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

    

Commission file

September 30, 2020

number 00139215

Professional Holding Corp.

(Exact name of Registrant as specified in its charter)

Florida

    

    

46-5144312

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

396 Alhambra Circle, Suite 255

Coral Gables, FL 33134 (786) 483-1757

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

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

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Class A Common Stock

 

PFHD

 

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

Number of shares of common stock outstanding as of November 12, 2020: 13,485,768


TABLE OF CONTENTS

Part I

    

Financial Information

3

Item 1

Condensed Consolidated Financial Statements (unaudited)

3

Item 2

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

26

Item 3

Quantitative and Qualitative Disclosures About Market Risk

60

Item 4

Controls and Procedures

60

Part II

Other Information

60

Item 1

Legal Proceedings

60

Item 1A

Risk Factors

61

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

61

Item 3

Defaults Upon Senior Securities

62

Item 4

Mine Safety Disclosures

62

Item 5

Other Information

62

Item 6

Exhibits

62

2


PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited).

PROFESSIONAL HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollar amounts in thousands, except share data)

     

September 30, 

     

December 31, 

2020

2019

ASSETS

 

  

 

  

Cash and due from banks

$

36,176

$

21,408

Interest-bearing deposits

 

251,664

 

150,572

Federal funds sold

 

26,696

 

26,970

Cash and cash equivalents

 

314,536

 

198,950

Securities available for sale, at fair value

 

97,067

 

28,441

Securities held to maturity (fair value September 30, 2020 – $1,605, December 31, 2019 – $224)

 

1,589

 

214

Equity securities

 

995

 

971

Loans, net of allowance of $15,035 and $6,548 as of September 30, 2020 and December 31, 2019, respectively

 

1,589,010

 

785,167

Federal Home Loan Bank stock, at cost

 

3,654

 

2,994

Federal Reserve Bank stock, at cost

 

4,762

 

2,074

Accrued interest receivable

 

6,547

 

2,498

Premises and equipment, net

 

4,655

 

4,307

Bank owned life insurance

 

17,236

 

16,858

Goodwill

15,651

Core deposit intangibles

3,603

Other assets

 

17,618

 

10,667

$

2,076,923

$

1,053,141

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

Deposits

 

 

Demand – non-interest bearing

$

489,757

$

184,211

Demand – interest bearing

 

840,418

 

599,318

Time deposits

 

236,968

 

109,344

Total deposits

 

1,567,143

 

892,873

Federal Home Loan Bank advances

 

50,000

 

55,000

Subordinated debt

10,197

Official checks

 

4,752

 

6,191

Line of credit

9,999

PPPLF advances

224,341

Accrued interest and other liabilities

 

16,375

 

9,776

Total liabilities

 

1,872,808

 

973,839

Commitments and contingent liabilities

 

 

Stockholders’ equity

 

 

Preferred stock, 10,000,000 shares authorized, none issued

 

 

Class A Voting Common stock, $0.01 par value; authorized 50,000,000 shares, issued 13,641,187 and outstanding 13,080,893 shares as of September 30, 2020 and authorized 50,000,000 shares, issued 5,360,262 and outstanding 5,115,262 shares at December 31, 2019

 

135

 

53

Class B Non-Voting Common stock, $0.01 par value; 10,000,000 shares authorized, 401,633 shares issued and outstanding at September 30, 2020 and 752,184 shares issued and outstanding at December 31, 2019

 

4

 

7

Treasury stock, at cost

 

(9,132)

 

(4,155)

Additional paid-in capital

 

203,041

 

77,019

Retained earnings

 

9,215

 

6,451

Accumulated other comprehensive income (loss)

 

852

 

(73)

Total stockholders’ equity

 

204,115

 

79,302

$

2,076,923

$

1,053,141

3


PROFESSIONAL HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)

(Dollar amounts in thousands, except share data)

Three Months Ended September 30, 

Nine Months Ended September 30, 

 

2020

    

2019

 

    

2020

    

2019

Interest income

Loans, including fees

$

18,488

$

9,502

$

46,400

$

26,289

Taxable securities

 

433

 

172

 

1,093

 

504

Dividend income on restricted stock

 

103

 

73

 

313

 

200

Other

 

77

 

583

 

837

 

1,607

Total interest income

 

19,101

 

10,330

 

48,643

 

28,600

Interest expense

 

 

  

 

 

  

Deposits

 

1,165

 

2,789

 

5,408

 

7,200

Federal Home Loan Bank advances

 

197

 

288

 

762

 

795

Other borrowings

279

661

Total interest expense

 

1,641

 

3,077

 

6,831

 

7,995

Net interest income

 

17,460

 

7,253

 

41,812

 

20,605

Provision for loan losses

 

5,957

 

380

 

8,552

 

762

Net interest income after provision for loan losses

 

11,503

 

6,873

 

33,260

 

19,843

Non-interest income

 

 

  

 

 

  

Service charges on deposit accounts

 

319

 

399

 

848

 

542

Income from Bank owned life insurance

 

123

 

136

 

378

 

278

Gain on sale and call of securities

1

16

3

Other

 

520

 

309

 

1,545

 

1,304

Total non-interest income

 

963

 

844

 

2,787

 

2,127

Non-interest expense

 

 

  

 

 

  

Salaries and employee benefits

 

6,433

 

4,662

 

18,608

 

13,534

Occupancy and equipment

 

1,196

 

701

 

3,051

 

1,824

Data processing

 

374

 

165

 

971

 

489

Marketing

 

435

 

128

 

723

 

400

Professional fees

 

562

 

524

 

1,723

 

1,106

Acquisition expenses

1,078

3,301

Regulatory assessments

 

250

 

46

 

764

 

353

Other

 

1,385

 

815

 

3,606

 

2,382

Total non-interest expense

 

11,713

 

7,041

 

32,747

 

20,088

Income before income taxes

 

753

 

676

 

3,300

 

1,882

Income tax provision (benefit)

 

(197)

 

182

 

536

 

534

Net income

 

950

 

494

 

2,764

 

1,348

Earnings (loss) per share:

 

 

  

 

 

  

Basic

$

0.07

$

0.09

$

0.24

$

0.23

Diluted

$

0.07

$

0.08

$

0.21

$

0.22

Other comprehensive income:

 

 

  

 

 

  

Unrealized holding gain on securities available for sale

 

171

 

1

 

1,240

 

485

Tax effect

 

(43)

 

 

(315)

 

(123)

Other comprehensive gain, net of tax

 

128

 

1

 

925

 

362

Comprehensive income

$

1,078

$

495

$

3,689

$

1,710

4


PROFESSIONAL HOLDING CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(Dollar amounts in thousands, except share data)

Accumulated

Additional

Other

Common Stock

Treasury

Paid-in

Retained

Comprehensive

Shares

Amount

Stock

Capital

Earnings

 

Income (Loss)

Total

Balance at July 1, 2020

13,444,635

$

139

$

(9,132)

$

202,438

$

8,265

$

724

    

$

202,434

Issuance of common stock, net of issuance cost

 

37,891

 

 

 

346

 

 

 

346

Treasury stock

 

 

 

 

 

 

 

Employee stock purchase plan

 

 

 

 

24

 

 

 

24

Net income

 

 

 

 

 

950

 

 

950

Other comprehensive income

 

 

 

 

 

 

128

 

128

Stock based compensation

 

 

 

 

233

 

 

 

233

Balance at September 30, 2020

 

13,482,526

$

139

$

(9,132)

$

203,041

$

9,215

$

852

$

204,115

Balance at July 1, 2019

5,937,987

    

$

60

    

$

(655)

    

$

76,612

    

$

4,969

    

$

(64)

    

$

80,922

Issuance of common stock, net of issuance cost

 

 

 

 

 

 

 

Treasury stock

 

(200,000)

 

 

(3,500)

 

 

 

 

(3,500)

Employee stock purchase plan

 

 

 

 

30

 

 

 

30

Net income

 

 

 

 

 

494

 

 

494

Other comprehensive income

 

 

 

 

 

 

1

 

1

Stock based compensation

 

2,499

 

 

 

25

 

 

 

25

Balance at September 30, 2019

 

5,740,486

$

60

$

(4,155)

$

76,667

$

5,463

$

(63)

$

77,972

Balance at January 1, 2020

    

5,867,446

    

$

60

    

$

(4,155)

    

$

77,019

    

$

6,451

    

$

(73)

    

$

79,302

Issuance of common stock, net of issuance cost

 

3,702,558

 

37

 

 

60,567

 

 

 

60,604

Treasury stock

 

(315,294)

 

 

(4,977)

 

(9)

 

 

 

(4,986)

Marquis Bancorp (MBI) acquisition

4,227,816

 

42

 

 

64,657

 

 

 

64,699

Employee stock purchase plan

 

 

 

 

82

 

 

 

82

Net income

 

 

 

 

 

2,764

 

 

2,764

Other comprehensive income

 

 

 

 

 

 

925

 

925

Stock based compensation

 

 

 

 

725

 

 

 

725

Balance at September 30, 2020

 

13,482,526

 

139

 

(9,132)

 

203,041

 

9,215

 

852

 

204,115

Balance at January 1, 2019

5,923,884

    

$

59

    

$

(220)

    

$

76,152

    

$

4,115

    

$

(425)

    

$

79,681

Issuance of common stock, net of issuance cost

 

39,103

 

1

 

 

385

 

 

 

386

Treasury stock

 

(225,000)

 

 

(3,935)

 

 

 

 

(3,935)

Employee stock purchase plan

 

2,499

 

 

 

130

 

 

 

130

Net income

 

 

 

 

 

1,348

 

 

1,348

Other comprehensive income

 

 

 

 

 

 

362

 

362

Stock based compensation

 

 

 

 

 

 

 

Balance at September 30, 2019

 

5,740,486

$

60

$

(4,155)

$

76,667

$

5,463

$

(63)

$

77,972

5


PROFESSIONAL HOLDING CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollar amounts in thousands, except share data)

Nine Months Ended September 30, 

    

2020

    

2019

Cash flows from operating activities

 

  

 

  

Net income (loss)

$

2,764

$

1,348

Adjustments to reconcile net income to net cash from operating activities

 

  

 

  

Provision for loan losses

 

8,552

 

762

Deferred income tax benefit

 

(2,981)

 

199

Depreciation and amortization

 

1,132

 

948

Gain on sale of securities

(4)

3

Gain on call of securities

(12)

Equity unrealized change in market value

(24)

(33)

Net amortization of securities

 

(287)

 

(107)

Net amortization of deferred loan fees

 

(2,371)

 

487

Employee stock purchase plan

82

87

Stock compensation

 

725

 

Income from bank owned life insurance

 

(378)

 

(279)

Changes in operating assets and liabilities:

 

  

 

  

Accrued interest receivable

 

(2,524)

 

(472)

Other assets

 

3,110

 

(656)

Official checks, accrued interest, interest payable and other liabilities

 

(2,054)

 

(1,557)

Net cash provided by operating activities

 

5,730

 

730

Cash flows from investing activities

 

  

 

  

Proceeds from maturities and paydowns of securities available for sale

 

10,407

 

4,247

Proceeds from calls of securities available for sale

8,500

Proceeds from paydowns of securities held to maturity

 

84

 

34

Purchase of securities available for sale

 

(60,693)

 

(17,008)

Sale of securities available for sale

1,739

4,501

Loans originations, net of principal repayments

 

(299,867)

 

(164,432)

Proceeds from sale of loans

10,540

Purchase of Federal Reserve Bank stock

 

(2,688)

 

(529)

Purchase of Federal Home Loan Bank Stock

 

(660)

 

(590)

Purchase of company owned life insurance

(8,000)

Purchases of premises and equipment

 

(486)

 

(1,598)

Proceeds from acquisition

26,860

Net cash used in investing activities

 

(306,264)

 

(183,375)

Cash flows from financing activities

 

  

 

  

Net increase in deposits

 

176,160

 

219,763

Proceeds from issuance of stock, net of issuance costs

 

60,604

 

429

Purchase of treasury stock

(4,986)

(3,935)

Proceeds from Federal Home Loan Bank advances

 

10,000

 

20,000

Repayments of Federal Home Loan advances

 

(40,000)

 

(10,000)

Repayment of line of credit

(9,999)

Proceeds from PPPLF advances

224,341

Net cash provided by financing activities

 

416,120

 

226,257

Increase in cash and cash equivalents

 

115,586

 

43,612

Cash and cash equivalents at beginning of period

 

198,950

 

86,883

Cash and cash equivalents at end of period

$

314,536

$

130,495

Supplemental cash flow information:

 

  

 

  

Cash paid during the period for interest

$

6,233

$

7,985

Cash paid during the period for taxes

 

2,186

 

637

Supplemental noncash disclosures:

 

  

 

  

Lease liabilities arising from obtaining right of use assets

$

1,680

$

5,673

Total asset acquired

589,760

Total liabilities assumed

540,712

6


PROFESSIONAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tables in thousands, except share data)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements of Professional Holding Corp. and its subsidiary, Professional Bank (the “Bank” and collectively with Professional Holding Corp., the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior period amounts have been reclassified to conform to the current period presentation.

Operating results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any other period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Use of Estimates:

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

The outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the global economy and created uncertainty in world financial markets. The economic effects of the coronavirus COVID-19 pandemic have significantly impacted business and economic activity in the U.S. and around the world. There have been full and partial business closures, increases in unemployment as workers are furloughed, laid off, or had hours limited. Such disruptions could adversely affect our loan and deposit fee income as well as create downward pressure on the quality of our loan portfolio possibly leading to an increase in loan charge-offs.

The coronavirus COVID-19 pandemic is an unprecedented event that has created high levels of uncertainty. We are hopeful that the CARES Act and derivative programs will be a stabilizing force for the remainder of 2020 and beyond, and we are vigilantly monitoring global events and actions being taken by various Federal and State Agencies. We have maintained interim periodic communications with our regulators and have not experienced any material deposit outflows to date and frequently communicate with our credit clients. Given the fluidity of the situation, management cannot predict the long-term impact of novel coronavirus COVID-19 for the remainder of 2020 or beyond.

7


New accounting standards that have not yet been adopted:

The following provides a brief description of accounting standards that have been issued but are not yet adopted that could have a material effect on the Company’s financial statements:

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326)

Description

In June 2016, FASB issued guidance to replace the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables and held to maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (i.e. loan commitments, standby letters of credit, financial guarantees and other similar instruments).

Date of Adoption

For PBEs that are non-SEC filers and for SEC filers that are considered small reporting companies, it is effective for January 1, 2023. Early adoption is still permitted.

Effect on the Consolidated Financial Statements

The Company's management is in the process of evaluating credit loss estimation models. Updates to business processes and the documentation of accounting policy decisions are ongoing. The company may recognize an increase in the allowance for credit losses upon adoption, recorded as a one-time cumulative adjustment to retained earnings. However, the magnitude of the impact on the Company's consolidated financial statements has not yet been determined. The Company will adopt this accounting standard effective January 1, 2023.

NOTE 2 — EARNINGS PER SHARE

Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding plus the effect of employee stock options during the year.

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2020

    

2019

2020

    

2019

Basic earnings per share:

 

  

 

  

  

 

  

Net Income(loss)

$

950

$

494

$

2,764

$

1,348

Total weighted average common stock outstanding

 

13,438,652

 

5,807,153

 

11,694,764

 

5,882,519

Net income(loss) per share

$

0.07

$

0.09

$

0.24

$

0.23

Diluted earnings per share:

 

 

 

 

Net Income

$

950

$

494

$

2,764

$

1,348

Total weighted average common stock outstanding

 

13,438,652

 

5,807,153

 

11,694,764

 

5,882,519

Add: Dilutive effect of employee stock options

1,117,563

181,233

1,290,819

202,877

Total weighted average diluted stock outstanding

14,556,215

5,988,386

12,985,583

6,085,396

Net income per share

$

0.07

$

0.08

$

0.21

$

0.22

For the three months ended September 30, 2020 there were 326 thousand stock options that were anti-dilutive and for the three months ended September 30, 2019 there were no stock options that were anti-dilutive. For the nine months ended September 30, 2020 there were 133 thousand stock options that were anti-dilutive and for the nine months ended September 30, 2019 there were no stock options that were anti-dilutive.

8


NOTE 3 — SECURITIES

The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at September 30, 2020 and December 31, 2019 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss and gross unrecognized gains and losses:

    

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

September 30, 2020

Cost

Gains

Losses

Fair Value

Available-for-sale

Small Business Administration loan pools

$

32,020

$

38

$

(235)

$

31,823

Mortgage-backed securities

 

32,873

 

545

 

(19)

 

33,399

U.S. agency obligations

5,002

139

-

5,141

Community Development District bonds

22,464

633

-

23,097

Municipals

1,066

33

-

1,099

Corporate bonds

 

2,501

 

7

 

-

 

2,508

Total available-for-sale

$

95,926

$

1,395

$

(254)

$

97,067

    

    

Gross

    

Gross

    

 

Amortized

Unrecognized

Unrecognized

Cost

Gains

Losses

Fair Value

Held-to-Maturity

 

  

 

  

 

  

 

  

Mortgage-backed securities

$

385

$

17

$

$

402

US Treasury

203

203

Foreign Bonds

1,001

(1)

1,000

Total Held-to-Maturity

$

1,589

$

17

$

(1)

$

1,605

    

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Fair

December 31, 2019

Cost

Gains

Losses

Value

Available-for-sale

 

  

 

  

 

  

 

  

Small Business Administration loan pools

$

17,303

$

19

$

(139)

$

17,183

Mortgage-backed securities

 

5,237

 

 

(52)

 

5,185

U.S. agency obligations

4,000

70

4,070

Corporate bonds

 

2,000

 

3

 

 

2,003

Total available-for-sale

$

28,540

$

92

$

(191)

$

28,441

    

    

Gross

    

Gross

Amortized

Unrecognized

Unrecognized

Fair

Cost

Gains

Losses

    

Value

Held-to-Maturity

 

  

 

  

 

  

 

  

Mortgage-backed securities

$

214

$

10

$

$

224

Total Held-to-Maturity

$

214

$

10

$

$

224

As of September 30, 2020 and December 31, 2019, Corporate bonds are comprised of investments in the financial services industry. During the nine months ended September 30, 2020 the net investment portfolio increased by $70.0 million as a result of purchases and acquisitions. Proceeds from sales of securities during the three and nine months ended September 30, 2020 were $0 and $1.7 million, with gross realized gains of $0 and $4 thousand, respectively. Proceeds from calls of securities during the three and nine months ended September 30, 2020 were $3.7 million and $8.5 million, with gross realized gains of $1 thousand and $12 thousand, respectively. Proceeds from sales and calls of securities for the year ended December 31, 2019 were $4.5 million and $0.5 million, respectively. Securities pledged as of September 30, 2020, and December 31, 2019 were $11.4 million and $14.9 million, respectively.

9


The scheduled maturities of securities as of September 30, 2020 are as follows. The amortized cost and fair value of debt securities are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers 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.

September 30, 2020

    

Amortized

    

Fair

Cost

Value

Available-for-sale

Due in one year or less

$

2,502

$

2,503

Due after one year through five years

 

24,721

 

25,418

Due after five years through ten years

3,495

3,607

Due after ten years

315

317

Subtotal

$

31,033

$

31,845

SBA loan pools

$

32,020

$

31,823

Mortgage-backed securities

32,873

33,399

Total available-for-sale

$

95,926

$

97,067

Held-to-maturity

Due in one year or less

$

1,204

$

1,203

Due after one year through five years

Subtotal

$

1,204

$

1,203

Mortgage-backed securities

$

385

$

402

Total held-to-maturity

$

1,589

$

1,605

At  September 30, 2020 and December 31, 2019, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

The tables below indicate the fair value of debt securities with unrealized losses and for the period of time of which these losses were outstanding at September 30, 2020 and December 31, 2019, respectively, 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

Value

Losses

Value

Losses

Value

Losses

September 30, 2020

Available-for-sale

Small Business Administration loan pools

$

13,795

$

(125)

$

11,022

$

(110)

$

24,817

$

(235)

Mortgage-backed securities

 

2,958

 

(19)

 

 

 

2,958

 

(19)

U.S. agency obligations

Community Development District bonds

Municipals

Corporate bonds

 

 

 

 

 

 

Total available-for-sale

$

16,753

$

(144)

$

11,022

$

(110)

$

27,775

$

(254)

December 31, 2019

 

  

 

  

 

  

 

  

 

  

 

  

Available-for-sale

 

  

 

  

 

  

 

  

 

  

 

  

SBA loan pools

$

9,984

$

(63)

$

4,035

$

(76)

$

14,019

$

(139)

Mortgage-backed

 

1,914

 

(24)

 

2,541

 

(28)

 

4,455

 

(52)

U.S. agency obligations

 

 

 

Corporate bonds

 

 

 

 

 

 

Total available-for-sale

$

11,898

$

(87)

$

6,576

$

(104)

$

18,474

$

(191)

The unrealized holding losses within the investment portfolio are considered to be temporary and are mainly due to changes in the interest rate cycle. The unrealized loss positions may fluctuate positively or negatively with changes in interest rates or spreads. Since SBA loan pools and mortgage-backed securities are government sponsored entities that are highly rated, the decline in fair value is attributable

10


to changes in interest rates and not credit quality. We do not have any securities in an OTTI position. The Company does not have the intent to sell these 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 other-than-temporarily impaired at September 30, 2020. No credit losses were recognized in operations during the nine months ended September 30, 2020 or during 2019.

NOTE 4 — LOANS

Loans at September 30, 2020 and December 31, 2019 were as follows:

    

September 30, 2020

    

December 31, 2019

Commercial real estate

$

727,933

$

270,981

Residential real estate

 

375,607

 

342,257

Commercial

 

411,250

 

129,477

Construction and development

 

82,744