Southern First Bancshares Inc 10-Q for FY2020 Q1

Southern First Bancshares Inc (SFST)

10-Q 2020-04-28 For: 2020-03-31

Added on April 07, 2026

About this 10-Q

Southern First Bancshares Inc filed this 10-Q on April 28, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.67M; up 43.7% from $1.86M a year earlier
Net income: $2.83M; down 52.9% from net income of $6.01M a year earlier
Diluted EPS: $0.36; down 53.8% from $0.78 a year earlier

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☒	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 000-27719

South Carolina		58-2459561
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 Verdae Boulevard, Suite 100
Greenville, S.C.		29607
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		SFST		The Nasdaq Global Market

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller Reporting Company	☒
		Emerging growth company	☐

PART I – CONSOLIDATED FINANCIAL INFORMATION		Page

Item 1.	Consolidated Financial Statements

	Consolidated Balance Sheets	3

	Consolidated Statements of Income	4

	Consolidated Statements of Comprehensive Income	5

	Consolidated Statements of Shareholders’ Equity	6

	Consolidated Statements of Cash Flows	7

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42

Item 4.	Controls and Procedures	42

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 3.	Defaults upon Senior Securities	44

Item 4.	Mine Safety Disclosures	44

Item 5.	Other Information	44

Item 6.	Exhibits	44


	March 31,			December 31,
(dollars in thousands, except share data)	2020			2019
	(Unaudited)			(Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	17,521		19,196
Federal funds sold		40,277		89,256
Interest-bearing deposits with banks		83,314		19,364
Total cash and cash equivalents		141,112		127,816
Investment securities:
Investment securities available for sale		70,507		67,694
Other investments		5,341		6,948
Total investment securities		75,848		74,642
Mortgage loans held for sale		34,948		27,046
Loans		2,030,261		1,943,525
Less allowance for loan losses		(22,462	)	(16,642	)
Loans, net		2,007,799		1,926,883
Bank owned life insurance		40,281		40,011
Property and equipment, net		58,656		58,478
Deferred income taxes		4,087		4,275
Other assets		9,518		8,044
Total assets	$	2,372,249		2,267,195
LIABILITIES
Deposits	$	2,025,698		1,876,124
Federal Home Loan Bank advances and other borrowings		65,000		110,000
Subordinated debentures		35,917		35,890
Other liabilities		35,159		39,321
Total liabilities		2,161,774		2,061,335
SHAREHOLDERS’ EQUITY
Preferred stock, par value $.01 per share, 10,000,000 shares authorized		-		-
Common stock, par value $.01 per share, 10,000,000 shares authorized, 7,717,582 and 7,672,678 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively		77		77
Nonvested restricted stock		(1,105	)	(803	)
Additional paid-in capital		107,529		106,152
Accumulated other comprehensive income (loss)		410		(298	)
Retained earnings		103,564		100,732
Total shareholders’ equity		210,475		205,860
Total liabilities and shareholders’ equity	$	2,372,249		2,267,195


	For the three months
	ended March 31,
(dollars in thousands, except share data)	2020		2019
Interest income
Loans	$	23,367	20,889
Investment securities		396	549
Federal funds sold and interest-bearing deposits with banks		103	174
Total interest income		23,866	21,612
Interest expense
Deposits		5,174	5,375
Borrowings		594	419
Total interest expense		5,768	5,794
Net interest income		18,098	15,818
Provision for loan losses		6,000	300
Net interest income after provision for loan losses		12,098	15,518
Noninterest income
Mortgage banking income		2,668	1,857
Service fees on deposit accounts		262	265
ATM and debit card income		398	380
Income from bank owned life insurance		270	216
Other income		318	276
Total noninterest income		3,916	2,994
Noninterest expenses
Compensation and benefits		7,871	6,783
Occupancy		1,536	1,339
Outside service and data processing costs		1,192	960
Insurance		320	318
Professional fees		497	439
Marketing		258	260
Other		698	549
Total noninterest expenses		12,372	10,648
Income before income tax expense		3,642	7,864
Income tax expense		810	1,855
Net income available to common shareholders	$	2,832	6,009
Earnings per common share
Basic	$	0.37	0.81
Diluted		0.36	0.78
Weighted average common shares outstanding
Basic		7,678,598	7,459,342
Diluted		7,827,173	7,741,860


	For the three months
	ended March 31,
(dollars in thousands)	2020			2019
Net income	$	2,832		6,009
Other comprehensive income:
Unrealized gain on securities available for sale:
Unrealized holding gain arising during the period, pretax		895		684
Tax expense		(187	)	(143	)
Reclassification of realized gain		-		(4	)
Tax expense		-		1
Other comprehensive income		708		538
Comprehensive income	$	3,540		6,547


												Accumulated
							Nonvested			Additional		other
	Common stock			Preferred stock			restricted			paid-in		comprehensive			Retained
(dollars in thousands, except share data)	Shares	Amount		Shares	Amount		stock			capital		loss			earnings		Total
December 31, 2018	7,466,481		75	-		-		(741	)		102,625		(917	)		72,874		173,916
Net income	-		-	-		-		-			-		-			6,009		6,009
Proceeds from exercise of stock options	28,455		-	-		-		-			322		-			-		322
Issuance of restricted stock	10,700		-	-		-		(347	)		347		-			-		-
Compensation expense related to restricted stock, net of tax	-		-	-		-		95			-		-			-		95
Compensation expense related to stock options, net of tax	-		-	-		-		-			306		-			-		306
Other comprehensive income	-		-	-		-		-			-		538			-		538

March 31, 2019	7,505,636	$	75	-	$	-	$	(993	)	$	103,600	$	(379	)	$	78,883	$	181,186
December 31, 2019	7,672,678		77	-		-		(803	)		106,152		(298	)		100,732		205,860
Net income	-		-	-		-		-			-		-			2,832		2,832
Proceeds from exercise of stock options	35,404		-	-		-		-			741		-			-		741
Issuance of restricted stock	9,500		-	-		-		(406	)		406		-			-		-
Compensation expense related to restricted stock, net of tax	-		-	-		-		104			-		-			-		104
Compensation expense related to stock options, net of tax	-		-	-		-		-			230		-			-		230
Other comprehensive income	-		-	-		-		-			-		708			-		708

March 31, 2020	7,717,582	$	77	-	$	-	$	(1,105	)	$	107,529	$	410		$	103,564	$	210,475


	For the three months ended
				March 31,
(dollars in thousands)	2020			2019
Operating activities
Net income	$	2,832		6,009
Adjustments to reconcile net income to cash provided by (used for) operating activities:
Provision for loan losses		6,000		300
Depreciation and other amortization		549		453
Accretion and amortization of securities discounts and premium, net		116		83
Net change in operating leases		55		447
Compensation expense related to stock options and restricted stock grants		334		401
Gain on sale of loans held for sale		(2,778	)	(1,775	)
Loans originated and held for sale		(95,423	)	(55,178	)
Proceeds from sale of loans held for sale		90,299		56,801
Increase in cash surrender value of bank owned life insurance		(270	)	(216	)
Decrease in deferred tax asset		-		1
Increase in other assets, net		(1,490	)	(400	)
Increase (decrease) in other liabilities		(3,782	)	5,978
Net cash provided by (used for) operating activities		(3,558	)	12,904
Investing activities
Increase (decrease) in cash realized from:
Increase in loans, net		(86,916	)	(56,643	)
Purchase of property and equipment		(1,119	)	(266	)
Purchase of investment securities:
Available for sale		(6,302	)	-
Payments and maturities, calls and repayments of investment securities:
Available for sale		4,269		2,205
Other investments		1,607		812
Net cash used for investing activities		(88,461	)	(53,892	)
Financing activities
Increase (decrease) in cash realized from:
Increase in deposits, net		149,574		110,099
Decrease in Federal Home Loan Bank advances and other borrowings, net		(45,000	)	(25,000	)
Proceeds from the exercise of stock options and warrants		741		322
Net cash provided by financing activities		105,315		85,421
Net increase in cash and cash equivalents		13,296		44,433
Cash and cash equivalents at beginning of the period		127,816		72,873
Cash and cash equivalents at end of the period	$	141,112		117,306
Supplemental information
Cash paid for
Interest	$	7,103		5,570
Income taxes		-		-
Schedule of non-cash transactions
Unrealized gain on securities, net of income taxes		708		541
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		-		15,395


				March 31, 2020
(dollars in thousands)	# Loans	Amount		% of Total Portfolio
Payment deferrals	252	$	208,555	10.3	%
Interest only	170		168,723	8.3	%
Financial difficulty (TDR)	6		2,925	0.1	%
	428	$	380,203	18.7	%


	March 31, 2020
						% of
			% of Total	Total		Committed	Total
	Balance		Loans	Committed		Balance	Modified
(dollars in thousands)	Outstanding		Outstanding	Balance		Outstanding	Balance		% Modified
Religious organizations	$	56,306	2.8%	$	88,422	63.6%	$	1,539	2.7%
Entertainment facilities		4,605	0.2%		9,464	48.7%		255	5.5%
Hotels		82,227	4.1%		104,155	78.9%		6,050	7.4%
Personal care businesses		1,349	0.1%		1,385	97.4%		137	10.2%
Restaurants		48,352	2.4%		53,526	90.3%		3,673	7.6%
Sports facilities		22,229	1.1%		22,882	97.1%		683	3.1%
Travel related businesses		3,328	0.2%		4,085	81.5%		555	16.7%
Private healthcare facilities		36,462	1.8%		41,899	87.0%		12,531	34.4%
Non-essential retail		154,450	7.6%		160,702	96.1%		13,843	9.0%
Total	$	409,308	20.2%	$	486,520	84.1%	$	39,266	9.6%


	March 31, 2020
	Amortized		Gross Unrealized		Fair
(dollars in thousands)	Cost		Gains	Losses	Value
Available for sale
US government agencies	$	500	-	1	499
SBA securities		519	-	18	501
State and political subdivisions		9,385	295	1	9,679
Asset-backed securities		12,929	-	643	12,286
Mortgage-backed securities
FHLMC		10,034	270	4	10,300
FNMA		33,057	702	135	33,624
GNMA		3,565	53	-	3,618
Total mortgage-backed securities		46,656	1,025	139	47,542
Total investment securities available for sale	$	69,989	1,320	802	70,507

	December 31, 2019
	Amortized		Gross Unrealized		Fair
	Cost		Gains	Losses	Value
Available for sale
US government agencies	$	500	-	1	499
SBA securities		550	-	19	531
State and political subdivisions		4,205	3	24	4,184
Asset-backed securities		13,351	-	184	13,167
Mortgage-backed securities
FHLMC		10,609	14	15	10,608
FNMA		35,275	34	169	35,140
GNMA		3,581	5	21	3,565
Total mortgage-backed securities		49,465	53	205	49,313
Total	$	68,071	56	433	67,694


	March 31, 2020
	Less than one year			One to five years		Five to ten years		Over ten years		Total
(dollars in thousands)	Amount		Yield	Amount	Yield	Amount	Yield	Amount	Yield	Amount	Yield
Available for sale
US government agencies	$	-	-	499	1.11%	-	-	-	-	499	1.11%
SBA securities		-	-	-	-	-	-	501	2.39%	501	2.39%
State and political subdivisions		-	-	-	-	972	2.65%	8,707	2.86%	9,679	2.84%
Asset-backed securities		-	-	-	-	1,402	2.22%	10,884	2.45%	12,286	2.43%
Mortgage-backed securities		-	-	3,224	1.80%	8,263	2.05%	36,055	2.34%	47,542	2.25%
Total	$	-	-	3,723	1.71%	10,637	2.13%	56,147	2.44%	70,507	2.36%

	December 31, 2019
	Less than one year			One to five years		Five to ten years		Over ten years		Total
(dollars in thousands)	Amount		Yield	Amount	Yield	Amount	Yield	Amount	Yield	Amount	Yield
Available for sale
US government agencies	$	-	-	499	1.97%	-	-	-	-	499	1.97%
SBA securities		-	-	-	-	-	-	531	2.62%	531	2.62%
State and political subdivisions		-	-	808	2.81%	1,283	2.96%	2,093	2.67%	4,184	2.79%
Asset-backed securities		-	-	-	-	1,493	2.34%	11,674	2.61%	13,167	2.58%
Mortgage-backed securities		-	-	3,368	1.78%	7,638	2.00%	38,307	2.24%	49,313	2.17%
Total	$	-	-	4,675	1.98%	10,414	2.17%	52,605	2.34%	67,694	2.29%


	March 31, 2020
	Less than 12 months					12 months or longer					Total
		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(dollars in thousands)	#	value		losses		#	value		losses		#	value		losses
Available for sale
US government agencies	1	$	499	$	1	-	$	-	$	-	1	$	499	$	1
SBA securities	-		-		-	1		501		18	1		501		18
State and political subdivisions	1		505		1	-		-		-	1		505		1
Asset-backed securities	5		5,489		365	5		6,797		278	10		12,286		643
Mortgage-backed securities
FHLMC	1		258		4	-		-		-	1		258		4
FNMA	-		-		-	4		2,778		135	4		2,778		135
Total	8	$	6,751	$	371	10	$	10,076	$	431	18	$	16,827	$	802

	December 31, 2019
	Less than 12 months					12 months or longer					Total
			Fair		Unrealized		Fair		Unrealized			Fair		Unrealized
(dollars in thousands)	#		value		losses	#	value		losses		#	value		losses
Available for sale
US government agencies	1	$	499	$	1	-	$	-	$	-	1	$	499	$	1
SBA securities	-		-		-	1		531		19	1		531		19
State and political subdivisions	2		2,093		24	-		-		-	2		2,093		24
Asset-backed securities	5		5,921		68	5		7,246		116	10		13,167		184
Mortgage-backed securities
FHLMC	4		3,842		2	4		2,323		13	8		6,165		15
FNMA	14		15,500		67	11		9,462		102	25		24,962		169
GNMA	2		2,240		6	1		734		15	3		2,974		21
Total	28	$	30,095	$	168	22	$	20,296	$	265	50	$	50,391	$	433


	March 31, 2020				December 31, 2019
(dollars in thousands)	Amount			% of Total	Amount			% of Total
Commercial
Owner occupied RE	$	422,124		20.8%	$	407,851		21.0%
Non-owner occupied RE		534,846		26.3%		501,878		25.8%
Construction		74,758		3.7%		80,486		4.1%
Business		317,702		15.7%		308,123		15.9%
Total commercial loans		1,349,430		66.5%		1,298,338		66.8%
Consumer
Real estate		427,697		21.1%		398,245		20.5%
Home equity		183,099		9.0%		179,738		9.3%
Construction		45,240		2.2%		41,471		2.1%
Other		24,795		1.2%		25,733		1.3%
Total consumer loans		680,831		33.5%		645,187		33.2%
Total gross loans, net of deferred fees		2,030,261		100.0%		1,943,525		100.0%
Less—allowance for loan losses		(22,462	)			(16,642	)
Total loans, net	$	2,007,799			$	1,926,883


	March 31, 2020
			After one
	One year		but within	After five
(dollars in thousands)	or less		five years	years	Total
Commercial
Owner occupied RE	$	35,613	143,626	242,885		422,124
Non-owner occupied RE		53,806	276,462	204,578		534,846
Construction		12,178	28,280	34,300		74,758
Business		86,055	151,281	80,366		317,702
Total commercial loans		187,652	599,649	562,129		1,349,430
Consumer
Real estate		15,969	74,920	336,808		427,697
Home equity		8,207	26,334	148,558		183,099
Construction		14,698	1,121	29,421		45,240
Other		5,696	14,763	4,336		24,795
Total consumer loans		44,570	117,138	519,123		680,831
Total gross loans, net of deferred fees	$	232,222	716,787	1,081,252		2,030,261
Loans maturing after one year with:
Fixed interest rates					$	1,425,015
Floating interest rates						373,024


	December 31, 2019
			After one
	One year		but within	After five
(dollars in thousands)	or less		five years	years	Total
Commercial
Owner occupied RE	$	40,476	147,945	219,430		407,851
Non-owner occupied RE		55,187	267,879	178,812		501,878
Construction		31,035	19,278	30,173		80,486
Business		84,452	146,051	77,620		308,123
Total commercial loans		211,150	581,153	506,035		1,298,338
Consumer
Real estate		16,663	82,445	299,137		398,245
Home equity		9,921	25,828	143,989		179,738
Construction		13,405	1,222	26,844		41,471
Other		6,422	15,022	4,289		25,733
Total consumer		46,411	124,517	474,259		645,187
Total gross loan, net of deferred fees	$	257,561	705,670	980,294		1,943,525
Loans maturing after one year with:
Fixed interest rates					$	1,310,744
Floating interest rates						375,220

●	Special mention—A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

●	Substandard—A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

●	Doubtful—A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.


	March 31, 2020
	Owner		Non-owner
(dollars in thousands)	occupied RE		occupied RE	Construction	Business	Total
Current	$	419,978	531,119	74,758	315,562	1,341,417
30-59 days past due		1,595	3,275	-	1,909	6,779
60-89 days past due		-	264	-	-	264
Greater than 90 Days		551	188	-	231	970
	$	422,124	534,846	74,758	317,702	1,349,430

	December 31, 2019
	Owner		Non-owner
	occupied RE		occupied RE	Construction	Business	Total
Current	$	406,594	501,676	80,486	307,710	1,296,466
30-59 days past due		706	151	-	178	1,035
60-89 days past due		-	-	-	-	-
Greater than 90 Days		551	51	-	235	837
	$	407,851	501,878	80,486	308,123	1,298,338


	March 31, 2020
(dollars in thousands)	Real estate		Home equity	Construction	Other	Total
Current	$	426,127	180,486	45,240	24,790	676,643
30-59 days past due		559	1,527	-	5	2,091
60-89 days past due		-	886	-	-	886
Greater than 90 Days		1,011	200	-	-	1,211
	$	427,697	183,099	45,240	24,795	680,831

	December 31, 2019
(dollars in thousands)	Real estate		Home equity	Construction	Other	Total
Current	$	396,445	179,051	41,471	25,650	642,617
30-59 days past due		799	369	-	83	1,251
60-89 days past due		-	118	-	-	118
Greater than 90 Days		1,001	200	-	-	1,201
	$	398,245	179,738	41,471	25,733	645,187


			March 31, 2020
			Recorded investment
				Impaired loans	Impaired loans
	Unpaid			with no related	with related	Related
	Principal		Impaired	allowance for	allowance for	allowance for
(dollars in thousands)	Balance		loans	loan losses	loan losses	loan losses
Commercial
Owner occupied RE	$	2,787	2,722	2,268	454	76
Non-owner occupied RE		7,586	7,085	5,485	1,600	486
Construction		-	-	-	-	-
Business		2,628	2,539	540	1,999	824
Total commercial		13,001	12,346	8,293	4,053	1,386
Consumer
Real estate		3,036	3,030	1,966	1,064	362
Home equity		2,403	2,352	2,174	178	65
Construction		-	-	-	-	-
Other		144	144	-	144	15
Total consumer		5,583	5,526	4,140	1,386	442
Total	$	18,584	17,872	12,433	5,439	1,828


	Three months ended			Three months ended		Year ended
	March 31, 2020			March 31, 2019		December 31, 2019
	Average		Recognized	Average	Recognized	Average	Recognized
	recorded		interest	recorded	interest	recorded	interest
(dollars in thousands)	investment		income	investment	income	investment	income
Commercial
Owner occupied RE	$	2,725	18	2,757	30	2,739	128
Non-owner occupied RE		7,108	62	2,977	49	4,161	255
Construction		-	-	-	-	-	-
Business		2,553	28	2,567	40	1,582	79
Total commercial		12,386	108	8,301	119	8,482	462
Consumer
Real estate		3,036	26	2,761	25	2,771	131
Home equity		2,355	12	1,677	30	853	42
Construction		-	-	-	-	-	-
Other		145	1	157	1	153	5
Total consumer		5,536	39	4,595	56	3,777	178
Total	$	17,922	147	12,896	175	12,259	640


	Three months ended March 31, 2020
	Commercial						Consumer
	Owner		Non-owner
	occupied		occupied				Real	Home
(dollars in thousands)	RE		RE		Construction	Business	Estate	equity	Construction	Other		Total
Balance, beginning of period	$	2,835	4,304		541	3,692	3,278	1,447	268	277		16,642
Provision for loan losses		1,170	1,711		153	1,006	1,326	381	147	106		6,000
Loan charge-offs		-	(221	)	-	-	-	-	-	(45	)	(266	)
Loan recoveries		-	-		-	16	2	68	-	-		86
Net loan charge-offs		-	(221	)	-	16	2	68	-	(45	)	(180	)
Balance, end of period	$	4,005	5,794		694	4,714	4,606	1,896	415	338		22,462
Net charge-offs to average loans (annualized)												0.04	%
Allowance for loan losses to gross loans												1.11	%
Allowance for loan losses to nonperforming loans												226.14	%

	Three months ended March 31, 2019
	Commercial						Consumer
	Owner		Non-owner
	occupied		occupied				Real		Home
(dollars in thousands)	RE		RE	Construction		Business	Estate		equity	Construction	Other		Total
Balance, beginning of period	$	2,726	3,811	615		3,616	3,081		1,348	275	290		15,762
Provision for loan losses		57	74	(43	)	171	(56	)	61	7	29		300
Loan charge-offs		-	-	-		-	-		-	-	(41	)	(41	)
Loan recoveries		-	1	-		9	16		1	-	3		30
Net loan charge-offs		-	1	-		9	16		1	-	(38	)	(11	)
Balance, end of period	$	2,783	3,886	572		3,796	3,041		1,410	282	281		16,051
Net charge-offs to average loans (annualized)													0.00	%
Allowance for loan losses to gross loans													0.93	%
Allowance for loan losses to nonperforming loans													265.35	%


	March 31, 2020
	Allowance for loan losses				Recorded investment in loans
(dollars in thousands)	Commercial		Consumer	Total	Commercial	Consumer	Total
Individually evaluated	$	1,386	442	1,828	12,346	5,526	17,872
Collectively evaluated		13,822	6,812	20,634	1,337,084	675,305	2,012,389
Total	$	15,208	7,254	22,462	1,349,430	680,831	2,030,261

	December 31, 2019
	Allowance for loan losses				Recorded investment in loans
(dollars in thousands)	Commercial		Consumer	Total	Commercial	Consumer	Total
Individually evaluated	$	992	446	1,438	8,308	3,705	12,013
Collectively evaluated		10,380	4,824	15,204	1,290,030	641,482	1,931,512
Total	$	11,372	5,270	16,642	1,298,338	645,187	1,943,525


				For the three months ended March 31, 2020
						Pre-		Post-
						modification		modification
	Renewals	Reduced	Converted	Maturity	Total	outstanding		outstanding
	deemed a	or deferred	to interest	date	Number	recorded		recorded
(dollars in thousands)	concession	payments	only	extensions	of loans	investment		investment
Commercial
Business	1				1	$	1,037	$	1,037
Consumer
Real estate	1				1		322		322
Home equity	3	-	-	-	3		1,522		1,522
Total loans	5	-	-	-	5	$	2,881	$	2,881


	March 31, 2020
				Fair Value
(dollars in thousands)	Notional		Balance Sheet Location	Asset/(Liability)
Mortgage loan interest rate lock commitments	$	109,337	Other assets	$	1,649
MBS forward sales commitments		63,000	Other liabilities		(1,087	)
Total derivative financial instruments	$	172,337		$	562

	December 31, 2019
				Fair Value
(dollars in thousands)	Notional		Balance Sheet Location	Asset/(Liability)
Mortgage loan interest rate lock commitments	$	26,446	Other assets	$	344
MBS forward sales commitments		20,500	Other liabilities		(39	)
Total derivative financial instruments	$	46,946		$	305


	March 31, 2020
(dollars in thousands)	Level 1		Level 2	Level 3	Total
Assets
Securities available for sale
US government agencies	$	-	499	-	499
SBA securities		-	501	-	501
State and political subdivisions		-	9,679	-	9,679
Asset-backed securities		-	12,286	-	12,286
Mortgage-backed securities		-	47,542	-	47,542
Mortgage loans held for sale		-	34,948	-	34,948
Mortgage loan interest rate lock commitments		-	1,649	-	1,649
Total assets measured at fair value on a recurring basis	$	-	107,104	-	107,104

Liabilities
MBS forward sales commitments	$	-	1,087	-	1,087
Total liabilities measured at fair value on a recurring basis	$	-	1,087	-	1,087

	December 31, 2019
(dollars in thousands)	Level 1		Level 2	Level 3	Total
Assets
Securities available for sale:
US government agencies	$	-	499	-	499
SBA securities		-	531	-	531
State and political subdivisions		-	4,184	-	4,184
Asset-backed securities		-	13,167	-	13,167
Mortgage-backed securities		-	49,313	-	49,313
Mortgage loans held for sale		-	27,046	-	27,046
Mortgage loan interest rate lock commitments		-	344	-	344
Total assets measured at fair value on a recurring basis	$	-	95,084	-	95,084


Liabilities
MBS forward sales commitments	$	-	39	-	39
Total liabilities measured at fair value on a recurring basis	$	-	39	-	39


	As of March 31, 2020
(dollars in thousands)	Level 1		Level 2	Level 3	Total
Assets
Impaired loans	$	-	10,552	5,492	16,044
Total assets measured at fair value on a nonrecurring basis	$	-	10,552	5,492	16,044

	As of December 31, 2019
(dollars in thousands)	Level 1		Level 2	Level 3	Total
Assets
Impaired loans	$	-	5,634	4,941	10,575
Total assets measured at fair value on a nonrecurring basis	$	-	5,634	4,941	10,575


	March 31, 2020
	Carrying		Fair
(dollars in thousands)	Amount		Value	Level 1	Level 2	Level 3
Financial Assets:
Other investments, at cost	$	5,341	5,341	-	-	5,341
Loans¹		1,989,927	1,942,206	-	-	1,942,206
Financial Liabilities:
Deposits		2,025,698	1,947,258	-	1,947,258	-
FHLB and other borrowings		65,000	65,021	-	65,021	-
Subordinated debentures		35,917	31,989	-	31,989	-

	December 31, 2019
		Carrying	Fair
(dollars in thousands)		Amount	Value	Level 1	Level 2	Level 3
Financial Assets:
Other investments, at cost	$	6,948	6,948	-	-	6,948
Loans¹		1,914,870	1,900,216	-	-	1,900,216
Financial Liabilities:
Deposits		1,876,124	1,772,121	-	1,772,121	-
FHLB and other borrowings		110,000	109,737	-	109,737	-
Subordinated debentures		35,890	33,250	-	33,250	-


(dollars in thousands)	Operating Leases
2020	$	1,581
2021		2,152
2022		1,400
2023		1,273
2024		1,305
Thereafter		17,405
Total undiscounted lease payments		25,116
Discount effect of cash flows		5,407
Total lease liability	$	19,709


	Three months ended March 31,
(dollars in thousands, except share data)		2020	2019
Numerator:
Net income available to common shareholders	$	2,832	6,009
Denominator:
Weighted-average common shares outstanding – basic	7,678,598		7,459,342
Common stock equivalents	148,575		282,518
Weighted-average common shares outstanding – diluted	7,827,173		7,741,860
Earnings per common share:
Basic	$	0.37	0.81
Diluted	$	0.36	0.78


	Three months ended March 31, 2020						Three months ended March 31, 2019
(dollars in thousands)	Commercial and Retail Banking		Mortgage Banking	Corporate	Elimin- ations	Consol- idated	Commercial and Retail Banking		Mortgage Banking	Corporate		Elimin- ation		Consol- idated
Interest income	$	23,670	196	4	(4)	23,866	$	21,519	93	3		(3)		21,612
Interest expense		5,333	-	439	(4)	5,768		5,631	-	166		(3)		5,794
Net interest income (loss)		18,337	196	(435)	-	18,098		15,888	93	(163	)	-		15,818
Provision for loan losses		6,000	-	-	-	6,000		300	-	-		-		300
Noninterest income		1,248	2,668	-	-	3,916		1,137	1,857	-		-		2,994
Noninterest expense		10,499	1,807	66	-	12,372		9,465	1,123	60		-		10,648
Net income (loss) before taxes		3,086	1,057	(501)	-	3,642		7,260	827	(223	)	-		7,864
Income tax provision (benefit)		693	222	(105)	-	810		1,728	174	(47	)	-		1,855
Net income (loss)	$	2,393	835	(396)	-	2,832	$	5,532	653	(176	)	-		6,009
Total assets	$	2,335,160	36,577	246,424	(245,912)	2,372,249	$	2,002,957	11,003	194,671		(194,205	)	2,014,426

●	Restrictions or conditions imposed by our regulators on our operations;
●	Increases in competitive pressure in the banking and financial services industries;
●	Changes in access to funding or increased regulatory requirements with regard to funding;

●	Changes in deposit flows;
●	Credit losses as a result of declining real estate values, increasing interest rates, increasing unemployment, changes in payment behavior or other factors;
●	Credit losses due to loan concentration;
●	Changes in the amount of our loan portfolio collateralized by real estate and weaknesses in the real estate market;
●	Our ability to successfully execute our business strategy;
●	Our ability to attract and retain key personnel;
●	The success and costs of our expansion into the Greensboro, North Carolina, Raleigh, North Carolina and Atlanta, Georgia markets and into potential new markets;
●	Changes in the interest rate environment which could reduce anticipated or actual margins;
●	Changes in political conditions or the legislative or regulatory environment, including governmental initiatives affecting the financial services industry, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act;
●	Changes in economic conditions in the United States and the strength of the local economies in which we conduct our operations, including, but not limited to, due to the negative impacts and disruptions resulting from the recent outbreak of COVID-19 on the economies and communities we serve, which may have an adverse impact on our business, operations and performance, and could have a negative impact on our credit portfolio, share price, borrowers, and on the economy as a whole, both domestically and globally;
●	Changes occurring in business conditions and inflation;
●	Increased cybersecurity risk, including potential business disruptions or financial losses;
●	Changes in technology;
●	The adequacy of the level of our allowance for loan losses and the amount of loan loss provisions required in future periods;
●	Examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for loan losses or write-down assets;
●	Changes in monetary and tax policies;
●	The rate of delinquencies and amounts of loans charged-off;
●	The rate of loan growth in recent years and the lack of seasoning of a portion of our loan portfolio;
●	Our ability to maintain appropriate levels of capital and to comply with our capital ratio requirements;
●	Adverse changes in asset quality and resulting credit risk-related losses and expenses;
●	Changes in accounting policies, practices or guidelines;
●	Adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed;
●	The potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, including the potential effects of coronavirus on trade (including supply chains and export levels, travel, employee activity and other economic activities), war or terrorist activities, essential utility outages or trade disputes and related tariffs; and
●	Other risks and uncertainties detailed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, in Part II, Item 1A of this Quarterly Report on Form 10-Q, and from time to time in our other filings with the SEC.

Average Balances, Income and Expenses, Yields and Rates
	For the Three Months Ended March 31,
						2020						2019
		Average		Income/		Yield/		Average		Income/		Yield/
(dollars in thousands)		Balance		Expense		Rate⁽¹⁾		Balance		Expense		Rate⁽¹⁾
Interest-earning assets
Federal funds sold and interest-bearing
deposits with banks		$	46,101	$	103	0.90	%	$	30,656	$	174	2.30	%
Investment securities, taxable			66,640		381	2.30	%		71,876		508	2.87	%
Investment securities, nontaxable⁽²⁾			3,815		19	2.05	%		5,427		53	3.98	%
Loans⁽³⁾			2,003,554		23,367	4.69	%		1,715,570		20,889	4.94	%
Total interest-earning assets			2,120,110		23,870	4.53	%		1,823,529		21,624	4.81	%
Noninterest-earning assets			111,338						86,431
Total assets		$	2,231,448					$	1,909,960
Interest-bearing liabilities
NOW accounts		$	227,688		168	0.30	%	$	186,070		86	0.19	%
Savings & money market			956,588		3,369	1.42	%		780,115		3,300	1.72	%
Time deposits			329,664		1,637	2.00	%		371,694		1,989	2.17	%
Total interest-bearing deposits			1,513,940		5,174	1.37	%		1,337,879		5,375	1.63	%
FHLB advances and other borrowings			43,470		158	1.46	%		31,302		256	3.32	%
Subordinated debentures			35,900		436	4.88	%		13,403		163	4.93	%
Total interest-bearing liabilities			1,593,310		5,768	1.46	%		1,382,584		5,794	1.70	%
Noninterest-bearing liabilities			427,992						349,988
Shareholders’ equity			210,146						177,388
Total liabilities and shareholders’ equity		$	2,231,448					$	1,909,960
Net interest spread						3.07	%					3.11	%
Net interest income (tax equivalent) / margin				$	18,102	3.43	%			$	15,830	3.52	%
Less: tax-equivalent adjustment⁽²⁾					4						12
Net interest income				$	18,098					$	15,818

(1)	Annualized for the three month period.
(2)	The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis.
(3)	Includes mortgage loans held for sale.

													Three Months Ended
	March 31, 2020 vs. 2019												March 31, 2019 vs. 2018
	Increase (Decrease) Due to												Increase (Decrease) Due to
						Rate/									Rate/
(dollars in thousands)	Volume			Rate		Volume		Total		Volume			Rate		Volume			Total
Interest income
Loans	$	3,507		(881	)	(148	)	2,478		$	3,110		1,024			192		4,326
Investment securities		(49	)	(114	)	10		(153	)		69		94			18		181
Federal funds sold and interest-bearing
deposits with banks		88		(106	)	(53	)	(71	)		(124	)	103			(52	)	(73	)
Total interest income		3,546		(1,101	)	(191	)	2,254			3,055		1,221			158		4,434
Interest expense
Deposits		790		(864	)	(127	)	(201	)		439		1,894			304		2,637
FHLB advances and other borrowings		100		(142	)	(56	)	(98	)		(32	)	6			(1	)	(27	)
Subordinated debentures		273		-		-		273			-		48			-		48
Total interest expense		1,163		(1,006	)	(183	)	(26	)		407		1,948			303		2,658
Net interest income	$	2,383		(95	)	(8	)	2,280		$	2,648		(727	)		(145	)	1,776