NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 NATURE OF OPERATIONS:
New Peoples Bankshares, Inc. (“The Company”)
is a financial holding company whose principal activity is the ownership and management of a community bank. New Peoples Bank,
Inc. (“Bank”) was organized and incorporated under the laws of the Commonwealth of Virginia on December 9, 1997. The
Bank commenced operations on October 28, 1998, after receiving regulatory approval. As a state-chartered member bank, the Bank
is subject to regulation by the Virginia Bureau of Financial Institutions, the Federal Deposit Insurance Corporation and the Federal
Reserve Bank. The Bank provides general banking services to individuals, small and medium size businesses and the professional
community of southwestern Virginia, southern West Virginia, and eastern Tennessee. On June 9, 2003, the Company formed two wholly-owned
subsidiaries; NPB Financial Services, Inc. and NPB Web Services, Inc. On July 7, 2004 the Company established NPB Capital Trust
I for the purpose of issuing trust preferred securities. On September 27, 2006, the Company established NPB Capital Trust 2 for
the purpose of issuing additional trust preferred securities. NPB Financial Services, Inc. was a subsidiary of the Company until
January 1, 2009 when it became a subsidiary of the Bank. In June 2012 the name of NPB Financial Services, Inc. was changed to
NPB Insurance Services, Inc. which operates solely as an insurance agency. On March 4, 2016 the Federal Reserve Bank of Richmond
approved the Company’s election to become a financial holding company.
NOTE 2 ACCOUNTING PRINCIPLES:
These consolidated financial statements conform
to U. S. generally accepted accounting principles and to general industry practices. In the opinion of management, the accompanying
consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present
fairly the Company’s financial position at March 31, 2016 and December 31, 2015, and the results of operations for the three-month
periods ended March 31, 2016 and 2015. The notes included herein should be read in conjunction with the notes to the consolidated
financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results
of operations for the three month periods ended March 31, 2016 and 2015 are not necessarily indicative of the results to be expected
for the full year.
The preparation of financial statements in
conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The determination of the adequacy of the allowance for loan losses and the determination of the deferred tax asset and related
valuation allowance are based on estimates that are particularly susceptible to significant changes in the economic environment
and market conditions.
NOTE 3 FORMAL WRITTEN AGREEMENT:
The Company and the Bank had previously entered
into the Written Agreement with the Federal Reserve Bank of Richmond and the Virginia State Corporation Commission Bureau of Financial
Institutions. On February 2, 2016, the Company and the Bank announced that they had successfully complied with all of the requirements
of the Written Agreement and accordingly, effective January 20, 2016, the agreement had been terminated.
Under the terms of the Written Agreement,
the Bank developed and submitted for approval within specified time periods written plans related to board oversight; the Bank’s
management and governance, including management of the Bank’s operations, credit risk management, lending and credit risk
administration, management of commercial real estate concentrations; the review and grading of the Bank’s loan portfolio;
the improvement of Bank problem assets in excess of $1 million; the maintenance of an adequate allowance for loan
and lease losses; the enhanced management of the Bank’s liquidity position and funds management practices; the revision
of the Bank’s contingency funding and strategic plans; and the enhancement of the Bank’s anti-money laundering
activities. The Written Agreement also imposed limitations on actions taken on criticized credits and credits classified as “loss”.
The Written Agreement required the submission of capital plans and the maintenance of adequate capital and restricted the payment
of dividends and other distributions, the redemption of stock and the incurrence of debt.
NOTE 4 CAPITAL:
Capital Requirements and Ratios
The Company and the Bank are subject to various
capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect
on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures
of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts
and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Prompt corrective action provisions are not applicable to bank holding companies.
Quantitative measures established by regulation
to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following
table) of total and Tier 1 capital (as defined) to risk-weighted assets (as defined), Tier 1 capital (as defined) to average assets
(as defined), and Common Equity Tier 1 capital (as defined) to risk-weighted assets (as defined). Management believes that, as
of March 31, 2016, the Company and the Bank meet all capital adequacy requirements to which they are subject. The Company’s
and the Bank’s actual capital amounts and ratios are presented in the following table as of March 31, 2016 and December
31, 2015, respectively. These ratios comply with Federal Reserve rules to align with the Basel III Capital requirements effective
January 1, 2015.
|
|
Actual
|
|
Minimum Capital Requirement
|
|
Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
|
(Dollars are in thousands)
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
March 31, 2016:
|
Total Capital to Risk Weighted Assets:
|
The Company
|
|
|
67,718
|
|
|
|
17.54
|
%
|
|
$
|
30,888
|
|
|
|
8.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
The Bank
|
|
|
66,711
|
|
|
|
17.28
|
%
|
|
|
30,883
|
|
|
|
8.0
|
%
|
|
|
38,604
|
|
|
|
10.0
|
%
|
Tier 1 Capital to Risk Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company
|
|
|
62,566
|
|
|
|
16.20
|
%
|
|
|
23,166
|
|
|
|
6.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
The Bank
|
|
|
61,856
|
|
|
|
16.02
|
%
|
|
|
23,162
|
|
|
|
6.0
|
%
|
|
|
30,883
|
|
|
|
8.0
|
%
|
Tier 1 Capital to Average Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company
|
|
|
62,566
|
|
|
|
9.95
|
%
|
|
|
25,157
|
|
|
|
4.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
The Bank
|
|
|
61,856
|
|
|
|
9.83
|
%
|
|
|
25,158
|
|
|
|
4.0
|
%
|
|
|
31,447
|
|
|
|
5.0
|
%
|
Common Equity Tier 1 Capital
to Risk Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company
|
|
|
46,862
|
|
|
|
12.14
|
%
|
|
|
17,374
|
|
|
|
4.5
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
The Bank
|
|
|
61,856
|
|
|
|
16.02
|
%
|
|
|
17,372
|
|
|
|
4.5
|
%
|
|
|
25,093
|
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to Risk Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company
|
|
|
66,649
|
|
|
|
17.80
|
%
|
|
$
|
29,954
|
|
|
|
8.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
The Bank
|
|
|
65,713
|
|
|
|
17.55
|
%
|
|
|
29,954
|
|
|
|
8.0
|
%
|
|
|
37,443
|
|
|
|
10.0
|
%
|
Tier 1 Capital to Risk Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company
|
|
|
61,406
|
|
|
|
16.40
|
%
|
|
|
22,465
|
|
|
|
6.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
The Bank
|
|
|
60,998
|
|
|
|
16.29
|
%
|
|
|
22,466
|
|
|
|
6.0
|
%
|
|
|
29,954
|
|
|
|
8.0
|
%
|
Tier 1 Capital to Average Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company
|
|
|
61,406
|
|
|
|
9.74
|
%
|
|
|
25,229
|
|
|
|
4.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
The Bank
|
|
|
60,998
|
|
|
|
9.67
|
%
|
|
|
25,239
|
|
|
|
4.0
|
%
|
|
|
31,549
|
|
|
|
5.0
|
%
|
Common Equity Tier 1 Capital
to Risk Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company
|
|
|
45,934
|
|
|
|
12.27
|
%
|
|
|
16,849
|
|
|
|
4.5
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
The Bank
|
|
|
60,998
|
|
|
|
16.29
|
%
|
|
|
16,849
|
|
|
|
4.5
|
%
|
|
|
24,338
|
|
|
|
6.5
|
%
|
As of March 31, 2016, the Bank was well capitalized
under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain
minimum total risk-based, Tier 1 risk-based, Tier
1 leverage, and Common Equity Tier 1 ratios
as set forth in the above tables. There are no conditions or events since the notification that management believes have changed
the Company’s and Bank’s category.
Beginning January 1, 2016, a capital conservation
buffer of 0.625% became effective. The capital conservation buffer will be gradually increased through January 1, 2019 to 2.5%.
Banks will be required to maintain levels that meet the required minimum plus the capital conservation buffer in order to make
distributions or discretionary bonus payments.
NOTE 5 INVESTMENT SECURITIES:
The amortized cost and estimated fair value of securities
(all available-for-sale (“AFS”)) are as follows:
|
|
Gross
|
|
Gross
|
|
Approximate
|
|
|
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
(Dollars are in thousands)
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
March 31, 2016
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
|
$
|
34,827
|
|
|
$
|
356
|
|
|
$
|
58
|
|
|
$
|
35,125
|
|
Taxable municipals
|
|
|
2,421
|
|
|
|
21
|
|
|
|
10
|
|
|
|
2,432
|
|
Corporate bonds
|
|
|
2,045
|
|
|
|
15
|
|
|
|
44
|
|
|
|
2,016
|
|
Mortgage backed securities
|
|
|
45,233
|
|
|
|
115
|
|
|
|
211
|
|
|
|
45,137
|
|
Total Securities AFS
|
|
$
|
84,526
|
|
|
$
|
507
|
|
|
$
|
323
|
|
|
$
|
84,710
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
|
$
|
41,488
|
|
|
$
|
244
|
|
|
$
|
209
|
|
|
$
|
41,523
|
|
Taxable municipals
|
|
|
3,337
|
|
|
|
5
|
|
|
|
61
|
|
|
|
3,281
|
|
Corporate bonds
|
|
|
1,944
|
|
|
|
15
|
|
|
|
20
|
|
|
|
1,939
|
|
Mortgage backed securities
|
|
|
55,369
|
|
|
|
41
|
|
|
|
511
|
|
|
|
54,899
|
|
Total Securities AFS
|
|
$
|
102,138
|
|
|
$
|
305
|
|
|
$
|
801
|
|
|
$
|
101,642
|
|
The following table details unrealized losses
and related fair values in the available-for-sale portfolio. This information is aggregated by the length of time that individual
securities have been in a continuous unrealized loss position as of March 31, 2016 and December 31, 2015.
|
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
(Dollars are in thousands)
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
|
$
|
7,243
|
|
|
$
|
23
|
|
|
$
|
3,855
|
|
|
$
|
35
|
|
|
$
|
11,098
|
|
|
$
|
58
|
|
Taxable municipals
|
|
|
549
|
|
|
|
8
|
|
|
|
276
|
|
|
|
2
|
|
|
|
825
|
|
|
|
10
|
|
Corporate bonds
|
|
|
901
|
|
|
|
44
|
|
|
|
—
|
|
|
|
—
|
|
|
|
901
|
|
|
|
44
|
|
Mtg. backed securities
|
|
|
14,946
|
|
|
|
101
|
|
|
|
9,376
|
|
|
|
110
|
|
|
|
24,322
|
|
|
|
211
|
|
Total Securities AFS
|
|
$
|
23,639
|
|
|
$
|
176
|
|
|
$
|
13,507
|
|
|
$
|
147
|
|
|
$
|
37,146
|
|
|
$
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
|
$
|
14,995
|
|
|
$
|
81
|
|
|
$
|
7,708
|
|
|
$
|
128
|
|
|
$
|
22,073
|
|
|
$
|
209
|
|
Taxable municipals
|
|
|
2,136
|
|
|
|
57
|
|
|
|
278
|
|
|
|
4
|
|
|
|
2,414
|
|
|
|
61
|
|
Corporate bonds
|
|
|
923
|
|
|
|
20
|
|
|
|
—
|
|
|
|
—
|
|
|
|
923
|
|
|
|
20
|
|
Mtg. backed securities
|
|
|
38,945
|
|
|
|
354
|
|
|
|
8,719
|
|
|
|
157
|
|
|
|
47,664
|
|
|
|
511
|
|
Total Securities AFS
|
|
$
|
56,999
|
|
|
$
|
512
|
|
|
$
|
16,705
|
|
|
$
|
289
|
|
|
$
|
73,074
|
|
|
$
|
801
|
|
At March 31, 2016, the available-for-sale
portfolio included seventy four investments for which the fair market value was less than amortized cost. At December 31, 2015,
the available-for-sale portfolio included one hundred and thirty four investments for which the fair market value was less than
amortized cost. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently
when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which
the fair value has been less than cost, (2) the financial conditions and near-term prospects of the issuer, and (3) the intent
and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated
recovery in fair value. Based on the Company’s analysis, the Company concluded that no securities had an other-than-temporary
impairment.
Gross proceeds on the sale of investment securities
were $12.9 million for the three months ended March 31, 2016, with $119 thousand of gross gains realized and $14 thousand of gross
losses realized. Gross proceeds on the sale of investment securities were $7.1 million for the three months ended March 31, 2015,
with $62 thousand of gross gains realized and $27 thousand of gross losses realized.
The amortized cost and fair value of investment
securities at March 31, 2016, by contractual maturity, are shown in the following schedule. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
|
|
|
|
Weighted
|
(Dollars are in thousands)
|
|
Amortized
|
|
Fair
|
|
Average
|
Securities Available-for-Sale
|
|
Cost
|
|
Value
|
|
Yield
|
Due in one year or less
|
|
$
|
1,243
|
|
|
$
|
1,246
|
|
|
|
0.91
|
%
|
Due after one year through five years
|
|
|
1,338
|
|
|
|
1,342
|
|
|
|
1.61
|
%
|
Due after five years through ten years
|
|
|
13,667
|
|
|
|
13,714
|
|
|
|
2.08
|
%
|
Due after ten years
|
|
|
68,278
|
|
|
|
68,408
|
|
|
|
1.96
|
%
|
Total
|
|
$
|
84,526
|
|
|
$
|
84,710
|
|
|
|
1.96
|
%
|
Investment securities with a carrying value
of $15.5 million and $15.4 million at March 31, 2016 and December 31, 2015, respectively, were pledged as collateral to secure
public deposits, overnight payment processing and for other purposes required by law.
The Bank, as a member of the Federal Reserve
Bank and the Federal Home Loan Bank, is required to hold stock in each. The Bank also owns stock in CBB Financial Corp., which
is a correspondent of the Bank. These equity securities are restricted from trading and are recorded at a cost of $2.8 million
and $2.4 million as of March 31, 2016 and December 31, 2015, respectively.
NOTE 6 LOANS:
Loans receivable outstanding are summarized
as follows:
(Dollars are in thousands)
|
|
March 31, 2016
|
|
December 31, 2015
|
Real estate secured:
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
98,644
|
|
|
$
|
98,569
|
|
Construction and land development
|
|
|
17,977
|
|
|
|
14,672
|
|
Residential 1-4 family
|
|
|
246,321
|
|
|
|
242,916
|
|
Multifamily
|
|
|
13,430
|
|
|
|
12,954
|
|
Farmland
|
|
|
23,458
|
|
|
|
22,174
|
|
Total real estate loans
|
|
|
399,830
|
|
|
|
391,285
|
|
Commercial
|
|
|
22,106
|
|
|
|
21,469
|
|
Agriculture
|
|
|
3,958
|
|
|
|
3,793
|
|
Consumer installment loans
|
|
|
24,373
|
|
|
|
24,568
|
|
All other loans
|
|
|
42
|
|
|
|
54
|
|
Total loans
|
|
$
|
450,309
|
|
|
$
|
441,169
|
|
Loans receivable on nonaccrual status
are summarized as follows:
(Dollars are in thousands)
|
|
March 31, 2016
|
|
December 31, 2015
|
Real estate secured:
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
3,249
|
|
|
$
|
4,358
|
|
Construction and land development
|
|
|
723
|
|
|
|
436
|
|
Residential 1-4 family
|
|
|
7,720
|
|
|
|
8,338
|
|
Multifamily
|
|
|
341
|
|
|
|
430
|
|
Farmland
|
|
|
1,157
|
|
|
|
1,170
|
|
Total real estate loans
|
|
|
13,190
|
|
|
|
14,732
|
|
Commercial
|
|
|
75
|
|
|
|
65
|
|
Agriculture
|
|
|
206
|
|
|
|
9
|
|
Consumer installment loans
|
|
|
56
|
|
|
|
41
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
Total loans receivable on nonaccrual status
|
|
$
|
13,527
|
|
|
$
|
14,847
|
|
Total interest income not recognized on nonaccrual
loans for the three months ended March 31, 2016 and 2015 was $94 thousand and $166 thousand, respectively.
The following table presents information concerning
the Company’s investment in loans considered impaired as of March 31, 2016 and December 31, 2015:
As
of March 31, 2016
(Dollars are in thousands)
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
|
Recorded
Investment
|
|
Unpaid Principal Balance
|
|
Related
Allowance
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
4,479
|
|
|
$
|
35
|
|
|
$
|
4,745
|
|
|
$
|
5,442
|
|
|
$
|
—
|
|
Construction and land development
|
|
|
171
|
|
|
|
(1
|
)
|
|
|
331
|
|
|
|
376
|
|
|
|
—
|
|
Residential 1-4 family
|
|
|
3,599
|
|
|
|
51
|
|
|
|
4,161
|
|
|
|
4,475
|
|
|
|
—
|
|
Multifamily
|
|
|
269
|
|
|
|
2
|
|
|
|
108
|
|
|
|
149
|
|
|
|
—
|
|
Farmland
|
|
|
4,149
|
|
|
|
51
|
|
|
|
4,314
|
|
|
|
5,240
|
|
|
|
—
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Agriculture
|
|
|
36
|
|
|
|
1
|
|
|
|
36
|
|
|
|
36
|
|
|
|
—
|
|
Consumer installment loans
|
|
|
27
|
|
|
|
1
|
|
|
|
43
|
|
|
|
43
|
|
|
|
—
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
1,768
|
|
|
|
—
|
|
|
|
1,033
|
|
|
|
1,104
|
|
|
|
150
|
|
Construction and land development
|
|
|
283
|
|
|
|
—
|
|
|
|
277
|
|
|
|
492
|
|
|
|
143
|
|
Residential 1-4 family
|
|
|
1,271
|
|
|
|
5
|
|
|
|
622
|
|
|
|
656
|
|
|
|
79
|
|
Multifamily
|
|
|
117
|
|
|
|
2
|
|
|
|
233
|
|
|
|
235
|
|
|
|
41
|
|
Farmland
|
|
|
640
|
|
|
|
6
|
|
|
|
518
|
|
|
|
525
|
|
|
|
310
|
|
Commercial
|
|
|
74
|
|
|
|
1
|
|
|
|
78
|
|
|
|
78
|
|
|
|
33
|
|
Agriculture
|
|
|
117
|
|
|
|
(2
|
)
|
|
|
215
|
|
|
|
215
|
|
|
|
114
|
|
Consumer installment loans
|
|
|
28
|
|
|
|
—
|
|
|
|
11
|
|
|
|
11
|
|
|
|
3
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
17,028
|
|
|
$
|
152
|
|
|
$
|
16,725
|
|
|
$
|
19,077
|
|
|
$
|
873
|
|
|
As of December 31, 2015
(Dollars are in thousands)
|
|
|
Average
Recorded
Investment
|
|
|
|
Interest
Income
Recognized
|
|
|
|
Recorded
Investment
|
|
|
|
Unpaid Principal Balance
|
|
|
|
Related
Allowance
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
4,534
|
|
|
$
|
163
|
|
|
$
|
4,212
|
|
|
$
|
5,173
|
|
|
$
|
—
|
|
Construction and land development
|
|
|
12
|
|
|
|
1
|
|
|
|
10
|
|
|
|
10
|
|
|
|
—
|
|
Residential 1-4 family
|
|
|
3,506
|
|
|
|
161
|
|
|
|
3,037
|
|
|
|
3,150
|
|
|
|
—
|
|
Multifamily
|
|
|
520
|
|
|
|
9
|
|
|
|
430
|
|
|
|
471
|
|
|
|
—
|
|
Farmland
|
|
|
5,073
|
|
|
|
213
|
|
|
|
3,983
|
|
|
|
4,620
|
|
|
|
—
|
|
Commercial
|
|
|
267
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Agriculture
|
|
|
42
|
|
|
|
4
|
|
|
|
36
|
|
|
|
36
|
|
|
|
—
|
|
Consumer installment loans
|
|
|
31
|
|
|
|
1
|
|
|
|
11
|
|
|
|
11
|
|
|
|
—
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
2,935
|
|
|
|
37
|
|
|
|
2,503
|
|
|
|
2,849
|
|
|
|
288
|
|
Construction and land development
|
|
|
373
|
|
|
|
—
|
|
|
|
289
|
|
|
|
499
|
|
|
|
155
|
|
Residential 1-4 family
|
|
|
2,219
|
|
|
|
99
|
|
|
|
1,920
|
|
|
|
2,121
|
|
|
|
168
|
|
Multifamily
|
|
|
23
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Farmland
|
|
|
906
|
|
|
|
38
|
|
|
|
761
|
|
|
|
778
|
|
|
|
328
|
|
Commercial
|
|
|
80
|
|
|
|
3
|
|
|
|
69
|
|
|
|
69
|
|
|
|
24
|
|
Agriculture
|
|
|
24
|
|
|
|
2
|
|
|
|
18
|
|
|
|
18
|
|
|
|
18
|
|
Consumer installment loans
|
|
|
19
|
|
|
|
4
|
|
|
|
45
|
|
|
|
45
|
|
|
|
2
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
20,564
|
|
|
$
|
735
|
|
|
$
|
17,324
|
|
|
$
|
19,850
|
|
|
$
|
983
|
|
An age analysis of past due loans receivable
was as follows:
As of March 31, 2016
(Dollars are in thousands)
|
|
Loans
30-59
Days
Past
Due
|
|
Loans
60-89
Days
Past
Due
|
|
Loans
90 or
More
Days
Past
Due
|
|
Total
Past
Due
Loans
|
|
Current
Loans
|
|
Total
Loans
|
|
Accruing
Loans
90 or
More
Days
Past
Due
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
1,094
|
|
|
$
|
260
|
|
|
$
|
1,321
|
|
|
$
|
2,675
|
|
|
$
|
95,969
|
|
|
$
|
98,644
|
|
|
$
|
—
|
|
Construction and land
development
|
|
|
89
|
|
|
|
322
|
|
|
|
—
|
|
|
|
411
|
|
|
|
17,566
|
|
|
|
17,977
|
|
|
|
—
|
|
Residential 1-4 family
|
|
|
6,440
|
|
|
|
1,168
|
|
|
|
1,564
|
|
|
|
9,172
|
|
|
|
237,149
|
|
|
|
246,321
|
|
|
|
—
|
|
Multifamily
|
|
|
502
|
|
|
|
—
|
|
|
|
233
|
|
|
|
735
|
|
|
|
12,695
|
|
|
|
13,430
|
|
|
|
—
|
|
Farmland
|
|
|
292
|
|
|
|
—
|
|
|
|
522
|
|
|
|
814
|
|
|
|
22,644
|
|
|
|
23,458
|
|
|
|
—
|
|
Total real estate loans
|
|
|
8,417
|
|
|
|
1,750
|
|
|
|
3,640
|
|
|
|
13,807
|
|
|
|
386,023
|
|
|
|
399,830
|
|
|
|
—
|
|
Commercial
|
|
|
—
|
|
|
|
17
|
|
|
|
75
|
|
|
|
92
|
|
|
|
22,014
|
|
|
|
22,106
|
|
|
|
—
|
|
Agriculture
|
|
|
870
|
|
|
|
—
|
|
|
|
—
|
|
|
|
870
|
|
|
|
3,088
|
|
|
|
3,958
|
|
|
|
—
|
|
Consumer installment
Loans
|
|
|
74
|
|
|
|
21
|
|
|
|
21
|
|
|
|
116
|
|
|
|
24,257
|
|
|
|
24,373
|
|
|
|
—
|
|
All other loans
|
|
|
4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
38
|
|
|
|
42
|
|
|
|
—
|
|
Total loans
|
|
$
|
9,365
|
|
|
$
|
1,788
|
|
|
$
|
3,736
|
|
|
$
|
14,889
|
|
|
$
|
435,420
|
|
|
$
|
450,309
|
|
|
$
|
—
|
|
As of December 31, 2015
(Dollars are in thousands)
|
|
Loans
30-59
Days
Past
Due
|
|
Loans
60-89
Days
Past
Due
|
|
Loans
90 or
More
Days
Past
Due
|
|
Total
Past
Due
Loans
|
|
Current
Loans
|
|
Total
Loans
|
|
Accruing
Loans
90 or
More
Days
Past
Due
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
311
|
|
|
$
|
105
|
|
|
$
|
2,534
|
|
|
$
|
2,950
|
|
|
$
|
95,619
|
|
|
$
|
98,569
|
|
|
$
|
—
|
|
Construction and land
development
|
|
|
144
|
|
|
|
—
|
|
|
|
17
|
|
|
|
161
|
|
|
|
14,511
|
|
|
|
14,672
|
|
|
|
—
|
|
Residential 1-4 family
|
|
|
4,694
|
|
|
|
1,487
|
|
|
|
2,891
|
|
|
|
9,072
|
|
|
|
233,844
|
|
|
|
242,916
|
|
|
|
—
|
|
Multifamily
|
|
|
47
|
|
|
|
—
|
|
|
|
320
|
|
|
|
367
|
|
|
|
12,587
|
|
|
|
12,954
|
|
|
|
—
|
|
Farmland
|
|
|
363
|
|
|
|
—
|
|
|
|
251
|
|
|
|
614
|
|
|
|
21,560
|
|
|
|
22,174
|
|
|
|
—
|
|
Total real estate loans
|
|
|
5,559
|
|
|
|
1,592
|
|
|
|
6,013
|
|
|
|
13,164
|
|
|
|
378,121
|
|
|
|
391,285
|
|
|
|
—
|
|
Commercial
|
|
|
18
|
|
|
|
1
|
|
|
|
64
|
|
|
|
83
|
|
|
|
21,386
|
|
|
|
21,469
|
|
|
|
—
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,793
|
|
|
|
3,793
|
|
|
|
—
|
|
Consumer installment
Loans
|
|
|
113
|
|
|
|
1
|
|
|
|
27
|
|
|
|
141
|
|
|
|
24,427
|
|
|
|
24,568
|
|
|
|
—
|
|
All other loans
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
|
48
|
|
|
|
54
|
|
|
|
—
|
|
Total loans
|
|
$
|
5,696
|
|
|
$
|
1,594
|
|
|
$
|
6,104
|
|
|
$
|
13,394
|
|
|
$
|
427,775
|
|
|
$
|
441,169
|
|
|
$
|
—
|
|
The Company categorizes loans receivable into
risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial
information, historical payment experience, credit documentation, public information, and current economic trends, among other
factors. The Company analyzes loans individually by classifying the loans receivable as to credit risk. The Company uses the following
definitions for risk ratings:
Pass
- Loans in this category are considered
to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt
and other factors.
Special Mention
- Loans in this category
are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial
strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification.
The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances. Special mention
loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s
credit position at some future date.
Substandard
-
A
substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral
pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation
of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies
are not corrected.
Doubtful
-
Loans classified Doubtful have all the weaknesses inherent in loans classified as Substandard, plus the added characteristic
that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly
questionable and improbable.
Based on the most recent analysis performed, the risk category
of loans receivable was as follows:
As
of March 31, 2016
(Dollars are in thousands)
|
|
Pass
|
|
Special
Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
85,360
|
|
|
$
|
8,448
|
|
|
$
|
4,836
|
|
|
$
|
—
|
|
|
$
|
98,644
|
|
Construction and land development
|
|
|
15,618
|
|
|
|
1,636
|
|
|
|
723
|
|
|
|
—
|
|
|
|
17,977
|
|
Residential 1-4 family
|
|
|
234,317
|
|
|
|
3,493
|
|
|
|
8,511
|
|
|
|
—
|
|
|
|
246,321
|
|
Multifamily
|
|
|
12,812
|
|
|
|
205
|
|
|
|
413
|
|
|
|
—
|
|
|
|
13,430
|
|
Farmland
|
|
|
17,576
|
|
|
|
3,311
|
|
|
|
2,571
|
|
|
|
—
|
|
|
|
23,458
|
|
Total real estate loans
|
|
|
365,683
|
|
|
|
17,093
|
|
|
|
17,054
|
|
|
|
—
|
|
|
|
399,830
|
|
Commercial
|
|
|
21,283
|
|
|
|
715
|
|
|
|
108
|
|
|
|
—
|
|
|
|
22,106
|
|
Agriculture
|
|
|
3,737
|
|
|
|
—
|
|
|
|
221
|
|
|
|
—
|
|
|
|
3,958
|
|
Consumer installment loans
|
|
|
24,271
|
|
|
|
—
|
|
|
|
102
|
|
|
|
—
|
|
|
|
24,373
|
|
All other loans
|
|
|
42
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
42
|
|
Total
|
|
$
|
415,016
|
|
|
$
|
17,808
|
|
|
$
|
17,485
|
|
|
$
|
—
|
|
|
$
|
450,309
|
|
As of December 31, 2015
(Dollars are in thousands)
|
|
|
Pass
|
|
|
|
Special
Mention
|
|
|
|
Substandard
|
|
|
|
Doubtful
|
|
|
|
Total
|
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
85,255
|
|
|
$
|
7,543
|
|
|
$
|
5,771
|
|
|
$
|
—
|
|
|
$
|
98,569
|
|
Construction and land development
|
|
|
12,262
|
|
|
|
1,974
|
|
|
|
436
|
|
|
|
—
|
|
|
|
14,672
|
|
Residential 1-4 family
|
|
|
229,182
|
|
|
|
3,572
|
|
|
|
10,162
|
|
|
|
—
|
|
|
|
242,916
|
|
Multifamily
|
|
|
12,264
|
|
|
|
187
|
|
|
|
503
|
|
|
|
—
|
|
|
|
12,954
|
|
Farmland
|
|
|
16,663
|
|
|
|
2,923
|
|
|
|
2,588
|
|
|
|
—
|
|
|
|
22,174
|
|
Total real estate loans
|
|
|
355,626
|
|
|
|
16,199
|
|
|
|
19,460
|
|
|
|
—
|
|
|
|
391,285
|
|
Commercial
|
|
|
20,641
|
|
|
|
724
|
|
|
|
104
|
|
|
|
—
|
|
|
|
21,469
|
|
Agriculture
|
|
|
3,767
|
|
|
|
—
|
|
|
|
26
|
|
|
|
—
|
|
|
|
3,793
|
|
Consumer installment loans
|
|
|
24,478
|
|
|
|
—
|
|
|
|
90
|
|
|
|
—
|
|
|
|
24,568
|
|
All other loans
|
|
|
54
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
54
|
|
Total
|
|
$
|
404,566
|
|
|
$
|
16,923
|
|
|
|
19,680
|
|
|
$
|
—
|
|
|
$
|
441,169
|
|
NOTE 7 ALLOWANCE FOR LOAN LOSSES:
The following table details activity
in the allowance for loan losses by portfolio segment for the period ended March 31, 2016. Allocation of a portion of the allowance
to one category of loans does not preclude its availability to absorb losses in other categories.
As of March 31, 2016
(Dollars are in thousands)
|
|
Beginning
Balance
|
|
Charge
Offs
|
|
Recoveries
|
|
Advances
|
|
Provisions
|
|
Ending Balance
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
2,384
|
|
|
$
|
(31
|
)
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
(316
|
)
|
|
$
|
2,040
|
|
Construction and land development
|
|
|
332
|
|
|
|
(5
|
)
|
|
|
14
|
|
|
|
—
|
|
|
|
(12
|
)
|
|
|
329
|
|
Residential 1-4 family
|
|
|
2,437
|
|
|
|
(261
|
)
|
|
|
8
|
|
|
|
—
|
|
|
|
137
|
|
|
|
2,321
|
|
Multifamily
|
|
|
232
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
49
|
|
|
|
279
|
|
Farmland
|
|
|
675
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
674
|
|
Total real estate loans
|
|
|
6,060
|
|
|
|
(299
|
)
|
|
|
25
|
|
|
|
—
|
|
|
|
(143
|
)
|
|
|
5,643
|
|
Commercial
|
|
|
266
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
|
|
(62
|
)
|
|
|
208
|
|
Agriculture
|
|
|
124
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
8
|
|
|
|
134
|
|
Consumer installment loans
|
|
|
128
|
|
|
|
(9
|
)
|
|
|
3
|
|
|
|
—
|
|
|
|
4
|
|
|
|
126
|
|
All other loans
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
Unallocated
|
|
|
914
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
193
|
|
|
|
1,107
|
|
Total
|
|
$
|
7,493
|
|
|
$
|
(308
|
)
|
|
$
|
34
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,219
|
|
|
|
Allowance for Loan Losses
|
|
Recorded Investment in Loans
|
As of March 31, 2016
(Dollars are in thousands)
|
|
Individually
Evaluated
for Impairment
|
|
Collectively Evaluated for Impairment
|
|
Total
|
|
Individually
Evaluated for Impairment
|
|
Collectively Evaluated for Impairment
|
|
Total
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
150
|
|
|
$
|
1,890
|
|
|
$
|
2,040
|
|
|
$
|
5,778
|
|
|
$
|
92,866
|
|
|
$
|
98,644
|
|
Construction and land
development
|
|
|
143
|
|
|
|
186
|
|
|
|
329
|
|
|
|
608
|
|
|
|
17,369
|
|
|
|
17,977
|
|
Residential 1-4 family
|
|
|
79
|
|
|
|
2,242
|
|
|
|
2,321
|
|
|
|
4,783
|
|
|
|
241,538
|
|
|
|
246,321
|
|
Multifamily
|
|
|
41
|
|
|
|
238
|
|
|
|
279
|
|
|
|
341
|
|
|
|
13,089
|
|
|
|
13,430
|
|
Farmland
|
|
|
310
|
|
|
|
364
|
|
|
|
674
|
|
|
|
4,832
|
|
|
|
18,626
|
|
|
|
23,458
|
|
Total real estate loans
|
|
|
723
|
|
|
|
4,920
|
|
|
|
5,643
|
|
|
|
16,342
|
|
|
|
383,488
|
|
|
|
399,830
|
|
Commercial
|
|
|
33
|
|
|
|
175
|
|
|
|
208
|
|
|
|
78
|
|
|
|
22,028
|
|
|
|
22,106
|
|
Agriculture
|
|
|
114
|
|
|
|
20
|
|
|
|
134
|
|
|
|
251
|
|
|
|
3,707
|
|
|
|
3,958
|
|
Consumer installment loans
|
|
|
3
|
|
|
|
123
|
|
|
|
126
|
|
|
|
54
|
|
|
|
24,319
|
|
|
|
24,373
|
|
All other loans
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
—
|
|
|
|
42
|
|
|
|
42
|
|
Unallocated
|
|
|
—
|
|
|
|
1,107
|
|
|
|
1,107
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
873
|
|
|
$
|
6,346
|
|
|
$
|
7,219
|
|
|
$
|
16,725
|
|
|
$
|
433,584
|
|
|
$
|
450,309
|
|
The following table details activity
in the allowance for loan losses by portfolio segment for the period ended December 31, 2015. Allocation of a portion of the allowance
to one category of loans does not preclude its availability to absorb losses in other categories.
As of December 31, 2015
(Dollars are in thousands)
|
|
Beginning
Balance
|
|
Charge
Offs
|
|
Recoveries
|
|
Advances
|
|
Provisions
|
|
Ending Balance
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
4,418
|
|
|
$
|
(724
|
)
|
|
$
|
147
|
|
|
$
|
—
|
|
|
$
|
(1,457
|
)
|
|
$
|
2,384
|
|
Construction and land development
|
|
|
199
|
|
|
|
(226
|
)
|
|
|
215
|
|
|
|
—
|
|
|
|
144
|
|
|
|
332
|
|
Residential 1-4 family
|
|
|
2,572
|
|
|
|
(743
|
)
|
|
|
93
|
|
|
|
—
|
|
|
|
515
|
|
|
|
2,437
|
|
Multifamily
|
|
|
154
|
|
|
|
(384
|
)
|
|
|
6
|
|
|
|
—
|
|
|
|
456
|
|
|
|
232
|
|
Farmland
|
|
|
913
|
|
|
|
(90
|
)
|
|
|
214
|
|
|
|
—
|
|
|
|
(362
|
)
|
|
|
675
|
|
Total real estate loans
|
|
|
8,256
|
|
|
|
(2,167
|
)
|
|
|
675
|
|
|
|
—
|
|
|
|
(704
|
)
|
|
|
6,060
|
|
Commercial
|
|
|
457
|
|
|
|
(92
|
)
|
|
|
1,412
|
|
|
|
—
|
|
|
|
(1,511
|
)
|
|
|
266
|
|
Agriculture
|
|
|
125
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
124
|
|
Consumer installment loans
|
|
|
171
|
|
|
|
(101
|
)
|
|
|
41
|
|
|
|
—
|
|
|
|
17
|
|
|
|
128
|
|
All other loans
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
Unallocated
|
|
|
912
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
914
|
|
Total
|
|
$
|
9,922
|
|
|
$
|
(2,360
|
)
|
|
$
|
2,131
|
|
|
$
|
—
|
|
|
$
|
(2,200
|
)
|
|
$
|
7,493
|
|
|
|
Allowance for Loan Losses
|
|
Recorded Investment in Loans
|
As of December 31, 2015
(Dollars are in thousands)
|
|
Individually
Evaluated
for Impairment
|
|
Collectively Evaluated for Impairment
|
|
Total
|
|
Individually
Evaluated for Impairment
|
|
Collectively Evaluated for Impairment
|
|
Total
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
288
|
|
|
$
|
2,096
|
|
|
$
|
2,384
|
|
|
$
|
6,715
|
|
|
$
|
91,854
|
|
|
$
|
98,569
|
|
Construction and land
development
|
|
|
155
|
|
|
|
177
|
|
|
|
332
|
|
|
|
299
|
|
|
|
14,373
|
|
|
|
14,672
|
|
Residential 1-4 family
|
|
|
168
|
|
|
|
2,269
|
|
|
|
2,437
|
|
|
|
4,957
|
|
|
|
237,959
|
|
|
|
242,916
|
|
Multifamily
|
|
|
—
|
|
|
|
232
|
|
|
|
232
|
|
|
|
430
|
|
|
|
12,524
|
|
|
|
12,954
|
|
Farmland
|
|
|
328
|
|
|
|
347
|
|
|
|
675
|
|
|
|
4,744
|
|
|
|
17,430
|
|
|
|
22,174
|
|
Total real estate loans
|
|
|
939
|
|
|
|
5,121
|
|
|
|
6,060
|
|
|
|
17,145
|
|
|
|
374,140
|
|
|
|
391,285
|
|
Commercial
|
|
|
24
|
|
|
|
242
|
|
|
|
266
|
|
|
|
69
|
|
|
|
21,400
|
|
|
|
21,469
|
|
Agriculture
|
|
|
18
|
|
|
|
106
|
|
|
|
124
|
|
|
|
54
|
|
|
|
3,739
|
|
|
|
3,793
|
|
Consumer installment loans
|
|
|
2
|
|
|
|
126
|
|
|
|
128
|
|
|
|
56
|
|
|
|
24,512
|
|
|
|
24,568
|
|
All other loans
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
—
|
|
|
|
54
|
|
|
|
54
|
|
Unallocated
|
|
|
—
|
|
|
|
914
|
|
|
|
914
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
983
|
|
|
$
|
6,510
|
|
|
|
7,493
|
|
|
$
|
17,324
|
|
|
$
|
423,845
|
|
|
$
|
441,169
|
|
In determining the amount of our allowance,
we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions, as well as the
requirements of the written agreement and other regulatory input. If our assumptions prove to be incorrect, our current allowance
may not be sufficient to cover future loan losses and we may experience significant increases to our provision.
NOTE 8 TROUBLED DEBT RESTRUCTURINGS:
At March 31, 2016 there were $9.6 million
in loans that are classified as troubled debt restructurings compared to $9.5 million at December 31, 2015. The following table
presents information related to loans modified as troubled debt restructurings during the three months ended March 31, 2016 and
2015.
|
|
For the three months ended
March 31, 2016
|
|
For the three months ended
March 31, 2015
|
Troubled Debt Restructurings
(Dollars are in thousands)
|
|
# of Loans
|
|
Pre-Mod. Recorded Investment
|
|
Post-Mod.
Recorded
Investment
|
|
# of
Loans
|
|
Pre-Mod.
Recorded Investment
|
|
Post-Mod.
Recorded
Investment
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
1
|
|
|
$
|
341
|
|
|
$
|
339
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Construction and land
Development
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
551
|
|
|
|
360
|
|
Residential 1-4 family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Multifamily
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Farmland
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total real estate loans
|
|
|
1
|
|
|
|
341
|
|
|
|
339
|
|
|
|
1
|
|
|
|
551
|
|
|
|
360
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer installment loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
1
|
|
|
$
|
341
|
|
|
$
|
339
|
|
|
|
1
|
|
|
$
|
551
|
|
|
$
|
360
|
|
During the three months ended March 31, 2016,
the Company modified the terms of one loan for which the modification was considered to be a troubled debt restructuring. The
interest rate and maturity date were not modified; however, the payment terms were changed. During the three months ended March
31, 2015, the Company modified the terms of one loan for which the modification was considered to be a troubled debt restructuring.
The interest rate was not modified on the loan; however, the maturity date was extended.
There was one commercial real estate loan
with a recorded investment of $310 thousand that had been modified as a troubled debt restructuring that defaulted during the
three months ended March 31, 2016, which was within twelve months of the loan’s modification date. No loans modified as
troubled debt restructurings defaulted during the three months ended March 31, 2015. Generally, a troubled debt restructuring
is considered to be in default once it becomes 90 days or more past due following a modification.
In determination of the allowance for loan
losses, management considers troubled debt restructurings and subsequent defaults in these restructurings in its estimate. The
Company evaluates all troubled debt restructurings for possible further impairment. As a result, the allowance may be increased,
adjustments may be made in the allocation of the allowance, or charge-offs may be taken to further writedown the carrying value
of the loan.
NOTE 9 OTHER REAL ESTATE OWNED:
The following table summarizes the activity
in other real estate owned for the three months ended March 31, 2016 and the year ended December 31, 2015:
(Dollars are in thousands)
|
|
March 31, 2016
|
|
December 31, 2015
|
Balance, beginning of period
|
|
$
|
12,398
|
|
|
$
|
15,049
|
|
Additions
|
|
|
1,063
|
|
|
|
3,277
|
|
Purchases of other real estate owned
|
|
|
—
|
|
|
|
12
|
|
Donation of other real estate owned
|
|
|
—
|
|
|
|
(33
|
)
|
Proceeds from sales
|
|
|
(312
|
)
|
|
|
(2,709
|
)
|
Proceeds from insurance claims
|
|
|
—
|
|
|
|
(101
|
)
|
Adjustment of carrying value
|
|
|
4
|
|
|
|
(3,246
|
)
|
Deferred gain from sales
|
|
|
—
|
|
|
|
50
|
|
Gain (loss) from sales
|
|
|
43
|
|
|
|
99
|
|
Balance, end of period
|
|
$
|
13,196
|
|
|
$
|
12,398
|
|
NOTE 10 EARNINGS PER SHARE:
Basic earnings per share computations are
based on the weighted average number of shares outstanding during each period. Dilutive earnings per share reflect the additional
common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that
may be issued relate to outstanding options and common stock warrants are determined by the Treasury method. For the three-months
ended March 31, 2016 and 2015, potential common shares of 882,353 and 1,539,877, respectively, were anti-dilutive and were not
included in the calculation. Basic and diluted net income per common share calculations follows:
(Amounts in Thousands, Except Share and Per Share Data)
|
|
For the three months ended March 31,
|
|
|
2016
|
|
2015
|
Net income
|
|
$
|
698
|
|
|
$
|
622
|
|
Weighted average shares outstanding
|
|
|
23,354,082
|
|
|
|
22,878,654
|
|
Dilutive shares for stock options and warrants
|
|
|
—
|
|
|
|
—
|
|
Weighted average dilutive shares outstanding
|
|
|
23,354,082
|
|
|
|
22,878,654
|
|
|
|
|
|
|
|
|
|
|
Basic income per share
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
Diluted income per share
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
NOTE 11 TRUST PREFERRED SECURITIES AND
DEFERRAL OF INTEREST PAYMENTS:
On July 7, 2004, the Company completed the
issuance of $11.3 million in floating rate trust preferred securities offered by its wholly owned subsidiary, NPB Capital Trust
I. The proceeds of the funds were used for general corporate purposes which included capital management for affiliates, retirement
of indebtedness and other investments. The securities have a floating rate of 3 month LIBOR plus 260 basis points, which resets
quarterly, with a current rate at March 31, 2016 of 3.22%.
On September 27, 2006, the Company completed
the issuance of $5.2 million in floating rate trust preferred securities offered by its wholly owned subsidiary, NPB Capital Trust
2. The proceeds of the funds were used for general corporate purposes, which include capital management for affiliates and the
acquisition of two branch banks. The securities have a floating rate of 3 month LIBOR plus 177 basis points, which resets quarterly,
with a current rate at March 31, 2016 of 2.39%.
Under the terms of the subordinated debt transactions,
the securities mature in 30 years from the date of issuance and are redeemable, in whole or in part, without penalty, at the option
of the Company after five years. Due to the ability to defer interest and principal payments for 60 months without being considered
in default, the regulatory agencies consider the trust preferred securities as Tier 1 capital up to certain limits.
In October 2009, a restriction to pay dividends
from the Bank to the Company was issued by the Federal Reserve Bank of Richmond. In July 2010 the Company and the Bank entered
into the Written Agreement discussed in Note 3. The Written Agreement prohibited the payment of interest on the trust preferred
securities without prior regulatory approval. As a result, interest on trust preferred securities was deferred. This deferral
was for a period of 60 months, and was set to expire on January 7, 2015. In the fourth quarter of 2014, the Company requested
and received regulatory approval to pay the cumulative deferred interest on the trust preferred securities due on January 7, 2015
totaling $2.5 million, which the Company paid on December 10, 2014. As a result of this payment there was no interest in arrears
on the trust preferred securities as of December 31, 2014.
The Company is currently not deferring the
quarterly interest payments on the trust preferred securities. However, as discussed above, regulatory approval was needed to
pay the interest while the Company was under the formal Written Agreement. In March 2015 the Company requested and received regulatory
approval to pay the $107 thousand in interest on the trust preferred securities due on April 7, 2015, which the Company paid on
April 3, 2015. In June 2015 the Company requested and received regulatory approval to pay the $109 thousand in interest on the
trust preferred securities due on July 7, 2015, which the Company paid on July 2, 2015. In September 2015 the Company requested
and received regulatory approval to pay the $111 thousand in interest on the trust preferred securities due on October 7, 2015,
which the Company paid on October 5, 2015. In December 2015 the Company requested and received regulatory approval to pay the
$112 thousand in interest on the trust preferred securities due on January 7, 2016, which the Company paid on January 5, 2016.
The restriction requiring regulatory approval
before the payment of interest on the trust preferred securities was lifted when the Written Agreement was terminated effective
January 20, 2016. On April 4, 2016, the Company paid $124 thousand in interest on the trust preferred securities, which was due
on April 7, 2016.
NOTE 12 FAIR VALUES:
The financial reporting standard, “Fair
Value Measurements and Disclosures” provides a framework for measuring fair value under generally accepted accounting principles
and requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent
to initial recognition, whether the measurements are made on a recurring basis (for example, available-for-sale investment securities)
or on a nonrecurring basis (for example, impaired loans and other real estate acquired through foreclosure).
Fair value is the exchange price that would
be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date. Fair Value Measurements and
Disclosures also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure
fair value:
Level 1: Quoted prices in active markets for
identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that
are traded in an exchange market, as well as U. S. Treasury, other U. S. Government and agency mortgage-backed debt securities
that are highly liquid and are actively traded in over-the-counter markets.
Level 2: Observable inputs other than Level
1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs
that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded
instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market
or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative
contracts and impaired loans.
Level 3: Unobservable inputs that are supported
by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets and liabilities
include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques,
as well as instruments for which the determination of fair value requires significant management judgment or estimation. For example,
this category generally includes certain private equity investments, retained residual interests in securitizations, residential
mortgage servicing rights, and highly structured or long-term derivative contracts.
Investment Securities Available-for-Sale
–
Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is
based upon quoted prices. The Company’s available-for-sale securities, totaling $84.7 million and $101.6 million at March
31, 2016 and December 31, 2015, respectively, are the only assets whose fair values are measured on a recurring basis using Level
2 inputs from an independent pricing service.
Loans -
The Company does not record
loans at fair value on a recurring basis. Real estate serves as collateral on a substantial majority of the Company’s loans.
When a loan is considered impaired a specific reserve may be established. Loans which are deemed to be impaired and require a
reserve are primarily valued on a non-recurring basis at the fair values of the underlying real estate collateral. Such fair values
are obtained using independent appraisals, which management evaluates and determines whether or not the fair value of the collateral
is further impaired below the appraised value and there is no observable market price, or whether or not an appraised value does
not include estimated costs of disposition. The Company records impaired loans as nonrecurring Level 3 assets. The aggregate carrying
amounts of impaired loans carried at fair value were $15.9 million and $16.3 million at March 31, 2016 and December 31, 2015,
respectively.
Foreclosed Assets
–
Foreclosed
assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Foreclosed assets are carried at the
lower of the carrying value or fair value. Fair value is based upon independent observable market prices or appraised values
of the collateral with a third party less an estimate of disposition costs, which the Company considers to be level 2 inputs.
When the appraised value is not available, management determines the fair value of the collateral if further impaired below the
appraised value and there is no observable market price, or an appraised value does not include estimated costs of disposition
and management must make an estimate, the Company records the foreclosed asset as nonrecurring Level 3. The aggregate carrying
amounts of foreclosed assets were $13.2 million and $12.4 million at March 31, 2016 and December 31, 2015, respectively.
Assets and liabilities measured at fair value
are as follows as of March 31, 2016 (for purpose of this table the impaired loans are shown net of the related allowance):
(Dollars are in thousands)
|
|
Quoted market price in active markets
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
(On a recurring basis)
Available-for-sale investments
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
|
$
|
—
|
|
|
$
|
35,125
|
|
|
$
|
—
|
|
Taxable municipals
|
|
|
—
|
|
|
|
2,432
|
|
|
|
—
|
|
Corporate bonds
|
|
|
—
|
|
|
|
2,016
|
|
|
|
—
|
|
Mortgage backed securities
|
|
|
—
|
|
|
|
45,137
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(On a non-recurring basis)
Other real estate owned
|
|
|
—
|
|
|
|
—
|
|
|
|
13,196
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
5,628
|
|
Construction and land development
|
|
|
—
|
|
|
|
—
|
|
|
|
465
|
|
Residential 1-4 family
|
|
|
—
|
|
|
|
—
|
|
|
|
4,704
|
|
Multifamily
|
|
|
—
|
|
|
|
—
|
|
|
|
300
|
|
Farmland
|
|
|
—
|
|
|
|
—
|
|
|
|
4,522
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
45
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
137
|
|
Consumer installment loans
|
|
|
—
|
|
|
|
—
|
|
|
|
51
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
—
|
|
|
$
|
84,710
|
|
|
$
|
29,048
|
|
Assets and liabilities measured at fair value
are as follows as of December 31, 2015 (for purpose of this table the impaired loans are shown net of the related allowance):
(Dollars are in thousands)
|
|
Quoted market price in active markets
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
(On a recurring basis)
Available-for-sale investments
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
|
$
|
—
|
|
|
$
|
41,523
|
|
|
$
|
—
|
|
Taxable municipals
|
|
|
—
|
|
|
|
3,281
|
|
|
|
—
|
|
Corporate bonds
|
|
|
—
|
|
|
|
1,939
|
|
|
|
—
|
|
Mortgage backed securities
|
|
|
—
|
|
|
|
54,899
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(On a non-recurring basis)
Other real estate owned
|
|
|
—
|
|
|
|
—
|
|
|
|
12,398
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
6,427
|
|
Construction and land development
|
|
|
—
|
|
|
|
—
|
|
|
|
144
|
|
Residential 1-4 family
|
|
|
—
|
|
|
|
—
|
|
|
|
4,789
|
|
Multifamily
|
|
|
—
|
|
|
|
—
|
|
|
|
430
|
|
Farmland
|
|
|
—
|
|
|
|
—
|
|
|
|
4,416
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
45
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
36
|
|
Consumer installment loans
|
|
|
—
|
|
|
|
—
|
|
|
|
54
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
—
|
|
|
$
|
101,642
|
|
|
$
|
28,739
|
|
For Level
3 assets measured at fair value on a recurring or non-recurring basis as of March 31, 2016, the significant unobservable inputs
used in the fair value measurements were as follows:
For Level 3 assets measured at fair value
on a recurring or non-recurring basis as of March 31, 2014, the significant unobservable inputs used in the fair value measurements
were as follows:
(Dollars in thousands)
|
|
Fair Value at March 31,
2016
|
|
Valuation Technique
|
|
Significant Unobservable Inputs
|
|
General Range of Significant Unobservable Input Values
|
Impaired Loans
|
|
$
|
15,852
|
|
|
Appraised Value/Discounted Cash Flows/Market Value of Note
|
|
Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell
|
|
0 – 18%
|
|
|
|
|
|
|
|
|
|
|
|
Other Real Estate Owned
|
|
$
|
13,196
|
|
|
Appraised Value/Comparable Sales/Other Estimates from Independent Sources
|
|
Discounts to reflect current market conditions and estimated costs to sell
|
|
0 – 18%
|
Fair Value of Financial Instruments
Fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics
of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or
contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another
financial instrument.
The following summary
presents the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments presented
below. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results
may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality,
and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts
that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.
The following presents the carrying amount,
fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of March 31, 2016 and December
31, 2015. This table excludes financial instruments for which the carrying amount approximates fair value. The carrying value
of cash and due from banks, federal funds sold, interest-bearing deposits, deposits with no stated maturities, trust preferred
securities and accrued interest approximates fair value. The remaining financial instruments were valued based on the present
value of estimated future cash flows, discounted at various rates in effect for similar instruments as of March 31, 2016 and December
31, 2015.
|
|
|
|
|
|
Fair Value Measurements
|
(Dollars are in thousands)
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Quoted market price in active markets
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments – Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loans
|
|
$
|
443,090
|
|
|
$
|
445,827
|
|
|
$
|
—
|
|
|
$
|
429,975
|
|
|
$
|
15,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments – Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Deposits
|
|
|
251,295
|
|
|
|
250,854
|
|
|
|
—
|
|
|
|
250,854
|
|
|
|
—
|
|
FHLB Advances
|
|
|
12,658
|
|
|
|
12,658
|
|
|
|
—
|
|
|
|
12,658
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments – Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loans
|
|
$
|
433,676
|
|
|
$
|
438,589
|
|
|
$
|
—
|
|
|
$
|
422,248
|
|
|
$
|
16,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments – Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Deposits
|
|
|
256,978
|
|
|
|
256,797
|
|
|
|
—
|
|
|
|
256,797
|
|
|
|
—
|
|
FHLB Advances
|
|
|
2,958
|
|
|
|
2,958
|
|
|
|
—
|
|
|
|
2,958
|
|
|
|
—
|
|
NOTE 13 RECENT ACCOUNTING DEVELOPMENTS:
The following is a summary of recent authoritative
announcements:
In May 2014, the Financial Accounting Standards
Board (“FASB”) issued guidance to change the recognition of revenue from contracts with customers. The core principle
of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an
amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for
reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach.
The Company does not expect these amendments to have a material effect on its financial statements.
In January 2015, the FASB issued guidance
to eliminate from U.S. GAAP the concept of an extraordinary item, which is an event or transaction that is both (1) unusual in
nature and (2) infrequently occurring. Under the new guidance, an entity will no longer (1) segregate an extraordinary item from
the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income
from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. The
amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015,
with early adoption permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company
applied the guidance prospectively. Adoption of these amendments did not have a material effect on the Company’s financial
statements.
In February 2015, the FASB issued guidance
which amends the consolidation requirements and significantly changes the consolidation analysis required under U.S. GAAP. Although
the amendments are expected to result in the deconsolidation of many entities, the Company will need to reevaluate all its previous
consolidation conclusions. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2015, with early adoption permitted (including during an interim period), provided that the guidance is applied
as of the beginning of the annual period containing the adoption date. Adoption of these amendments did not have a material effect
on the Company’s financial statements.
In June 2015, the FASB issued amendments to
clarify the Accounting Standards Codification (“ASC”), correct unintended application of guidance, and make minor
improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant
cost to most entities. The amendments were effective upon issuance (June 12, 2015) for amendments that do not have transition
guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. Adoption
of these amendments did not have a material effect on the Company’s financial statements.
In August 2015, the FASB deferred the effective
date of ASU 2014-09, Revenue from Contracts with Customers. As a result of the deferral the guidance in ASU 2014-09 will be effective
for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have
a material effect on its financial statements.
In August 2015, the FASB issued amendments
to the Interest topic of the ASC to clarify the SEC staff’s position on presenting and measuring debt issuance costs incurred
in connection with line-of-credit arrangements. The amendments were effective upon issuance. The Company does not expect these
amendments to have a material effect on its financial statements.
In January 2016, the FASB amended the Financial
Instruments topic of the ASC to address certain aspects of recognition, measurement, presentation, and disclosure of financial
instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within
those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of
the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values
will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does
not expect these amendments to have a material effect on its financial statements.
In February 2016, the FASB amended the Leases
topic of the ASC to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions.
The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position,
results of operations, and cash flows.
In March 2016, the FASB amended the Revenue
from Contracts with Customers topic of the ASC to clarify the implementation guidance on principal versus agent considerations
and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties.
The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not
expect these amendments to have a material effect on its financial statements.
In March 2016, the FASB issued guidance to
simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the
classification of awards as either equity or liabilities, and the classification on the statement of cash flows. Additionally,
the guidance simplifies two areas specific to entities other than public business entities allowing them to apply a practical
expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics
and also allowing them to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring
them at intrinsic value. The amendments will be effective for the Company for annual periods beginning after December 15, 2016
and interim periods within those annual periods. The Company does not expect these amendments to have a material effect on its
financial statements.
Other accounting standards that have been
issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s
financial position, results of operations or cash flows.