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UNITED STATES  

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the Quarterly period ended March 31, 2020

Commission file number 001-35296

 

FARMERS NATIONAL BANC CORP.

(Exact name of registrant as specified in its charter)

 

 

Ohio

 

34-1371693

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No)

 

 

 

20 South Broad Street Canfield, OH

 

44406

(Address of principal executive offices)

 

(Zip Code)

(330) 533-3341

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

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

 

Large accelerated filer

 

☐

  

Accelerated filer

 

☒

 

 

 

 

Non-accelerated filer

 

☐

  

Small reporting company

 

☐

 

 

 

 

 

 

 

Emerging growth company

 

☐

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

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

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, No Par Value

FMNB

The NASDAQ Stock Market

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at April 30, 2020

Common Stock, No Par Value

 

28,176,602 shares

 

 

 

 

 

 

 

 

 

Page Number

PART I - FINANCIAL INFORMATION

 

 

 

 

Item 1

Financial Statements (Unaudited)

 

 

 

 

 

Included in Part I of this report:

 

 

 

 

 

Farmers National Banc Corp. and Subsidiaries

 

 

 

 

 

Consolidated Balance Sheets

2

 

Consolidated Statements of Income

3

 

Consolidated Statements of Comprehensive Income

4

 

Consolidated Statement of Stockholders’ Equity

5

 

Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Consolidated Financial Statements

7

 

 

 

Item 2

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

40

 

 

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

49

 

 

 

Item 4

Controls and Procedures

49

 

 

 

PART II - OTHER INFORMATION

50

 

 

 

Item 1

Legal Proceedings

50

 

 

 

Item 1A

Risk Factors

50

 

 

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

51

 

 

 

Item 3

Defaults Upon Senior Securities

51

 

 

 

Item 4

Mine Safety Disclosures

51

 

 

 

Item 5

Other Information

51

 

 

 

Item 6

Exhibits

52

 

 

SIGNATURES

53

 

 

10-Q Certifications

 

 

 

Section 906 Certifications

 

 

 

 

1

 

CONSOLIDATED BALANCE SHEETS

FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES

 

 

 

(In Thousands of Dollars)

 

(Unaudited)

 

March 31,

2020

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

30,943

 

 

$

23,229

 

Federal funds sold and other

 

 

52,164

 

 

 

47,531

 

TOTAL CASH AND CASH EQUIVALENTS

 

 

83,107

 

 

 

70,760

 

Securities available for sale

 

 

448,043

 

 

 

432,233

 

Equity securities

 

 

8,080

 

 

 

7,909

 

Loans held for sale

 

 

3,272

 

 

 

2,600

 

Loans

 

 

1,976,582

 

 

 

1,811,539

 

Less allowance for loan losses

 

 

14,952

 

 

 

14,487

 

NET LOANS

 

 

1,961,630

 

 

 

1,797,052

 

Premises and equipment, net

 

 

25,374

 

 

 

23,817

 

Goodwill

 

 

47,360

 

 

 

38,201

 

Other intangibles, net

 

 

4,838

 

 

 

4,444

 

Bank owned life insurance

 

 

35,735

 

 

 

35,527

 

Other assets

 

 

50,810

 

 

 

36,615

 

TOTAL ASSETS

 

$

2,668,249

 

 

$

2,449,158

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

449,952

 

 

$

434,126

 

Interest-bearing

 

 

1,679,325

 

 

 

1,490,763

 

Brokered time deposits

 

 

117,000

 

 

 

84,075

 

TOTAL DEPOSITS

 

 

2,246,277

 

 

 

2,008,964

 

Short-term borrowings

 

 

19,998

 

 

 

77,050

 

Long-term borrowings

 

 

76,854

 

 

 

45,147

 

Other liabilities

 

 

21,523

 

 

 

18,688

 

TOTAL LIABILITIES

 

 

2,364,652

 

 

 

2,149,849

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Common Stock - Authorized 50,000,000 shares; issued 29,577,827 in 2020 and 28,179,598 in 2019

 

 

209,214

 

 

 

186,345

 

Retained earnings

 

 

114,351

 

 

 

108,851

 

Accumulated other comprehensive income (loss)

 

 

(28

)

 

 

9,826

 

Treasury stock, at cost; 1,450,492 shares in 2020 and 508,859 shares in 2019

 

 

(19,940

)

 

 

(5,713

)

TOTAL STOCKHOLDERS' EQUITY

 

 

303,597

 

 

 

299,309

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

2,668,249

 

 

$

2,449,158

 

 

See accompanying notes

 

 

 

2

 

CONSOLIDATED STATEMENTS OF INCOME

FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES

 

 

 

(In Thousands except Per Share Data)

 

 

 

For the Three Months Ended

 

(Unaudited)

 

March 31,

2020

 

 

March 31,

2019

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

Loans, including fees

 

$

24,099

 

 

$

21,469

 

Taxable securities

 

 

1,547

 

 

 

1,244

 

Tax exempt securities

 

 

1,782

 

 

 

1,595

 

Dividends

 

 

140

 

 

 

175

 

Federal funds sold and other interest income

 

 

149

 

 

 

196

 

TOTAL INTEREST AND DIVIDEND INCOME

 

 

27,717

 

 

 

24,679

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

Deposits

 

 

4,639

 

 

 

3,435

 

Short-term borrowings

 

 

320

 

 

 

1,231

 

Long-term borrowings

 

 

456

 

 

 

48

 

TOTAL INTEREST EXPENSE

 

 

5,415

 

 

 

4,714

 

NET INTEREST INCOME

 

 

22,302

 

 

 

19,965

 

Provision for loan losses

 

 

1,100

 

 

 

550

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

 

21,202

 

 

 

19,415

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

1,095

 

 

 

1,074

 

Bank owned life insurance income

 

 

208

 

 

 

214

 

Trust fees

 

 

1,857

 

 

 

1,858

 

Insurance agency commissions

 

 

883

 

 

 

803

 

Security gains, including fair value changes for equity securities

 

 

157

 

 

 

10

 

Retirement plan consulting fees

 

 

380

 

 

 

358

 

Investment commissions

 

 

423

 

 

 

260

 

Net gains on sale of loans

 

 

1,366

 

 

 

671

 

Debit card and EFT fees

 

 

851

 

 

 

778

 

Other operating income

 

 

495

 

 

 

494

 

TOTAL NONINTEREST INCOME

 

 

7,715

 

 

 

6,520

 

NONINTEREST EXPENSES

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

10,231

 

 

 

9,356

 

Occupancy and equipment

 

 

1,800

 

 

 

1,717

 

State and local taxes

 

 

464

 

 

 

470

 

Professional fees

 

 

816

 

 

 

794

 

Merger related costs

 

 

1,319

 

 

 

0

 

Advertising

 

 

271

 

 

 

250

 

FDIC insurance

 

 

225

 

 

 

87

 

Intangible amortization

 

 

332

 

 

 

327

 

Core processing charges

 

 

861

 

 

 

791

 

Telephone and data

 

 

203

 

 

 

260

 

Other operating expenses

 

 

2,060

 

 

 

1,925

 

TOTAL NONINTEREST EXPENSES

 

 

18,582

 

 

 

15,977

 

INCOME BEFORE INCOME TAXES

 

 

10,335

 

 

 

9,958

 

INCOME TAXES

 

 

1,696

 

 

 

1,570

 

NET INCOME

 

$

8,639

 

 

$

8,388

 

EARNINGS PER SHARE - basic

 

$

0.30

 

 

$

0.30

 

EARNINGS PER SHARE - fully diluted

 

$

0.30

 

 

$

0.30

 

 

See accompanying notes

 

3

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES

 

 

 

(In Thousands of Dollars)

 

 

 

For the Three Months Ended

 

(Unaudited)

 

March 31,

2020

 

 

March 31,

2019

 

NET INCOME

 

$

8,639

 

 

$

8,388

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Net unrealized holding gains (losses) on available for sale securities

 

 

(12,217

)

 

 

5,821

 

Reclassification adjustment for (gains) losses realized in income

 

 

(256

)

 

 

34

 

Net unrealized holding gains (losses)

 

 

(12,473

)

 

 

5,855

 

Income tax effect

 

 

2,619

 

 

 

(1,230

)

Other comprehensive income (loss), net of tax

 

 

(9,854

)

 

 

4,625

 

TOTAL COMPREHENSIVE INCOME (LOSS)

 

$

(1,215

)

 

$

13,013

 

 

See accompanying notes

 

4

 

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES

 

 

 

(In Thousands of Dollars)

 

 

 

For the Three Months Ended

 

(Unaudited)

 

March 31,

2020

 

 

March 31,

2019

 

COMMON STOCK

 

 

 

 

 

 

 

 

Beginning balance

 

$

186,345

 

 

$

186,163

 

Issued 1,334 in 2020 and 0 in 2019 treasury shares under the Long Term Incentive Plan

 

 

(22

)

 

 

0

 

Issued 1,398,229 in 2020 as part of a business combination

 

 

22,554

 

 

 

0

 

Stock compensation expense for unvested shares

 

 

337

 

 

 

320

 

Ending balance

 

 

209,214

 

 

 

186,483

 

 

 

 

 

 

 

 

 

 

RETAINED EARNINGS

 

 

 

 

 

 

 

 

Beginning balance

 

 

108,851

 

 

 

83,630

 

Net income

 

 

8,639

 

 

 

8,388

 

Dividends declared at $0.11 per share in 2020 and $0.09 per share in 2019

 

 

(3,139

)

 

 

(2,500

)

Ending balance

 

 

114,351

 

 

 

89,518

 

 

 

 

 

 

 

 

 

 

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

Beginning balance

 

 

9,826

 

 

 

(4,030

)

Other comprehensive income (loss)

 

 

(9,854

)

 

 

4,625

 

Ending balance

 

 

(28

)

 

 

595

 

 

 

 

 

 

 

 

 

 

TREASURY STOCK, AT COST

 

 

 

 

 

 

 

 

Beginning balance

 

 

(5,713

)

 

 

(3,443

)

Purchased 942,967 shares in 2020 and 14,993 shares in 2019

 

 

(14,238

)

 

 

(202

)

Issued 2,000 shares in 2020 and 0 shares in 2019 under the Long Term Incentive Plan

 

 

22

 

 

 

0

 

Retained 666 shares in 2020 and 0 shares in 2019 to cover tax withholdings under the Long Term Incentive Plan

 

 

(11

)

 

 

0

 

Ending balance

 

 

(19,940

)

 

 

(3,645

)

TOTAL STOCKHOLDERS' EQUITY

 

$

303,597

 

 

$

272,951

 

 

 

 

See accompanying notes

 

5

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES

 

 

 

(In Thousands of Dollars)

 

 

 

Three Months Ended

 

(Unaudited)

 

March 31,

2020

 

 

March 31,

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

8,639

 

 

$

8,388

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

1,100

 

 

 

550

 

Depreciation and amortization

 

 

751

 

 

 

709

 

Net amortization of securities

 

 

488

 

 

 

538

 

Available for sale security (gain) loss

 

 

(256

)

 

 

34

 

Realized (gains) losses on equity securities

 

 

99

 

 

 

(44

)

Loss on premises and equipment sales and disposals, net

 

 

77

 

 

 

8

 

Stock compensation expense

 

 

337

 

 

 

320

 

Loss on adjustment of other real estate owned

 

 

0

 

 

 

60

 

Earnings on bank owned life insurance

 

 

(208

)

 

 

(214

)

Origination of loans held for sale

 

 

(31,012

)

 

 

(10,695

)

Proceeds from loans held for sale

 

 

31,706

 

 

 

10,243

 

Net gains on sale of loans

 

 

(1,366

)

 

 

(671

)

Net change in other assets and liabilities

 

 

(4,574

)

 

 

(3,993

)

NET CASH FROM OPERATING ACTIVITIES

 

 

5,781

 

 

 

5,233

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from maturities and repayments of securities available for sale

 

 

9,622

 

 

 

5,635

 

Proceeds from sales of securities available for sale

 

 

15,126

 

 

 

9,646

 

Purchases of securities available for sale

 

 

(25,224

)

 

 

(10,153

)

Purchase of equity securities

 

 

(423

)

 

 

(230

)

Proceeds from redemption of restricted stock

 

 

255

 

 

 

8

 

Purchase of restricted stock

 

 

(1,825

)

 

 

0

 

Loan originations and payments, net

 

 

15,602

 

 

 

(8,444

)

Proceeds from land and building sales

 

 

502

 

 

 

62

 

Additions to premises and equipment

 

 

(2,279

)

 

 

(466

)

Net cash paid in business combinations

 

 

(8,136

)

 

 

0

 

NET CASH FROM INVESTING ACTIVITIES

 

 

3,220

 

 

 

(3,942

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Net change in deposits

 

 

54,062

 

 

 

154,613

 

Net change in short-term borrowings

 

 

(32,052

)

 

 

(141,261

)

Repayment of long-term borrowings

 

 

(1,287

)

 

 

(195

)

Cash dividends paid

 

 

(3,139

)

 

 

(2,500

)

Repurchase of common shares

 

 

(14,238

)

 

 

(202

)

NET CASH FROM FINANCING ACTIVITIES

 

 

3,346

 

 

 

10,455

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

12,347

 

 

 

11,746

 

Beginning cash and cash equivalents

 

 

70,760

 

 

 

57,926

 

Ending cash and cash equivalents

 

$

83,107

 

 

$

69,672

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

5,158

 

 

$

4,536

 

Supplemental noncash disclosures:

 

 

 

 

 

 

 

 

Transfer of loans to other real estate

 

$

0

 

 

$

268

 

Security purchases not settled

 

$

0

 

 

$

1,426

 

Issuance of stock awards

 

$

22

 

 

$

0

 

Issuance of stock for business combinations

 

$

22,554

 

 

$

0

 

 

See accompanying notes

 

 

 

6

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Principles of Consolidation:

Farmers National Banc Corp. (“Company”) is a Financial Holding Company registered under the Bank Holding Company Act of 1956, as amended.  The Company provides full banking services through its nationally chartered subsidiary, The Farmers National Bank of Canfield (“Bank”).  The consolidated financial statements also include the accounts of the Bank’s subsidiaries; Farmers National Insurance, LLC (“Insurance”) and Farmers of Canfield Investment Co. (“Investments”).  The Company provides trust and retirement consulting services through its subsidiary, Farmers Trust Company (“Trust”), and insurance services through the Bank’s subsidiary, Insurance.  Farmers National Captive, Inc. (“Captive”) is a wholly-owned insurance subsidiary of the Company that provides property and casualty insurance coverage to the Company and its subsidiaries.  The Captive pools resources with eleven other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among the pool members and to provide insurance where not currently available or economically feasible in today’s insurance market place.  The consolidated financial statements include the accounts of the Company, the Bank and its subsidiaries, along with the Trust and Captive.  All significant intercompany balances and transactions have been eliminated in the consolidation.

Corporate Reorganization:

On July 1, 2019, Trust acquired all shares of National Associates, Inc. (“NAI”) from the Company through a corporate reorganization.  The Company was the sole shareholder of Trust and NAI before the reorganization.  The entities were combined into one reporting unit and one operating segment and began reporting as one unit, for both internal and external reports, during the third quarter of 2019.  The combination is part of the Company’s plan to increase efficiencies within the different business lines.

Basis of Presentation:

The unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements.  The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2019 Annual Report to Shareholders included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.  The interim consolidated financial statements include all adjustments (consisting of only normal recurring items) that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented.  The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year.  Certain items included in the prior period financial statements were reclassified to conform to the current period presentation. There was no effect on net income or total stockholders’ equity.

Estimates:

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Segments:

The Company provides a broad range of financial services to individuals and companies in northeastern Ohio and western Pennsylvania.  Operations are managed and financial performance is primarily aggregated and reported in two lines of business, the Bank segment and the Trust segment.  During the third quarter of 2019 the Company merged the Retirement Consulting segment into the Trust segment.  In prior periods segment reporting was reported in three segments.

Equity:

There are 50,000,000 shares authorized and available for issuance as of March 31, 2020.  Outstanding shares at March 31, 2020 were 28,127,335.

Comprehensive Income:

Comprehensive income consists of net income and other comprehensive income.  Other comprehensive income consists of unrealized gains and losses on securities available for sale which are recognized as components of stockholders’ equity, net of tax effect.

7

 

Risks and Uncertainties:

The outbreak of COVID-19 has adversely impacted a broad range of industries in which the Company’s customers operate and could impair their ability to fulfill their financial obligations to the Company.  The World Health Organization has declared COVID-19 to be a global pandemic indicating that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections.  The spread of the outbreak has caused significant disruptions in the economy and has disrupted banking and other financial activity in the areas in which the Company operates.  While there has been no material impact to the Company’s employees to date, COVID-19 could also potentially create widespread business continuity issues for the Company.  

Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout.  Most notably, the Coronavirus Aid, Relief and Economic Security Act (“CARES”) was signed into law at the end of March 2020 as a $2 trillion legislative package.  The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors.  The package also includes extensive emergency funding for hospitals and providers.  In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts are expected to have a material impact on the Company’s operations.

The Company’s business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions.  If the global response to contain COVID-19 escalates further or is unsuccessful, the Company could experience a material adverse effect on its business, financial condition, results of operations and cash flows.  While it is not possible to know the full universe or extent that the impact of COVID-19, and resulting measures to curtail its spread, will have on the Company’s operations, the Company will disclose potentially material items of which it is aware.

Financial position and results of operations:

The Company’s fee income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company is actively working with COVID-19 affected customers to waive fees from a variety of sources, such as, but not limited to, insufficient funds and overdraft fees, ATM fees, account maintenance fees, etc. These reductions in fees are thought, at this time, to be temporary in conjunction with the length of the expected COVID-19 related economic crisis. At this time, the Company is unable to project the materiality of such an impact, but recognize the breadth of the economic impact is likely to impact its fee income in future periods.

The Company’s interest income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company is actively working with COVID-19 affected borrowers to defer their payments. While interest and fees will still accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted. At this time, the Company is unable to project the materiality of such an impact, but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods.

Capital and liquidity:

While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted by further credit losses. The Company relies on cash on hand as well as dividends from its subsidiaries. If the Company’s capital deteriorates such that its subsidiary bank is unable to pay dividends to it for an extended period of time, the Company may not be able to pay dividends to shareholders.

8

 

The Company maintains access to multiple sources of liquidity. Wholesale funding markets have remained open, but rates for short term funding have recently been volatile. If funding costs are elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large numbers of the Company’s deposit customers to withdraw their funds, the Company might become more reliant on volatile or more expensive sources of funding.

New Accounting Standards:

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 from the goodwill impairment test.  Instead, under the new guidance, an entity is to perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.  An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.  The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2019.  Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  The Company adopted this ASU on January 1, 2020.  The adoption of this guidance did not have an impact on the Company’s Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13: Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (modified by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments Credit Losses).  The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.  Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques changed to reflect the full amount of expected credit losses.  Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.  Additionally, the ASU amends the accounting for credit losses on available for sale debt securities and purchased financial assets with credit deterioration.  ASU 2016-13 is effective for public companies for annual periods beginning after December 15, 2019.  Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted.

In accordance with the accounting relief provisions of the CARES, the Bank has postponed the adoption of the current expected credit losses (“CECL”) accounting standards, primarily due to the impact that the COVID-19 pandemic is having on the economy and the lack of reasonable and supportable economic forecasts.  Had the Company adopted CECL as of January 1, 2020, the increase to the allowance for loan losses estimated to have ranged from 15% to 20% of the amount recorded at December 31, 2019, which did not consider potential COVID-19 pandemic related impacts.

In February 2016, FASB issued ASU 2016-02 (Topic 842): Leases.  The main objective of ASU 2016-02 is to provide users with useful, transparent, and complete information about leasing transactions.  ASU 2016-02 requires the rights and obligations associated with leasing arrangements be reflected on the balance sheet in order to increase transparency and comparability among organizations.  Under the updated guidance, lessees are required to recognize a right-to-use asset and a liability to make a lease payment and disclose key information about leasing arrangements.  ASU 2016-02 is effective for public companies for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted.  The Company adopted this ASU on January 1, 2019.  As disclosed in the lease footnote, certain leases that the Company has in place required the capitalization of $3.6 million on the balance sheet as an asset and a related liability in the same amount with no income statement effect at January 1, 2019.

9

 

In January 2016, FASB issued ASU 2016-01: Financial Instruments-Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities.  The main objective of ASU 2016-01 is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.  ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.  Some of the amendments in ASU 2016-01  include the following: 1) Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; 2) Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and 4) Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value; among others.  The amendments of ASU 2016-01 were effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  The Company adopted this ASU 2016-01 on January 1, 2018 which resulted in a $169 thousand increase to beginning retained earnings and a $169 thousand decrease to accumulated other comprehensive income on the December 31, 2018 Consolidated Financial Statements.  

Business Combinations:

On January 7, 2020, the Company completed the acquisition of Maple Leaf Financial, Inc. (“Maple Leaf”), the parent company of Geauga Savings Bank, with branches located in Cuyahoga and Geauga Counties in Ohio.  The Company expects the acquisition to increase synergies and cost savings resulting from the combining of the two companies.  The transaction involved both cash and 1,398,229 shares of stock totaling $43.0 million.  Pursuant to the terms of the Merger Agreement, common shareholders of Maple Leaf had the right to receive $640.00 in cash or 45.5948 common shares, without par value, of the Company.  Holders of outstanding and unexercised warrants to purchase Maple Leaf Common Shares received an amount in cash equal to the excess of $640.00 over $370.00, the exercise price of such warrants.

Goodwill of $9.2 million, which is recorded on the balance sheet, arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the entities.  The goodwill was determined not to be deductible for income tax purposes.  

The following table summarizes the consideration paid for Maple Leaf and the amounts of the assets acquired and liabilities assumed on the closing date of the acquisition.

 

 

 

 

 

(In Thousands of Dollars)

 

 

 

Consideration

 

 

 

Cash

$

20,423

 

Stock

 

22,554

 

Fair value of total consideration transferred

$

42,977

 

Fair value of assets acquired

 

 

 

Cash and due from financial institutions

$

12,287

 

Securities available for sale

 

28,038

 

Loans

 

181,280

 

Premises and equipment

 

229

 

Core deposit intangible

 

725

 

Other assets

 

6,471

 

Total assets

 

229,030

 

Fair value of liabilities assumed

 

 

 

Deposits

 

183,251

 

Long-term borrowings

 

7,946

 

Accrued interest payable and other liabilities

 

4,015

 

Total liabilities

 

195,212

 

Net assets acquired

$

33,818

 

Goodwill created

 

9,159

 

Total net assets acquired

$

42,977

 

10

 

 

 

The following table presents pro forma information as if the Maple Leaf acquisition that occurred during January 2020 actually took place at the beginning of 2019.  The pro forma information includes adjustments for merger related costs, amortization of intangibles arising from the transaction and the related income tax effects.  The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been effective on the assumed date.

 

 

For Three Months Ended March 31,

 

(In thousands of dollars except per share results)

2020

 

 

2019

 

Net interest income

$

22,482

 

 

$

22,120

 

Net income

$

8,659

 

 

$

8,624

 

Basic and diluted earnings per share

$

0.30

 

 

$

0.31

 

 

 

Securities:

The following table summarizes the amortized cost and fair value of the available for sale investment securities portfolio at March 31, 2020 and December 31, 2019 and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income:

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

(In Thousands of Dollars)

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

$

3,714

 

 

$

126

 

 

$

0

 

 

$

3,840

 

State and political subdivisions

 

273,941

 

 

 

1,171

 

 

 

(7,529

)

 

 

267,583

 

Corporate bonds

 

3,262

 

 

 

90

 

 

 

(9

)

 

 

3,343

 

Mortgage-backed securities - residential

 

128,064

 

 

 

5,857

 

 

 

0

 

 

 

133,921

 

Collateralized mortgage obligations - residential

 

32,832

 

 

 

458

 

 

 

(239

)

 

 

33,051

 

Small Business Administration

 

6,265

 

 

 

40

 

 

 

0

 

 

 

6,305

 

Totals

$

448,078

 

 

$

7,742

 

 

$

(7,777

)

 

$

448,043

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

(In Thousands of Dollars)

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

$

3,773

 

 

$

41

 

 

$

(3

)

 

$

3,811

 

State and political subdivisions

 

250,905

 

 

 

10,944

 

 

 

(424

)

 

 

261,425

 

Corporate bonds

 

1,238

 

 

 

22

 

 

 

0

 

 

 

1,260

 

Mortgage-backed securities - residential

 

145,886

 

 

 

2,396

 

 

 

(372

)

 

 

147,910

 

Collateralized mortgage obligations - residential

 

11,459

 

 

 

101

 

 

 

(213

)

 

 

11,347

 

Small Business Administration

 

6,534

 

 

 

0

 

 

 

(54

)

 

 

6,480

 

Totals

$

419,795

 

 

$

13,504

 

 

$

(1,066

)

 

$

432,233

 

 

Proceeds from the sale of portfolio securities were $15.1 million during the three month period ended March 31, 2020.  Gross gains of $256 thousand along with gross losses of $0 were realized on these sales during the three month period ended March 31, 2020.  $99 thousand of realized losses during the three month period were recognized in the income statement for equity securities as of March 31, 2020.  Proceeds from the sale of portfolio securities were $9.6 million during the three month period ended March 31, 2019.  Gross gains were $22 thousand along with gross losses of $56 thousand during the same three month period ended March 31, 2019. $44 thousand of realized gains during the three month period ended March 31, 2019 were recognized in the income statement for equity securities.

11

 

The amortized cost and fair value of the debt securities portfolio are shown by expected maturity.  Expected maturities may differ from contractual maturities if issuers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

 

 

 

March 31, 2020

 

(In Thousands of Dollars)

 

Amortized Cost

 

 

Fair Value

 

Maturity

 

 

 

 

 

 

 

 

Within one year

 

$

1,185

 

 

$

1,186

 

One to five years

 

 

5,493

 

 

 

5,570

 

Five to ten years

 

 

22,426

 

 

 

22,303

 

Beyond ten years

 

 

251,813

 

 

 

245,707

 

Mortgage-backed, collateralized mortgage obligations and Small Business Administration securities

 

 

167,161

 

 

 

173,277

 

Total

 

$

448,078

 

 

$

448,043

 

 

 

The following table summarizes the available for sale investment securities with unrealized losses at March 31, 2020 and December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position.   

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

(In Thousands of Dollars)

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and political subdivisions

 

$

170,483

 

 

$

(7,529

)

 

$

0

 

 

$

0

 

 

$

170,483

 

 

$

(7,529

)

Corporate bonds

 

 

717

 

 

 

(9

)

 

 

0

 

 

 

0

 

 

 

717

 

 

 

(9

)

Collateralized mortgage obligations - residential

 

 

10,003

 

 

 

(239

)

 

 

0

 

 

 

0

 

 

 

10,003

 

 

 

(239

)

Total

 

$

181,203

 

 

$

(7,777

)

 

$

0

 

 

$

0

 

 

$

181,203

 

 

$

(7,777

)

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

(In Thousands of Dollars)

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

0

 

 

$

0

 

 

$

622

 

 

$

(3

)

 

$

622

 

 

$

(3

)

State and political subdivisions

 

 

30,887

 

 

 

(424

)

 

 

0

 

 

 

0

 

 

 

30,887

 

 

 

(424

)

Corporate bonds

 

 

0

 

 

 

0

 

 

 

100

 

 

 

0

 

 

 

100

 

 

 

0

 

Mortgage-backed securities - residential

 

 

14,435

 

 

 

(98

)

 

 

22,381

 

 

 

(274

)

 

 

36,816

 

 

 

(372

)

Collateralized mortgage obligations - residential

 

 

1,198

 

 

 

(18

)

 

 

7,935

 

 

 

(195

)

 

 

9,133

 

 

 

(213

)

Small Business Administration

 

 

6,479

 

 

 

(54

)

 

 

1

 

 

 

0

 

 

 

6,480

 

 

 

(54

)

Total

 

$

52,999

 

 

$

(594

)

 

$

31,039

 

 

$

(472

)

 

$

84,038

 

 

$

(1,066

)

 

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  Investment securities are generally evaluated for OTTI under ASC Topic 320: Investments - Debt Securities.  Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery.  In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, or U.S. government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.  The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment, and is based on the information available to management at a point in time.

 

12

 

Due to market changes during the first quarter of 2020, securities that had unrealized losses for greater than twelve months at December 31, 2019, appreciated and are in an unrealized gain position at March 31, 2020.  Unrealized losses are generally due to changes in interest rates or general market conditions.  As of March 31, 2020 and 2019, debt securities had net unrealized losses of $35 thousand and unrealized gains of $769 thousand, respectively.  In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports.  Management concluded that the unrealized losses on debt securities were temporary.  Due to potential changes in conditions, it is at least reasonably possible that changes in fair values and management’s assessments will occur in the near term and that such changes could materially affect the amounts reported in the Company’s financial statements.

As of March 31, 2020, the Company’s security portfolio consisted of 617 securities, 303 of which were in an unrealized loss position.  The majority of the unrealized losses on the Company’s securities are related to its holdings of state and political subdivisions, collateralized mortgage obligations, and corporate bonds securities as discussed below.

Unrealized losses on debt securities issued by state and political subdivisions have not been recognized into income.  These securities have maintained their investment grade ratings and management does not have the intent and does not expect to be required to sell these securities before their anticipated recovery.  The fair value is expected to recover as the securities approach their maturity date.

All of the Company’s holdings of collateralized mortgage obligations and residential mortgage-backed securities were issued by U.S. government-sponsored entities.  Unrealized losses on these securities have not been recognized into income.  Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, the issues are guaranteed by the issuing entity which the U.S. government has affirmed its commitment to support, and because the Company does not have the intent to sell these residential mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be OTTI.

 

 

13

 

Loans:

Loan balances were as follows:

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

Owner occupied

 

$

193,855

 

 

$

184,311

 

Non-owner occupied

 

 

286,613

 

 

 

287,160

 

Farmland

 

 

141,310

 

 

 

138,702

 

Other

 

 

91,517

 

 

 

93,501

 

Commercial

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

251,517

 

 

 

244,172

 

Agricultural

 

 

43,006

 

 

 

46,207

 

Residential real estate

 

 

 

 

 

 

 

 

1-4 family residential

 

 

316,197

 

 

 

324,964

 

Home equity lines of credit

 

 

94,043

 

 

 

91,958

 

Consumer

 

 

 

 

 

 

 

 

Indirect

 

 

164,600

 

 

 

166,149

 

Direct

 

 

28,742

 

 

 

27,415

 

Other

 

 

9,265

 

 

 

9,485

 

Total originated loans

 

$

1,620,665

 

 

$

1,614,024

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

Owner occupied

 

$

54,953

 

 

$

35,408

 

Non-owner occupied

 

 

66,218

 

 

 

10,439

 

Farmland

 

 

34,418

 

 

 

35,377

 

Other

 

 

21,321

 

 

 

5,960

 

Commercial

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

31,516

 

 

 

11,651

 

Agricultural

 

 

5,243

 

 

 

6,047

 

Residential real estate

 

 

 

 

 

 

 

 

1-4 family residential

 

 

110,395

 

 

 

63,457

 

Home equity lines of credit

 

 

20,899

 

 

 

19,645

 

Consumer

 

 

 

 

 

 

 

 

Direct

 

 

7,466

 

 

 

6,068

 

Other

 

 

100

 

 

 

154

 

Total acquired loans

 

$

352,529

 

 

$

194,206

 

Net Deferred loan costs

 

 

3,388

 

 

 

3,309

 

Allowance for loan losses

 

 

(14,952

)

 

 

(14,487

)

Net loans

 

$

1,961,630

 

 

$

1,797,052

 

 

Purchased credit impaired loans

 

As part of past acquisitions the Company acquired various loans that displayed evidence of deterioration of credit quality since origination and which was probable that all contractually required payments would not be collected.  The carrying amounts and contractually required payments of these loans which are included in the loan balances above are summarized in the following tables:

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

Commercial real estate

 

 

 

 

 

 

 

 

Non-owner occupied

 

$

648

 

 

$

225

 

Commercial

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

682

 

 

 

725

 

Total outstanding balance

 

$

1,330

 

 

$

950

 

Carrying amount, net of allowance of $0 in 2020 and 2019

 

$

1,045

 

 

$

690

 

14

 

 

Accretable yield, or income expected to be collected, is shown in the table below:

 

 

 

 

 

Three Months Ended

 

(In Thousands of Dollars)

 

 

 

March 31, 2020

 

 

March 31, 2019

 

Beginning balance

 

$

65

 

 

$

93

 

New loans purchased

 

32

 

 

0

 

Accretion of income

 

 

(8

)

 

 

(7

)

Ending balance

 

$

89

 

 

$

86

 

 

The key assumptions considered include probability of default and the amount of actual prepayments after the acquisition date.  Prepayments affect the estimated life of the loans and could change the amount of interest income and principal expected to be collected.  In reforecasting future estimated cash flows, credit loss expectations are adjusted as necessary.  There were no adjustments to forecasted cash flows that impacted the allowance for loan losses for the three month periods ended March 31, 2020 and 2019.

The following tables present the activity in the allowance for loan losses by portfolio segment for the three month periods ended March 31, 2020 and 2019:

Three Months Ended March 31, 2020

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

5,843

 

 

$

2,323

 

 

$

2,875

 

 

$

2,710

 

 

$

736

 

 

$

14,487

 

Provision for loan losses

 

 

717

 

 

 

495

 

 

 

129

 

 

 

324

 

 

 

(565

)

 

 

1,100

 

Loans charged off

 

 

0

 

 

 

(198

)

 

 

(108

)

 

 

(443

)

 

 

0

 

 

 

(749

)

Recoveries

 

 

1

 

 

 

1

 

 

 

15

 

 

 

97

 

 

 

0

 

 

 

114

 

Total ending allowance balance

 

$

6,561

 

 

$

2,621

 

 

$

2,911

 

 

$

2,688

 

 

$

171

 

 

$

14,952

 

 

 

Three Months Ended March 31, 2019

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

5,036

 

 

$

2,093

 

 

$

2,837

 

 

$

2,963

 

 

$

663

 

 

$

13,592

 

Provision for loan losses

 

 

159

 

 

 

107

 

 

 

(28

)

 

 

182

 

 

 

130

 

 

 

550

 

Loans charged off

 

 

0

 

 

 

(44

)

 

 

(21

)

 

 

(501

)

 

 

0

 

 

 

(566

)

Recoveries

 

 

0

 

 

 

1

 

 

 

25

 

 

 

175

 

 

 

0

 

 

 

201

 

Total ending allowance balance

 

$

5,195

 

 

$

2,157

 

 

$

2,813

 

 

$

2,819

 

 

$

793

 

 

$

13,777

 

 

 

 

15

 

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment, based on impairment method as of March 31, 2020 and December 31, 2019.  The recorded investment in loans includes the unpaid principal balance and unamortized loan origination fees and costs, but excludes accrued interest receivable, which is not considered to be material:

March 31, 2020

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

0

 

 

$

2

 

 

$

59

 

 

$

0

 

 

$

0

 

 

$

61

 

Collectively evaluated for impairment

 

 

6,516

 

 

 

2,610

 

 

 

2,818

 

 

 

2,686

 

 

 

171

 

 

 

14,801

 

Acquired loans collectively evaluated for impairment

 

 

45

 

 

 

9

 

 

 

34

 

 

 

2

 

 

 

0

 

 

 

90

 

Acquired with deteriorated credit quality

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Total ending allowance balance

 

$

6,561

 

 

$

2,621

 

 

$

2,911

 

 

$

2,688

 

 

$

171

 

 

$

14,952

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

549

 

 

$

211

 

 

$

3,363

 

 

$

260

 

 

$

0

 

 

$

4,383

 

Loans collectively evaluated for impairment

 

 

711,923

 

 

 

294,190

 

 

 

406,688

 

 

 

208,069

 

 

 

0

 

 

 

1,620,870

 

Acquired loans

 

 

175,770

 

 

 

36,218

 

 

 

130,757

 

 

 

7,539

 

 

 

0

 

 

 

350,284

 

Acquired with deteriorated credit quality

 

 

586

 

 

 

459

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,045

 

Total ending loans balance

 

$

888,828

 

 

$

331,078

 

 

$

540,808

 

 

$

215,868

 

 

$

0

 

 

$

1,976,582

 

 

December 31, 2019

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

0

 

 

$

2

 

 

$

59

 

 

$

0

 

 

$

0

 

 

$

61

 

Collectively evaluated for impairment

 

 

5,790

 

 

 

2,309

 

 

 

2,777

 

 

 

2,708

 

 

 

736

 

 

 

14,320

 

Acquired loans collectively evaluated for impairment

 

 

53

 

 

 

12

 

 

 

39

 

 

 

2

 

 

 

0

 

 

 

106

 

Acquired with deteriorated credit quality

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Total ending allowance balance

 

$

5,843

 

 

$

2,323

 

 

$

2,875

 

 

$

2,710

 

 

$

736

 

 

$

14,487

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

561

 

 

$

205

 

 

$

3,240

 

 

$

247

 

 

$

0

 

 

$

4,253

 

Loans collectively evaluated for impairment

 

 

702,226

 

 

 

290,017

 

 

 

413,446

 

 

 

208,578

 

 

 

0

 

 

 

1,614,267

 

Acquired loans

 

 

86,431

 

 

 

17,110

 

 

 

82,615

 

 

 

6,173

 

 

 

0

 

 

 

192,329

 

Acquired with deteriorated credit quality

 

 

195

 

 

 

495

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

690

 

Total ending loans balance

 

$

789,413

 

 

$

307,827

 

 

$

499,301

 

 

$

214,998

 

 

$

0

 

 

$

1,811,539

 

 

16

 

The following tables present information related to impaired loans by class of loans as of March 31, 2020 and December 31, 2019:

 

(In Thousands of Dollars)

 

Unpaid Principal

Balance

 

 

Recorded

Investment

 

 

Allowance for

Loan Losses

Allocated

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

$

38

 

 

$

33

 

 

$

0

 

Farmland

 

 

567

 

 

 

516

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

170

 

 

 

129

 

 

 

0

 

Agricultural

 

 

31

 

 

 

31

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2,949

 

 

 

2,145

 

 

 

0

 

Home equity lines of credit

 

 

469

 

 

 

379

 

 

 

0

 

Consumer

 

 

539

 

 

 

260

 

 

 

0

 

Subtotal

 

 

4,763

 

 

 

3,493

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

Farmland

 

 

0

 

 

 

0

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

51

 

 

 

51

 

 

 

2

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

783

 

 

 

724

 

 

 

48

 

Home equity lines of credit

 

 

132

 

 

 

115

 

 

 

11

 

Consumer

 

 

0

 

 

 

0

 

 

 

0

 

Subtotal

 

 

966

 

 

 

890

 

 

 

61

 

Total

 

$

5,729

 

 

$

4,383

 

 

$

61

 

17

 

 

(In Thousands of Dollars)

 

Unpaid Principal

Balance

 

 

Recorded

Investment

 

 

Allowance for

Loan Losses

Allocated

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

22

 

 

$

8

 

 

$

0

 

Non-owner occupied

 

 

38

 

 

 

34

 

 

 

0

 

Farmland

 

 

570

 

 

 

519

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

179

 

 

 

141

 

 

 

0

 

Agricultural

 

 

11

 

 

 

11

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2,889

 

 

 

2,095

 

 

 

0

 

Home equity lines of credit

 

 

428

 

 

 

344

 

 

 

0

 

Consumer

 

 

480

 

 

 

247

 

 

 

0

 

Subtotal

 

 

4,617

 

 

 

3,399

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

53

 

 

 

53

 

 

 

2

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

795

 

 

 

729

 

 

 

52

 

Home equity lines of credit

 

 

72

 

 

 

72

 

 

 

7

 

Consumer

 

 

0

 

 

 

0

 

 

 

0

 

Subtotal

 

 

920

 

 

 

854

 

 

 

61

 

Total

 

$

5,537

 

 

$

4,253

 

 

$

61

 

 

18

 

The following tables present the average recorded investment in impaired loans by class and interest income recognized by loan class for the three month periods ended March 31, 2020 and 2019:

 

 

 

Average Recorded Investment

 

 

Interest Income Recognized

 

 

 

For Three Months Ended

March 31,

 

 

For Three Months Ended

March 31,

 

(In Thousands of Dollars)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

0

 

 

$

331

 

 

$

0

 

 

$

4

 

Non-owner occupied

 

 

34

 

 

 

38

 

 

 

0

 

 

 

0

 

Farmland

 

 

517

 

 

 

0

 

 

 

1

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

132

 

 

 

157

 

 

 

2

 

 

 

2

 

Agricultural

 

 

17

 

 

 

0

 

 

 

1

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2,139

 

 

 

2,693

 

 

 

38

 

 

 

43

 

Home equity lines of credit

 

 

368

 

 

 

347

 

 

 

6

 

 

 

5

 

Consumer

 

 

244

 

 

 

112

 

 

 

7

 

 

 

3

 

Subtotal

 

 

3,451

 

 

 

3,678

 

 

 

55

 

 

 

57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Farmland

 

 

0

 

 

 

257

 

 

 

0

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

52

 

 

 

59

 

 

 

1

 

 

 

1

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

701

 

 

 

1,319

 

 

 

8

 

 

 

8

 

Home equity lines of credit

 

 

99

 

 

 

196

 

 

 

0

 

 

 

2

 

Consumer

 

 

0

 

 

 

8

 

 

 

0

 

 

 

0

 

Subtotal

 

 

852

 

 

 

1,839

 

 

 

9

 

 

 

11

 

Total

 

$

4,303

 

 

$

5,517

 

 

$

64

 

 

$

68

 

 

 

Cash basis interest recognized during the three month periods ended March 31, 2020 and 2019 was materially equal to interest income recognized.

Nonaccrual loans and loans past due 90 days or more still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

19

 

The following table presents the recorded investment in nonaccrual and loans past due 90 days or more still on accrual by class of loans as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

(In Thousands of Dollars)

 

Nonaccrual

 

 

Loans Past

Due 90 Days

or More

Still Accruing

 

 

Nonaccrual

 

 

Loans Past

Due 90 Days

or More

Still Accruing

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

0

 

 

$

340

 

 

$

6

 

 

$

0

 

Farmland

 

 

10

 

 

 

0

 

 

 

14

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

390

 

 

 

44

 

 

 

567

 

 

 

0

 

Agricultural

 

 

77

 

 

 

0

 

 

 

0

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

1,279

 

 

 

366

 

 

 

1,234

 

 

 

438

 

Home equity lines of credit

 

 

688

 

 

 

23

 

 

 

669

 

 

 

14

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

602

 

 

 

94

 

 

 

568

 

 

 

120

 

Direct

 

 

180

 

 

 

146

 

 

 

139

 

 

 

70

 

Other

 

 

0

 

 

 

14

 

 

 

0

 

 

 

6

 

Total originated loans

 

$

3,226

 

 

$

1,027

 

 

$

3,197

 

 

$

648

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

59

 

 

$

0

 

 

$

0

 

 

$

0

 

Non-owner occupied

 

 

612

 

 

 

0

 

 

 

102

 

 

 

0

 

Farmland

 

 

516

 

 

 

368

 

 

 

519

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

558

 

 

 

0

 

 

 

602

 

 

 

0

 

Agricultural

 

 

7

 

 

 

0

 

 

 

9

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

4,881

 

 

 

203

 

 

 

659

 

 

 

186

 

Home equity lines of credit

 

 

230

 

 

 

0

 

 

 

239

 

 

 

9

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 

136

 

 

 

22

 

 

 

151

 

 

 

24

 

Total acquired loans

 

$

6,999

 

 

$

593

 

 

$

2,281

 

 

$

219

 

Total loans

 

$

10,225

 

 

$

1,620

 

 

$

5,478

 

 

$

867

 

 

20

 

The following tables present the aging of the recorded investment in past due loans as of March 31, 2020 and December 31, 2019 by class of loans:

 

(In Thousands of Dollars)

 

30-59

Days Past

Due

 

 

60-89

Days Past

Due

 

 

90 Days or

More Past

Due and

Nonaccrual

 

 

Total Past

Due

 

 

Loans Not

Past Due

 

 

Total

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

739

 

 

$

53

 

 

$

340

 

 

$

1,132

 

 

$

192,333

 

 

$

193,465

 

Non-owner occupied

 

 

32

 

 

 

0

 

 

 

0

 

 

 

32

 

 

 

285,989

 

 

 

286,021

 

Farmland

 

 

430

 

 

 

0

 

 

 

10

 

 

 

440

 

 

 

140,674

 

 

 

141,114

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

91,322

 

 

 

91,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

925

 

 

 

93

 

 

 

434

 

 

 

1,452

 

 

 

249,747

 

 

 

251,199

 

Agricultural

 

 

79

 

 

 

3

 

 

 

77

 

 

 

159

 

 

 

42,961

 

 

 

43,120

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

4,469

 

 

 

912

 

 

 

1,645

 

 

 

7,026

 

 

 

308,432

 

 

 

315,458

 

Home equity lines of credit

 

 

496

 

 

 

0

 

 

 

711

 

 

 

1,207

 

 

 

92,850

 

 

 

94,057

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

1,715

 

 

 

387

 

 

 

696

 

 

 

2,798

 

 

 

167,359

 

 

 

170,157

 

Direct

 

 

599

 

 

 

285

 

 

 

326

 

 

 

1,210

 

 

 

27,669

 

 

 

28,879

 

Other

 

 

52

 

 

 

18

 

 

 

14

 

 

 

84

 

 

 

9,182

 

 

 

9,266

 

Total originated loans:

 

$

9,536

 

 

$

1,751

 

 

$

4,253

 

 

$

15,540

 

 

$

1,608,518

 

 

$

1,624,058

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

133

 

 

$

0

 

 

$

59

 

 

$

192

 

 

$

54,757

 

 

$

54,949

 

Non-owner occupied

 

 

146

 

 

 

707

 

 

 

612

 

 

 

1,465

 

 

 

64,752

 

 

 

66,217

 

Farmland

 

 

779

 

 

 

0

 

 

 

884

 

 

 

1,663

 

 

 

32,755

 

 

 

34,418

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

21,322

 

 

 

21,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

558

 

 

 

112

 

 

 

558

 

 

 

1,228

 

 

 

30,288

 

 

 

31,516

 

Agricultural

 

 

0

 

 

 

0

 

 

 

7

 

 

 

7

 

 

 

5,236

 

 

 

5,243

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

3,586

 

 

 

1,359

 

 

 

5,084

 

 

 

10,029

 

 

 

100,365

 

 

 

110,394

 

Home equity lines of credit

 

 

48

 

 

 

30

 

 

 

230

 

 

 

308

 

 

 

20,591

 

 

 

20,899

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 

192

 

 

 

130

 

 

 

158

 

 

 

480

 

 

 

6,986

 

 

 

7,466

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

100

 

 

 

100

 

Total acquired loans

 

$

5,442

 

 

$

2,338

 

 

$

7,592

 

 

$

15,372

 

 

$

337,152

 

 

$

352,524

 

Total loans

 

$

14,978

 

 

$

4,089

 

 

$

11,845

 

 

$

30,912

 

 

$

1,945,670

 

 

$

1,976,582

 

 

21

 

(In Thousands of Dollars)

 

30-59

Days Past

Due

 

 

60-89

Days Past

Due

 

 

90 Days or

More Past

Due and

Nonaccrual

 

 

Total Past

Due

 

 

Loans Not

Past Due

 

 

Total

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

87

 

 

$

0

 

 

$

6

 

 

$

93

 

 

$

183,830

 

 

$

183,923

 

Non-owner occupied

 

 

2

 

 

 

0

 

 

 

0

 

 

 

2

 

 

 

286,522

 

 

 

286,524

 

Farmland

 

 

0

 

 

 

0

 

 

 

14

 

 

 

14

 

 

 

138,501

 

 

 

138,515

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

93,271

 

 

 

93,271

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

1,458

 

 

 

573

 

 

 

567

 

 

 

2,598

 

 

 

241,210

 

 

 

243,808

 

Agricultural

 

 

103

 

 

 

77

 

 

 

0

 

 

 

180

 

 

 

46,142

 

 

 

46,322

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

3,811

 

 

 

207

 

 

 

1,672

 

 

 

5,690

 

 

 

318,536

 

 

 

324,226

 

Home equity lines of credit

 

 

270

 

 

 

21

 

 

 

683

 

 

 

974

 

 

 

91,000

 

 

 

91,974

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

1,599

 

 

 

533

 

 

 

688

 

 

 

2,820

 

 

 

168,905

 

 

 

171,725

 

Direct

 

 

537

 

 

 

272

 

 

 

209

 

 

 

1,018

 

 

 

26,549

 

 

 

27,567

 

Other

 

 

153

 

 

 

26

 

 

 

6

 

 

 

185

 

 

 

9,299

 

 

 

9,484

 

Total originated loans

 

$

8,020

 

 

$

1,709

 

 

$

3,845

 

 

$

13,574

 

 

$

1,603,765

 

 

$

1,617,339

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

0

 

 

$

0

 

 

$

0

 

 

$

0

 

 

$

35,424

 

 

$

35,424

 

Non-owner occupied

 

 

0

 

 

 

0

 

 

 

102

 

 

 

102

 

 

 

10,317

 

 

 

10,419

 

Farmland

 

 

0

 

 

 

0

 

 

 

519

 

 

 

519

 

 

 

34,858

 

 

 

35,377

 

Other

 

 

69

 

 

 

0

 

 

 

0

 

 

 

69

 

 

 

5,891

 

 

 

5,960

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

47

 

 

 

1

 

 

 

602

 

 

 

650

 

 

 

11,000

 

 

 

11,650

 

Agricultural

 

 

0

 

 

 

8

 

 

 

9

 

 

 

17

 

 

 

6,030

 

 

 

6,047

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

1,159

 

 

 

448

 

 

 

845

 

 

 

2,452

 

 

 

61,004

 

 

 

63,456

 

Home equity lines of credit

 

 

56

 

 

 

8

 

 

 

248

 

 

 

312

 

 

 

19,333

 

 

 

19,645

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 

347

 

 

 

21

 

 

 

175

 

 

 

543

 

 

 

5,525

 

 

 

6,068

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

154

 

 

 

154

 

Total acquired loans

 

$

1,678

 

 

$

486

 

 

$

2,500

 

 

$

4,664

 

 

$

189,536

 

 

$

194,200

 

Total loans

 

$

9,698

 

 

$

2,195

 

 

$

6,345

 

 

$

18,238

 

 

$

1,793,301

 

 

$

1,811,539

 

 

 

Troubled Debt Restructurings:

Total troubled debt restructurings were $4.7 million and $4.6 million at March 31, 2020 and December 31, 2019, respectively.  The Company has allocated $61 thousand of specific reserves to loans whose terms have been modified in troubled debt restructurings at March 31, 2020 and December 31, 2019.  There were no commitments to lend additional amounts to borrowers with loans that were classified as troubled debt restructurings at March 31, 2020 and at December 31, 2019.

During the three month periods ended March 31, 2020 and 2019, the terms of certain loans were modified as troubled debt restructurings.  The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; a deferral of principal, interest and/or escrow; or a legal concession.  During the three month period ended March 31, 2020, the terms of such loans included a deferral of principal and/or interest and an extension of the maturity date on these and other troubled debt restructurings in the range of 168 to 180 months.  During the same three month period in 2019, the terms of such loans included a reduction of the stated interest rate of loans in the range of 2.38% to 2.74% and an extension of the maturity date on these and other troubled debt restructurings by 86 months.        

22

 

The following table presents loans by class modified as troubled debt restructurings that occurred during the three month period ended March 31, 2020 and 2019:

 

 

 

 

 

 

 

Pre-

Modification

 

 

Post-

Modification

 

Three Months Ended March 31, 2020

 

Number of

 

 

Outstanding

Recorded

 

 

Outstanding

Recorded

 

(In Thousands of Dollars)

 

Loans

 

 

Investment

 

 

Investment

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

1

 

 

$

21

 

 

$

21

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

5

 

 

 

209

 

 

 

210

 

Home equity lines of credit

 

 

4

 

 

 

100

 

 

 

102

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

10

 

 

 

61

 

 

 

61

 

Other

 

 

1

 

 

 

15

 

 

 

15

 

Total originated loans

 

 

21

 

 

$

406

 

 

$

409

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

1

 

 

$

68

 

 

$

68

 

Total acquired loans

 

 

1

 

 

$

68

 

 

$

68

 

Total loans

 

 

22

 

 

$

474

 

 

$

477

 

 

 

 

 

 

 

 

 

Pre-

Modification

 

 

Post-

Modification

 

Three Months Ended March 31, 2019

 

Number of

 

 

Outstanding

Recorded

 

 

Outstanding

Recorded

 

(In Thousands of Dollars)

 

Loans

 

 

Investment

 

 

Investment

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

3

 

 

$

73

 

 

$

75

 

Home equity lines of credit

 

 

1

 

 

 

40

 

 

 

40

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

      Indirect

 

 

12

 

 

 

105

 

 

 

105

 

Total originated loans

 

 

16

 

 

$

218

 

 

$

220

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2

 

 

$

51

 

 

$

55

 

Total acquired loans

 

 

2

 

 

$

51

 

 

$

55

 

Total loans

 

 

18

 

 

$

269

 

 

$

275

 

 

 

There were $5 thousand and $6 thousand in charge offs and a $5 thousand and $6 thousand increase to the provision for loan losses during the three month periods ended March 31, 2020 and 2019, respectively, as a result of outstanding troubled debt restructurings.      

There were two commercial farmland loans and one commercial loan for which there was a payment default within twelve months following the modification of the troubled debt restructuring during the three month period ended March 31, 2020.  There were two commercial farmland and one commercial loan that were past due at March 31, 2020.  There was no provision recorded as a result of the defaults during 2020.  A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

There were two residential real estate loans and one home equity line of credit for which there was a payment default within twelve months following the modification of the troubled debt restructuring during the three month period ended March 31, 2019.  All of the loans were past due at March 31, 2019.  There was no provision recorded as a result of the defaults during 2019.  A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.  

 

 

23

 

Credit Quality Indicators:

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 establishes a risk rating at origination for all commercial loan and commercial real estate relationships.  For relationships over $750 thousand, management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt.  Management also affirms the risk ratings for the loans in their respective portfolios on an annual 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.  Substandard loans 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.

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 March 31, 2020 and December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

(In Thousands of Dollars)

 

Pass

 

 

Special

Mention

 

 

Sub

standard

 

 

Total

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

188,841

 

 

$

3,073

 

 

$

1,551

 

 

$

193,465

 

Non-owner occupied

 

 

278,852

 

 

 

7,092

 

 

 

77

 

 

 

286,021

 

Farmland

 

 

138,919

 

 

 

1,815

 

 

 

380

 

 

 

141,114

 

Other

 

 

90,895

 

 

 

246

 

 

 

181

 

 

 

91,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

246,242

 

 

 

1,453

 

 

 

3,504

 

 

 

251,199

 

Agricultural

 

 

42,736

 

 

 

47

 

 

 

337

 

 

 

43,120

 

Total originated loans

 

$

986,485

 

 

$

13,726

 

 

$

6,030

 

 

$

1,006,241

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

53,806

 

 

$

104

 

 

$

1,039

 

 

$

54,949

 

Non-owner occupied

 

 

65,387

 

 

 

53

 

 

 

777

 

 

 

66,217

 

Farmland

 

 

31,961

 

 

 

0

 

 

 

2,457

 

 

 

34,418

 

Other

 

 

21,256

 

 

 

0

 

 

 

66

 

 

 

21,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

28,768

 

 

 

0

 

 

 

2,748

 

 

 

31,516

 

Agricultural

 

 

4,816

 

 

 

332

 

 

 

95

 

 

 

5,243

 

Total acquired loans

 

$

205,994

 

 

$

489

 

 

$

7,182

 

 

$

213,665

 

Total loans

 

$

1,192,479

 

 

$

14,215

 

 

$

13,212

 

 

$

1,219,906

 

 

24

 

(In Thousands of Dollars)

 

Pass

 

 

Special

Mention

 

 

Sub

standard

 

 

Total

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

177,540

 

 

$

5,357

 

 

$

1,026

 

 

$

183,923

 

Non-owner occupied

 

 

279,103

 

 

 

7,374

 

 

 

47

 

 

 

286,524

 

Farmland

 

 

136,674

 

 

 

1,457

 

 

 

384

 

 

 

138,515

 

Other

 

 

93,082

 

 

 

0

 

 

 

189

 

 

 

93,271

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

238,351

 

 

 

1,673

 

 

 

3,784

 

 

 

243,808

 

Agricultural

 

 

46,283

 

 

 

6

 

 

 

33

 

 

 

46,322

 

Total originated loans

 

$

971,033

 

 

$

15,867

 

 

$

5,463

 

 

$

992,363

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

34,707

 

 

$

110

 

 

$

607

 

 

$

35,424

 

Non-owner occupied

 

 

10,246

 

 

 

54

 

 

 

119

 

 

 

10,419

 

Farmland

 

 

32,112

 

 

 

0

 

 

 

3,265

 

 

 

35,377

 

Other

 

 

5,891

 

 

 

0

 

 

 

69

 

 

 

5,960

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

10,570

 

 

 

0

 

 

 

1,080

 

 

 

11,650

 

Agricultural

 

 

5,617

 

 

 

317

 

 

 

113

 

 

 

6,047

 

Total acquired loans

 

$

99,143

 

 

$

481

 

 

$

5,253

 

 

$

104,877

 

Total loans

 

$

1,070,176

 

 

$

16,348

 

 

$

10,716

 

 

$

1,097,240

 

 

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses.  For residential, consumer indirect and direct loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.  In the 1-4 family residential real estate portfolio at March 31, 2020, other real estate owned and foreclosure properties were $131 thousand and $231 thousand, respectively.  At December 31, 2019 other real estate owned and foreclosure properties were $19 thousand and $316 thousand, respectively.

The following tables present the recorded investment in residential, consumer indirect and direct auto loans based on payment activity as of March 31, 2020 and December 31, 2019.  Nonperforming loans are loans past due 90 days or more and still accruing interest and nonaccrual loans.

 

 

 

Residential Real Estate

 

 

Consumer

 

(In Thousands of Dollars)

 

1-4 Family

Residential

 

 

Home

Equity Lines

of Credit

 

 

Indirect

 

 

Direct

 

 

Other

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

313,813

 

 

$

93,346

 

 

$

169,461

 

 

$

28,553

 

 

$

9,252

 

Nonperforming

 

 

1,645

 

 

 

711

 

 

 

696

 

 

 

326

 

 

 

14

 

Total originated loans

 

$

315,458

 

 

$

94,057

 

 

$

170,157

 

 

$

28,879

 

 

$

9,266

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

105,310

 

 

$

20,669

 

 

$

0

 

 

$

7,308

 

 

$

100

 

Nonperforming

 

 

5,084

 

 

 

230

 

 

 

0

 

 

 

158

 

 

 

0

 

Total acquired loans

 

 

110,394

 

 

 

20,899

 

 

 

0

 

 

 

7,466

 

 

 

100

 

Total loans

 

$

425,852

 

 

$

114,956

 

 

$

170,157

 

 

$

36,345

 

 

$

9,366

 

25

 

 

 

 

Residential Real Estate

 

 

Consumer

 

(In Thousands of Dollars)

 

1-4 Family

Residential

 

 

Home

Equity Lines

of Credit

 

 

Indirect

 

 

Direct

 

 

Other

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

322,554

 

 

$

91,291

 

 

$

171,037

 

 

$

27,358

 

 

$

9,478

 

Nonperforming

 

 

1,672

 

 

 

683

 

 

 

688

 

 

 

209

 

 

 

6

 

Total originated loans

 

$

324,226

 

 

$

91,974

 

 

$

171,725

 

 

$

27,567

 

 

$

9,484

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

62,611

 

 

$

19,397

 

 

$

0

 

 

$

5,893

 

 

$

154

 

Nonperforming

 

 

845

 

 

 

248

 

 

 

0

 

 

 

175

 

 

 

0

 

Total acquired loans

 

 

63,456

 

 

 

19,645

 

 

 

0

 

 

 

6,068

 

 

 

154

 

Total loans

 

$

387,682

 

 

$

111,619

 

 

$

171,725

 

 

$

33,635

 

 

$

9,638

 

 

 

Revenue from Contracts with Customers:

 

All material revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income.  The following table presents the Company’s noninterest income by revenue stream and reportable segment, net of eliminations, for the three months ended March 31, 2020 and 2019.

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Totals

 

For Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

$

0

 

 

$

1,095

 

 

$

1,095

 

Debit card and EFT fees

 

 

0

 

 

 

851

 

 

 

851

 

Trust fees

 

 

1,857

 

 

 

0

 

 

 

1,857

 

Insurance agency commissions

 

 

0

 

 

 

883

 

 

 

883

 

Retirement plan consulting fees

 

 

380

 

 

 

0

 

 

 

380

 

Investment commissions

 

 

0

 

 

 

423

 

 

 

423

 

Other (outside the scope of ASC 606)

 

 

0

 

 

 

2,226

 

 

 

2,226

 

Total noninterest income

 

$

2,237

 

 

$

5,478

 

 

$

7,715

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Totals

 

For Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

$

0

 

 

$

1,074

 

 

$

1,074

 

Debit card and EFT fees

 

 

0

 

 

 

778

 

 

 

778

 

Trust fees

 

 

1,858

 

 

 

0

 

 

 

1,858

 

Insurance agency commissions

 

 

0

 

 

 

803

 

 

 

803

 

Retirement plan consulting fees

 

 

358

 

 

 

0

 

 

 

358

 

Investment commissions

 

 

0

 

 

 

260

 

 

 

260

 

Other (outside the scope of ASC 606)

 

 

0

 

 

 

1,389

 

 

 

1,389

 

Total noninterest income

 

$

2,216

 

 

$

4,304

 

 

$

6,520

 

 

 

 

A description of the Company’s revenue streams under ASC 606 follows:

 

Service charges on deposit accounts – The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Management reviewed the deposit account agreements, and determined that the agreements can be terminated at any time by either the Bank or the account holder.  Transaction fees, such as balance transfers, wires and overdraft charges are settled the day the performance obligation is satisfied.  The Bank’s monthly service charges and maintenance fees are for services provided to the customer on a monthly basis are considered a series of services that have the same pattern of transfer each month.  The review of service charges assessed on deposit accounts, included the amount of variable consideration that is a part of the monthly charges.  It was found that the waiver of service charges due to insufficient funds and dormant account fees is immaterial and would not require a change in the accounting treatment for these fees under the new revenue standards.

26

 

Debit Card Interchange Fees – Customers and the Bank have an account agreement and maintain deposit balances with the Bank.  Customers use a bank issued debit card to purchase goods and services, and the Bank earns interchange fees on those transactions, typically a percentage of the sale amount of the transaction.  The Bank records the amount due when it receives the settlement from the payment network.  Payments from the payment network are received and recorded into income on a daily basis.  There are no contingent debit card interchange fees recorded by the Company that could be subject to a clawback in future periods.

Trust fees – Services provided to Trust customers are a series of distinct services that have the same pattern of transfer each month.  Fees for trust accounts are billed and drafted from trust accounts monthly.  The Company records these fees on the income statement on a monthly basis.  Fees are assessed based on the total investable assets of the customer’s trust account.  A signed contract between the Company and the customer is maintained for all customer trust accounts with payment terms identified.  It is probable that the fees will be collectible as funds being managed are accessible by the asset manager.  Past history of trust fee income recorded by the Company indicates that it is highly unlikely that a significant reversal could occur.  There are no contingent incentive fees recorded by the Company that could be subject to a clawback in future periods.

Insurance Agency Commissions – Insurance agency commissions are received from insurance carriers for the agency’s share of commissions from customer premium payments.  These commissions are recorded into income when checks are received from the insurance carriers, and there is no contingent portion associated with these commission checks.  There may be a short time-lag in recording revenue when cash is received instead of recording the revenue when the policy is signed by the customer, but the time lag is insignificant and does not impact the revenue recognition process.

Insurance also receives incentive checks from the insurance carriers for achieving specified levels of production with particular carriers.  These amounts are recorded into income when a check is received, and there are no contingent amounts associated with these payments that may be clawed back by the carrier in the future.  Similar to the monthly commissions explained in the preceding paragraph, there may be a short time-lag in recording incentive revenue on a cash basis as opposed to estimating the amount of incentive revenue expected to be earned, this does not materially impact the recognition of Insurance revenue.  If there were any amounts that would need to be refunded for one specific Insurance customer, management believes the reversal would not be significant.

Other potential situations surrounding the recognition of Insurance revenue include the estimating potential refunds due to the likely cancellation of a percentage of customers cancelling their policies and recording revenue at the time of policy renewals.  Management concluded that since Insurance agency commissions represent only 2.5% of the Company’s total revenue, adjusting the current practice of recording insurance revenue for these situations would not have a material impact on the reporting of total revenue.  

Retirement Plan Consulting Fees – Revenue is recognized based on the level of work performed for the client.  Any payments that are received for work to be performed in the future are recorded in a deferred revenue account, and recorded into income when the fees are earned.  Retirement plan consulting fees represent only 1.1% of the Company’s total revenue, and therefore management has concluded that any adjustment of revenue for one particular customer for a refund or any other reason would be insignificant and would not materially impact the Company’s total revenue.  

Investment Commissions – Investment commissions are earned through the sales of non-deposit investment products to customers of the Company.  The sales are conducted through a third-party broker-dealer.  When the commissions are received and recorded into income on the Bank’s income statement, there is no contingent portion that may need to be refunded back to Cetera.  Investment commissions represent only 1.2% of the Company’s total revenue, and therefore management has concluded that any adjustment of revenue for a particular customer for a refund or any other reason would be insignificant and would not materially impact the Company’s total revenue.  

Other – Income items included in “Other” are Bank owned life insurance income, security gains, net gains on the sale of loans and other operating income.  Any amounts within the scope of ASC 606 are deemed immaterial.

 

27

 

Fair Value:

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (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.  There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other 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.

Level 3 – Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Investment Securities: The Company uses a third party service to estimate fair value on available for sale securities on a monthly basis.  The Company’s service provider is considered a leading evaluation pricing service for U.S. domestic fixed income securities and complies fully with ASU 2016-01’s exit pricing requirements.  They subscribe to multiple third-party pricing vendors, and supplement that information with matrix pricing methods.  The fair values for investment securities, which consist of equity securities that are recorded at fair market value to comply with ASU 2016-01, are determined by quoted market prices in active markets, if available (Level 1).  The equity securities change in fair market value is recorded in the income statements.  For securities where quoted prices are not available, fair values are calculated based on quoted prices for similar assets in active markets, quoted prices for similar assets in markets that are not active or inputs other than quoted prices, which provide a reasonable basis for fair value determination.  Such inputs may include interest rates and yield curves, volatilities, prepayment speeds, credit risks and default rates.  Inputs used are derived principally from observable market data (Level 2).  For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).  The fair values of Level 3 investment securities are determined by using unobservable inputs to measure fair value of assets for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based on the best information at the time, to the extent that inputs are available without undue cost and effort.  For the period ended March 31, 2020 and for the year ended December 31, 2019, the fair value of Level 3 investment securities was immaterial.

Derivative Instruments: The fair values of derivative instruments are based on valuation models using observable market data as of the measurement date (Level 2).

Impaired Loans: At the time loans are considered impaired, collateral dependent impaired loans are valued at the lower of cost or fair value and non-collateral dependent loans are valued based on discounted cash flows.  Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses.  For collateral dependent loans fair value is commonly based on recent real estate appraisals.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.  Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available.  Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.  Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification.  Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair values are commonly based on recent real estate appraisals.  These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

28

 

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial and commercial real estate properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  Once received, a member of the Appraisal Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.  On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what adjustments should be made to appraisals to arrive at fair value.

Assets measured at fair value on a recurring basis are summarized below:

 

 

 

Fair Value Measurements at March 31, 2020 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

3,840

 

 

$

0

 

 

$

3,840

 

 

$

0

 

State and political subdivisions

 

 

267,583

 

 

 

0

 

 

 

267,583

 

 

 

0

 

Corporate bonds

 

 

3,343

 

 

 

0

 

 

 

3,343

 

 

 

0

 

Mortgage-backed securities-residential

 

 

133,921

 

 

 

0

 

 

 

133,916

 

 

 

5

 

Collateralized mortgage obligations

 

 

33,051

 

 

 

0

 

 

 

33,051

 

 

 

0

 

Small Business Administration

 

 

6,305

 

 

 

0

 

 

 

6,305

 

 

 

0

 

Equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities at fair value

 

 

444

 

 

 

444

 

 

 

0

 

 

 

0

 

Other investments measured at net asset value

 

 

7,636

 

 

n/a

 

 

n/a

 

 

n/a

 

Total investment securities

 

$

456,123

 

 

$

444

 

 

$

448,038

 

 

$

5

 

Loan yield maintenance provisions

 

$

4,810

 

 

$

0

 

 

$

4,810

 

 

$

0

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

4,810

 

 

$

0

 

 

$

4,810

 

 

$

0

 

 

 

 

Fair Value Measurements at December 31, 2019 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices  in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

3,811

 

 

$

0

 

 

$

3,811

 

 

$

0

 

State and political subdivisions

 

 

261,425

 

 

 

0

 

 

 

261,425

 

 

 

0

 

Corporate bonds

 

 

1,260

 

 

 

0

 

 

 

1,260

 

 

 

0

 

Mortgage-backed securities-residential

 

 

147,910

 

 

 

0

 

 

 

147,905

 

 

 

5

 

Collateralized mortgage obligations

 

 

11,347

 

 

 

0

 

 

 

11,347

 

 

 

0

 

Small Business Administration

 

 

6,480

 

 

 

0

 

 

 

6,480

 

 

 

0

 

Equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities at fair value

 

 

594

 

 

 

594

 

 

 

0

 

 

 

0

 

Other investments measured at net asset value

 

 

7,315

 

 

n/a

 

 

n/a

 

 

n/a

 

Total investment securities

 

$

440,142

 

 

$

594

 

 

$

432,228

 

 

$

5

 

Loan yield maintenance provisions

 

$

1,898

 

 

$

0

 

 

$

1,898

 

 

$

0

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

1,898

 

 

$

0

 

 

$

1,898

 

 

$

0

 

 

There were no significant transfers between Level 1 and Level 2 during the three month period ended March 31, 2020 and 2019.  For additional information related to yield maintenance provisions and interest rate swaps see Interest – Rate Swaps note.

 

29

 

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

 

 

 

Investment Securities Available-for-sale

(Level 3)

 

 

 

Three Months ended

March 31,

 

(In Thousands of Dollars)

 

2020

 

 

2019

 

Beginning Balance

 

$

5

 

 

$

6

 

Transfers from level 2

 

 

0

 

 

 

0

 

Repayments, calls and maturities

 

 

0

 

 

 

0

 

Ending Balance

 

$

5

 

 

$

6

 

 

Assets measured at fair value on a non-recurring basis are summarized below:

 

 

 

Fair Value Measurements at March 31, 2020 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices  in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      1–4 family residential

 

$

254

 

 

$

0

 

 

$

0

 

 

$

254

 

Consumer indirect

 

 

25

 

 

 

0

 

 

 

0

 

 

 

25

 

Other real estate owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1–4 family residential

 

 

77

 

 

 

0

 

 

 

0

 

 

 

77

 

 

 

 

Fair Value Measurements at December 31, 2019 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      1–4 family residential

 

$

183

 

 

$

0

 

 

$

0

 

 

$

183

 

Consumer

 

 

12

 

 

 

0

 

 

 

0

 

 

 

12

 

 

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $297 thousand with a valuation allowance of $18 thousand at March 31, 2020, resulting in an additional provision for loan losses of $5 thousand for the three month period ending March 31, 2020.  At December 31, 2019, impaired loans had a principal balance of $208 thousand, with a valuation allowance of $13 thousand.  Loans measured at fair value resulted in an additional provision for loan losses of $223 thousand for the three month period ending March 31, 2019.  Excluded from the fair value of impaired loans, at March 31, 2020 and December 31, 2019, discussed above are $575 thousand and $583 thousand of loans classified as troubled debt restructurings and measured using the present value of cash flows, which is not considered an exit price.

Impaired commercial real estate loans, both owner-occupied and non-owner occupied are valued by independent external appraisals.  These external appraisals are prepared using the sales comparison approach and income approach valuation techniques.  Management makes subsequent unobservable adjustments to the impaired loan appraisals.  Impaired loans other than commercial real estate and other real estate owned are not considered material.

30

 

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at the periods ended March 31, 2020 and December 31, 2019:

 

March 31, 2020

Fair value

 

 

Valuation

Technique(s)

 

Unobservable Input(s)

 

Range

(Weighted Average)

Impaired loans

 

 

 

 

 

 

 

 

 

Residential

$

254

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(40.00%) - 47.15%

(17.77%)

Consumer

 

25

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(10.00%) - 10.00%

0.00%

Other Real Estate owned residential

 

77

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(0%) - 0%

0%

 

December 31, 2019

Fair value

 

 

Valuation

Technique(s)

 

Unobservable Input(s)

 

Range

(Weighted Average)

Impaired loans

 

 

 

 

 

 

 

 

 

Residential

$

183

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(24.26%) - 23.74%

14.53%

Consumer

 

12

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(12.95%) - 12.95%

(0.00%)

 

The carrying amounts and estimated fair values of financial instruments not previously disclosed at March 31, 2020 and December 31, 2019 are as follows:

 

 

 

 

 

 

 

Fair Value Measurements at March 31, 2020 Using:

 

(In Thousands of Dollars)

 

Carrying

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

83,107

 

 

$

30,943

 

 

$

52,164

 

 

$

0

 

 

$

83,107

 

Restricted stock

 

 

18,757

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

Loans held for sale

 

 

3,272

 

 

 

0

 

 

 

3,370

 

 

 

0

 

 

 

3,370

 

Loans, net

 

 

1,961,630

 

 

 

0

 

 

 

0

 

 

 

1,957,445

 

 

 

1,957,445

 

Accrued interest receivable

 

 

8,602

 

 

 

0

 

 

 

2,713

 

 

 

5,889

 

 

 

8,602

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,246,277

 

 

 

1,591,705

 

 

 

631,227

 

 

 

0

 

 

 

2,222,932

 

Short-term borrowings

 

 

19,998

 

 

 

0

 

 

 

19,998

 

 

 

0

 

 

 

19,998

 

Long-term borrowings

 

 

76,854

 

 

 

0

 

 

 

78,869

 

 

 

0

 

 

 

78,869

 

Accrued interest payable

 

 

1,346

 

 

 

51

 

 

 

1,295

 

 

 

0

 

 

 

1,346

 

31

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2019 Using:

 

(In Thousands of Dollars)

 

Carrying

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,760

 

 

$

23,229

 

 

$

47,531

 

 

$

0

 

 

$

70,760

 

Restricted stock

 

 

11,729

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

Loans held for sale

 

 

2,600

 

 

 

0

 

 

 

2,678

 

 

 

0

 

 

 

2,678

 

Loans, net

 

 

1,797,052

 

 

 

0

 

 

 

0

 

 

 

1,760,062

 

 

 

1,760,062

 

Accrued interest receivable

 

 

7,552

 

 

 

0

 

 

 

2,578

 

 

 

4,974

 

 

 

7,552

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,008,964

 

 

 

1,457,309

 

 

 

495,222

 

 

 

0

 

 

 

1,952,531

 

Short-term borrowings

 

 

77,050

 

 

 

0

 

 

 

77,050

 

 

 

0

 

 

 

77,050

 

Long-term borrowings

 

 

45,147

 

 

 

0

 

 

 

45,998

 

 

 

0

 

 

 

45,998

 

Accrued interest payable

 

 

1,070

 

 

 

61

 

 

 

1,009

 

 

 

0

 

 

 

1,070

 

 

The methods and assumptions used to estimate fair value, not previously described, are described as follows:

Cash and Cash Equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2.  The Company has determined that cash on hand and non-interest bearing due from bank accounts are Level 1 whereas interest bearing federal funds sold and other are Level 2.

Restricted Stock: It is not practical to determine the fair value of restricted stock due to restrictions placed on its transferability.

Loans: Fair values of loans, excluding loans held for sale, are estimated as follows: The Company uses a third party firm that uses cash flow analysis and current market interest rates along with adjustments for credit, liquidity and option risk to conform to the ASU 2016-01 exit price requirement.  Loans in the tables above consist of impaired credits held for investment. In accordance with the loan impairment guidance, impairment was measured based on the fair value of collateral less estimated selling costs for collateral dependent loans or the cash flow method for noncollateral dependent loans. Fair value for collateral dependent impaired loans is based upon appraised values adjusted for trends observed in the market. A valuation allowance was recorded for the excess of the loan’s recorded investment over the amounts determined by the collateral value method. This valuation is a component of the allowance for loan losses. The Company considers these fair values level 3.

Loans held for sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

Accrued Interest Receivable/Payable: The carrying amounts of accrued interest receivable and payable approximate fair value resulting in a Level 1, Level 2 or Level 3 classification.  The classification is the result of the association with securities, loans and deposits.

Deposits: The fair values disclosed for demand deposits – interest and non-interest checking, passbook savings, and money market accounts – are, by definition, equal to the amount payable on demand at the reporting date resulting in a Level 1 classification.  The carrying amounts of variable rate certificates of deposit approximate their fair values at the reporting date resulting in a Level 2 classification.  Fair value for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Short-term Borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.

Long-term Borrowings: The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Off-balance Sheet Instruments: The fair value of commitments is not considered material.

 

 

32

 

Goodwill and Intangible Assets:

 

Goodwill associated with the Company’s purchase of Maple Leaf in January 2020 and other past acquisitions totaled $47.4 million and $38.2 million at March 31, 2020 and December 31, 2019.  Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value, which is determined through a two-step impairment test. Management performs goodwill impairment testing on an annual basis as of September 30 or when a triggering event occurs. The fair value of the reporting unit is determined based on a discounted cash flow model.  

Acquired Intangible Assets

Acquired intangible assets were as follows:

 

 

March 31, 2020

 

 

December 31, 2019

 

(In Thousands of Dollars)

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

Amortized intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationship intangibles

$

7,210

 

 

$

(6,033

)

 

$

7,210

 

 

$

(5,938

)

Non-compete contracts

 

430

 

 

 

(385

)

 

 

430

 

 

 

(384

)

Trade name

 

520

 

 

 

(287

)

 

 

520

 

 

 

(277

)

Core deposit intangible

 

6,980

 

 

 

(3,597

)

 

 

6,254

 

 

 

(3,371

)

Total

$

15,140

 

 

$

(10,302

)

 

$

14,414

 

 

$

(9,970

)

 

Aggregate amortization expense was $332 thousand for the three month period ended March 31, 2020.  Amortization expense was $327 thousand for the three months ended March 31, 2019.

Estimated amortization expense for each of the next five periods and thereafter:

 

2020 (9 months)

$

995

 

2021

 

1,264

 

2022

 

1,090

 

2023

 

617

 

2024

 

314

 

Thereafter

 

558

 

Total

$

4,838

 

 

Leases:

 

The Company has operating leases for branch office locations, vehicles and certain office equipment such as printers, copiers and faxes. The leases have remaining lease terms of 10 months to 10.25 years, some of which include options to extend the lease for up to 10 years and some of which include options to terminate the leases within 10 months.

The right of use asset and lease liability were $4.9 million and $5.0 million as of March 31, 2020. At March 31, 2019, the right of use asset and lease liability were $3.5 million.

Lease payments made for the three month period ended March 31, 2020 and 2019 were $195 thousand and $146 thousand, respectively. Interest expense and amortization expense on finance leases for the three month period ended March 31, 2020 was $23 thousand and $107 thousand, and $27 thousand and $89 thousand for the three month period ended March 31, 2019.  The weighted-average remaining lease term for all leases was 5.5 years as of March 31, 2020 and the weighted-average discount rate was 3.07%.

 

33

 

Maturities of lease liabilities are as follows as of March 31, 2020:

 

2020 (9 months)

 

$

588

 

2021

 

 

781

 

2022

 

 

607

 

2023

 

 

503

 

2024

 

 

333

 

Thereafter

 

 

3,230

 

Total Payments

 

 

6,042

 

Less: Imputed Interest

 

 

(1,030

)

Total

 

$

5,012

 

 

Interest-Rate Swaps:

The Company uses a program that utilizes interest-rate swaps as part of its asset/liability management strategy.  The interest-rate swaps are used to help manage the Company’s interest rate risk position and not as derivatives for trading purposes.  The notional amount of the interest-rate swaps does not represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest-rate swap agreements.

The objective of the interest-rate swaps is to protect the related fixed rate commercial real estate loans from changes in fair value due to changes in interest rates.  The Company has a program whereby it lends to its borrowers at a fixed rate with the loan agreement containing a two-way yield maintenance provision, which will be invoked in the event of prepayment of the loan, and is expected to exactly offset the fair value of unwinding the swap.  The yield maintenance provision represents an embedded derivative which is bifurcated from the host loan contract and, as such, the swaps and embedded derivatives are not designated as hedges.  Accordingly, both instruments are carried at fair value and changes in fair value are reported in current period earnings.

Summary information about these interest-rate swaps at periods ended March 31, 2020 and December 31, 2019 is as follows:

 

 

March 31, 2020

 

 

December 31, 2019

 

Notional amounts (In thousands)

$

43,310

 

 

$

42,178

 

Weighted average pay rate on interest-rate swaps

 

4.63

%

 

 

4.60

%

Weighted average receive rate on interest-rate swaps

 

2.87

%

 

 

4.02

%

Weighted average maturity (years)

 

4.4

 

 

 

4.2

 

Fair value of interest-rate swaps (In thousands)

$

(4,810

)

 

$

(1,898

)

Fair value of loan yield maintenance provisions (In thousands)

$

4,810

 

 

$

1,898

 

 

The fair value of the yield maintenance provisions and interest-rate swaps is recorded in other assets and other liabilities, respectively, in the consolidated balance sheets.  Changes in the fair value of the yield maintenance provisions and interest-rate swaps are reported in earnings, as other noninterest income in the consolidated statements of income.  For the three month period ended March 31, 2020 and 2019 there were no net gains or losses recognized in earnings.

 

 

34

 

Earnings Per Share:

The computation of basic and diluted earnings per share is shown in the following table:

 

 

Three Months Ended

March 31,

 

 

2020

 

 

2019

 

Basic EPS

 

 

 

 

 

 

 

Net income (In thousands)

$

8,639

 

 

$

8,388

 

Weighted average shares outstanding

 

28,535,371

 

 

 

27,790,028

 

Basic earnings per share

$

0.30

 

 

$

0.30

 

 

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

Net income (In thousands)

$

8,639

 

 

$

8,388

 

Weighted average shares outstanding for basic earnings per share

 

28,535,371

 

 

 

27,790,028

 

Dilutive effect of restricted stock awards

 

174,632

 

 

 

193,301

 

Weighted average shares for diluted earnings per share

 

28,710,003

 

 

 

27,983,329

 

Diluted earnings per share

$

0.30

 

 

$

0.30

 

 

There were no restricted stock awards that were considered anti-dilutive for the three month periods ended March 31, 2020 and 2019.

 

 

Stock Based Compensation:

 

During 2017, the Company, with the approval of shareholders, created the 2017 Equity Incentive Plan (the “2017 Plan”).  The 2017 Plan permits the award of up to 800 thousand shares to the Company’s directors and employees to attract and retain exceptional personnel, motivate performance and most importantly to help align the interests of the Company’s executives with those of the Company’s shareholders.  There were 19,045 service time based share awards and 50,187 performance based share awards granted under the 2017 Plan during the three month period ended March 31, 2020, as shown in the table below.  The actual number of performance based shares issued will depend on the relative performance of the Company’s average return on equity compared to a group of peer companies over a three year vesting period, ending December 31, 2022.  As of March 31, 2020, 406,315 shares are still available to be awarded from the 2017 Plan.  

The restricted stock awards were granted with a fair value price equal to the market price of the Company’s common stock at the date of the grant.  Expense recognized was $337 thousand for the three month period ended March 31, 2020.  Expense recognized was $320 thousand for the three month period ended March 31, 2019.  As of March 31, 2020, there was $2.3 million of total unrecognized compensation expense related to the nonvested shares granted under the 2017 Plan.  The remaining cost is expected to be recognized over 2.9 years.  

The following is the activity under the Plans during the three month period ended March 31, 2020.

 

 

Three Months Ended March 31, 2020

 

 

Maximum

Awarded

Service

Units

 

 

Weighted

Average

Grant Date

Fair Value

 

 

Maximum

Awarded

Performance

Units

 

 

Weighted

Average

Grant Date

Fair Value

 

Beginning balance - non-vested shares

 

81,165

 

 

$

14.17

 

 

 

192,665

 

 

$

13.72

 

Granted

 

19,045

 

 

 

15.75

 

 

 

50,187

 

 

 

15.93

 

Vested

 

(2,000

)

 

 

14.65

 

 

 

0

 

 

 

0

 

Forfeited

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Ending balance - non-vested shares

 

98,210

 

 

$

14.47

 

 

 

242,852

 

 

$

14.18

 

 

The 2,000 shares that vested during the three month period ended March 31, 2020 had a weighted average fair value of $16.26 per share at vesting date.

 

35

 

Other Comprehensive Income (Loss):

The following table represents the details of other comprehensive income for the three month periods ended March 31, 2020 and 2019.

 

 

Three Months Ended March 31, 2020

 

(In Thousands of Dollars)

Pre-tax

 

 

Tax

 

 

After-Tax

 

Unrealized holding gains (losses) on available-for-sale securities during the period

$

(12,217

)

 

$

2,565

 

 

$

(9,652

)

Reclassification adjustment for (gains) losses included in net income (1)

 

(256

)

 

 

54

 

 

 

(202

)

Net other comprehensive income (loss)

$

(12,473

)

 

$

2,619

 

 

$

(9,854

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019

 

(In Thousands of Dollars)

Pre-tax

 

 

Tax

 

 

After-Tax

 

Unrealized holding gains (losses) on available-for-sale securities during the period

$

5,821

 

 

$

(1,223

)

 

$

4,598

 

Reclassification adjustment for losses included in net income (1)

 

34

 

 

 

(7

)

 

 

27

 

Net other comprehensive income (loss)

$

5,855

 

 

$

(1,230

)

 

$

4,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Pre-tax reclassification adjustments relating to available-for-sale securities are reported in security gains and the tax impact is included in income tax expense on the consolidated statements of income.

 

 

Regulatory Capital Matters:

Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies.  Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  The new minimum capital requirements associated with the Basel Committee on capital and liquidity regulation (Basel III) were phased in between January 1, 2016 and January 1, 2019.  Capital amounts and classifications are also subject to qualitative judgments by regulators.  Failure to meet capital requirements can initiate regulatory action by regulators that, if undertaken, could have a direct material effect on the financial statements.  Management believes that as of March 31, 2020, the Company and the Bank meet all capital adequacy requirements to which they are subject.

The FDIC and other federal banking regulators revised the risk-based capital requirements applicable to financial holding companies and insured depository institutions, including the Company and the Bank, to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision (“Basel III”).

The common equity tier 1 capital, tier 1 capital and total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets.  The leverage ratio is calculated by dividing tier 1 capital by adjusted average total assets.

Basel III limits capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity tier 1 capital, tier 1 capital and total capital to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements.  The capital conservation buffer phased in beginning January 1, 2016 and increased each year until it was fully implemented at 2.5% on January 1, 2019.  The additional capital conservation buffer is 2.5%.  Excluding the additional buffer, Basel III requires the Company and the Bank to maintain (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%, (ii) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%, (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0% and (iv) a minimum leverage ratio of at least 4.0%.

36

 

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.  If only adequately capitalized, regulatory approval is required to accept brokered deposits.  If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.  At March 31, 2020 and December 31, 2019, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  There are no conditions or events since that notification that management believes have changed the institution’s category.

Actual and required capital amounts and ratios, which do not include the capital conservation buffer, are presented below at March 31, 2020 and December 31, 2019:

 

 

Actual

 

 

Requirement For Capital

Adequacy Purposes:

 

 

To be Well Capitalized

Under Prompt Corrective

Action Provisions:

 

 

Amount

 

Ratio

 

 

Amount

 

Ratio

 

 

Amount

 

Ratio

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

$

253,014

 

 

12.26

%

 

$

92,891

 

 

4.5

%

 

N/A

 

N/A

 

Bank

 

240,670

 

 

11.57

%

 

 

93,568

 

 

4.5

%

 

$

135,154

 

 

6.5

%

Total risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

277,167

 

 

13.43

%

 

 

165,139

 

 

8.0

%

 

N/A

 

N/A

 

Bank

 

255,622

 

 

12.29

%

 

 

166,344

 

 

8.0

%

 

 

207,929

 

 

10.0

%

Tier I risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

262,215

 

 

12.70

%

 

 

123,854

 

 

6.0

%

 

N/A

 

N/A

 

Bank

 

240,670

 

 

11.57

%

 

 

124,758

 

 

6.0

%

 

 

166,344

 

 

8.0

%

Tier I leverage ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

262,215

 

 

10.18

%

 

 

103,016

 

 

4.0

%

 

N/A

 

N/A

 

Bank

 

240,670

 

 

9.34

%

 

 

103,052

 

 

4.0

%

 

 

128,815

 

 

5.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

$

247,395

 

 

12.94

%

 

$

86,039

 

 

4.5

%

 

N/A

 

N/A

 

Bank

 

213,507

 

 

11.19

%

 

 

85,854

 

 

4.5

%

 

$

124,011

 

 

6.5

%

Total risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

264,188

 

 

13.82

%

 

 

152,958

 

 

8.0

%

 

N/A

 

N/A

 

Bank

 

227,994

 

 

11.95

%

 

 

152,629

 

 

8.0

%

 

 

190,787

 

 

10.0

%

Tier I risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

249,701

 

 

13.06

%

 

 

114,719

 

 

6.0

%

 

N/A

 

N/A

 

Bank

 

213,507

 

 

11.19

%

 

 

114,472

 

 

6.0

%

 

 

152,629

 

 

8.0

%

Tier I leverage ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

249,701

 

 

10.69

%

 

 

93,406

 

 

4.0

%

 

N/A

 

N/A

 

Bank

 

213,507

 

 

9.06

%

 

 

94,304

 

 

4.0

%

 

 

117,881

 

 

5.0

%

 

37

 

Segment Information:

The reportable segments are determined by the products and services offered, primarily distinguished between banking and trust.  The trust and retirement consulting segments were combined in 2019.   The segments are also distinguished by the level of information provided to the chief operating decision makers in the Company, who use such information to review performance of various components of the business, which are then aggregated.  Loans, investments, and deposits provide the revenues in the banking operation.  All operations are domestic.  Significant segment totals are reconciled to the financial statements as follows:

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

 

$

6,256

 

 

$

49,500

 

 

$

(3,558

)

 

$

52,198

 

Total assets

 

$

14,208

 

 

$

2,649,518

 

 

$

4,523

 

 

$

2,668,249

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

 

$

6,326

 

 

$

37,141

 

 

$

(822

)

 

$

42,645

 

Total assets

 

$

13,892

 

 

$

2,430,784

 

 

$

4,482

 

 

$

2,449,158

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

For Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

34

 

 

$

22,352

 

 

$

(84

)

 

$

22,302

 

Provision for loan losses

 

 

0

 

 

 

1,100

 

 

 

0

 

 

 

1,100

 

Service fees, security gains and other noninterest income

 

 

2,243

 

 

 

5,620

 

 

 

(148

)

 

 

7,715

 

Noninterest expense

 

 

1,517

 

 

 

15,881

 

 

 

433

 

 

 

17,831

 

Amortization and depreciation expense

 

 

76

 

 

 

627

 

 

 

48

 

 

 

751

 

Income before taxes

 

 

684

 

 

 

10,364

 

 

 

(713

)

 

 

10,335

 

Income taxes

 

 

144

 

 

 

1,759

 

 

 

(207

)

 

 

1,696

 

Net income

 

$

540

 

 

$

8,605

 

 

$

(506

)

 

$

8,639

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

For Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

38

 

 

$

19,949

 

 

$

(22

)

 

$

19,965

 

Provision for loan losses

 

 

0

 

 

 

550

 

 

 

0

 

 

 

550

 

Service fees, security gains and other noninterest income

 

 

2,256

 

 

 

4,305

 

 

 

(41

)

 

 

6,520

 

Noninterest expense

 

 

1,601

 

 

 

13,527

 

 

 

140

 

 

 

15,268

 

Amortization and depreciation expense

 

 

92

 

 

 

605

 

 

 

12

 

 

 

709

 

Income before taxes

 

 

601

 

 

 

9,572

 

 

 

(215

)

 

 

9,958

 

Income taxes

 

 

126

 

 

 

1,556

 

 

 

(112

)

 

 

1,570

 

Net income

 

$

475

 

 

$

8,016

 

 

$

(103

)

 

$

8,388

 

 

 

The Bank segment includes Farmers National Insurance and Farmers of Canfield Investment Co.

 

 

Contingencies:

 

The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. Legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, although the Company establishes accruals where losses are deemed probable and reasonably estimable. The Company’s assessment of the current exposure with respect to adverse claims in legal matters could change in the event of the discovery of additional facts in such matters or upon determinations by judges, juries, administrative agencies, or other finds or fact that are inconsistent with the Company’s evaluations of claims. During 2019, the Company accrued a charge of $505 thousand relating to a pending settlement of a legal contingency. The Company has insurance coverage for this contingency and expects to recover the amount of this estimated charge.  No amount for an expected insurance recovery has been recorded as of March 31, 2020.

38

 

 

Short-term borrowings:

There were $15 million in short-term Federal Home Loan Bank Advances at March 31, 2020 with a weighted average interest rate of 0.26%.  Short-term Federal Home Loan Bank Advances were $75 million at December 31, 2019.  The Company had $4.6 million and $1.7 million in securities sold under repurchase agreements for the periods ended March 31, 2020 and December 31, 2019, respectively.  In addition, the Company had no Federal funds purchased and has a $350 thousand balance on business lines of credit with one lending institution at March 31, 2020 and December 31, 2019.

Securities sold under repurchase agreements are secured by the Bank’s holdings of debt securities issued by U.S. Government sponsored entities and agencies.  These pledged securities which are 105% of the repurchase agreement balances, had a carrying amount of $4.9 million and $1.8 million at March 31, 2020 and December 31, 2019.

The following table provides a disaggregation of the obligation by the class of collateral pledged for short-term financing obtained through the sales of repurchase agreements:

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

Overnight and continuous repurchase agreements

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

119

 

 

$

55

 

State and political subdivisions

 

 

2,060

 

 

 

627

 

Mortgage-backed securities - residential

 

 

1,974

 

 

 

948

 

Collateralized mortgage obligations - residential

 

 

495

 

 

 

70

 

Total repurchase agreements

 

$

4,648

 

 

$

1,700

 

 

Management believes the risks associated with the agreements are minimal and, in the case of collateral decline, the Company has additional investment securities available to adequately pledge as guarantees for the repurchase agreements.  

 

Long-term borrowings:

There were $67.7 million in long-term Federal Home Loan Bank Advances at March 31, 2020 with a weighted average interest rate of 1.39%.  Long-term Federal Home Loan Bank Advances were $42.8 million at December 31, 2019.  In addition, the Company had two Trust Preferred Debentures with an outstanding balance of $9.2 million at March 31, 2020 and $2.1 million at December 31, 2019.  The final maturity of this Debt is December 31, 2036.

Long-term and short-term FHLB advances are secured by a blanket pledge of residential mortgage, commercial real estate, and multi-family loans totaling $575.1 million and $577.9 million at March 31, 2020 and December 31, 2019, respectively.  Based on this collateral, the Bank is eligible to borrow an additional $492.4 million at March 31, 2020.  Each advance is subject to a prepayment penalty if paid prior to its maturity date.

 

 

39

 

Item 2.

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

Cautionary Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are not statements of historical fact, but rather statements based on the Company’s current expectations, beliefs and assumptions regarding the future of Farmers’ business, future plans and strategies, projections, anticipated events and trends, its intended results and future performance, the economy and other future conditions. Forward-looking statements are preceded by terms such as “will,” “would,” “should,” “could,” “may,” “expect,” “estimate,” “believe,” “anticipate,” “intend,” “plan” “project,” or variations of these words, or similar expressions. Forward-looking statements are not a guarantee of future performance and actual future results could differ materially from those contained in forward-looking information. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control.  Numerous uncertainties, risks, and changes could cause or contribute to Farmers’ actual results, performance, and achievements to be materially different from those expressed or implied by the forward-looking statements.  

Factors that could cause or contribute to such differences include, without limitation, risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission (the “Commission”), including without limitation, the risk factors disclosed in Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as updated in Item 1A, “Risk Factors,” in this Quarterly Report on Form 10-Q.

Many of these factors are beyond the Company’s ability to control or predict, and readers are cautioned not to put undue reliance on those forward-looking statements. The following, which is not intended to be an all-encompassing list, summarizes several factors that could cause the Company’s actual results to differ materially from those anticipated or expected in any forward-looking statement:

 

 

•

general economic conditions in markets where the Company conducts business, which could materially impact credit quality trends;

 

•

effects of the COVID-19 pandemic on the local, national, and international economy, our organization and employees, and our customers and suppliers and their business operations, financial condition, and including our customers’ ability to repay loans;

 

•

disruptions in the mortgage and lending markets and significant or unexpected fluctuations in interest rates related to COVID-19 and governmental responses, including financial stimulus packages;

 

•

general business conditions in the banking industry;

 

•

the regulatory environment;

 

•

general fluctuations in interest rates;

 

•

demand for loans in the market areas where the Company conducts business;

 

•

rapidly changing technology and evolving banking industry standards;

 

•

competitive factors, including increased competition with regional and national financial institutions;

 

•

and new service and product offerings by competitors and price pressures.

 

Other factors not currently anticipated may also materially and adversely affect the Company’s results of operations, cash flows and financial position.  There can be no assurance that future results will meet expectations.  While the Company believes that the forward-looking statements in the presentation are reasonable, you should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made.  The Company does not undertake, and expressly disclaims, any obligation to update or alter any statements whether as a result of new information, future events or otherwise, expect as may be required by applicable law.

Overview

The Company’s results of operations for the quarter ended March 31, 2020 are discussed below.  However, the Company’s past results of operations may not reflect its future operating trends. In March 2020, the COVID-19 pandemic began to affect the U.S. economy and has created additional uncertainty for the Company’s business, particularly for the remainder of 2020.  Regulatory actions in response to the COVID-19 pandemic have varied across jurisdictions and have included closure of nonessential businesses, affecting customers of the Company, although the Company as a financial institution has been considered an essential business.  The duration and extent of these regulatory measures is unknown.

40

 

The Company’s net income for the three months ended March 31, 2020 was $8.6 million, or $0.30 per diluted share, which compares to $8.4 million, or $0.30 per diluted share, for the three months ended March 31, 2019.  Net income excluding acquisition costs (non-GAAP) for the quarter ended March 31, 2020 was $9.7 million or $0.34 per share, compared to $8.4 million or $0.30 per share for the same quarter in 2019.  Annualized return on average assets and annualized return on average equity were 1.32% and 11.53%, respectively, for the three month period ending March 31, 2020, compared to 1.45% and 12.71% for the same three month period in 2019.  Excluding acquisition costs (non-GAAP), annualized return on average assets and annualized return on equity (non-GAAP) would have been 1.48% and 12.95% respectively, for the quarter ended March 31, 2020.  Farmers’ annualized return on average tangible equity (non-GAAP) was 13.81% for the quarter ended March 31, 2020 compared to 14.99% for the same quarter in 2019.  Excluding acquisition costs (non-GAAP), annualized return on average tangible equity would have been 15.50% for the quarter ended March 31, 2020.  

 

In response to the rapidly evolving COVID-19 pandemic, the Company focused first on the well-being of its people, customers and communities. Preventative health measures were put in place including elimination of business related travel requirements, mandatory work from home for all employees able to do so, social distancing precautions for all employees in the office and customers visiting branches, and preventative cleaning at offices and branches. The Company also focused on business continuity measures, including forming a COVID-19 task force, monitoring potential business interruptions, making improvements to our remote working technology, and conducting regular discussions with our technology vendors.

 

Farmers is offering special financial assistance to support customers who are experiencing financial hardships related to the COVID-19 pandemic. Through March 31, 2020, the Company has processed approximately 168 consumer payment deferral requests for a total of $8.3 million, including approximately 41 related to residential mortgages totaling $5.5 million.   From a business customer perspective, the Company has processed approximately 170 payment deferral requests totaling $89.1 million.  Farmers is also a preferred SBA lender and has dedicated significant additional staff and other resources to help our customers complete and submit their applications and supporting documentation for loans offered under the new Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to obtain SBA approval and receive funding as quickly as possible. Through April 24, 2020, the Company has facilitated PPP assistance to 726 business customers totaling approximately $145.6 million.

 

On January 7, 2020, Farmers announced it completed the merger of Maple Leaf Financial (“Maple Leaf”), the holding company for Geauga Savings Bank, with branches located in Cuyahoga and Geauga Counties in Ohio.  The transaction increases Farmers’ market share in Cuyahoga and Geauga Counties and enables Farmers to continue building local scale throughout Northeast Ohio.

 

Total loans were $1.98 billion at March 31, 2020 compared to $1.81 billion at December 31, 2019, representing an annualized growth rate of 9.1%.  The increase in loans is a result of the acquisition of Maple Leaf along with the company’s focus on loan growth utilizing a talented lending and credit team, while adhering to a sound underwriting discipline.  The increase in loans has occurred in many of the major loan categories but mainly in the commercial, commercial real estate and residential real estate loan categories.  Loans comprise 78.6% of the Bank's first quarter average earning assets at March 31, 2020, down slightly compared to 79.3% for the same period in 2019.  The growth in loans has resulted in a 12.2% increase in tax equated loan interest income, including fees, in the first quarter of 2020 compared to the same quarter in 2019.

Even though non-performing assets to total assets increased from 0.33% at March 31, 2019, they remain at a low level, currently at 0.45%.  Early stage delinquencies, which are loans 30 - 89 days delinquent were $19.1 million, or 0.96% of total loans, at March 31, 2020.  Net charge-offs for the current quarter were $635 thousand, compared to $365 thousand in the same quarter in 2019 and net charge-offs as a percentage of average net loans outstanding is only 0.13% for the quarter ended March 31, 2020, compared to 0.08% in the same quarter in 2019.  The amount of loans made to vulnerable industries (Restaurants, Transportation, Arts/Entertainment, Hotels and Oil & Gas) is less than 4.1% of our total loan portfolio,

The net interest margin for the three months ended March 31, 2020 was 3.75%, a 6 basis point decrease from the quarter ended March 31, 2019.  In comparing the first quarter of 2020 to the same period in 2019, asset yields decreased 5 basis points, while the cost of interest-bearing liabilities decreased 1 basis point.  Most of the decrease in the asset yields was the result of lower rates earned on tax-exempt securities, declining from 3.93% to 3.90%.  Loan yields also dropped one basis point from 5.06% to 5.05%.  Although the cost of interest bearing liabilities decreased one basis point, this was offset by the cost of time deposits, which increased from 1.83% to 1.98%, however the 1.98% remains unchanged to the most recent quarter.  The net interest margin is impacted by the additional accretion as a result of the discounted loan portfolios acquired in recent mergers, which increased the net interest margin by 6 and 4 basis points for the quarters ended March 31, 2020 and 2019, respectively.

41

 

The Company made progress in its effort to increase noninterest income, which increased 18.3% to $7.7 million for the quarter ended March 31, 2020 compared to $6.5 million in the same quarter of 2019.  Gains on the sale of mortgage loans increased $695 thousand or 104%, insurance agency commissions grew $80 thousand or 10%, security gains increased $147 thousand or 1,470% and investment commissions increased $163 thousand or 63% in comparing the first quarter of 2020 to the same quarter in 2019.

The Company has remained committed to managing its level of noninterest expenses.  Total noninterest expenses for the first quarter of 2020 increased 16.3% to $18.6 million compared to $16.0 million in the same quarter in 2019, primarily as a result of an increase in   salaries and employee benefits of $875 thousand or 9.4%, an increase in merger related costs of $1.3 million and a $138 thousand or 158.6% increase in FDIC insurance expense.  Annualized noninterest expenses excluding acquisition costs (non-GAAP) measured as a percentage of quarterly average assets decreased from 2.77% in the first quarter of 2019 to 2.63% in the first quarter of 2020.

The efficiency ratio for the quarter ended March 31, 2020 increased to 59.7% compared to 57.8% for the same quarter in 2019.  Excluding acquisition costs (non-GAAP) of $1.3 million, the efficiency ratio improved to 55.4% in the first quarter of 2020.  The improvement in net interest income and noninterest income in the first quarter of 2020 was offset by a slightly higher level of noninterest expenses as explained in the preceding paragraphs.

The Company’s return on average tangible equity (Non-GAAP) was 13.8% for the three month period ended March 31, 2020 compared to 15.0% for the same period in 2019.

Return on average tangible equity is a non-U.S. GAAP financial measure and should be considered in addition to, not a substitute for or superior to, financial measures determined in accordance with U.S. GAAP.  With respect to the calculation of the tangible equity for the three month period ended March 31, 2020 and 2019, reconciliations are displayed in the table below.

Results of Operations The following is a comparison of selected financial ratios and other results at or for the three month period ended March 31, 2020 and 2019:

 

 

 

At or for the Three Months

Ended March 31,

 

(In Thousands, except Per Share Data)

 

2020

 

 

2019

 

Total assets

 

$

2,668,249

 

 

$

2,356,074

 

Net income

 

$

8,639

 

 

$

8,388

 

Diluted earnings per share

 

$

0.30

 

 

$

0.30

 

Return on average assets (annualized)

 

 

1.32

%

 

 

1.45

%

Return on average equity (annualized)

 

 

11.53

%

 

 

12.71

%

Efficiency ratio (tax equivalent basis) (1)

 

 

59.72

%

 

 

57.83

%

Equity to asset ratio

 

 

11.38

%

 

 

11.58

%

Tangible common equity ratio (2)

 

 

9.61

%

 

 

9.92

%

Dividends to net income

 

 

36.34

%

 

 

29.80

%

Net loans to assets

 

 

73.52

%

 

 

73.42

%

Loans to deposits

 

 

87.99

%

 

 

89.22

%

 

(1)

The ratio is calculated by dividing noninterest expenses by the sum of net interest income and noninterest income.  The Company strives for a lower efficiency ratio.  This efficiency ratio measure is not required by any regulatory agency but provides meaningful information to management and investors since a lower ratio indicates the Company is using their assets more effectively to generate profits.  

(2)

The tangible common equity ratio is calculated by dividing total common stockholders’ equity by total assets, after reducing both amounts by intangible assets.  The tangible common equity ratio is not required by U.S. GAAP or by applicable bank regulatory requirements, but is a metric used by management to evaluate the adequacy of the Company’s capital levels.  Since there is no authoritative requirement to calculate the tangible common equity ratio, the Company’s tangible common equity ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry.  Tangible common equity and tangible assets are non - U.S. GAAP financial measures and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with U.S. GAAP.  With respect to the calculation of the actual unaudited tangible common equity ratio as of March 31, 2020 and 2019, reconciliations of tangible common equity (non-GAAP) to U.S. GAAP total common stockholders’ equity and tangible assets (non-GAAP) to U.S. GAAP total assets are set forth below:

42

 

 

 

Reconciliation of Common Stockholders' Equity to Tangible Common Equity

 

 

 

At or for the

Three Months

Ended

 

 

At or for the

Three Months

Ended

 

 

At or for the

Three Months

Ended

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

 

March 31, 2019

 

Stockholders' equity

 

$

303,597

 

 

$

299,309

 

 

$

272,951

 

Less goodwill and other intangibles

 

 

52,198

 

 

 

42,645

 

 

 

43,625

 

Tangible common equity

 

 

251,399

 

 

 

256,664

 

 

 

229,326

 

Average stockholders' equity

 

 

301,408

 

 

 

300,355

 

 

 

267,736

 

Less average goodwill and other intangibles

 

 

51,103

 

 

 

42,859

 

 

 

43,840

 

Average tangible common equity

 

$

250,305

 

 

$

257,496

 

 

$

223,896

 

 

Reconciliation of Total Assets to Tangible Assets

 

 

 

At or for the

Three Months

Ended

 

 

At or for the

Three Months

Ended

 

 

At or for the

Three Months

Ended

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

 

March 31, 2019

 

Total assets

 

$

2,668,249

 

 

$

2,449,158

 

 

$

2,356,074

 

Less goodwill and other intangibles

 

 

52,198

 

 

 

42,645

 

 

 

43,625

 

Tangible assets

 

$

2,616,051

 

 

$

2,406,513

 

 

$

2,312,449

 

Average assets

 

 

2,641,597

 

 

 

2,424,574

 

 

 

2,338,792

 

Less average goodwill and other intangibles

 

 

51,103

 

 

 

42,859

 

 

 

43,840

 

Average tangible assets

 

$

2,590,494

 

 

$

2,381,715

 

 

$

2,294,952

 

 

 

Reconciliation of Net Income, Excluding Acquisition Related Costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At or for the

Three Months

Ended

 

 

At or for the

Three Months

Ended

 

 

At or for the

Three Months

Ended

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

 

March 31, 2019

 

Net income

 

$

8,639

 

 

$

9,675

 

 

$

8,388

 

Acquisistion related costs - tax equated

 

 

1,063

 

 

 

90

 

 

 

-

 

Net Income - adjusted

 

$

9,702

 

 

$

9,765

 

 

$

8,388

 

Diluted EPS excluding acquisition costs

 

$

0.34

 

 

$

0.35

 

 

$

0.30

 

 

 

Net Interest Income. The following schedule details the various components of net interest income for the periods indicated.  All asset yields are calculated on a tax-equivalent basis where applicable.  Security yields are based on amortized cost.

 

43

 

Average Balance Sheets and Related Yields and Rates

(Dollar Amounts in Thousands)

 

 

Three Months Ended

 

 

Three Months Ended

 

 

March 31, 2020

 

 

March 31, 2019

 

 

AVERAGE

 

 

 

 

 

 

 

 

 

 

AVERAGE

 

 

 

 

 

 

 

 

 

 

BALANCE

 

 

INTEREST

 

 

RATE (1)

 

 

BALANCE

 

 

INTEREST

 

 

RATE (1)

 

EARNING ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (3) (5) (6)

$

1,927,468

 

 

$

24,197

 

 

 

5.05

%

 

$

1,727,950

 

 

$

21,571

 

 

 

5.06

%

Taxable securities (4)

 

220,374

 

 

 

1,547

 

 

 

2.82

 

 

 

196,062

 

 

 

1,244

 

 

 

2.57

 

Tax-exempt securities (4) (6)

 

231,213

 

 

 

2,243

 

 

 

3.90

 

 

 

207,618

 

 

 

2,011

 

 

 

3.93

 

Equity securities (2)

 

16,304

 

 

 

140

 

 

 

3.45

 

 

 

11,932

 

 

 

175

 

 

 

5.95

 

Federal funds sold and other

 

57,900

 

 

 

149

 

 

 

1.04

 

 

 

34,789

 

 

 

196

 

 

 

2.28

 

TOTAL EARNING ASSETS

 

2,453,259

 

 

 

28,276

 

 

 

4.64

 

 

 

2,178,351

 

 

 

25,197

 

 

 

4.69

 

NONEARNING ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

38,720

 

 

 

 

 

 

 

 

 

 

 

33,380

 

 

 

 

 

 

 

 

 

Premises and equipment

 

24,951

 

 

 

 

 

 

 

 

 

 

 

22,419

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

(16,218

)

 

 

 

 

 

 

 

 

 

 

(13,727

)

 

 

 

 

 

 

 

 

Unrealized gains (losses) on securities

 

15,585

 

 

 

 

 

 

 

 

 

 

 

(4,437

)

 

 

 

 

 

 

 

 

Other assets (3)

 

125,300

 

 

 

 

 

 

 

 

 

 

 

122,806

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

$

2,641,597

 

 

 

 

 

 

 

 

 

 

$

2,338,792

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST-BEARING LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Time deposits

$

495,813

 

 

$

2,442

 

 

 

1.98

%

 

$

368,117

 

 

$

1,659

 

 

 

1.83

%

Brokered time deposits

 

105,493

 

 

 

483

 

 

 

1.83

 

 

 

46,861

 

 

 

266

 

 

 

2.27

 

Savings deposits

 

425,276

 

 

 

321

 

 

 

0.30

 

 

 

420,613

 

 

 

308

 

 

 

0.30

 

Demand deposits

 

690,705

 

 

 

1,393

 

 

 

0.81

 

 

 

589,595

 

 

 

1,202

 

 

 

0.83

 

Short term borrowings

 

62,476

 

 

 

320

 

 

 

2.06

 

 

 

197,787

 

 

 

1,231

 

 

 

2.52

 

Long term borrowings

 

100,230

 

 

 

456

 

 

 

1.83

 

 

 

5,907

 

 

 

48

 

 

 

3.30

 

TOTAL INTEREST-BEARING LIABILITIES

 

1,879,993

 

 

 

5,415

 

 

 

1.16

 

 

 

1,628,880

 

 

 

4,714

 

 

 

1.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

448,319

 

 

 

 

 

 

 

 

 

 

 

428,520

 

 

 

 

 

 

 

 

 

Other liabilities

 

11,877

 

 

 

 

 

 

 

 

 

 

 

13,656

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

301,408

 

 

 

 

 

 

 

 

 

 

 

267,736

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,641,597

 

 

 

 

 

 

 

 

 

 

$

2,338,792

 

 

 

 

 

 

 

 

 

Net interest income and interest rate spread

 

 

 

 

$

22,861

 

 

 

3.48

%

 

 

 

 

 

$

20,483

 

 

 

3.52

%

Net interest margin

 

 

 

 

 

 

 

 

 

3.75

%

 

 

 

 

 

 

 

 

 

 

3.81

%

 

(1)

Rates are calculated on an annualized basis.

(2)

Equity securities include restricted stock, which is included in other assets on the consolidated balance sheets.

(3)

Non-accrual loans and overdraft deposits are included in other assets.

(4)

Includes unamortized discounts and premiums.  Average balance and yield are computed using the average historical amortized cost.

(5)

Interest on loans includes fee income of $1.0 million and $877 thousand for 2020 and 2019, respectively, and is reduced by amortization of $664 thousand and $702 thousand for 2020 and 2019, respectively.

(6)

For 2020, adjustments of $98 thousand and $461 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities.  For 2019, adjustments of $102 thousand and $416 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. These adjustments were based on a marginal federal income tax rate of 21%, less disallowances.

 

44

 

 

Net Interest Income.  Net interest income for the three month period ended March 31, 2020 was $22.3 million compared to $20.0 million for the same period in 2019.  On a tax equivalent basis net interest income was $22.9 million for the first quarter of 2020 compared to $20.5 million for the same period in 2019.  The net interest margin to average earning assets on a fully taxable equivalent basis decreased 6 basis points to 3.75% for the three months ended March 31, 2020, compared to 3.81% for the same three month period in the prior year.  In comparing the quarters ended March 31, 2020 and 2019, yields on earning assets decreased 5 basis points, while the cost of interest bearing liabilities decreased 1 basis point.  Excluding the amortization of premium on time deposits and the accretion of the loan portfolio discount, the net interest margin would have been 6 basis points lower for the quarter ended March 31, 2020.

Noninterest Income.  Noninterest income increased 18.3% to $7.7 million for the quarter ended March 31, 2020 compared to $6.5 million in the same quarter of 2019.  Gains on the sale of mortgage loans increased $695 thousand or 104%, security gains increased $147 thousand or 1,470%, insurance agency commissions grew $80 thousand or 10% and investment commissions increased $163 thousand or 63% in comparing the first quarter of 2020 to the same quarter in 2019.

Noninterest Expense.  Total noninterest expenses for the first quarter of 2020 increased 16.3% to $18.6 million compared to $16.0 million in the same quarter in 2019, primarily as a result of an increase in salaries and employee benefits of $875 thousand or 9.4%, an increase in merger related costs of $1.3 million and a $138 thousand or 158.6% increase in FDIC insurance expense.  Annualized noninterest expenses measured as a percentage of quarterly average assets increased from 2.77% in the first quarter of 2019 to 2.81% in the first quarter of 2020.

The Company’s tax equivalent efficiency ratio for the three month period ended March 31, 2020 was 59.7% compared to 57.8% for the same period in 2019.  Excluding acquisition costs (non-GAAP) of $1.3 million, the efficiency ratio improved to 55.40% in the first quarter of 2020.  The improvement in net interest income and noninterest income in the first quarter of 2020 was offset by a slightly higher level of noninterest expenses as explained in the preceding paragraphs.     

Income Taxes. Income tax expense totaled $1.7 million for the quarter ended March 31, 2020 and $1.6 million for the quarter ended March 31, 2019.  The effective tax rate for the three month period ended March 31, 2020 was 16.4% compared to the effective tax rate of 15.8% for the same period in 2019.  

Other Comprehensive Income.  For the quarter ended March 31, 2020, the change in net unrealized gains or losses on securities, net of reclassifications, resulted in an unrealized loss, net of tax, of $9.9 million, compared to an unrealized gain of $4.6 million for the same period in 2019.  The negative change in the fair value of securities, as a result of the market’s reaction to the economy and COVID-19, for the three month period ended March 31, 2020 was the reason for the other comprehensive income decrease.

Financial Condition

Cash and Cash Equivalents.  Cash and cash equivalents increased $12.3 million during the first three months of 2020 from $70.8 million to $83.1 million.  The increase in the cash balance is part of normal fluctuations on the Company’s $2.668 billion balance sheet.  The Company expects cash and cash equivalents to be reduced to December 31, 2019 levels over the next few months as cash is used for daily operations.

Securities.  Securities available-for-sale increased by $15.8 million since December 31, 2019.  The Company intends to maintain the securities portfolio’s current level, as a percentage of total assets, during the remaining months of 2020.

Loans. Gross loans increased $165.0 million since December 31, 2019.  The increase in loans has occurred across many of the major loan categories but especially the commercial, commercial real estate and residential real estate loan portfolios.  The Bank’s acquisition of Maple Leaf along with utilizing a talented lending and credit team while adhering to sound underwriting discipline helped to increase the loan portfolio.  The increase in average loan balances along with the loans acquired in the Maple Leaf merger helped the current quarter’s loan income improve to $24.2 million or 12.2% compared to $21.6 million or 16.5% in the same quarter ended March 31, 2019.  

On a tax equated basis loan income improved by $2.6 million compared to the same quarter in 2019.  The average tax equivalent interest rate on the loan portfolio was 5.05% for the three month period ended March 31, 2020 compared to 5.06% for the same period in 2019.

Allowance for Loan Losses.  The following table indicates key asset quality ratios that management evaluates on an ongoing basis.  The recorded investment balances were used in the calculations.

45

 

Asset Quality History

(In Thousands of Dollars)

 

 

3/31/2020

 

 

12/31/2019

 

 

9/30/2019

 

 

6/30/2019

 

 

3/31/2019

 

Nonperforming loans

$

11,845

 

 

$

6,345

 

 

$

6,749

 

 

$

7,252

 

 

$

7,578

 

Nonperforming loans as a % of total loans

 

0.60

%

 

 

0.35

%

 

 

0.38

%

 

 

0.41

%

 

 

0.43

%

Loans delinquent 30-89 days

$

19,067

 

 

$

11,893

 

 

$

9,076

 

 

$

10,203

 

 

$

9,082

 

Loans delinquent 30-89 days as a % of total loans

 

0.97

%

 

 

0.66

%

 

 

0.51

%

 

 

0.57

%

 

 

0.52

%

Allowance for loan losses

$

14,952

 

 

$

14,487

 

 

$

14,261

 

 

$

14,222

 

 

$

13,777

 

Allowance for loan losses as a % of loans

 

0.76

%

 

 

0.80

%

 

 

0.80

%

 

 

0.80

%

 

 

0.79

%

Allowance for loan losses as a % of non-acquired loans

 

0.92

%

 

 

0.89

%

 

 

0.90

%

 

 

0.91

%

 

 

0.92

%

Allowance for loan losses as a % of nonperforming loans

 

126.23

%

 

 

228.32

%

 

 

211.31

%

 

 

196.11

%

 

 

181.80

%

Annualized net charge-offs to average net loans outstanding

 

0.13

%

 

 

0.09

%

 

 

0.12

%

 

 

0.07

%

 

 

0.08

%

Non-performing assets

$

11,976

 

 

$

6,364

 

 

$

6,823

 

 

$

7,326

 

 

$

7,786

 

Non-performing assets as a % of total assets

 

0.45

%

 

 

0.26

%

 

 

0.28

%

 

 

0.30

%

 

 

0.33

%

Net charge-offs for the quarter

$

635

 

 

$

374

 

 

$

511

 

 

$

305

 

 

$

365

 

 

 

In accordance with the accounting relief provisions of the CARES, the Bank has postponed the adoption of the current expected credit losses (“CECL”) accounting standards, primarily due to the impact that the COVID-19 pandemic is having on the economy and the lack of reasonable and supportable economic forecasts.  Had the Company adopted CECL as of January 1, 2020, the increase to the allowance for loan losses estimated to have ranged from 15% to 20% of the amount recorded at December 31, 2019, which did not consider potential COVID-19 pandemic related impacts.  

 

For the three months ended March 31, 2020 and 2019, management recorded a $1.1 million and $550 thousand provision for loan losses. The larger provision for the current quarter was necessary for the allowance as a result of the impact of increased negative economic factors that exist in the current business environment. .  In determining the estimate of the allowance for loan losses, management computes the historical loss percentage based upon the loss history of the past 12 quarters.  The Company believes that using a loss history of the previous 12 quarters helps mitigate volatility in the timing of charge-offs and better reflects probable incurred losses. The allowance for loan losses as a percentage of the total loan portfolio was 0.76% at March 31, 2020 and 0.79% at March 31, 2019.  The loan portfolios acquired at fair market value from Maple Leaf and other previous acquisitions were recorded at fair market value and without an associated allowance for loan loss.  When the acquired loans are excluded, the ratio of allowance for loan losses to total non-acquired loans is 0.92% at March 31, 2020 and 2019.  Early stage delinquencies, which are loans 30 - 89 days delinquent, as a percentage of total loans increased from 0.52% at March 31, 2019 to 0.97% at March 31, 2020 and non-performing loans as a percentage of total loans increased from 0.43% at March 31, 2019 to 0.60% at March 31, 2020.  The allowance for loan losses to non-performing loans decreased from 181.80% at March 31, 2019 to 126.23% at March 31, 2020.  The amount of loans made to vulnerable industries (Restaurants, Transportation, Arts/Entertainment, Hotels and Oil & Gas) is less than 4.1% of our total loan portfolio.  It is also important to note that the average FICO score of our consumer loan portfolio stands at a healthy 759.

Based on the evaluation of the adequacy of the allowance for loan losses, management believes that the allowance for loan losses at March 31, 2020 is adequate and reflects probable incurred losses in the portfolio.  The provision for loan losses is based on management’s judgment after taking into consideration all factors connected with the collectability of the existing loan portfolio.  Management evaluates the loan portfolio in light of economic conditions, changes in the nature and volume of the loan portfolio, industry standards and other relevant factors.  Specific factors considered by management in determining the amounts charged to operating expenses include previous credit loss experience, the status of past due interest and principal payments, the quality of financial information supplied by loan customers and the general condition of the industries in the community to which loans have been made.

Deposits.  Total deposits increased $237.3 million from December 31, 2019 to March 31, 2020, for a balance of $2.25 billion.  The increase in deposits is the result of the addition of $183.3 million in deposits from the Maple Leaf acquisition and the Company’s efforts to increase deposits without causing a significant negative impact to the net interest margin.  Interest bearing accounts and brokered time deposits increased a combined $221.5 million, or 14.1%, during the first three months of 2020. The increase in interest bearing accounts is mostly due to an approximate increase of $65.2 million in public funds deposits and a $32.9 million increase in brokered time deposits.  Money market index accounts increased as customers moved funds out of certificates of deposit during the period.  

46

 

At December 31, 2019 the balance in money market index accounts was $177.4 million and at March 31, 2020 it was $198.6 million, an increase of 12.0%.  The Company’s strategy is to grow deposit balances. At March 31, 2020, core deposits, which include, savings and money market accounts, time deposits less than $250 thousand, demand deposits and interest bearing demand deposits represented approximately 89.1% of total deposits.

Borrowings.  Total borrowing balances decreased 26.1% from $122.2 million at December 31, 2019 to $96.9 million at March 31, 2020.  During the three month period ended March 31, 2020 the Company was able to repay a net amount of $60.0 million in short-term FHLB advances as a result of the use of additional brokered time deposits.  The use of brokered time deposits also had a positive impact on the overall cost of funds due to lower interest rates.  While short term borrowings decreased by $57.1 million since December 31, 2019, long term borrowings increased $31.7 million during that same period ended March 31, 2020.  The Bank was able to lock in long term advances from the Federal Home Loan Bank at lower interest rates.

Capital Resources.  Total stockholders’ equity increased $4.3 million, or 1.4%, during the three month period ended March 31, 2020.  The increase in equity is due primarily to an increase in common stock due to the acquisition of Maple Leaf.  Shareholders received $0.11 per share in cash dividends in the first quarter of 2020.  The increased first quarter dividend to $0.11 is a 10.0% increase over the $0.10 paid in the last quarter of 2019.  Book value per share decreased slightly from $10.82 per share at December 31, 2019 to $10.79 per share at March 31, 2020.  The Company’s tangible book value, which is a non-GAAP measure, per share also decreased, from $9.28 per share at December 31, 2019 to $8.94 per share at March 31, 2020.  During the three month period ended March 31, 2020, 942,967 shares were repurchased into treasury stock. During March 2020, the repurchase program was suspended.

The capital management function is a regular process that consists of providing capital for both the current financial position and the anticipated future growth of the Company.  New minimum capital requirements associated with the Basel Committee on capital and liquidity regulation (Basel III) were phased in from January 1, 2016 through January 1, 2019.  The Company must hold a capital conservation buffer of 2.5% above adequately capitalized risk-based capital ratios during 2020.  At March 31, 2020 the Company is required to maintain 4.5% common equity tier 1 to risk weighted assets excluding the conservation buffer to be adequately capitalized.  The Company’s common equity tier 1 to risk weighted assets was 12.26%, total risk-based capital ratio stood at 13.4%, and the Tier I risk-based capital ratio and Tier I leverage ratio were at 12.7% and 10.2%, respectively, at March 31, 2020.  Management believes that the Company and the Bank meet all capital adequacy requirements to which they are subject, as of March 31, 2020.

Federal bank regulatory agencies finalized a rule that simplifies capital requirements for community banks by allowing them to adopt a simple leverage ratio to measure capital adequacy.  The community bank leverage ratio framework removes requirements for calculating and reporting risk-based capital ratios for a qualifying community bank that opts into the framework. 

The community bank leverage ratio framework will first be available for banking organizations to use in their March 31, 2020, Call Report.  The Company has not elected to use the new framework as of March 31, 2020.

Critical Accounting Policies

The Company follows financial accounting and reporting policies that are in accordance with U.S. GAAP. These policies are presented in Note 1 of the consolidated audited financial statements in the Company’s Annual Report to Shareholders included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.  Critical accounting policies are those policies that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  The Company has identified three accounting policies that are critical accounting policies and an understanding of these policies is necessary to understand the Company’s financial statements.  These policies relate to determining the adequacy of the allowance for loan losses, if there is any impairment of goodwill or other intangible, and estimating the fair value of assets acquired and liabilities assumed in connection with the merger activity.  Additional information regarding these policies is included in the notes to the aforementioned 2019 consolidated financial statements, Note 1 (Summary of Significant Accounting Policies), Note 2 (Business Combination), Note 4 (Loans), and the sections captioned “Loan Portfolio.”

U.S. GAAP establishes standards for the amortization of acquired intangible assets and the impairment assessment of goodwill.  Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired.  The Company’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of the Company’s subsidiaries to provide quality, cost-effective services in a competitive marketplace.  The goodwill value is supported by revenue that is in part driven by the volume of business transacted.  A decrease in earnings resulting from a decline in the customer base or the inability to deliver cost-effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods.  U.S. GAAP requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired.  The fair value of the goodwill is estimated by reviewing the past and projected operating results for the subsidiaries and comparable industry information.

47

 

Liquidity

The Company maintains, in the opinion of management, liquidity sufficient to satisfy depositors’ requirements and meet the credit needs of customers.  The Company depends on its ability to maintain its market share of deposits as well as acquiring new funds.  The Company’s ability to attract deposits and borrow funds depends in large measure on its profitability, capitalization and overall financial condition.  The Company’s objective in liquidity management is to maintain the ability to meet loan commitments, purchase securities or to repay deposits and other liabilities in accordance with their terms without an adverse impact on current or future earnings.  Principal sources of liquidity for the Company include assets considered relatively liquid, such as federal funds sold, cash and due from banks, as well as cash flows from maturities and repayments of loans, and securities.

Along with its liquid assets, the Bank has additional sources of liquidity available which help to ensure that adequate funds are available as needed.  These other sources include, but are not limited to, loan repayments, the ability to obtain deposits through the adjustment of interest rates and the purchasing of federal funds and borrowings on approved lines of credit at major domestic banks.  At March 31, 2020, this line of credit totaled $35 million of which the Bank had not borrowed against.  In addition, the Company has two revolving lines of credit with correspondent banks totaling $5.4 million. The outstanding balance at March 31, 2020 was $350 thousand.  Management feels that its liquidity position is adequate and continues to monitor the position on a monthly basis.  As of March 31, 2020, the Bank had outstanding balances with the Federal Home Loan Bank of $82.7 million with additional borrowing capacity of approximately $492.4 million with the FHLB, as well as access to the Federal Reserve Discount Window, which provides an additional source of funds.  The Bank views its membership in the FHLB as a solid source of liquidity.  

The primary investing activities of the Company are originating loans and purchasing securities.  During the first three months of 2020, net cash provided by investing activities amounted to $3.4 million, compared to $3.9 million used in the same period in 2019.  Purchases of securities available for sale used $25.2 million at March 31, 2020 compared to $10.2 million used in the same period in 2019.   Loan originations and payments provided $15.6 million during the first three months of 2020 compared to $8.4 million used during the same period in 2019.  Cash provided by the proceeds from the sales of securities amounted to $15.1 million for the three months ended March 31, 2020, compared to $9.6 million in the same three month period of 2019.  There was also $8.0 million used in the purchase of Maple Leaf during the three months ended March 31, 2020.

The primary financing activities of the Company are obtaining deposits, repurchase agreements and other borrowings.  Net cash provided by financing activities amounted to $3.3 million for the period ended March 31, 2020, compared to $10.5 million provided in financing activities for the same period in 2019.  There were large swings in three line items during the three month period ended March 31, 2020 compared to the same period last year; changes in short term borrowings used $32.1 million in the three month period ended March 31, 2020, compared to $141.3 million used during the three month period ended March 31, 2019. There was also $54.1 million provided by deposits during the three month period ended March 31, 2020 compared to $154.6 million provided during the three month period ended March 31, 2019, and there was $14.2 million used in the repurchase of common shares in the current quarter compared to $202 thousand used in the same period of the prior year.

Off-Balance Sheet Arrangements

In the normal course of business, to meet the financial needs of our customers, we are a party to financial instruments with off-balance sheet risk.  These financial instruments generally include commitments to originate mortgage, commercial and consumer loans, and involve to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the Consolidated Balance Sheets.  The Bank’s maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments.  Because some commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The same credit policies are used in making commitments as are used for on-balance sheet instruments.  Collateral is required in instances where deemed necessary.  Undisbursed balances of loans closed include funds not disbursed but committed for construction projects.  Unused lines of credit include funds not disbursed, but committed for, home equity, commercial and consumer lines of credit.  Financial standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party.  Those guarantees are primarily used to support public and private borrowing arrangements.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  Total unused commitments were $397.4 million at March 31, 2020 and $372.4 at December 31, 2019.  Additionally, the Company has committed up to $8 million in subscriptions in Small Business Investment Company investment funds.  At March 31, 2020 the Company had invested $6.7 million in these funds.

Recent Market and Regulatory Developments

Various and significant legislation affecting financial institutions and the financial industry is from time to time introduced in the U.S. Congress and state legislatures, as well as by regulatory agencies.  Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system.

48

 

It is likely that the Trump Administration and the U.S. Congress will pursue and potentially implement legislative or regulatory changes affecting financial institutions and the financial industry.  In 2018, President Trump signed a bill reforming the Dodd-Frank Act and the Trump Administration has indicated its intent to loosen additional regulations.  Such legislation could change the operating environment for Farmers and its subsidiaries in unpredictable ways, decrease the costs of doing business, expand permissible activities or affect the competitive balance among financial institutions.  With the enactment and the continuing implementation of the Dodd-Frank Act and regulations thereunder, the nature and extent of future legislative and regulatory changes affecting financial institutions remains very unpredictable.  Farmers cannot predict the scope and timing of any such future legislation and, if enacted, the effect that it could have on its business, financial condition or results of operations.

Also, such statutes, regulations and policies are continually under review by Congress, state legislatures and federal and state regulatory agencies and are subject to change at any time, particularly in the current economic and regulatory environment.  Any such change in statutes, regulations or regulatory policies applicable to the Company could have a material effect on the business of the Company.

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk  

The Company’s ability to maximize net income is dependent, in part, on management’s ability to plan and control net interest income through management of the pricing and mix of assets and liabilities.  Because a large portion of assets and liabilities of the Company are monetary in nature, changes in interest rates and monetary or fiscal policy affect its financial condition and can have significant impact on the net income of the Company.  Additionally, the Company’s balance sheet is slightly asset sensitive and in the uncertain interest rate environment that exists today, the Company’s net interest margin could be under additional pressure should interest rates continue to remain low in the near future.

The Company considers the primary market exposure to be interest rate risk.  Simulation analysis is used to monitor the Company’s exposure to changes in interest rates, and the effect of the change to net interest income.  The following table shows the effect on net interest income and the net present value of equity in the event of a sudden and sustained 300 basis point increase or 100 basis point decrease in market interest rates:

 

Changes In Interest Rate

(basis points)

 

March 31, 2020

Result

 

 

December 31, 2019

Result

 

 

ALCO

Guidelines

 

Net Interest Income Change

 

 

 

 

 

 

 

 

 

 

 

 

+300

 

 

5.2

%

 

 

5.9

%

 

 

-15

%

+200

 

 

3.4

%

 

 

4.0

%

 

 

-10

%

+100

 

 

1.7

%

 

 

2.1

%

 

 

-5

%

-100

 

 

-3.2

%

 

 

-4.4

%

 

 

-5

%

Net Present Value Of Equity Change

 

 

 

 

 

 

 

 

 

 

 

 

+300

 

 

18.1

%

 

 

21.6

%

 

 

-20

%

+200

 

 

15.5

%

 

 

19.0

%

 

 

-15

%

+100

 

 

10.4

%

 

 

12.6

%

 

 

-10

%

-100

 

 

-10.7

%

 

 

-19.7

%

 

 

-10

%

 

It should be noted that the change in the net present value of equity exceeded policy when the simulation model assumed a sudden decrease in rates of 100 basis points (1%).  This is primarily due to the positive impact on the fair value of assets not being as great as the negative impact on the fair value of certain liabilities.  Specifically, because core deposits typically bear relatively low interest rates, their fair value would be negatively impacted as the rates could not be adjusted by the full extent of the sudden decrease in rates.  Management will continue to monitor the policy exception and may consider changes to the asset/liability position in the future.  The remaining results of the simulations indicate that interest rate change results fall within internal limits established by the Company at March 31, 2020.  A report on interest rate risk is presented to the Board of Directors and the Asset/Liability Committee on a quarterly basis.  The Company has no market risk sensitive instruments held for trading purposes, nor does it hold derivative financial instruments, and does not plan to purchase these instruments in the near future.

 

Item 4.

Controls and Procedures

Based on their evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective.  There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a–15(f) under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

49

 

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business.  Legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, although the Company establishes accruals where losses are deemed probable and reasonably estimable.  The Company’s assessment of the current exposure with respect to adverse claims in legal matters could change in the event of the discovery of additional facts in such matters or upon determinations by judges, juries, administrative agencies or other finders of fact that are inconsistent with the Company’s evaluation of claims. Additional disclosures relating to charges accrued during 2019 in connection with certain legal proceedings are included in the Contingencies Note.  It is possible that the ultimate resolution of other matters, if unfavorable, may be material to the results of operations in a particular future period as the time and amount of any resolution of such actions and its relationship to the future results of operations are not known.

Item 1A.

Risk Factors

For a discussion of risk factors related to the Company, refer to Part 1, Item 1A, “Risk Factors,” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The following risk factor should be read in conjunction with those risk factors.

The outbreak of the recent COVID-19 could adversely affect our business, financial condition and results of operations.

Our business is dependent upon the willingness and ability of our customers to conduct banking and other financial transactions. The spread of a highly infectious or contagious disease, such as COVlD-19, has caused severe disruptions in the U.S. economy, which could in turn disrupt the businesses, activities, and operations of our customers, as well as our business and operations. Moreover, the COVID-19 outbreak has caused significant disruption in the financial markets both globally and in the United States. The spread of COVID-19, including the time such outbreak takes to wane and the time it takes our markets to return to normal, may result in a significant decrease in business and/or cause our customers to be unable to meet existing payment or other obligations to us.  Although we maintain contingency plans, the spread could also negatively impact the business and operations of third-party service providers who perform critical services for us. The spread of COVID-19, or another highly infectious or contagious disease, or the failure to contain such spread, could have a material adverse effect to our business, financial condition and results of operations.

Adverse changes in the ability or willingness of our customers to meet their repayment obligations to the Company could adversely impact our liquidity, financial condition and results of operations.

Our business consists mainly of making loans to salaried people or other wage earners who generally depend on their earnings to meet their repayment obligations, and our ability to collect on loans depends on the willingness and repayment ability of our customers. Adverse changes in the ability or willingness of a significant portion of our customers to repay their obligations to the Company, whether due to changes in general economic, political or social conditions, the cost of consumer goods, interest rates, natural disasters, acts of war or terrorism, prolonged public health crisis or a pandemic, such as COVID-19, or other causes, or events affecting our customers such as unemployment, major medical expenses, bankruptcy, divorce or death, could have a material effect on our liquidity, financial condition and results of operations.

 

We maintain an allowance for loan losses in our financial statements at a level considered adequate by Management to absorb probable loan losses inherent in the loan portfolio as of the balance sheet date, based on estimates and assumptions at that date. However, the amount of actual future loan losses we may incur is susceptible to changes in economic, operating and other conditions within our various local markets, which may be beyond our control, and such losses may exceed current estimates. Although Management believes that the Company’s allowance for loan losses is adequate to absorb losses on any existing loans that may become uncollectible, we cannot estimate loan losses with certainty, and we cannot provide any assurances that our allowance for loan losses will prove sufficient to cover actual loan losses in the future. Loan losses in excess of our reserves may adversely affect our financial condition and results of operations.

 

In any event, any reduced liquidity could negatively impact our ability to be able to fund loans, or to pay the principal and interest on any of our outstanding debt securities at any time, including when due.

 

50

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of equity securities by the issuer.

On July 30, 2019, the Company announced that its Board of Directors authorized the purchase of up to 1,500,000 shares of its common stock in the open market or in privately negotiated transactions, from time to time and subject to market and other conditions.  This 2019 Repurchase Program supersedes the Company’s prior share repurchase program initially approved in 2012 authorizing the purchase of up to 920,000 shares of common stock.  The 2019 Repurchase Program may be modified, suspended or terminated by the Company at any time.

The following table summarizes the treasury stock activity under the program during the three month period ended March 31, 2020.

 

Period

 

Total Number of

Shares Purchased

 

 

Average Price

Paid per Share

 

 

Total Number of

Shares Purchased

as Part of Publicly

Announced Program

 

 

Maximum Number

of Shares that May

Yet be Purchased

Under the Program

 

Beginning balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,500,000

 

January 1-31

 

 

264,018

 

 

$

15.91

 

 

 

264,018

 

 

 

1,235,982

 

February 1-29

 

 

327,121

 

 

 

15.77

 

 

 

327,121

 

 

 

908,861

 

March 1-31

 

 

351,828

 

 

 

13.73

 

 

 

351,828

 

 

 

557,033

 

Ending balance

 

 

942,967

 

 

$

15.05

 

 

 

942,967

 

 

 

557,033

 

 

Item 3.Defaults Upon Senior Securities

Not applicable.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

Not applicable.

51

 

Item 6.

Exhibits

The following exhibits are filed or incorporated by reference as part of this report:

 

2.1

Agreement and Plan of Merger by and among Farmers National Banc Corp., Maple Leaf Financial, Inc., and FMNB Merger Subsidiary III, LLC, dated as of August 29, 2019 (incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 5, 2019).

 

 

3.1

Articles of Incorporation of Farmers National Banc Corp., as amended (incorporated by reference from Exhibit 4.1 to the Company’s Registration Statement on Form S-3 filed with the Commission on October 3, 2001 (File No. 333-70806)).

 

 

3.2

Amendment to Articles of Incorporation of Farmers National Banc Corp., as amended (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 20, 2018).

 

 

3.3

Amended Code of Regulations of Farmers National Banc Corp. (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 17, 2020).

 

 

10.1*

Farmers National Banc Corp. 2020 Form of Notice of Grant of Long-term Incentive Plan Awards under 2017 Equity Incentive Plan (filed herewith).

 

 

10.2*

Farmers National Banc Corp. 2020 Form of Performance-Based Equity Award Agreement under 2017 Equity Incentive Plan (filed herewith).

 

 

10.3*

Farmers National Banc Corp. 2020 Form of Service-Based Restricted Stock Award Agreement under 2017 Equity Incentive Plan (filed herewith).

 

 

10.4*

Farmers National Banc Corp. 2020 Form of Performance-Based Cash Award Agreement 2017 Equity Incentive Plan (filed herewith).

 

 

31.1

Rule 13a-14(a)/15d-14(a) Certification of Kevin J. Helmick, President and Chief Executive Officer of the Company (filed herewith).

 

 

31.2

Rule 13a-14(a)/15d-14(a) Certification of Carl D. Culp, Executive Vice President, Chief Financial Officer and Treasurer of the Company (filed herewith).

 

 

32.1

Certification pursuant to 18 U.S.C. Section 1350 of Kevin J. Helmick, President and Chief Executive Officer of the Company (filed herewith).

 

 

32.2

Certification pursuant to 18 U.S.C. Section 1350 of Carl D. Culp, Executive Vice President, Chief Financial Officer and Treasurer of the Company (filed herewith).

 

 

101

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in iXBRL (Inline Extensible Business Reporting Language), filed herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows; and (vi) Notes to Unaudited Consolidated Financial Statements.

 

 

104

The cover page from the Company’s Quarterly report on Form 10-Q for the quarter ended March 31, 2020, has been formatted in Inline XBRL.

 

 

*

Constitutes a management contract or compensatory plan or arrangement.

 

52

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FARMERS NATIONAL BANC CORP.

Dated: May 7, 2020

 

/s/ Kevin J. Helmick

Kevin J. Helmick

President and Chief Executive Officer

Dated: May 7, 2020  

 

/s/ Carl D. Culp

Carl D. Culp

Senior Executive Vice President and Treasurer

 

53

 fmnb-ex101_62.htm

Exhibit 10.1

 

Notice of Grant of

Restricted Stock Award,

Performance-based Equity Award, and

Performance-based Cash Award

Name

Address

City, State Zip

Subject to the terms and conditions of the 2017 Equity Incentive Plan and the Farmers National Banc Corp. Long-Term Incentive Plan (the “Plans”) and the accompanying Restricted Stock Award Agreement, Performance-based Equity Award Agreement, and Performance-based Cash Award Agreement (the “Award Agreements”), you have been granted Shares of Restricted Stock, Performance-based Shares, and a Performance-based Cash Award (collectively, the “Awards”) as follows:

Grant Date:

February 18, 2020

Number of Shares:

Your Awards consist of the following:

     Shares of Restricted Stock 1

     Performance-based Shares 2

$ __Target Performance-based Cash 3

Vesting Schedule:

Your Awards of Shares of Restricted Stock, Performance-based Shares, and Performance-based Cash will be subject to vesting on February 18, 2022 (Normal Vesting Date).

Settlement:

Your Awards will be settled in Shares or Cash, depending on the Award, as described in the respective Award Agreements.

This Notice of Grant and the accompanying Award Agreements describe your Awards and the terms and conditions of your Awards.  To ensure you fully understand these terms and conditions, you should:

 

•

Read the Plan carefully to ensure you understand how the Plans work; and

 

•

Read this Notice of Grant and corresponding Award Agreement carefully to ensure you understand the nature of your Award and what you must do to earn it.  

You may contact Mark Nicastro by telephone (330-533-5025) or email (mnicastro@farmersbankgroup.com) if you have any questions about your Award or Award Agreement.

 

 

 

1 

Number of Shares of Restricted Stock were determined by multiplying $____ (the dollar amount used to determine your total target Awards) by .25, and dividing the result by $____ (the average reported closing price of a Share during the 30-day period ending on the last trading day prior to the Grant Date). The resulting number of Shares were rounded to the nearest whole Share.

2 

Number of Performance-based Shares were determined by multiplying $____ by .5, dividing the result by $___ (to determine the target number of Performance-based Shares), and multiplying the result by 2 (to determine the maximum number of Performance-based Shares). The resulting number of Performance-based Shares were rounded to the nearest whole Share.

3 

Your target Performance-based Cash Award was determined by multiplying $____ by .25.

 

fmnb-ex102_61.htm

Exhibit 10.2

FARMERS NATIONAL BANC CORP.

PERFORMANCE-BASED EQUITY AWARD AGREEMENT

(2020)

 

Farmers National Banc Corp. (the “Company”) hereby grants the undersigned Participant an Award pursuant to the Farmers National Banc Corp. 2017 Equity Incentive Plan (the “Equity LTI Plan”) as evidenced by the Notice of Grant accompanying this Award Agreement (the “Grant Notice”), and as further described in this Award Agreement (this “Award Agreement”).

1.

Nature of Award.  Effective as of the date specified in the Grant Notice (the “Grant Date”), the Company hereby grants to the individual identified in the Grant Notice (the “Participant”) the award as set forth in the Grant Notice (the “Award”).  The Award is subject to the terms and conditions described in the Equity LTI Plan, this Award Agreement and the Grant Notice.

2.

Performance Period:  The three-year period beginning January 1, 2020 and ending on December 31, 2022 (the “Performance Period”).

3.

Target Equity Award as Percentage of Base Compensation: ____% x .50 (the “Target Performance-Based Equity Award”).

4.

Earning an Award:  The Participant shall be eligible to receive a benefit in Company common shares equal in value based on the Grant Date between 0% and 200% of the Target Performance-Based Equity Award, based on achievement during the Performance Period of the Performance Objective set forth below. Performance between two stated levels will be interpolated when determining the percentage of the Target Performance-Based Equity Award earned.

The amount of the Target Performance-Based Equity Award that may be earned in Company common shares will be based on the sum of the Company’s return on equity for each fiscal year during the Performance Period divided by three (“Average ROE”), compared to the Average ROE of the Company’s Peer Group during the Performance Period (“Relative Average ROE”).  The total, maximum number of ROE Award Shares described in the Grant Notice eligible to be earned was determined by (i) dividing the dollar amount of Participant’s Target Performance-Based Equity Award by the average reported closing price of a share of Company common stock during the 30-day period ending on the day prior to the Grant Date of this Award, and (ii) multiplying the result by 200% (x 2.0), rounded to the nearest whole share.  Therefore, between 0% and 100% of the ROE Award Shares are subject to vesting on the “Normal Vesting Date” stated in the Grant Notice, in accordance with the following schedule and percentages:

Performance Objective:

Relative Average ROE during Performance Period

Percentage of Average

ROE Award Shares Earned

Less than Peer Group 25th percentile

0%

Equal to Peer Group 25th percentile (threshold)

10%

Equal to Peer Group 50th percentile (target)

50%

Equal to or higher than Peer Group 75th percentile (max)

100%

 

 

 

 

 

For these purposes: (i) Relative Average ROE shall be determined by the Committee in its sole discretion; and (ii) the Committee shall select the institutions constituting, and make such periodic adjustments as it determines appropriate to, the “Peer Group” in its sole discretion.

 

5.

Payment of Award:  With respect to the Performance Period, the Committee shall certify the level of achievement of the Performance Objective set forth in Section 4 and determine the amount payable with respect to your Award based on such level of achievement. Payment of the Award shall be made to the Participant on the Normal Vesting Date in the form of a number of Company common shares determined by multiplying the applicable percentage for the level of performance certified by the Compensation Committee times the Participant’s total number of ROE Award Shares. Any ROE Award Shares that do not vest as of the Normal Vesting Date will be forfeited.

6.

Limitations on Payment of Award:  The Committee may, in its sole discretion, reduce the amount payable with respect to the Award.

7.

Forfeiture of Awards:  If the Company is required to prepare an accounting restatement due to material non-compliance of the Company, as a result of misconduct by a Participant, with any financial reporting requirement under any applicable laws, the Participant shall reimburse the Company for all amounts received under the Equity LTI Plan within 30 days after receipt of notice of the same from the Company.

8.

Effect of Termination:  Participant may forfeit this Award if employment terminates prior to the Normal Vesting Date, although it will depend on the reason for termination as provided below:

 

(a)

Death, Disability or Retirement. If you terminate due to death, Disability, or Retirement, you will vest in a prorated portion of your ROE Award Shares determined by multiplying the number of your ROE Award Shares by a fraction, the numerator of which is the number of whole months you were employed from the Grant Date to the date of death, Disability or Retirement, and the denominator of which is 36.  Payment of the Award shall be made to the Participant in the form of a number of Company common shares determined by multiplying such pro rata portion of your ROE Award Shares by the applicable percentage for the level of performance certified by the Compensation Committee, with performance based on the Company’s relative Average ROE for the portion of the Performance Period that ended on the last day of the calendar quarter immediately preceding the date of termination. Such settlement of the Award will occur within ninety (90) days of the date of termination. Any ROE Award Shares that do not vest or are not so settled will be forfeited.

 

 

(b)

Termination by the Company without Cause or by Participant for Good Reason. If the Company terminates your employment without “Cause,” or you terminate your employment with the Company for “Good Reason,” each as defined in Exhibit A attached hereto and incorporated herein, you will vest in and receive a prorated portion of your ROE Award Shares determined in the same manner as described in Section 8(a) hereinabove based on your termination date.

 

 

(c)

Termination for any Other Reason. If your employment with the Company terminates under any other circumstance (including if such termination is by the Company for Cause regardless of whether such termination could also constitute a Retirement), your ROE Award Shares will be forfeited on your termination date.

 

-2-

 

9.

Effect of Change in Control: Notwithstanding the foregoing, if a Change in Control occurs after the Grant Date, your ROE Award Shares will be subject to the following additional terms and conditions:

 

(a)

If such a Change in Control occurs prior to the Normal Vesting Date and in connection therewith or within two years thereafter your employment is terminated either by the Company or a successor in interest for any reason other than for “Cause” or by you for “Good Reason,” you shall be entitled to receive a number of Company common shares determined as though the Performance Objective had been satisfied at the “target” level of achievement for the Performance Period. Therefore, 50% of your unvested ROE Award Shares which remain unvested as of the termination date will fully vest.

10.

Restrictive Covenants.

 

 

(a)

Non-Solicitation.  The Participant acknowledges and agrees that as a condition to and in consideration of this Award Agreement, during the term of the Participant’s employment and for a period of twenty-four (24) months thereafter (the “Non-Solicitation Restrictive Period”), the Participant will not, directly or indirectly:

 

(i)

Solicit, engage or otherwise interfere with any customer or client who is at the time of termination or was within the preceding six (6) months of termination a customer or client of Company, its subsidiaries or any other related entity for the purposes of directly or indirectly furnishing any financial or banking services that a national banking association, bank holding company, state bank, savings and loan association or other regulated financial institution is permitted by law to conduct or furnish on the date the Participant’s employment is terminated.  

 

(ii)

Employ, solicit for employment, engage or otherwise interfere with any person who is at the time of termination or was within the preceding six (6) months of termination employed by the Company, its subsidiaries or any related entity, or otherwise directly or indirectly induce or take any action which would encourage or influence any such person to leave that person’s employment or terminate, reduce or modify their business or relationship with the Company, or any of its subsidiaries or related entities.

The restrictive covenants and Restrictive Periods provided for herein will not be construed to limit the application of any other restrictive covenant or restriction period set forth in any other agreement entered into between the Participant and the Company.

 

(b)

Nondisclosure and Non-appropriation of Information.  The Participant recognizes and acknowledges that while employed by the Company, the Participant will have access to, learn, be provided with and, in some cases, prepare and create, certain Confidential Information (as defined in section (c) below), proprietary information or Trade Secrets (as defined below) of the Company, including, but not limited to, processes, financial information, pricing information, operating techniques, marketing processes, training techniques, customer, vendor, and referral source lists, price and cost information, files and forms, (collectively, the “Trade Secrets”), all of which are of substantial value to the Company and the businesses conducted by it.  The Participant expressly covenants and agrees that the Participant will:

-3-

 

 

(i)

Hold in a fiduciary capacity and not reveal, communicate, use or cause to be used for the Participant’s own benefit or divulge during the period of employment by the Company and for an indefinite period thereafter, any Confidential Information, proprietary information or Trade Secrets now or hereafter owned by the Company;

 

(ii)

Not sell, exchange, give away, or otherwise dispose of Confidential Information, proprietary information or Trade Secrets now or hereafter owned by the Company, whether the same will or may have been originated or discovered by the Company, the Participant or otherwise;

 

(iii)

Not reveal, divulge or make known to any person, firm, company or corporation any Confidential Information, proprietary information or Trade Secrets of the Company, unless such communication is required pursuant to a compulsory proceeding in which the Participant’s failure to provide such Confidential Information, proprietary information or Trade Secrets would subject the Participant to criminal or civil sanctions and then only to the extent that Executive provides prior notice to Company prior to disclosure.

 

(iv)

Return to the Company before termination of employment with the Company, any and all written information, material or equipment that constitutes, contains or relates in any way to Confidential Information, proprietary information, Trade Secrets and any other documents, equipment, and material of any kind relating in any way to the business of the Company, which are in the Participant’s possession, custody and control and which are or may be property of the Company, whether confidential or not, including any and all copies thereof which may have been made by or for the Participant and that the Participant will maintain no copies thereof after termination of the Participant’s employment.

 

(c)

Definitions.

 

(i)

“Confidential Information” means all information disclosed to or known by the Participant as a consequence of or through is employment with the Company which either has not been made generally available to the public and is useful or of value to the current or anticipated business of the Company; or has been identified to the Participant as confidential, either orally or in writing.  Confidential Information includes without limitation computer software and programs; marketing, manufacturing, organizational research and development; business plans; sales forecasts; identities, competence, abilities and compensation of other employees of the Company; pricing cost and other financial information; current and prospective customer and supplier lists and information about customers, suppliers or their employees; information concerning planned or pending acquisitions or divestitures; and information concerning purchases of equipment or property.  Confidential Information does not include information which is in or hereafter enters the public domain through no fault of the Participant, or is disclosed by a third party having the legal right to use and disclose the information.

-4-

 

 

(d)

Other Terms and Conditions.

 

(i)

The Participant acknowledges that the Participant is entering into this Award Agreement voluntarily and has given careful consideration to the restraints imposed by this Award Agreement.  Irrespective of the manner of any employment termination, the restraints imposed by this Award Agreement will be operative during their full time periods and throughout the restrictive areas set forth in this Award Agreement.  The Participant further acknowledges that if the Participant’s employment with the Company terminates for any reason the Participant can earn a livelihood without violating the foregoing restrictions and that the Participant’s ability to earn a livelihood without violating these restrictions is a material employment condition.  The Participant acknowledges and recognizes that if the Participant’s employment terminates for any reason, this Section 10 of this Award Agreement will survive any such termination and any expiration of this Award Agreement.  Further, the Participant agrees and consents that this Award Agreement is assignable by the Company.

 

(ii)

The Participant agrees that if a court of law finds that the provisions of this Award Agreement are too harsh so that they are unenforceable, then such court of law may enforce those restrictions and limitations which are acceptable and deemed enforceable by the court.

 

(iii)

In the event the Participant breaches the terms of this Award Agreement, it is agreed that all time periods contained in this Award Agreement will be tolled until the Participant ceases to breach this Award Agreement.

 

(e)

Injunction.  The parties acknowledge and agree, due to the subject matter of this Award Agreement, that money damages will be an inadequate remedy for a breach by Participant of any of the obligations hereunder.  Consequently, if the Participant breaches or threatens to breach any of the obligations under this Award Agreement, the Participant agrees that the Company shall have the right, in addition to any other rights or remedies available to it at law or in equity, to obtain equitable relief, including, without limitation, injunctive relief and specific performance, in the event of any breach or threatened breach. Further, the parties hereto agree and declare that it may be impossible to measure in monetary terms the damages that may accrue to the Company by reason of Participant’s violation of this Award Agreement.  Therefore, in the event that the Company, or any successor in interest thereto, shall institute an action or proceeding to enforce the provisions of this Award Agreement, each party or other person against whom such action or proceeding is brought shall and hereby does, in advance, waive the claim or defense that there is adequate remedy at law. In the event such injunctive relief is warranted and obtained by the Company, Participant agrees to pay all costs of said action, including reasonable attorney fees.

11.

Miscellaneous:

 

 

(a)

Non-Transferability.  An Award may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, except by will or the laws of descent and distribution.  

 

 

(b)

Beneficiary. Unless otherwise specifically designated by the Participant in writing, a Participant’s beneficiary under the Equity LTI Plan shall be the Participant’s spouse or, if no spouse survives the Participant, the Participant’s estate.

 

-5-

 

 

(c)

No Right to Continued Service or to Awards.  The granting of an Award shall impose no obligation on the Company or any Affiliate to continue the employment of a Participant or interfere with or limit the right of the Company or any Affiliate to Terminate the employment of the Participant at any time, with or without Cause, which right is expressly reserved.  

 

 

(d)

Tax Withholding.  The Company or an Affiliate, as applicable, shall have the power and the right to deduct, withhold or collect any amount required by law or regulation to be withheld with respect to any taxable event arising with respect to an Award granted under the Equity LTI Plan.

 

 

(e)

Requirements of Law.  The grant of Awards shall be subject to all applicable laws, rules and regulations (including applicable federal and state securities laws) and to all required approvals of any governmental agencies or national securities exchange, market or other quotation system.  

 

 

(f)

Governing Law.  The Equity LTI Plan and all Award Agreements shall be governed by and construed in accordance with the laws of (other than laws governing conflicts of laws) the State of Ohio.

 

 

(g)

Award Subject to Equity LTI Plan. The Award is subject to the terms and conditions described in this Award Agreement and the Equity LTI Plan, which is incorporated by reference into and made a part of this Award Agreement.  In the event of a conflict between the terms of the Equity LTI Plan and the terms of this Award Agreement, the terms of the Equity LTI Plan will govern.  The Committee has the sole responsibility of interpreting the Equity LTI Plan and this Award Agreement, and its determination of the meaning of any provision in the Equity LTI Plan or this Award Agreement will be binding on the Participant. Capitalized terms that are not defined in this Award Agreement have the same meanings as in the Equity LTI Plan.

 

(h)

Section 409A Payment Delay. If a Participant is determined to be a “specified employee” (within the meaning of Section 409A of the Code and as determined under the Company’s policy for determining specified employees), the Participant shall not be entitled to payment or to distribution of any portion of an Award that is subject to Section 409A of the Code (and for which no exception applies) and is payable or distributable on account of the Participant’s “separation from service” (within the meaning of Section 409A of the Code) until the expiration of six months from the date of such separation from service (or, if earlier, the Participant’s death).  Such Award, or portion thereof, shall be paid or distributed on the first business day of the seventh month following such separation from service.

 

 

(i)

Signature in Counterparts.  This Award Agreement may be signed in counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument.

[signature page attached]

-6-

 

 

PARTICIPANT

 

 

 

 

 

 

 

 

Date:

 

 

 

 

 

 

 

 

 

Print Name:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FARMERS NATIONAL BANC CORP.

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Date:

 

 

 

 

 

 

 

 

 

Its:

 

 

 

 

 

 

 

 

 

-7-

 

EXHIBIT A

 

DEFINITIONS OF “CAUSE” AND “GOOD REASON”

 

“Cause” means that, in the reasonable judgment of the Compensation Committee, any of the following events have occurred: (1) the willful or negligent failure by the Participant to substantially perform his or her duties with the Company and, after written notification by the Company to the Participant, the continued failure of the Participant to substantially perform such duties; (2) the willful or negligent engagement by the Participant in conduct which is demonstrably and materially injurious to the Company, financially or otherwise; (3) action or inaction by the Participant that constitutes a breach of fiduciary duty with respect to the Company or any of its subsidiaries; (4) the violation of any material written policy, rule or regulation of the Company; or (5) the Participant’s material breach of any agreement in respect of confidentiality with the Company, whether or not entered into after the Grant Date.

 

“Good Reason” means the occurrence of any of the following: (1) a reduction in Participant’s annual base salary rate, unless such reduction generally applies to other Participants regardless of the reason(s) therefor; (2) a substantial diminution in Participant’s duties, authorities or responsibilities; or (3) the relocation of Participant’s principal place of employment with the Company such that (a) the distance from the former principal place of employment to the relocated principal place of employment is over 50 miles and (b) the distance from his or her primary residence to the relocated principal place of employment is over 50 miles; provided, however, that Good Reason shall exist only to the extent that Participant provides the Company with written notice of his or her intention to terminate employment with the Company for Good Reason that specifies the condition(s) constituting Good Reason and the Company fails to correct such condition(s) within ten (10) business days from receipt of such written notice. Notwithstanding the foregoing, Good Reason shall cease to exist for an event on the one hundred and twentieth (120th) day following the later of its occurrence or Participant’s knowledge thereof, unless Participant has given the Company written notice of such condition and of Participant’s intent to terminate for Good Reason prior to such date. With respect to the Chief Executive Officer only, Good Reason shall also include a change in responsibilities such that the Chief Executive Officer reports to someone other than directly to the Company’s Board of Directors.

 

-8-

1/15/2018 29006425 V.4

fmnb-ex103_59.htm

Exhibit 10.3

 

FARMERS NATIONAL BANC CORP.

RESTRICTED STOCK AWARD AGREEMENT

(2020)

 

Farmers National Banc Corp. (the “Company”) hereby grants the undersigned Participant an Award pursuant to the Farmers National Banc Corp. 2017 Equity Incentive Plan (the “Plan”) as evidenced by the Notice of Grant accompanying this Award Agreement (the “Grant Notice”), and as further described in this Award Agreement (this “Award Agreement”).

1.

Nature of Award.  Effective as of the date specified in the Grant Notice (the “Grant Date”), the Company hereby grants to the individual identified in the Grant Notice (the “Participant”) the award as set forth in the Grant Notice (the “Award”).  The Award is subject to the terms and conditions described in the Plan, this Award Agreement and the Grant Notice.

 

2.

Number of Shares.  The number of Shares of Restricted Stock in your Award is set forth in the Grant Notice.  For purposes of this Award Agreement, each whole Share awarded represents the right to receive one Share.

 

3.

Vesting.  The Shares of Restricted Stock in your Award will be settled or will be forfeited depending on whether the terms and conditions described in the Grant Notice, this Award Agreement, and the Plan are satisfied. Accordingly, your Shares normally will vest on the “Normal Vesting Date” in accordance with the schedule identified in the Grant Notice. If the scheduled Normal Vesting Date is a non-business day, the next following business day will be considered the Normal Vesting Date.

4.

Forfeiture of Awards:  If the Company is required to prepare an accounting restatement due to material non-compliance of the Company, as a result of misconduct by a Participant, with any financial reporting requirement under any applicable laws, the Participant shall reimburse the Company for all amounts received under the Plan within 30 days after receipt of notice of the same from the Company.

5.

Effect of Termination:  Participant may forfeit this Award if employment terminates prior to the Normal Vesting Date, although it will depend on the reason for termination as provided below:

 

a.

Termination Due to Death or Disability.  If you terminate due to death or Disability, your Shares of Restricted Stock will vest fully on the date of your death or Disability.

 

b.

Termination Due to Retirement.  If you terminate due to Retirement, and provided that the Committee agrees to treat your termination as a Retirement, you will vest in a prorated portion of your Shares of Restricted Stock determined by multiplying the number of your Award Shares by a fraction, the numerator of which is the number of whole months you were employed from the Grant Date to the date of Retirement, and the denominator of which is 36.

 

c.

Termination by the Company without Cause or by Participant for Good Reason. If the Company terminates your employment without “Cause,” or you terminate your employment with the Company for “Good Reason,” each as defined in Exhibit A attached hereto and incorporated herein, you will vest in and receive a prorated portion of your Award Shares determined in the same manner as described in Section 5(b) hereinabove based on your termination date.

 

d.

Termination for any Other Reason.  If your employment with the Company terminates under any other circumstance (including if such termination is by the Company for Cause regardless of whether such termination could also constitute a Retirement), your Shares of Restricted Stock will be forfeited on your termination date.

 

 

6.

Effect of Change in Control: Notwithstanding the foregoing, if a Change in Control occurs after the Grant Date, your Shares of Restricted Stock will be subject to the following additional terms and conditions:

 

a.

If such a Change in Control occurs prior to the Normal Vesting Date and in connection therewith or within two years thereafter your employment is terminated either by the Company or a successor in interest for any reason other than for “Cause” or by you for “Good Reason,” your Shares of Restricted Stock which remain unvested as of the termination date will fully vest.

7.

Restrictive Covenants.

 

 

a.

Non-Solicitation.  The Participant acknowledges and agrees that as a condition to and in consideration of this Award Agreement, during the term of the Participant’s employment and for a period of twenty-four (24) months thereafter (the “Non-Solicitation Restrictive Period”), the Participant will not, directly or indirectly:

 

(i)

Solicit, engage or otherwise interfere with any customer or client who is at the time of termination or was within the preceding six (6) months of termination a customer or client of Company, its subsidiaries or any other related entity for the purposes of directly or indirectly furnishing any financial or banking services that a national banking association, bank holding company, state bank, savings and loan association or other regulated financial institution is permitted by law to conduct or furnish on the date the Participant’s employment is terminated.  

 

(ii)

Employ, solicit for employment, engage or otherwise interfere with any person who is at the time of termination or was within the preceding six (6) months of termination employed by the Company, its subsidiaries or any related entity, or otherwise directly or indirectly induce or take any action which would encourage or influence any such person to leave that person’s employment or terminate, reduce or modify their business or relationship with the Company, or any of its subsidiaries or related entities.

The restrictive covenants and Restrictive Periods provided for herein will not be construed to limit the application of any other restrictive covenant or restriction period set forth in any other agreement entered into between the Participant and the Company.

 

b.

Nondisclosure and Non-appropriation of Information.  The Participant recognizes and acknowledges that while employed by the Company, the Participant will have access to, learn, be provided with and, in some cases, prepare and create, certain Confidential Information (as defined in section (c) below), proprietary information or Trade Secrets (as defined below) of the Company, including, but not limited to, processes, financial information, pricing information, operating techniques, marketing processes, training techniques, customer, vendor, and referral source lists, price and cost information, files and forms, (collectively, the “Trade Secrets”), all of which are of substantial value to the Company and the businesses conducted by it.  The Participant expressly covenants and agrees that the Participant will:

 

(i)

Hold in a fiduciary capacity and not reveal, communicate, use or cause to be used for the Participant’s own benefit or divulge during the period of employment by the Company and for an indefinite period thereafter, any Confidential Information, proprietary information or Trade Secrets now or hereafter owned by the Company;

-2-

 

 

(ii)

Not sell, exchange, give away, or otherwise dispose of Confidential Information, proprietary information or Trade Secrets now or hereafter owned by the Company, whether the same will or may have been originated or discovered by the Company, the Participant or otherwise;

 

(iii)

Not reveal, divulge or make known to any person, firm, company or corporation any Confidential Information, proprietary information or Trade Secrets of the Company, unless such communication is required pursuant to a compulsory proceeding in which the Participant’s failure to provide such Confidential Information, proprietary information or Trade Secrets would subject the Participant to criminal or civil sanctions and then only to the extent that Executive provides prior notice to Company prior to disclosure.

 

(iv)

Return to the Company before termination of employment with the Company, any and all written information, material or equipment that constitutes, contains or relates in any way to Confidential Information, proprietary information, Trade Secrets and any other documents, equipment, and material of any kind relating in any way to the business of the Company, which are in the Participant’s possession, custody and control and which are or may be property of the Company, whether confidential or not, including any and all copies thereof which may have been made by or for the Participant and that the Participant will maintain no copies thereof after termination of the Participant’s employment.

 

c.

Definitions.

 

(i)

“Confidential Information” means all information disclosed to or known by the Participant as a consequence of or through is employment with the Company which either has not been made generally available to the public and is useful or of value to the current or anticipated business of the Company; or has been identified to the Participant as confidential, either orally or in writing.  Confidential Information includes without limitation computer software and programs; marketing, manufacturing, organizational research and development; business plans; sales forecasts; identities, competence, abilities and compensation of other employees of the Company; pricing cost and other financial information; current and prospective customer and supplier lists and information about customers, suppliers or their employees; information concerning planned or pending acquisitions or divestitures; and information concerning purchases of equipment or property.  Confidential Information does not include information which is in or hereafter enters the public domain through no fault of the Participant, or is disclosed by a third party having the legal right to use and disclose the information.

 

d.

Other Terms and Conditions.

 

(i)

The Participant acknowledges that the Participant is entering into this Award Agreement voluntarily and has given careful consideration to the restraints imposed by this Award Agreement.  Irrespective of the manner of any employment termination, the restraints imposed by this Award Agreement will be operative during their full time periods and throughout the restrictive areas set forth in this Award Agreement.  The Participant further acknowledges that if the Participant’s employment with the Company terminates for any reason the Participant can earn a livelihood without violating the foregoing restrictions and that the Participant’s ability to earn a livelihood without violating these restrictions is a material employment condition.  The Participant acknowledges and recognizes that if the Participant’s employment terminates for any reason, this Section 7 of this Award Agreement will survive any such termination and any expiration of this Award Agreement.  Further, the Participant agrees and consents that this Award Agreement is assignable by the Company.

-3-

 

 

(ii)

The Participant agrees that if a court of law finds that the provisions of this Award Agreement are too harsh so that they are unenforceable, then such court of law may enforce those restrictions and limitations which are acceptable and deemed enforceable by the court.

 

(iii)

In the event the Participant breaches the terms of this Award Agreement, it is agreed that all time periods contained in this Award Agreement will be tolled until the Participant ceases to breach this Award Agreement.

 

e.

Injunction.  The parties acknowledge and agree, due to the subject matter of this Award Agreement, that money damages will be an inadequate remedy for a breach by Participant of any of the obligations hereunder.  Consequently, if the Participant breaches or threatens to breach any of the obligations under this Award Agreement, the Participant agrees that the Company shall have the right, in addition to any other rights or remedies available to it at law or in equity, to obtain equitable relief, including, without limitation, injunctive relief and specific performance, in the event of any breach or threatened breach. Further, the parties hereto agree and declare that it may be impossible to measure in monetary terms the damages that may accrue to the Company by reason of Participant’s violation of this Award Agreement.  Therefore, in the event that the Company, or any successor in interest thereto, shall institute an action or proceeding to enforce the provisions of this Award Agreement, each party or other person against whom such action or proceeding is brought shall and hereby does, in advance, waive the claim or defense that there is adequate remedy at law. In the event such injunctive relief is warranted and obtained by the Company, Participant agrees to pay all costs of said action, including reasonable attorney fees.

8.

Miscellaneous:  

 

a.

Non-Transferability.  An Award may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, except by will or the laws of descent and distribution.  

 

b.

Beneficiary. Unless otherwise specifically designated by the Participant in writing, a Participant’s beneficiary under the Plan shall be the Participant’s spouse or, if no spouse survives the Participant, the Participant’s estate.

 

c.

No Right to Continued Service or to Awards.  The granting of an Award shall impose no obligation on the Company or any Affiliate to continue the employment of a Participant or interfere with or limit the right of the Company or any Affiliate to Terminate the employment of the Participant at any time, with or without Cause, which right is expressly reserved.  

 

d.

Tax Withholding.  The Company or an Affiliate, as applicable, shall have the power and the right to deduct, withhold or collect any amount required by law or regulation to be withheld with respect to any taxable event arising with respect to an Award granted under the Plan.

 

e.

Requirements of Law.  The grant of Awards shall be subject to all applicable laws, rules and regulations (including applicable federal and state securities laws) and to all required approvals of any governmental agencies or national securities exchange, market or other quotation system.  

 

f.

Governing Law.  The Plan and all Award Agreements shall be governed by and construed in accordance with the laws of (other than laws governing conflicts of laws) the State of Ohio.

-4-

 

 

g.

Award Subject to Plan. The Award is subject to the terms and conditions described in this Award Agreement and the Plan, which is incorporated by reference into and made a part of this Award Agreement.  In the event of a conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan will govern.  The Committee has the sole responsibility of interpreting the Plan and this Award Agreement, and its determination of the meaning of any provision in the Plan or this Award Agreement will be binding on the Participant. Capitalized terms that are not defined in this Award Agreement have the same meanings as in the Plan.

 

h.

Section 409A Payment Delay. If a Participant is determined to be a “specified employee” (within the meaning of Section 409A of the Code and as determined under the Company’s policy for determining specified employees), the Participant shall not be entitled to payment or to distribution of any portion of an Award that is subject to Section 409A of the Code (and for which no exception applies) and is payable or distributable on account of the Participant’s “separation from service” (within the meaning of Section 409A of the Code) until the expiration of six months from the date of such separation from service (or, if earlier, the Participant’s death).  Such Award, or portion thereof, shall be paid or distributed on the first business day of the seventh month following such separation from service.

 

i.

Signature in Counterparts.  This Award Agreement may be signed in counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument.

 

[signature page attached]


-5-

 

 

PARTICIPANT

 

 

FARMERS NATIONAL BANC CORP.

 

 

 

 

 

 

 

 

 

By:

 

 

Signature

 

 

 

 

 

 

 

Its:

 

 

Print

 

 

 

 

 

 

 

 

 

 

Date:

 

 

Date:

 

 

 


-6-

 

EXHIBIT A

 

DEFINITIONS OF “CAUSE” AND “GOOD REASON”

 

“Cause” means that, in the reasonable judgment of the Compensation Committee, any of the following events have occurred: (1) the willful or negligent failure by the Participant to substantially perform his or her duties with the Company and, after written notification by the Company to the Participant, the continued failure of the Participant to substantially perform such duties; (2) the willful or negligent engagement by the Participant in conduct which is demonstrably and materially injurious to the Company, financially or otherwise; (3) action or inaction by the Participant that constitutes a breach of fiduciary duty with respect to the Company or any of its subsidiaries; (4) the violation of any material written policy, rule or regulation of the Company; or (5) the Participant’s material breach of any agreement in respect of confidentiality with the Company, whether or not entered into after the Grant Date.

 

“Good Reason” means the occurrence of any of the following: (1) a reduction in Participant’s annual base salary rate, unless such reduction generally applies to other Participants regardless of the reason(s) therefor; (2) a substantial diminution in Participant’s duties, authorities or responsibilities; or (3) the relocation of Participant’s principal place of employment with the Company such that (a) the distance from the former principal place of employment to the relocated principal place of employment is over 50 miles and (b) the distance from his or her primary residence to the relocated principal place of employment is over 50 miles; provided, however, that Good Reason shall exist only to the extent that Participant provides the Company with written notice of his or her intention to terminate employment with the Company for Good Reason that specifies the condition(s) constituting Good Reason and the Company fails to correct such condition(s) within ten (10) business days from receipt of such written notice. Notwithstanding the foregoing, Good Reason shall cease to exist for an event on the one hundred and twentieth (120th) day following the later of its occurrence or Participant’s knowledge thereof, unless Participant has given the Company written notice of such condition and of Participant’s intent to terminate for Good Reason prior to such date. With respect to the Chief Executive Officer only, Good Reason shall also include a change in responsibilities such that the Chief Executive Officer reports to someone other than directly to the Company’s Board of Directors.

1/15/2018 29006765 V.4

 

-7-

fmnb-ex104_60.htm

Exhibit 10.4

 

 

FARMERS NATIONAL BANC CORP.

PERFORMANCE-BASED CASH AWARD AGREEMENT

(2020)

 

Farmers National Banc Corp. (the “Company”) hereby grants the undersigned Participant an Award pursuant to the Farmers National Banc Corp. Long-Term Incentive Plan (the “Cash LTI Plan”), as evidenced by the Notice of Grant accompanying this Award Agreement (the “Grant Notice”), and as further described in this Award Agreement (this “Award Agreement”).

1.

Nature of Award.  Effective as of the date specified in the Grant Notice (the “Grant Date”), the Company hereby grants to the individual identified in the Grant Notice (the “Participant”) the award as set forth in the Grant Notice (the “Award”).  The Award is subject to the terms and conditions described in the Cash LTI Plan, this Award Agreement and the Grant Notice.

 

2.

Performance Period:  The three-year period beginning on the January 1, 2020 and ending on December 31, 2022 (the “Performance Period”).

 

3.

Target Cash Award as Percentage of Base Compensation: ____% x .25 (the “Target Performance-Based Cash Award”).

 

4.

Earning an Award:  The Participant shall be eligible to receive a payment equal to between 0% and 200% of the Target Performance-Based Cash Award, based on achievement during the Performance Period of the Performance Objective set forth below. Performance between two stated levels will be interpolated when determining the percentage of the Target Performance-Based Cash Award earned.

The percentage of the Target Performance-Based Cash Award that is earned will be based on the Company’s Total Shareholder Return (“TSR”) during the Performance Period compared to the Total Shareholder Return of the Company’s Peer Group during the Performance Period (“Relative TSR”), expressed as a percentile. Between 0% and 200% of the Target Performance-Based Cash Award is subject to vesting on the “Normal Vesting Date” stated in the Grant Notice, in accordance with the following schedule and percentages:

 

Performance Objective:

Relative TSR during Performance Period

Percentage of

Target Cash Award Earned

Less than Peer Group 25th percentile

0%

Equal to Peer Group 25th percentile (threshold)

20%

Equal to Peer Group 50th percentile (target)

100%

Equal to or higher than Peer Group 75th percentile (max)

200%

 

For these purposes: (i) Relative TSR shall be determined by the Committee in its sole discretion; and (ii) the Committee shall select the institutions constituting, and make such periodic adjustments as it determines appropriate to, the “Peer Group” in its sole discretion.

 

 

 

 

5.

Payment of Award:  With respect to the Performance Period, the Committee shall certify the level of achievement of the Performance Objective set forth in Section 4 and determine the amount payable with respect to your Award based on such level of achievement. Payment of the Award shall be made to the Participant in cash in a single lump sum on the Normal Vesting Date determined by multiplying the applicable percentage for the level of performance certified by the Compensation Committee times the Participant’s Target Performance-Based Cash Award.

 

6.

Limitations on Payment of Award:  The Committee may, in its sole discretion, reduce the amount payable with respect to the Award.

 

7.

Forfeiture of Awards:  If the Company is required to prepare an accounting restatement due to material non-compliance of the Company, as a result of misconduct by a Participant, with any financial reporting requirement under any applicable laws, the Participant shall reimburse the Company for all amounts received under the Cash LTI Plan within 30 days after receipt of notice of the same from the Company.

 

8.

Effect of Termination:  Participant may forfeit this Award if employment terminates prior to the Normal Vesting Date, although it will depend on the reason for termination as provided below:

 

(a)

Death, Disability or Retirement. If you terminate due to death, Disability, or Retirement, the amount of your Award (if any) shall be multiplied by a fraction, the numerator of which is the number of whole months you were employed from the Grant Date to the date of death, Disability or Retirement, and the denominator of which is 36.  Payment of the Award shall be made to the Participant in cash in a single lump sum determined by multiplying such pro rata portion of your Target Performance-Based Cash Award by the applicable percentage for the level of performance certified by the Compensation Committee, with performance based on the Company’s relative TSR for the portion of the Performance Period that ended on the last day of the calendar quarter immediately preceding the date of termination. Such payment of the Award will occur within ninety (90) days of the date of termination.

 

 

(b)

Termination by the Company without Cause or by Participant for Good Reason. If the Company terminates your employment without “Cause,” or you terminate your employment with the Company for “Good Reason,” each as defined in Exhibit A attached hereto and incorporated herein, you will be paid a prorated portion of your Target Performance-Based Cash Award determined in the same manner as described in Section 8(a) hereinabove based on your termination date.

 

 

(c)

Termination for any Other Reason. If your employment with the Company terminates under any other circumstance (including if such termination is by the Company for Cause regardless of whether such termination could also constitute a Retirement), you shall forfeit any rights with respect to the Award on your termination date.

 

-2-

 

9.

Effect of Change in Control: Notwithstanding the foregoing, if a Change in Control occurs after the Grant Date, your Award will be subject to the following additional terms and conditions:

 

(a)

If such a Change in Control occurs prior to the Normal Vesting Date and in connection therewith or within two years thereafter your employment is terminated either by the Company or a successor in interest for any reason other than for “Cause” or by you for “Good Reason,” you shall be entitled to receive a payment equal to the amount payable with respect to your Award as though the Performance Objective had been satisfied at the “target” level of achievement for the Performance Period.  Therefore, you shall be entitled to a payment in the amount of 100% of your Target Performance-Based Cash Award. Payment will be made in a single lump-sum cash payment within 60 days following the termination date.

10.

Restrictive Covenants.

 

 

(a)

Non-Solicitation.  The Participant acknowledges and agrees that as a condition to and in consideration of this Award Agreement, during the term of the Participant’s employment and for a period of twenty-four (24) months thereafter (the “Non-Solicitation Restrictive Period”), the Participant will not, directly or indirectly:

 

(i)

Solicit, engage or otherwise interfere with any customer or client who is at the time of termination or was within the preceding six (6) months of termination a customer or client of Company, its subsidiaries or any other related entity for the purposes of directly or indirectly furnishing any financial or banking services that a national banking association, bank holding company, state bank, savings and loan association or other regulated financial institution is permitted by law to conduct or furnish on the date the Participant’s employment is terminated.  

 

(ii)

Employ, solicit for employment, engage or otherwise interfere with any person who is at the time of termination or was within the preceding six (6) months of termination employed by the Company, its subsidiaries or any related entity, or otherwise directly or indirectly induce or take any action which would encourage or influence any such person to leave that person’s employment or terminate, reduce or modify their business or relationship with the Company, or any of its subsidiaries or related entities.

The restrictive covenants and Restrictive Periods provided for herein will not be construed to limit the application of any other restrictive covenant or restriction period set forth in any other agreement entered into between the Participant and the Company.

-3-

 

 

(b)

Nondisclosure and Non-appropriation of Information.  The Participant recognizes and acknowledges that while employed by the Company, the Participant will have access to, learn, be provided with and, in some cases, prepare and create, certain Confidential Information (as defined in section (c) below), proprietary information or Trade Secrets (as defined below) of the Company, including, but not limited to, processes, financial information, pricing information, operating techniques, marketing processes, training techniques, customer, vendor, and referral source lists, price and cost information, files and forms, (collectively, the “Trade Secrets”), all of which are of substantial value to the Company and the businesses conducted by it.  The Participant expressly covenants and agrees that the Participant will:

 

(i)

Hold in a fiduciary capacity and not reveal, communicate, use or cause to be used for the Participant’s own benefit or divulge during the period of employment by the Company and for an indefinite period thereafter, any Confidential Information, proprietary information or Trade Secrets now or hereafter owned by the Company;

 

(ii)

Not sell, exchange, give away, or otherwise dispose of Confidential Information, proprietary information or Trade Secrets now or hereafter owned by the Company, whether the same will or may have been originated or discovered by the Company, the Participant or otherwise;

 

(iii)

Not reveal, divulge or make known to any person, firm, company or corporation any Confidential Information, proprietary information or Trade Secrets of the Company, unless such communication is required pursuant to a compulsory proceeding in which the Participant’s failure to provide such Confidential Information, proprietary information or Trade Secrets would subject the Participant to criminal or civil sanctions and then only to the extent that Executive provides prior notice to Company prior to disclosure.

 

(iv)

Return to the Company before termination of employment with the Company, any and all written information, material or equipment that constitutes, contains or relates in any way to Confidential Information, proprietary information, Trade Secrets and any other documents, equipment, and material of any kind relating in any way to the business of the Company, which are in the Participant’s possession, custody and control and which are or may be property of the Company, whether confidential or not, including any and all copies thereof which may have been made by or for the Participant and that the Participant will maintain no copies thereof after termination of the Participant’s employment.

 

(c)

Definitions.

 

(i)

“Confidential Information” means all information disclosed to or known by the Participant as a consequence of or through is employment with the Company which either has not been made generally available to the public and is useful or of value to the current or anticipated business of the Company; or has been identified to the Participant as confidential, either orally or in writing.  Confidential Information includes without limitation computer software and programs; marketing, manufacturing, organizational research and development; business plans; sales forecasts; identities, competence, abilities and compensation of other employees of the Company; pricing cost and other financial information; current and prospective customer and supplier lists and information about customers,

-4-

 

 

suppliers or their employees; information concerning planned or pending acquisitions or divestitures; and information concerning purchases of equipment or property.  Confidential Information does not include information which is in or hereafter enters the public domain through no fault of the Participant, or is disclosed by a third party having the legal right to use and disclose the information.

 

(d)

Other Terms and Conditions.

 

(i)

The Participant acknowledges that the Participant is entering into this Award Agreement voluntarily and has given careful consideration to the restraints imposed by this Award Agreement.  Irrespective of the manner of any employment termination, the restraints imposed by this Award Agreement will be operative during their full time periods and throughout the restrictive areas set forth in this Award Agreement.  The Participant further acknowledges that if the Participant’s employment with the Company terminates for any reason the Participant can earn a livelihood without violating the foregoing restrictions and that the Participant’s ability to earn a livelihood without violating these restrictions is a material employment condition.  The Participant acknowledges and recognizes that if the Participant’s employment terminates for any reason, this Section 10 of the Award Agreement will survive any such termination and any expiration of this Award Agreement.  Further, the Participant agrees and consents that this Award Agreement is assignable by the Company.

 

(ii)

The Participant agrees that if a court of law finds that the provisions of this Award Agreement are too harsh so that they are unenforceable, then such court of law may enforce those restrictions and limitations which are acceptable and deemed enforceable by the court.

 

(iii)

In the event the Participant breaches the terms of this Award Agreement, it is agreed that all time periods contained in this Award Agreement will be tolled until the Participant ceases to breach this Award Agreement.

 

(e)

Injunction.  The parties acknowledge and agree, due to the subject matter of this Award Agreement, that money damages will be an inadequate remedy for a breach by Participant of any of the obligations hereunder.  Consequently, if the Participant breaches or threatens to breach any of the obligations under this Award Agreement, the Participant agrees that the Company shall have the right, in addition to any other rights or remedies available to it at law or in equity, to obtain equitable relief, including, without limitation, injunctive relief and specific performance, in the event of any breach or threatened breach. Further, the parties hereto agree and declare that it may be impossible to measure in monetary terms the damages that may accrue to the Company by reason of Participant’s violation of this Award Agreement.  Therefore, in the event that the Company, or any successor in interest thereto, shall institute an action or proceeding to enforce the provisions of this Award Agreement, each party or other person against whom such action or proceeding is brought shall and hereby does, in advance, waive the claim or defense that there is adequate remedy at law. In the event such injunctive relief is warranted and obtained by the Company, Participant agrees to pay all costs of said action, including reasonable attorney fees.

 

-5-

 

11.

Miscellaneous:  

 

(a)

Non-Transferability.  An Award may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, except by will or the laws of descent and distribution.  

 

 

(b)

Beneficiary. Unless otherwise specifically designated by the Participant in writing, a Participant’s beneficiary under the Cash LTI Plan shall be the Participant’s spouse or, if no spouse survives the Participant, the Participant’s estate.

 

 

(c)

No Right to Continued Service or to Awards.  The granting of an Award shall impose no obligation on the Company or any Affiliate to continue the employment of a Participant or interfere with or limit the right of the Company or any Affiliate to Terminate the employment of the Participant at any time, with or without Cause, which right is expressly reserved.  

 

 

(d)

Tax Withholding.  The Company or an Affiliate, as applicable, shall have the power and the right to deduct, withhold or collect any amount required by law or regulation to be withheld with respect to any taxable event arising with respect to an Award granted under the Cash LTI Plan.

 

 

(e)

Requirements of Law.  The grant of Awards shall be subject to all applicable laws, rules and regulations (including applicable federal and state securities laws) and to all required approvals of any governmental agencies or national securities exchange, market or other quotation system.  

 

 

(f)

Governing Law.  The Cash LTI Plan and all Award Agreements shall be governed by and construed in accordance with the laws of (other than laws governing conflicts of laws) the State of Ohio.

 

 

(g)

Award Subject to Cash LTI Plan. The Award is subject to the terms and conditions described in this Award Agreement and the Cash LTI Plan, which is incorporated by reference into and made a part of this Award Agreement.  In the event of a conflict between the terms of the Cash LTI Plan and the terms of this Award Agreement, the terms of the Cash LTI Plan will govern.  The Committee has the sole responsibility of interpreting the Cash LTI Plan and this Award Agreement, and its determination of the meaning of any provision in the Cash LTI Plan or this Award Agreement will be binding on the Participant. Capitalized terms that are not defined in this Award Agreement have the same meanings as in the Cash LTI Plan.

 

-6-

 

 

(h)

Section 409A Payment Delay. If a Participant is determined to be a “specified employee” (within the meaning of Section 409A of the Code and as determined under the Company’s policy for determining specified employees), the Participant shall not be entitled to payment or to distribution of any portion of an Award that is subject to Section 409A of the Code (and for which no exception applies) and is payable or distributable on account of the Participant’s “separation from service” (within the meaning of Section 409A of the Code) until the expiration of six months from the date of such separation from service (or, if earlier, the Participant’s death).  Such Award, or portion thereof, shall be paid or distributed on the first business day of the seventh month following such separation from service.

 

 

(i)

Signature in Counterparts.  This Award Agreement may be signed in counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument.

[signature page attached]

 

 

-7-

 

 

PARTICIPANT

 

 

Date:

 

 

 

Print Name:                                                               

 

FARMERS NATIONAL BANC CORP.

 

By:

 

 

Date:

 

 

 

 

 

 

 

 

Its:

 

 

 

 

 

 

 

 

-8-

1/08/2018 29018398 V.3

 

EXHIBIT A

 

DEFINITIONS OF “CAUSE” AND “GOOD REASON”

 

“Cause” means that, in the reasonable judgment of the Compensation Committee, any of the following events have occurred: (1) the willful or negligent failure by the Participant to substantially perform his or her duties with the Company and, after written notification by the Company to the Participant, the continued failure of the Participant to substantially perform such duties; (2) the willful or negligent engagement by the Participant in conduct which is demonstrably and materially injurious to the Company, financially or otherwise; (3) action or inaction by the Participant that constitutes a breach of fiduciary duty with respect to the Company or any of its subsidiaries; (4) the violation of any material written policy, rule or regulation of the Company; or (5) the Participant’s material breach of any agreement in respect of confidentiality with the Company, whether or not entered into after the Grant Date.

 

“Good Reason” means the occurrence of any of the following: (1) a reduction in Participant’s annual base salary rate, unless such reduction generally applies to other Participants regardless of the reason(s) therefor; (2) a substantial diminution in Participant’s duties, authorities or responsibilities; or (3) the relocation of Participant’s principal place of employment with the Company such that (a) the distance from the former principal place of employment to the relocated principal place of employment is over 50 miles and (b) the distance from his or her primary residence to the relocated principal place of employment is over 50 miles; provided, however, that Good Reason shall exist only to the extent that Participant provides the Company with written notice of his or her intention to terminate employment with the Company for Good Reason that specifies the condition(s) constituting Good Reason and the Company fails to correct such condition(s) within ten (10) business days from receipt of such written notice. Notwithstanding the foregoing, Good Reason shall cease to exist for an event on the one hundred and twentieth (120th) day following the later of its occurrence or Participant’s knowledge thereof, unless Participant has given the Company written notice of such condition and of Participant’s intent to terminate for Good Reason prior to such date. With respect to the Chief Executive Officer only, Good Reason shall also include a change in responsibilities such that the Chief Executive Officer reports to someone other than directly to the Company’s Board of Directors.

 

-9-

1/15/2018 29018398 V.4

fmnb-ex311_6.htm

 

Exhibit 31.1

CERTIFICATIONS

Certification of Chief Executive Officer

CERTIFICATION FOR QUARTERLY REPORT ON FORM 10-Q

I, Kevin J. Helmick certify that:

1) I have reviewed this quarterly report on Form 10-Q of Farmers National Banc Corp.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 7, 2020

/s/ Kevin J. Helmick

Kevin J. Helmick

Chief Executive Officer

 

fmnb-ex312_7.htm

 

Exhibit 31.2

CERTIFICATIONS

Certification of Chief Financial Officer

CERTIFICATION FOR QUARTERLY REPORT ON FORM 10-Q

I, Carl D. Culp certify that:

1) I have reviewed this quarterly report on Form 10-Q of Farmers National Banc Corp.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 7, 2020

/s/ Carl D. Culp

Carl D. Culp

Chief Financial Officer

 

fmnb-ex321_9.htm

 

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Farmers National Banc Corp. (the “Corporation”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I Kevin J. Helmick, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Kevin J. Helmick

Kevin J. Helmick

Chief Executive Officer

May 7, 2020

 

 

 

fmnb-ex322_8.htm

 

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Farmers National Banc Corp. (the “Corporation”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I Carl D. Culp, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Carl D. Culp

Carl D. Culp

Chief Financial Officer

May 7, 2020

 

v3.20.1
Loans (Details 5) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Financing Receivable Impaired [Line Items]    
Unpaid Principal Balance, With no related allowance recorded $ 4,763 $ 4,617
Unpaid Principal Balance, With an allowance recorded 966 920
Unpaid Principal Balance 5,729 5,537
Recorded Investment, With no related allowance recorded 3,493 3,399
Recorded Investment, With an allowance recorded 890 854
Recorded Investment 4,383 4,253
Allowance for Loan Losses Allocated 61 61
Consumer    
Financing Receivable Impaired [Line Items]    
Unpaid Principal Balance, With no related allowance recorded 539 480
Unpaid Principal Balance, With an allowance recorded 0 0
Recorded Investment, With no related allowance recorded 260 247
Recorded Investment, With an allowance recorded 0 0
Allowance for Loan Losses Allocated 0 0
Commercial real estate, Owner occupied | Commercial real estate    
Financing Receivable Impaired [Line Items]    
Unpaid Principal Balance, With no related allowance recorded   22
Recorded Investment, With no related allowance recorded   8
Allowance for Loan Losses Allocated   0
Commercial real estate, Non-owner occupied | Commercial real estate    
Financing Receivable Impaired [Line Items]    
Unpaid Principal Balance, With no related allowance recorded 38 38
Recorded Investment, With no related allowance recorded 33 34
Allowance for Loan Losses Allocated 0 0
Commercial real estate, Farmland | Commercial real estate    
Financing Receivable Impaired [Line Items]    
Unpaid Principal Balance, With no related allowance recorded 567 570
Unpaid Principal Balance, With an allowance recorded 0  
Recorded Investment, With no related allowance recorded 516 519
Recorded Investment, With an allowance recorded 0  
Allowance for Loan Losses Allocated 0 0
Commercial, Commercial and industrial | Commercial    
Financing Receivable Impaired [Line Items]    
Unpaid Principal Balance, With no related allowance recorded 170 179
Unpaid Principal Balance, With an allowance recorded 51 53
Recorded Investment, With no related allowance recorded 129 141
Recorded Investment, With an allowance recorded 51 53
Allowance for Loan Losses Allocated 2 2
Commercial, Agricultural | Commercial    
Financing Receivable Impaired [Line Items]    
Unpaid Principal Balance, With no related allowance recorded 31 11
Recorded Investment, With no related allowance recorded 31 11
Allowance for Loan Losses Allocated 0 0
Residential real estate, 1-4 family residential | Residential real estate    
Financing Receivable Impaired [Line Items]    
Unpaid Principal Balance, With no related allowance recorded 2,949 2,889
Unpaid Principal Balance, With an allowance recorded 783 795
Recorded Investment, With no related allowance recorded 2,145 2,095
Recorded Investment, With an allowance recorded 724 729
Allowance for Loan Losses Allocated 48 52
Residential real estate, Home equity lines of credit | Residential real estate    
Financing Receivable Impaired [Line Items]    
Unpaid Principal Balance, With no related allowance recorded 469 428
Unpaid Principal Balance, With an allowance recorded 132 72
Recorded Investment, With no related allowance recorded 379 344
Recorded Investment, With an allowance recorded 115 72
Allowance for Loan Losses Allocated $ 11 $ 7
v3.20.1
Loans (Details 1) (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Receivables Acquired with Deteriorated Credit Quality | National Bancshares Corporation    
Financing Receivable Impaired [Line Items]    
Acquired with deteriorated credit quality, allowances $ 0 $ 0
v3.20.1
Securities (Details 1) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Amortized cost and fair value of the debt securities maturity    
Amortized Cost, Within one year $ 1,185  
Amortized Cost, One to five years 5,493  
Amortized Cost, Five to ten years 22,426  
Amortized Cost, Beyond ten years 251,813  
Amortized Cost, Mortgage-backed, collateralized mortgage obligations and Small Business Administration securities 167,161  
Amortized Cost 448,078 $ 419,795
Fair Value, Within one year 1,186  
Fair Value, One to five years 5,570  
Fair Value, Five to ten years 22,303  
Fair Value, Beyond ten years 245,707  
Fair Value, Mortgage-backed, collateralized mortgage obligations and Small Business Administration securities 173,277  
Fair Value, Total $ 448,043 $ 432,233
v3.20.1
Fair Value (Details 1) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs    
Beginning Balance $ 5 $ 6
Transfers from level 2 0 0
Repayments, calls and maturities 0 0
Ending Balance $ 5 $ 6
v3.20.1
Interest-Rate Swaps (Details Textual) - USD ($)
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Interest rate swaps    
Derivative [Line Items]    
Net Gain or Loss recognized in earnings $ 0 $ 0
v3.20.1
Stock Based Compensation (Details) - 2017 Incentive Plan
 3 Months Ended
Mar. 31, 2020
$ / shares
shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Vested, Maximum Awarded Units | shares (2,000)
Vested, Weighted Average Grant Date Fair Value | $ / shares $ 16.26
Service Units  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Beginning balance - non-vested shares, Maximum Awarded Unit | shares 81,165
Granted, Maximum Awarded Units | shares 19,045
Vested, Maximum Awarded Units | shares (2,000)
Forfeited, Maximum Awarded Units | shares 0
Ending balance - non-vested shares, Maximum Awarded Unit | shares 98,210
Beginning balance - non-vested shares, Weighted Average Grant Date Fair Value | $ / shares $ 14.17
Granted, Weighted Average Grant Date Fair Value | $ / shares 15.75
Vested, Weighted Average Grant Date Fair Value | $ / shares 14.65
Forfeited, Weighted Average Grant Date Fair Value | $ / shares 0
Ending balance - non-vested shares, Weighted Average Grant Date Fair Value | $ / shares $ 14.47
Performance Units  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Beginning balance - non-vested shares, Maximum Awarded Unit | shares 192,665
Granted, Maximum Awarded Units | shares 50,187
Vested, Maximum Awarded Units | shares 0
Forfeited, Maximum Awarded Units | shares 0
Ending balance - non-vested shares, Maximum Awarded Unit | shares 242,852
Beginning balance - non-vested shares, Weighted Average Grant Date Fair Value | $ / shares $ 13.72
Granted, Weighted Average Grant Date Fair Value | $ / shares 15.93
Vested, Weighted Average Grant Date Fair Value | $ / shares 0
Forfeited, Weighted Average Grant Date Fair Value | $ / shares 0
Ending balance - non-vested shares, Weighted Average Grant Date Fair Value | $ / shares $ 14.18
v3.20.1
Goodwill and Intangible Assets (Details Textual) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Goodwill And Intangible Assets Disclosure [Abstract]      
Goodwill associated with the Company's purchase and other past acquisitions $ 47,360   $ 38,201
Aggregate amortization expense $ 332 $ 327  
v3.20.1
Goodwill and Intangible Assets
 3 Months Ended
Mar. 31, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

Goodwill and Intangible Assets:

 

Goodwill associated with the Company’s purchase of Maple Leaf in January 2020 and other past acquisitions totaled $47.4 million and $38.2 million at March 31, 2020 and December 31, 2019.  Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value, which is determined through a two-step impairment test. Management performs goodwill impairment testing on an annual basis as of September 30 or when a triggering event occurs. The fair value of the reporting unit is determined based on a discounted cash flow model.  

Acquired Intangible Assets

Acquired intangible assets were as follows:

 

 

March 31, 2020

 

 

December 31, 2019

 

(In Thousands of Dollars)

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

Amortized intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationship intangibles

$

7,210

 

 

$

(6,033

)

 

$

7,210

 

 

$

(5,938

)

Non-compete contracts

 

430

 

 

 

(385

)

 

 

430

 

 

 

(384

)

Trade name

 

520

 

 

 

(287

)

 

 

520

 

 

 

(277

)

Core deposit intangible

 

6,980

 

 

 

(3,597

)

 

 

6,254

 

 

 

(3,371

)

Total

$

15,140

 

 

$

(10,302

)

 

$

14,414

 

 

$

(9,970

)

 

Aggregate amortization expense was $332 thousand for the three month period ended March 31, 2020.  Amortization expense was $327 thousand for the three months ended March 31, 2019.

Estimated amortization expense for each of the next five periods and thereafter:

 

2020 (9 months)

$

995

 

2021

 

1,264

 

2022

 

1,090

 

2023

 

617

 

2024

 

314

 

Thereafter

 

558

 

Total

$

4,838

 

 
v3.20.1
Troubled Debt Restructurings
 3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Troubled Debt Restructurings

Troubled Debt Restructurings:

Total troubled debt restructurings were $4.7 million and $4.6 million at March 31, 2020 and December 31, 2019, respectively.  The Company has allocated $61 thousand of specific reserves to loans whose terms have been modified in troubled debt restructurings at March 31, 2020 and December 31, 2019.  There were no commitments to lend additional amounts to borrowers with loans that were classified as troubled debt restructurings at March 31, 2020 and at December 31, 2019.

During the three month periods ended March 31, 2020 and 2019, the terms of certain loans were modified as troubled debt restructurings.  The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; a deferral of principal, interest and/or escrow; or a legal concession.  During the three month period ended March 31, 2020, the terms of such loans included a deferral of principal and/or interest and an extension of the maturity date on these and other troubled debt restructurings in the range of 168 to 180 months.  During the same three month period in 2019, the terms of such loans included a reduction of the stated interest rate of loans in the range of 2.38% to 2.74% and an extension of the maturity date on these and other troubled debt restructurings by 86 months.        

The following table presents loans by class modified as troubled debt restructurings that occurred during the three month period ended March 31, 2020 and 2019:

 

 

 

 

 

 

 

Pre-

Modification

 

 

Post-

Modification

 

Three Months Ended March 31, 2020

 

Number of

 

 

Outstanding

Recorded

 

 

Outstanding

Recorded

 

(In Thousands of Dollars)

 

Loans

 

 

Investment

 

 

Investment

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

1

 

 

$

21

 

 

$

21

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

5

 

 

 

209

 

 

 

210

 

Home equity lines of credit

 

 

4

 

 

 

100

 

 

 

102

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

10

 

 

 

61

 

 

 

61

 

Other

 

 

1

 

 

 

15

 

 

 

15

 

Total originated loans

 

 

21

 

 

$

406

 

 

$

409

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

1

 

 

$

68

 

 

$

68

 

Total acquired loans

 

 

1

 

 

$

68

 

 

$

68

 

Total loans

 

 

22

 

 

$

474

 

 

$

477

 

 

 

 

 

 

 

 

 

Pre-

Modification

 

 

Post-

Modification

 

Three Months Ended March 31, 2019

 

Number of

 

 

Outstanding

Recorded

 

 

Outstanding

Recorded

 

(In Thousands of Dollars)

 

Loans

 

 

Investment

 

 

Investment

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

3

 

 

$

73

 

 

$

75

 

Home equity lines of credit

 

 

1

 

 

 

40

 

 

 

40

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

      Indirect

 

 

12

 

 

 

105

 

 

 

105

 

Total originated loans

 

 

16

 

 

$

218

 

 

$

220

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2

 

 

$

51

 

 

$

55

 

Total acquired loans

 

 

2

 

 

$

51

 

 

$

55

 

Total loans

 

 

18

 

 

$

269

 

 

$

275

 

 

 

There were $5 thousand and $6 thousand in charge offs and a $5 thousand and $6 thousand increase to the provision for loan losses during the three month periods ended March 31, 2020 and 2019, respectively, as a result of outstanding troubled debt restructurings.      

There were two commercial farmland loans and one commercial loan for which there was a payment default within twelve months following the modification of the troubled debt restructuring during the three month period ended March 31, 2020.  There were two commercial farmland and one commercial loan that were past due at March 31, 2020.  There was no provision recorded as a result of the defaults during 2020.  A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

There were two residential real estate loans and one home equity line of credit for which there was a payment default within twelve months following the modification of the troubled debt restructuring during the three month period ended March 31, 2019.  All of the loans were past due at March 31, 2019.  There was no provision recorded as a result of the defaults during 2019.  A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.  
v3.20.1
Securities (Tables)
 3 Months Ended
Mar. 31, 2020
Investments Debt And Equity Securities [Abstract]  
Summary of the Amortized Cost and Fair Value of Available-for-Sale Investment Securities Corresponding Amounts of Unrealized Gains and Losses

The following table summarizes the amortized cost and fair value of the available for sale investment securities portfolio at March 31, 2020 and December 31, 2019 and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income:

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

(In Thousands of Dollars)

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

$

3,714

 

 

$

126

 

 

$

0

 

 

$

3,840

 

State and political subdivisions

 

273,941

 

 

 

1,171

 

 

 

(7,529

)

 

 

267,583

 

Corporate bonds

 

3,262

 

 

 

90

 

 

 

(9

)

 

 

3,343

 

Mortgage-backed securities - residential

 

128,064

 

 

 

5,857

 

 

 

0

 

 

 

133,921

 

Collateralized mortgage obligations - residential

 

32,832

 

 

 

458

 

 

 

(239

)

 

 

33,051

 

Small Business Administration

 

6,265

 

 

 

40

 

 

 

0

 

 

 

6,305

 

Totals

$

448,078

 

 

$

7,742

 

 

$

(7,777

)

 

$

448,043

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

(In Thousands of Dollars)

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

$

3,773

 

 

$

41

 

 

$

(3

)

 

$

3,811

 

State and political subdivisions

 

250,905

 

 

 

10,944

 

 

 

(424

)

 

 

261,425

 

Corporate bonds

 

1,238

 

 

 

22

 

 

 

0

 

 

 

1,260

 

Mortgage-backed securities - residential

 

145,886

 

 

 

2,396

 

 

 

(372

)

 

 

147,910

 

Collateralized mortgage obligations - residential

 

11,459

 

 

 

101

 

 

 

(213

)

 

 

11,347

 

Small Business Administration

 

6,534

 

 

 

0

 

 

 

(54

)

 

 

6,480

 

Totals

$

419,795

 

 

$

13,504

 

 

$

(1,066

)

 

$

432,233

 

 
Amortized Cost and Fair Value of the Debt Securities Maturity

The amortized cost and fair value of the debt securities portfolio are shown by expected maturity.  Expected maturities may differ from contractual maturities if issuers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

 

 

 

March 31, 2020

 

(In Thousands of Dollars)

 

Amortized Cost

 

 

Fair Value

 

Maturity

 

 

 

 

 

 

 

 

Within one year

 

$

1,185

 

 

$

1,186

 

One to five years

 

 

5,493

 

 

 

5,570

 

Five to ten years

 

 

22,426

 

 

 

22,303

 

Beyond ten years

 

 

251,813

 

 

 

245,707

 

Mortgage-backed, collateralized mortgage obligations and Small Business Administration securities

 

 

167,161

 

 

 

173,277

 

Total

 

$

448,078

 

 

$

448,043

 

 
Available for Sale Investment Securities with Unrealized Losses The following table summarizes the available for sale investment securities with unrealized losses at March 31, 2020 and December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position.

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

(In Thousands of Dollars)

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and political subdivisions

 

$

170,483

 

 

$

(7,529

)

 

$

0

 

 

$

0

 

 

$

170,483

 

 

$

(7,529

)

Corporate bonds

 

 

717

 

 

 

(9

)

 

 

0

 

 

 

0

 

 

 

717

 

 

 

(9

)

Collateralized mortgage obligations - residential

 

 

10,003

 

 

 

(239

)

 

 

0

 

 

 

0

 

 

 

10,003

 

 

 

(239

)

Total

 

$

181,203

 

 

$

(7,777

)

 

$

0

 

 

$

0

 

 

$

181,203

 

 

$

(7,777

)

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

(In Thousands of Dollars)

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

0

 

 

$

0

 

 

$

622

 

 

$

(3

)

 

$

622

 

 

$

(3

)

State and political subdivisions

 

 

30,887

 

 

 

(424

)

 

 

0

 

 

 

0

 

 

 

30,887

 

 

 

(424

)

Corporate bonds

 

 

0

 

 

 

0

 

 

 

100

 

 

 

0

 

 

 

100

 

 

 

0

 

Mortgage-backed securities - residential

 

 

14,435

 

 

 

(98

)

 

 

22,381

 

 

 

(274

)

 

 

36,816

 

 

 

(372

)

Collateralized mortgage obligations - residential

 

 

1,198

 

 

 

(18

)

 

 

7,935

 

 

 

(195

)

 

 

9,133

 

 

 

(213

)

Small Business Administration

 

 

6,479

 

 

 

(54

)

 

 

1

 

 

 

0

 

 

 

6,480

 

 

 

(54

)

Total

 

$

52,999

 

 

$

(594

)

 

$

31,039

 

 

$

(472

)

 

$

84,038

 

 

$

(1,066

)

 
v3.20.1
Revenue from Contracts with Customers (Tables)
 3 Months Ended
Mar. 31, 2020
Revenue From Contract With Customer [Abstract]  
Summary of Noninterest Income by Revenue Stream and Reportable Segment, Net of Eliminations

All material revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income.  The following table presents the Company’s noninterest income by revenue stream and reportable segment, net of eliminations, for the three months ended March 31, 2020 and 2019.

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Totals

 

For Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

$

0

 

 

$

1,095

 

 

$

1,095

 

Debit card and EFT fees

 

 

0

 

 

 

851

 

 

 

851

 

Trust fees

 

 

1,857

 

 

 

0

 

 

 

1,857

 

Insurance agency commissions

 

 

0

 

 

 

883

 

 

 

883

 

Retirement plan consulting fees

 

 

380

 

 

 

0

 

 

 

380

 

Investment commissions

 

 

0

 

 

 

423

 

 

 

423

 

Other (outside the scope of ASC 606)

 

 

0

 

 

 

2,226

 

 

 

2,226

 

Total noninterest income

 

$

2,237

 

 

$

5,478

 

 

$

7,715

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Totals

 

For Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

$

0

 

 

$

1,074

 

 

$

1,074

 

Debit card and EFT fees

 

 

0

 

 

 

778

 

 

 

778

 

Trust fees

 

 

1,858

 

 

 

0

 

 

 

1,858

 

Insurance agency commissions

 

 

0

 

 

 

803

 

 

 

803

 

Retirement plan consulting fees

 

 

358

 

 

 

0

 

 

 

358

 

Investment commissions

 

 

0

 

 

 

260

 

 

 

260

 

Other (outside the scope of ASC 606)

 

 

0

 

 

 

1,389

 

 

 

1,389

 

Total noninterest income

 

$

2,216

 

 

$

4,304

 

 

$

6,520

 

 

 
v3.20.1
Interest-Rate Swaps (Tables)
 3 Months Ended
Mar. 31, 2020
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Summary Information about Interest-Rate Swaps

Summary information about these interest-rate swaps at periods ended March 31, 2020 and December 31, 2019 is as follows:

 

 

March 31, 2020

 

 

December 31, 2019

 

Notional amounts (In thousands)

$

43,310

 

 

$

42,178

 

Weighted average pay rate on interest-rate swaps

 

4.63

%

 

 

4.60

%

Weighted average receive rate on interest-rate swaps

 

2.87

%

 

 

4.02

%

Weighted average maturity (years)

 

4.4

 

 

 

4.2

 

Fair value of interest-rate swaps (In thousands)

$

(4,810

)

 

$

(1,898

)

Fair value of loan yield maintenance provisions (In thousands)

$

4,810

 

 

$

1,898

 

 
v3.20.1
Business Combinations (Tables)
 3 Months Ended
Mar. 31, 2020
Pro Forma Information The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been effective on the assumed date.

 

For Three Months Ended March 31,

 

(In thousands of dollars except per share results)

2020

 

 

2019

 

Net interest income

$

22,482

 

 

$

22,120

 

Net income

$

8,659

 

 

$

8,624

 

Basic and diluted earnings per share

$

0.30

 

 

$

0.31

 

 
Maple Leaf  
Summary of Consideration Paid and Amounts of Assets Acquired and Liabilities Assumed

The following table summarizes the consideration paid for Maple Leaf and the amounts of the assets acquired and liabilities assumed on the closing date of the acquisition.

 

 

 

 

 

(In Thousands of Dollars)

 

 

 

Consideration

 

 

 

Cash

$

20,423

 

Stock

 

22,554

 

Fair value of total consideration transferred

$

42,977

 

Fair value of assets acquired

 

 

 

Cash and due from financial institutions

$

12,287

 

Securities available for sale

 

28,038

 

Loans

 

181,280

 

Premises and equipment

 

229

 

Core deposit intangible

 

725

 

Other assets

 

6,471

 

Total assets

 

229,030

 

Fair value of liabilities assumed

 

 

 

Deposits

 

183,251

 

Long-term borrowings

 

7,946

 

Accrued interest payable and other liabilities

 

4,015

 

Total liabilities

 

195,212

 

Net assets acquired

$

33,818

 

Goodwill created

 

9,159

 

Total net assets acquired

$

42,977

 
v3.20.1
Contingencies
 3 Months Ended
Mar. 31, 2020
Commitments And Contingencies Disclosure [Abstract]  
Contingencies

Contingencies:

 

The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. Legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, although the Company establishes accruals where losses are deemed probable and reasonably estimable. The Company’s assessment of the current exposure with respect to adverse claims in legal matters could change in the event of the discovery of additional facts in such matters or upon determinations by judges, juries, administrative agencies, or other finds or fact that are inconsistent with the Company’s evaluations of claims. During 2019, the Company accrued a charge of $505 thousand relating to a pending settlement of a legal contingency. The Company has insurance coverage for this contingency and expects to recover the amount of this estimated charge.  No amount for an expected insurance recovery has been recorded as of March 31, 2020.
v3.20.1
Stock Based Compensation
 3 Months Ended
Mar. 31, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock Based Compensation

Stock Based Compensation:

 

During 2017, the Company, with the approval of shareholders, created the 2017 Equity Incentive Plan (the “2017 Plan”).  The 2017 Plan permits the award of up to 800 thousand shares to the Company’s directors and employees to attract and retain exceptional personnel, motivate performance and most importantly to help align the interests of the Company’s executives with those of the Company’s shareholders.  There were 19,045 service time based share awards and 50,187 performance based share awards granted under the 2017 Plan during the three month period ended March 31, 2020, as shown in the table below.  The actual number of performance based shares issued will depend on the relative performance of the Company’s average return on equity compared to a group of peer companies over a three year vesting period, ending December 31, 2022.  As of March 31, 2020, 406,315 shares are still available to be awarded from the 2017 Plan.  

The restricted stock awards were granted with a fair value price equal to the market price of the Company’s common stock at the date of the grant.  Expense recognized was $337 thousand for the three month period ended March 31, 2020.  Expense recognized was $320 thousand for the three month period ended March 31, 2019.  As of March 31, 2020, there was $2.3 million of total unrecognized compensation expense related to the nonvested shares granted under the 2017 Plan.  The remaining cost is expected to be recognized over 2.9 years.  

The following is the activity under the Plans during the three month period ended March 31, 2020.

 

 

Three Months Ended March 31, 2020

 

 

Maximum

Awarded

Service

Units

 

 

Weighted

Average

Grant Date

Fair Value

 

 

Maximum

Awarded

Performance

Units

 

 

Weighted

Average

Grant Date

Fair Value

 

Beginning balance - non-vested shares

 

81,165

 

 

$

14.17

 

 

 

192,665

 

 

$

13.72

 

Granted

 

19,045

 

 

 

15.75

 

 

 

50,187

 

 

 

15.93

 

Vested

 

(2,000

)

 

 

14.65

 

 

 

0

 

 

 

0

 

Forfeited

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Ending balance - non-vested shares

 

98,210

 

 

$

14.47

 

 

 

242,852

 

 

$

14.18

 

 

The 2,000 shares that vested during the three month period ended March 31, 2020 had a weighted average fair value of $16.26 per share at vesting date.
v3.20.1
Stock Based Compensation (Tables)
 3 Months Ended
Mar. 31, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Summary of Award Activity under Plans

The following is the activity under the Plans during the three month period ended March 31, 2020.

 

 

Three Months Ended March 31, 2020

 

 

Maximum

Awarded

Service

Units

 

 

Weighted

Average

Grant Date

Fair Value

 

 

Maximum

Awarded

Performance

Units

 

 

Weighted

Average

Grant Date

Fair Value

 

Beginning balance - non-vested shares

 

81,165

 

 

$

14.17

 

 

 

192,665

 

 

$

13.72

 

Granted

 

19,045

 

 

 

15.75

 

 

 

50,187

 

 

 

15.93

 

Vested

 

(2,000

)

 

 

14.65

 

 

 

0

 

 

 

0

 

Forfeited

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Ending balance - non-vested shares

 

98,210

 

 

$

14.47

 

 

 

242,852

 

 

$

14.18

 
v3.20.1
Consolidated Statements of Stockholders' Equity (Parenthetical) Unaudited - $ / shares
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
COMMON STOCK    
Treasury shares issued under the Long Term Incentive Plan 1,334 0
Shares issued as part of a business combination 1,398,229  
RETAINED EARNINGS    
Cash dividend declared per share of common stock $ 0.11 $ 0.09
TREASURY STOCK, AT COST    
Treasury stock repurchased 942,967 14,993
Shares issued under long term incentive plan 2,000 0
Shares retained to cover tax withholdings under the Long Term Incentive Plan 666 0
v3.20.1
Consolidated Balance Sheets (Parenthetical) - shares
Mar. 31, 2020
Dec. 31, 2019
Statement Of Financial Position [Abstract]    
Common stock, shares authorized 50,000,000 50,000,000
Common stock, shares issued 29,577,827 28,179,598
Treasury stock, shares 1,450,492 508,859
v3.20.1
Short-term Borrowings (Tables)
 3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Schedule Disaggregation of the Obligation by the Class of Collateral Pledged for Short-Term Financing Obtained Through the Sales of Repurchase Agreements

The following table provides a disaggregation of the obligation by the class of collateral pledged for short-term financing obtained through the sales of repurchase agreements:

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

Overnight and continuous repurchase agreements

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

119

 

 

$

55

 

State and political subdivisions

 

 

2,060

 

 

 

627

 

Mortgage-backed securities - residential

 

 

1,974

 

 

 

948

 

Collateralized mortgage obligations - residential

 

 

495

 

 

 

70

 

Total repurchase agreements

 

$

4,648

 

 

$

1,700

 
v3.20.1
Business Combinations (Details 1) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Business Combinations [Abstract]    
Net interest income $ 22,482 $ 22,120
Net income $ 8,659 $ 8,624
Basic and diluted earnings per share $ 0.30 $ 0.31
v3.20.1
Credit Quality Indicators (Details 1) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Financing Receivable Recorded Investment [Line Items]    
Loans $ 1,976,582 $ 1,811,539
Originated Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 1,624,058 1,617,339
Acquired Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 352,524 194,200
Residential real estate    
Financing Receivable Recorded Investment [Line Items]    
Loans 540,808 499,301
Residential real estate | Residential real estate, 1-4 family residential    
Financing Receivable Recorded Investment [Line Items]    
Loans 425,852 387,682
Residential real estate | Residential real estate, 1-4 family residential | Originated Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 315,458 324,226
Residential real estate | Residential real estate, 1-4 family residential | Originated Loans | Performing Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 313,813 322,554
Residential real estate | Residential real estate, 1-4 family residential | Originated Loans | Nonperforming Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 1,645 1,672
Residential real estate | Residential real estate, 1-4 family residential | Acquired Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 110,394 63,456
Residential real estate | Residential real estate, 1-4 family residential | Acquired Loans | Performing Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 105,310 62,611
Residential real estate | Residential real estate, 1-4 family residential | Acquired Loans | Nonperforming Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 5,084 845
Residential real estate | Residential real estate, Home equity lines of credit    
Financing Receivable Recorded Investment [Line Items]    
Loans 114,956 111,619
Residential real estate | Residential real estate, Home equity lines of credit | Originated Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 94,057 91,974
Residential real estate | Residential real estate, Home equity lines of credit | Originated Loans | Performing Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 93,346 91,291
Residential real estate | Residential real estate, Home equity lines of credit | Originated Loans | Nonperforming Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 711 683
Residential real estate | Residential real estate, Home equity lines of credit | Acquired Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 20,899 19,645
Residential real estate | Residential real estate, Home equity lines of credit | Acquired Loans | Performing Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 20,669 19,397
Residential real estate | Residential real estate, Home equity lines of credit | Acquired Loans | Nonperforming Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 230 248
Consumer    
Financing Receivable Recorded Investment [Line Items]    
Loans 215,868 214,998
Consumer | Consumer, Indirect    
Financing Receivable Recorded Investment [Line Items]    
Loans 170,157 171,725
Consumer | Consumer, Indirect | Originated Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 170,157 171,725
Consumer | Consumer, Indirect | Originated Loans | Performing Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 169,461 171,037
Consumer | Consumer, Indirect | Originated Loans | Nonperforming Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 696 688
Consumer | Consumer, Indirect | Acquired Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 0 0
Consumer | Consumer, Indirect | Acquired Loans | Performing Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 0 0
Consumer | Consumer, Indirect | Acquired Loans | Nonperforming Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 0 0
Consumer | Consumer, Direct    
Financing Receivable Recorded Investment [Line Items]    
Loans 36,345 33,635
Consumer | Consumer, Direct | Originated Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 28,879 27,567
Consumer | Consumer, Direct | Originated Loans | Performing Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 28,553 27,358
Consumer | Consumer, Direct | Originated Loans | Nonperforming Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 326 209
Consumer | Consumer, Direct | Acquired Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 7,466 6,068
Consumer | Consumer, Direct | Acquired Loans | Performing Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 7,308 5,893
Consumer | Consumer, Direct | Acquired Loans | Nonperforming Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 158 175
Consumer | Consumer, Other    
Financing Receivable Recorded Investment [Line Items]    
Loans 9,366 9,638
Consumer | Consumer, Other | Originated Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 9,266 9,484
Consumer | Consumer, Other | Originated Loans | Performing Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 9,252 9,478
Consumer | Consumer, Other | Originated Loans | Nonperforming Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 14 6
Consumer | Consumer, Other | Acquired Loans    
Financing Receivable Recorded Investment [Line Items]    
Loans 100 154
Consumer | Consumer, Other | Acquired Loans | Performing Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans 100 154
Consumer | Consumer, Other | Acquired Loans | Nonperforming Financing Receivable    
Financing Receivable Recorded Investment [Line Items]    
Loans $ 0 $ 0
v3.20.1
Short-term borrowings (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Assets Sold Under Agreements To Repurchase [Line Items]    
Total repurchase agreements $ 19,998 $ 77,050
Repurchase agreement    
Assets Sold Under Agreements To Repurchase [Line Items]    
Total repurchase agreements 4,648 1,700
Repurchase agreement | U.S. Treasury and U.S. government sponsored entities    
Assets Sold Under Agreements To Repurchase [Line Items]    
Total repurchase agreements 119 55
Repurchase agreement | State and political subdivisions    
Assets Sold Under Agreements To Repurchase [Line Items]    
Total repurchase agreements 2,060 627
Repurchase agreement | Mortgage-backed securities - residential    
Assets Sold Under Agreements To Repurchase [Line Items]    
Total repurchase agreements 1,974 948
Repurchase agreement | Collateralized mortgage obligations    
Assets Sold Under Agreements To Repurchase [Line Items]    
Total repurchase agreements $ 495 $ 70
v3.20.1
Troubled Debt Restructurings (Details Textual)
 3 Months Ended
Mar. 31, 2020
USD ($)
Loans
Mar. 31, 2019
USD ($)
Loans
Dec. 31, 2019
USD ($)
Financing Receivable Modifications [Line Items]      
Total troubled debt restructurings $ 4,700,000   $ 4,600,000
Specific reserves to loans 61,000   61,000
Commitments to lend additional amounts to borrowers classified as troubled debt restructurings $ 0   0
Commercial farmland loans      
Financing Receivable Modifications [Line Items]      
Troubled debt restructured loans with subsequent payment defaults | Loans | Loans 2    
Commercial loans      
Financing Receivable Modifications [Line Items]      
Provision for loan losses $ 0    
Troubled debt restructured loans with subsequent payment defaults | Loans | Loans 1    
Loans default payment past due period 30 days    
Residential real estate loan      
Financing Receivable Modifications [Line Items]      
Provision for loan losses   $ 0  
Troubled debt restructured loans with subsequent payment defaults | Loans | Loans   2  
Loans default payment past due period   30 days  
Residential real estate, Home equity lines of credit      
Financing Receivable Modifications [Line Items]      
Troubled debt restructured loans with subsequent payment defaults | Loans | Loans   1  
Troubled debt restructurings      
Financing Receivable Modifications [Line Items]      
Specific reserves to loans $ 61,000   $ 61,000
Allowance adjustment charge offs 5,000 $ 6,000  
Provision for loan losses $ 5,000 $ 6,000  
Extended Maturity      
Financing Receivable Modifications [Line Items]      
Maturity period loans   86 months  
Extended Maturity | Minimum      
Financing Receivable Modifications [Line Items]      
Maturity period loans 168 months    
Extended Maturity | Maximum      
Financing Receivable Modifications [Line Items]      
Maturity period loans 180 months    
Contractual Interest Rate Reduction | Minimum      
Financing Receivable Modifications [Line Items]      
Reduction of the notes stated interest rate   2.38%  
Contractual Interest Rate Reduction | Maximum      
Financing Receivable Modifications [Line Items]      
Reduction of the notes stated interest rate   2.74%  
v3.20.1
Segment Information
 3 Months Ended
Mar. 31, 2020
Segment Reporting [Abstract]  
Segment Information

Segment Information:

The reportable segments are determined by the products and services offered, primarily distinguished between banking and trust.  The trust and retirement consulting segments were combined in 2019.   The segments are also distinguished by the level of information provided to the chief operating decision makers in the Company, who use such information to review performance of various components of the business, which are then aggregated.  Loans, investments, and deposits provide the revenues in the banking operation.  All operations are domestic.  Significant segment totals are reconciled to the financial statements as follows:

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

 

$

6,256

 

 

$

49,500

 

 

$

(3,558

)

 

$

52,198

 

Total assets

 

$

14,208

 

 

$

2,649,518

 

 

$

4,523

 

 

$

2,668,249

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

 

$

6,326

 

 

$

37,141

 

 

$

(822

)

 

$

42,645

 

Total assets

 

$

13,892

 

 

$

2,430,784

 

 

$

4,482

 

 

$

2,449,158

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

For Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

34

 

 

$

22,352

 

 

$

(84

)

 

$

22,302

 

Provision for loan losses

 

 

0

 

 

 

1,100

 

 

 

0

 

 

 

1,100

 

Service fees, security gains and other noninterest income

 

 

2,243

 

 

 

5,620

 

 

 

(148

)

 

 

7,715

 

Noninterest expense

 

 

1,517

 

 

 

15,881

 

 

 

433

 

 

 

17,831

 

Amortization and depreciation expense

 

 

76

 

 

 

627

 

 

 

48

 

 

 

751

 

Income before taxes

 

 

684

 

 

 

10,364

 

 

 

(713

)

 

 

10,335

 

Income taxes

 

 

144

 

 

 

1,759

 

 

 

(207

)

 

 

1,696

 

Net income

 

$

540

 

 

$

8,605

 

 

$

(506

)

 

$

8,639

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

For Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

38

 

 

$

19,949

 

 

$

(22

)

 

$

19,965

 

Provision for loan losses

 

 

0

 

 

 

550

 

 

 

0

 

 

 

550

 

Service fees, security gains and other noninterest income

 

 

2,256

 

 

 

4,305

 

 

 

(41

)

 

 

6,520

 

Noninterest expense

 

 

1,601

 

 

 

13,527

 

 

 

140

 

 

 

15,268

 

Amortization and depreciation expense

 

 

92

 

 

 

605

 

 

 

12

 

 

 

709

 

Income before taxes

 

 

601

 

 

 

9,572

 

 

 

(215

)

 

 

9,958

 

Income taxes

 

 

126

 

 

 

1,556

 

 

 

(112

)

 

 

1,570

 

Net income

 

$

475

 

 

$

8,016

 

 

$

(103

)

 

$

8,388

 

 

 

The Bank segment includes Farmers National Insurance and Farmers of Canfield Investment Co.
v3.20.1
Earnings Per Share
 3 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Earnings Per Share

Earnings Per Share:

The computation of basic and diluted earnings per share is shown in the following table:

 

 

Three Months Ended

March 31,

 

 

2020

 

 

2019

 

Basic EPS

 

 

 

 

 

 

 

Net income (In thousands)

$

8,639

 

 

$

8,388

 

Weighted average shares outstanding

 

28,535,371

 

 

 

27,790,028

 

Basic earnings per share

$

0.30

 

 

$

0.30

 

 

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

Net income (In thousands)

$

8,639

 

 

$

8,388

 

Weighted average shares outstanding for basic earnings per share

 

28,535,371

 

 

 

27,790,028

 

Dilutive effect of restricted stock awards

 

174,632

 

 

 

193,301

 

Weighted average shares for diluted earnings per share

 

28,710,003

 

 

 

27,983,329

 

Diluted earnings per share

$

0.30

 

 

$

0.30

 

 

There were no restricted stock awards that were considered anti-dilutive for the three month periods ended March 31, 2020 and 2019.
v3.20.1
Summary of Significant Accounting Policies (Policies)
 3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation:

Farmers National Banc Corp. (“Company”) is a Financial Holding Company registered under the Bank Holding Company Act of 1956, as amended.  The Company provides full banking services through its nationally chartered subsidiary, The Farmers National Bank of Canfield (“Bank”).  The consolidated financial statements also include the accounts of the Bank’s subsidiaries; Farmers National Insurance, LLC (“Insurance”) and Farmers of Canfield Investment Co. (“Investments”).  The Company provides trust and retirement consulting services through its subsidiary, Farmers Trust Company (“Trust”), and insurance services through the Bank’s subsidiary, Insurance.  Farmers National Captive, Inc. (“Captive”) is a wholly-owned insurance subsidiary of the Company that provides property and casualty insurance coverage to the Company and its subsidiaries.  The Captive pools resources with eleven other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among the pool members and to provide insurance where not currently available or economically feasible in today’s insurance market place.  The consolidated financial statements include the accounts of the Company, the Bank and its subsidiaries, along with the Trust and Captive.  All significant intercompany balances and transactions have been eliminated in the consolidation.

Corporate Reorganization

Corporate Reorganization:

On July 1, 2019, Trust acquired all shares of National Associates, Inc. (“NAI”) from the Company through a corporate reorganization.  The Company was the sole shareholder of Trust and NAI before the reorganization.  The entities were combined into one reporting unit and one operating segment and began reporting as one unit, for both internal and external reports, during the third quarter of 2019.  The combination is part of the Company’s plan to increase efficiencies within the different business lines.
Basis of Presentation

Basis of Presentation:

The unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements.  The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2019 Annual Report to Shareholders included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.  The interim consolidated financial statements include all adjustments (consisting of only normal recurring items) that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented.  The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year.  Certain items included in the prior period financial statements were reclassified to conform to the current period presentation. There was no effect on net income or total stockholders’ equity.
Estimates

Estimates:

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
Segments

Segments:

The Company provides a broad range of financial services to individuals and companies in northeastern Ohio and western Pennsylvania.  Operations are managed and financial performance is primarily aggregated and reported in two lines of business, the Bank segment and the Trust segment.  During the third quarter of 2019 the Company merged the Retirement Consulting segment into the Trust segment.  In prior periods segment reporting was reported in three segments.
Equity

Equity:

There are 50,000,000 shares authorized and available for issuance as of March 31, 2020.  Outstanding shares at March 31, 2020 were 28,127,335.
Comprehensive Income

Comprehensive Income:

Comprehensive income consists of net income and other comprehensive income.  Other comprehensive income consists of unrealized gains and losses on securities available for sale which are recognized as components of stockholders’ equity, net of tax effect.
Risks and Uncertainties

Risks and Uncertainties:

The outbreak of COVID-19 has adversely impacted a broad range of industries in which the Company’s customers operate and could impair their ability to fulfill their financial obligations to the Company.  The World Health Organization has declared COVID-19 to be a global pandemic indicating that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections.  The spread of the outbreak has caused significant disruptions in the economy and has disrupted banking and other financial activity in the areas in which the Company operates.  While there has been no material impact to the Company’s employees to date, COVID-19 could also potentially create widespread business continuity issues for the Company.  

Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout.  Most notably, the Coronavirus Aid, Relief and Economic Security Act (“CARES”) was signed into law at the end of March 2020 as a $2 trillion legislative package.  The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors.  The package also includes extensive emergency funding for hospitals and providers.  In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts are expected to have a material impact on the Company’s operations.

The Company’s business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions.  If the global response to contain COVID-19 escalates further or is unsuccessful, the Company could experience a material adverse effect on its business, financial condition, results of operations and cash flows.  While it is not possible to know the full universe or extent that the impact of COVID-19, and resulting measures to curtail its spread, will have on the Company’s operations, the Company will disclose potentially material items of which it is aware.

Financial position and results of operations:

The Company’s fee income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company is actively working with COVID-19 affected customers to waive fees from a variety of sources, such as, but not limited to, insufficient funds and overdraft fees, ATM fees, account maintenance fees, etc. These reductions in fees are thought, at this time, to be temporary in conjunction with the length of the expected COVID-19 related economic crisis. At this time, the Company is unable to project the materiality of such an impact, but recognize the breadth of the economic impact is likely to impact its fee income in future periods.

The Company’s interest income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company is actively working with COVID-19 affected borrowers to defer their payments. While interest and fees will still accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted. At this time, the Company is unable to project the materiality of such an impact, but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods.
Capital and liquidity

Capital and liquidity:

While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted by further credit losses. The Company relies on cash on hand as well as dividends from its subsidiaries. If the Company’s capital deteriorates such that its subsidiary bank is unable to pay dividends to it for an extended period of time, the Company may not be able to pay dividends to shareholders.

The Company maintains access to multiple sources of liquidity. Wholesale funding markets have remained open, but rates for short term funding have recently been volatile. If funding costs are elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large numbers of the Company’s deposit customers to withdraw their funds, the Company might become more reliant on volatile or more expensive sources of funding.
New Accounting Standards

New Accounting Standards:

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 from the goodwill impairment test.  Instead, under the new guidance, an entity is to perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.  An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.  The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2019.  Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  The Company adopted this ASU on January 1, 2020.  The adoption of this guidance did not have an impact on the Company’s Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13: Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (modified by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments Credit Losses).  The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.  Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques changed to reflect the full amount of expected credit losses.  Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.  Additionally, the ASU amends the accounting for credit losses on available for sale debt securities and purchased financial assets with credit deterioration.  ASU 2016-13 is effective for public companies for annual periods beginning after December 15, 2019.  Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted.

In accordance with the accounting relief provisions of the CARES, the Bank has postponed the adoption of the current expected credit losses (“CECL”) accounting standards, primarily due to the impact that the COVID-19 pandemic is having on the economy and the lack of reasonable and supportable economic forecasts.  Had the Company adopted CECL as of January 1, 2020, the increase to the allowance for loan losses estimated to have ranged from 15% to 20% of the amount recorded at December 31, 2019, which did not consider potential COVID-19 pandemic related impacts.

In February 2016, FASB issued ASU 2016-02 (Topic 842): Leases.  The main objective of ASU 2016-02 is to provide users with useful, transparent, and complete information about leasing transactions.  ASU 2016-02 requires the rights and obligations associated with leasing arrangements be reflected on the balance sheet in order to increase transparency and comparability among organizations.  Under the updated guidance, lessees are required to recognize a right-to-use asset and a liability to make a lease payment and disclose key information about leasing arrangements.  ASU 2016-02 is effective for public companies for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted.  The Company adopted this ASU on January 1, 2019.  As disclosed in the lease footnote, certain leases that the Company has in place required the capitalization of $3.6 million on the balance sheet as an asset and a related liability in the same amount with no income statement effect at January 1, 2019.

In January 2016, FASB issued ASU 2016-01: Financial Instruments-Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities.  The main objective of ASU 2016-01 is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.  ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.  Some of the amendments in ASU 2016-01  include the following: 1) Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; 2) Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and 4) Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value; among others.  The amendments of ASU 2016-01 were effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  The Company adopted this ASU 2016-01 on January 1, 2018 which resulted in a $169 thousand increase to beginning retained earnings and a $169 thousand decrease to accumulated other comprehensive income on the December 31, 2018 Consolidated Financial Statements.  

v3.20.1
Securities (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Schedule Of Available For Sale Securities [Line Items]    
Amortized Cost $ 448,078 $ 419,795
Gross Unrealized Gains 7,742 13,504
Gross Unrealized Losses (7,777) (1,066)
Fair Value 448,043 432,233
U.S. Treasury and U.S. government sponsored entities    
Schedule Of Available For Sale Securities [Line Items]    
Amortized Cost 3,714 3,773
Gross Unrealized Gains 126 41
Gross Unrealized Losses 0 (3)
Fair Value 3,840 3,811
State and political subdivisions    
Schedule Of Available For Sale Securities [Line Items]    
Amortized Cost 273,941 250,905
Gross Unrealized Gains 1,171 10,944
Gross Unrealized Losses (7,529) (424)
Fair Value 267,583 261,425
Mortgage-backed securities - residential    
Schedule Of Available For Sale Securities [Line Items]    
Amortized Cost 128,064 145,886
Gross Unrealized Gains 5,857 2,396
Gross Unrealized Losses 0 (372)
Fair Value 133,921 147,910
Collateralized mortgage obligations - residential    
Schedule Of Available For Sale Securities [Line Items]    
Amortized Cost 32,832 11,459
Gross Unrealized Gains 458 101
Gross Unrealized Losses (239) (213)
Fair Value 33,051 11,347
Corporate bonds    
Schedule Of Available For Sale Securities [Line Items]    
Amortized Cost 3,262 1,238
Gross Unrealized Gains 90 22
Gross Unrealized Losses (9) 0
Fair Value 3,343 1,260
Small Business Administration    
Schedule Of Available For Sale Securities [Line Items]    
Amortized Cost 6,265 6,534
Gross Unrealized Gains 40 0
Gross Unrealized Losses 0 (54)
Fair Value $ 6,305 $ 6,480
v3.20.1
Other Comprehensive Income (Loss) (Tables)
 3 Months Ended
Mar. 31, 2020
Comprehensive Income Net Of Tax [Abstract]  
Schedule of Other Comprehensive Income (Loss)

The following table represents the details of other comprehensive income for the three month periods ended March 31, 2020 and 2019.

 

 

Three Months Ended March 31, 2020

 

(In Thousands of Dollars)

Pre-tax

 

 

Tax

 

 

After-Tax

 

Unrealized holding gains (losses) on available-for-sale securities during the period

$

(12,217

)

 

$

2,565

 

 

$

(9,652

)

Reclassification adjustment for (gains) losses included in net income (1)

 

(256

)

 

 

54

 

 

 

(202

)

Net other comprehensive income (loss)

$

(12,473

)

 

$

2,619

 

 

$

(9,854

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019

 

(In Thousands of Dollars)

Pre-tax

 

 

Tax

 

 

After-Tax

 

Unrealized holding gains (losses) on available-for-sale securities during the period

$

5,821

 

 

$

(1,223

)

 

$

4,598

 

Reclassification adjustment for losses included in net income (1)

 

34

 

 

 

(7

)

 

 

27

 

Net other comprehensive income (loss)

$

5,855

 

 

$

(1,230

)

 

$

4,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Pre-tax reclassification adjustments relating to available-for-sale securities are reported in security gains and the tax impact is included in income tax expense on the consolidated statements of income.
v3.20.1
Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Total
COMMON STOCK
RETAINED EARNINGS
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
TREASURY STOCK, AT COST
Balance at beginning of year at Dec. 31, 2018   $ 186,163 $ 83,630 $ (4,030) $ (3,443)
Net income $ 8,388   8,388    
Dividends declared     (2,500)    
Issued treasury shares under the Long Term Incentive Plan   0      
Issued as part of a business combination   0      
Stock compensation expense for unvested shares   320      
Other comprehensive income (loss) 4,625     4,625  
Purchased shares         (202)
Issued shares under the Long Term Incentive Plan         0
Retained shares to cover tax withholdings under the Long Term Incentive Plan         0
Balance at end of year at Mar. 31, 2019 272,951 186,483 89,518 595 (3,645)
Balance at beginning of year at Dec. 31, 2019 299,309 186,345 108,851 9,826 (5,713)
Net income 8,639   8,639    
Dividends declared     (3,139)    
Issued treasury shares under the Long Term Incentive Plan   (22)      
Issued as part of a business combination   22,554      
Stock compensation expense for unvested shares   337      
Other comprehensive income (loss) (9,854)     (9,854)  
Purchased shares         (14,238)
Issued shares under the Long Term Incentive Plan         22
Retained shares to cover tax withholdings under the Long Term Incentive Plan         (11)
Balance at end of year at Mar. 31, 2020 $ 303,597 $ 209,214 $ 114,351 $ (28) $ (19,940)
v3.20.1
Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
ASSETS    
Cash and due from banks $ 30,943 $ 23,229
Federal funds sold and other 52,164 47,531
TOTAL CASH AND CASH EQUIVALENTS 83,107 70,760
Securities available for sale 448,043 432,233
Equity securities 8,080 7,909
Loans held for sale 3,272 2,600
Loans 1,976,582 1,811,539
Less allowance for loan losses 14,952 14,487
NET LOANS 1,961,630 1,797,052
Premises and equipment, net 25,374 23,817
Goodwill 47,360 38,201
Other intangibles, net 4,838 4,444
Bank owned life insurance 35,735 35,527
Other assets 50,810 36,615
TOTAL ASSETS 2,668,249 2,449,158
Deposits:    
Noninterest-bearing 449,952 434,126
Interest-bearing 1,679,325 1,490,763
Brokered time deposits 117,000 84,075
TOTAL DEPOSITS 2,246,277 2,008,964
Short-term borrowings 19,998 77,050
Long-term borrowings 76,854 45,147
Other liabilities 21,523 18,688
TOTAL LIABILITIES 2,364,652 2,149,849
Commitments and contingent liabilities
Stockholders' Equity:    
Common Stock - Authorized 50,000,000 shares; issued 29,577,827 in 2020 and 28,179,598 in 2019 209,214 186,345
Retained earnings 114,351 108,851
Accumulated other comprehensive income (loss) (28) 9,826
Treasury stock, at cost; 1,450,492 shares in 2020 and 508,859 shares in 2019 (19,940) (5,713)
TOTAL STOCKHOLDERS' EQUITY 303,597 299,309
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,668,249 $ 2,449,158
v3.20.1
Summary of Significant Accounting Policies (Details Textual)
$ in Thousands
 3 Months Ended 12 Months Ended
Jan. 01, 2020
Mar. 31, 2020
USD ($)
Reporting
Segment
shares
Dec. 31, 2019
Segment
shares
Jan. 01, 2019
USD ($)
Dec. 31, 2018
USD ($)
Apr. 30, 2018
shares
Jan. 01, 2018
USD ($)
Summary of Significant Accounting Policies (Additional Textual) [Abstract]              
Operating segments of business | Segment   2 3        
Common stock, shares authorized and available for issuance | shares   50,000,000 50,000,000     50,000,000  
Common stock, shares outstanding | shares   28,127,335          
CARES act of 2020 Aid   $ 2,000,000,000          
ASU 2016-13 | Minimum              
Summary of Significant Accounting Policies (Additional Textual) [Abstract]              
Increase in percentage of allowance for loan losses 15.00%            
ASU 2016-13 | Maximum              
Summary of Significant Accounting Policies (Additional Textual) [Abstract]              
Increase in percentage of allowance for loan losses 20.00%            
ASU 2016-02              
Summary of Significant Accounting Policies (Additional Textual) [Abstract]              
Capitalization of leases as an asset       $ 3,600      
ASU 2016-01 | Retained Earnings              
Summary of Significant Accounting Policies (Additional Textual) [Abstract]              
Cumulative effect adjustment upon adoption of new accounting principle             $ 169
ASU 2016-01 | Accumulated Other Comprehensive Income              
Summary of Significant Accounting Policies (Additional Textual) [Abstract]              
Cumulative effect adjustment upon adoption of new accounting principle         $ (169)    
NAI              
Summary of Significant Accounting Policies (Additional Textual) [Abstract]              
Number of reporting units | Reporting   1          
Number of reportable segments | Segment   1          
v3.20.1
Credit Quality Indicators (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans $ 1,219,906 $ 1,097,240
Pass    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 1,192,479 1,070,176
Special Mention    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 14,215 16,348
Substandard    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 13,212 10,716
Originated Loans    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 1,006,241 992,363
Originated Loans | Pass    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 986,485 971,033
Originated Loans | Special Mention    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 13,726 15,867
Originated Loans | Substandard    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 6,030 5,463
Originated Loans | Commercial real estate | Commercial real estate, Owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 193,465 183,923
Originated Loans | Commercial real estate | Commercial real estate, Non-owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 286,021 286,524
Originated Loans | Commercial real estate | Commercial farmland    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 141,114 138,515
Originated Loans | Commercial real estate | Commercial real estate, Other    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 91,322 93,271
Originated Loans | Commercial real estate | Pass | Commercial real estate, Owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 188,841 177,540
Originated Loans | Commercial real estate | Pass | Commercial real estate, Non-owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 278,852 279,103
Originated Loans | Commercial real estate | Pass | Commercial farmland    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 138,919 136,674
Originated Loans | Commercial real estate | Pass | Commercial real estate, Other    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 90,895 93,082
Originated Loans | Commercial real estate | Special Mention | Commercial real estate, Owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 3,073 5,357
Originated Loans | Commercial real estate | Special Mention | Commercial real estate, Non-owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 7,092 7,374
Originated Loans | Commercial real estate | Special Mention | Commercial farmland    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 1,815 1,457
Originated Loans | Commercial real estate | Special Mention | Commercial real estate, Other    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 246 0
Originated Loans | Commercial real estate | Substandard | Commercial real estate, Owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 1,551 1,026
Originated Loans | Commercial real estate | Substandard | Commercial real estate, Non-owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 77 47
Originated Loans | Commercial real estate | Substandard | Commercial farmland    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 380 384
Originated Loans | Commercial real estate | Substandard | Commercial real estate, Other    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 181 189
Originated Loans | Commercial | Commercial and industrial    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 251,199 243,808
Originated Loans | Commercial | Commercial, Agricultural    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 43,120 46,322
Originated Loans | Commercial | Pass | Commercial and industrial    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 246,242 238,351
Originated Loans | Commercial | Pass | Commercial, Agricultural    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 42,736 46,283
Originated Loans | Commercial | Special Mention | Commercial and industrial    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 1,453 1,673
Originated Loans | Commercial | Special Mention | Commercial, Agricultural    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 47 6
Originated Loans | Commercial | Substandard | Commercial and industrial    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 3,504 3,784
Originated Loans | Commercial | Substandard | Commercial, Agricultural    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 337 33
Acquired Loans    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 213,665 104,877
Acquired Loans | Pass    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 205,994 99,143
Acquired Loans | Special Mention    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 489 481
Acquired Loans | Substandard    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 7,182 5,253
Acquired Loans | Commercial real estate | Commercial real estate, Owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 54,949 35,424
Acquired Loans | Commercial real estate | Commercial real estate, Non-owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 66,217 10,419
Acquired Loans | Commercial real estate | Commercial farmland    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 34,418 35,377
Acquired Loans | Commercial real estate | Commercial real estate, Other    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 21,322 5,960
Acquired Loans | Commercial real estate | Pass | Commercial real estate, Owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 53,806 34,707
Acquired Loans | Commercial real estate | Pass | Commercial real estate, Non-owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 65,387 10,246
Acquired Loans | Commercial real estate | Pass | Commercial farmland    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 31,961 32,112
Acquired Loans | Commercial real estate | Pass | Commercial real estate, Other    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 21,256 5,891
Acquired Loans | Commercial real estate | Special Mention | Commercial real estate, Owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 104 110
Acquired Loans | Commercial real estate | Special Mention | Commercial real estate, Non-owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 53 54
Acquired Loans | Commercial real estate | Special Mention | Commercial farmland    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 0 0
Acquired Loans | Commercial real estate | Special Mention | Commercial real estate, Other    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 0 0
Acquired Loans | Commercial real estate | Substandard | Commercial real estate, Owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 1,039 607
Acquired Loans | Commercial real estate | Substandard | Commercial real estate, Non-owner occupied    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 777 119
Acquired Loans | Commercial real estate | Substandard | Commercial farmland    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 2,457 3,265
Acquired Loans | Commercial real estate | Substandard | Commercial real estate, Other    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 66 69
Acquired Loans | Commercial | Commercial and industrial    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 31,516 11,650
Acquired Loans | Commercial | Commercial, Agricultural    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 5,243 6,047
Acquired Loans | Commercial | Pass | Commercial and industrial    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 28,768 10,570
Acquired Loans | Commercial | Pass | Commercial, Agricultural    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 4,816 5,617
Acquired Loans | Commercial | Special Mention | Commercial and industrial    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 0 0
Acquired Loans | Commercial | Special Mention | Commercial, Agricultural    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 332 317
Acquired Loans | Commercial | Substandard | Commercial and industrial    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans 2,748 1,080
Acquired Loans | Commercial | Substandard | Commercial, Agricultural    
Financing Receivable Recorded Investment [Line Items]    
Total risk category of loans by class of loans $ 95 $ 113
v3.20.1
Short-term borrowings (Details Textual)
Mar. 31, 2020
USD ($)
Institution
Dec. 31, 2019
USD ($)
Institution
Short Term Debt [Line Items]    
Short-term Federal Home Loan Banks advances $ 15,000,000 $ 75,000,000
Securities sold under repurchase agreements 4,600,000 1,700,000
Federal funds purchased 0 0
Business line of credit $ 350,000 $ 350,000
Number of lending institutions | Institution 1 1
US Treasury and Government Short-term Debt Securities    
Short Term Debt [Line Items]    
Securities sold under repurchase agreements $ 4,900,000 $ 1,800,000
Pledged securities, percentage of repurchase agreement balances 105.00%  
Weighted Average    
Short Term Debt [Line Items]    
Weighted average interest rate 0.26%  
v3.20.1
Loans (Details 8) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Schedule of investment in past due loans    
Total Past Due $ 30,912 $ 18,238
Loans Not Past Due 1,945,670 1,793,301
Loans 1,976,582 1,811,539
Commercial real estate    
Schedule of investment in past due loans    
Loans 888,828 789,413
Commercial    
Schedule of investment in past due loans    
Loans 331,078 307,827
Residential real estate    
Schedule of investment in past due loans    
Loans 540,808 499,301
Consumer    
Schedule of investment in past due loans    
Loans 215,868 214,998
Financing Receivables, 30 to 59 Days Past Due    
Schedule of investment in past due loans    
Total Past Due 14,978 9,698
Financing Receivables, 60 to 89 Days Past Due    
Schedule of investment in past due loans    
Total Past Due 4,089 2,195
Financing Receivables, Equal to Greater than 90 Days Past Due    
Schedule of investment in past due loans    
Total Past Due 11,845 6,345
Residential real estate, 1-4 family residential | Residential real estate    
Schedule of investment in past due loans    
Loans 425,852 387,682
Residential real estate, Home equity lines of credit | Residential real estate    
Schedule of investment in past due loans    
Loans 114,956 111,619
Consumer, Indirect | Consumer    
Schedule of investment in past due loans    
Loans 170,157 171,725
Consumer, Direct | Consumer    
Schedule of investment in past due loans    
Loans 36,345 33,635
Consumer, Other | Consumer    
Schedule of investment in past due loans    
Loans 9,366 9,638
Originated Loans    
Schedule of investment in past due loans    
Total Past Due 15,540 13,574
Loans Not Past Due 1,608,518 1,603,765
Loans 1,624,058 1,617,339
Originated Loans | Financing Receivables, 30 to 59 Days Past Due    
Schedule of investment in past due loans    
Total Past Due 9,536 8,020
Originated Loans | Financing Receivables, 60 to 89 Days Past Due    
Schedule of investment in past due loans    
Total Past Due 1,751 1,709
Originated Loans | Financing Receivables, Equal to Greater than 90 Days Past Due    
Schedule of investment in past due loans    
Total Past Due 4,253 3,845
Originated Loans | Commercial real estate, Owner occupied | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 1,132 93
Loans Not Past Due 192,333 183,830
Loans 193,465 183,923
Originated Loans | Commercial real estate, Owner occupied | Financing Receivables, 30 to 59 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 739 87
Originated Loans | Commercial real estate, Owner occupied | Financing Receivables, 60 to 89 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 53 0
Originated Loans | Commercial real estate, Owner occupied | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 340 6
Originated Loans | Commercial real estate, Non-owner occupied | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 32 2
Loans Not Past Due 285,989 286,522
Loans 286,021 286,524
Originated Loans | Commercial real estate, Non-owner occupied | Financing Receivables, 30 to 59 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 32 2
Originated Loans | Commercial real estate, Non-owner occupied | Financing Receivables, 60 to 89 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 0
Originated Loans | Commercial real estate, Non-owner occupied | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 0
Originated Loans | Commercial real estate, Farmland | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 440 14
Loans Not Past Due 140,674 138,501
Loans 141,114 138,515
Originated Loans | Commercial real estate, Farmland | Financing Receivables, 30 to 59 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 430 0
Originated Loans | Commercial real estate, Farmland | Financing Receivables, 60 to 89 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 0
Originated Loans | Commercial real estate, Farmland | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 10 14
Originated Loans | Commercial real estate, Other | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 0
Loans Not Past Due 91,322 93,271
Loans 91,322 93,271
Originated Loans | Commercial real estate, Other | Financing Receivables, 30 to 59 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 0
Originated Loans | Commercial real estate, Other | Financing Receivables, 60 to 89 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 0
Originated Loans | Commercial real estate, Other | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 0
Originated Loans | Commercial, Commercial and industrial | Commercial    
Schedule of investment in past due loans    
Total Past Due 1,452 2,598
Loans Not Past Due 249,747 241,210
Loans 251,199 243,808
Originated Loans | Commercial, Commercial and industrial | Financing Receivables, 30 to 59 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 925 1,458
Originated Loans | Commercial, Commercial and industrial | Financing Receivables, 60 to 89 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 93 573
Originated Loans | Commercial, Commercial and industrial | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 434 567
Originated Loans | Commercial, Agricultural | Commercial    
Schedule of investment in past due loans    
Total Past Due 159 180
Loans Not Past Due 42,961 46,142
Loans 43,120 46,322
Originated Loans | Commercial, Agricultural | Financing Receivables, 30 to 59 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 79 103
Originated Loans | Commercial, Agricultural | Financing Receivables, 60 to 89 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 3 77
Originated Loans | Commercial, Agricultural | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 77 0
Originated Loans | Residential real estate, 1-4 family residential | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 7,026 5,690
Loans Not Past Due 308,432 318,536
Loans 315,458 324,226
Originated Loans | Residential real estate, 1-4 family residential | Financing Receivables, 30 to 59 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 4,469 3,811
Originated Loans | Residential real estate, 1-4 family residential | Financing Receivables, 60 to 89 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 912 207
Originated Loans | Residential real estate, 1-4 family residential | Financing Receivables, Equal to Greater than 90 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 1,645 1,672
Originated Loans | Residential real estate, Home equity lines of credit | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 1,207 974
Loans Not Past Due 92,850 91,000
Loans 94,057 91,974
Originated Loans | Residential real estate, Home equity lines of credit | Financing Receivables, 30 to 59 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 496 270
Originated Loans | Residential real estate, Home equity lines of credit | Financing Receivables, 60 to 89 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 0 21
Originated Loans | Residential real estate, Home equity lines of credit | Financing Receivables, Equal to Greater than 90 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 711 683
Originated Loans | Consumer, Indirect | Consumer    
Schedule of investment in past due loans    
Total Past Due 2,798 2,820
Loans Not Past Due 167,359 168,905
Loans 170,157 171,725
Originated Loans | Consumer, Indirect | Financing Receivables, 30 to 59 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 1,715 1,599
Originated Loans | Consumer, Indirect | Financing Receivables, 60 to 89 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 387 533
Originated Loans | Consumer, Indirect | Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 696 688
Originated Loans | Consumer, Direct | Consumer    
Schedule of investment in past due loans    
Total Past Due 1,210 1,018
Loans Not Past Due 27,669 26,549
Loans 28,879 27,567
Originated Loans | Consumer, Direct | Financing Receivables, 30 to 59 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 599 537
Originated Loans | Consumer, Direct | Financing Receivables, 60 to 89 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 285 272
Originated Loans | Consumer, Direct | Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 326 209
Originated Loans | Consumer, Other | Consumer    
Schedule of investment in past due loans    
Total Past Due 84 185
Loans Not Past Due 9,182 9,299
Loans 9,266 9,484
Originated Loans | Consumer, Other | Financing Receivables, 30 to 59 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 52 153
Originated Loans | Consumer, Other | Financing Receivables, 60 to 89 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 18 26
Originated Loans | Consumer, Other | Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 14 6
Acquired Loans    
Schedule of investment in past due loans    
Total Past Due 15,372 4,664
Loans Not Past Due 337,152 189,536
Loans 352,524 194,200
Acquired Loans | Financing Receivables, 30 to 59 Days Past Due    
Schedule of investment in past due loans    
Total Past Due 5,442 1,678
Acquired Loans | Financing Receivables, 60 to 89 Days Past Due    
Schedule of investment in past due loans    
Total Past Due 2,338 486
Acquired Loans | Financing Receivables, Equal to Greater than 90 Days Past Due    
Schedule of investment in past due loans    
Total Past Due 7,592 2,500
Acquired Loans | Commercial real estate, Owner occupied | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 192 0
Loans Not Past Due 54,757 35,424
Loans 54,949 35,424
Acquired Loans | Commercial real estate, Owner occupied | Financing Receivables, 30 to 59 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 133 0
Acquired Loans | Commercial real estate, Owner occupied | Financing Receivables, 60 to 89 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 0
Acquired Loans | Commercial real estate, Owner occupied | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 59 0
Acquired Loans | Commercial real estate, Non-owner occupied | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 1,465 102
Loans Not Past Due 64,752 10,317
Loans 66,217 10,419
Acquired Loans | Commercial real estate, Non-owner occupied | Financing Receivables, 30 to 59 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 146 0
Acquired Loans | Commercial real estate, Non-owner occupied | Financing Receivables, 60 to 89 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 707 0
Acquired Loans | Commercial real estate, Non-owner occupied | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 612 102
Acquired Loans | Commercial real estate, Farmland | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 1,663 519
Loans Not Past Due 32,755 34,858
Loans 34,418 35,377
Acquired Loans | Commercial real estate, Farmland | Financing Receivables, 30 to 59 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 779 0
Acquired Loans | Commercial real estate, Farmland | Financing Receivables, 60 to 89 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 0
Acquired Loans | Commercial real estate, Farmland | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 884 519
Acquired Loans | Commercial real estate, Other | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 69
Loans Not Past Due 21,322 5,891
Loans 21,322 5,960
Acquired Loans | Commercial real estate, Other | Financing Receivables, 30 to 59 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 69
Acquired Loans | Commercial real estate, Other | Financing Receivables, 60 to 89 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 0
Acquired Loans | Commercial real estate, Other | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial real estate    
Schedule of investment in past due loans    
Total Past Due 0 0
Acquired Loans | Commercial, Commercial and industrial | Commercial    
Schedule of investment in past due loans    
Total Past Due 1,228 650
Loans Not Past Due 30,288 11,000
Loans 31,516 11,650
Acquired Loans | Commercial, Commercial and industrial | Financing Receivables, 30 to 59 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 558 47
Acquired Loans | Commercial, Commercial and industrial | Financing Receivables, 60 to 89 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 112 1
Acquired Loans | Commercial, Commercial and industrial | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 558 602
Acquired Loans | Commercial, Agricultural | Commercial    
Schedule of investment in past due loans    
Total Past Due 7 17
Loans Not Past Due 5,236 6,030
Loans 5,243 6,047
Acquired Loans | Commercial, Agricultural | Financing Receivables, 30 to 59 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 0 0
Acquired Loans | Commercial, Agricultural | Financing Receivables, 60 to 89 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 0 8
Acquired Loans | Commercial, Agricultural | Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial    
Schedule of investment in past due loans    
Total Past Due 7 9
Acquired Loans | Residential real estate, 1-4 family residential | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 10,029 2,452
Loans Not Past Due 100,365 61,004
Loans 110,394 63,456
Acquired Loans | Residential real estate, 1-4 family residential | Financing Receivables, 30 to 59 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 3,586 1,159
Acquired Loans | Residential real estate, 1-4 family residential | Financing Receivables, 60 to 89 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 1,359 448
Acquired Loans | Residential real estate, 1-4 family residential | Financing Receivables, Equal to Greater than 90 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 5,084 845
Acquired Loans | Residential real estate, Home equity lines of credit | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 308 312
Loans Not Past Due 20,591 19,333
Loans 20,899 19,645
Acquired Loans | Residential real estate, Home equity lines of credit | Financing Receivables, 30 to 59 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 48 56
Acquired Loans | Residential real estate, Home equity lines of credit | Financing Receivables, 60 to 89 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 30 8
Acquired Loans | Residential real estate, Home equity lines of credit | Financing Receivables, Equal to Greater than 90 Days Past Due | Residential real estate    
Schedule of investment in past due loans    
Total Past Due 230 248
Acquired Loans | Consumer, Indirect | Consumer    
Schedule of investment in past due loans    
Loans 0 0
Acquired Loans | Consumer, Direct | Consumer    
Schedule of investment in past due loans    
Total Past Due 480 543
Loans Not Past Due 6,986 5,525
Loans 7,466 6,068
Acquired Loans | Consumer, Direct | Financing Receivables, 30 to 59 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 192 347
Acquired Loans | Consumer, Direct | Financing Receivables, 60 to 89 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 130 21
Acquired Loans | Consumer, Direct | Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 158 175
Acquired Loans | Consumer, Other | Consumer    
Schedule of investment in past due loans    
Total Past Due 0 0
Loans Not Past Due 100 154
Loans 100 154
Acquired Loans | Consumer, Other | Financing Receivables, 30 to 59 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 0 0
Acquired Loans | Consumer, Other | Financing Receivables, 60 to 89 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due 0 0
Acquired Loans | Consumer, Other | Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer    
Schedule of investment in past due loans    
Total Past Due $ 0 $ 0
v3.20.1
Loans (Details 1) - National Bancshares Corporation - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Financing Receivable Impaired [Line Items]    
Total outstanding balance $ 1,330 $ 950
Carrying amount, net of allowance 1,045 690
Commercial real estate, Non-owner occupied | Commercial real estate    
Financing Receivable Impaired [Line Items]    
Loans acquired with deteriorated credit quality 648 225
Commercial, Commercial and industrial | Commercial    
Financing Receivable Impaired [Line Items]    
Loans acquired with deteriorated credit quality $ 682 $ 725
v3.20.1
Securities (Details Textual)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
USD ($)
Securities
Mar. 31, 2019
USD ($)
Schedule Of Available For Sale Securities [Line Items]    
Proceeds from sales of securities available for sale $ 15,126 $ 9,646
Gross gains realized 256 22
Gross losses realized 0 56
Debt securities, net unrealized gains (losses) $ (35) 769
Number of securities | Securities 617  
Number of securities on unrealized loss position | Securities 303  
ASU 2016-01 | Equity securities    
Schedule Of Available For Sale Securities [Line Items]    
Unrealized losses recognized in income statement for securities   $ 44
Unrealized gains recognized in income statement for securities $ 99  
v3.20.1
Loans (Details 4) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Dec. 31, 2018
Ending allowance balance attributable to loans:        
Individually evaluated for impairment $ 61 $ 61    
Collectively evaluated for impairment 14,801 14,320    
Acquired loans collectively evaluated for impairment 90 106    
Total ending allowance balance 14,952 14,487 $ 13,777 $ 13,592
Loans:        
Loans individually evaluated for impairment 4,383 4,253    
Loans collectively evaluated for impairment 1,620,870 1,614,267    
Acquired loans 350,284 192,329    
Acquired with deteriorated credit quality 1,219,906 1,097,240    
Loans 1,976,582 1,811,539    
Receivables Acquired with Deteriorated Credit Quality        
Ending allowance balance attributable to loans:        
Acquired with deteriorated credit quality 0 0    
Loans:        
Acquired with deteriorated credit quality 1,045 690    
Commercial real estate        
Ending allowance balance attributable to loans:        
Individually evaluated for impairment 0 0    
Collectively evaluated for impairment 6,516 5,790    
Acquired loans collectively evaluated for impairment 45 53    
Total ending allowance balance 6,561 5,843 5,195 5,036
Loans:        
Loans individually evaluated for impairment 549 561    
Loans collectively evaluated for impairment 711,923 702,226    
Acquired loans 175,770 86,431    
Loans 888,828 789,413    
Commercial real estate | Receivables Acquired with Deteriorated Credit Quality        
Ending allowance balance attributable to loans:        
Acquired with deteriorated credit quality 0 0    
Loans:        
Acquired with deteriorated credit quality 586 195    
Commercial        
Ending allowance balance attributable to loans:        
Individually evaluated for impairment 2 2    
Collectively evaluated for impairment 2,610 2,309    
Acquired loans collectively evaluated for impairment 9 12    
Total ending allowance balance 2,621 2,323 2,157 2,093
Loans:        
Loans individually evaluated for impairment 211 205    
Loans collectively evaluated for impairment 294,190 290,017    
Acquired loans 36,218 17,110    
Loans 331,078 307,827    
Commercial | Receivables Acquired with Deteriorated Credit Quality        
Ending allowance balance attributable to loans:        
Acquired with deteriorated credit quality 0 0    
Loans:        
Acquired with deteriorated credit quality 459 495    
Residential real estate        
Ending allowance balance attributable to loans:        
Individually evaluated for impairment 59 59    
Collectively evaluated for impairment 2,818 2,777    
Acquired loans collectively evaluated for impairment 34 39    
Total ending allowance balance 2,911 2,875 2,813 2,837
Loans:        
Loans individually evaluated for impairment 3,363 3,240    
Loans collectively evaluated for impairment 406,688 413,446    
Acquired loans 130,757 82,615    
Loans 540,808 499,301    
Residential real estate | Receivables Acquired with Deteriorated Credit Quality        
Ending allowance balance attributable to loans:        
Acquired with deteriorated credit quality 0 0    
Loans:        
Acquired with deteriorated credit quality 0 0    
Consumer        
Ending allowance balance attributable to loans:        
Individually evaluated for impairment 0 0    
Collectively evaluated for impairment 2,686 2,708    
Acquired loans collectively evaluated for impairment 2 2    
Total ending allowance balance 2,688 2,710 2,819 2,963
Loans:        
Loans individually evaluated for impairment 260 247    
Loans collectively evaluated for impairment 208,069 208,578    
Acquired loans 7,539 6,173    
Loans 215,868 214,998    
Consumer | Receivables Acquired with Deteriorated Credit Quality        
Ending allowance balance attributable to loans:        
Acquired with deteriorated credit quality 0 0    
Loans:        
Acquired with deteriorated credit quality 0 0    
Unallocated        
Ending allowance balance attributable to loans:        
Individually evaluated for impairment 0 0    
Collectively evaluated for impairment 171 736    
Acquired loans collectively evaluated for impairment 0 0    
Total ending allowance balance 171 736 $ 793 $ 663
Loans:        
Loans individually evaluated for impairment 0 0    
Loans collectively evaluated for impairment 0 0    
Acquired loans 0 0    
Loans 0 0    
Unallocated | Receivables Acquired with Deteriorated Credit Quality        
Ending allowance balance attributable to loans:        
Acquired with deteriorated credit quality 0 0    
Loans:        
Acquired with deteriorated credit quality $ 0 $ 0    
v3.20.1
Fair Value (Details 2) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment $ 4,383 $ 4,253
Residential Real Estate | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment 254 183
Consumer | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment 25 12
Other Real Estate Owned | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment 77  
Quoted Prices in Active Markets for Identical Assets (Level 1) | Residential Real Estate | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Consumer | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other Real Estate Owned | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment 0  
Significant Other Observable Inputs (Level 2) | Residential Real Estate | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment 0 0
Significant Other Observable Inputs (Level 2) | Consumer | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment 0 0
Significant Other Observable Inputs (Level 2) | Other Real Estate Owned | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment 0  
Significant Unobservable Inputs (Level 3) | Residential Real Estate | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment 254 183
Significant Unobservable Inputs (Level 3) | Consumer | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment 25 $ 12
Significant Unobservable Inputs (Level 3) | Other Real Estate Owned | Fair Value, Measurements, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Recorded Investment $ 77  
v3.20.1
Earnings Per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Basic EPS    
Net income $ 8,639 $ 8,388
Weighted average shares outstanding 28,535,371 27,790,028
Basic earnings per share $ 0.30 $ 0.30
Diluted EPS    
Net income $ 8,639 $ 8,388
Weighted average shares outstanding 28,535,371 27,790,028
Dilutive effect of restricted stock awards 174,632 193,301
Weighted average shares for diluted earnings per share 28,710,003 27,983,329
Diluted earnings per share $ 0.30 $ 0.30
v3.20.1
Other Comprehensive Income (Loss) (Details) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Comprehensive Income Net Of Tax [Abstract]    
Unrealized holding gains (losses) on available-for-sale securities during the period, pre-tax $ (12,217) $ 5,821
Reclassification adjustment for (gains) losses included in net income, pre-tax [1] (256) 34
Net other comprehensive income (loss), pre-tax (12,473) 5,855
Unrealized holding gains (losses) on available-for-sale securities during the period, tax 2,565 (1,223)
Reclassification adjustment for (gains) losses included in net income, tax [1] 54 (7)
Net other comprehensive income (loss), tax 2,619 (1,230)
Unrealized holding gains (losses) on available-for-sale securities during the period, after tax (9,652) 4,598
Reclassification adjustment for (gains) losses included in net income, after-tax [1] (202) 27
Other comprehensive income (loss), net of tax $ (9,854) $ 4,625
[1] Pre-tax reclassification adjustments relating to available-for-sale securities are reported in security gains and the tax impact is included in income tax expense on the consolidated statements of income.
v3.20.1
Goodwill and Intangible Assets (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Acquired intangible assets    
Gross Carrying Amount $ 15,140 $ 14,414
Accumulated Amortization (10,302) (9,970)
Customer Relationships    
Acquired intangible assets    
Gross Carrying Amount 7,210 7,210
Accumulated Amortization (6,033) (5,938)
Non-compete contracts    
Acquired intangible assets    
Gross Carrying Amount 430 430
Accumulated Amortization (385) (384)
Trade Name    
Acquired intangible assets    
Gross Carrying Amount 520 520
Accumulated Amortization (287) (277)
Core Deposits    
Acquired intangible assets    
Gross Carrying Amount 6,980 6,254
Accumulated Amortization $ (3,597) $ (3,371)
v3.20.1
Fair Value
 3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value

Fair Value:

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (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.  There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other 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.

Level 3 – Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Investment Securities: The Company uses a third party service to estimate fair value on available for sale securities on a monthly basis.  The Company’s service provider is considered a leading evaluation pricing service for U.S. domestic fixed income securities and complies fully with ASU 2016-01’s exit pricing requirements.  They subscribe to multiple third-party pricing vendors, and supplement that information with matrix pricing methods.  The fair values for investment securities, which consist of equity securities that are recorded at fair market value to comply with ASU 2016-01, are determined by quoted market prices in active markets, if available (Level 1).  The equity securities change in fair market value is recorded in the income statements.  For securities where quoted prices are not available, fair values are calculated based on quoted prices for similar assets in active markets, quoted prices for similar assets in markets that are not active or inputs other than quoted prices, which provide a reasonable basis for fair value determination.  Such inputs may include interest rates and yield curves, volatilities, prepayment speeds, credit risks and default rates.  Inputs used are derived principally from observable market data (Level 2).  For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).  The fair values of Level 3 investment securities are determined by using unobservable inputs to measure fair value of assets for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based on the best information at the time, to the extent that inputs are available without undue cost and effort.  For the period ended March 31, 2020 and for the year ended December 31, 2019, the fair value of Level 3 investment securities was immaterial.

Derivative Instruments: The fair values of derivative instruments are based on valuation models using observable market data as of the measurement date (Level 2).

Impaired Loans: At the time loans are considered impaired, collateral dependent impaired loans are valued at the lower of cost or fair value and non-collateral dependent loans are valued based on discounted cash flows.  Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses.  For collateral dependent loans fair value is commonly based on recent real estate appraisals.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.  Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available.  Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.  Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification.  Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair values are commonly based on recent real estate appraisals.  These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial and commercial real estate properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  Once received, a member of the Appraisal Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.  On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what adjustments should be made to appraisals to arrive at fair value.

Assets measured at fair value on a recurring basis are summarized below:

 

 

 

Fair Value Measurements at March 31, 2020 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

3,840

 

 

$

0

 

 

$

3,840

 

 

$

0

 

State and political subdivisions

 

 

267,583

 

 

 

0

 

 

 

267,583

 

 

 

0

 

Corporate bonds

 

 

3,343

 

 

 

0

 

 

 

3,343

 

 

 

0

 

Mortgage-backed securities-residential

 

 

133,921

 

 

 

0

 

 

 

133,916

 

 

 

5

 

Collateralized mortgage obligations

 

 

33,051

 

 

 

0

 

 

 

33,051

 

 

 

0

 

Small Business Administration

 

 

6,305

 

 

 

0

 

 

 

6,305

 

 

 

0

 

Equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities at fair value

 

 

444

 

 

 

444

 

 

 

0

 

 

 

0

 

Other investments measured at net asset value

 

 

7,636

 

 

n/a

 

 

n/a

 

 

n/a

 

Total investment securities

 

$

456,123

 

 

$

444

 

 

$

448,038

 

 

$

5

 

Loan yield maintenance provisions

 

$

4,810

 

 

$

0

 

 

$

4,810

 

 

$

0

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

4,810

 

 

$

0

 

 

$

4,810

 

 

$

0

 

 

 

 

Fair Value Measurements at December 31, 2019 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices  in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

3,811

 

 

$

0

 

 

$

3,811

 

 

$

0

 

State and political subdivisions

 

 

261,425

 

 

 

0

 

 

 

261,425

 

 

 

0

 

Corporate bonds

 

 

1,260

 

 

 

0

 

 

 

1,260

 

 

 

0

 

Mortgage-backed securities-residential

 

 

147,910

 

 

 

0

 

 

 

147,905

 

 

 

5

 

Collateralized mortgage obligations

 

 

11,347

 

 

 

0

 

 

 

11,347

 

 

 

0

 

Small Business Administration

 

 

6,480

 

 

 

0

 

 

 

6,480

 

 

 

0

 

Equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities at fair value

 

 

594

 

 

 

594

 

 

 

0

 

 

 

0

 

Other investments measured at net asset value

 

 

7,315

 

 

n/a

 

 

n/a

 

 

n/a

 

Total investment securities

 

$

440,142

 

 

$

594

 

 

$

432,228

 

 

$

5

 

Loan yield maintenance provisions

 

$

1,898

 

 

$

0

 

 

$

1,898

 

 

$

0

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

1,898

 

 

$

0

 

 

$

1,898

 

 

$

0

 

 

There were no significant transfers between Level 1 and Level 2 during the three month period ended March 31, 2020 and 2019.  For additional information related to yield maintenance provisions and interest rate swaps see Interest – Rate Swaps note.

 

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

 

 

 

Investment Securities Available-for-sale

(Level 3)

 

 

 

Three Months ended

March 31,

 

(In Thousands of Dollars)

 

2020

 

 

2019

 

Beginning Balance

 

$

5

 

 

$

6

 

Transfers from level 2

 

 

0

 

 

 

0

 

Repayments, calls and maturities

 

 

0

 

 

 

0

 

Ending Balance

 

$

5

 

 

$

6

 

 

Assets measured at fair value on a non-recurring basis are summarized below:

 

 

 

Fair Value Measurements at March 31, 2020 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices  in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      1–4 family residential

 

$

254

 

 

$

0

 

 

$

0

 

 

$

254

 

Consumer indirect

 

 

25

 

 

 

0

 

 

 

0

 

 

 

25

 

Other real estate owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1–4 family residential

 

 

77

 

 

 

0

 

 

 

0

 

 

 

77

 

 

 

 

Fair Value Measurements at December 31, 2019 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      1–4 family residential

 

$

183

 

 

$

0

 

 

$

0

 

 

$

183

 

Consumer

 

 

12

 

 

 

0

 

 

 

0

 

 

 

12

 

 

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $297 thousand with a valuation allowance of $18 thousand at March 31, 2020, resulting in an additional provision for loan losses of $5 thousand for the three month period ending March 31, 2020.  At December 31, 2019, impaired loans had a principal balance of $208 thousand, with a valuation allowance of $13 thousand.  Loans measured at fair value resulted in an additional provision for loan losses of $223 thousand for the three month period ending March 31, 2019.  Excluded from the fair value of impaired loans, at March 31, 2020 and December 31, 2019, discussed above are $575 thousand and $583 thousand of loans classified as troubled debt restructurings and measured using the present value of cash flows, which is not considered an exit price.

Impaired commercial real estate loans, both owner-occupied and non-owner occupied are valued by independent external appraisals.  These external appraisals are prepared using the sales comparison approach and income approach valuation techniques.  Management makes subsequent unobservable adjustments to the impaired loan appraisals.  Impaired loans other than commercial real estate and other real estate owned are not considered material.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at the periods ended March 31, 2020 and December 31, 2019:

 

March 31, 2020

Fair value

 

 

Valuation

Technique(s)

 

Unobservable Input(s)

 

Range

(Weighted Average)

Impaired loans

 

 

 

 

 

 

 

 

 

Residential

$

254

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(40.00%) - 47.15%

(17.77%)

Consumer

 

25

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(10.00%) - 10.00%

0.00%

Other Real Estate owned residential

 

77

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(0%) - 0%

0%

 

December 31, 2019

Fair value

 

 

Valuation

Technique(s)

 

Unobservable Input(s)

 

Range

(Weighted Average)

Impaired loans

 

 

 

 

 

 

 

 

 

Residential

$

183

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(24.26%) - 23.74%

14.53%

Consumer

 

12

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(12.95%) - 12.95%

(0.00%)

 

The carrying amounts and estimated fair values of financial instruments not previously disclosed at March 31, 2020 and December 31, 2019 are as follows:

 

 

 

 

 

 

 

Fair Value Measurements at March 31, 2020 Using:

 

(In Thousands of Dollars)

 

Carrying

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

83,107

 

 

$

30,943

 

 

$

52,164

 

 

$

0

 

 

$

83,107

 

Restricted stock

 

 

18,757

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

Loans held for sale

 

 

3,272

 

 

 

0

 

 

 

3,370

 

 

 

0

 

 

 

3,370

 

Loans, net

 

 

1,961,630

 

 

 

0

 

 

 

0

 

 

 

1,957,445

 

 

 

1,957,445

 

Accrued interest receivable

 

 

8,602

 

 

 

0

 

 

 

2,713

 

 

 

5,889

 

 

 

8,602

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,246,277

 

 

 

1,591,705

 

 

 

631,227

 

 

 

0

 

 

 

2,222,932

 

Short-term borrowings

 

 

19,998

 

 

 

0

 

 

 

19,998

 

 

 

0

 

 

 

19,998

 

Long-term borrowings

 

 

76,854

 

 

 

0

 

 

 

78,869

 

 

 

0

 

 

 

78,869

 

Accrued interest payable

 

 

1,346

 

 

 

51

 

 

 

1,295

 

 

 

0

 

 

 

1,346

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2019 Using:

 

(In Thousands of Dollars)

 

Carrying

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,760

 

 

$

23,229

 

 

$

47,531

 

 

$

0

 

 

$

70,760

 

Restricted stock

 

 

11,729

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

Loans held for sale

 

 

2,600

 

 

 

0

 

 

 

2,678

 

 

 

0

 

 

 

2,678

 

Loans, net

 

 

1,797,052

 

 

 

0

 

 

 

0

 

 

 

1,760,062

 

 

 

1,760,062

 

Accrued interest receivable

 

 

7,552

 

 

 

0

 

 

 

2,578

 

 

 

4,974

 

 

 

7,552

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,008,964

 

 

 

1,457,309

 

 

 

495,222

 

 

 

0

 

 

 

1,952,531

 

Short-term borrowings

 

 

77,050

 

 

 

0

 

 

 

77,050

 

 

 

0

 

 

 

77,050

 

Long-term borrowings

 

 

45,147

 

 

 

0

 

 

 

45,998

 

 

 

0

 

 

 

45,998

 

Accrued interest payable

 

 

1,070

 

 

 

61

 

 

 

1,009

 

 

 

0

 

 

 

1,070

 

 

The methods and assumptions used to estimate fair value, not previously described, are described as follows:

Cash and Cash Equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2.  The Company has determined that cash on hand and non-interest bearing due from bank accounts are Level 1 whereas interest bearing federal funds sold and other are Level 2.

Restricted Stock: It is not practical to determine the fair value of restricted stock due to restrictions placed on its transferability.

Loans: Fair values of loans, excluding loans held for sale, are estimated as follows: The Company uses a third party firm that uses cash flow analysis and current market interest rates along with adjustments for credit, liquidity and option risk to conform to the ASU 2016-01 exit price requirement.  Loans in the tables above consist of impaired credits held for investment. In accordance with the loan impairment guidance, impairment was measured based on the fair value of collateral less estimated selling costs for collateral dependent loans or the cash flow method for noncollateral dependent loans. Fair value for collateral dependent impaired loans is based upon appraised values adjusted for trends observed in the market. A valuation allowance was recorded for the excess of the loan’s recorded investment over the amounts determined by the collateral value method. This valuation is a component of the allowance for loan losses. The Company considers these fair values level 3.

Loans held for sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

Accrued Interest Receivable/Payable: The carrying amounts of accrued interest receivable and payable approximate fair value resulting in a Level 1, Level 2 or Level 3 classification.  The classification is the result of the association with securities, loans and deposits.

Deposits: The fair values disclosed for demand deposits – interest and non-interest checking, passbook savings, and money market accounts – are, by definition, equal to the amount payable on demand at the reporting date resulting in a Level 1 classification.  The carrying amounts of variable rate certificates of deposit approximate their fair values at the reporting date resulting in a Level 2 classification.  Fair value for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Short-term Borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.

Long-term Borrowings: The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Off-balance Sheet Instruments: The fair value of commitments is not considered material.

v3.20.1
Loans
 3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Loans

Loans:

Loan balances were as follows:

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

Owner occupied

 

$

193,855

 

 

$

184,311

 

Non-owner occupied

 

 

286,613

 

 

 

287,160

 

Farmland

 

 

141,310

 

 

 

138,702

 

Other

 

 

91,517

 

 

 

93,501

 

Commercial

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

251,517

 

 

 

244,172

 

Agricultural

 

 

43,006

 

 

 

46,207

 

Residential real estate

 

 

 

 

 

 

 

 

1-4 family residential

 

 

316,197

 

 

 

324,964

 

Home equity lines of credit

 

 

94,043

 

 

 

91,958

 

Consumer

 

 

 

 

 

 

 

 

Indirect

 

 

164,600

 

 

 

166,149

 

Direct

 

 

28,742

 

 

 

27,415

 

Other

 

 

9,265

 

 

 

9,485

 

Total originated loans

 

$

1,620,665

 

 

$

1,614,024

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

Owner occupied

 

$

54,953

 

 

$

35,408

 

Non-owner occupied

 

 

66,218

 

 

 

10,439

 

Farmland

 

 

34,418

 

 

 

35,377

 

Other

 

 

21,321

 

 

 

5,960

 

Commercial

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

31,516

 

 

 

11,651

 

Agricultural

 

 

5,243

 

 

 

6,047

 

Residential real estate

 

 

 

 

 

 

 

 

1-4 family residential

 

 

110,395

 

 

 

63,457

 

Home equity lines of credit

 

 

20,899

 

 

 

19,645

 

Consumer

 

 

 

 

 

 

 

 

Direct

 

 

7,466

 

 

 

6,068

 

Other

 

 

100

 

 

 

154

 

Total acquired loans

 

$

352,529

 

 

$

194,206

 

Net Deferred loan costs

 

 

3,388

 

 

 

3,309

 

Allowance for loan losses

 

 

(14,952

)

 

 

(14,487

)

Net loans

 

$

1,961,630

 

 

$

1,797,052

 

 

Purchased credit impaired loans

 

As part of past acquisitions the Company acquired various loans that displayed evidence of deterioration of credit quality since origination and which was probable that all contractually required payments would not be collected.  The carrying amounts and contractually required payments of these loans which are included in the loan balances above are summarized in the following tables:

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

Commercial real estate

 

 

 

 

 

 

 

 

Non-owner occupied

 

$

648

 

 

$

225

 

Commercial

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

682

 

 

 

725

 

Total outstanding balance

 

$

1,330

 

 

$

950

 

Carrying amount, net of allowance of $0 in 2020 and 2019

 

$

1,045

 

 

$

690

 

 

Accretable yield, or income expected to be collected, is shown in the table below:

 

 

 

 

 

Three Months Ended

 

(In Thousands of Dollars)

 

 

 

March 31, 2020

 

 

March 31, 2019

 

Beginning balance

 

$

65

 

 

$

93

 

New loans purchased

 

32

 

 

0

 

Accretion of income

 

 

(8

)

 

 

(7

)

Ending balance

 

$

89

 

 

$

86

 

 

The key assumptions considered include probability of default and the amount of actual prepayments after the acquisition date.  Prepayments affect the estimated life of the loans and could change the amount of interest income and principal expected to be collected.  In reforecasting future estimated cash flows, credit loss expectations are adjusted as necessary.  There were no adjustments to forecasted cash flows that impacted the allowance for loan losses for the three month periods ended March 31, 2020 and 2019.

The following tables present the activity in the allowance for loan losses by portfolio segment for the three month periods ended March 31, 2020 and 2019:

Three Months Ended March 31, 2020

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

5,843

 

 

$

2,323

 

 

$

2,875

 

 

$

2,710

 

 

$

736

 

 

$

14,487

 

Provision for loan losses

 

 

717

 

 

 

495

 

 

 

129

 

 

 

324

 

 

 

(565

)

 

 

1,100

 

Loans charged off

 

 

0

 

 

 

(198

)

 

 

(108

)

 

 

(443

)

 

 

0

 

 

 

(749

)

Recoveries

 

 

1

 

 

 

1

 

 

 

15

 

 

 

97

 

 

 

0

 

 

 

114

 

Total ending allowance balance

 

$

6,561

 

 

$

2,621

 

 

$

2,911

 

 

$

2,688

 

 

$

171

 

 

$

14,952

 

 

 

Three Months Ended March 31, 2019

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

5,036

 

 

$

2,093

 

 

$

2,837

 

 

$

2,963

 

 

$

663

 

 

$

13,592

 

Provision for loan losses

 

 

159

 

 

 

107

 

 

 

(28

)

 

 

182

 

 

 

130

 

 

 

550

 

Loans charged off

 

 

0

 

 

 

(44

)

 

 

(21

)

 

 

(501

)

 

 

0

 

 

 

(566

)

Recoveries

 

 

0

 

 

 

1

 

 

 

25

 

 

 

175

 

 

 

0

 

 

 

201

 

Total ending allowance balance

 

$

5,195

 

 

$

2,157

 

 

$

2,813

 

 

$

2,819

 

 

$

793

 

 

$

13,777

 

 

 

 

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment, based on impairment method as of March 31, 2020 and December 31, 2019.  The recorded investment in loans includes the unpaid principal balance and unamortized loan origination fees and costs, but excludes accrued interest receivable, which is not considered to be material:

March 31, 2020

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

0

 

 

$

2

 

 

$

59

 

 

$

0

 

 

$

0

 

 

$

61

 

Collectively evaluated for impairment

 

 

6,516

 

 

 

2,610

 

 

 

2,818

 

 

 

2,686

 

 

 

171

 

 

 

14,801

 

Acquired loans collectively evaluated for impairment

 

 

45

 

 

 

9

 

 

 

34

 

 

 

2

 

 

 

0

 

 

 

90

 

Acquired with deteriorated credit quality

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Total ending allowance balance

 

$

6,561

 

 

$

2,621

 

 

$

2,911

 

 

$

2,688

 

 

$

171

 

 

$

14,952

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

549

 

 

$

211

 

 

$

3,363

 

 

$

260

 

 

$

0

 

 

$

4,383

 

Loans collectively evaluated for impairment

 

 

711,923

 

 

 

294,190

 

 

 

406,688

 

 

 

208,069

 

 

 

0

 

 

 

1,620,870

 

Acquired loans

 

 

175,770

 

 

 

36,218

 

 

 

130,757

 

 

 

7,539

 

 

 

0

 

 

 

350,284

 

Acquired with deteriorated credit quality

 

 

586

 

 

 

459

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,045

 

Total ending loans balance

 

$

888,828

 

 

$

331,078

 

 

$

540,808

 

 

$

215,868

 

 

$

0

 

 

$

1,976,582

 

 

December 31, 2019

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

0

 

 

$

2

 

 

$

59

 

 

$

0

 

 

$

0

 

 

$

61

 

Collectively evaluated for impairment

 

 

5,790

 

 

 

2,309

 

 

 

2,777

 

 

 

2,708

 

 

 

736

 

 

 

14,320

 

Acquired loans collectively evaluated for impairment

 

 

53

 

 

 

12

 

 

 

39

 

 

 

2

 

 

 

0

 

 

 

106

 

Acquired with deteriorated credit quality

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Total ending allowance balance

 

$

5,843

 

 

$

2,323

 

 

$

2,875

 

 

$

2,710

 

 

$

736

 

 

$

14,487

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

561

 

 

$

205

 

 

$

3,240

 

 

$

247

 

 

$

0

 

 

$

4,253

 

Loans collectively evaluated for impairment

 

 

702,226

 

 

 

290,017

 

 

 

413,446

 

 

 

208,578

 

 

 

0

 

 

 

1,614,267

 

Acquired loans

 

 

86,431

 

 

 

17,110

 

 

 

82,615

 

 

 

6,173

 

 

 

0

 

 

 

192,329

 

Acquired with deteriorated credit quality

 

 

195

 

 

 

495

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

690

 

Total ending loans balance

 

$

789,413

 

 

$

307,827

 

 

$

499,301

 

 

$

214,998

 

 

$

0

 

 

$

1,811,539

 

 

The following tables present information related to impaired loans by class of loans as of March 31, 2020 and December 31, 2019:

 

(In Thousands of Dollars)

 

Unpaid Principal

Balance

 

 

Recorded

Investment

 

 

Allowance for

Loan Losses

Allocated

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

$

38

 

 

$

33

 

 

$

0

 

Farmland

 

 

567

 

 

 

516

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

170

 

 

 

129

 

 

 

0

 

Agricultural

 

 

31

 

 

 

31

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2,949

 

 

 

2,145

 

 

 

0

 

Home equity lines of credit

 

 

469

 

 

 

379

 

 

 

0

 

Consumer

 

 

539

 

 

 

260

 

 

 

0

 

Subtotal

 

 

4,763

 

 

 

3,493

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

Farmland

 

 

0

 

 

 

0

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

51

 

 

 

51

 

 

 

2

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

783

 

 

 

724

 

 

 

48

 

Home equity lines of credit

 

 

132

 

 

 

115

 

 

 

11

 

Consumer

 

 

0

 

 

 

0

 

 

 

0

 

Subtotal

 

 

966

 

 

 

890

 

 

 

61

 

Total

 

$

5,729

 

 

$

4,383

 

 

$

61

 

 

(In Thousands of Dollars)

 

Unpaid Principal

Balance

 

 

Recorded

Investment

 

 

Allowance for

Loan Losses

Allocated

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

22

 

 

$

8

 

 

$

0

 

Non-owner occupied

 

 

38

 

 

 

34

 

 

 

0

 

Farmland

 

 

570

 

 

 

519

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

179

 

 

 

141

 

 

 

0

 

Agricultural

 

 

11

 

 

 

11

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2,889

 

 

 

2,095

 

 

 

0

 

Home equity lines of credit

 

 

428

 

 

 

344

 

 

 

0

 

Consumer

 

 

480

 

 

 

247

 

 

 

0

 

Subtotal

 

 

4,617

 

 

 

3,399

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

53

 

 

 

53

 

 

 

2

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

795

 

 

 

729

 

 

 

52

 

Home equity lines of credit

 

 

72

 

 

 

72

 

 

 

7

 

Consumer

 

 

0

 

 

 

0

 

 

 

0

 

Subtotal

 

 

920

 

 

 

854

 

 

 

61

 

Total

 

$

5,537

 

 

$

4,253

 

 

$

61

 

 

The following tables present the average recorded investment in impaired loans by class and interest income recognized by loan class for the three month periods ended March 31, 2020 and 2019:

 

 

 

Average Recorded Investment

 

 

Interest Income Recognized

 

 

 

For Three Months Ended

March 31,

 

 

For Three Months Ended

March 31,

 

(In Thousands of Dollars)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

0

 

 

$

331

 

 

$

0

 

 

$

4

 

Non-owner occupied

 

 

34

 

 

 

38

 

 

 

0

 

 

 

0

 

Farmland

 

 

517

 

 

 

0

 

 

 

1

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

132

 

 

 

157

 

 

 

2

 

 

 

2

 

Agricultural

 

 

17

 

 

 

0

 

 

 

1

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2,139

 

 

 

2,693

 

 

 

38

 

 

 

43

 

Home equity lines of credit

 

 

368

 

 

 

347

 

 

 

6

 

 

 

5

 

Consumer

 

 

244

 

 

 

112

 

 

 

7

 

 

 

3

 

Subtotal

 

 

3,451

 

 

 

3,678

 

 

 

55

 

 

 

57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Farmland

 

 

0

 

 

 

257

 

 

 

0

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

52

 

 

 

59

 

 

 

1

 

 

 

1

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

701

 

 

 

1,319

 

 

 

8

 

 

 

8

 

Home equity lines of credit

 

 

99

 

 

 

196

 

 

 

0

 

 

 

2

 

Consumer

 

 

0

 

 

 

8

 

 

 

0

 

 

 

0

 

Subtotal

 

 

852

 

 

 

1,839

 

 

 

9

 

 

 

11

 

Total

 

$

4,303

 

 

$

5,517

 

 

$

64

 

 

$

68

 

 

 

Cash basis interest recognized during the three month periods ended March 31, 2020 and 2019 was materially equal to interest income recognized.

Nonaccrual loans and loans past due 90 days or more still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the recorded investment in nonaccrual and loans past due 90 days or more still on accrual by class of loans as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

(In Thousands of Dollars)

 

Nonaccrual

 

 

Loans Past

Due 90 Days

or More

Still Accruing

 

 

Nonaccrual

 

 

Loans Past

Due 90 Days

or More

Still Accruing

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

0

 

 

$

340

 

 

$

6

 

 

$

0

 

Farmland

 

 

10

 

 

 

0

 

 

 

14

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

390

 

 

 

44

 

 

 

567

 

 

 

0

 

Agricultural

 

 

77

 

 

 

0

 

 

 

0

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

1,279

 

 

 

366

 

 

 

1,234

 

 

 

438

 

Home equity lines of credit

 

 

688

 

 

 

23

 

 

 

669

 

 

 

14

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

602

 

 

 

94

 

 

 

568

 

 

 

120

 

Direct

 

 

180

 

 

 

146

 

 

 

139

 

 

 

70

 

Other

 

 

0

 

 

 

14

 

 

 

0

 

 

 

6

 

Total originated loans

 

$

3,226

 

 

$

1,027

 

 

$

3,197

 

 

$

648

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

59

 

 

$

0

 

 

$

0

 

 

$

0

 

Non-owner occupied

 

 

612

 

 

 

0

 

 

 

102

 

 

 

0

 

Farmland

 

 

516

 

 

 

368

 

 

 

519

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

558

 

 

 

0

 

 

 

602

 

 

 

0

 

Agricultural

 

 

7

 

 

 

0

 

 

 

9

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

4,881

 

 

 

203

 

 

 

659

 

 

 

186

 

Home equity lines of credit

 

 

230

 

 

 

0

 

 

 

239

 

 

 

9

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 

136

 

 

 

22

 

 

 

151

 

 

 

24

 

Total acquired loans

 

$

6,999

 

 

$

593

 

 

$

2,281

 

 

$

219

 

Total loans

 

$

10,225

 

 

$

1,620

 

 

$

5,478

 

 

$

867

 

 

The following tables present the aging of the recorded investment in past due loans as of March 31, 2020 and December 31, 2019 by class of loans:

 

(In Thousands of Dollars)

 

30-59

Days Past

Due

 

 

60-89

Days Past

Due

 

 

90 Days or

More Past

Due and

Nonaccrual

 

 

Total Past

Due

 

 

Loans Not

Past Due

 

 

Total

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

739

 

 

$

53

 

 

$

340

 

 

$

1,132

 

 

$

192,333

 

 

$

193,465

 

Non-owner occupied

 

 

32

 

 

 

0

 

 

 

0

 

 

 

32

 

 

 

285,989

 

 

 

286,021

 

Farmland

 

 

430

 

 

 

0

 

 

 

10

 

 

 

440

 

 

 

140,674

 

 

 

141,114

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

91,322

 

 

 

91,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

925

 

 

 

93

 

 

 

434

 

 

 

1,452

 

 

 

249,747

 

 

 

251,199

 

Agricultural

 

 

79

 

 

 

3

 

 

 

77

 

 

 

159

 

 

 

42,961

 

 

 

43,120

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

4,469

 

 

 

912

 

 

 

1,645

 

 

 

7,026

 

 

 

308,432

 

 

 

315,458

 

Home equity lines of credit

 

 

496

 

 

 

0

 

 

 

711

 

 

 

1,207

 

 

 

92,850

 

 

 

94,057

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

1,715

 

 

 

387

 

 

 

696

 

 

 

2,798

 

 

 

167,359

 

 

 

170,157

 

Direct

 

 

599

 

 

 

285

 

 

 

326

 

 

 

1,210

 

 

 

27,669

 

 

 

28,879

 

Other

 

 

52

 

 

 

18

 

 

 

14

 

 

 

84

 

 

 

9,182

 

 

 

9,266

 

Total originated loans:

 

$

9,536

 

 

$

1,751

 

 

$

4,253

 

 

$

15,540

 

 

$

1,608,518

 

 

$

1,624,058

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

133

 

 

$

0

 

 

$

59

 

 

$

192

 

 

$

54,757

 

 

$

54,949

 

Non-owner occupied

 

 

146

 

 

 

707

 

 

 

612

 

 

 

1,465

 

 

 

64,752

 

 

 

66,217

 

Farmland

 

 

779

 

 

 

0

 

 

 

884

 

 

 

1,663

 

 

 

32,755

 

 

 

34,418

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

21,322

 

 

 

21,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

558

 

 

 

112

 

 

 

558

 

 

 

1,228

 

 

 

30,288

 

 

 

31,516

 

Agricultural

 

 

0

 

 

 

0

 

 

 

7

 

 

 

7

 

 

 

5,236

 

 

 

5,243

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

3,586

 

 

 

1,359

 

 

 

5,084

 

 

 

10,029

 

 

 

100,365

 

 

 

110,394

 

Home equity lines of credit

 

 

48

 

 

 

30

 

 

 

230

 

 

 

308

 

 

 

20,591

 

 

 

20,899

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 

192

 

 

 

130

 

 

 

158

 

 

 

480

 

 

 

6,986

 

 

 

7,466

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

100

 

 

 

100

 

Total acquired loans

 

$

5,442

 

 

$

2,338

 

 

$

7,592

 

 

$

15,372

 

 

$

337,152

 

 

$

352,524

 

Total loans

 

$

14,978

 

 

$

4,089

 

 

$

11,845

 

 

$

30,912

 

 

$

1,945,670

 

 

$

1,976,582

 

 

(In Thousands of Dollars)

 

30-59

Days Past

Due

 

 

60-89

Days Past

Due

 

 

90 Days or

More Past

Due and

Nonaccrual

 

 

Total Past

Due

 

 

Loans Not

Past Due

 

 

Total

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

87

 

 

$

0

 

 

$

6

 

 

$

93

 

 

$

183,830

 

 

$

183,923

 

Non-owner occupied

 

 

2

 

 

 

0

 

 

 

0

 

 

 

2

 

 

 

286,522

 

 

 

286,524

 

Farmland

 

 

0

 

 

 

0

 

 

 

14

 

 

 

14

 

 

 

138,501

 

 

 

138,515

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

93,271

 

 

 

93,271

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

1,458

 

 

 

573

 

 

 

567

 

 

 

2,598

 

 

 

241,210

 

 

 

243,808

 

Agricultural

 

 

103

 

 

 

77

 

 

 

0

 

 

 

180

 

 

 

46,142

 

 

 

46,322

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

3,811

 

 

 

207

 

 

 

1,672

 

 

 

5,690

 

 

 

318,536

 

 

 

324,226

 

Home equity lines of credit

 

 

270

 

 

 

21

 

 

 

683

 

 

 

974

 

 

 

91,000

 

 

 

91,974

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

1,599

 

 

 

533

 

 

 

688

 

 

 

2,820

 

 

 

168,905

 

 

 

171,725

 

Direct

 

 

537

 

 

 

272

 

 

 

209

 

 

 

1,018

 

 

 

26,549

 

 

 

27,567

 

Other

 

 

153

 

 

 

26

 

 

 

6

 

 

 

185

 

 

 

9,299

 

 

 

9,484

 

Total originated loans

 

$

8,020

 

 

$

1,709

 

 

$

3,845

 

 

$

13,574

 

 

$

1,603,765

 

 

$

1,617,339

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

0

 

 

$

0

 

 

$

0

 

 

$

0

 

 

$

35,424

 

 

$

35,424

 

Non-owner occupied

 

 

0

 

 

 

0

 

 

 

102

 

 

 

102

 

 

 

10,317

 

 

 

10,419

 

Farmland

 

 

0

 

 

 

0

 

 

 

519

 

 

 

519

 

 

 

34,858

 

 

 

35,377

 

Other

 

 

69

 

 

 

0

 

 

 

0

 

 

 

69

 

 

 

5,891

 

 

 

5,960

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

47

 

 

 

1

 

 

 

602

 

 

 

650

 

 

 

11,000

 

 

 

11,650

 

Agricultural

 

 

0

 

 

 

8

 

 

 

9

 

 

 

17

 

 

 

6,030

 

 

 

6,047

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

1,159

 

 

 

448

 

 

 

845

 

 

 

2,452

 

 

 

61,004

 

 

 

63,456

 

Home equity lines of credit

 

 

56

 

 

 

8

 

 

 

248

 

 

 

312

 

 

 

19,333

 

 

 

19,645

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 

347

 

 

 

21

 

 

 

175

 

 

 

543

 

 

 

5,525

 

 

 

6,068

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

154

 

 

 

154

 

Total acquired loans

 

$

1,678

 

 

$

486

 

 

$

2,500

 

 

$

4,664

 

 

$

189,536

 

 

$

194,200

 

Total loans

 

$

9,698

 

 

$

2,195

 

 

$

6,345

 

 

$

18,238

 

 

$

1,793,301

 

 

$

1,811,539

 

 
v3.20.1
Earnings Per Share (Tables)
 3 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Computation of Basic and Diluted Earnings Per Share

The computation of basic and diluted earnings per share is shown in the following table:

 

 

Three Months Ended

March 31,

 

 

2020

 

 

2019

 

Basic EPS

 

 

 

 

 

 

 

Net income (In thousands)

$

8,639

 

 

$

8,388

 

Weighted average shares outstanding

 

28,535,371

 

 

 

27,790,028

 

Basic earnings per share

$

0.30

 

 

$

0.30

 

 

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

Net income (In thousands)

$

8,639

 

 

$

8,388

 

Weighted average shares outstanding for basic earnings per share

 

28,535,371

 

 

 

27,790,028

 

Dilutive effect of restricted stock awards

 

174,632

 

 

 

193,301

 

Weighted average shares for diluted earnings per share

 

28,710,003

 

 

 

27,983,329

 

Diluted earnings per share

$

0.30

 

 

$

0.30

 

 
v3.20.1
Loans (Tables)
 3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Schedule of Loan Balances

Loan balances were as follows:

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

Owner occupied

 

$

193,855

 

 

$

184,311

 

Non-owner occupied

 

 

286,613

 

 

 

287,160

 

Farmland

 

 

141,310

 

 

 

138,702

 

Other

 

 

91,517

 

 

 

93,501

 

Commercial

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

251,517

 

 

 

244,172

 

Agricultural

 

 

43,006

 

 

 

46,207

 

Residential real estate

 

 

 

 

 

 

 

 

1-4 family residential

 

 

316,197

 

 

 

324,964

 

Home equity lines of credit

 

 

94,043

 

 

 

91,958

 

Consumer

 

 

 

 

 

 

 

 

Indirect

 

 

164,600

 

 

 

166,149

 

Direct

 

 

28,742

 

 

 

27,415

 

Other

 

 

9,265

 

 

 

9,485

 

Total originated loans

 

$

1,620,665

 

 

$

1,614,024

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

Owner occupied

 

$

54,953

 

 

$

35,408

 

Non-owner occupied

 

 

66,218

 

 

 

10,439

 

Farmland

 

 

34,418

 

 

 

35,377

 

Other

 

 

21,321

 

 

 

5,960

 

Commercial

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

31,516

 

 

 

11,651

 

Agricultural

 

 

5,243

 

 

 

6,047

 

Residential real estate

 

 

 

 

 

 

 

 

1-4 family residential

 

 

110,395

 

 

 

63,457

 

Home equity lines of credit

 

 

20,899

 

 

 

19,645

 

Consumer

 

 

 

 

 

 

 

 

Direct

 

 

7,466

 

 

 

6,068

 

Other

 

 

100

 

 

 

154

 

Total acquired loans

 

$

352,529

 

 

$

194,206

 

Net Deferred loan costs

 

 

3,388

 

 

 

3,309

 

Allowance for loan losses

 

 

(14,952

)

 

 

(14,487

)

Net loans

 

$

1,961,630

 

 

$

1,797,052

 
Purchased Credit Impaired Loans

As part of past acquisitions the Company acquired various loans that displayed evidence of deterioration of credit quality since origination and which was probable that all contractually required payments would not be collected.  The carrying amounts and contractually required payments of these loans which are included in the loan balances above are summarized in the following tables:

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

Commercial real estate

 

 

 

 

 

 

 

 

Non-owner occupied

 

$

648

 

 

$

225

 

Commercial

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

682

 

 

 

725

 

Total outstanding balance

 

$

1,330

 

 

$

950

 

Carrying amount, net of allowance of $0 in 2020 and 2019

 

$

1,045

 

 

$

690

 
Schedule of Accretable Yield or Income Expected to be Collected

 

Accretable yield, or income expected to be collected, is shown in the table below:

 

 

 

 

 

Three Months Ended

 

(In Thousands of Dollars)

 

 

 

March 31, 2020

 

 

March 31, 2019

 

Beginning balance

 

$

65

 

 

$

93

 

New loans purchased

 

32

 

 

0

 

Accretion of income

 

 

(8

)

 

 

(7

)

Ending balance

 

$

89

 

 

$

86

 
Activity in the Allowance for Loan Losses by Portfolio Segment

The following tables present the activity in the allowance for loan losses by portfolio segment for the three month periods ended March 31, 2020 and 2019:

Three Months Ended March 31, 2020

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

5,843

 

 

$

2,323

 

 

$

2,875

 

 

$

2,710

 

 

$

736

 

 

$

14,487

 

Provision for loan losses

 

 

717

 

 

 

495

 

 

 

129

 

 

 

324

 

 

 

(565

)

 

 

1,100

 

Loans charged off

 

 

0

 

 

 

(198

)

 

 

(108

)

 

 

(443

)

 

 

0

 

 

 

(749

)

Recoveries

 

 

1

 

 

 

1

 

 

 

15

 

 

 

97

 

 

 

0

 

 

 

114

 

Total ending allowance balance

 

$

6,561

 

 

$

2,621

 

 

$

2,911

 

 

$

2,688

 

 

$

171

 

 

$

14,952

 

 

 

Three Months Ended March 31, 2019

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

5,036

 

 

$

2,093

 

 

$

2,837

 

 

$

2,963

 

 

$

663

 

 

$

13,592

 

Provision for loan losses

 

 

159

 

 

 

107

 

 

 

(28

)

 

 

182

 

 

 

130

 

 

 

550

 

Loans charged off

 

 

0

 

 

 

(44

)

 

 

(21

)

 

 

(501

)

 

 

0

 

 

 

(566

)

Recoveries

 

 

0

 

 

 

1

 

 

 

25

 

 

 

175

 

 

 

0

 

 

 

201

 

Total ending allowance balance

 

$

5,195

 

 

$

2,157

 

 

$

2,813

 

 

$

2,819

 

 

$

793

 

 

$

13,777

 

 

 
Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment, Based on Impairment Method

 

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment, based on impairment method as of March 31, 2020 and December 31, 2019.  The recorded investment in loans includes the unpaid principal balance and unamortized loan origination fees and costs, but excludes accrued interest receivable, which is not considered to be material:

March 31, 2020

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

0

 

 

$

2

 

 

$

59

 

 

$

0

 

 

$

0

 

 

$

61

 

Collectively evaluated for impairment

 

 

6,516

 

 

 

2,610

 

 

 

2,818

 

 

 

2,686

 

 

 

171

 

 

 

14,801

 

Acquired loans collectively evaluated for impairment

 

 

45

 

 

 

9

 

 

 

34

 

 

 

2

 

 

 

0

 

 

 

90

 

Acquired with deteriorated credit quality

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Total ending allowance balance

 

$

6,561

 

 

$

2,621

 

 

$

2,911

 

 

$

2,688

 

 

$

171

 

 

$

14,952

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

549

 

 

$

211

 

 

$

3,363

 

 

$

260

 

 

$

0

 

 

$

4,383

 

Loans collectively evaluated for impairment

 

 

711,923

 

 

 

294,190

 

 

 

406,688

 

 

 

208,069

 

 

 

0

 

 

 

1,620,870

 

Acquired loans

 

 

175,770

 

 

 

36,218

 

 

 

130,757

 

 

 

7,539

 

 

 

0

 

 

 

350,284

 

Acquired with deteriorated credit quality

 

 

586

 

 

 

459

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,045

 

Total ending loans balance

 

$

888,828

 

 

$

331,078

 

 

$

540,808

 

 

$

215,868

 

 

$

0

 

 

$

1,976,582

 

 

December 31, 2019

 

(In Thousands of Dollars)

 

Commercial

Real Estate

 

 

Commercial

 

 

Residential

Real Estate

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

0

 

 

$

2

 

 

$

59

 

 

$

0

 

 

$

0

 

 

$

61

 

Collectively evaluated for impairment

 

 

5,790

 

 

 

2,309

 

 

 

2,777

 

 

 

2,708

 

 

 

736

 

 

 

14,320

 

Acquired loans collectively evaluated for impairment

 

 

53

 

 

 

12

 

 

 

39

 

 

 

2

 

 

 

0

 

 

 

106

 

Acquired with deteriorated credit quality

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Total ending allowance balance

 

$

5,843

 

 

$

2,323

 

 

$

2,875

 

 

$

2,710

 

 

$

736

 

 

$

14,487

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

561

 

 

$

205

 

 

$

3,240

 

 

$

247

 

 

$

0

 

 

$

4,253

 

Loans collectively evaluated for impairment

 

 

702,226

 

 

 

290,017

 

 

 

413,446

 

 

 

208,578

 

 

 

0

 

 

 

1,614,267

 

Acquired loans

 

 

86,431

 

 

 

17,110

 

 

 

82,615

 

 

 

6,173

 

 

 

0

 

 

 

192,329

 

Acquired with deteriorated credit quality

 

 

195

 

 

 

495

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

690

 

Total ending loans balance

 

$

789,413

 

 

$

307,827

 

 

$

499,301

 

 

$

214,998

 

 

$

0

 

 

$

1,811,539

 
Loans Individually Evaluated for Impairment by Class of Loans

 

The following tables present information related to impaired loans by class of loans as of March 31, 2020 and December 31, 2019:

 

(In Thousands of Dollars)

 

Unpaid Principal

Balance

 

 

Recorded

Investment

 

 

Allowance for

Loan Losses

Allocated

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

$

38

 

 

$

33

 

 

$

0

 

Farmland

 

 

567

 

 

 

516

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

170

 

 

 

129

 

 

 

0

 

Agricultural

 

 

31

 

 

 

31

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2,949

 

 

 

2,145

 

 

 

0

 

Home equity lines of credit

 

 

469

 

 

 

379

 

 

 

0

 

Consumer

 

 

539

 

 

 

260

 

 

 

0

 

Subtotal

 

 

4,763

 

 

 

3,493

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

Farmland

 

 

0

 

 

 

0

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

51

 

 

 

51

 

 

 

2

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

783

 

 

 

724

 

 

 

48

 

Home equity lines of credit

 

 

132

 

 

 

115

 

 

 

11

 

Consumer

 

 

0

 

 

 

0

 

 

 

0

 

Subtotal

 

 

966

 

 

 

890

 

 

 

61

 

Total

 

$

5,729

 

 

$

4,383

 

 

$

61

 

 

(In Thousands of Dollars)

 

Unpaid Principal

Balance

 

 

Recorded

Investment

 

 

Allowance for

Loan Losses

Allocated

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

22

 

 

$

8

 

 

$

0

 

Non-owner occupied

 

 

38

 

 

 

34

 

 

 

0

 

Farmland

 

 

570

 

 

 

519

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

179

 

 

 

141

 

 

 

0

 

Agricultural

 

 

11

 

 

 

11

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2,889

 

 

 

2,095

 

 

 

0

 

Home equity lines of credit

 

 

428

 

 

 

344

 

 

 

0

 

Consumer

 

 

480

 

 

 

247

 

 

 

0

 

Subtotal

 

 

4,617

 

 

 

3,399

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

53

 

 

 

53

 

 

 

2

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

795

 

 

 

729

 

 

 

52

 

Home equity lines of credit

 

 

72

 

 

 

72

 

 

 

7

 

Consumer

 

 

0

 

 

 

0

 

 

 

0

 

Subtotal

 

 

920

 

 

 

854

 

 

 

61

 

Total

 

$

5,537

 

 

$

4,253

 

 

$

61

 

 

The following tables present the average recorded investment in impaired loans by class and interest income recognized by loan class for the three month periods ended March 31, 2020 and 2019:

 

 

 

Average Recorded Investment

 

 

Interest Income Recognized

 

 

 

For Three Months Ended

March 31,

 

 

For Three Months Ended

March 31,

 

(In Thousands of Dollars)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

0

 

 

$

331

 

 

$

0

 

 

$

4

 

Non-owner occupied

 

 

34

 

 

 

38

 

 

 

0

 

 

 

0

 

Farmland

 

 

517

 

 

 

0

 

 

 

1

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

132

 

 

 

157

 

 

 

2

 

 

 

2

 

Agricultural

 

 

17

 

 

 

0

 

 

 

1

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2,139

 

 

 

2,693

 

 

 

38

 

 

 

43

 

Home equity lines of credit

 

 

368

 

 

 

347

 

 

 

6

 

 

 

5

 

Consumer

 

 

244

 

 

 

112

 

 

 

7

 

 

 

3

 

Subtotal

 

 

3,451

 

 

 

3,678

 

 

 

55

 

 

 

57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Farmland

 

 

0

 

 

 

257

 

 

 

0

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

52

 

 

 

59

 

 

 

1

 

 

 

1

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

701

 

 

 

1,319

 

 

 

8

 

 

 

8

 

Home equity lines of credit

 

 

99

 

 

 

196

 

 

 

0

 

 

 

2

 

Consumer

 

 

0

 

 

 

8

 

 

 

0

 

 

 

0

 

Subtotal

 

 

852

 

 

 

1,839

 

 

 

9

 

 

 

11

 

Total

 

$

4,303

 

 

$

5,517

 

 

$

64

 

 

$

68

 

 

 
Schedule of Investment in Nonaccrual and Loans Past Due 90 Days or More Still on Accrual by Class of Loans

The following table presents the recorded investment in nonaccrual and loans past due 90 days or more still on accrual by class of loans as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

(In Thousands of Dollars)

 

Nonaccrual

 

 

Loans Past

Due 90 Days

or More

Still Accruing

 

 

Nonaccrual

 

 

Loans Past

Due 90 Days

or More

Still Accruing

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

0

 

 

$

340

 

 

$

6

 

 

$

0

 

Farmland

 

 

10

 

 

 

0

 

 

 

14

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

390

 

 

 

44

 

 

 

567

 

 

 

0

 

Agricultural

 

 

77

 

 

 

0

 

 

 

0

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

1,279

 

 

 

366

 

 

 

1,234

 

 

 

438

 

Home equity lines of credit

 

 

688

 

 

 

23

 

 

 

669

 

 

 

14

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

602

 

 

 

94

 

 

 

568

 

 

 

120

 

Direct

 

 

180

 

 

 

146

 

 

 

139

 

 

 

70

 

Other

 

 

0

 

 

 

14

 

 

 

0

 

 

 

6

 

Total originated loans

 

$

3,226

 

 

$

1,027

 

 

$

3,197

 

 

$

648

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

59

 

 

$

0

 

 

$

0

 

 

$

0

 

Non-owner occupied

 

 

612

 

 

 

0

 

 

 

102

 

 

 

0

 

Farmland

 

 

516

 

 

 

368

 

 

 

519

 

 

 

0

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

558

 

 

 

0

 

 

 

602

 

 

 

0

 

Agricultural

 

 

7

 

 

 

0

 

 

 

9

 

 

 

0

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

4,881

 

 

 

203

 

 

 

659

 

 

 

186

 

Home equity lines of credit

 

 

230

 

 

 

0

 

 

 

239

 

 

 

9

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 

136

 

 

 

22

 

 

 

151

 

 

 

24

 

Total acquired loans

 

$

6,999

 

 

$

593

 

 

$

2,281

 

 

$

219

 

Total loans

 

$

10,225

 

 

$

1,620

 

 

$

5,478

 

 

$

867

 
Schedule of Investment in Past Due Loans

The following tables present the aging of the recorded investment in past due loans as of March 31, 2020 and December 31, 2019 by class of loans:

 

(In Thousands of Dollars)

 

30-59

Days Past

Due

 

 

60-89

Days Past

Due

 

 

90 Days or

More Past

Due and

Nonaccrual

 

 

Total Past

Due

 

 

Loans Not

Past Due

 

 

Total

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

739

 

 

$

53

 

 

$

340

 

 

$

1,132

 

 

$

192,333

 

 

$

193,465

 

Non-owner occupied

 

 

32

 

 

 

0

 

 

 

0

 

 

 

32

 

 

 

285,989

 

 

 

286,021

 

Farmland

 

 

430

 

 

 

0

 

 

 

10

 

 

 

440

 

 

 

140,674

 

 

 

141,114

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

91,322

 

 

 

91,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

925

 

 

 

93

 

 

 

434

 

 

 

1,452

 

 

 

249,747

 

 

 

251,199

 

Agricultural

 

 

79

 

 

 

3

 

 

 

77

 

 

 

159

 

 

 

42,961

 

 

 

43,120

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

4,469

 

 

 

912

 

 

 

1,645

 

 

 

7,026

 

 

 

308,432

 

 

 

315,458

 

Home equity lines of credit

 

 

496

 

 

 

0

 

 

 

711

 

 

 

1,207

 

 

 

92,850

 

 

 

94,057

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

1,715

 

 

 

387

 

 

 

696

 

 

 

2,798

 

 

 

167,359

 

 

 

170,157

 

Direct

 

 

599

 

 

 

285

 

 

 

326

 

 

 

1,210

 

 

 

27,669

 

 

 

28,879

 

Other

 

 

52

 

 

 

18

 

 

 

14

 

 

 

84

 

 

 

9,182

 

 

 

9,266

 

Total originated loans:

 

$

9,536

 

 

$

1,751

 

 

$

4,253

 

 

$

15,540

 

 

$

1,608,518

 

 

$

1,624,058

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

133

 

 

$

0

 

 

$

59

 

 

$

192

 

 

$

54,757

 

 

$

54,949

 

Non-owner occupied

 

 

146

 

 

 

707

 

 

 

612

 

 

 

1,465

 

 

 

64,752

 

 

 

66,217

 

Farmland

 

 

779

 

 

 

0

 

 

 

884

 

 

 

1,663

 

 

 

32,755

 

 

 

34,418

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

21,322

 

 

 

21,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

558

 

 

 

112

 

 

 

558

 

 

 

1,228

 

 

 

30,288

 

 

 

31,516

 

Agricultural

 

 

0

 

 

 

0

 

 

 

7

 

 

 

7

 

 

 

5,236

 

 

 

5,243

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

3,586

 

 

 

1,359

 

 

 

5,084

 

 

 

10,029

 

 

 

100,365

 

 

 

110,394

 

Home equity lines of credit

 

 

48

 

 

 

30

 

 

 

230

 

 

 

308

 

 

 

20,591

 

 

 

20,899

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 

192

 

 

 

130

 

 

 

158

 

 

 

480

 

 

 

6,986

 

 

 

7,466

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

100

 

 

 

100

 

Total acquired loans

 

$

5,442

 

 

$

2,338

 

 

$

7,592

 

 

$

15,372

 

 

$

337,152

 

 

$

352,524

 

Total loans

 

$

14,978

 

 

$

4,089

 

 

$

11,845

 

 

$

30,912

 

 

$

1,945,670

 

 

$

1,976,582

 

 

(In Thousands of Dollars)

 

30-59

Days Past

Due

 

 

60-89

Days Past

Due

 

 

90 Days or

More Past

Due and

Nonaccrual

 

 

Total Past

Due

 

 

Loans Not

Past Due

 

 

Total

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

87

 

 

$

0

 

 

$

6

 

 

$

93

 

 

$

183,830

 

 

$

183,923

 

Non-owner occupied

 

 

2

 

 

 

0

 

 

 

0

 

 

 

2

 

 

 

286,522

 

 

 

286,524

 

Farmland

 

 

0

 

 

 

0

 

 

 

14

 

 

 

14

 

 

 

138,501

 

 

 

138,515

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

93,271

 

 

 

93,271

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

1,458

 

 

 

573

 

 

 

567

 

 

 

2,598

 

 

 

241,210

 

 

 

243,808

 

Agricultural

 

 

103

 

 

 

77

 

 

 

0

 

 

 

180

 

 

 

46,142

 

 

 

46,322

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

3,811

 

 

 

207

 

 

 

1,672

 

 

 

5,690

 

 

 

318,536

 

 

 

324,226

 

Home equity lines of credit

 

 

270

 

 

 

21

 

 

 

683

 

 

 

974

 

 

 

91,000

 

 

 

91,974

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

1,599

 

 

 

533

 

 

 

688

 

 

 

2,820

 

 

 

168,905

 

 

 

171,725

 

Direct

 

 

537

 

 

 

272

 

 

 

209

 

 

 

1,018

 

 

 

26,549

 

 

 

27,567

 

Other

 

 

153

 

 

 

26

 

 

 

6

 

 

 

185

 

 

 

9,299

 

 

 

9,484

 

Total originated loans

 

$

8,020

 

 

$

1,709

 

 

$

3,845

 

 

$

13,574

 

 

$

1,603,765

 

 

$

1,617,339

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

0

 

 

$

0

 

 

$

0

 

 

$

0

 

 

$

35,424

 

 

$

35,424

 

Non-owner occupied

 

 

0

 

 

 

0

 

 

 

102

 

 

 

102

 

 

 

10,317

 

 

 

10,419

 

Farmland

 

 

0

 

 

 

0

 

 

 

519

 

 

 

519

 

 

 

34,858

 

 

 

35,377

 

Other

 

 

69

 

 

 

0

 

 

 

0

 

 

 

69

 

 

 

5,891

 

 

 

5,960

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

47

 

 

 

1

 

 

 

602

 

 

 

650

 

 

 

11,000

 

 

 

11,650

 

Agricultural

 

 

0

 

 

 

8

 

 

 

9

 

 

 

17

 

 

 

6,030

 

 

 

6,047

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

1,159

 

 

 

448

 

 

 

845

 

 

 

2,452

 

 

 

61,004

 

 

 

63,456

 

Home equity lines of credit

 

 

56

 

 

 

8

 

 

 

248

 

 

 

312

 

 

 

19,333

 

 

 

19,645

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 

347

 

 

 

21

 

 

 

175

 

 

 

543

 

 

 

5,525

 

 

 

6,068

 

Other

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

154

 

 

 

154

 

Total acquired loans

 

$

1,678

 

 

$

486

 

 

$

2,500

 

 

$

4,664

 

 

$

189,536

 

 

$

194,200

 

Total loans

 

$

9,698

 

 

$

2,195

 

 

$

6,345

 

 

$

18,238

 

 

$

1,793,301

 

 

$

1,811,539

 
v3.20.1
Fair Value (Tables)
 3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Assets Measured at Fair Value on Recurring Basis

Assets measured at fair value on a recurring basis are summarized below:

 

 

 

Fair Value Measurements at March 31, 2020 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

3,840

 

 

$

0

 

 

$

3,840

 

 

$

0

 

State and political subdivisions

 

 

267,583

 

 

 

0

 

 

 

267,583

 

 

 

0

 

Corporate bonds

 

 

3,343

 

 

 

0

 

 

 

3,343

 

 

 

0

 

Mortgage-backed securities-residential

 

 

133,921

 

 

 

0

 

 

 

133,916

 

 

 

5

 

Collateralized mortgage obligations

 

 

33,051

 

 

 

0

 

 

 

33,051

 

 

 

0

 

Small Business Administration

 

 

6,305

 

 

 

0

 

 

 

6,305

 

 

 

0

 

Equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities at fair value

 

 

444

 

 

 

444

 

 

 

0

 

 

 

0

 

Other investments measured at net asset value

 

 

7,636

 

 

n/a

 

 

n/a

 

 

n/a

 

Total investment securities

 

$

456,123

 

 

$

444

 

 

$

448,038

 

 

$

5

 

Loan yield maintenance provisions

 

$

4,810

 

 

$

0

 

 

$

4,810

 

 

$

0

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

4,810

 

 

$

0

 

 

$

4,810

 

 

$

0

 

 

 

 

Fair Value Measurements at December 31, 2019 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices  in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

3,811

 

 

$

0

 

 

$

3,811

 

 

$

0

 

State and political subdivisions

 

 

261,425

 

 

 

0

 

 

 

261,425

 

 

 

0

 

Corporate bonds

 

 

1,260

 

 

 

0

 

 

 

1,260

 

 

 

0

 

Mortgage-backed securities-residential

 

 

147,910

 

 

 

0

 

 

 

147,905

 

 

 

5

 

Collateralized mortgage obligations

 

 

11,347

 

 

 

0

 

 

 

11,347

 

 

 

0

 

Small Business Administration

 

 

6,480

 

 

 

0

 

 

 

6,480

 

 

 

0

 

Equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities at fair value

 

 

594

 

 

 

594

 

 

 

0

 

 

 

0

 

Other investments measured at net asset value

 

 

7,315

 

 

n/a

 

 

n/a

 

 

n/a

 

Total investment securities

 

$

440,142

 

 

$

594

 

 

$

432,228

 

 

$

5

 

Loan yield maintenance provisions

 

$

1,898

 

 

$

0

 

 

$

1,898

 

 

$

0

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

1,898

 

 

$

0

 

 

$

1,898

 

 

$

0

 

 
Reconciliation of All Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

 

 

 

Investment Securities Available-for-sale

(Level 3)

 

 

 

Three Months ended

March 31,

 

(In Thousands of Dollars)

 

2020

 

 

2019

 

Beginning Balance

 

$

5

 

 

$

6

 

Transfers from level 2

 

 

0

 

 

 

0

 

Repayments, calls and maturities

 

 

0

 

 

 

0

 

Ending Balance

 

$

5

 

 

$

6

 
Assets Measured at Fair Value on Non-Recurring Basis

 

Assets measured at fair value on a non-recurring basis are summarized below:

 

 

 

Fair Value Measurements at March 31, 2020 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices  in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      1–4 family residential

 

$

254

 

 

$

0

 

 

$

0

 

 

$

254

 

Consumer indirect

 

 

25

 

 

 

0

 

 

 

0

 

 

 

25

 

Other real estate owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1–4 family residential

 

 

77

 

 

 

0

 

 

 

0

 

 

 

77

 

 

 

 

Fair Value Measurements at December 31, 2019 Using:

 

(In Thousands of Dollars)

 

Carrying

Value

 

 

Quoted Prices in

Active Markets

for Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      1–4 family residential

 

$

183

 

 

$

0

 

 

$

0

 

 

$

183

 

Consumer

 

 

12

 

 

 

0

 

 

 

0

 

 

 

12

 

 
Fair Value Measurements for Financial Instruments

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at the periods ended March 31, 2020 and December 31, 2019:

 

March 31, 2020

Fair value

 

 

Valuation

Technique(s)

 

Unobservable Input(s)

 

Range

(Weighted Average)

Impaired loans

 

 

 

 

 

 

 

 

 

Residential

$

254

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(40.00%) - 47.15%

(17.77%)

Consumer

 

25

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(10.00%) - 10.00%

0.00%

Other Real Estate owned residential

 

77

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(0%) - 0%

0%

 

December 31, 2019

Fair value

 

 

Valuation

Technique(s)

 

Unobservable Input(s)

 

Range

(Weighted Average)

Impaired loans

 

 

 

 

 

 

 

 

 

Residential

$

183

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(24.26%) - 23.74%

14.53%

Consumer

 

12

 

 

Sales comparison

 

Adjustment for differences between comparable sales

 

(12.95%) - 12.95%

(0.00%)

 
Carrying Amounts and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments not previously disclosed at March 31, 2020 and December 31, 2019 are as follows:

 

 

 

 

 

 

 

Fair Value Measurements at March 31, 2020 Using:

 

(In Thousands of Dollars)

 

Carrying

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

83,107

 

 

$

30,943

 

 

$

52,164

 

 

$

0

 

 

$

83,107

 

Restricted stock

 

 

18,757

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

Loans held for sale

 

 

3,272

 

 

 

0

 

 

 

3,370

 

 

 

0

 

 

 

3,370

 

Loans, net

 

 

1,961,630

 

 

 

0

 

 

 

0

 

 

 

1,957,445

 

 

 

1,957,445

 

Accrued interest receivable

 

 

8,602

 

 

 

0

 

 

 

2,713

 

 

 

5,889

 

 

 

8,602

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,246,277

 

 

 

1,591,705

 

 

 

631,227

 

 

 

0

 

 

 

2,222,932

 

Short-term borrowings

 

 

19,998

 

 

 

0

 

 

 

19,998

 

 

 

0

 

 

 

19,998

 

Long-term borrowings

 

 

76,854

 

 

 

0

 

 

 

78,869

 

 

 

0

 

 

 

78,869

 

Accrued interest payable

 

 

1,346

 

 

 

51

 

 

 

1,295

 

 

 

0

 

 

 

1,346

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2019 Using:

 

(In Thousands of Dollars)

 

Carrying

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,760

 

 

$

23,229

 

 

$

47,531

 

 

$

0

 

 

$

70,760

 

Restricted stock

 

 

11,729

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

Loans held for sale

 

 

2,600

 

 

 

0

 

 

 

2,678

 

 

 

0

 

 

 

2,678

 

Loans, net

 

 

1,797,052

 

 

 

0

 

 

 

0

 

 

 

1,760,062

 

 

 

1,760,062

 

Accrued interest receivable

 

 

7,552

 

 

 

0

 

 

 

2,578

 

 

 

4,974

 

 

 

7,552

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,008,964

 

 

 

1,457,309

 

 

 

495,222

 

 

 

0

 

 

 

1,952,531

 

Short-term borrowings

 

 

77,050

 

 

 

0

 

 

 

77,050

 

 

 

0

 

 

 

77,050

 

Long-term borrowings

 

 

45,147

 

 

 

0

 

 

 

45,998

 

 

 

0

 

 

 

45,998

 

Accrued interest payable

 

 

1,070

 

 

 

61

 

 

 

1,009

 

 

 

0

 

 

 

1,070

 

 
v3.20.1
Short-term Borrowings
 3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Short-term Borrowings

Short-term borrowings:

There were $15 million in short-term Federal Home Loan Bank Advances at March 31, 2020 with a weighted average interest rate of 0.26%.  Short-term Federal Home Loan Bank Advances were $75 million at December 31, 2019.  The Company had $4.6 million and $1.7 million in securities sold under repurchase agreements for the periods ended March 31, 2020 and December 31, 2019, respectively.  In addition, the Company had no Federal funds purchased and has a $350 thousand balance on business lines of credit with one lending institution at March 31, 2020 and December 31, 2019.

Securities sold under repurchase agreements are secured by the Bank’s holdings of debt securities issued by U.S. Government sponsored entities and agencies.  These pledged securities which are 105% of the repurchase agreement balances, had a carrying amount of $4.9 million and $1.8 million at March 31, 2020 and December 31, 2019.

The following table provides a disaggregation of the obligation by the class of collateral pledged for short-term financing obtained through the sales of repurchase agreements:

 

(In Thousands of Dollars)

 

March 31, 2020

 

 

December 31, 2019

 

Overnight and continuous repurchase agreements

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

119

 

 

$

55

 

State and political subdivisions

 

 

2,060

 

 

 

627

 

Mortgage-backed securities - residential

 

 

1,974

 

 

 

948

 

Collateralized mortgage obligations - residential

 

 

495

 

 

 

70

 

Total repurchase agreements

 

$

4,648

 

 

$

1,700

 

 

Management believes the risks associated with the agreements are minimal and, in the case of collateral decline, the Company has additional investment securities available to adequately pledge as guarantees for the repurchase agreements.  
v3.20.1
Other Comprehensive Income (Loss)
 3 Months Ended
Mar. 31, 2020
Comprehensive Income Net Of Tax [Abstract]  
Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss):

The following table represents the details of other comprehensive income for the three month periods ended March 31, 2020 and 2019.

 

 

Three Months Ended March 31, 2020

 

(In Thousands of Dollars)

Pre-tax

 

 

Tax

 

 

After-Tax

 

Unrealized holding gains (losses) on available-for-sale securities during the period

$

(12,217

)

 

$

2,565

 

 

$

(9,652

)

Reclassification adjustment for (gains) losses included in net income (1)

 

(256

)

 

 

54

 

 

 

(202

)

Net other comprehensive income (loss)

$

(12,473

)

 

$

2,619

 

 

$

(9,854

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019

 

(In Thousands of Dollars)

Pre-tax

 

 

Tax

 

 

After-Tax

 

Unrealized holding gains (losses) on available-for-sale securities during the period

$

5,821

 

 

$

(1,223

)

 

$

4,598

 

Reclassification adjustment for losses included in net income (1)

 

34

 

 

 

(7

)

 

 

27

 

Net other comprehensive income (loss)

$

5,855

 

 

$

(1,230

)

 

$

4,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Pre-tax reclassification adjustments relating to available-for-sale securities are reported in security gains and the tax impact is included in income tax expense on the consolidated statements of income.
v3.20.1
Revenue from Contracts with Customers (Details) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Disaggregation Of Revenue [Line Items]    
TOTAL NONINTEREST INCOME $ 7,715 $ 6,520
Service Charges on Deposit Accounts    
Disaggregation Of Revenue [Line Items]    
Noninterest income 1,095 1,074
Debit Card and EFT Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 851 778
Trust Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 1,857 1,858
Insurance Agency Commissions    
Disaggregation Of Revenue [Line Items]    
Noninterest income 883 803
Retirement Plan Consulting Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 380 358
Investment Commissions    
Disaggregation Of Revenue [Line Items]    
Noninterest income 423 260
Operating Segments    
Disaggregation Of Revenue [Line Items]    
TOTAL NONINTEREST INCOME 7,715 6,520
Operating Segments | Service Charges on Deposit Accounts    
Disaggregation Of Revenue [Line Items]    
Noninterest income 1,095 1,074
Operating Segments | Debit Card and EFT Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 851 778
Operating Segments | Trust Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 1,857 1,858
Operating Segments | Insurance Agency Commissions    
Disaggregation Of Revenue [Line Items]    
Noninterest income 883 803
Operating Segments | Retirement Plan Consulting Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 380 358
Operating Segments | Investment Commissions    
Disaggregation Of Revenue [Line Items]    
Noninterest income 423 260
Operating Segments | Other    
Disaggregation Of Revenue [Line Items]    
Other (outside the scope of ASC 606) 2,226 1,389
Operating Segments | Trust Segment    
Disaggregation Of Revenue [Line Items]    
TOTAL NONINTEREST INCOME 2,237 2,216
Operating Segments | Trust Segment | Service Charges on Deposit Accounts    
Disaggregation Of Revenue [Line Items]    
Noninterest income 0 0
Operating Segments | Trust Segment | Debit Card and EFT Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 0 0
Operating Segments | Trust Segment | Trust Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 1,857 1,858
Operating Segments | Trust Segment | Insurance Agency Commissions    
Disaggregation Of Revenue [Line Items]    
Noninterest income 0 0
Operating Segments | Trust Segment | Retirement Plan Consulting Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 380 358
Operating Segments | Trust Segment | Investment Commissions    
Disaggregation Of Revenue [Line Items]    
Noninterest income 0 0
Operating Segments | Trust Segment | Other    
Disaggregation Of Revenue [Line Items]    
Other (outside the scope of ASC 606) 0 0
Operating Segments | Bank Segment    
Disaggregation Of Revenue [Line Items]    
TOTAL NONINTEREST INCOME 5,478 4,304
Operating Segments | Bank Segment | Service Charges on Deposit Accounts    
Disaggregation Of Revenue [Line Items]    
Noninterest income 1,095 1,074
Operating Segments | Bank Segment | Debit Card and EFT Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 851 778
Operating Segments | Bank Segment | Trust Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 0 0
Operating Segments | Bank Segment | Insurance Agency Commissions    
Disaggregation Of Revenue [Line Items]    
Noninterest income 883 803
Operating Segments | Bank Segment | Retirement Plan Consulting Fees    
Disaggregation Of Revenue [Line Items]    
Noninterest income 0 0
Operating Segments | Bank Segment | Investment Commissions    
Disaggregation Of Revenue [Line Items]    
Noninterest income 423 260
Operating Segments | Bank Segment | Other    
Disaggregation Of Revenue [Line Items]    
Other (outside the scope of ASC 606) $ 2,226 $ 1,389
v3.20.1
Troubled Debt Restructurings (Details)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
USD ($)
Loan
Mar. 31, 2019
USD ($)
Loan
Financing Receivable Modifications [Line Items]    
Number of Loans | Loan 22 18
Pre-Modification Outstanding Recorded Investment $ 474 $ 269
Post-Modification Outstanding Recorded Investment $ 477 $ 275
Originated Loans    
Financing Receivable Modifications [Line Items]    
Number of Loans | Loan 21 16
Pre-Modification Outstanding Recorded Investment $ 406 $ 218
Post-Modification Outstanding Recorded Investment $ 409 $ 220
Originated Loans | Residential real estate, 1-4 family residential    
Financing Receivable Modifications [Line Items]    
Number of Loans | Loan 5 3
Pre-Modification Outstanding Recorded Investment $ 209 $ 73
Post-Modification Outstanding Recorded Investment $ 210 $ 75
Originated Loans | Residential real estate, Home equity lines of credit    
Financing Receivable Modifications [Line Items]    
Number of Loans | Loan 4 1
Pre-Modification Outstanding Recorded Investment $ 100 $ 40
Post-Modification Outstanding Recorded Investment $ 102 $ 40
Originated Loans | Consumer, Indirect    
Financing Receivable Modifications [Line Items]    
Number of Loans | Loan 10 12
Pre-Modification Outstanding Recorded Investment $ 61 $ 105
Post-Modification Outstanding Recorded Investment $ 61 $ 105
Originated Loans | Consumer, Other    
Financing Receivable Modifications [Line Items]    
Number of Loans | Loan 1  
Pre-Modification Outstanding Recorded Investment $ 15  
Post-Modification Outstanding Recorded Investment $ 15  
Acquired Loans    
Financing Receivable Modifications [Line Items]    
Number of Loans | Loan 1 2
Pre-Modification Outstanding Recorded Investment $ 68 $ 51
Post-Modification Outstanding Recorded Investment $ 68 $ 55
Acquired Loans | Commercial    
Financing Receivable Modifications [Line Items]    
Number of Loans | Loan 1  
Pre-Modification Outstanding Recorded Investment $ 21  
Post-Modification Outstanding Recorded Investment $ 21  
Acquired Loans | Residential real estate, 1-4 family residential    
Financing Receivable Modifications [Line Items]    
Number of Loans | Loan 1 2
Pre-Modification Outstanding Recorded Investment $ 68 $ 51
Post-Modification Outstanding Recorded Investment $ 68 $ 55
v3.20.1
Long-term borrowings (Details Textual) - USD ($)
$ in Millions
 3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Debt Instrument [Line Items]    
Long-term Federal Home Loan Bank Advances $ 67.7 $ 42.8
Long-term investments $ 9.2 2.1
Debenture maturity date Dec. 31, 2036  
Residential mortgage, commercial real estate, and multi-family loans $ 575.1 $ 577.9
Additional borrowing limit $ 492.4  
Weighted Average    
Debt Instrument [Line Items]    
Weighted average interest rate 0.26%  
Weighted Average | Long-term Debt    
Debt Instrument [Line Items]    
Weighted average interest rate 1.39%  
v3.20.1
Segment Information (Details) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Segment Reporting Information [Line Items]      
Goodwill and other intangibles $ 52,198   $ 42,645
Total assets 2,668,249   2,449,158
Net interest income 22,302 $ 19,965  
Provision for loan losses 1,100 550  
Service fees, security gains and other noninterest income 7,715 6,520  
Noninterest expense 17,831 15,268  
Amortization and depreciation expense 751 709  
INCOME BEFORE INCOME TAXES 10,335 9,958  
Income taxes 1,696 1,570  
NET INCOME 8,639 8,388  
Eliminations And Others      
Segment Reporting Information [Line Items]      
Goodwill and other intangibles (3,558)   (822)
Total assets 4,523   4,482
Net interest income (84) (22)  
Provision for loan losses 0 0  
Service fees, security gains and other noninterest income (148) (41)  
Noninterest expense 433 140  
Amortization and depreciation expense 48 12  
INCOME BEFORE INCOME TAXES (713) (215)  
Income taxes (207) (112)  
NET INCOME (506) (103)  
Trust Segment | Operating Segments      
Segment Reporting Information [Line Items]      
Goodwill and other intangibles 6,256   6,326
Total assets 14,208   13,892
Net interest income 34 38  
Provision for loan losses 0 0  
Service fees, security gains and other noninterest income 2,243 2,256  
Noninterest expense 1,517 1,601  
Amortization and depreciation expense 76 92  
INCOME BEFORE INCOME TAXES 684 601  
Income taxes 144 126  
NET INCOME 540 475  
Bank Segment | Operating Segments      
Segment Reporting Information [Line Items]      
Goodwill and other intangibles 49,500   37,141
Total assets 2,649,518   $ 2,430,784
Net interest income 22,352 19,949  
Provision for loan losses 1,100 550  
Service fees, security gains and other noninterest income 5,620 4,305  
Noninterest expense 15,881 13,527  
Amortization and depreciation expense 627 605  
INCOME BEFORE INCOME TAXES 10,364 9,572  
Income taxes 1,759 1,556  
NET INCOME $ 8,605 $ 8,016  
v3.20.1
Loans (Details 6) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Financing Receivable Impaired [Line Items]    
Average Recorded Investment, With no related allowance recorded $ 3,451 $ 3,678
Average Recorded Investment, With an allowance recorded 852 1,839
Average Recorded Investment 4,303 5,517
Interest Income Recognized, With no related allowance recorded 55 57
Interest Income Recognized, With related allowance recorded 9 11
Interest Income Recognized 64 68
Consumer    
Financing Receivable Impaired [Line Items]    
Average Recorded Investment, With no related allowance recorded 244 112
Average Recorded Investment, With an allowance recorded 0 8
Interest Income Recognized, With no related allowance recorded 7 3
Interest Income Recognized, With related allowance recorded 0 0
Commercial real estate, Owner occupied | Commercial real estate    
Financing Receivable Impaired [Line Items]    
Average Recorded Investment, With no related allowance recorded 0 331
Interest Income Recognized, With no related allowance recorded 0 4
Commercial real estate, Non-owner occupied | Commercial real estate    
Financing Receivable Impaired [Line Items]    
Average Recorded Investment, With no related allowance recorded 34 38
Interest Income Recognized, With no related allowance recorded 0 0
Commercial real estate, Farmland | Commercial real estate    
Financing Receivable Impaired [Line Items]    
Average Recorded Investment, With no related allowance recorded 517 0
Average Recorded Investment, With an allowance recorded 0 257
Interest Income Recognized, With no related allowance recorded 1 0
Interest Income Recognized, With related allowance recorded 0 0
Commercial, Commercial and industrial | Commercial    
Financing Receivable Impaired [Line Items]    
Average Recorded Investment, With no related allowance recorded 132 157
Average Recorded Investment, With an allowance recorded 52 59
Interest Income Recognized, With no related allowance recorded 2 2
Interest Income Recognized, With related allowance recorded 1 1
Commercial, Agricultural | Commercial    
Financing Receivable Impaired [Line Items]    
Average Recorded Investment, With no related allowance recorded 17 0
Interest Income Recognized, With no related allowance recorded 1 0
Residential real estate, 1-4 family residential | Residential real estate    
Financing Receivable Impaired [Line Items]    
Average Recorded Investment, With no related allowance recorded 2,139 2,693
Average Recorded Investment, With an allowance recorded 701 1,319
Interest Income Recognized, With no related allowance recorded 38 43
Interest Income Recognized, With related allowance recorded 8 8
Residential real estate, Home equity lines of credit | Residential real estate    
Financing Receivable Impaired [Line Items]    
Average Recorded Investment, With no related allowance recorded 368 347
Average Recorded Investment, With an allowance recorded 99 196
Interest Income Recognized, With no related allowance recorded 6 5
Interest Income Recognized, With related allowance recorded $ 0 $ 2
v3.20.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES    
Net income $ 8,639 $ 8,388
Adjustments to reconcile net income to net cash from operating activities:    
Provision for loan losses 1,100 550
Depreciation and amortization 751 709
Net amortization of securities 488 538
Available for sale security (gain) loss (256) 34
Realized (gains) losses on equity securities 99 (44)
Loss on premises and equipment sales and disposals, net 77 8
Stock compensation expense 337 320
Loss on adjustment of other real estate owned 0 60
Earnings on bank owned life insurance (208) (214)
Origination of loans held for sale (31,012) (10,695)
Proceeds from loans held for sale 31,706 10,243
Net gains on sale of loans (1,366) (671)
Net change in other assets and liabilities (4,574) (3,993)
NET CASH FROM OPERATING ACTIVITIES 5,781 5,233
CASH FLOWS FROM INVESTING ACTIVITIES    
Proceeds from maturities and repayments of securities available for sale 9,622 5,635
Proceeds from sales of securities available for sale 15,126 9,646
Purchases of securities available for sale (25,224) (10,153)
Purchase of equity securities (423) (230)
Proceeds from redemption of restricted stock 255 8
Purchase of restricted stock (1,825) 0
Loan originations and payments, net 15,602 (8,444)
Proceeds from land and building sales 502 62
Additions to premises and equipment (2,279) (466)
Net cash paid in business combinations (8,136) 0
NET CASH FROM INVESTING ACTIVITIES 3,220 (3,942)
CASH FLOWS FROM FINANCING ACTIVITIES    
Net change in deposits 54,062 154,613
Net change in short-term borrowings (32,052) (141,261)
Repayment of long-term borrowings (1,287) (195)
Cash dividends paid (3,139) (2,500)
Repurchase of common shares (14,238) (202)
NET CASH FROM FINANCING ACTIVITIES 3,346 10,455
NET CHANGE IN CASH AND CASH EQUIVALENTS 12,347 11,746
Beginning cash and cash equivalents 70,760 57,926
Ending cash and cash equivalents 83,107 69,672
Supplemental cash flow information:    
Interest paid 5,158 4,536
Supplemental noncash disclosures:    
Transfer of loans to other real estate 0 268
Security purchases not settled 0 1,426
Issuance of stock awards 22 0
Issuance of stock for business combinations $ 22,554 $ 0
v3.20.1
Segment Information (Tables)
 3 Months Ended
Mar. 31, 2020
Segment Reporting [Abstract]  
Schedule of Segment Reporting Information Significant segment totals are reconciled to the financial statements as follows:

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

 

$

6,256

 

 

$

49,500

 

 

$

(3,558

)

 

$

52,198

 

Total assets

 

$

14,208

 

 

$

2,649,518

 

 

$

4,523

 

 

$

2,668,249

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

 

$

6,326

 

 

$

37,141

 

 

$

(822

)

 

$

42,645

 

Total assets

 

$

13,892

 

 

$

2,430,784

 

 

$

4,482

 

 

$

2,449,158

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

For Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

34

 

 

$

22,352

 

 

$

(84

)

 

$

22,302

 

Provision for loan losses

 

 

0

 

 

 

1,100

 

 

 

0

 

 

 

1,100

 

Service fees, security gains and other noninterest income

 

 

2,243

 

 

 

5,620

 

 

 

(148

)

 

 

7,715

 

Noninterest expense

 

 

1,517

 

 

 

15,881

 

 

 

433

 

 

 

17,831

 

Amortization and depreciation expense

 

 

76

 

 

 

627

 

 

 

48

 

 

 

751

 

Income before taxes

 

 

684

 

 

 

10,364

 

 

 

(713

)

 

 

10,335

 

Income taxes

 

 

144

 

 

 

1,759

 

 

 

(207

)

 

 

1,696

 

Net income

 

$

540

 

 

$

8,605

 

 

$

(506

)

 

$

8,639

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Eliminations

and Others

 

 

Consolidated

Totals

 

For Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

38

 

 

$

19,949

 

 

$

(22

)

 

$

19,965

 

Provision for loan losses

 

 

0

 

 

 

550

 

 

 

0

 

 

 

550

 

Service fees, security gains and other noninterest income

 

 

2,256

 

 

 

4,305

 

 

 

(41

)

 

 

6,520

 

Noninterest expense

 

 

1,601

 

 

 

13,527

 

 

 

140

 

 

 

15,268

 

Amortization and depreciation expense

 

 

92

 

 

 

605

 

 

 

12

 

 

 

709

 

Income before taxes

 

 

601

 

 

 

9,572

 

 

 

(215

)

 

 

9,958

 

Income taxes

 

 

126

 

 

 

1,556

 

 

 

(112

)

 

 

1,570

 

Net income

 

$

475

 

 

$

8,016

 

 

$

(103

)

 

$

8,388

 

 

 
v3.20.1
Consolidated Statements of Income (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
INTEREST AND DIVIDEND INCOME    
Loans, including fees $ 24,099 $ 21,469
Taxable securities 1,547 1,244
Tax exempt securities 1,782 1,595
Dividends 140 175
Federal funds sold and other interest income 149 196
TOTAL INTEREST AND DIVIDEND INCOME 27,717 24,679
INTEREST EXPENSE    
Deposits 4,639 3,435
Short-term borrowings 320 1,231
Long-term borrowings 456 48
TOTAL INTEREST EXPENSE 5,415 4,714
NET INTEREST INCOME 22,302 19,965
Provision for loan losses 1,100 550
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 21,202 19,415
NONINTEREST INCOME    
Bank owned life insurance income 208 214
Security gains, including fair value changes for equity securities 157 10
Net gains on sale of loans 1,366 671
Other operating income 495 494
TOTAL NONINTEREST INCOME 7,715 6,520
NONINTEREST EXPENSES    
Salaries and employee benefits 10,231 9,356
Occupancy and equipment 1,800 1,717
State and local taxes 464 470
Professional fees 816 794
Merger related costs 1,319 0
Advertising 271 250
FDIC insurance 225 87
Intangible amortization 332 327
Core processing charges 861 791
Telephone and data 203 260
Other operating expenses 2,060 1,925
TOTAL NONINTEREST EXPENSES 18,582 15,977
INCOME BEFORE INCOME TAXES 10,335 9,958
INCOME TAXES 1,696 1,570
NET INCOME $ 8,639 $ 8,388
EARNINGS PER SHARE - basic $ 0.30 $ 0.30
EARNINGS PER SHARE - fully diluted $ 0.30 $ 0.30
Service Charges on Deposit Accounts    
NONINTEREST INCOME    
Noninterest income $ 1,095 $ 1,074
Trust Fees    
NONINTEREST INCOME    
Noninterest income 1,857 1,858
Insurance Agency Commissions    
NONINTEREST INCOME    
Noninterest income 883 803
Retirement Plan Consulting Fees    
NONINTEREST INCOME    
Noninterest income 380 358
Investment Commissions    
NONINTEREST INCOME    
Noninterest income 423 260
Debit Card and EFT Fees    
NONINTEREST INCOME    
Noninterest income $ 851 $ 778
v3.20.1
Business Combinations (Details) - USD ($)
$ in Thousands
Jan. 07, 2020
Mar. 31, 2020
Dec. 31, 2019
Fair value of liabilities assumed      
Goodwill created   $ 47,360 $ 38,201
Maple Leaf      
Consideration      
Cash $ 20,423    
Stock 22,554    
Fair value of total consideration transferred 42,977    
Fair value of assets acquired      
Cash and due from financial institutions 12,287    
Securities available for sale 28,038    
Loans 181,280    
Premises and equipment 229    
Core deposit intangible 725    
Other assets 6,471    
Total assets 229,030    
Fair value of liabilities assumed      
Deposits 183,251    
Long-term borrowings 7,946    
Accrued interest payable and other liabilities 4,015    
Total liabilities 195,212    
Net assets acquired 33,818    
Goodwill created 9,159    
Total net assets acquired $ 42,977    
v3.20.1
Fair Value (Details Textual) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]      
Fair value assets liabilities transfers amount between level 1 and level 2 $ 0 $ 0  
Impaired loans, unpaid principal balance with allowance recorded 966   $ 920
Impaired loans, allowance 61   61
Troubled debt restructurings $ 4,700   4,600
Maximum maturity period of short term borrowings 90 days    
Measured Using Present Value of Cash Flows      
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]      
Troubled debt restructurings $ 575   583
Collateral Dependent Impaired Loans      
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]      
Impaired loans, unpaid principal balance with allowance recorded 297   208
Impaired loans, allowance 18   $ 13
Provision for loan losses $ 5 $ 223  
v3.20.1
Interest-Rate Swaps (Details) - USD ($)
$ in Thousands
 3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Derivative [Line Items]    
Weighted average pay rate on interest-rate swaps 4.63% 4.60%
Weighted average receive rate on interest-rate swaps 2.87% 4.02%
Weighted average maturity (years) 4 years 1 month 6 days 4 years 4 months 24 days
Fair value of interest-rate swaps $ (4,810) $ (1,898)
Fair value of loan yield maintenance provisions 4,810 1,898
Interest rate swaps    
Derivative [Line Items]    
Notional amounts $ 43,310 $ 42,178
v3.20.1
Stock Based Compensation (Details Textual) - 2017 Incentive Plan - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Number of shares vested 2,000    
Number of shares vested, weighted average fair value $ 16.26    
Restricted Stock Awards      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Maximum shares available under equity incentive plan     800,000
Number of shares available for grant 406,315    
Stock based compensation expense $ 337 $ 320  
Unrecognized compensation expense $ 2,300    
Compensation cost not yet recognized, period for recognition 2 years 10 months 24 days    
Time Based Restricted Stock Awards      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Share awards granted under equity incentive plan 19,045    
Number of shares vested 2,000    
Number of shares vested, weighted average fair value $ 14.65    
Performance Based Restricted Stock Awards      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Share awards granted under equity incentive plan 50,187    
Number of shares vested 0    
Number of shares vested, weighted average fair value $ 0    
v3.20.1
Fair Value (Details 4) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Dec. 31, 2018
Financial assets        
Cash and cash equivalents, Carrying Amount $ 83,107 $ 70,760 $ 69,672 $ 57,926
Restricted stock, Carrying Amount 18,757 11,729    
Loans held for sale, Carrying Amount 3,272 2,600    
Loans, net, Carrying Amount 1,961,630 1,797,052    
Accrued interest receivable, Carrying Amount 8,602 7,552    
Financial liabilities        
Deposits, Carrying Amount 2,246,277 2,008,964    
Short-term borrowings, Carrying Amount 19,998 77,050    
Long-term borrowings 76,854 45,147    
Accrued interest payable, Carrying Amount 1,346 1,070    
Fair Value, Measurements, Recurring        
Financial assets        
Cash and cash equivalents, Fair Value 83,107 70,760    
Loans held for sale, Fair Value 3,370 2,678    
Loans, net, Fair Value 1,957,445 1,760,062    
Accrued interest receivable, Fair Value 8,602 7,552    
Financial liabilities        
Deposits, Fair Value 2,222,932 1,952,531    
Short-term borrowings, Fair Value 19,998 77,050    
Long-term borrowings, Fair Value 78,869 45,998    
Accrued interest payable, Fair value 1,346 1,070    
Fair Value, Measurements, Recurring | Level 1        
Financial assets        
Cash and cash equivalents, Fair Value 30,943 23,229    
Loans held for sale, Fair Value 0 0    
Loans, net, Fair Value 0 0    
Accrued interest receivable, Fair Value 0 0    
Financial liabilities        
Deposits, Fair Value 1,591,705 1,457,309    
Short-term borrowings, Fair Value 0 0    
Long-term borrowings, Fair Value 0 0    
Accrued interest payable, Fair value 51 61    
Fair Value, Measurements, Recurring | Level 2        
Financial assets        
Cash and cash equivalents, Fair Value 52,164 47,531    
Loans held for sale, Fair Value 3,370 2,678    
Loans, net, Fair Value 0 0    
Accrued interest receivable, Fair Value 2,713 2,578    
Financial liabilities        
Deposits, Fair Value 631,227 495,222    
Short-term borrowings, Fair Value 19,998 77,050    
Long-term borrowings, Fair Value 78,869 45,998    
Accrued interest payable, Fair value 1,295 1,009    
Fair Value, Measurements, Recurring | Level 3        
Financial assets        
Cash and cash equivalents, Fair Value 0 0    
Loans held for sale, Fair Value 0 0    
Loans, net, Fair Value 1,957,445 1,760,062    
Accrued interest receivable, Fair Value 5,889 4,974    
Financial liabilities        
Deposits, Fair Value 0 0    
Short-term borrowings, Fair Value 0 0    
Long-term borrowings, Fair Value 0 0    
Accrued interest payable, Fair value $ 0 $ 0    
v3.20.1
Leases (Details Textual) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Lessee Lease Description [Line Items]    
Operating leases options to extend [true false] true  
Operating leases Options to terminate 10 months  
Operating lease, description The Company has operating leases for branch office locations, vehicles and certain office equipment such as printers, copiers and faxes. The leases have remaining lease terms of 10 months to 10.25 years, some of which include options to extend the lease for up to 10 years and some of which include options to terminate the leases within 10 months.  
Operating lease, right-of-use asset $ 4,900 $ 3,500
Operating lease, liability 5,012 3,500
Operating lease, payments 195 146
Finance leases, interest expense 23 27
Finance leases, amortization expense $ 107 $ 89
Weighted average remaining lease term 5 years 6 months  
Weighted-average discount rate 3.07%  
Minimum    
Lessee Lease Description [Line Items]    
Operating leases remaining lease terms 10 months  
Maximum    
Lessee Lease Description [Line Items]    
Operating leases remaining lease terms 10 years 3 months  
Operating leases options to extend 10 years  
v3.20.1
Regulatory Capital Matters (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Common equity tier 1 capital ratio    
Actual, Amount $ 253,014 $ 247,395
Actual, Ratio 12.26% 12.94%
Requirement for Capital Adequacy Purposes, Amount $ 92,891 $ 86,039
Requirement for Capital Adequacy Purposes, Ratio 4.50% 4.50%
Total risk based capital ratio    
Actual, Amount $ 277,167 $ 264,188
Actual, Ratio 13.43% 13.82%
Requirement for Capital Adequacy Purposes, Amount $ 165,139 $ 152,958
Requirement for Capital Adequacy Purposes, Ratio 8.00% 8.00%
Tier 1 risk based capital ratio    
Actual, Amount $ 262,215 $ 249,701
Actual, Ratio 12.70% 13.06%
Requirement for Capital Adequacy Purposes, Amount $ 123,854 $ 114,719
Requirement for Capital Adequacy Purposes, Ratio 6.00% 6.00%
Tier 1 leverage ratio    
Actual, Amount $ 262,215 $ 249,701
Actual, Ratio 10.18% 10.69%
Requirement for Capital Adequacy Purposes, Amount $ 103,016 $ 93,406
Requirement for Capital Adequacy Purposes, Ratio 4.00% 4.00%
Farmers National Banc Corp    
Common equity tier 1 capital ratio    
Actual, Amount $ 240,670 $ 213,507
Actual, Ratio 11.57% 11.19%
Requirement for Capital Adequacy Purposes, Amount $ 93,568 $ 85,854
Requirement for Capital Adequacy Purposes, Ratio 4.50% 4.50%
To be Well Capitalized Under Prompt Corrective Action Provisions, Amount $ 135,154 $ 124,011
To be Well Capitalized Under Prompt Corrective Action Provisions, Ratio 6.50% 6.50%
Total risk based capital ratio    
Actual, Amount $ 255,622 $ 227,994
Actual, Ratio 12.29% 11.95%
Requirement for Capital Adequacy Purposes, Amount $ 166,344 $ 152,629
Requirement for Capital Adequacy Purposes, Ratio 8.00% 8.00%
To be Well Capitalized Under Prompt Corrective Action Provisions, Amount $ 207,929 $ 190,787
To be Well Capitalized Under Prompt Corrective Action Provisions, Ratio 10.00% 10.00%
Tier 1 risk based capital ratio    
Actual, Amount $ 240,670 $ 213,507
Actual, Ratio 11.57% 11.19%
Requirement for Capital Adequacy Purposes, Amount $ 124,758 $ 114,472
Requirement for Capital Adequacy Purposes, Ratio 6.00% 6.00%
To be Well Capitalized Under Prompt Corrective Action Provisions, Amount $ 166,344 $ 152,629
To be Well Capitalized Under Prompt Corrective Action Provisions, Ratio 8.00% 8.00%
Tier 1 leverage ratio    
Actual, Amount $ 240,670 $ 213,507
Actual, Ratio 9.34% 9.06%
Requirement for Capital Adequacy Purposes, Amount $ 103,052 $ 94,304
Requirement for Capital Adequacy Purposes, Ratio 4.00% 4.00%
To be Well Capitalized Under Prompt Corrective Action Provisions, Amount $ 128,815 $ 117,881
To be Well Capitalized Under Prompt Corrective Action Provisions, Ratio 5.00% 5.00%
v3.20.1
Loans (Details 2) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Receivables [Abstract]    
Beginning balance $ 65 $ 93
New loans purchased 32 0
Accretion of income (8) (7)
Ending balance $ 89 $ 86
v3.20.1
Securities (Details 2) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Investment securities with unrealized losses    
Fair Value, Less Than 12 Months $ 181,203 $ 52,999
Unrealized Losses, Less Than 12 Months (7,777) (594)
Fair Value, 12 Months or Longer 0 31,039
Unrealized Losses, 12 Months or Longer 0 (472)
Fair Value, Total 181,203 84,038
Unrealized Losses, Total (7,777) (1,066)
U.S. Treasury and U.S. government sponsored entities    
Investment securities with unrealized losses    
Fair Value, Less Than 12 Months   0
Unrealized Losses, Less Than 12 Months   0
Fair Value, 12 Months or Longer   622
Unrealized Losses, 12 Months or Longer   (3)
Fair Value, Total   622
Unrealized Losses, Total   (3)
State and political subdivisions    
Investment securities with unrealized losses    
Fair Value, Less Than 12 Months 170,483 30,887
Unrealized Losses, Less Than 12 Months (7,529) (424)
Fair Value, 12 Months or Longer 0 0
Unrealized Losses, 12 Months or Longer 0 0
Fair Value, Total 170,483 30,887
Unrealized Losses, Total (7,529) (424)
Mortgage-backed securities - residential    
Investment securities with unrealized losses    
Fair Value, Less Than 12 Months   14,435
Unrealized Losses, Less Than 12 Months   (98)
Fair Value, 12 Months or Longer   22,381
Unrealized Losses, 12 Months or Longer   (274)
Fair Value, Total   36,816
Unrealized Losses, Total   (372)
Collateralized mortgage obligations - residential    
Investment securities with unrealized losses    
Fair Value, Less Than 12 Months 10,003 1,198
Unrealized Losses, Less Than 12 Months (239) (18)
Fair Value, 12 Months or Longer 0 7,935
Unrealized Losses, 12 Months or Longer 0 (195)
Fair Value, Total 10,003 9,133
Unrealized Losses, Total (239) (213)
Corporate bonds    
Investment securities with unrealized losses    
Fair Value, Less Than 12 Months 717 0
Unrealized Losses, Less Than 12 Months (9) 0
Fair Value, 12 Months or Longer 0 100
Unrealized Losses, 12 Months or Longer 0 0
Fair Value, Total 717 100
Unrealized Losses, Total $ (9) 0
Small Business Administration    
Investment securities with unrealized losses    
Fair Value, Less Than 12 Months   6,479
Unrealized Losses, Less Than 12 Months   (54)
Fair Value, 12 Months or Longer   1
Unrealized Losses, 12 Months or Longer   0
Fair Value, Total   6,480
Unrealized Losses, Total   $ (54)
v3.20.1
Credit Quality Indicators (Tables)
 3 Months Ended
Mar. 31, 2020
Risks And Uncertainties [Abstract]  
Risk Category of Loans by Class of Loans

As of March 31, 2020 and December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

(In Thousands of Dollars)

 

Pass

 

 

Special

Mention

 

 

Sub

standard

 

 

Total

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

188,841

 

 

$

3,073

 

 

$

1,551

 

 

$

193,465

 

Non-owner occupied

 

 

278,852

 

 

 

7,092

 

 

 

77

 

 

 

286,021

 

Farmland

 

 

138,919

 

 

 

1,815

 

 

 

380

 

 

 

141,114

 

Other

 

 

90,895

 

 

 

246

 

 

 

181

 

 

 

91,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

246,242

 

 

 

1,453

 

 

 

3,504

 

 

 

251,199

 

Agricultural

 

 

42,736

 

 

 

47

 

 

 

337

 

 

 

43,120

 

Total originated loans

 

$

986,485

 

 

$

13,726

 

 

$

6,030

 

 

$

1,006,241

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

53,806

 

 

$

104

 

 

$

1,039

 

 

$

54,949

 

Non-owner occupied

 

 

65,387

 

 

 

53

 

 

 

777

 

 

 

66,217

 

Farmland

 

 

31,961

 

 

 

0

 

 

 

2,457

 

 

 

34,418

 

Other

 

 

21,256

 

 

 

0

 

 

 

66

 

 

 

21,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

28,768

 

 

 

0

 

 

 

2,748

 

 

 

31,516

 

Agricultural

 

 

4,816

 

 

 

332

 

 

 

95

 

 

 

5,243

 

Total acquired loans

 

$

205,994

 

 

$

489

 

 

$

7,182

 

 

$

213,665

 

Total loans

 

$

1,192,479

 

 

$

14,215

 

 

$

13,212

 

 

$

1,219,906

 

 

(In Thousands of Dollars)

 

Pass

 

 

Special

Mention

 

 

Sub

standard

 

 

Total

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

177,540

 

 

$

5,357

 

 

$

1,026

 

 

$

183,923

 

Non-owner occupied

 

 

279,103

 

 

 

7,374

 

 

 

47

 

 

 

286,524

 

Farmland

 

 

136,674

 

 

 

1,457

 

 

 

384

 

 

 

138,515

 

Other

 

 

93,082

 

 

 

0

 

 

 

189

 

 

 

93,271

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

238,351

 

 

 

1,673

 

 

 

3,784

 

 

 

243,808

 

Agricultural

 

 

46,283

 

 

 

6

 

 

 

33

 

 

 

46,322

 

Total originated loans

 

$

971,033

 

 

$

15,867

 

 

$

5,463

 

 

$

992,363

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

34,707

 

 

$

110

 

 

$

607

 

 

$

35,424

 

Non-owner occupied

 

 

10,246

 

 

 

54

 

 

 

119

 

 

 

10,419

 

Farmland

 

 

32,112

 

 

 

0

 

 

 

3,265

 

 

 

35,377

 

Other

 

 

5,891

 

 

 

0

 

 

 

69

 

 

 

5,960

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

10,570

 

 

 

0

 

 

 

1,080

 

 

 

11,650

 

Agricultural

 

 

5,617

 

 

 

317

 

 

 

113

 

 

 

6,047

 

Total acquired loans

 

$

99,143

 

 

$

481

 

 

$

5,253

 

 

$

104,877

 

Total loans

 

$

1,070,176

 

 

$

16,348

 

 

$

10,716

 

 

$

1,097,240

 

 
Investment in Residential, Consumer and Indirect Auto Loans Based on Payment Activity

The following tables present the recorded investment in residential, consumer indirect and direct auto loans based on payment activity as of March 31, 2020 and December 31, 2019.  Nonperforming loans are loans past due 90 days or more and still accruing interest and nonaccrual loans.

 

 

 

Residential Real Estate

 

 

Consumer

 

(In Thousands of Dollars)

 

1-4 Family

Residential

 

 

Home

Equity Lines

of Credit

 

 

Indirect

 

 

Direct

 

 

Other

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

313,813

 

 

$

93,346

 

 

$

169,461

 

 

$

28,553

 

 

$

9,252

 

Nonperforming

 

 

1,645

 

 

 

711

 

 

 

696

 

 

 

326

 

 

 

14

 

Total originated loans

 

$

315,458

 

 

$

94,057

 

 

$

170,157

 

 

$

28,879

 

 

$

9,266

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

105,310

 

 

$

20,669

 

 

$

0

 

 

$

7,308

 

 

$

100

 

Nonperforming

 

 

5,084

 

 

 

230

 

 

 

0

 

 

 

158

 

 

 

0

 

Total acquired loans

 

 

110,394

 

 

 

20,899

 

 

 

0

 

 

 

7,466

 

 

 

100

 

Total loans

 

$

425,852

 

 

$

114,956

 

 

$

170,157

 

 

$

36,345

 

 

$

9,366

 

 

 

 

Residential Real Estate

 

 

Consumer

 

(In Thousands of Dollars)

 

1-4 Family

Residential

 

 

Home

Equity Lines

of Credit

 

 

Indirect

 

 

Direct

 

 

Other

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

322,554

 

 

$

91,291

 

 

$

171,037

 

 

$

27,358

 

 

$

9,478

 

Nonperforming

 

 

1,672

 

 

 

683

 

 

 

688

 

 

 

209

 

 

 

6

 

Total originated loans

 

$

324,226

 

 

$

91,974

 

 

$

171,725

 

 

$

27,567

 

 

$

9,484

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

62,611

 

 

$

19,397

 

 

$

0

 

 

$

5,893

 

 

$

154

 

Nonperforming

 

 

845

 

 

 

248

 

 

 

0

 

 

 

175

 

 

 

0

 

Total acquired loans

 

 

63,456

 

 

 

19,645

 

 

 

0

 

 

 

6,068

 

 

 

154

 

Total loans

 

$

387,682

 

 

$

111,619

 

 

$

171,725

 

 

$

33,635

 

 

$

9,638

 
v3.20.1
Leases (Tables)
 3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Maturities of Lease Liabilities

Maturities of lease liabilities are as follows as of March 31, 2020:

 

2020 (9 months)

 

$

588

 

2021

 

 

781

 

2022

 

 

607

 

2023

 

 

503

 

2024

 

 

333

 

Thereafter

 

 

3,230

 

Total Payments

 

 

6,042

 

Less: Imputed Interest

 

 

(1,030

)

Total

 

$

5,012

 
v3.20.1
Leases
 3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Leases

Leases:

 

The Company has operating leases for branch office locations, vehicles and certain office equipment such as printers, copiers and faxes. The leases have remaining lease terms of 10 months to 10.25 years, some of which include options to extend the lease for up to 10 years and some of which include options to terminate the leases within 10 months.

The right of use asset and lease liability were $4.9 million and $5.0 million as of March 31, 2020. At March 31, 2019, the right of use asset and lease liability were $3.5 million.

Lease payments made for the three month period ended March 31, 2020 and 2019 were $195 thousand and $146 thousand, respectively. Interest expense and amortization expense on finance leases for the three month period ended March 31, 2020 was $23 thousand and $107 thousand, and $27 thousand and $89 thousand for the three month period ended March 31, 2019.  The weighted-average remaining lease term for all leases was 5.5 years as of March 31, 2020 and the weighted-average discount rate was 3.07%.

 

Maturities of lease liabilities are as follows as of March 31, 2020:

 

2020 (9 months)

 

$

588

 

2021

 

 

781

 

2022

 

 

607

 

2023

 

 

503

 

2024

 

 

333

 

Thereafter

 

 

3,230

 

Total Payments

 

 

6,042

 

Less: Imputed Interest

 

 

(1,030

)

Total

 

$

5,012

 

 
v3.20.1
Credit Quality Indicators
 3 Months Ended
Mar. 31, 2020
Risks And Uncertainties [Abstract]  
Credit Quality Indicators

Credit Quality Indicators:

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 establishes a risk rating at origination for all commercial loan and commercial real estate relationships.  For relationships over $750 thousand, management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt.  Management also affirms the risk ratings for the loans in their respective portfolios on an annual 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.  Substandard loans 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.

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 March 31, 2020 and December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

(In Thousands of Dollars)

 

Pass

 

 

Special

Mention

 

 

Sub

standard

 

 

Total

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

188,841

 

 

$

3,073

 

 

$

1,551

 

 

$

193,465

 

Non-owner occupied

 

 

278,852

 

 

 

7,092

 

 

 

77

 

 

 

286,021

 

Farmland

 

 

138,919

 

 

 

1,815

 

 

 

380

 

 

 

141,114

 

Other

 

 

90,895

 

 

 

246

 

 

 

181

 

 

 

91,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

246,242

 

 

 

1,453

 

 

 

3,504

 

 

 

251,199

 

Agricultural

 

 

42,736

 

 

 

47

 

 

 

337

 

 

 

43,120

 

Total originated loans

 

$

986,485

 

 

$

13,726

 

 

$

6,030

 

 

$

1,006,241

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

53,806

 

 

$

104

 

 

$

1,039

 

 

$

54,949

 

Non-owner occupied

 

 

65,387

 

 

 

53

 

 

 

777

 

 

 

66,217

 

Farmland

 

 

31,961

 

 

 

0

 

 

 

2,457

 

 

 

34,418

 

Other

 

 

21,256

 

 

 

0

 

 

 

66

 

 

 

21,322

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

28,768

 

 

 

0

 

 

 

2,748

 

 

 

31,516

 

Agricultural

 

 

4,816

 

 

 

332

 

 

 

95

 

 

 

5,243

 

Total acquired loans

 

$

205,994

 

 

$

489

 

 

$

7,182

 

 

$

213,665

 

Total loans

 

$

1,192,479

 

 

$

14,215

 

 

$

13,212

 

 

$

1,219,906

 

 

(In Thousands of Dollars)

 

Pass

 

 

Special

Mention

 

 

Sub

standard

 

 

Total

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

177,540

 

 

$

5,357

 

 

$

1,026

 

 

$

183,923

 

Non-owner occupied

 

 

279,103

 

 

 

7,374

 

 

 

47

 

 

 

286,524

 

Farmland

 

 

136,674

 

 

 

1,457

 

 

 

384

 

 

 

138,515

 

Other

 

 

93,082

 

 

 

0

 

 

 

189

 

 

 

93,271

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

238,351

 

 

 

1,673

 

 

 

3,784

 

 

 

243,808

 

Agricultural

 

 

46,283

 

 

 

6

 

 

 

33

 

 

 

46,322

 

Total originated loans

 

$

971,033

 

 

$

15,867

 

 

$

5,463

 

 

$

992,363

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

$

34,707

 

 

$

110

 

 

$

607

 

 

$

35,424

 

Non-owner occupied

 

 

10,246

 

 

 

54

 

 

 

119

 

 

 

10,419

 

Farmland

 

 

32,112

 

 

 

0

 

 

 

3,265

 

 

 

35,377

 

Other

 

 

5,891

 

 

 

0

 

 

 

69

 

 

 

5,960

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

10,570

 

 

 

0

 

 

 

1,080

 

 

 

11,650

 

Agricultural

 

 

5,617

 

 

 

317

 

 

 

113

 

 

 

6,047

 

Total acquired loans

 

$

99,143

 

 

$

481

 

 

$

5,253

 

 

$

104,877

 

Total loans

 

$

1,070,176

 

 

$

16,348

 

 

$

10,716

 

 

$

1,097,240

 

 

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses.  For residential, consumer indirect and direct loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.  In the 1-4 family residential real estate portfolio at March 31, 2020, other real estate owned and foreclosure properties were $131 thousand and $231 thousand, respectively.  At December 31, 2019 other real estate owned and foreclosure properties were $19 thousand and $316 thousand, respectively.

The following tables present the recorded investment in residential, consumer indirect and direct auto loans based on payment activity as of March 31, 2020 and December 31, 2019.  Nonperforming loans are loans past due 90 days or more and still accruing interest and nonaccrual loans.

 

 

 

Residential Real Estate

 

 

Consumer

 

(In Thousands of Dollars)

 

1-4 Family

Residential

 

 

Home

Equity Lines

of Credit

 

 

Indirect

 

 

Direct

 

 

Other

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

313,813

 

 

$

93,346

 

 

$

169,461

 

 

$

28,553

 

 

$

9,252

 

Nonperforming

 

 

1,645

 

 

 

711

 

 

 

696

 

 

 

326

 

 

 

14

 

Total originated loans

 

$

315,458

 

 

$

94,057

 

 

$

170,157

 

 

$

28,879

 

 

$

9,266

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

105,310

 

 

$

20,669

 

 

$

0

 

 

$

7,308

 

 

$

100

 

Nonperforming

 

 

5,084

 

 

 

230

 

 

 

0

 

 

 

158

 

 

 

0

 

Total acquired loans

 

 

110,394

 

 

 

20,899

 

 

 

0

 

 

 

7,466

 

 

 

100

 

Total loans

 

$

425,852

 

 

$

114,956

 

 

$

170,157

 

 

$

36,345

 

 

$

9,366

 

 

 

 

Residential Real Estate

 

 

Consumer

 

(In Thousands of Dollars)

 

1-4 Family

Residential

 

 

Home

Equity Lines

of Credit

 

 

Indirect

 

 

Direct

 

 

Other

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

322,554

 

 

$

91,291

 

 

$

171,037

 

 

$

27,358

 

 

$

9,478

 

Nonperforming

 

 

1,672

 

 

 

683

 

 

 

688

 

 

 

209

 

 

 

6

 

Total originated loans

 

$

324,226

 

 

$

91,974

 

 

$

171,725

 

 

$

27,567

 

 

$

9,484

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

62,611

 

 

$

19,397

 

 

$

0

 

 

$

5,893

 

 

$

154

 

Nonperforming

 

 

845

 

 

 

248

 

 

 

0

 

 

 

175

 

 

 

0

 

Total acquired loans

 

 

63,456

 

 

 

19,645

 

 

 

0

 

 

 

6,068

 

 

 

154

 

Total loans

 

$

387,682

 

 

$

111,619

 

 

$

171,725

 

 

$

33,635

 

 

$

9,638

 

 
v3.20.1
Business Combinations
 3 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Business Combinations

Business Combinations:

On January 7, 2020, the Company completed the acquisition of Maple Leaf Financial, Inc. (“Maple Leaf”), the parent company of Geauga Savings Bank, with branches located in Cuyahoga and Geauga Counties in Ohio.  The Company expects the acquisition to increase synergies and cost savings resulting from the combining of the two companies.  The transaction involved both cash and 1,398,229 shares of stock totaling $43.0 million.  Pursuant to the terms of the Merger Agreement, common shareholders of Maple Leaf had the right to receive $640.00 in cash or 45.5948 common shares, without par value, of the Company.  Holders of outstanding and unexercised warrants to purchase Maple Leaf Common Shares received an amount in cash equal to the excess of $640.00 over $370.00, the exercise price of such warrants.

Goodwill of $9.2 million, which is recorded on the balance sheet, arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the entities.  The goodwill was determined not to be deductible for income tax purposes.  

The following table summarizes the consideration paid for Maple Leaf and the amounts of the assets acquired and liabilities assumed on the closing date of the acquisition.

 

 

 

 

 

(In Thousands of Dollars)

 

 

 

Consideration

 

 

 

Cash

$

20,423

 

Stock

 

22,554

 

Fair value of total consideration transferred

$

42,977

 

Fair value of assets acquired

 

 

 

Cash and due from financial institutions

$

12,287

 

Securities available for sale

 

28,038

 

Loans

 

181,280

 

Premises and equipment

 

229

 

Core deposit intangible

 

725

 

Other assets

 

6,471

 

Total assets

 

229,030

 

Fair value of liabilities assumed

 

 

 

Deposits

 

183,251

 

Long-term borrowings

 

7,946

 

Accrued interest payable and other liabilities

 

4,015

 

Total liabilities

 

195,212

 

Net assets acquired

$

33,818

 

Goodwill created

 

9,159

 

Total net assets acquired

$

42,977

 

 

 

The following table presents pro forma information as if the Maple Leaf acquisition that occurred during January 2020 actually took place at the beginning of 2019.  The pro forma information includes adjustments for merger related costs, amortization of intangibles arising from the transaction and the related income tax effects.  The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been effective on the assumed date.

 

 

For Three Months Ended March 31,

 

(In thousands of dollars except per share results)

2020

 

 

2019

 

Net interest income

$

22,482

 

 

$

22,120

 

Net income

$

8,659

 

 

$

8,624

 

Basic and diluted earnings per share

$

0.30

 

 

$

0.31

 

 
v3.20.1
Goodwill and Intangible Assets (Details 1) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Finite Lived Intangible Assets Future Amortization Expense [Abstract]    
2020 (9 months) $ 995  
2021 1,264  
2022 1,090  
2023 617  
2024 314  
Thereafter 558  
Total $ 4,838 $ 4,444
v3.20.1
Regulatory Capital Matters (Details Textual)
Mar. 31, 2020
Dec. 31, 2019
Regulatory Matters (Additional Textual) [Abstract]    
Common equity tier 1 capital to risk-weighted assets, capital conservation buffer ratio 2.50%  
Tier 1 capital to risk-weighted assets, capital conservation buffer ratio 2.50%  
Total capital to risk-weighted assets, capital conservation buffer ratio 2.50%  
Additional capital conservation buffer ratio 2.50%  
Minimum ratio of common equity tier 1 capital to risk-weighted assets 4.50% 4.50%
Minimum ratio of tier 1 capital to risk-weighted assets 6.00% 6.00%
Minimum ratio of total capital to risk-weighted assets 8.00% 8.00%
Minimum leverage ratio 4.00% 4.00%
Farmers National Banc Corp    
Regulatory Matters (Additional Textual) [Abstract]    
Minimum ratio of common equity tier 1 capital to risk-weighted assets 4.50% 4.50%
Minimum ratio of tier 1 capital to risk-weighted assets 6.00% 6.00%
Minimum ratio of total capital to risk-weighted assets 8.00% 8.00%
Minimum leverage ratio 4.00% 4.00%
v3.20.1
Fair Value (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Financial Assets    
Securities available for sale $ 448,043 $ 432,233
Equity securities 8,080 7,909
Loan yield maintenance provisions 4,810 1,898
Fair Value, Measurements, Recurring    
Financial Assets    
Total investment securities 456,123 440,142
Loan yield maintenance provisions 4,810 1,898
Corporate bonds    
Financial Assets    
Securities available for sale 3,343 1,260
Corporate bonds | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 3,343 1,260
Collateralized mortgage obligations | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 33,051 11,347
Small Business Administration    
Financial Assets    
Securities available for sale 6,305 6,480
Small Business Administration | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 6,305 6,480
Other investments measured at net asset value | Fair Value, Measurements, Recurring    
Financial Assets    
Equity securities 7,636 7,315
U.S. Treasury and U.S. government sponsored entities    
Financial Assets    
Securities available for sale 3,840 3,811
U.S. Treasury and U.S. government sponsored entities | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 3,840 3,811
State and political subdivisions    
Financial Assets    
Securities available for sale 267,583 261,425
State and political subdivisions | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 267,583 261,425
Mortgage-backed securities - residential    
Financial Assets    
Securities available for sale 133,921 147,910
Mortgage-backed securities - residential | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 133,921 147,910
Equity securities at fair value | Fair Value, Measurements, Recurring    
Financial Assets    
Equity securities 444 594
Interest rate swaps | Fair Value, Measurements, Recurring    
Financial Liabilities    
Derivative liabilities 4,810 1,898
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring    
Financial Assets    
Total investment securities 444 594
Loan yield maintenance provisions 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate bonds | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Collateralized mortgage obligations | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Small Business Administration | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasury and U.S. government sponsored entities | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | State and political subdivisions | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage-backed securities - residential | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity securities at fair value | Fair Value, Measurements, Recurring    
Financial Assets    
Equity securities 444 594
Quoted Prices in Active Markets for Identical Assets (Level 1) | Interest rate swaps | Fair Value, Measurements, Recurring    
Financial Liabilities    
Derivative liabilities 0 0
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring    
Financial Assets    
Total investment securities 448,038 432,228
Loan yield maintenance provisions 4,810 1,898
Significant Other Observable Inputs (Level 2) | Corporate bonds | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 3,343 1,260
Significant Other Observable Inputs (Level 2) | Collateralized mortgage obligations | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 33,051 11,347
Significant Other Observable Inputs (Level 2) | Small Business Administration | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 6,305 6,480
Significant Other Observable Inputs (Level 2) | U.S. Treasury and U.S. government sponsored entities | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 3,840 3,811
Significant Other Observable Inputs (Level 2) | State and political subdivisions | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 267,583 261,425
Significant Other Observable Inputs (Level 2) | Mortgage-backed securities - residential | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 133,916 147,905
Significant Other Observable Inputs (Level 2) | Equity securities at fair value | Fair Value, Measurements, Recurring    
Financial Assets    
Equity securities 0 0
Significant Other Observable Inputs (Level 2) | Interest rate swaps | Fair Value, Measurements, Recurring    
Financial Liabilities    
Derivative liabilities 4,810 1,898
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring    
Financial Assets    
Total investment securities 5 5
Loan yield maintenance provisions 0 0
Significant Unobservable Inputs (Level 3) | Corporate bonds | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 0 0
Significant Unobservable Inputs (Level 3) | Collateralized mortgage obligations | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 0 0
Significant Unobservable Inputs (Level 3) | Small Business Administration | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 0 0
Significant Unobservable Inputs (Level 3) | U.S. Treasury and U.S. government sponsored entities | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 0 0
Significant Unobservable Inputs (Level 3) | State and political subdivisions | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 0 0
Significant Unobservable Inputs (Level 3) | Mortgage-backed securities - residential | Fair Value, Measurements, Recurring    
Financial Assets    
Securities available for sale 5 5
Significant Unobservable Inputs (Level 3) | Equity securities at fair value | Fair Value, Measurements, Recurring    
Financial Assets    
Equity securities 0 0
Significant Unobservable Inputs (Level 3) | Interest rate swaps | Fair Value, Measurements, Recurring    
Financial Liabilities    
Derivative liabilities $ 0 $ 0
v3.20.1
Leases (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Mar. 31, 2019
Leases [Abstract]    
2020 (9 months) $ 588  
2021 781  
2022 607  
2023 503  
2024 333  
Thereafter 3,230  
Total Payments 6,042  
Less: Imputed Interest (1,030)  
Total $ 5,012 $ 3,500
v3.20.1
Earnings Per Share (Details Textual) - shares
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Restricted Stock Awards    
Earnings Per Share Basic [Line Items]    
Anti-dilutive securities excluded from computation of earnings per share 0 0
v3.20.1
Fair Value (Details 3)
$ in Thousands
 3 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
Dec. 31, 2019
USD ($)
Fair value measurements for financial instruments    
Recorded Investment $ 4,383 $ 4,253
Fair Value, Measurements, Nonrecurring | Residential Real Estate    
Fair value measurements for financial instruments    
Recorded Investment 254 183
Fair Value, Measurements, Nonrecurring | Consumer    
Fair value measurements for financial instruments    
Recorded Investment 25 12
Fair Value, Measurements, Nonrecurring | Other Real Estate Owned    
Fair value measurements for financial instruments    
Recorded Investment 77  
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Residential Real Estate    
Fair value measurements for financial instruments    
Recorded Investment $ 254 $ 183
Fair Value Measurements Valuation Technique(s) Description Sales comparison Sales comparison
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Residential Real Estate | Minimum | Measurement Input Comparability Adjustment    
Fair value measurements for financial instruments    
Adjustment for differences between earning multiplier and comparable sales, Percent (40.00) (24.26)
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Residential Real Estate | Maximum | Measurement Input Comparability Adjustment    
Fair value measurements for financial instruments    
Adjustment for differences between earning multiplier and comparable sales, Percent 47.15 23.74
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Residential Real Estate | Weighted Average | Measurement Input Comparability Adjustment    
Fair value measurements for financial instruments    
Adjustment for differences between earning multiplier and comparable sales, Percent (17.77) 14.53
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Consumer    
Fair value measurements for financial instruments    
Recorded Investment   $ 12
Fair Value Measurements Valuation Technique(s) Description Sales comparison Sales comparison
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Consumer | Minimum | Measurement Input Comparability Adjustment    
Fair value measurements for financial instruments    
Adjustment for differences between earning multiplier and comparable sales, Percent (10.00) (12.95)
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Consumer | Maximum | Measurement Input Comparability Adjustment    
Fair value measurements for financial instruments    
Adjustment for differences between earning multiplier and comparable sales, Percent 10.00 12.95
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Consumer | Weighted Average | Measurement Input Comparability Adjustment    
Fair value measurements for financial instruments    
Adjustment for differences between earning multiplier and comparable sales, Percent 0.00 0.00
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Other Real Estate Owned    
Fair value measurements for financial instruments    
Recorded Investment $ 77  
Fair Value Measurements Valuation Technique(s) Description Sales comparison  
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Other Real Estate Owned | Minimum | Measurement Input Comparability Adjustment    
Fair value measurements for financial instruments    
Adjustment for differences between earning multiplier and comparable sales, Percent 0  
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Other Real Estate Owned | Maximum | Measurement Input Comparability Adjustment    
Fair value measurements for financial instruments    
Adjustment for differences between earning multiplier and comparable sales, Percent 0  
Fair Value, Measurements, Nonrecurring | Sales Comparison Valuation | Other Real Estate Owned | Weighted Average | Measurement Input Comparability Adjustment    
Fair value measurements for financial instruments    
Adjustment for differences between earning multiplier and comparable sales, Percent 0  
v3.20.1
Loans (Details 3) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Allowance for loan losses    
Beginning balance $ 14,487 $ 13,592
Provision for loan losses 1,100 550
Loans charged off (749) (566)
Recoveries 114 201
Ending balance 14,952 13,777
Commercial real estate    
Allowance for loan losses    
Beginning balance 5,843 5,036
Provision for loan losses 717 159
Loans charged off 0 0
Recoveries 1 0
Ending balance 6,561 5,195
Commercial    
Allowance for loan losses    
Beginning balance 2,323 2,093
Provision for loan losses 495 107
Loans charged off (198) (44)
Recoveries 1 1
Ending balance 2,621 2,157
Residential real estate    
Allowance for loan losses    
Beginning balance 2,875 2,837
Provision for loan losses 129 (28)
Loans charged off (108) (21)
Recoveries 15 25
Ending balance 2,911 2,813
Consumer    
Allowance for loan losses    
Beginning balance 2,710 2,963
Provision for loan losses 324 182
Loans charged off (443) (501)
Recoveries 97 175
Ending balance 2,688 2,819
Unallocated    
Allowance for loan losses    
Beginning balance 736 663
Provision for loan losses (565) 130
Loans charged off 0 0
Recoveries 0 0
Ending balance $ 171 $ 793
v3.20.1
Loans (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Dec. 31, 2018
Schedule of loan balances        
Total loans $ 1,961,630 $ 1,797,052    
Allowance for loan losses (14,952) (14,487) $ (13,777) $ (13,592)
Commercial real estate        
Schedule of loan balances        
Allowance for loan losses (6,561) (5,843) (5,195) (5,036)
Commercial        
Schedule of loan balances        
Allowance for loan losses (2,621) (2,323) (2,157) (2,093)
Residential real estate        
Schedule of loan balances        
Allowance for loan losses (2,911) (2,875) (2,813) (2,837)
Consumer        
Schedule of loan balances        
Allowance for loan losses (2,688) (2,710) $ (2,819) $ (2,963)
Originated Loans        
Schedule of loan balances        
Total loans 1,620,665 1,614,024    
Originated Loans | Commercial real estate, Owner occupied | Commercial real estate        
Schedule of loan balances        
Loan balances 193,855 184,311    
Originated Loans | Commercial real estate, Non-owner occupied | Commercial real estate        
Schedule of loan balances        
Loan balances 286,613 287,160    
Originated Loans | Commercial real estate, Farmland | Commercial real estate        
Schedule of loan balances        
Loan balances 141,310 138,702    
Originated Loans | Commercial real estate, Other | Commercial real estate        
Schedule of loan balances        
Loan balances 91,517 93,501    
Originated Loans | Commercial, Commercial and industrial | Commercial        
Schedule of loan balances        
Loan balances 251,517 244,172    
Originated Loans | Commercial, Agricultural | Commercial        
Schedule of loan balances        
Loan balances 43,006 46,207    
Originated Loans | Residential real estate, 1-4 family residential | Residential real estate        
Schedule of loan balances        
Loan balances 316,197 324,964    
Originated Loans | Residential real estate, Home equity lines of credit | Residential real estate        
Schedule of loan balances        
Loan balances 94,043 91,958    
Originated Loans | Consumer, Indirect | Consumer        
Schedule of loan balances        
Loan balances 164,600 166,149    
Originated Loans | Consumer, Direct | Consumer        
Schedule of loan balances        
Loan balances 28,742 27,415    
Originated Loans | Consumer, Other | Consumer        
Schedule of loan balances        
Loan balances 9,265 9,485    
Acquired Loans        
Schedule of loan balances        
Total loans 352,529 194,206    
Net Deferred loan costs 3,388 3,309    
Allowance for loan losses (14,952) (14,487)    
Acquired Loans | Commercial real estate, Owner occupied | Commercial real estate        
Schedule of loan balances        
Loan balances 54,953 35,408    
Acquired Loans | Commercial real estate, Non-owner occupied | Commercial real estate        
Schedule of loan balances        
Loan balances 66,218 10,439    
Acquired Loans | Commercial real estate, Farmland | Commercial real estate        
Schedule of loan balances        
Loan balances 34,418 35,377    
Acquired Loans | Commercial real estate, Other | Commercial real estate        
Schedule of loan balances        
Loan balances 21,321 5,960    
Acquired Loans | Commercial, Commercial and industrial | Commercial        
Schedule of loan balances        
Loan balances 31,516 11,651    
Acquired Loans | Commercial, Agricultural | Commercial        
Schedule of loan balances        
Loan balances 5,243 6,047    
Acquired Loans | Residential real estate, 1-4 family residential | Residential real estate        
Schedule of loan balances        
Loan balances 110,395 63,457    
Acquired Loans | Residential real estate, Home equity lines of credit | Residential real estate        
Schedule of loan balances        
Loan balances 20,899 19,645    
Acquired Loans | Consumer, Direct | Consumer        
Schedule of loan balances        
Loan balances 7,466 6,068    
Acquired Loans | Consumer, Other | Consumer        
Schedule of loan balances        
Loan balances $ 100 $ 154    
v3.20.1
Troubled Debt Restructurings (Tables)
 3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Schedule of Loans By Class Modified as Troubled Debt Restructurings

The following table presents loans by class modified as troubled debt restructurings that occurred during the three month period ended March 31, 2020 and 2019:

 

 

 

 

 

 

 

Pre-

Modification

 

 

Post-

Modification

 

Three Months Ended March 31, 2020

 

Number of

 

 

Outstanding

Recorded

 

 

Outstanding

Recorded

 

(In Thousands of Dollars)

 

Loans

 

 

Investment

 

 

Investment

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

1

 

 

$

21

 

 

$

21

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

5

 

 

 

209

 

 

 

210

 

Home equity lines of credit

 

 

4

 

 

 

100

 

 

 

102

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

Indirect

 

 

10

 

 

 

61

 

 

 

61

 

Other

 

 

1

 

 

 

15

 

 

 

15

 

Total originated loans

 

 

21

 

 

$

406

 

 

$

409

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

1

 

 

$

68

 

 

$

68

 

Total acquired loans

 

 

1

 

 

$

68

 

 

$

68

 

Total loans

 

 

22

 

 

$

474

 

 

$

477

 

 

 

 

 

 

 

 

 

Pre-

Modification

 

 

Post-

Modification

 

Three Months Ended March 31, 2019

 

Number of

 

 

Outstanding

Recorded

 

 

Outstanding

Recorded

 

(In Thousands of Dollars)

 

Loans

 

 

Investment

 

 

Investment

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

3

 

 

$

73

 

 

$

75

 

Home equity lines of credit

 

 

1

 

 

 

40

 

 

 

40

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

      Indirect

 

 

12

 

 

 

105

 

 

 

105

 

Total originated loans

 

 

16

 

 

$

218

 

 

$

220

 

Acquired loans:

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

 

2

 

 

$

51

 

 

$

55

 

Total acquired loans

 

 

2

 

 

$

51

 

 

$

55

 

Total loans

 

 

18

 

 

$

269

 

 

$

275

 

 

 
v3.20.1
Goodwill and Intangible Assets (Tables)
 3 Months Ended
Mar. 31, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Acquired Intangible Assets

Acquired intangible assets were as follows:

 

 

March 31, 2020

 

 

December 31, 2019

 

(In Thousands of Dollars)

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

Amortized intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationship intangibles

$

7,210

 

 

$

(6,033

)

 

$

7,210

 

 

$

(5,938

)

Non-compete contracts

 

430

 

 

 

(385

)

 

 

430

 

 

 

(384

)

Trade name

 

520

 

 

 

(287

)

 

 

520

 

 

 

(277

)

Core deposit intangible

 

6,980

 

 

 

(3,597

)

 

 

6,254

 

 

 

(3,371

)

Total

$

15,140

 

 

$

(10,302

)

 

$

14,414

 

 

$

(9,970

)
Estimated Amortization Expense

Estimated amortization expense for each of the next five periods and thereafter:

 

2020 (9 months)

$

995

 

2021

 

1,264

 

2022

 

1,090

 

2023

 

617

 

2024

 

314

 

Thereafter

 

558

 

Total

$

4,838

 
v3.20.1
Revenue from Contracts with Customers
 3 Months Ended
Mar. 31, 2020
Revenue From Contract With Customer [Abstract]  
Revenue from Contracts with Customers

Revenue from Contracts with Customers:

 

All material revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income.  The following table presents the Company’s noninterest income by revenue stream and reportable segment, net of eliminations, for the three months ended March 31, 2020 and 2019.

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Totals

 

For Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

$

0

 

 

$

1,095

 

 

$

1,095

 

Debit card and EFT fees

 

 

0

 

 

 

851

 

 

 

851

 

Trust fees

 

 

1,857

 

 

 

0

 

 

 

1,857

 

Insurance agency commissions

 

 

0

 

 

 

883

 

 

 

883

 

Retirement plan consulting fees

 

 

380

 

 

 

0

 

 

 

380

 

Investment commissions

 

 

0

 

 

 

423

 

 

 

423

 

Other (outside the scope of ASC 606)

 

 

0

 

 

 

2,226

 

 

 

2,226

 

Total noninterest income

 

$

2,237

 

 

$

5,478

 

 

$

7,715

 

 

(In Thousands of Dollars)

 

Trust

Segment

 

 

Bank

Segment

 

 

Totals

 

For Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

$

0

 

 

$

1,074

 

 

$

1,074

 

Debit card and EFT fees

 

 

0

 

 

 

778

 

 

 

778

 

Trust fees

 

 

1,858

 

 

 

0

 

 

 

1,858

 

Insurance agency commissions

 

 

0

 

 

 

803

 

 

 

803

 

Retirement plan consulting fees

 

 

358

 

 

 

0

 

 

 

358

 

Investment commissions

 

 

0

 

 

 

260

 

 

 

260

 

Other (outside the scope of ASC 606)

 

 

0

 

 

 

1,389

 

 

 

1,389

 

Total noninterest income

 

$

2,216

 

 

$

4,304

 

 

$

6,520

 

 

 

 

A description of the Company’s revenue streams under ASC 606 follows:

 

Service charges on deposit accounts – The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Management reviewed the deposit account agreements, and determined that the agreements can be terminated at any time by either the Bank or the account holder.  Transaction fees, such as balance transfers, wires and overdraft charges are settled the day the performance obligation is satisfied.  The Bank’s monthly service charges and maintenance fees are for services provided to the customer on a monthly basis are considered a series of services that have the same pattern of transfer each month.  The review of service charges assessed on deposit accounts, included the amount of variable consideration that is a part of the monthly charges.  It was found that the waiver of service charges due to insufficient funds and dormant account fees is immaterial and would not require a change in the accounting treatment for these fees under the new revenue standards.

Debit Card Interchange Fees – Customers and the Bank have an account agreement and maintain deposit balances with the Bank.  Customers use a bank issued debit card to purchase goods and services, and the Bank earns interchange fees on those transactions, typically a percentage of the sale amount of the transaction.  The Bank records the amount due when it receives the settlement from the payment network.  Payments from the payment network are received and recorded into income on a daily basis.  There are no contingent debit card interchange fees recorded by the Company that could be subject to a clawback in future periods.

Trust fees – Services provided to Trust customers are a series of distinct services that have the same pattern of transfer each month.  Fees for trust accounts are billed and drafted from trust accounts monthly.  The Company records these fees on the income statement on a monthly basis.  Fees are assessed based on the total investable assets of the customer’s trust account.  A signed contract between the Company and the customer is maintained for all customer trust accounts with payment terms identified.  It is probable that the fees will be collectible as funds being managed are accessible by the asset manager.  Past history of trust fee income recorded by the Company indicates that it is highly unlikely that a significant reversal could occur.  There are no contingent incentive fees recorded by the Company that could be subject to a clawback in future periods.

Insurance Agency Commissions – Insurance agency commissions are received from insurance carriers for the agency’s share of commissions from customer premium payments.  These commissions are recorded into income when checks are received from the insurance carriers, and there is no contingent portion associated with these commission checks.  There may be a short time-lag in recording revenue when cash is received instead of recording the revenue when the policy is signed by the customer, but the time lag is insignificant and does not impact the revenue recognition process.

Insurance also receives incentive checks from the insurance carriers for achieving specified levels of production with particular carriers.  These amounts are recorded into income when a check is received, and there are no contingent amounts associated with these payments that may be clawed back by the carrier in the future.  Similar to the monthly commissions explained in the preceding paragraph, there may be a short time-lag in recording incentive revenue on a cash basis as opposed to estimating the amount of incentive revenue expected to be earned, this does not materially impact the recognition of Insurance revenue.  If there were any amounts that would need to be refunded for one specific Insurance customer, management believes the reversal would not be significant.

Other potential situations surrounding the recognition of Insurance revenue include the estimating potential refunds due to the likely cancellation of a percentage of customers cancelling their policies and recording revenue at the time of policy renewals.  Management concluded that since Insurance agency commissions represent only 2.5% of the Company’s total revenue, adjusting the current practice of recording insurance revenue for these situations would not have a material impact on the reporting of total revenue.  

Retirement Plan Consulting Fees – Revenue is recognized based on the level of work performed for the client.  Any payments that are received for work to be performed in the future are recorded in a deferred revenue account, and recorded into income when the fees are earned.  Retirement plan consulting fees represent only 1.1% of the Company’s total revenue, and therefore management has concluded that any adjustment of revenue for one particular customer for a refund or any other reason would be insignificant and would not materially impact the Company’s total revenue.  

Investment Commissions – Investment commissions are earned through the sales of non-deposit investment products to customers of the Company.  The sales are conducted through a third-party broker-dealer.  When the commissions are received and recorded into income on the Bank’s income statement, there is no contingent portion that may need to be refunded back to Cetera.  Investment commissions represent only 1.2% of the Company’s total revenue, and therefore management has concluded that any adjustment of revenue for a particular customer for a refund or any other reason would be insignificant and would not materially impact the Company’s total revenue.  

Other – Income items included in “Other” are Bank owned life insurance income, security gains, net gains on the sale of loans and other operating income.  Any amounts within the scope of ASC 606 are deemed immaterial.
v3.20.1
Securities
 3 Months Ended
Mar. 31, 2020
Investments Debt And Equity Securities [Abstract]  
Securities

Securities:

The following table summarizes the amortized cost and fair value of the available for sale investment securities portfolio at March 31, 2020 and December 31, 2019 and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income:

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

(In Thousands of Dollars)

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

$

3,714

 

 

$

126

 

 

$

0

 

 

$

3,840

 

State and political subdivisions

 

273,941

 

 

 

1,171

 

 

 

(7,529

)

 

 

267,583

 

Corporate bonds

 

3,262

 

 

 

90

 

 

 

(9

)

 

 

3,343

 

Mortgage-backed securities - residential

 

128,064

 

 

 

5,857

 

 

 

0

 

 

 

133,921

 

Collateralized mortgage obligations - residential

 

32,832

 

 

 

458

 

 

 

(239

)

 

 

33,051

 

Small Business Administration

 

6,265

 

 

 

40

 

 

 

0

 

 

 

6,305

 

Totals

$

448,078

 

 

$

7,742

 

 

$

(7,777

)

 

$

448,043

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

(In Thousands of Dollars)

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

$

3,773

 

 

$

41

 

 

$

(3

)

 

$

3,811

 

State and political subdivisions

 

250,905

 

 

 

10,944

 

 

 

(424

)

 

 

261,425

 

Corporate bonds

 

1,238

 

 

 

22

 

 

 

0

 

 

 

1,260

 

Mortgage-backed securities - residential

 

145,886

 

 

 

2,396

 

 

 

(372

)

 

 

147,910

 

Collateralized mortgage obligations - residential

 

11,459

 

 

 

101

 

 

 

(213

)

 

 

11,347

 

Small Business Administration

 

6,534

 

 

 

0

 

 

 

(54

)

 

 

6,480

 

Totals

$

419,795

 

 

$

13,504

 

 

$

(1,066

)

 

$

432,233

 

 

Proceeds from the sale of portfolio securities were $15.1 million during the three month period ended March 31, 2020.  Gross gains of $256 thousand along with gross losses of $0 were realized on these sales during the three month period ended March 31, 2020.  $99 thousand of realized losses during the three month period were recognized in the income statement for equity securities as of March 31, 2020.  Proceeds from the sale of portfolio securities were $9.6 million during the three month period ended March 31, 2019.  Gross gains were $22 thousand along with gross losses of $56 thousand during the same three month period ended March 31, 2019. $44 thousand of realized gains during the three month period ended March 31, 2019 were recognized in the income statement for equity securities.

The amortized cost and fair value of the debt securities portfolio are shown by expected maturity.  Expected maturities may differ from contractual maturities if issuers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

 

 

 

March 31, 2020

 

(In Thousands of Dollars)

 

Amortized Cost

 

 

Fair Value

 

Maturity

 

 

 

 

 

 

 

 

Within one year

 

$

1,185

 

 

$

1,186

 

One to five years

 

 

5,493

 

 

 

5,570

 

Five to ten years

 

 

22,426

 

 

 

22,303

 

Beyond ten years

 

 

251,813

 

 

 

245,707

 

Mortgage-backed, collateralized mortgage obligations and Small Business Administration securities

 

 

167,161

 

 

 

173,277

 

Total

 

$

448,078

 

 

$

448,043

 

 

 

The following table summarizes the available for sale investment securities with unrealized losses at March 31, 2020 and December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position.   

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

(In Thousands of Dollars)

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and political subdivisions

 

$

170,483

 

 

$

(7,529

)

 

$

0

 

 

$

0

 

 

$

170,483

 

 

$

(7,529

)

Corporate bonds

 

 

717

 

 

 

(9

)

 

 

0

 

 

 

0

 

 

 

717

 

 

 

(9

)

Collateralized mortgage obligations - residential

 

 

10,003

 

 

 

(239

)

 

 

0

 

 

 

0

 

 

 

10,003

 

 

 

(239

)

Total

 

$

181,203

 

 

$

(7,777

)

 

$

0

 

 

$

0

 

 

$

181,203

 

 

$

(7,777

)

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

(In Thousands of Dollars)

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

 

Value

 

 

Loss

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government sponsored entities

 

$

0

 

 

$

0

 

 

$

622

 

 

$

(3

)

 

$

622

 

 

$

(3

)

State and political subdivisions

 

 

30,887

 

 

 

(424

)

 

 

0

 

 

 

0

 

 

 

30,887

 

 

 

(424

)

Corporate bonds

 

 

0

 

 

 

0

 

 

 

100

 

 

 

0

 

 

 

100

 

 

 

0

 

Mortgage-backed securities - residential

 

 

14,435

 

 

 

(98

)

 

 

22,381

 

 

 

(274

)

 

 

36,816

 

 

 

(372

)

Collateralized mortgage obligations - residential

 

 

1,198

 

 

 

(18

)

 

 

7,935

 

 

 

(195

)

 

 

9,133

 

 

 

(213

)

Small Business Administration

 

 

6,479

 

 

 

(54

)

 

 

1

 

 

 

0

 

 

 

6,480

 

 

 

(54

)

Total

 

$

52,999

 

 

$

(594

)

 

$

31,039

 

 

$

(472

)

 

$

84,038

 

 

$

(1,066

)

 

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  Investment securities are generally evaluated for OTTI under ASC Topic 320: Investments - Debt Securities.  Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery.  In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, or U.S. government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.  The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment, and is based on the information available to management at a point in time.

 

Due to market changes during the first quarter of 2020, securities that had unrealized losses for greater than twelve months at December 31, 2019, appreciated and are in an unrealized gain position at March 31, 2020.  Unrealized losses are generally due to changes in interest rates or general market conditions.  As of March 31, 2020 and 2019, debt securities had net unrealized losses of $35 thousand and unrealized gains of $769 thousand, respectively.  In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports.  Management concluded that the unrealized losses on debt securities were temporary.  Due to potential changes in conditions, it is at least reasonably possible that changes in fair values and management’s assessments will occur in the near term and that such changes could materially affect the amounts reported in the Company’s financial statements.

As of March 31, 2020, the Company’s security portfolio consisted of 617 securities, 303 of which were in an unrealized loss position.  The majority of the unrealized losses on the Company’s securities are related to its holdings of state and political subdivisions, collateralized mortgage obligations, and corporate bonds securities as discussed below.

Unrealized losses on debt securities issued by state and political subdivisions have not been recognized into income.  These securities have maintained their investment grade ratings and management does not have the intent and does not expect to be required to sell these securities before their anticipated recovery.  The fair value is expected to recover as the securities approach their maturity date.

All of the Company’s holdings of collateralized mortgage obligations and residential mortgage-backed securities were issued by U.S. government-sponsored entities.  Unrealized losses on these securities have not been recognized into income.  Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, the issues are guaranteed by the issuing entity which the U.S. government has affirmed its commitment to support, and because the Company does not have the intent to sell these residential mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be OTTI.

 
v3.20.1
Interest-Rate Swaps
 3 Months Ended
Mar. 31, 2020
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Interest-Rate Swaps

Interest-Rate Swaps:

The Company uses a program that utilizes interest-rate swaps as part of its asset/liability management strategy.  The interest-rate swaps are used to help manage the Company’s interest rate risk position and not as derivatives for trading purposes.  The notional amount of the interest-rate swaps does not represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest-rate swap agreements.

The objective of the interest-rate swaps is to protect the related fixed rate commercial real estate loans from changes in fair value due to changes in interest rates.  The Company has a program whereby it lends to its borrowers at a fixed rate with the loan agreement containing a two-way yield maintenance provision, which will be invoked in the event of prepayment of the loan, and is expected to exactly offset the fair value of unwinding the swap.  The yield maintenance provision represents an embedded derivative which is bifurcated from the host loan contract and, as such, the swaps and embedded derivatives are not designated as hedges.  Accordingly, both instruments are carried at fair value and changes in fair value are reported in current period earnings.

Summary information about these interest-rate swaps at periods ended March 31, 2020 and December 31, 2019 is as follows:

 

 

March 31, 2020

 

 

December 31, 2019

 

Notional amounts (In thousands)

$

43,310

 

 

$

42,178

 

Weighted average pay rate on interest-rate swaps

 

4.63

%

 

 

4.60

%

Weighted average receive rate on interest-rate swaps

 

2.87

%

 

 

4.02

%

Weighted average maturity (years)

 

4.4

 

 

 

4.2

 

Fair value of interest-rate swaps (In thousands)

$

(4,810

)

 

$

(1,898

)

Fair value of loan yield maintenance provisions (In thousands)

$

4,810

 

 

$

1,898

 

 

The fair value of the yield maintenance provisions and interest-rate swaps is recorded in other assets and other liabilities, respectively, in the consolidated balance sheets.  Changes in the fair value of the yield maintenance provisions and interest-rate swaps are reported in earnings, as other noninterest income in the consolidated statements of income.  For the three month period ended March 31, 2020 and 2019 there were no net gains or losses recognized in earnings.
v3.20.1
Long-Term Borrowings
 3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Long-term Borrowings

Long-term borrowings:

There were $67.7 million in long-term Federal Home Loan Bank Advances at March 31, 2020 with a weighted average interest rate of 1.39%.  Long-term Federal Home Loan Bank Advances were $42.8 million at December 31, 2019.  In addition, the Company had two Trust Preferred Debentures with an outstanding balance of $9.2 million at March 31, 2020 and $2.1 million at December 31, 2019.  The final maturity of this Debt is December 31, 2036.

Long-term and short-term FHLB advances are secured by a blanket pledge of residential mortgage, commercial real estate, and multi-family loans totaling $575.1 million and $577.9 million at March 31, 2020 and December 31, 2019, respectively.  Based on this collateral, the Bank is eligible to borrow an additional $492.4 million at March 31, 2020.  Each advance is subject to a prepayment penalty if paid prior to its maturity date.

 
v3.20.1
Regulatory Capital Matters
 3 Months Ended
Mar. 31, 2020
Regulatory Capital Requirements [Abstract]  
Regulatory Capital Matters

Regulatory Capital Matters:

Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies.  Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  The new minimum capital requirements associated with the Basel Committee on capital and liquidity regulation (Basel III) were phased in between January 1, 2016 and January 1, 2019.  Capital amounts and classifications are also subject to qualitative judgments by regulators.  Failure to meet capital requirements can initiate regulatory action by regulators that, if undertaken, could have a direct material effect on the financial statements.  Management believes that as of March 31, 2020, the Company and the Bank meet all capital adequacy requirements to which they are subject.

The FDIC and other federal banking regulators revised the risk-based capital requirements applicable to financial holding companies and insured depository institutions, including the Company and the Bank, to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision (“Basel III”).

The common equity tier 1 capital, tier 1 capital and total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets.  The leverage ratio is calculated by dividing tier 1 capital by adjusted average total assets.

Basel III limits capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity tier 1 capital, tier 1 capital and total capital to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements.  The capital conservation buffer phased in beginning January 1, 2016 and increased each year until it was fully implemented at 2.5% on January 1, 2019.  The additional capital conservation buffer is 2.5%.  Excluding the additional buffer, Basel III requires the Company and the Bank to maintain (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%, (ii) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%, (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0% and (iv) a minimum leverage ratio of at least 4.0%.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.  If only adequately capitalized, regulatory approval is required to accept brokered deposits.  If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.  At March 31, 2020 and December 31, 2019, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  There are no conditions or events since that notification that management believes have changed the institution’s category.

Actual and required capital amounts and ratios, which do not include the capital conservation buffer, are presented below at March 31, 2020 and December 31, 2019:

 

 

Actual

 

 

Requirement For Capital

Adequacy Purposes:

 

 

To be Well Capitalized

Under Prompt Corrective

Action Provisions:

 

 

Amount

 

Ratio

 

 

Amount

 

Ratio

 

 

Amount

 

Ratio

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

$

253,014

 

 

12.26

%

 

$

92,891

 

 

4.5

%

 

N/A

 

N/A

 

Bank

 

240,670

 

 

11.57

%

 

 

93,568

 

 

4.5

%

 

$

135,154

 

 

6.5

%

Total risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

277,167

 

 

13.43

%

 

 

165,139

 

 

8.0

%

 

N/A

 

N/A

 

Bank

 

255,622

 

 

12.29

%

 

 

166,344

 

 

8.0

%

 

 

207,929

 

 

10.0

%

Tier I risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

262,215

 

 

12.70

%

 

 

123,854

 

 

6.0

%

 

N/A

 

N/A

 

Bank

 

240,670

 

 

11.57

%

 

 

124,758

 

 

6.0

%

 

 

166,344

 

 

8.0

%

Tier I leverage ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

262,215

 

 

10.18

%

 

 

103,016

 

 

4.0

%

 

N/A

 

N/A

 

Bank

 

240,670

 

 

9.34

%

 

 

103,052

 

 

4.0

%

 

 

128,815

 

 

5.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

$

247,395

 

 

12.94

%

 

$

86,039

 

 

4.5

%

 

N/A

 

N/A

 

Bank

 

213,507

 

 

11.19

%

 

 

85,854

 

 

4.5

%

 

$

124,011

 

 

6.5

%

Total risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

264,188

 

 

13.82

%

 

 

152,958

 

 

8.0

%

 

N/A

 

N/A

 

Bank

 

227,994

 

 

11.95

%

 

 

152,629

 

 

8.0

%

 

 

190,787

 

 

10.0

%

Tier I risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

249,701

 

 

13.06

%

 

 

114,719

 

 

6.0

%

 

N/A

 

N/A

 

Bank

 

213,507

 

 

11.19

%

 

 

114,472

 

 

6.0

%

 

 

152,629

 

 

8.0

%

Tier I leverage ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

249,701

 

 

10.69

%

 

 

93,406

 

 

4.0

%

 

N/A

 

N/A

 

Bank

 

213,507

 

 

9.06

%

 

 

94,304

 

 

4.0

%

 

 

117,881

 

 

5.0

%

 
v3.20.1
Credit Quality Indicators (Details Textual) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Financing Receivable Recorded Investment [Line Items]    
Maximum commercial loan and commercial real estate relationships $ 750,000  
Residential real estate, 1-4 family residential    
Financing Receivable Recorded Investment [Line Items]    
Other real estate owned properties 131,000 $ 19,000
Other real estate properties in foreclosure $ 231,000 $ 316,000
v3.20.1
Contingencies (Details Textual) - USD ($)
 12 Months Ended
Dec. 31, 2019
Mar. 31, 2020
Commitments And Contingencies Disclosure [Abstract]    
Charge accrued relating to pending settlement of legal contingency $ 505,000  
Expected insurance recovery   $ 0
v3.20.1
Loans (Details 7) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual $ 10,225 $ 5,478
Loans Past Due 90 Days or More Still Accruing 1,620 867
Originated Loans    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 3,226 3,197
Loans Past Due 90 Days or More Still Accruing 1,027 648
Originated Loans | Commercial real estate, Owner occupied | Commercial real estate    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 0 6
Loans Past Due 90 Days or More Still Accruing 340 0
Originated Loans | Commercial real estate, Farmland | Commercial real estate    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 10 14
Loans Past Due 90 Days or More Still Accruing 0 0
Originated Loans | Commercial, Commercial and industrial | Commercial    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 390 567
Loans Past Due 90 Days or More Still Accruing 44 0
Originated Loans | Commercial, Agricultural | Commercial    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 77 0
Loans Past Due 90 Days or More Still Accruing 0 0
Originated Loans | Residential real estate, 1-4 family residential | Residential real estate    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 1,279 1,234
Loans Past Due 90 Days or More Still Accruing 366 438
Originated Loans | Residential real estate, Home equity lines of credit | Residential real estate    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 688 669
Loans Past Due 90 Days or More Still Accruing 23 14
Originated Loans | Consumer, Indirect | Consumer    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 602 568
Loans Past Due 90 Days or More Still Accruing 94 120
Originated Loans | Consumer, Direct | Consumer    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 180 139
Loans Past Due 90 Days or More Still Accruing 146 70
Originated Loans | Consumer, Other | Consumer    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 0 0
Loans Past Due 90 Days or More Still Accruing 14 6
Acquired Loans    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 6,999 2,281
Loans Past Due 90 Days or More Still Accruing 593 219
Acquired Loans | Commercial real estate, Owner occupied | Commercial real estate    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 59 0
Loans Past Due 90 Days or More Still Accruing 0 0
Acquired Loans | Commercial real estate, Non-owner occupied | Commercial real estate    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 612 102
Loans Past Due 90 Days or More Still Accruing 0 0
Acquired Loans | Commercial real estate, Farmland | Commercial real estate    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 516 519
Loans Past Due 90 Days or More Still Accruing 368 0
Acquired Loans | Commercial, Commercial and industrial | Commercial    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 558 602
Loans Past Due 90 Days or More Still Accruing 0 0
Acquired Loans | Commercial, Agricultural | Commercial    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 7 9
Loans Past Due 90 Days or More Still Accruing 0 0
Acquired Loans | Residential real estate, 1-4 family residential | Residential real estate    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 4,881 659
Loans Past Due 90 Days or More Still Accruing 203 186
Acquired Loans | Residential real estate, Home equity lines of credit | Residential real estate    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 230 239
Loans Past Due 90 Days or More Still Accruing 0 9
Acquired Loans | Consumer, Direct | Consumer    
Schedule of investment in nonaccrual and loans past due over 90 days still on accrual by class of loans    
Nonaccrual 136 151
Loans Past Due 90 Days or More Still Accruing $ 22 $ 24
v3.20.1
Revenue from Contracts with Customers (Details Textual) - ASC 606
 3 Months Ended
Mar. 31, 2020
USD ($)
Revenue From Contract With Customer [Line Items]  
Contingent debit card interchange fees $ 0
Contingent incentive fees 0
Contingent commission $ 0
Percentage of insurance agency commissions representing total revenue 2.50%
Percentage of retirement plan consulting fees representing total revenue 1.10%
Percentage of investment commissions representing total revenue 1.20%
Cetera  
Revenue From Contract With Customer [Line Items]  
Contingent investment commissions to be refunded $ 0
v3.20.1
Regulatory Capital Matters (Tables)
 3 Months Ended
Mar. 31, 2020
Regulatory Capital Requirements [Abstract]  
Schedule of Actual and Required Capital Amounts and Ratios, Not Include Capital Conservation Buffer

Actual and required capital amounts and ratios, which do not include the capital conservation buffer, are presented below at March 31, 2020 and December 31, 2019:

 

 

Actual

 

 

Requirement For Capital

Adequacy Purposes:

 

 

To be Well Capitalized

Under Prompt Corrective

Action Provisions:

 

 

Amount

 

Ratio

 

 

Amount

 

Ratio

 

 

Amount

 

Ratio

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

$

253,014

 

 

12.26

%

 

$

92,891

 

 

4.5

%

 

N/A

 

N/A

 

Bank

 

240,670

 

 

11.57

%

 

 

93,568

 

 

4.5

%

 

$

135,154

 

 

6.5

%

Total risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

277,167

 

 

13.43

%

 

 

165,139

 

 

8.0

%

 

N/A

 

N/A

 

Bank

 

255,622

 

 

12.29

%

 

 

166,344

 

 

8.0

%

 

 

207,929

 

 

10.0

%

Tier I risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

262,215

 

 

12.70

%

 

 

123,854

 

 

6.0

%

 

N/A

 

N/A

 

Bank

 

240,670

 

 

11.57

%

 

 

124,758

 

 

6.0

%

 

 

166,344

 

 

8.0

%

Tier I leverage ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

262,215

 

 

10.18

%

 

 

103,016

 

 

4.0

%

 

N/A

 

N/A

 

Bank

 

240,670

 

 

9.34

%

 

 

103,052

 

 

4.0

%

 

 

128,815

 

 

5.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

$

247,395

 

 

12.94

%

 

$

86,039

 

 

4.5

%

 

N/A

 

N/A

 

Bank

 

213,507

 

 

11.19

%

 

 

85,854

 

 

4.5

%

 

$

124,011

 

 

6.5

%

Total risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

264,188

 

 

13.82

%

 

 

152,958

 

 

8.0

%

 

N/A

 

N/A

 

Bank

 

227,994

 

 

11.95

%

 

 

152,629

 

 

8.0

%

 

 

190,787

 

 

10.0

%

Tier I risk based capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

249,701

 

 

13.06

%

 

 

114,719

 

 

6.0

%

 

N/A

 

N/A

 

Bank

 

213,507

 

 

11.19

%

 

 

114,472

 

 

6.0

%

 

 

152,629

 

 

8.0

%

Tier I leverage ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

249,701

 

 

10.69

%

 

 

93,406

 

 

4.0

%

 

N/A

 

N/A

 

Bank

 

213,507

 

 

9.06

%

 

 

94,304

 

 

4.0

%

 

 

117,881

 

 

5.0

%

 
v3.20.1
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement Of Income And Comprehensive Income [Abstract]    
NET INCOME $ 8,639 $ 8,388
Other comprehensive income:    
Net unrealized holding gains (losses) on available for sale securities (12,217) 5,821
Reclassification adjustment for (gains) losses realized in income [1] (256) 34
Net unrealized holding gains (losses) (12,473) 5,855
Income tax effect 2,619 (1,230)
Other comprehensive income (loss), net of tax (9,854) 4,625
TOTAL COMPREHENSIVE INCOME (LOSS) $ (1,215) $ 13,013
[1] Pre-tax reclassification adjustments relating to available-for-sale securities are reported in security gains and the tax impact is included in income tax expense on the consolidated statements of income.
v3.20.1
Document and Entity Information - shares
 3 Months Ended
Mar. 31, 2020
Apr. 30, 2020
Cover [Abstract]    
Entity Registrant Name FARMERS NATIONAL BANC CORP /OH/  
Entity Central Index Key 0000709337  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Document Type 10-Q  
Document Period End Date Mar. 31, 2020  
Amendment Flag false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   28,176,602
Entity Shell Company false  
Title of 12(b) Security Common Stock, No Par Value  
Trading Symbol FMNB  
Security Exchange Name NASDAQ  
Entity File Number 001-35296  
Entity Incorporation, State or Country Code OH  
Entity Tax Identification Number 34-1371693  
Entity Address, Address Line One 20 South Broad Street  
Entity Address, City or Town Canfield  
Entity Address, State or Province OH  
Entity Address, Postal Zip Code 44406  
City Area Code 330  
Local Phone Number 533-3341  
Document Quarterly Report true  
Document Transition Report false  
v3.20.1
Business Combinations (Details Textual) - USD ($)
$ / shares in Units, $ in Thousands
Jan. 07, 2020
Mar. 31, 2020
Dec. 31, 2019
Business Acquisition [Line Items]      
Goodwill   $ 47,360 $ 38,201
Maple Leaf      
Business Acquisition [Line Items]      
Business acquisition, date of merger agreement Jan. 07, 2020    
Shares of stock issued for acquisition 1,398,229    
Fair value of total consideration transferred $ 42,977    
Goodwill $ 9,159    
Maple Leaf | COMMON STOCK      
Business Acquisition [Line Items]      
Shares of stock issued for acquisition 45.5948    
Cash consideration per share | $ / shares $ 640.00    
Exercise price of warrants $ 370.00    
v3.20.1
Summary of Significant Accounting Policies
 3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Principles of Consolidation:

Farmers National Banc Corp. (“Company”) is a Financial Holding Company registered under the Bank Holding Company Act of 1956, as amended.  The Company provides full banking services through its nationally chartered subsidiary, The Farmers National Bank of Canfield (“Bank”).  The consolidated financial statements also include the accounts of the Bank’s subsidiaries; Farmers National Insurance, LLC (“Insurance”) and Farmers of Canfield Investment Co. (“Investments”).  The Company provides trust and retirement consulting services through its subsidiary, Farmers Trust Company (“Trust”), and insurance services through the Bank’s subsidiary, Insurance.  Farmers National Captive, Inc. (“Captive”) is a wholly-owned insurance subsidiary of the Company that provides property and casualty insurance coverage to the Company and its subsidiaries.  The Captive pools resources with eleven other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among the pool members and to provide insurance where not currently available or economically feasible in today’s insurance market place.  The consolidated financial statements include the accounts of the Company, the Bank and its subsidiaries, along with the Trust and Captive.  All significant intercompany balances and transactions have been eliminated in the consolidation.

Corporate Reorganization:

On July 1, 2019, Trust acquired all shares of National Associates, Inc. (“NAI”) from the Company through a corporate reorganization.  The Company was the sole shareholder of Trust and NAI before the reorganization.  The entities were combined into one reporting unit and one operating segment and began reporting as one unit, for both internal and external reports, during the third quarter of 2019.  The combination is part of the Company’s plan to increase efficiencies within the different business lines.

Basis of Presentation:

The unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements.  The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2019 Annual Report to Shareholders included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.  The interim consolidated financial statements include all adjustments (consisting of only normal recurring items) that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented.  The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year.  Certain items included in the prior period financial statements were reclassified to conform to the current period presentation. There was no effect on net income or total stockholders’ equity.

Estimates:

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Segments:

The Company provides a broad range of financial services to individuals and companies in northeastern Ohio and western Pennsylvania.  Operations are managed and financial performance is primarily aggregated and reported in two lines of business, the Bank segment and the Trust segment.  During the third quarter of 2019 the Company merged the Retirement Consulting segment into the Trust segment.  In prior periods segment reporting was reported in three segments.

Equity:

There are 50,000,000 shares authorized and available for issuance as of March 31, 2020.  Outstanding shares at March 31, 2020 were 28,127,335.

Comprehensive Income:

Comprehensive income consists of net income and other comprehensive income.  Other comprehensive income consists of unrealized gains and losses on securities available for sale which are recognized as components of stockholders’ equity, net of tax effect.

Risks and Uncertainties:

The outbreak of COVID-19 has adversely impacted a broad range of industries in which the Company’s customers operate and could impair their ability to fulfill their financial obligations to the Company.  The World Health Organization has declared COVID-19 to be a global pandemic indicating that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections.  The spread of the outbreak has caused significant disruptions in the economy and has disrupted banking and other financial activity in the areas in which the Company operates.  While there has been no material impact to the Company’s employees to date, COVID-19 could also potentially create widespread business continuity issues for the Company.  

Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout.  Most notably, the Coronavirus Aid, Relief and Economic Security Act (“CARES”) was signed into law at the end of March 2020 as a $2 trillion legislative package.  The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors.  The package also includes extensive emergency funding for hospitals and providers.  In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts are expected to have a material impact on the Company’s operations.

The Company’s business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions.  If the global response to contain COVID-19 escalates further or is unsuccessful, the Company could experience a material adverse effect on its business, financial condition, results of operations and cash flows.  While it is not possible to know the full universe or extent that the impact of COVID-19, and resulting measures to curtail its spread, will have on the Company’s operations, the Company will disclose potentially material items of which it is aware.

Financial position and results of operations:

The Company’s fee income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company is actively working with COVID-19 affected customers to waive fees from a variety of sources, such as, but not limited to, insufficient funds and overdraft fees, ATM fees, account maintenance fees, etc. These reductions in fees are thought, at this time, to be temporary in conjunction with the length of the expected COVID-19 related economic crisis. At this time, the Company is unable to project the materiality of such an impact, but recognize the breadth of the economic impact is likely to impact its fee income in future periods.

The Company’s interest income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company is actively working with COVID-19 affected borrowers to defer their payments. While interest and fees will still accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted. At this time, the Company is unable to project the materiality of such an impact, but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods.

Capital and liquidity:

While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted by further credit losses. The Company relies on cash on hand as well as dividends from its subsidiaries. If the Company’s capital deteriorates such that its subsidiary bank is unable to pay dividends to it for an extended period of time, the Company may not be able to pay dividends to shareholders.

The Company maintains access to multiple sources of liquidity. Wholesale funding markets have remained open, but rates for short term funding have recently been volatile. If funding costs are elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large numbers of the Company’s deposit customers to withdraw their funds, the Company might become more reliant on volatile or more expensive sources of funding.

New Accounting Standards:

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 from the goodwill impairment test.  Instead, under the new guidance, an entity is to perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.  An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.  The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2019.  Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  The Company adopted this ASU on January 1, 2020.  The adoption of this guidance did not have an impact on the Company’s Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13: Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (modified by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments Credit Losses).  The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.  Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques changed to reflect the full amount of expected credit losses.  Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.  Additionally, the ASU amends the accounting for credit losses on available for sale debt securities and purchased financial assets with credit deterioration.  ASU 2016-13 is effective for public companies for annual periods beginning after December 15, 2019.  Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted.

In accordance with the accounting relief provisions of the CARES, the Bank has postponed the adoption of the current expected credit losses (“CECL”) accounting standards, primarily due to the impact that the COVID-19 pandemic is having on the economy and the lack of reasonable and supportable economic forecasts.  Had the Company adopted CECL as of January 1, 2020, the increase to the allowance for loan losses estimated to have ranged from 15% to 20% of the amount recorded at December 31, 2019, which did not consider potential COVID-19 pandemic related impacts.

In February 2016, FASB issued ASU 2016-02 (Topic 842): Leases.  The main objective of ASU 2016-02 is to provide users with useful, transparent, and complete information about leasing transactions.  ASU 2016-02 requires the rights and obligations associated with leasing arrangements be reflected on the balance sheet in order to increase transparency and comparability among organizations.  Under the updated guidance, lessees are required to recognize a right-to-use asset and a liability to make a lease payment and disclose key information about leasing arrangements.  ASU 2016-02 is effective for public companies for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted.  The Company adopted this ASU on January 1, 2019.  As disclosed in the lease footnote, certain leases that the Company has in place required the capitalization of $3.6 million on the balance sheet as an asset and a related liability in the same amount with no income statement effect at January 1, 2019.

In January 2016, FASB issued ASU 2016-01: Financial Instruments-Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities.  The main objective of ASU 2016-01 is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.  ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.  Some of the amendments in ASU 2016-01  include the following: 1) Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; 2) Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and 4) Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value; among others.  The amendments of ASU 2016-01 were effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  The Company adopted this ASU 2016-01 on January 1, 2018 which resulted in a $169 thousand increase to beginning retained earnings and a $169 thousand decrease to accumulated other comprehensive income on the December 31, 2018 Consolidated Financial Statements.