cbtx_Current_Folio_10Q

Table of Contents

June

 

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

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____    to   ____.

Commission File Number: 001-38280

 

CBTX, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

Texas

 

20‑8339782

 

 

 

(State or other jurisdiction of

 

(I.R.S. employer

 

 

 

incorporation or organization)

 

identification no.)

9 Greenway Plaza, Suite 110

Houston, Texas 77046

(Address of principal executive offices)

 

(713) 210‑7600

(Registrant’s telephone number, including area code)

 

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

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

CBTX

The Nasdaq Global Select Market

 

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

 

 

Large accelerated filer

 

Accelerated filer 

 

 

 

Non-accelerated filer

 

Smaller 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 

 

 

As of April 25, 2020, there were 24,949,027 shares of the registrant’s common stock outstanding, including 202,874 shares of unvested restricted stock .

 

 

 

 

Table of Contents

CBTX, INC.

 

 

Page

PART I — FINANCIAL INFORMATION  

 

 

 

Item 1.  

Financial Statements – (Unaudited)

1

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

1

 

Condensed Consolidated Statements of Income for the Three Months ended March 31, 2020 and 2019

2

 

Condensed Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2020 and 2019

3

 

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three Months ended March 31, 2020 and 2019

4

 

Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2020 and 2019

5

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.  

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

34

 

Cautionary Note Regarding Forward-Looking Statements

34

 

Overview

35

 

Information Regarding COVID-19 Impact and Uncertain Economic Outlook

36

 

Results of Operations

37

 

Financial Condition

41

 

Liquidity and Capital Resources

48

 

Interest Rate Sensitivity and Market Risk

50

 

Impact of Inflation

51

 

Non-GAAP Financial Measures

52

 

Critical Accounting Policies

53

 

Recently Issued Accounting Pronouncements

54

Item 3.  

Quantitative and Qualitative Disclosures about Market Risk

54

Item 4.  

Controls and Procedures

54

 

 

 

PART II — OTHER INFORMATION  

 

Item 1.  

Legal Proceedings

55

Item 1A.  

Risk Factors

55

Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

59

Item 3.  

Defaults Upon Senior Securities

60

Item 4.  

Mine Safety Disclosures

60

Item 5.  

Other Information

60

Item 6.  

Exhibits

61

 

SIGNATURES

62

 

 

 

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in thousands, except par value and share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

March 31, 2020

    

December 31, 2019

 

 

 

 

 

 

ASSETS

 

 

  

 

 

  

Cash and due from banks

 

$

47,895

 

$

51,259

Interest-bearing deposits at other financial institutions

 

 

237,003

 

 

320,805

Total cash and cash equivalents

 

 

284,898

 

 

372,064

Securities

 

 

234,014

 

 

231,262

Equity investments

 

 

16,807

 

 

16,710

Loans held for sale

 

 

882

 

 

1,463

Loans, net of allowance for credit losses of $31,194 and $25,280 at March 31, 2020 and December 31, 2019, respectively

 

 

2,640,393

 

 

2,613,805

Premises and equipment, net of accumulated depreciation of $33,665 and $32,923 at March 31, 2020 and December 31, 2019, respectively

 

 

50,243

 

 

50,875

Goodwill

 

 

80,950

 

 

80,950

Other intangible assets, net of accumulated amortization of $16,020 and $15,809 at March 31, 2020 and December 31, 2019, respectively

 

 

4,700

 

 

4,938

Bank-owned life insurance

 

 

72,297

 

 

71,881

Operating lease right-to-use asset

 

 

12,577

 

 

12,926

Deferred tax asset, net

 

 

7,026

 

 

7,432

Other assets

 

 

20,863

 

 

14,238

Total assets

 

$

3,425,650

 

$

3,478,544

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

  

 

 

  

Liabilities

 

 

  

 

 

  

Noninterest-bearing deposits

 

$

1,195,541

 

$

1,184,861

Interest-bearing deposits

 

 

1,596,692

 

 

1,667,527

Total deposits

 

 

2,792,233

 

 

2,852,388

Federal Home Loan Bank advances

 

 

50,000

 

 

50,000

Repurchase agreements

 

 

1,415

 

 

485

Operating lease liabilities

 

 

15,356

 

 

15,704

Other liabilities

 

 

29,772

 

 

24,246

Total liabilities

 

 

2,888,776

 

 

2,942,823

Commitments and contingencies (Note 16)

 

 

  

 

 

  

Shareholders’ equity

 

 

  

 

 

  

Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued

 

 

 —

 

 

 —

Common stock, $0.01 par value, 90,000,000 shares authorized, 25,601,835 and 25,837,048 shares issued at March 31, 2020 and December 31, 2019, respectively, 24,746,013 and 24,979,702 shares outstanding at March 31, 2020 and December 31, 2019, respectively

 

 

256

 

 

258

Additional paid-in capital

 

 

341,713

 

 

346,559

Retained earnings

 

 

203,080

 

 

201,080

Treasury stock, at cost, 855,822 and 857,346 shares held at March 31, 2020 and December 31, 2019, respectively

 

 

(14,536)

 

 

(14,562)

Accumulated other comprehensive gain, net of tax of $1,058 and $634 at March 31, 2020 and December 31, 2019, respectively

 

 

6,361

 

 

2,386

Total shareholders’ equity

 

 

536,874

 

 

535,721

Total liabilities and shareholders’ equity

 

$

3,425,650

 

$

3,478,544

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

1

Table of Contents

CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Income (Unaudited)

(Dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

    

2020

    

2019

Interest income

 

 

  

 

 

  

Interest and fees on loans

 

$

33,617

 

$

33,793

Securities

 

 

1,363

 

 

1,557

Other interest-earning assets

 

 

1,055

 

 

1,483

Equity investments

 

 

176

 

 

152

Total interest income

 

 

36,211

 

 

36,985

Interest expense

 

 

  

 

 

  

Deposits

 

 

3,766

 

 

3,584

Federal Home Loan Bank advances

 

 

221

 

 

64

Repurchase agreements

 

 

 —

 

 

 1

Note payable and junior subordinated debt

 

 

 4

 

 

 8

Total interest expense

 

 

3,991

 

 

3,657

Net interest income

 

 

32,220

 

 

33,328

Provision for credit losses

 

 

 

 

 

 

Provision for credit losses for loans

 

 

4,739

 

 

1,147

Provision for credit losses for unfunded commitments

 

 

310

 

 

 —

Total provision for credit losses

 

 

5,049

 

 

1,147

Net interest income after provision for credit losses

 

 

27,171

 

 

32,181

Noninterest income

 

 

  

 

 

  

Deposit account service charges

 

 

1,485

 

 

1,629

Card interchange fees

 

 

922

 

 

864

Earnings on bank-owned life insurance

 

 

416

 

 

430

Net gain on sales of assets

 

 

123

 

 

88

Other

 

 

1,381

 

 

482

Total noninterest income

 

 

4,327

 

 

3,493

Noninterest expense

 

 

  

 

 

  

Salaries and employee benefits

 

 

14,223

 

 

13,822

Occupancy expense

 

 

2,424

 

 

2,267

Professional and director fees

 

 

1,152

 

 

2,091

Data processing and software

 

 

1,222

 

 

1,154

Regulatory fees

 

 

103

 

 

464

Advertising, marketing and business development

 

 

364

 

 

440

Telephone and communications

 

 

419

 

 

378

Security and protection expense

 

 

374

 

 

323

Amortization of intangibles

 

 

221

 

 

232

Other expenses

 

 

1,587

 

 

1,414

Total noninterest expense

 

 

22,089

 

 

22,585

Net income before income tax expense

 

 

9,409

 

 

13,089

Income tax expense

 

 

1,868

 

 

2,599

Net income

 

$

7,541

 

$

10,490

Earnings per common share

 

 

  

 

 

  

Basic

 

$

0.30

 

$

0.42

Diluted

 

$

0.30

 

$

0.42

 

See accompanying notes to condensed consolidated financial statements.

 

2

Table of Contents

CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

    

2020

    

2019

Net income

 

$

7,541

    

$

10,490

 

 

 

 

 

 

 

Change in unrealized gains on securities available for sale arising during the period, net

 

 

5,023

 

 

3,027

Reclassification adjustments for net realized gains included in net income

 

 

10

 

 

 3

Change in related deferred income tax

 

 

(1,058)

 

 

(637)

Other comprehensive income, net of tax

 

 

3,975

 

 

2,393

Total comprehensive income

 

$

11,516

 

$

12,883

 

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(Dollars in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

Common Stock

 

Paid-In

 

Retained

 

Treasury Stock

 

Comprehensive

 

 

 

 

    

Shares

    

Amount

    

Capital

    

Earnings

    

Shares

    

Amount

    

Income (Loss)

    

Total

Balance at December 31, 2018

 

25,777,693

 

$

258

 

$

344,497

 

$

160,626

 

(870,272)

 

$

(14,781)

 

$

(2,975)

 

$

487,625

Net income

 

 —

 

 

 —

 

 

 —

 

 

10,490

 

 —

 

 

 —

 

 

 —

 

 

10,490

Dividends on common stock, $0.10 per share

 

 —

 

 

 —

 

 

 —

 

 

(2,513)

 

 —

 

 

 —

 

 

 —

 

 

(2,513)

Stock-based compensation expense

 

 —

 

 

 —

 

 

545

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

545

Vesting of restricted stock, net of shares withheld for employee tax liabilities

 

211

 

 

 —

 

 

(2)

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(2)

Exercise of stock options, net of shares withheld for employee tax liabilities

 

 —

 

 

 —

 

 

(69)

 

 

 —

 

10,844

 

 

184

 

 

 —

 

 

115

Other comprehensive income, net of tax

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

2,393

 

 

2,393

Balance at March 31, 2019

 

25,777,904

 

$

258

 

$

344,971

 

$

168,603

 

(859,428)

 

$

(14,597)

 

$

(582)

 

$

498,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

25,837,048

 

 

258

 

 

346,559

 

 

201,080

 

(857,346)

 

 

(14,562)

 

 

2,386

 

 

535,721

Net income

 

 —

 

 

 —

 

 

 —

 

 

7,541

 

 —

 

 

 —

 

 

 —

 

 

7,541

Cumulative effect of accounting changes from adoption of CECL, net of deferred tax asset

 

 —

 

 

 —

 

 

 —

 

 

(3,045)

 

 —

 

 

 —

 

 

 —

 

 

(3,045)

Dividends on common stock, $0.10 per share

 

 —

 

 

 —

 

 

 —

 

 

(2,496)

 

 —

 

 

 —

 

 

 —

 

 

(2,496)

Stock-based compensation expense

 

 —

 

 

 —

 

 

557

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

557

Vesting of restricted stock, net of shares withheld for employee tax liabilities

 

5,232

 

 

 —

 

 

(35)

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(35)

Exercise of stock options, net of shares withheld for employee tax liabilities

 

 —

 

 

 —

 

 

(10)

 

 

 —

 

1,524

 

 

26

 

 

 —

 

 

16

Shares repurchased

 

(240,445)

 

 

(2)

 

 

(5,358)

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(5,360)

Other comprehensive income, net of tax

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

3,975

 

 

3,975

Balance at March 31, 2020

 

25,601,835

 

$

256

 

$

341,713

 

$

203,080

 

(855,822)

 

$

(14,536)

 

$

6,361

 

$

536,874

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

    

2020

 

2019

Cash flows from operating activities:

 

 

  

 

 

 

Net income

 

$

7,541

 

$

10,490

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

 

 

  

 

 

 

Provision for credit losses

 

 

5,049

 

 

1,147

Depreciation expense

 

 

775

 

 

824

Amortization of intangibles

 

 

221

 

 

232

Amortization of premiums on securities

 

 

368

 

 

256

Amortization of lease right-to-use assets

 

 

349

 

 

329

Accretion of lease liabilities

 

 

133

 

 

131

Earnings on bank-owned life insurance

 

 

(416)

 

 

(430)

Stock-based compensation expense

 

 

557

 

 

545

Deferred income tax provision

 

 

158

 

 

622

Net gain on sales of assets

 

 

(123)

 

 

(88)

Earnings on securities

 

 

(24)

 

 

(9)

Change in operating assets and liabilities:

 

 

  

 

 

 

Loans held for sale

 

 

670

 

 

(820)

Other assets

 

 

(6,625)

 

 

303

Other liabilities

 

 

1,759

 

 

(3,517)

Total adjustments

 

 

2,851

 

 

(475)

Net cash provided by operating activities

 

 

10,392

 

 

10,015

Cash flows from investing activities:

 

 

  

 

 

 

Purchases of securities

 

 

(160,580)

 

 

(153,962)

Proceeds from sales, calls and maturities of securities

 

 

153,005

 

 

153,056

Principal repayments of securities

 

 

9,522

 

 

4,969

Net increase in loans

 

 

(30,168)

 

 

(97,639)

Purchases of loan participations

 

 

(2,500)

 

 

(1,256)

Proceeds from sales of Small Business Administration loans

 

 

508

 

 

818

Net contributions to equity investments

 

 

(97)

 

 

(2,039)

Net purchases sales of premises and equipment

 

 

(143)

 

 

 —

Proceeds from sales of repossessed real estate and other assets

 

 

 —

 

 

20

Proceeds from insurance claims

 

 

 —

 

 

(653)

Net cash used in investing activities

 

 

(30,453)

 

 

(96,686)

Cash flows from financing activities:

 

 

  

 

 

 

Net increase in noninterest-bearing deposits

 

 

10,680

 

 

46,114

Net decrease in interest-bearing deposits

 

 

(70,835)

 

 

(61,397)

Net increase (decrease) in securities sold under agreements to repurchase

 

 

930

 

 

(898)

Redemption of trust preferred securities

 

 

 —

 

 

(1,571)

Dividends paid on common stock

 

 

(2,501)

 

 

(1,245)

Payments to tax authorities for stock-based compensation

 

 

(35)

 

 

(2)

Proceeds from exercise of stock options

 

 

16

 

 

115

Repurchase of common stock

 

 

(5,360)

 

 

 —

Net cash provided by financing activities

 

 

(67,105)

 

 

(18,884)

Net decrease in cash, cash equivalents and restricted cash

 

 

(87,166)

 

 

(105,555)

Cash, cash equivalents and restricted cash, beginning

 

 

372,064

 

 

382,070

Cash, cash equivalents and restricted cash, ending

 

$

284,898

 

$

276,515

 

See accompanying notes to condensed consolidated financial statements.

 

5

Table of Contents

CBTX, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

CBTX, Inc., or the Company, or CBTX, operates 35 branches, 19 in the Houston market area, 15 in the Beaumont/East Texas market area and one in Dallas, through its wholly-owned subsidiary, CommunityBank of Texas, N.A., or the Bank. The Bank provides relationship-driven commercial banking products and services primarily to small and mid-sized businesses and professionals with operations within the Bank’s markets. The Bank operates under a national charter and therefore is subject to regulation by the Office of the Comptroller of the Currency, or OCC, and the Federal Deposit Insurance Corporation, or FDIC. The Company is subject to regulation by the Board of Governors of the Federal Reserve, or the Federal Reserve.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and the Bank. All material intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP, but do not include all the information and footnotes required for complete consolidated financial statements. In management’s opinion, these interim unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair statement of the Company’s consolidated financial position at March 31, 2020 and December 31, 2019, consolidated results of operations and consolidated shareholders’ equity for the three months ended March 31, 2020 and 2019, and consolidated cash flows for the three months ended March 31, 2020 and 2019.

Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end and the results for the interim periods shown in this report are not necessarily indicative of results to be expected for the full year due in part to global economic and financial market conditions, interest rates, access to sources of liquidity, market competition and interruptions of business processes. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included within the Company’s Annual Report on Form 10-K.

Reclassification—Within noninterest expense for 2019, data processing and software have been combined together. In addition, printing, stationary and office, correspondent bank and customer related transaction fees, loan processing costs and repossessed real estate and other asset expenses have been combined with other expenses. These reclassifications were made to conform to the 2020 financial statement presentation in the condensed consolidated statements of income.

Share Repurchase Program

During the three months ended March 31, 2020, 240,445 shares were repurchased under the Company’s share repurchase program at an average price of $22.29 per share and retired and returned to the status of authorized but unissued shares. There were no shares repurchased during the three months ended March 31, 2019.

 

6

Table of Contents

Accounting Standards Recently Adopted

The Company adopted Accounting Standards Update, or ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments effective January 1, 2020. The scope of ASU 2016-13 includes loans, debt securities classified as held to maturity, other receivables, off-balance sheet credit exposures and any other financial assets not excluded from the scope that have the contractual right to receive cash. In addition, ASU 2016-13 amends the accounting and reporting for credit losses on available for sale securities.

ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. As part of the implementation of ASU 2016-13, the Company changed its methodology of determining the allowance for credit losses, or ACL, for loans and for determining an ACL associated with the Company’s off-balance sheet credit exposures, which are primarily unfunded commitments to borrowers. Through a one-time cumulative effect reduction of retained earnings of $3.0 million, the adoption of ASU 2016-13 increased the ACL for loans by $874,000, increased the liability related to the ACL for unfunded commitments by $2.9 million, with the associated deferred tax assets increasing by $809,000.

 

The adoption of ASU 2016-13 did not have any impact on held-to-maturity securities as the Company did not hold any as of January 1, 2020. Additionally, the Company assessed the impact of ASU 2016-13 on its available for sale securities utilizing various qualitative factors and determined there were no credit losses within the portfolio requiring an allowance upon adoption. The Company did not have any purchased financial assets with credit deterioration as of January 1, 2020. See Note 6 —Allowance for Credit Losses for further discussion related to ASC 2016-13 and related disclosures.

 

Accounting Standards Not Yet Adopted

ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate, or LIBOR, or another reference rate expected to be discontinued, if certain criteria are met. LIBOR is used as an index rate for the Company’s interest-rate swaps and approximately 12.9% of the Company’s loans as of March 31, 2020.

If reference rates are discontinued, the existing contracts will be modified to replace the discontinued rate with a replacement rate. For accounting purposes, such contract modifications would have to be evaluated to determine whether the modified contract is a new contract or a continuation of an existing contract. If they are considered new contracts, the previous contract would be extinguished. Under one of the optional expedients of ASU 2020-04, modifications of contracts within the scope of Topic 310, Receivables, and 470, Debt, will be accounted for by prospectively adjusting the effective interest rates and no such evaluation is required. When elected, the optional expedient for contract modifications must be applied consistently for all eligible contracts or eligible transactions. The expedients and exceptions in this update are available to all entities starting March 12, 2020 through December 31, 2022. The Company is in the process of evaluating the impact of this pronouncement on those financial assets where LIBOR is used as an index rate.

Cash Flow Reporting

The Bank is required to maintain regulatory reserves with the Federal Reserve Bank and the reserve requirements for the Bank were $17.2 million and $18.6 million at March 31, 2020 and December 31, 2019, respectively. Additionally, as of March 31, 2020 and December 31, 2019, the Company had $9.3 million and $3.1 million, respectively, in cash collateral for interest rate swap transactions. The reserves maintained with the Federal Reserve Bank and the cash collateral used in interest rate swap transactions are considered restricted cash.

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Supplemental disclosures of cash flow information are as follows for the periods indicated below:

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

(Dollars in thousands)

    

2020

 

2019

Supplemental disclosures of cash flow information:

 

 

  

 

 

 

Cash paid for taxes

 

$

 —

 

$

 —

Cash paid for interest

 

 

3,944

 

 

3,599

Supplemental disclosures of non-cash flow information:

 

 

 

 

 

 

Operating lease right-to-use asset obtained in exchange for lease liabilities

 

 

 —

 

 

13,208

Dividends accrued

 

 

 5

 

 

1,268

Repossessed real estate and other assets

 

 

 —

 

 

41

 

 

NOTE 2: SECURITIES

The amortized cost and fair values of investments in securities, including the gross unrealized gains and losses reported net of tax in other comprehensive income, as of the dates shown below were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

(Dollars in thousands)

    

Cost

    

Gains

    

Losses

    

Fair Value

March 31, 2020

 

 

  

 

 

  

 

 

  

 

 

  

Debt securities available for sale:

 

 

  

 

 

  

 

 

  

 

 

  

State and municipal securities

 

$

48,988

 

$

1,898

 

$

 —

 

$

50,886

U.S. agency securities:

 

 

 

 

 

 

 

 

 

 

 

  

Collateralized mortgage obligations

 

 

51,433

 

 

1,632

 

 

 —

 

 

53,065

Mortgage-backed securities

 

 

124,370

 

 

4,522

 

 

 —

 

 

128,892

Equity securities

 

 

1,161

 

 

10

 

 

 —

 

 

1,171

Total

 

$

225,952

 

$

8,062

 

$

 —

 

$

234,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

(Dollars in thousands)

    

Cost

    

Gains

    

Losses

    

Fair Value

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities available for sale:

 

 

  

 

 

  

 

 

  

 

 

  

State and municipal securities

 

$

51,525

 

$

1,761

 

$

(7)

 

$

53,279

U.S. agency securities:

 

 

  

 

 

  

 

 

  

 

 

  

Collateralized mortgage obligations

 

 

55,784

 

 

324

 

 

(119)

 

 

55,989

Mortgage-backed securities

 

 

119,787

 

 

1,315

 

 

(255)

 

 

120,847

Equity securities

 

 

1,155

 

 

 —

 

 

(8)

 

 

1,147

Total

 

$

228,251

 

$

3,400

 

$

(389)

 

$

231,262

 

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The amortized cost and estimated fair value of securities, by contractual maturities, as of the dates shown below were as follows:

 

 

 

 

 

 

 

 

 

Available for Sale

 

 

Amortized

 

Fair

(Dollars in thousands)

    

Cost

    

Value

March 31, 2020

 

 

  

 

 

  

Amounts maturing in:

 

 

  

 

 

  

1 year or less

 

$

1,759

 

$

1,776

1 year through 5 years

 

 

3,050

 

 

3,131

5 years through 10 years

 

 

15,042

 

 

15,536

After 10 years

 

 

206,101