CODORUS VALLEY BANCORP, INC. Management's discussion and analysis of the significant changes in the results
of operations, capital resources and liquidity presented in the accompanying
consolidated financial statements for
Forward-looking Statements
Management of the Corporation has made forward-looking statements in this Form 10-Q. These forward-looking statements may be subject to risks and uncertainties. Forward-looking statements include information concerning possible or assumed future results of operations of the Corporation and its subsidiaries. When words such as "believes," "expects," "anticipates" or similar expressions occur in the Form 10-Q, management is making forward-looking statements.
Note that many factors, some of which are discussed elsewhere in this report and in the documents that are incorporated by reference, could affect the future financial results of the Corporation and its subsidiaries, both individually and collectively, and could cause those results to differ materially from those expressed in the forward-looking statements contained or incorporated by reference in this Form 10-Q. These factors include, but are not limited to, the following:
?Operating, legal and regulatory risks;
?Credit risk, including an increase in nonperforming assets requiring loss provisions and the incurrence of carrying costs related to nonperforming assets;
?Interest rate fluctuations which could increase our cost of funds or decrease our yield on earning assets and therefore reduce our net interest income;
?Declines in the market value of investment securities considered to be other-than-temporary;
?Unavailability of capital when needed, or availability at less than favorable terms;
?Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, which may adversely affect the Corporation's operations, net income or reputation;
?Inability to achieve merger-related synergies, and difficulties in integrating the business and operations of acquired institutions;
?A prolonged economic downturn or excessive inflation;
?Political and competitive forces affecting banking, securities, asset management and credit services businesses;
?Occurrence of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, or pandemics;
?The effects of and changes in the rate of
?Future legislative or administrative changes to
?Future changes in federal or state tax laws or tax rates;
?Enacted financial reform legislation, e.g., Dodd-Frank Wall Street Reform and Consumer Protection Act, may have a significant impact on the Corporation's business and results of operations;
?The risk that management's analyses of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful; and
?Impact of COVID-19 pandemic.
COVID-19
Higher vaccination rates and a continued decline in COVID-19 cases in
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Associates
The first group of associates working remotely returned to the office on a full
or part-time basis in
Re-Opening
At the time of this filing, all Financial Centers are operating with regular
lobby and drive thru hours. All Retirement Community Office lobbies are open.
Three Loan Production Offices (
Client Hardship
The Corporation undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this report.
Critical Accounting Policies
The Corporation's critical accounting policies, as summarized in Note 1-Summary
of Significant Accounting Policies, include those related to the allowance for
loan losses and the fair value of its available-for-sale securities portfolio,
which require management to make significant judgments, estimates and
assumptions that have a material impact on the carrying value of the respective
assets and liabilities. For this Form 10-Q, there were no material changes made
to the Corporation's critical accounting policies, which are more fully
disclosed in Item 7 of the Corporation's previously filed Annual Report on Form
10-K for the year ended
?
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Three Months Ended
The schedule below presents selected performance metrics for the second quarter
of both 2021 and 2020.
Three months ended
June 30,
2021 2020
Basic earnings per share $ 0.33 $ 0.31
Diluted earnings per share $ 0.33 $ 0.31
Cash dividend payout ratio 39.12 % 51.22 %
Return on average assets 0.58 % 0.59 %
Return on average equity 6.56 % 6.37 %
Net interest margin (tax equivalent basis) 2.80 % 3.07 %
Net overhead ratio 1.85 % 1.68 %
Efficiency ratio 74.81 % 65.52 %
Average equity to average assets 8.88 % 9.30 %
The Corporation's net income (earnings) was
A more detailed analysis of the factors and trends affecting the Corporation's earnings and financial position follows.
INCOME STATEMENT ANALYSIS
Net Interest Income
Unless otherwise noted, this section discusses interest income and interest expense amounts as reported in the Consolidated Statements of Income, which are not presented on a tax equivalent basis.
Net interest income for the quarter ended
The Corporation's net interest margin, computed as interest income (tax-equivalent basis) annualized as a percentage of average interest earning assets, was 2.80 percent for the second quarter 2021 compared to the 3.07 percent for the second quarter 2020. The net interest margin contraction was a result of lower interest rates on loans and higher volume and rate on long-term debt, partially offset by lower rates on interest bearing demand and time deposits.
Total interest income for the second quarter 2021 totaled
Interest and dividend income on investments decreased
Interest income on loans decreased
Total interest expense for the second quarter 2021 was
Interest expense on deposits decreased
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For the second quarter 2021 interest expense on borrowings (long-term debt and
subordinated debentures) increased
Table 1-Average Balances and Interest Rates (tax equivalent basis)
Three months ended June 30,
2021 2020
Average Yield/ Average Yield/
(dollars in thousands) Balance Interest Rate Balance Interest Rate
Assets Interest bearing deposits with banks$ 383,440 $ 105 0.11 %$ 194,820 $ 48 0.10 % Investment securities: Taxable 170,961 813 1.91 143,861 784 2.19 Tax-exempt 20,600 108 2.10 21,304 157 2.96 Total investment securities 191,561 921 1.93 165,165 941 2.29 Loans: Taxable (1) 1,564,672 16,419 4.21 1,590,244 17,800 4.50 Tax-exempt 9,078 91 4.02 10,103 100 3.98 Total loans 1,573,750 16,510 4.21 1,600,347 17,900 4.50 Total earning assets 2,148,751 17,536 3.27 1,960,332 18,889 3.88 Other assets (2) 103,034 97,777 Total assets$ 2,251,785 $ 2,058,109 Liabilities and Shareholders' Equity Deposits: Interest bearing demand$ 836,011 $ 426 0.20 %$ 747,550 $ 654 0.35 % Savings 131,528 17 0.05 97,506 15 0.06 Time 518,325 1,506 1.17 555,683 2,832 2.05 Total interest bearing deposits 1,485,864 1,949 0.53 1,400,739 3,501 1.01 Short-term borrowings 10,617 10 0.38 8,234 11 0.54 Long-term debt 71,249 623 3.51 66,406 426 2.58 Total interest bearing liabilities 1,567,730 2,582 0.66 1,475,379 3,938 1.07 Noninterest bearing deposits 470,530 378,549 Other liabilities 13,529 12,684 Shareholders' equity 199,996 191,497 Total liabilities and shareholders' equity$ 2,251,785 $ 2,058,109 Net interest income (tax equivalent basis)$ 14,954 $ 14,951 Net interest margin (3) 2.80 % 3.07 % Tax equivalent adjustment (40) (51) Net interest income$ 14,914 $ 14,900
(1)Average balance includes average nonaccrual loans of
Interest includes net loan fees of
(2)Average balance includes average bank owned life insurance and foreclosed real estate.
(3)Net interest income (tax equivalent basis) annualized as a percentage of average earning assets.
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Table 2-Rate/Volume Analysis of Changes in Net Interest Income (tax equivalent
basis)
Three months ended
June 30,
2021 vs. 2020
Increase (decrease) due to change in*
(dollars in thousands) Volume Rate Net
Interest Income
Interest bearing deposits with banks $ 47 $ 10 $ 57
Investment securities:
Taxable 247 (218) 29
Tax-exempt (4) (45) (49)
Loans:
Taxable 345 (1,726) (1,381)
Tax-exempt (10) 1 (9)
Total interest income 625 (1,978) (1,353)
Interest Expense
Deposits:
Interest bearing demand 79 (307) (228)
Savings 5 (3) 2
Time (190) (1,136) (1,326)
Short-term borrowings 3 (4) (1)
Long-term debt 52 145 197
Total interest expense (51) (1,305) (1,356)
Net interest income (tax equivalent basis)
*Changes which are due to both volume and rate are allocated in proportion to their relationship to the amount of change attributed directly to volume or rate.
Provision for Loan Losses
The provision for loan losses is an expense charged to earnings to cover the
estimated losses attributable to uncollected loans. The provision reflects
management's judgment of an appropriate level for the allowance for loan losses.
Provision for loan losses for the second quarter 2021 was
More information about the allowance for loan losses can be found in this report under the caption Allowance for Loan Losses on page 54.
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Noninterest Income
The following table presents the components of total noninterest income for the second quarter 2021, compared to the second quarter 2020.
Table 3 - Noninterest income
Three months ended Change
June 30, Increase (Decrease)
(dollars in thousands) 2021 2020 $ %
Trust and investment services
fees $ 1,143 $ 946 $ 197 21 %
Income from mutual fund, annuity
and insurance sales 344 249 95 38
Service charges on deposit
accounts 1,319 975 344 35
Income from bank owned life
insurance 427 279 148 53
Other income 359 482 (123) (26)
Gain on sales of loans held for
sale 933 554 379 68
Loss on write down of assets
held for sale (1,174) 0 (1,174) *nm
Gain on sales of securities 0 50 (50) (100)
Total noninterest income $ 3,351 $ 3,535 $ (184) (5) %
*nm - not meaningful
The discussion that follows addresses changes in selected categories of noninterest income.
Trust and investment services fees-The
Income from mutual fund, annuity and insurance sales-The
Service charges on deposit accounts-The
Income from bank owned life insurance-The
Other income-The
Gain on sales of loans held for sale-The
Loss on write down of assets held for sale-The
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Noninterest Expense
The following table presents the components of total noninterest expense for the second quarter 2021, compared to the second quarter 2020.
Table 4 - Noninterest
expense
Three months ended Change
June 30, Increase (Decrease)
(dollars in thousands) 2021 2020 $ %
Personnel $ 8,268 $ 7,196 $ 1,072 15 %
Occupancy of premises, net 856 865 (9) (1)
Furniture and equipment 793 841 (48) (6)
Professional and legal 253 245 8 3
Marketing 438 311 127 41
FDIC insurance 192 172 20 12
Debit card processing 397 284 113 40
Charitable donations 750 93 657 706
External data processing 858 704 154 22
Gain on foreclosed real
estate, including recovery
of losses 0 (193) 193 100
Impaired loan carrying costs 87 190 (103) (54)
Other 888 1,422 (534) (38)
Total noninterest expense
The discussion that follows addresses changes in selected categories of noninterest expense.
Personnel-The
Marketing-The
Debit card processing-The
Charitable donations-The
External data processing-The
Gain on foreclosed real estate, including recovery of losses-The
Impaired loan carrying costs-The
Other-The
Provision for Income Taxes
The provision for income taxes for the second quarter 2021 was
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Six Months Ended
The Corporation's net income (earnings) was
The schedule below presents selected performance metrics for the first six
months of both 2021 and 2020.
Six months ended
June 30,
2021 2020
Basic earnings per share $ 0.73 $ 0.01
Diluted earnings per share $ 0.73 $ 0.01
Cash dividend payout ratio 35.67 % 5,119.67 %
Return on average assets 0.65 % 0.01 %
Return on average equity 7.25 % 0.06 %Net interest margin (tax equivalent basis) 2.91 % 3.25 % Net overhead ratio
1.77 % 1.88 %
Efficiency ratio 71.45 % 68.00 %
Average equity to average assets 8.93 % 9.75 %
A more detailed analysis of the factors and trends affecting the Corporation's earnings and financial position follows.
INCOME STATEMENT ANALYSIS
Net Interest Income
Net interest income for the six months ended
The Corporation's net interest margin, computed as interest income (tax-equivalent basis) annualized as a percentage of average interest earning assets, was 2.91 percent for the first six months of 2021, representing a decrease compared to the 3.25 percent net interest margin for the first six months of 2020. The net interest margin contraction was a result of lower interest rates on loans and higher volume and rate on long-term debt, partially offset by lower rates on interest bearing demand and time deposits and volume of commercial loans.
Total interest income for the first six months of 2021 totaled
Interest income on loans decreased
Investment income for the first six months of 2021 decreased
Total interest expense for the first six months of 2021 was
Interest expense on deposits decreased
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2021 was 0.57 percent, a decrease from the average rate of 1.14 percent paid on
interest-bearing deposits during the first six months of 2020. Also, the
Corporation experienced favorable growth in noninterest-bearing deposits, with
the average volume for the first six months of 2021 increasing to
Interest expense on borrowings for the first six months of 2021 increased 33
percent compared to the first six months of 2020, due to the issuance of
subordinated debt in
Table 5-Average Balances and Interest Rates (tax equivalent
basis)
Six months ended June 30,
2021 2020
Average Yield/ Average Yield/(dollars in thousands) Balance Interest Rate Balance Interest Rate
Assets Interest bearing deposits with banks$ 354,477 $ 186 0.11 %$ 163,666 $ 440 0.54 % Investment securities: Taxable 163,224 1,421 1.76 141,878 1,676 2.38 Tax-exempt 20,014 226 2.28 22,442 332 2.97 Total investment securities 183,238 1,647 1.81 164,320 2,008 2.46 Loans: Taxable (1) 1,566,236 33,934 4.37 1,541,876 36,468 4.76 Tax-exempt 9,486 188 4.00 10,965 221 4.05 Total loans 1,575,722 34,122 4.37 1,552,841 36,689 4.75 Total earning assets 2,113,437 35,955 3.43 1,880,827 39,137 4.18 Other assets (2) 105,481 97,972 Total assets$ 2,218,918 $ 1,978,799 Liabilities and Shareholders' Equity Deposits: Interest bearing demand$ 825,096 $ 856 0.21 %$ 721,070 $ 1,951 0.54 % Savings 124,616 31 0.05 92,527 35 0.08 Time 523,865 3,282 1.26 553,009 5,791 2.11 Total interest bearing deposits 1,473,577 4,169 0.57 1,366,606 7,777 1.14 Short-term borrowings 9,184 18 0.40 7,637 20 0.53 Long-term debt 75,430 1,293 3.46 75,538 963 2.56 Total interest bearing liabilities 1,558,191 5,480 0.71 1,449,781 8,760 1.22 Noninterest bearing deposits 447,259 322,962 Other liabilities 15,427 13,172 Shareholders' equity 198,041 192,884 Total liabilities and shareholders' equity$ 2,218,918 $ 1,978,799 Net interest income (tax equivalent basis)$ 30,475 $ 30,377 Net interest margin (3) 2.91 % 3.25 % Tax equivalent adjustment (84) (110) Net interest income$ 30,391 $ 30,267
(1)Average balance includes average nonaccrual loans of
Interest includes net loan fees of
(2)Average balance includes average bank owned life insurance and foreclosed real estate.
(3)Net interest income (tax equivalent basis) annualized as a percentage of average interest earning assets.
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Table 6-Rate/Volume Analysis of Changes in Net Interest Income (tax equivalent
basis)
Six months ended
June 30,
2021 vs. 2020
Increase (decrease) due to change in*
(dollars in thousands) Volume Rate Net
Interest Income
Interest bearing deposits with banks $ 513 $ (767) $ (254)
Investment securities:
Taxable 356 (611) (255)
Tax-exempt (35) (71) (106)
Loans:
Taxable 2,950 (5,484) (2,534)
Tax-exempt (30) (3) (33)
Total interest income 3,754 (6,936) (3,182)
Interest Expense
Deposits:
Interest bearing demand 240 (1,335) (1,095)
Savings 12 (16) (4)
Time (305) (2,204) (2,509)
Short-term borrowings 4 (6) (2)
Long-term debt (377) 707 330
Total interest expense (426) (2,854) (3,280)
Net interest income (tax equivalent basis)
*Changes which are due to both volume and rate are allocated in proportion to their relationship to the amount of change attributed directly to volume or rate.
Provision for Loan Losses
For the first six months of 2021, the provision for loan losses was
More information about the allowance for loan losses can be found in this report under the caption Allowance for Loan Losses on page 54.
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Noninterest Income
The following table presents the components of total noninterest income for the first six months of 2021, compared to the first six months of 2020.
Table 7 - Noninterest income
Six months ended Change
June 30, Increase (Decrease)
(dollars in thousands) 2021 2020 $ %
Trust and investment services
fees $ 2,195 $ 1,940 $ 255 13 %
Income from mutual fund,
annuity and insurance sales 644 510 134 26
Service charges on deposit
accounts 2,540 2,105 435 21
Income from bank owned life
insurance 697 565 132 23
Other income 922 921 1 0
Gain on sales of loans held
for sale 1,983 852 1,131 133
Loss on write down of assets
held for sale (1,174) 0 (1,174) *nm
(Loss) gain on sales of
securities (23) 65 (88) (135)
Total noninterest income $ 7,784 $ 6,958 $ 826 12 %
*nm - not meaningful
The discussion that follows addresses changes in selected categories of noninterest income.
Income from mutual fund, annuity and insurance sales-The
Service charges on deposit accounts-The
Income from bank owned life insurance-The
Gain on sales of loans held for sale-The
Loss on write down of assets held for sale-The
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Noninterest Expense
The following table presents the components of total noninterest expense for the first six months of 2021, compared to the first six months of 2020.
Table 8 - Noninterest expense
Six months ended Change
June 30, Increase (Decrease)
(dollars in thousands) 2021 2020 $ %
Personnel $ 16,696 $ 15,001 $ 1,695 11 %
Occupancy of premises, net 1,829 1,791 38 2
Furniture and equipment 1,631 1,694 (63) (4)
Professional and legal 604 450 154 34
Marketing 703 636 67 11
FDIC insurance 418 339 79 23
Debit card processing 677 673 4 1
Charitable donations 938 965 (27) (3)
External data processing 1,678 1,408 270 19
Gain on foreclosed real
estate, including recovery of
losses 0 (173) 173 100
Impaired loan carrying costs 187 476 (289) (61)
Other 2,125 2,189 (64) (3)
Total noninterest expense $ 27,486 $ 25,449 $ 2,037 8 %
The discussion that follows addresses changes in selected categories of noninterest expense.
Personnel-The
Professional and legal-The
External data processing-The
Gain on foreclosed real estate, including recovery of losses-The
Impaired loan carrying costs-The
Provision for Income Taxes
The income tax expense for the first six months of 2021 was
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BALANCE SHEET REVIEW
Interest Bearing Deposits with Banks
On
The Corporation's entire investment securities portfolio is classified
available-for-sale, and is comprised of interest-earning debt securities. The
overall composition of the Corporation's investment securities portfolio is
provided in Note 2-Securities. On
Loans
On
Deposits
Deposits are the Corporation's principal source of funding for earning assets.
On
Short-term Borrowings
Short-term borrowings, which consist of securities sold under agreements to
repurchase (repurchase agreements), federal funds purchased, and other
short-term borrowings, totaled
Long-term Debt
The Corporation uses long-term borrowings as a secondary funding source for
asset growth and to manage interest rate risk. On
Other Liabilities
Other liabilities totaled
Shareholders' Equity and Capital Adequacy
Shareholders' equity, or capital, enables Codorus Valley to maintain asset
growth and absorb losses. Capital adequacy can be affected by a multitude of
factors, including profitability, new stock issuances, corporate expansion and
acquisitions, dividend policy and distributions, and regulatory mandates. The
Corporation's total shareholders' equity was approximately
Cash Dividends on Stock
The Corporation has historically paid cash dividends on its stock on a quarterly
basis. The Board of Directors determines the dividend rate after considering the
Corporation's capital requirements, current and projected net income, and
other relevant factors. As recently announced, the Board of Directors declared a
quarterly cash dividend of
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dividends follow a quarterly cash dividend of
Capital Adequacy
The Corporation and
RISK MANAGEMENT
Credit Risk Management
Credit risk represents the possibility that a loan client, counterparty or
issuer may not perform in accordance with contractual terms, posing one of the
most significant risks of loss to the Corporation. Accordingly, the Corporation
emphasizes the management of credit risk, and has established a lending policy
which management believes is sound given the nature and scope of our operations.
The Credit Risk Management section included in Item 7 of the Corporation's
previously filed Annual Report on Form 10-K for the year ended
Nonperforming Assets
Nonperforming assets, as shown in the table below, are asset categories that
pose the greatest risk of loss. The level of nonperforming assets at
The Corporation regularly monitors large and criticized assets in its commercial loan portfolio recognizing that prolonged low economic growth, or a weakening economy, could have negative effects on these commercial borrowers. Nonperforming assets are monitored and managed for collection of these accounts. Collection efforts, including modification of contractual terms for individual accounts based on prevailing market conditions and liquidation of collateral assets, are employed to maximize recovery. A special assets committee meets regularly, at a minimum quarterly, to review nonperforming assets. We generally rely on appraisals performed by independent licensed appraisers to determine the value of real estate collateral for impaired collateral-dependent loans. Generally, an appraisal is performed when: an account reaches 90 days past due, unless a certified appraisal was completed within the past twelve months; market values have changed significantly; the condition of the property has changed significantly; or the existing appraisal is outdated based upon regulatory or policy requirements. In instances where the value of the collateral, net of costs to sell, is less than the net carrying amount for impaired commercial related loans, a specific loss allowance is established for the difference. Further provisions for loan losses may be required for nonaccrual loans as additional information becomes available or conditions change. When it is probable that some portion or an entire loan balance will not be collected, that amount is charged off as loss against the allowance.
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The paragraphs and table below address significant changes in the nonperforming
asset categories as of
Table 9 - Nonperforming Assets
June 30, December 31,
(dollars in thousands) 2021 2020
Nonaccrual loans $ 39,990 $ 38,175
Accruing loans 90 days or more past due 0 1,295
Total nonperforming loans 39,990 39,470
Total nonperforming assets $ 39,990 $ 39,470
Accruing troubled debt restructurings $ 1,058 $ 1,395 Total period-end loans, net of deferred fees
$ 22,011 $ 21,264 ALL as a % of total period-end loans 1.43 % 1.38 %
Net charge-offs year-to-date, annualized as a % of average total loans
0.11 % 0.93 %
ALL as a % of nonperforming loans 55.04 % 53.87 %
Nonperforming loans as a % of total period-end loans 2.59 % 2.56 %
Nonperforming assets as a % of total period-end
loans and net foreclosed real estate 2.59 % 2.56 %
Nonperforming assets as a % of total period-end
assets 1.79 % 1.83 %
Nonperforming assets as a % of total period-end
shareholders' equity 20.07 % 19.94 %
Nonperforming loans
Nonperforming loans consist of nonaccrual loans and accruing loans 90 days or
more past due. We generally place a loan on nonaccrual status and cease accruing
interest income (i.e., recognize interest income on a cash basis, as long as the
loan is sufficiently collateralized) when loan payment performance is
unsatisfactory and the loan is past due 90 days or more. A loan is returned to
interest accruing status when we determine that circumstances have improved to
the extent that all of the principal and interest amounts contractually due are
current for at least six consecutive payments and future payments are reasonably
assured. Loans past due 90 days or more and still accruing interest represent
loans that are contractually past due, but are well collateralized and in the
process of collection. As of
Foreclosed real estate represents real estate acquired to satisfy debts owed to
Troubled Debt Restructurings
Troubled debt restructurings pertain to loans whose terms have been modified to
include a concession that we would not ordinarily consider due to the debtor's
financial difficulties. Concessions granted under a troubled debt restructuring
typically involve a reduction of interest rate lower than the current market
rate for new debt with similar risk, the deferral of payments or extension of
the stated maturity date. Troubled debt restructurings are evaluated for
impairment if they have been restructured during the most recent calendar year,
or if they cease to perform in accordance with the modified terms. As of
As of
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Allowance for Loan Losses
Although the Corporation believes that it maintains sound credit policies, certain loans deteriorate and must be charged off as losses. The allowance for loan losses is maintained to absorb losses inherent in the portfolio. The allowance is increased by provisions charged to expense and is reduced by loan charge-offs, net of recoveries. The allowance is based upon management's continuous evaluation of the loan portfolio coupled with a formal review of adequacy on a quarterly basis, which is subject to review and approval by the Board.
The allowance for loan losses consists primarily of two components: specific allowances for individually impaired commercial loans and allowances calculated for pools of loans. The Corporation uses an internal risk rating system to evaluate individual loans. Loans are segmented into industry groups or pools with similar characteristics, and an allowance for loan losses is allocated to each segment based on quantitative factors such as recent loss history (two-year rolling average of net charge-offs) and qualitative factors, such as the results of internal and external credit reviews, changes in the size and composition of the loan portfolio, adequacy of collateral, and general economic conditions. Determining the level of the allowance for probable loan losses at any given period is subjective, particularly during deteriorating or uncertain economic periods, and requires that we make estimates using assumptions. There is also the potential for adjustment to the allowance as a result of regulatory examinations.
The following tables presents an analysis of the activity in the allowance for
loan losses for the three and six months ended
Table 10 - Analysis of Allowance for Loan Losses
(dollars in thousands) 2021 2020 Balance-April 1,$ 22,411 $ 22,838 Provision charged to operating expense 352 2,550 Loans charged off: Commercial, financial and agricultural 814 4,360 Real estate - construction and land development 0 0 Consumer and home equity 7 7 Total loans charged off 821 4,367
Recoveries:
Commercial, financial and agricultural 65 3 Consumer and home equity 4 14 Total recoveries 69 17 Net charge-offs 752 4,350 Balance-June 30,$ 22,011 $ 21,038 Ratios:
Annualized net charge-offs as a % of average total loans 0.11 % 1.55 % Allowance for loan losses as a % of total period-end loans 1.43 % 1.31 % Allowance for loan losses as a % of nonperforming loans 55.04 % 100.62 %
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Table 11 - Analysis of Allowance for Loan Losses
(dollars in thousands) 2021 2020 Balance-January 1,$ 21,264 $ 22,838 Provision charged to operating expense 1,583 2,550 Loans charged off: Commercial, financial and agricultural 906 4,361 Real estate - construction and land development 0 0 Consumer and home equity 19 6 Total loans charged off 925 4,367
Recoveries:
Commercial, financial and agricultural 70 3 Consumer and home equity 19 14 Total recoveries 89 17 Net charge-offs 836 4,350 Balance-June 30,$ 22,011 $ 21,038 Ratios:
Annualized net charge-offs as a % of average total loans 0.11 % 1.55 % Allowance for loan losses as a % of total period-end loans 1.43 % 1.31 % Allowance for loan losses as a % of nonperforming loans 55.04 % 100.62 %
The provision for loan losses decreased
Net charge-offs for the first six months of 2021 were
Liquidity Risk Management
Maintaining adequate liquidity provides the Corporation with the ability to meet
financial obligations to depositors, loan clients, employees, and shareholders
on a timely and cost effective basis in the normal course of business.
Additionally, adequate liquidity provides funds for growth and business
opportunities as they arise. Liquidity is generated from transactions relating
to both the Corporation's assets and liabilities. The primary sources of
asset liquidity are funds received from client loan payments, investment
maturities and cash inflows from mortgage-backed securities, and the net
proceeds of asset sales. The primary sources of liability liquidity are deposit
growth, and funds obtained from short-term borrowings and long-term debt. The
Consolidated Statements of Cash Flows, included in this report, present the
changes in cash from operating, investing and financing activities. At
Off-Balance Sheet Arrangements
The Corporation's financial statements do not reflect various commitments that
are made in the normal course of business, which may involve some liquidity
risk. These commitments consist primarily of commitments to grant new loans,
unfunded commitments under existing loan facilities, and letters of credit
issued under the same standards as on-balance sheet instruments. Unused
commitments on
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Recent Legislative Developments
On
At its
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