Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
This discussion should be read in conjunction with the unaudited
consolidated financial statements, notes and tables included in this report. For further information, refer to the audited consolidated
financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Forward-Looking Statements
This report contains certain “forward-looking statements”
within the meaning of the federal securities laws. These statements are not historical facts, but rather statements based on the
Company’s current expectations regarding its business strategies, intended results and future performance. Forward-looking
statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends”
and similar expressions. Management’s ability to predict results or the effect of future plans or strategies is inherently
uncertain. Factors which could affect actual results include, but are not limited to, the following:
|
·
|
General and local economic conditions;
|
|
·
|
Changes in interest rates, deposit flows, demand for loans, real estate
values and competition;
|
|
·
|
Competitive products and pricing;
|
|
·
|
The ability of our customers to make scheduled loan payments;
|
|
·
|
Loan delinquency rates;
|
|
·
|
Our ability to manage the risks involved in our business;
|
|
·
|
Our ability to integrate the operations of businesses we acquire;
|
|
·
|
Inflation, market and monetary fluctuations;
|
|
·
|
Our ability to control costs and expenses;
|
|
·
|
Changes in federal and state legislation and regulation applicable
to our business; and
|
|
·
|
Other factors disclosed in the Company’s periodic filings with
the Securities and Exchange Commission.
|
The Company uses the current statutory federal income tax rate
of 21.0% to value its deferred tax assets and liabilities. In addition, all deferred tax assets and liabilities including deferred
tax assets and liabilities that were retained from the FWVB merger have been tax effected at the WV state income tax rate of 6.5%
times the appropriate WV state apportionment according to state revenue laws regarding nexus.
The Company assumes no obligation to update any forward-looking
statements except as may be required by applicable law or regulation.
General
CB Financial Services, Inc. is a bank holding company established
in 2006 and headquartered in Carmichaels, Pennsylvania. CB Financial’s business activity is conducted primarily through its
wholly owned banking subsidiary Community Bank.
The Bank is a Pennsylvania-chartered
commercial bank headquartered in Carmichaels, Pennsylvania. The Bank operates from twenty offices in Greene, Allegheny, Washington,
Fayette and Westmoreland Counties in southwestern Pennsylvania,
seven offices in Brooke, Marshall, Ohio, Upshur and Wetzel
Counties in West Virginia, and one office in Belmont County in Ohio.
The Bank is a community-oriented
institution offering residential and commercial real estate loans, commercial and industrial loans, and consumer loans as well
as a variety of deposit products for individuals and businesses in its market area. Property and casualty, commercial liability,
surety and other insurance products are offered through Exchange Underwriters, Inc., the Bank’s wholly owned subsidiary that
is a full-service, independent insurance agency.
On April 30, 2018, the Company
completed its merger with FWVB. For additional information regarding the merger, refer to Note 2 in the
Notes to Consolidated
Financial Statements
.
On August 1, 2018, the Bank’s insurance
subsidiary, Exchange Underwriters, completed its acquisition of the Beynon Insurance customer list.
Overview
The following discussion and analysis is presented to assist
in the understanding and evaluation of our consolidated financial condition and results of operations. It is intended to complement
the unaudited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and should be read in conjunction
therewith. The detailed discussion focuses on our consolidated financial condition as of June 30, 2019, compared to the financial
condition as of December 31, 2018 and the consolidated results of operations for the three and six months ended June 30, 2019 and
2018.
Our results of operations depend primarily on our net interest
income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest
we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for loan losses, noninterest
income and noninterest expense. Noninterest income consists primarily of fees and service charges on deposit accounts, fees and
charges on loans, insurance commissions, income from bank-owned life insurance and other income. Noninterest expense consists primarily
of expenses related to salaries and employee benefits, occupancy and equipment, contracted services, legal fees, OREO, advertising and promotion, stationery and supplies, deposit and general insurance and other expenses.
Financial institutions like us, in general, are significantly
affected by economic conditions, competition, and the monetary and fiscal policies of the federal government. Lending activities
are influenced by the demand for and supply of housing, competition among lenders, interest rate conditions, and funds availability.
Our operations and lending are principally concentrated in southwestern Pennsylvania and Ohio Valley market areas.
Statement of Financial Condition Analysis
Total assets increased $23.9 million, or 1.9%, to over $1.3
billion at June 30, 2019, from just under $1.3 billion at December 31, 2018.
Cash and due from banks decreased $9.0 million, or 16.8%, to
$44.4 million at June 30, 2019, compared to $53.4 million at December 31, 2018. This is primarily the result of funding loan growth
and security purchases.
Investment securities classified as available-for-sale increased
$10.6 million, or 4.7%, to $236.0 million at June 30, 2019, compared to $225.4 million at December 31, 2018. This increase was
primarily the result of security purchases and current securities portfolio market value.
Loans, net, increased $22.9 million, or 2.5%, to $926.2 million
at June 30, 2019, compared to $903.3 million at December 31, 2018. This was primarily due to net loan originations of $11.6 million
in construction loans, $10.1 million in commercial real estate loans, $4.1 million in residential mortgage loans, $2.4 million
in commercial and industrial loans, partially offset by a decrease of $5.5 million in consumer loans. There was an increase of
$1.9 million in impaired loans due to increased credit risk on a commercial real estate relationship contributing to an increase
in nonperforming loans to total loans. This ratio increased 37 basis points, or 53.6%, to 1.06% at June 30, 2019, compared to 0.69%
at December 31, 2018.
Premises and equipment, net, decreased $590,000, or 2.5%, to
$22.9 million at June 30, 2019 compared to $23.4 million at December 31, 2018. This is due to current period depreciation on capitalized
assets.
Liabilities.
Total liabilities increased $16.0
million, or 1.4%, to $1.2 billion at June 30, 2019 compared to $1.1 billion at December 31, 2018.
Total deposits increased $20.4 million, or 1.9%, to over $1.1
billion at June 30, 2019, from just under $1.1 billion at December 31, 2018. There were increases of $20.0 million in demand deposits,
$8.4 million in savings accounts, $6.6 million in time deposits and $1.9 million in brokered deposits, partially offset by decreases
of $11.9 million in money market accounts and $4.5 million in NOW accounts. This increase is largely the result of demand, savings
and time deposits greater than $100,000 during the current period. The legacy Bank deposit portfolio had approximately $19.1 million
increase in deposits. The FWVB acquired deposit portfolio had an increase of $1.3 million in deposits. The Bank has been selective
on offering promotional interest rates and has concentrated its efforts on increasing noninterest-bearing accounts by building
strong customer relationships.
Short-term borrowings decreased $3.2 million, or 10.5%, to $27.7
million at June 30, 2019, compared to $31.0 million at December 31, 2018. At June 30, 2019 and December 31, 2018, short-term borrowings
were comprised entirely of securities sold under agreements to repurchase. The decrease is related to business deposit customers
whose funds, above designated target balances, are transferred into an overnight interest-earning investment account by purchasing
securities from the Bank’s investment portfolio under an agreement to repurchase. Other borrowed funds decreased by $3.0
million, due to a maturing FHLB long-term borrowing that was retired in the current period. As a result of the current period activity,
the weighted average interest rate on long-term borrowings increased by 6 basis points to 2.09%.
Stockholders’ Equity.
Stockholders’
equity increased $7.9 million, or 5.7%, to $145.5 million at June 30, 2019, compared to $137.6 million at December 31, 2018. Net
income was $5.9 million for the six months ended June 30, 2019. Book value per share was $26.78, an increase of $1.45, or 5.7%,
at June 30, 2019, compared to $25.33 for December 31, 2018. The Company paid $2.6 million in dividends to stockholders and the
unrealized gain on investment securities increased by $4.4 million due to improved current period market interest rate conditions.
Results of Operations for the Three Months Ended June 30,
2019 and 2018
Overview.
Net income increased $2.0 million, to
$3.0 million for the three months ended June 30, 2019, compared to $970,000 for the three months ended June 30, 2018. The quarterly
results were mainly impacted by the FWVB merger and loan growth, which produced increased net interest income, and the acquisition
of the Beynon Insurance customer list on August 1, 2018, which produced additional noninterest income through increased commission
and fees and contingency income. In addition, reduced provision for loan losses in the current quarter attributed to overall net
income.
Net Interest Income.
Net interest income increased
$1.5 million, or 16.7%, to $10.7 million for the three months ended June 30, 2019, compared to $9.2 million for the three months
ended June 30, 2018.
Interest and dividend income increased $2.0 million, or 18.5%,
to $12.7 million for the three months ended June 30, 2019 compared to $10.7 million for the three months ended June 30, 2018. Interest
income on loans increased $1.4 million for the three months ended June 30, 2019, compared to the three months ended June 30, 2018.
Average net loans increased by $65.5 million for the three months ended June 30, 2019, compared to the three months ended June
30, 2018. This was primarily due to the FWVB merger and organic loan growth. The FWVB merger not only affected the average loan
balance, it also contributed to an increase of 31 basis points in loan yield. The credit mark recorded for the acquired loans in
the FWVB merger was approximately $1.3 million for the prior quarter-ended June 30, 2018. The impact of the accretion from both
the FWVB and FedFirst Financial Corporation (“FFCO”) acquired loan portfolios for the three months ended June 30, 2019
was $78,000, or 3 basis points increase, compared to $93,000, or 4 basis points increase, for the three months ended June 30, 2018.
The remaining credit mark balance for both acquired loan portfolios was $1.8 million as of June 30, 2019. Interest income on taxable
securities increased $402,000, mainly due to an increase of $51.1 million in the average balance and 14 basis points in yield in
the current period. Other interest and dividend income increased $121,000, as a result of increased interest earned on correspondent
deposit banks in the current period. This is a result of the FWVB merger and organic deposit growth. Interest income on federal
funds sold increased $111,000, mainly due to an increase of $36.2 million in the average balance of other interest-earning assets
comprised mainly of an increase of $15.8 million in interest-bearing cash at the Federal Reserve Bank and the two quarterly interest
rate hikes of 25 basis points each by the Federal Reserve Board (“FRB”) since the three months ended June 30, 2018.
Interest income on securities exempt from federal income tax decreased $71,000 in the current period. This was due to lower yielding
security calls and sales for securities exempt from federal income tax, which attributed to an average balance decrease of $15.0
million.
Interest expense increased $447,000, or 29.5%, to $2.0 million
for the three months ended June 30, 2019, compared to $1.5 million for the three months ended June 30, 2018. Interest expense on
deposits increased $638,000, due to an increase in average interest-bearing deposits of $122.6 million, primarily due to increases
in deposits as a result of the FWVB merger. The average cost of interest-bearing deposits increased 21 basis points. This was primarily
related to previously mentioned interest rate hikes by the FRB. Interest expense on short-term borrowings decreased $158,000, due
to a decrease of $33.6 million in the average balance of FHLB borrowings, partially offset by an increase of $1.1 million in the
average balance of securities sold under agreement to repurchase. Interest expense on other borrowed funds decreased $33,000 primarily
due to FHLB long-term borrowings that had a decrease in the average balance of $4.8 million during the current quarter. This is
a result of maturing FHLB long-term borrowings being retired.
Average Balances
and Yields
.
The following tables present information regarding average balances of assets and liabilities, the total dollar
amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on
average interest-bearing liabilities, and the resulting average yields and costs. Average balances are derived from daily balances
over the periods indicated. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized
or accreted to interest income or interest expense. Tax-equivalent yield adjustments have been made for tax exempt loan and securities
income utilizing a marginal federal income tax rate of 21% for 2019 and 2018. As such, amounts will not agree to income as reported
in the consolidated financial statements. Average balances for loans are net of the allowance for loan losses, and include nonaccrual
loans. Nonaccrual loans are included in average balances only. The yields and costs for the periods indicated are derived by dividing
annualized income or expense by the average balances of assets or liabilities, respectively, for the periods presented.
|
|
(Dollars in thousands) (Unaudited)
|
|
|
Three Months Ended June 30,
|
|
|
2019
|
|
2018
|
|
|
|
|
Interest
|
|
|
|
|
|
Interest
|
|
|
|
|
Average
|
|
and
|
|
Yield/
|
|
Average
|
|
and
|
|
Yield/
|
|
|
Balance
|
|
Dividends
|
|
Cost
(1)
|
|
Balance
|
|
Dividends
|
|
Cost
(1)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, Net
|
|
$
|
906,038
|
|
|
$
|
10,707
|
|
|
|
4.74
|
%
|
|
$
|
840,537
|
|
|
$
|
9,288
|
|
|
|
4.43
|
%
|
Investment Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
204,010
|
|
|
|
1,390
|
|
|
|
2.73
|
|
|
|
152,867
|
|
|
|
988
|
|
|
|
2.59
|
|
Exempt From Federal Tax
|
|
|
31,130
|
|
|
|
285
|
|
|
|
3.66
|
|
|
|
46,101
|
|
|
|
371
|
|
|
|
3.22
|
|
Other Interest-Earning Assets
|
|
|
53,479
|
|
|
|
374
|
|
|
|
2.81
|
|
|
|
17,232
|
|
|
|
142
|
|
|
|
3.31
|
|
Total Interest-Earning Assets
|
|
|
1,194,657
|
|
|
|
12,756
|
|
|
|
4.28
|
|
|
|
1,056,737
|
|
|
|
10,789
|
|
|
|
4.10
|
|
Noninterest-Earning Assets
|
|
|
113,447
|
|
|
|
|
|
|
|
|
|
|
|
89,120
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,308,104
|
|
|
|
|
|
|
|
|
|
|
$
|
1,145,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing Demand Deposits
|
|
$
|
215,139
|
|
|
|
295
|
|
|
|
0.55
|
%
|
|
$
|
163,801
|
|
|
|
139
|
|
|
|
0.34
|
%
|
Savings
|
|
|
217,426
|
|
|
|
149
|
|
|
|
0.27
|
|
|
|
188,628
|
|
|
|
124
|
|
|
|
0.26
|
|
Money Market
|
|
|
178,561
|
|
|
|
263
|
|
|
|
0.59
|
|
|
|
159,898
|
|
|
|
201
|
|
|
|
0.50
|
|
Time Deposits
|
|
|
221,126
|
|
|
|
1,117
|
|
|
|
2.03
|
|
|
|
197,281
|
|
|
|
722
|
|
|
|
1.47
|
|
Total Interest-Bearing Deposits
|
|
|
832,252
|
|
|
|
1,824
|
|
|
|
0.88
|
|
|
|
709,608
|
|
|
|
1,186
|
|
|
|
0.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
47,560
|
|
|
|
140
|
|
|
|
1.18
|
|
|
|
84,834
|
|
|
|
331
|
|
|
|
1.56
|
|
Total Interest-Bearing Liabilities
|
|
|
879,812
|
|
|
|
1,964
|
|
|
|
0.90
|
|
|
|
794,442
|
|
|
|
1,517
|
|
|
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-Bearing Demand Deposits
|
|
|
274,804
|
|
|
|
|
|
|
|
|
|
|
|
231,491
|
|
|
|
|
|
|
|
|
|
Other Liabilities
|
|
|
9,872
|
|
|
|
|
|
|
|
|
|
|
|
5,527
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,164,488
|
|
|
|
|
|
|
|
|
|
|
|
1,031,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
143,616
|
|
|
|
|
|
|
|
|
|
|
|
114,397
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
1,308,104
|
|
|
|
|
|
|
|
|
|
|
$
|
1,145,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
|
|
|
|
|
|
$
|
10,792
|
|
|
|
|
|
|
|
|
|
|
$
|
9,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Rate Spread
(2)
|
|
|
|
|
|
|
|
|
|
|
3.38
|
%
|
|
|
|
|
|
|
|
|
|
|
3.33
|
%
|
Net Interest-Earning Assets
(3)
|
|
$
|
314,845
|
|
|
|
|
|
|
|
|
|
|
$
|
262,295
|
|
|
|
|
|
|
|
|
|
Net Interest Margin
(4)
|
|
|
|
|
|
|
|
|
|
|
3.62
|
|
|
|
|
|
|
|
|
|
|
|
3.52
|
|
Return on Average Assets
|
|
|
|
|
|
|
|
|
|
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
0.34
|
|
Return on Average Equity
|
|
|
|
|
|
|
|
|
|
|
8.32
|
|
|
|
|
|
|
|
|
|
|
|
3.40
|
|
Average Equity to Average Assets
|
|
|
|
|
|
|
|
|
|
|
10.98
|
|
|
|
|
|
|
|
|
|
|
|
9.98
|
|
Average Interest-Earning Assets to Average Interest-Bearing Liabilities
|
|
|
|
|
|
|
|
|
|
|
135.79
|
|
|
|
|
|
|
|
|
|
|
|
133.02
|
|
|
(2)
|
Net
interest rate spread represents the difference between the weighted average yield on
interest-earning assets and the weighted average cost of interest-bearing liabilities.
|
|
(3)
|
Net
interest-earning assets represent total interest-earning assets less total interest-bearing
liabilities.
|
|
(4)
|
Net
interest margin represents annualized net interest income divided by average total interest-earning
assets. Interest income and yields are on a fully tax equivalent basis utilizing a marginal
tax rate of 21% for the three months ended June 30, 2019, and 2018, respectively.
|
Rate/Volume Analysis
.
The following table presents
the effects of changing rates and volumes on our net interest income for the periods indicated. Tax-equivalent yield adjustments
have been made for tax exempt loan and securities income utilizing a marginal federal income tax rate of 21% for 2019 and 2018.
The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column
shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due
to rate and the changes due to volume. The total column represents the sum of the prior columns.
|
|
(Dollars in thousands) (Unaudited)
|
|
|
Three Months Ended June 30, 2019
|
|
|
Compared To
|
|
|
Three Months Ended June 30, 2018
|
|
|
Increase (Decrease) Due to
|
|
|
Volume
|
|
Rate
|
|
Total
|
|
|
|
|
|
|
|
Interest and Dividend Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
$
|
745
|
|
|
$
|
674
|
|
|
$
|
1,419
|
|
Investment Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
345
|
|
|
|
57
|
|
|
|
402
|
|
Exempt From Federal Tax
|
|
|
(132
|
)
|
|
|
46
|
|
|
|
(86
|
)
|
Other Interest-Earning Assets
|
|
|
256
|
|
|
|
(24
|
)
|
|
|
232
|
|
Total Interest-Earning Assets
|
|
|
1,214
|
|
|
|
753
|
|
|
|
1,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
225
|
|
|
|
413
|
|
|
|
638
|
|
Borrowings
|
|
|
(123
|
)
|
|
|
(68
|
)
|
|
|
(191
|
)
|
Total Interest-Bearing Liabilities
|
|
|
102
|
|
|
|
345
|
|
|
|
447
|
|
Change in Net Interest Income
|
|
$
|
1,112
|
|
|
$
|
408
|
|
|
$
|
1,520
|
|
Provision for Loan Losses.
The provision for loan
losses was $350,000 for the three months ended June 30, 2019, compared to $600,000, for the three months ended June 30, 2018. Net
charge-offs for the three months ended June 30, 2019, were $71,000, which included net-charge-offs of $47,000 on automobile loans,
compared to $125,000 of net charge-offs for the three months ended June 30, 2018, which included $113,000 of net charge-offs on
automobile loans. Management analyzes the loan portfolio on a quarterly basis to determine the adequacy of the allowance for loan
losses and the need for additional provisions for loan losses. The decrease in the quarterly provision was primarily due to improved
credit metrics for criticized loans and reduced charge-offs. In addition, overall improvements in credit matrix factors had a positive
impact on the qualitative factors within the allowance calculation.
Noninterest Income
.
Noninterest income increased
$274,000, or 12.9%, to $2.4 million for the three months ended June 30, 2019, compared to $2.1 million for the three months ended
June 30, 2018. Insurance commissions from Exchange Underwriters increased $203,000 due to increased direct bill commercial lines
commission and fee income as a result of the Beynon customer list acquisition and contingency fees received. Contingency fees are
commissions that are contingent upon several factors including, but not limited to, eligible written premiums, earned premiums,
incurred losses and stop loss charges. Service fees on deposit accounts increased $79,000 due to increased volume in ATM and Mastercard
debit card fees as a result of the FWVB merger in the current quarter. The fair value of equity securities increased $65,000, due
to the $109,000 gain for the three months ended June 30, 2019, as compared to the $44,000 gain for the three months ended June
30, 2018. This was a result of current market interest rate conditions. Other noninterest income increased $35,000 due to decreased
amortization of mortgage servicing rights on sold mortgages and reduced student loan origination fees as a result of the student
loan insurance company insolvency, and the discontinuing of student loan originations in the prior year. Other commissions decreased
$132,000, due to the prior quarter recognition of a loan referral fee and liquidation of a partnership interest in the West Virginia
Bankers Title Company, a legacy item from the FWVB merger.
Noninterest Expense.
Noninterest expense decreased
$463,000, or 4.9%, to $9.0 million for the three months ended June 30, 2019, compared to $9.5 million for the three months ended
June 30, 2018. Merger-related expense decreased $769,000, due to the prior quarter FWVB merger. Salaries and employee benefits
decreased $157,000, primarily related to our health care insurance benefit attaining the stop-loss policy cap as a result of isolated
participant claims and the prior quarter incentive compensation accrual related to loan growth. Occupancy decreased $125,000, primarily
due to decreases in acquired bank building purchase accounting adjustments from the post-prior quarter finalization of all purchase
accounting adjustments. In addition, there were decreases in building repairs and maintenance and other property expense. Contracted
services increased $190,000, mainly as a result of the additional branch locations acquired in the FWVB merger. Bankcard processing
expenses increased $91,000, due to increased ATM transactions as a result of the FWVB merger. Amortization of Core Deposit Intangible
(“CDI”) increased $85,000, due to the CDI recorded for the FWVB merger. Other noninterest expense increased $69,000,
primarily due to other losses that were charged-off as a result of fraudulent phishing transactions on customer accounts, amortization
of the Beynon customer list for Exchange Underwriters, telephone, insurance, loan expenses and postage. These items were partially
offset by decreases in office supplies, meals and entertainment, dues and subscriptions, travel and conference expenses. PA shares
tax expense increased $52,000, due to the increase in equity based on the FWVB merger. Advertising expense increased $48,000, due
to the Bank’s expanded marketing initiatives in various media outlets. Equipment expense increased $33,000 primarily due
to additional branch locations requiring equipment maintenance contracts and data processing related to the FWVB merger. The Federal
Deposit Insurance Corporation (“FDIC”) assessment expense increased $17,000, due to average asset growth and an assessment
factor increase by the FDIC in the computation of the insurance assessment related to the FWVB merger.
Income Tax Expense.
Income taxes increased $510,000
to $744,000 for the three months ended June 30, 2019, compared to $234,000, for the three months ended June 30, 2018. The effective
tax rate for the three months ended June 30, 2019 was 20.0%, compared to 19.4%, for the three months ended June 30, 2018. The increase
in income taxes was due to an increase of $2.5 million in pre-tax income. The increase in the effective tax rate is due to a current
quarter decline in tax-exempt income from securities.
Results of Operations for the Six Months Ended June 30, 2019
and 2018
Overview.
Net income increased $3.6 million, to $5.9
million as of the six months ended June 30, 2019, as compared to $2.3 million for the six months ended June 30, 2018.
Net Interest Income.
Net interest income increased
$4.4 million, or 26.0%, to $21.1 million for the six months ended June 30, 2019, compared to $16.8 million for the six months ended
June 30, 2018.
Interest and dividend income increased $5.6 million, or 28.7%,
to $25.0 million for the six months ended June 30, 2019, compared to $19.4 million for the six months ended June 30, 2018. Interest
income on loans increased $3.9 million primarily due to an increase in average loans outstanding of $106.3 million and an increase
of 35 basis points in loan yield for the six months ended June 30, 2019. The increase in average loans was mainly due to the FWVB
merger and total loan growth of $22.9 million during the current period. This was partially offset by a decrease of $21,000 in
accretion on the acquired loan portfolios credit mark for the six months ended June 30, 2019. Credit mark accretion of $138,000,
or 3 basis points, was recognized for the six months ended June 30, 2019, compared to $159,000, or 4 basis points for the six months
ended June 30, 2018. Interest income on taxable securities increased $1.2 million in the current period. In addition, an increase
of 35 basis points in yield resulted from securities acquired in the FWVB merger. The average balance for taxable securities increased
$75.0 million for the six months ended June 30, 2019. Other interest and dividend income increased $265,000 as a result of increased
interest earned on correspondent deposit banks in the current period. The average balance of correspondent bank deposits increased
$21.7 million in the current period. Interest income on federal funds sold increased $219,000, mainly due to an increase in the
average balance of federal funds by $17.4 million for the current year and the two quarterly interest rate hikes of 25 basis points
each by the FRB. Interest income on securities exempt from federal tax decreased $26,000 due to a decrease of $6.9 million in the
average balance on securities exempt from federal tax. Despite the average balance decrease, there was an increase of 43 basis
points in yield as a result of calls and sales of securities exempt from income tax with lower prevailing yields.
Interest expense increased $1.2 million, or 46.3%, to $3.8 million
for the six months ended June 30, 2019, compared to $2.6 million for the six months ended June 30, 2018. Interest expense on deposits
increased $1.6 million due to an increase in average interest-bearing deposits of $189.9 million, which is attributed primarily
to the FWVB merger. The average cost of interest-bearing deposits increased 24 basis points in the current period. Interest expense
on short-term borrowings decreased $309,000 in the current period primarily due to retired FHLB overnight borrowings that had an
average balance of $38.0 million, partially offset by an increase of $5.1 million in the average balance of securities sold under
agreements to repurchase. Interest expense on other borrowed funds decreased $49,000, primarily due to FHLB long-term borrowings
that had a decrease in the average balance of $4.5 million during the current period. This is a result of maturing FHLB long-term
borrowings being retired.
Average Balances and Yields
.
The
following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest
income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing
liabilities, and the resulting average yields and costs. Average balances are derived from daily balances over the periods indicated.
The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest
income or interest expense. Tax-equivalent yield adjustments have been made for tax exempt loan and securities income utilizing
a marginal federal income tax rate of 21% for 2019 and 2018. As such, amounts will not agree to income as reported in the consolidated
financial statements. Average balances for loans are net of the allowance for loan losses, and include nonaccrual loans. Nonaccrual
loans are included in average balances only. The yields and costs for the periods indicated are derived by dividing annualized
income or expense by the average balances of assets or liabilities, respectively, for the periods presented.
|
|
(Dollars in thousands) (Unaudited)
|
|
|
Six Months Ended June 30,
|
|
|
2019
|
|
2018
|
|
|
|
|
Interest
|
|
|
|
|
|
Interest
|
|
|
|
|
Average
|
|
and
|
|
Yield/
|
|
Average
|
|
and
|
|
Yield/
|
|
|
Balance
|
|
Dividends
|
|
Cost
(1)
|
|
Balance
|
|
Dividends
|
|
Cost
(1)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, Net
|
|
$
|
902,183
|
|
|
$
|
21,174
|
|
|
|
4.73
|
%
|
|
$
|
795,872
|
|
|
$
|
17,295
|
|
|
|
4.38
|
%
|
Investment Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
194,683
|
|
|
|
2,654
|
|
|
|
2.73
|
|
|
|
119,720
|
|
|
|
1,422
|
|
|
|
2.38
|
|
Exempt From Federal Tax
|
|
|
35,783
|
|
|
|
629
|
|
|
|
3.52
|
|
|
|
42,672
|
|
|
|
660
|
|
|
|
3.09
|
|
Other Interest-Earning Assets
|
|
|
49,617
|
|
|
|
692
|
|
|
|
2.81
|
|
|
|
12,483
|
|
|
|
208
|
|
|
|
3.36
|
|
Total Interest-Earning Assets
|
|
|
1,182,266
|
|
|
|
25,149
|
|
|
|
4.29
|
|
|
|
970,747
|
|
|
|
19,585
|
|
|
|
4.07
|
|
Noninterest-Earning Assets
|
|
|
112,727
|
|
|
|
|
|
|
|
|
|
|
|
73,793
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,294,993
|
|
|
|
|
|
|
|
|
|
|
$
|
1,044,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing Demand Deposits
|
|
$
|
213,674
|
|
|
|
570
|
|
|
|
0.54
|
%
|
|
$
|
147,790
|
|
|
|
241
|
|
|
|
0.33
|
%
|
Savings
|
|
|
215,283
|
|
|
|
294
|
|
|
|
0.28
|
|
|
|
161,610
|
|
|
|
186
|
|
|
|
0.23
|
|
Money Market
|
|
|
181,515
|
|
|
|
536
|
|
|
|
0.60
|
|
|
|
148,667
|
|
|
|
320
|
|
|
|
0.43
|
|
Time Deposits
|
|
|
219,220
|
|
|
|
2,143
|
|
|
|
1.97
|
|
|
|
181,751
|
|
|
|
1,227
|
|
|
|
1.36
|
|
Total Interest-Bearing Deposits
|
|
|
829,692
|
|
|
|
3,543
|
|
|
|
0.86
|
|
|
|
639,818
|
|
|
|
1,974
|
|
|
|
0.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
49,322
|
|
|
|
283
|
|
|
|
1.16
|
|
|
|
86,782
|
|
|
|
642
|
|
|
|
1.49
|
|
Total Interest-Bearing Liabilities
|
|
|
879,014
|
|
|
|
3,826
|
|
|
|
0.88
|
|
|
|
726,600
|
|
|
|
2,616
|
|
|
|
0.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-Bearing Demand Deposits
|
|
|
265,194
|
|
|
|
|
|
|
|
|
|
|
|
209,713
|
|
|
|
|
|
|
|
|
|
Other Liabilities
|
|
|
9,420
|
|
|
|
|
|
|
|
|
|
|
|
4,472
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,153,628
|
|
|
|
|
|
|
|
|
|
|
|
940,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
141,365
|
|
|
|
|
|
|
|
|
|
|
|
103,755
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
1,294,993
|
|
|
|
|
|
|
|
|
|
|
$
|
1,044,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
21,323
|
|
|
|
|
|
|
|
|
|
|
$
|
16,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Rate Spread
(2)
|
|
|
|
|
|
|
|
|
|
|
3.41
|
%
|
|
|
|
|
|
|
|
|
|
|
3.34
|
%
|
Net Interest-Earning Assets
(3)
|
|
$
|
303,252
|
|
|
|
|
|
|
|
|
|
|
$
|
244,147
|
|
|
|
|
|
|
|
|
|
Net Interest Margin
(4)
|
|
|
|
|
|
|
|
|
|
|
3.64
|
|
|
|
|
|
|
|
|
|
|
|
3.53
|
|
Return on Average Assets
|
|
|
|
|
|
|
|
|
|
|
0.92
|
|
|
|
|
|
|
|
|
|
|
|
0.45
|
|
Return on Average Equity
|
|
|
|
|
|
|
|
|
|
|
8.42
|
|
|
|
|
|
|
|
|
|
|
|
4.53
|
|
Average Equity to Average Assets
|
|
|
|
|
|
|
|
|
|
|
10.92
|
|
|
|
|
|
|
|
|
|
|
|
9.93
|
|
Average Interest-Earning Assets to Average Interest-Bearing Liabilities
|
|
|
|
|
|
|
|
|
|
|
134.50
|
|
|
|
|
|
|
|
|
|
|
|
133.60
|
|
|
(2)
|
Net interest rate spread represents
the difference between the weighted average yield on interest-earning assets and the
weighted average cost of interest-bearing liabilities.
|
|
(3)
|
Net interest-earning assets represent
total interest-earning assets less total interest-bearing liabilities.
|
|
(4)
|
Net interest margin represents annualized
net interest income divided by average total interest-earning assets. Interest income
and yields are on a fully tax equivalent basis utilizing a marginal tax rate of 21% for
the six months ended June 30, 2019, and 2018, respectively.
|
Rate/Volume Analysis
.
The following table presents
the effects of changing rates and volumes on our net interest income for the periods indicated. Tax-equivalent yield adjustments
have been made for tax exempt loan and securities income utilizing a marginal federal income tax rate of 21% for 2019 and 2018.
The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column
shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due
to rate and the changes due to volume. The total column represents the sum of the prior columns.
|
|
(Dollars in thousands) (Unaudited)
|
|
|
Six Months Ended June 30, 2019
|
|
|
Compared To
|
|
|
Six Months Ended June 30, 2018
|
|
|
Increase (Decrease) Due to
|
|
|
Volume
|
|
Rate
|
|
Total
|
|
|
|
|
|
|
|
Interest and Dividend Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
$
|
2,429
|
|
|
$
|
1,450
|
|
|
$
|
3,879
|
|
Investment Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
997
|
|
|
|
235
|
|
|
|
1,232
|
|
Exempt From Federal Tax
|
|
|
(116
|
)
|
|
|
85
|
|
|
|
(31
|
)
|
Other Interest-Earning Assets
|
|
|
523
|
|
|
|
(39
|
)
|
|
|
484
|
|
Total Interest-Earning Assets
|
|
|
3,833
|
|
|
|
1,731
|
|
|
|
5,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
680
|
|
|
|
889
|
|
|
|
1,569
|
|
Borrowings
|
|
|
(238
|
)
|
|
|
(121
|
)
|
|
|
(359
|
)
|
Total Interest-Bearing Liabilities
|
|
|
442
|
|
|
|
768
|
|
|
|
1,210
|
|
Change in Net Interest Income
|
|
$
|
3,391
|
|
|
$
|
963
|
|
|
$
|
4,354
|
|
Provision for Loan Losses.
The provision for loan
losses decreased $1.7 million, to $375,000, for the six months ended June 30, 2019, compared to $2.1 million of provision for loan
losses for the six months ended June 30, 2018. Net charge-offs for the six months ended June 30, 2019, were $242,000, which included
$180,000 of net charge-offs on automobile loans and $25,000 of net-charge-offs for student loans, compared to net charge-offs of
$1.5 million for the six months ended June 30, 2018, which included $200,000 of net charge-offs on automobile loans. The decrease
in net charge-offs for the current period was due to prior period charge-offs of $1.2 million for three commercial and industrial
relationships in the first quarter of 2018. The provision for loan losses was impacted in the prior period by recording $2.1 million
of provision for the originated loan portfolio due to the above-mentioned loan charge-offs and to appropriately reflect risk associated
with the originated loan portfolio as of the six months ended June 30, 2018. Additionally, this was due to growth in the loan portfolio
and average loan balances. The acquired loan portfolio from the FWVB merger included a credit mark of approximately $1.3 million
in the prior period. The current period showed improved credit metrics within criticized loans, which had a positive impact on
the qualitative factors within the allowance calculation. Management analyzes the loan portfolio on a quarterly basis to determine
the adequacy of the allowance for loan losses and credit mark on acquired loan portfolios, with the possible need for additional
provisions for loan losses.
Noninterest Income
.
Noninterest income increased
$503,000, or 11.9%, to $4.7 million for the six months ended June 30, 2019, compared to $4.2 million for the six months ended June
30, 2018. There was a $423,000 increase in insurance commissions from Exchange Underwriters mainly due to the Beynon customer list
acquisition in the prior year. Service fees on deposit accounts increased $241,000 primarily due to increased ATM fees due to an
increased volume of customer transactions and check card fees related to the FWVB merger. The fair value of equity securities increased
$110,000, due to the $129,000 gain for the six months ended June 30, 2019, as compared to the $19,000 gain for the six months ended
June 30, 2018, which was a result of current market interest rate conditions. There was an increase in the net gains on sales of
residential mortgage loans of $88,000. The increase in gains was primarily due to an increase in the number of loans originated
and subsequently sold to the FHLB as part of the Mortgage Partnership Finance® (“MPF®”) program and a stabilization
in mortgage rates. The MPF® program enables member financial institutions to offer competitive interest rates for fixed-rate
mortgage loans without assuming any of the interest rate risk associated with a long-term asset. Other noninterest income increased
$72,000 due to decreased amortization of mortgage servicing rights on sold mortgages and reduced student loan origination fees
as a result of the student loan insurance company insolvency, and the discontinuing of student loan originations in the prior year.
Income on bank-owned life insurance (“BOLI”) increased by $31,000 due to the BOLI policies acquired in the FWVB merger.
There was a decrease of $407,000, for other commissions due to prior period items of insurance proceeds recognized by a claim on
a bank-owned life insurance policy due to the death of a former officer of the Bank, recognition of an ARC loan referral fee and
liquidation of a partnership interest in the West Virginia Bankers Title Company, a legacy item from the FWVB merger. Net gains
on the sales of investments decreased $53,000 due to investments sold at a loss of $60,000 in the first quarter of the current
period. The losses were strategically recognized and designed to mitigate deteriorating investments-credit risk and to reinvest
in higher yielding, longer-term investments.
Noninterest Expense.
Noninterest expense increased
$2.0 million, or 12.1%, to $18.1 million for the six months ended June 30, 2019, compared to $16.2 million for the six months ended
June 30, 2018. Salaries and employee benefits increased $1.1 million, primarily due to additional employees, salary increases,
and employee group health insurance as a direct result of the FWVB merger. CDI amortization increased $436,000 due to the CDI recorded
for the FWVB merger. Contracted services increased $323,000, due to the additional branch locations acquired in the FWVB merger.
Equipment increased $239,000, primarily due to equipment purchases and new maintenance contracts related to the FWVB merger. Other
noninterest expense increased $211,000, primarily due to the recorded amortization related to the Exchange Underwriters acquisition
of the Beynon customer list, well as other losses that were charged-off as a result of fraudulent phishing transactions on customer
accounts, telephone, West Virginia Business Office (“B&O”) taxes for the WV branch locations, and postage; partially
offset by decreases in office supplies, and dues and subscriptions. Bankcard processing expense increased $159,000, due to the
increased number of ATM and debit card transactions as a result of the FWVB merger. PA shares tax expense increased $121,000 due
to the increase in equity based on the FWVB merger. OREO expense decreased $82,000, primarily due to recognized
income of $76,000 for the leasing of mineral rights and a $33,000 gain on the sale of the acquired OREO property
from the FWVB merger. This was partially offset by expenses related to two new properties that moved into OREO in the current period.
FDIC assessment fees increased $69,000 due to average asset growth and an assessment factor increase by the FDIC in the computation
of the insurance assessment related to the FWVB merger. Advertising increased $65,000 related to the Bank’s expanded marketing
initiatives in various media outlet and promotional items to promote the FWVB merger. Occupancy and legal and professional fees
increased $64,000 and $56,000, respectively, due to increased real estate taxes, utilities, audit, consultation and legal fees
in connection with post-merger Bank and Exchange Underwriters acquisition of the Beynon customer list. Merger-related expenses
decreased $793,000 due to the absence of such expenses in the current period.
Income Tax Expense.
Income taxes increased $1.1
million, to $1.5 million for the six months ended June 30, 2019, compared to $401,000 for the six months ended June 30, 2018. The
effective tax rate for the six months ended June 30, 2019 was 19.8% compared to 14.7% for the six months ended June 30, 2018. The
increase in income taxes was related to an increase of $4.6 million in pre-tax income. The increase in the current period effective
tax rate was due to the prior period recognition of the one-time income on a bank-owned life insurance claim of approximately $421,000,
which was a discrete tax item for the first quarter of 2018. In addition, there was a decrease in income on securities exempt from
federal income tax.
Off-Balance Sheet Arrangements.
Other than loan commitments and standby and performance letters
of credit, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a significant current or
future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital
resources that are material to investors. Refer to Note 11 in the Notes to Consolidated Financial Statements for a summary of commitments
outstanding as of June 30, 2019.
Liquidity and Capital Management
Liquidity.
Liquidity
is the ability to meet current and future financial obligations of a short-term nature. The Company’s primary sources of
funds consist of deposit inflows, loan repayments and maturities, calls and sales of securities. While maturities and scheduled
amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced
by general interest rates, economic conditions and competition.
The Company regularly adjusts its investments in liquid assets
based upon its assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities,
and the objectives of its asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits
with other banks and short- and intermediate-term securities. The Company believes that it had sufficient liquidity at June 30,
2019 to satisfy its short- and long-term liquidity needs.
The Company’s most liquid assets are cash and due from
banks, which totaled $44.4 million at June 30, 2019. The levels of these assets depend on our operating, financing, lending and
investing activities during any given period. Unpledged securities, which provide an additional source of liquidity, totaled $82.9
million at June 30, 2019. In addition, at June 30, 2019, the Company had the ability to borrow up to $358.1 million from the FHLB
of Pittsburgh, of which $35.2 million was utilized toward standby letters of credit. The Company also has the ability to borrow
up to $101.6 million from the FRB through its Borrower-In-Custody line of credit agreement and the Company also maintains multiple
line of credit arrangements with various unaffiliated banks totaling $60.0 million as of both June 30, 2019 and December 31, 2018.
At June 30, 2019, time deposits due within one year of that
date totaled $90.0 million, or 40.6% of total time deposits. If these time deposits do not remain with the Company, the Company
will be required to seek other sources of funds. Depending on market conditions, the Company may be required to pay higher rates
on such deposits or other borrowings than it currently pays on these certificates of deposit. The Company believes, however, based
on past experience that a significant portion of its certificates of deposit will remain with it, either as certificates of deposit
or as other deposit products. The Company has the ability to attract and retain deposits by adjusting the interest rates offered.
CB Financial is a separate legal entity from the Bank and must
provide for its own liquidity to pay any dividends to its shareholders and for other corporate purposes. Its primary source of
liquidity is dividend payments it receives from the Bank. The Bank’s ability to pay dividends to CB Financial is subject
to regulatory limitations. At June 30, 2019, CB Financial (on an unconsolidated, stand-alone basis) had liquid assets of $3.3 million.
We are committed to maintaining a strong liquidity position;
therefore, we monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current
funding commitments. The marginal cost of new funding, however, whether from deposits or borrowings from the FHLB, will be carefully
considered as we monitor our liquidity needs. Therefore, in order to minimize our cost of funds, we may consider additional borrowings
from the FHLB in the future.
Capital Management.
The Bank is subject to various
regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can
result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, each must meet specific capital guidelines that involve quantitative measures of their assets, liabilities,
and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification
are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Under the Regulatory Capital Rules, in order to avoid limitations
on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking
organization must hold a capital conservation buffer comprised of common equity Tier I capital above its minimum risk-based capital
requirements in an amount greater than 2.5% of total risk-weighted assets. The capital conservation buffer, which is composed of
common equity Tier I capital, began on January 1, 2016 at the 0.625% level and was phased in over a three-year period (increasing
by that amount on each January 1, until it reached 2.5% on January 1, 2019).
At June 30, 2019 and December 31, 2018, the Bank was categorized
as “well capitalized” under the regulatory framework for prompt corrective action. The following table presents the
Bank’s regulatory capital amounts and ratios, as well as the minimum amounts and ratios required to be well capitalized as
of the dates indicated.
|
|
(Dollars in thousands)
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
Common Equity Tier 1 (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
$
|
100,469
|
|
|
|
11.47
|
%
|
|
$
|
96,985
|
|
|
|
11.44
|
%
|
For Capital Adequacy Purposes
|
|
|
39,416
|
|
|
|
4.50
|
|
|
|
38,137
|
|
|
|
4.50
|
|
To Be Well Capitalized
|
|
|
56,934
|
|
|
|
6.50
|
|
|
|
55,086
|
|
|
|
6.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
100,469
|
|
|
|
11.47
|
|
|
|
96,985
|
|
|
|
11.44
|
|
For Capital Adequacy Purposes
|
|
|
52,554
|
|
|
|
6.00
|
|
|
|
50,849
|
|
|
|
6.00
|
|
To Be Well Capitalized
|
|
|
70,072
|
|
|
|
8.00
|
|
|
|
67,799
|
|
|
|
8.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
110,160
|
|
|
|
12.58
|
|
|
|
106,543
|
|
|
|
12.57
|
|
For Capital Adequacy Purposes
|
|
|
70,072
|
|
|
|
8.00
|
|
|
|
67,799
|
|
|
|
8.00
|
|
To Be Well Capitalized
|
|
|
87,590
|
|
|
|
10.00
|
|
|
|
84,748
|
|
|
|
10.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Leverage (to adjusted total assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
100,469
|
|
|
|
7.93
|
|
|
|
96,985
|
|
|
|
7.82
|
|
For Capital Adequacy Purposes
|
|
|
50,658
|
|
|
|
4.00
|
|
|
|
49,637
|
|
|
|
4.00
|
|
To Be Well Capitalized
|
|
|
63,322
|
|
|
|
5.00
|
|
|
|
62,046
|
|
|
|
5.00
|
|