board, the Bank is generally permitted under South Carolina State banking regulations to pay cash dividends of up to
100% of net income in any calendar year without obtaining the prior approval of the S.C. Board. The FDIC also has the authority
under federal law to enjoin a bank from engaging in what in its opinion constitutes an unsafe or unsound practice in conducting
its business, including the payment of a dividend under certain circumstances.
If the Bank is
not permitted to pay cash dividends to the Company, it is unlikely that we would be able to pay cash dividends on our common stock.
Moreover, holders of the Company’s common stock are entitled to receive dividends only when, and if declared by the board
of directors. Although the Company has historically paid cash dividends on its common stock, the Company is not required to do
so and the board of directors could reduce or eliminate our common stock dividend in the future.
Note 22—PARENT COMPANY
FINANCIAL INFORMATION
The balance
sheets, statements of operations and cash flows for First Community Corporation (Parent Only) follow:
Condensed Balance Sheets
Note 22—PARENT COMPANY
FINANCIAL INFORMATION (Continued)
Condensed Statements of
Operations
Condensed Statements of
Cash Flows
Note 23—SUBSEQUENT EVENTS
Subsequent events
are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent
events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including
the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence
about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring
through the date the financial statements were available to be issued and no subsequent events occurred requiring accrual or disclosure.
Note 24—QUARTERLY
FINANCIAL DATA (UNAUDITED)
The following
provides quarterly financial data for 2021, 2020 and 2019 (dollars in thousands, except per share amounts).
Schedule
of Unaudited Quarterly Financial Data
2021 | |
Fourth Quarter | | |
Third Quarter | | |
Second Quarter | | |
First Quarter | |
Interest income | |
$ | 11,656 | | |
$ | 12,982 | | |
$ | 11,664 | | |
$ | 11,218 | |
Net interest income | |
| 11,164 | | |
| 12,456 | | |
| 11,092 | | |
| 10,567 | |
Provision for loan losses | |
| (59 | ) | |
| 49 | | |
| 168 | | |
| 177 | |
Gain on sale of securities | |
| — | | |
| — | | |
| — | | |
| — | |
Income before income taxes | |
| 4,971 | | |
| 6,066 | | |
| 4,464 | | |
| 4,146 | |
Net income | |
| 3,919 | | |
| 4,748 | | |
| 3,543 | | |
| 3,255 | |
Net income available to common shareholders | |
| 3,919 | | |
| 4,748 | | |
| 3,543 | | |
| 3,255 | |
Net income per share, basic | |
$ | 0.52 | | |
$ | 0.63 | | |
$ | 0.47 | | |
$ | 0.44 | |
Net income per share, diluted | |
$ | 0.52 | | |
$ | 0.63 | | |
$ | 0.47 | | |
$ | 0.43 | |
| |
| | | |
| | | |
| | | |
| | |
2020 | |
Fourth Quarter | | |
Third Quarter | | |
Second Quarter | | |
First Quarter | |
Interest income | |
$ | 11,426 | | |
$ | 10,976 | | |
$ | 10,666 | | |
$ | 10,710 | |
Net interest income | |
| 10,687 | | |
| 10,176 | | |
| 9,743 | | |
| 9,417 | |
Provision for loan losses | |
| 276 | | |
| 1,062 | | |
| 1,250 | | |
| 1,075 | |
Gain on sale of securities | |
| — | | |
| 99 | | |
| — | | |
| — | |
Income before income taxes | |
| 4,364 | | |
| 3,250 | | |
| 2,749 | | |
| 2,232 | |
Net income | |
| 3,436 | | |
| 2,652 | | |
| 2,217 | | |
| 1,794 | |
Net income available to common shareholders | |
| 3,436 | | |
| 2,652 | | |
| 2,217 | | |
| 1,794 | |
Net income per share, basic | |
$ | 0.46 | | |
$ | 0.36 | | |
$ | 0.30 | | |
$ | 0.24 | |
Net income per share, diluted | |
$ | 0.46 | | |
$ | 0.35 | | |
$ | 0.30 | | |
$ | 0.24 | |
| |
| | | |
| | | |
| | | |
| | |
2019 | |
Fourth Quarter | | |
Third Quarter | | |
Second Quarter | | |
First Quarter | |
Interest income | |
$ | 10,786 | | |
$ | 10,864 | | |
$ | 10,606 | | |
$ | 10,374 | |
Net interest income | |
| 9,360 | | |
| 9,353 | | |
| 9,116 | | |
| 9,020 | |
Provision for loan losses | |
| — | | |
| 25 | | |
| 9 | | |
| 105 | |
Gain on sale of securities | |
| 1 | | |
| — | | |
| 164 | | |
| (29 | ) |
Income before income taxes | |
| 3,425 | | |
| 3,651 | | |
| 3,653 | | |
| 3,101 | |
Net income | |
| 2,697 | | |
| 2,898 | | |
| 2,881 | | |
| 2,495 | |
Net income available to common shareholders | |
| 2,698 | | |
| 2,898 | | |
| 2,881 | | |
| 2,495 | |
Net income per share, basic | |
$ | 0.36 | | |
$ | 0.39 | | |
$ | 0.38 | | |
$ | 0.33 | |
Net income per share, diluted | |
$ | 0.36 | | |
$ | 0.39 | | |
$ | 0.37 | | |
$ | 0.33 | |
Note 25—REPORTABLE
SEGMENTS
The Company’s
reportable segments represent the distinct product lines the Company offers and are viewed separately for strategic planning by
management. The Company has four reportable segments:
|
· |
Commercial and retail
banking: The Company’s primary business is to provide deposit and lending products and services to its commercial and
retail customers. |
|
· |
Mortgage banking:
This segment provides mortgage origination services for loans that will be sold to investors in the secondary market. |
|
· |
Investment advisory
and non-deposit: This segment provides investment advisory services and non-deposit products. |
|
· |
Corporate: This segment includes the parent
company financial information, including interest on parent company debt and dividend income received from First Community
Bank (the “Bank”). |
Note 25—REPORTABLE
SEGMENTS (Continued)
The following
tables present selected financial information for the Company’s reportable business segments for the years ended December
31, 2021, December 31, 2020 and December 31, 2019.
Schedule of Company’s Reportable Segment
Year ended December 31, 2021 (Dollars in thousands) | |
Commercial and Retail Banking | | |
Mortgage Banking | | |
Investment advisory and non-deposit | | |
Corporate | | |
Eliminations | | |
Consolidated | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Dividend and Interest Income | |
$ | 46,499 | | |
$ | 1,008 | | |
$ | — | | |
$ | 4,032 | | |
$ | (4,019 | ) | |
$ | 47,520 | |
Interest expense | |
| 1,825 | | |
| — | | |
| — | | |
| 416 | | |
| — | | |
| 2,241 | |
Net interest income | |
$ | 44,674 | | |
$ | 1,008 | | |
$ | — | | |
$ | 3,616 | | |
$ | (4,019 | ) | |
$ | 45,279 | |
Provision for loan losses | |
| 335 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 335 | |
Noninterest income | |
| 5,590 | | |
| 4,319 | | |
| 3,995 | | |
| — | | |
| — | | |
| 13,904 | |
Noninterest expense | |
| 31,275 | | |
| 4,694 | | |
| 2,460 | | |
| 772 | | |
| — | | |
| 39,201 | |
Net income before taxes | |
$ | 18,654 | | |
$ | 633 | | |
$ | 1,535 | | |
$ | 2,844 | | |
$ | (4,019 | ) | |
$ | 19,647 | |
Income tax expense (benefit) | |
| 4,417 | | |
| — | | |
| — | | |
| (235 | ) | |
| — | | |
| 4,182 | |
Net income | |
$ | 14,237 | | |
$ | 633 | | |
$ | 1,535 | | |
$ | 3,079 | | |
$ | (4,019 | ) | |
$ | 15,465 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Year ended December 31, 2020 (Dollars in thousands) | |
Commercial and Retail Banking | | |
Mortgage Banking | | |
Investment advisory and non-deposit | | |
Corporate | | |
Eliminations | | |
Consolidated | |
Dividend and Interest Income | |
$ | 42,024 | | |
$ | 1,737 | | |
$ | — | | |
$ | 4,175 | | |
$ | (4,158 | ) | |
$ | 43,778 | |
Interest expense | |
| 3,219 | | |
| — | | |
| — | | |
| 536 | | |
| — | | |
| 3,755 | |
Net interest income | |
$ | 38,805 | | |
$ | 1,737 | | |
$ | — | | |
$ | 3,639 | | |
$ | (4,158 | ) | |
$ | 40,023 | |
Provision for loan losses | |
| 3,663 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 3,663 | |
Noninterest income | |
| 5,492 | | |
| 5,557 | | |
| 2,720 | | |
| — | | |
| — | | |
| 13,769 | |
Noninterest expense | |
| 30,111 | | |
| 4,993 | | |
| 1,912 | | |
| 518 | | |
| — | | |
| 37,534 | |
Net income before taxes | |
$ | 10,523 | | |
$ | 2,301 | | |
$ | 808 | | |
$ | 3,121 | | |
$ | (4,158 | ) | |
$ | 12,595 | |
Income tax expense (benefit) | |
| 2,715 | | |
| — | | |
| — | | |
| (219 | ) | |
| — | | |
| 2,496 | |
Net income | |
$ | 7,808 | | |
$ | 2,301 | | |
$ | 808 | | |
$ | 3,340 | | |
$ | (4,158 | ) | |
$ | 10,099 | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Year ended December 31, 2019 (Dollars in thousands) | |
Commercial and Retail Banking | | |
Mortgage Banking | | |
Investment advisory and non-deposit | | |
Corporate | | |
Eliminations | | |
Consolidated | |
Dividend and Interest Income | |
$ | 41,545 | | |
$ | 1,061 | | |
$ | — | | |
$ | 7,081 | | |
$ | (7,057 | ) | |
$ | 42,630 | |
Interest expense | |
| 5,021 | | |
| — | | |
| — | | |
| 760 | | |
| — | | |
| 5,781 | |
Net interest income | |
$ | 36,524 | | |
$ | 1,061 | | |
$ | — | | |
$ | 6,321 | | |
$ | (7,057 | ) | |
$ | 36,849 | |
Provision for loan losses | |
| 139 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 139 | |
Noninterest income | |
| 5,160 | | |
| 4,555 | | |
| 2,021 | | |
| — | | |
| — | | |
| 11,736 | |
Noninterest expense | |
| 28,732 | | |
| 3,771 | | |
| 1,733 | | |
| 381 | | |
| — | | |
| 34,617 | |
Net income before taxes | |
$ | 12,813 | | |
$ | 1,845 | | |
$ | 288 | | |
$ | 5,940 | | |
$ | (7,057 | ) | |
$ | 13,829 | |
Income tax expense (benefit) | |
| 3,114 | | |
| — | | |
| — | | |
| (256 | ) | |
| — | | |
| 2,858 | |
Net income | |
$ | 9,699 | | |
$ | 1,845 | | |
$ | 288 | | |
$ | 6,196 | | |
$ | (7,057 | ) | |
$ | 10,971 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
(Dollars in thousands) | |
Commercial and Retail Banking | | |
Mortgage Banking | | |
Investment advisory and non-deposit | | |
Corporate | | |
Eliminations | | |
Consolidated | |
Total Assets as of December 31, 2021 | |
$ | 1,566,949 | | |
$ | 16,798 | | |
$ | 2 | | |
$ | 152,928 | | |
$ | (152,169 | ) | |
$ | 1,584,508 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets as of December 31, 2020 | |
$ | 1,335,320 | | |
$ | 59,372 | | |
$ | 2 | | |
$ | 140,256 | | |
$ | (139,568 | ) | |
$ | 1,395,382 | |