Provision for Loan Losses
For the quarter ended March 31, 2019, the Company recorded a
provision for loan losses of $390,000, a decrease of $574,000, or 59.5%, compared to the $964,000 recorded for the same period in 2018. The decrease in the provision for loan losses during the first quarter of 2019 was primarily due to paydowns in
the portfolio and modestly improved economic conditions across the Companys major markets.
The Company recorded net loan charge-offs of $168,000
during the first quarter of 2019, compared to $1.5 million of net loan charge-offs in the first quarter of 2018. During the first quarter of 2018, the Companys charge-offs were elevated primarily due to deterioration in two loan
relationships.
As of March 31, 2019, the Companys ratio of allowance for loan losses to total loans was 1.00%, compared to 0.99% and 0.87% at
December 31, 2018 and March 31, 2018, respectively. Excluding Acquired Loans, the ratio of the allowance for loan losses to total loans was 1.34% at March 31, 2019, compared to 1.36% and 1.40% at December 31, 2018 and
March 31, 2018, respectively. The ratio of nonperforming loans to total assets was 1.21% at March 31, 2019, compared to 1.13% and 1.24% at December 31, 2018 and March 31, 2018, respectively.
Noninterest Income
The Companys noninterest income was $3.2 million for the quarter ended March 31, 2019, a decrease of
$317,000, or 9.1%, compared to the $3.5 million earned for the same period in 2018. The decrease in noninterest income was primarily driven by a decrease in service fees and charges (down $188,000), mainly due to lower overdraft fees, and the
absence of a gain recorded on the sale of a branch location during the first quarter of 2018.
Noninterest Expense
The Companys
noninterest expense was $15.3 million for the quarter ended March 31, 2019, a decrease of $299,000, or 1.9%, compared to the $15.6 million recorded for the same period in 2018. The decrease was primarily due to decreases in data
processing and communication expense (down $257,000) and forms, printing and supplies expense (down $196,000), which were partially offset with an increase in compensation and benefit expense (up $157,000). The decrease in data processing and
communication expense and forms, printing and supplies expense resulted primarily from the absence of merger-related expenses incurred in the first quarter of 2018.
Income Taxes
For the quarters ended March 31, 2019 and 2018, the Company incurred income tax expense of $1.3 million and
$2.0 million, respectively. For the same periods, the Companys effective tax rate was 14.3% and 20.9%, respectively. The Companys effective tax rate for the first quarter of 2019 equaled 14.3% due primarily to elevated levels of
stock option exercises. These options, which were associated with the 2009 stock option plan, were set to expire in May 2019. Such option exercises reduced income tax expense by $514,000 during the first quarter.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Quantitative and qualitative disclosures about market risk are presented in the Companys Annual Report on Form
10-K
filed with the SEC for the year ended December 31, 2018, under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations Asset/Liability
Management and Market Risk. Additional information at March 31, 2019 is included herein under Item 2, Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Asset/Liability
Management.
Item 4. Controls and Procedures.
Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and
procedures (as defined in Rules
13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such
evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SECs rules and regulations and are operating in an effective manner.
37