*During the third quarter of 2016, 175 shares of common stock
were issued in connection with common stock warrants being exercised.
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. In July 2016, the Bank and its wholly-owned subsidiary
NPB Insurance Services, Inc. announced by press release it is teaming up with The Hilb Group of Virginia dba CSE Insurance Services,
a division of the Hilb Group, LLC (“CSE”), located in Abingdon, Virginia, to provide insurance services for its current
and future customers. Effective July 1, 2016, NPB Insurance Services, Inc. sold its existing book of business to CSE. These customers
will be serviced by CSE and the Bank will refer future insurance needs of its bank customers to CSE.
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 September 30, 2016 and December 31, 2015, and the results of operations for the
three and nine month periods ended September 30, 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 and nine month periods ended September 30, 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 under which the Company and the Bank were required to take certain actions and implement certain
plans. 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.
NOTE 4 CAPITAL:
Capital Requirements and Ratios
The Bank is 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 Bank’s financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, 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.
Quantitative measures established by regulation
to ensure capital adequacy require 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). As of September 30, 2016, the Bank meets all
capital adequacy requirements to which it is subject.
The Company meets eligibility criteria of
a small bank holding company in accordance with the Federal Reserve Board’s Small Bank Holding Company Policy Statement
issued in February 2015, and is no longer obligated to report consolidated regulatory capital. The Bank continues to be subject
to various capital requirements administered by banking agencies. The Bank’s actual capital amounts and ratios are presented
in the following table as of September 30, 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
|
September 30, 2016:
|
Total Capital to Risk Weighted
Assets:
|
New
Peoples Bank, Inc.
|
|
|
68,259
|
|
|
|
16.98
|
%
|
|
$
|
32,168
|
|
|
|
8.0
|
%
|
|
|
40,209
|
|
|
|
10.0
|
%
|
Tier
1 Capital to Risk Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Peoples Bank, Inc.
|
|
|
63,216
|
|
|
|
15.72
|
%
|
|
|
24,126
|
|
|
|
6.0
|
%
|
|
|
32,168
|
|
|
|
8.0
|
%
|
Tier
1 Capital to Average Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Peoples Bank, Inc.
|
|
|
63,216
|
|
|
|
10.00
|
%
|
|
|
25,287
|
|
|
|
4.0
|
%
|
|
|
31,609
|
|
|
|
5.0
|
%
|
Common
Equity Tier 1 Capital
to Risk Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Peoples Bank, Inc.
|
|
|
63,216
|
|
|
|
15.72
|
%
|
|
|
18,094
|
|
|
|
4.5
|
%
|
|
|
26,136
|
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital to Risk Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Peoples Bank, Inc.
|
|
|
65,713
|
|
|
|
17.55
|
%
|
|
$
|
29,954
|
|
|
|
8.0
|
%
|
|
|
37,443
|
|
|
|
10.0
|
%
|
Tier
1 Capital to Risk Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Peoples Bank, Inc.
|
|
|
60,998
|
|
|
|
16.29
|
%
|
|
|
22,466
|
|
|
|
6.0
|
%
|
|
|
29,954
|
|
|
|
8.0
|
%
|
Tier
1 Capital to Average Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Peoples Bank, Inc.
|
|
|
60,998
|
|
|
|
9.67
|
%
|
|
|
25,239
|
|
|
|
4.0
|
%
|
|
|
31,549
|
|
|
|
5.0
|
%
|
Common
Equity Tier 1 Capital
to Risk Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Peoples Bank, Inc.
|
|
|
60,998
|
|
|
|
16.29
|
%
|
|
|
16,849
|
|
|
|
4.5
|
%
|
|
|
24,338
|
|
|
|
6.5
|
%
|
As of September 30, 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 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, such as dividends, 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
|
September
30, 2016
|
U.S.
Government Agencies
|
$
|
26,995
|
$
|
314
|
$
|
51
|
$
|
27,258
|
Taxable
municipals
|
2,401
|
73
|
-
|
2,474
|
Corporate
bonds
|
3,100
|
186
|
-
|
3,286
|
Mortgage
backed securities
|
41,392
|
239
|
88
|
41,543
|
Total
Securities AFS
|
$
|
73,888
|
$
|
812
|
$
|
139
|
$
|
74,561
|
|
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 September 30, 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
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies
|
|
$
|
3,724
|
|
|
$
|
42
|
|
|
$
|
1,794
|
|
|
$
|
9
|
|
|
$
|
5,518
|
|
|
$
|
51
|
|
Mtg.
backed securities
|
|
|
7,915
|
|
|
|
45
|
|
|
|
4,938
|
|
|
|
43
|
|
|
|
12,853
|
|
|
|
88
|
|
Total
Securities AFS
|
|
$
|
11,639
|
|
|
$
|
87
|
|
|
$
|
6,732
|
|
|
$
|
52
|
|
|
$
|
18,371
|
|
|
$
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, 2016, the available-for-sale portfolio
included forty two 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, or
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.
Investment securities with a carrying value
of $11.8 million and $15.4 million at September 30, 2016 and December 31, 2015, respectively, were pledged as collateral to secure
public deposits and for other purposes required by law.
Gross proceeds on the sale of investment securities
were $24.8 million and $7.1 million, respectively, for the nine months ended September 30, 2016 and 2015. Gross realized gains
and losses pertaining to the sale of investment securities available for sale are detailed as follows:
|
|
|
|
|
|
|
|
|
|
|
For
the three months
ended September 30,
|
|
For
the nine months
ended September 30,
|
(Dollars
are in thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Gross
gains realized
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
275
|
|
|
$
|
62
|
|
Gross
losses realized
|
|
|
—
|
|
|
|
—
|
|
|
|
(35
|
)
|
|
|
(27
|
)
|
Net
realized gains
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
240
|
|
|
$
|
35
|
|
The amortized cost and fair value of investment
securities at September 30, 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
|
$
|
1,221
|
$
|
1,225
|
|
0.91%
|
Due
after one year through five years
|
656
|
657
|
1.84%
|
Due
after five years through ten years
|
|
12,836
|
|
13,107
|
|
2.50%
|
Due
after ten years
|
|
59,175
|
|
59,572
|
|
1.80%
|
Total
|
$
|
73,888
|
$
|
74,561
|
|
1.91%
|
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 $2.6 million
and $2.4 million as of September 30, 2016 and December 31, 2015, respectively.
NOTE 6 LOANS:
Loans receivable outstanding are summarized
as follows:
|
|
|
|
|
(Dollars
are in thousands)
|
|
September
30, 2016
|
|
December
31, 2015
|
Real
estate secured:
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
102,997
|
|
|
$
|
98,569
|
|
Construction
and land development
|
|
|
22,749
|
|
|
|
14,672
|
|
Residential
1-4 family
|
|
|
248,042
|
|
|
|
242,916
|
|
Multifamily
|
|
|
13,205
|
|
|
|
12,954
|
|
Farmland
|
|
|
23,828
|
|
|
|
22,174
|
|
Total
real estate loans
|
|
|
410,821
|
|
|
|
391,285
|
|
Commercial
|
|
|
26,246
|
|
|
|
21,469
|
|
Agriculture
|
|
|
4,459
|
|
|
|
3,793
|
|
Consumer
installment loans
|
|
|
23,177
|
|
|
|
24,568
|
|
All
other loans
|
|
|
18
|
|
|
|
54
|
|
Total
loans
|
|
$
|
464,721
|
|
|
$
|
441,169
|
|
Loans receivable on nonaccrual status
are summarized as follows:
|
|
|
|
|
|
|
|
|
|
(Dollars
are in thousands)
|
|
September
30, 2016
|
|
December
31, 2015
|
Real
estate secured:
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
3,671
|
|
|
$
|
4,358
|
|
Construction
and land development
|
|
|
354
|
|
|
|
436
|
|
Residential
1-4 family
|
|
|
8,145
|
|
|
|
8,338
|
|
Multifamily
|
|
|
169
|
|
|
|
430
|
|
Farmland
|
|
|
930
|
|
|
|
1,170
|
|
Total
real estate loans
|
|
|
13,269
|
|
|
|
14,732
|
|
Commercial
|
|
|
3
|
|
|
|
65
|
|
Agriculture
|
|
|
83
|
|
|
|
9
|
|
Consumer
installment loans
|
|
|
93
|
|
|
|
41
|
|
All
other loans
|
|
|
—
|
|
|
|
—
|
|
Total
loans receivable on nonaccrual status
|
|
$
|
13,448
|
|
|
$
|
14,847
|
|
Total interest income not recognized on nonaccrual
loans for the nine months ended September 30, 2016 and 2015 was $397 thousand and $486 thousand, respectively.
The following table presents information concerning
the Company’s investment in loans considered impaired as of September 30, 2016 and December 31, 2015:
|
|
|
|
|
|
|
As
of September 30, 2016
(Dollars
are in thousands)
|
Recorded
Investment
|
|
Unpaid
Principal Balance
|
|
Related
Allowance
|
|
With
no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
3,533
|
|
|
$
|
3,959
|
|
|
$
|
—
|
|
Construction
and land development
|
|
7
|
|
|
|
7
|
|
|
|
—
|
|
Residential
1-4 family
|
|
3,590
|
|
|
|
3,888
|
|
|
|
—
|
|
Multifamily
|
|
305
|
|
|
|
346
|
|
|
|
—
|
|
Farmland
|
|
4,358
|
|
|
|
5,050
|
|
|
|
—
|
|
Commercial
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Agriculture
|
|
19
|
|
|
|
19
|
|
|
|
—
|
|
Consumer
installment loans
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
All
other loans
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
With
an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
1,589
|
|
|
|
1,680
|
|
|
|
172
|
|
Construction
and land development
|
|
253
|
|
|
|
477
|
|
|
|
119
|
|
Residential
1-4 family
|
|
644
|
|
|
|
652
|
|
|
|
88
|
|
Multifamily
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Farmland
|
|
502
|
|
|
|
512
|
|
|
|
293
|
|
Commercial
|
|
67
|
|
|
|
67
|
|
|
|
19
|
|
Agriculture
|
|
8
|
|
|
|
8
|
|
|
|
8
|
|
Consumer
installment loans
|
|
53
|
|
|
|
53
|
|
|
|
20
|
|
All
other loans
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
14,928
|
|
|
$
|
16,718
|
|
|
$
|
719
|
|
As
of December 31, 2015
(Dollars
are in thousands)
|
|
Recorded
Investment
|
|
|
|
Unpaid
Principal Balance
|
|
|
|
Related
Allowance
|
|
With
no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
4,212
|
|
|
$
|
5,173
|
|
|
$
|
—
|
|
Construction
and land development
|
|
10
|
|
|
|
10
|
|
|
|
—
|
|
Residential
1-4 family
|
|
3,037
|
|
|
|
3,150
|
|
|
|
—
|
|
Multifamily
|
|
430
|
|
|
|
471
|
|
|
|
—
|
|
Farmland
|
|
3,983
|
|
|
|
4,620
|
|
|
|
—
|
|
Commercial
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Agriculture
|
|
36
|
|
|
|
36
|
|
|
|
—
|
|
Consumer
installment loans
|
|
11
|
|
|
|
11
|
|
|
|
—
|
|
All
other loans
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
With
an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
2,503
|
|
|
|
2,849
|
|
|
|
288
|
|
Construction
and land development
|
|
289
|
|
|
|
499
|
|
|
|
155
|
|
Residential
1-4 family
|
|
1,920
|
|
|
|
2,121
|
|
|
|
168
|
|
Multifamily
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Farmland
|
|
761
|
|
|
|
778
|
|
|
|
328
|
|
Commercial
|
|
69
|
|
|
|
69
|
|
|
|
24
|
|
Agriculture
|
|
18
|
|
|
|
18
|
|
|
|
18
|
|
Consumer
installment loans
|
|
45
|
|
|
|
45
|
|
|
|
2
|
|
All
other loans
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
17,324
|
|
|
$
|
19,850
|
|
|
$
|
983
|
|
The following table presents information concerning
the Company’s average impaired loans and interest recognized on those impaired loans, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
September 30, 2016
|
|
September 30, 2015
|
(Dollars are in thousands)
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
4,222
|
|
|
$
|
77
|
|
|
$
|
4,615
|
|
|
$
|
102
|
|
Construction and land development
|
|
|
89
|
|
|
|
—
|
|
|
|
13
|
|
|
|
1
|
|
Residential 1-4 family
|
|
|
3,716
|
|
|
|
140
|
|
|
|
3,623
|
|
|
|
140
|
|
Multifamily
|
|
|
288
|
|
|
|
14
|
|
|
|
543
|
|
|
|
5
|
|
Farmland
|
|
|
4,211
|
|
|
|
163
|
|
|
|
5,346
|
|
|
|
94
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
333
|
|
|
|
—
|
|
Agriculture
|
|
|
29
|
|
|
|
2
|
|
|
|
44
|
|
|
|
3
|
|
Consumer installment loans
|
|
|
24
|
|
|
|
—
|
|
|
|
36
|
|
|
|
4
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
1,539
|
|
|
|
6
|
|
|
|
3,043
|
|
|
|
58
|
|
Construction and land development
|
|
|
271
|
|
|
|
—
|
|
|
|
394
|
|
|
|
—
|
|
Residential 1-4 family
|
|
|
939
|
|
|
|
18
|
|
|
|
2,294
|
|
|
|
84
|
|
Multifamily
|
|
|
100
|
|
|
|
—
|
|
|
|
28
|
|
|
|
—
|
|
Farmland
|
|
|
572
|
|
|
|
18
|
|
|
|
942
|
|
|
|
28
|
|
Commercial
|
|
|
71
|
|
|
|
2
|
|
|
|
83
|
|
|
|
3
|
|
Agriculture
|
|
|
107
|
|
|
|
1
|
|
|
|
26
|
|
|
|
1
|
|
Consumer installment loans
|
|
|
30
|
|
|
|
1
|
|
|
|
13
|
|
|
|
—
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
16,208
|
|
|
$
|
442
|
|
|
$
|
21,376
|
|
|
$
|
523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
September 30, 2016
|
|
September 30, 2015
|
(Dollars are in thousands)
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
3,965
|
|
|
$
|
4
|
|
|
$
|
4,916
|
|
|
$
|
43
|
|
Construction and land development
|
|
|
7
|
|
|
|
—
|
|
|
|
12
|
|
|
|
1
|
|
Residential 1-4 family
|
|
|
3,833
|
|
|
|
37
|
|
|
|
3,674
|
|
|
|
47
|
|
Multifamily
|
|
|
307
|
|
|
|
3
|
|
|
|
434
|
|
|
|
3
|
|
Farmland
|
|
|
4,274
|
|
|
|
61
|
|
|
|
4,963
|
|
|
|
42
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
105
|
|
|
|
(2
|
)
|
Agriculture
|
|
|
23
|
|
|
|
—
|
|
|
|
36
|
|
|
|
—
|
|
Consumer installment loans
|
|
|
22
|
|
|
|
(2
|
)
|
|
|
59
|
|
|
|
1
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
1,309
|
|
|
|
6
|
|
|
|
2,411
|
|
|
|
18
|
|
Construction and land development
|
|
|
259
|
|
|
|
—
|
|
|
|
407
|
|
|
|
—
|
|
Residential 1-4 family
|
|
|
606
|
|
|
|
7
|
|
|
|
2,162
|
|
|
|
31
|
|
Multifamily
|
|
|
83
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
Farmland
|
|
|
504
|
|
|
|
6
|
|
|
|
781
|
|
|
|
9
|
|
Commercial
|
|
|
68
|
|
|
|
—
|
|
|
|
82
|
|
|
|
1
|
|
Agriculture
|
|
|
97
|
|
|
|
3
|
|
|
|
23
|
|
|
|
—
|
|
Consumer installment loans
|
|
|
32
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
15,389
|
|
|
$
|
122
|
|
|
$
|
20,065
|
|
|
$
|
194
|
|
An age analysis of past due loans receivable
was as follows:
As of September 30, 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
|
|
$
|
747
|
|
|
$
|
305
|
|
|
$
|
1,819
|
|
|
$
|
2,871
|
|
|
$
|
100,126
|
|
|
$
|
102,997
|
|
|
$
|
—
|
|
Construction and land
development
|
|
|
100
|
|
|
|
—
|
|
|
|
64
|
|
|
|
164
|
|
|
|
22,585
|
|
|
|
22,749
|
|
|
|
—
|
|
Residential 1-4 family
|
|
|
4,099
|
|
|
|
1,312
|
|
|
|
1,669
|
|
|
|
7,080
|
|
|
|
240,962
|
|
|
|
248,042
|
|
|
|
—
|
|
Multifamily
|
|
|
1,720
|
|
|
|
—
|
|
|
|
67
|
|
|
|
1,787
|
|
|
|
11,418
|
|
|
|
13,205
|
|
|
|
—
|
|
Farmland
|
|
|
82
|
|
|
|
—
|
|
|
|
—
|
|
|
|
82
|
|
|
|
23,746
|
|
|
|
23,828
|
|
|
|
—
|
|
Total real estate loans
|
|
|
6,748
|
|
|
|
1,617
|
|
|
|
3,619
|
|
|
|
11,984
|
|
|
|
398,837
|
|
|
|
410,821
|
|
|
|
—
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,246
|
|
|
|
26,246
|
|
|
|
—
|
|
Agriculture
|
|
|
15
|
|
|
|
—
|
|
|
|
79
|
|
|
|
94
|
|
|
|
4,365
|
|
|
|
4,459
|
|
|
|
—
|
|
Consumer installment
Loans
|
|
|
91
|
|
|
|
—
|
|
|
|
68
|
|
|
|
159
|
|
|
|
23,018
|
|
|
|
23,177
|
|
|
|
—
|
|
All other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
|
|
18
|
|
|
|
—
|
|
Total loans
|
|
$
|
6,854
|
|
|
$
|
1,617
|
|
|
$
|
3,766
|
|
|
$
|
12,237
|
|
|
$
|
452,484
|
|
|
$
|
464,721
|
|
|
$
|
—
|
|
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 September 30, 2016
(Dollars
are in thousands)
|
|
Pass
|
|
Special
Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
Real
estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
91,708
|
|
|
$
|
7,165
|
|
|
$
|
4,124
|
|
|
$
|
—
|
|
|
$
|
102,997
|
|
Construction
and land development
|
|
|
20,885
|
|
|
|
1,539
|
|
|
|
325
|
|
|
|
—
|
|
|
|
22,749
|
|
Residential
1-4 family
|
|
|
237,338
|
|
|
|
2,054
|
|
|
|
8,650
|
|
|
|
—
|
|
|
|
248,042
|
|
Multifamily
|
|
|
12,831
|
|
|
|
—
|
|
|
|
374
|
|
|
|
—
|
|
|
|
13,205
|
|
Farmland
|
|
|
17,847
|
|
|
|
3,531
|
|
|
|
2,450
|
|
|
|
—
|
|
|
|
23,828
|
|
Total
real estate loans
|
|
|
380,609
|
|
|
|
14,289
|
|
|
|
15,923
|
|
|
|
—
|
|
|
|
410,821
|
|
Commercial
|
|
|
25,483
|
|
|
|
696
|
|
|
|
67
|
|
|
|
—
|
|
|
|
26,246
|
|
Agriculture
|
|
|
4,368
|
|
|
|
—
|
|
|
|
91
|
|
|
|
—
|
|
|
|
4,459
|
|
Consumer
installment loans
|
|
|
23,016
|
|
|
|
—
|
|
|
|
161
|
|
|
|
—
|
|
|
|
23,177
|
|
All
other loans
|
|
|
18
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
Total
|
|
$
|
433,494
|
|
|
$
|
14,985
|
|
|
$
|
16,242
|
|
|
$
|
—
|
|
|
$
|
464,721
|
|
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 September 30, 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 September 30, 2016
(Dollars
are in thousands)
|
|
Beginning
Balance
|
|
Charge
Offs
|
|
Recoveries
|
|
Advances
|
|
Provisions
|
|
Ending
Balance
|
Real
estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
2,384
|
|
|
$
|
(417
|
)
|
|
$
|
217
|
|
|
$
|
—
|
|
|
$
|
(238
|
)
|
|
$
|
1,946
|
|
Construction
and land development
|
|
|
332
|
|
|
|
(5
|
)
|
|
|
24
|
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
346
|
|
Residential
1-4 family
|
|
|
2,437
|
|
|
|
(601
|
)
|
|
|
78
|
|
|
|
—
|
|
|
|
329
|
|
|
|
2,243
|
|
Multifamily
|
|
|
232
|
|
|
|
(18
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
19
|
|
|
|
233
|
|
Farmland
|
|
|
675
|
|
|
|
(2
|
)
|
|
|
102
|
|
|
|
—
|
|
|
|
(144
|
)
|
|
|
631
|
|
Total
real estate loans
|
|
|
6,060
|
|
|
|
(1,043
|
)
|
|
|
421
|
|
|
|
—
|
|
|
|
(39
|
)
|
|
|
5,399
|
|
Commercial
|
|
|
266
|
|
|
|
(65
|
)
|
|
|
52
|
|
|
|
—
|
|
|
|
(46
|
)
|
|
|
207
|
|
Agriculture
|
|
|
124
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
(87
|
)
|
|
|
43
|
|
Consumer
installment loans
|
|
|
128
|
|
|
|
(22
|
)
|
|
|
16
|
|
|
|
—
|
|
|
|
9
|
|
|
|
131
|
|
All
other loans
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
Unallocated
|
|
|
914
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(336
|
)
|
|
|
578
|
|
Total
|
|
$
|
7,493
|
|
|
$
|
(1,130
|
)
|
|
$
|
495
|
|
|
$
|
—
|
|
|
$
|
(500
|
)
|
|
$
|
6,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for Loan Losses
|
|
Recorded
Investment in Loans
|
As
of September 30, 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
|
$
|
172
|
$
|
1,774
|
$
|
1,946
|
$
|
5,122
|
$
|
97,875
|
$
|
102,997
|
Construction
and land
development
|
|
119
|
|
227
|
|
346
|
|
260
|
|
22,489
|
|
22,749
|
Residential
1-4 family
|
|
88
|
|
2,155
|
|
2,243
|
|
4,234
|
|
243,808
|
|
248,042
|
Multifamily
|
|
-
|
|
233
|
|
233
|
|
305
|
|
12,900
|
|
13,205
|
Farmland
|
|
293
|
|
338
|
|
631
|
|
4,860
|
|
18,968
|
|
23,828
|
Total
real estate loans
|
|
672
|
|
4,727
|
|
5,399
|
|
14,781
|
|
396,040
|
|
410,821
|
Commercial
|
|
19
|
|
188
|
|
207
|
|
67
|
|
26,179
|
|
26,246
|
Agriculture
|
|
8
|
|
35
|
|
43
|
|
27
|
|
4,432
|
|
4,459
|
Consumer
installment loans
|
|
20
|
|
111
|
|
131
|
|
53
|
|
23,124
|
|
23,177
|
All
other loans
|
|
-
|
|
-
|
|
-
|
|
-
|
|
18
|
|
18
|
Unallocated
|
|
-
|
|
578
|
|
578
|
|
-
|
|
-
|
|
-
|
Total
|
$
|
719
|
$
|
5,639
|
$
|
6,358
|
$
|
14,928
|
$
|
449,793
|
$
|
464,721
|
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
September 30, 2016 there were $9.4 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 nine and three months ended September 30, 2016 and 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the nine months ended
September 30, 2016
|
|
For
the nine months ended
September 30, 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
|
|
|
$
|
341
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Construction
and land
Development
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
551
|
|
|
|
302
|
|
Residential
1-4 family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
225
|
|
|
|
224
|
|
Multifamily
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Farmland
|
|
|
1
|
|
|
|
291
|
|
|
|
280
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
real estate loans
|
|
|
2
|
|
|
|
632
|
|
|
|
621
|
|
|
|
3
|
|
|
|
776
|
|
|
|
526
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer
installment loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
All
other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
2
|
|
|
$
|
632
|
|
|
$
|
621
|
|
|
|
3
|
|
|
$
|
776
|
|
|
$
|
526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the three months ended
September
30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
For
the three months ended
September
30, 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
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Construction
and land
Development
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Residential
1-4 family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
225
|
|
|
|
224
|
|
Multifamily
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Farmland
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
real estate loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
225
|
|
|
|
224
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer
installment loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
All
other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
2
|
|
|
$
|
225
|
|
|
$
|
224
|
|
During
the nine months ended September 30, 2016, the Company modified the terms of two loans for which the modification was considered
to be a troubled debt restructuring. On one loan the interest rate and maturity date were not modified; however, the payment terms
were changed. On one loan the interest rate was lowered and the payment terms and maturity date were changed. During the nine
months ended September 30, 2015, the Company modified the terms of three loans for which the modification was considered to be
a troubled debt restructuring. On two of the loans we modified the terms and lowered the interest rate. On one loan the interest
rate was not modified; however, the maturity date was extended.
During
the three months ended September 30, 2016, the Company modified no loans that were considered to be a troubled debt restructuring.
During the three months ended September 30, 2015, the Company modified the terms of two loans for which the modification was considered
to be a troubled debt restructuring. On the two loans we modified the terms and lowered the interest rate.
One commercial real estate loan with a recorded
investment of $302 thousand that had been modified as a troubled debt restructuring defaulted during the nine months ended September
30, 2016, which was within twelve months of the loan’s modification date. No loans modified as troubled debt restructurings
defaulted during the nine months ended September 30, 2015. No loans modified as troubled debt restructurings defaulted during the
three months ended September 30, 2016 and 2015, which were within twelve months of their modification date. 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 nine months ended September 30, 2016 and the year
ended December 31, 2015:
(Dollars
are in thousands)
|
|
September
30,
2016
|
|
December
31, 2015
|
Balance,
beginning of period
|
|
$
|
12,398
|
|
|
$
|
15,049
|
|
Additions
|
|
|
3,851
|
|
|
|
3,277
|
|
Purchases
of other real estate owned
|
|
|
—
|
|
|
|
12
|
|
Transfers
of other real estate owned
|
|
|
(125
|
)
|
|
|
—
|
|
Donation
of other real estate owned
|
|
|
—
|
|
|
|
(33
|
)
|
Proceeds
from sales
|
|
|
(2,379
|
)
|
|
|
(1,831
|
)
|
Loans
made to finance sales
|
|
|
(676
|
)
|
|
|
(878
|
)
|
Proceeds
from insurance claims
|
|
|
—
|
|
|
|
(101
|
)
|
Adjustment
of carrying value
|
|
|
(165
|
)
|
|
|
(3,246
|
)
|
Deferred
gain from sales
|
|
|
—
|
|
|
|
50
|
|
Gain
from sales
|
|
|
290
|
|
|
|
99
|
|
Balance,
end of period
|
|
$
|
13,194
|
|
|
$
|
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 and nine months ended September 30, 2016 and 2015, potential common shares of 882,178 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 September 30,
|
|
For
the nine months
ended September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net
income
|
|
$
|
346
|
|
|
$
|
2,293
|
|
|
$
|
1,926
|
|
|
$
|
3,377
|
|
Weighted
average shares outstanding
|
|
|
23,354,111
|
|
|
|
22,878,654
|
|
|
|
23,354,092
|
|
|
|
22,878,654
|
|
Dilutive
shares for stock options and warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Weighted
average dilutive shares outstanding
|
|
|
23,354,111
|
|
|
|
22,878,654
|
|
|
|
23,354,092
|
|
|
|
22,878,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
income per share
|
|
$
|
0.01
|
|
|
$
|
0.10
|
|
|
$
|
0.08
|
|
|
$
|
0.15
|
|
Diluted
income per share
|
|
$
|
0.01
|
|
|
$
|
0.10
|
|
|
$
|
0.08
|
|
|
$
|
0.15
|
|
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 September 30, 2016 of 3.28%.
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 September 30, 2016 of 2.45%.
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 has been no interest in arrears on the trust preferred securities since that date.
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. On July 6, 2016 the Company paid $124 thousand in interest on the
trust preferred securities, which was due on July 7, 2016. On October 4, 2016 the Company paid $127 thousand in interest on the
trust preferred securities, which was due on October 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 establish 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 $74.6 million
and $101.6 million at September 30, 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 $14.2 million and
$16.3 million at September 30, 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 September 30, 2016 and December
31, 2015, respectively.
Assets
and liabilities measured at fair value are as follows as of September 30, 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
|
|
$
|
—
|
|
|
$
|
27,258
|
|
|
$
|
—
|
|
Taxable
municipals
|
|
|
—
|
|
|
|
2,474
|
|
|
|
—
|
|
Corporate
bonds
|
|
|
—
|
|
|
|
3,286
|
|
|
|
—
|
|
Mortgage
backed securities
|
|
|
—
|
|
|
|
41,543
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(On
a non-recurring basis)
Other real estate owned
|
|
|
—
|
|
|
|
—
|
|
|
|
13,194
|
|
Impaired
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate secured:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
4,950
|
|
Construction
and land development
|
|
|
—
|
|
|
|
—
|
|
|
|
141
|
|
Residential
1-4 family
|
|
|
—
|
|
|
|
—
|
|
|
|
4,146
|
|
Multifamily
|
|
|
—
|
|
|
|
—
|
|
|
|
305
|
|
Farmland
|
|
|
—
|
|
|
|
—
|
|
|
|
4,567
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
48
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
19
|
|
Consumer
installment loans
|
|
|
—
|
|
|
|
—
|
|
|
|
33
|
|
All
other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
—
|
|
|
$
|
74,561
|
|
|
$
|
27,403
|
|
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 September 30, 2016, the significant unobservable
inputs used in the fair value measurements were as follows:
(Dollars
in thousands)
|
|
Fair
Value at September 30,
2016
|
|
Valuation
Technique
|
|
Significant
Unobservable Inputs
|
|
General
Range of Significant Unobservable Input Values
|
|
|
|
|
|
|
|
|
|
Impaired
Loans
|
$
|
14,209
|
|
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
|
$
|
13,194
|
|
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 September 30, 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 September 30, 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)
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments – Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loans
|
|
$
|
458,363
|
|
|
$
|
461,025
|
|
|
$
|
—
|
|
|
$
|
446,816
|
|
|
$
|
14,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments – Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Deposits
|
|
|
247,956
|
|
|
|
247,529
|
|
|
|
—
|
|
|
|
247,529
|
|
|
|
—
|
|
FHLB Advances
|
|
|
9,058
|
|
|
|
9,110
|
|
|
|
—
|
|
|
|
9,110
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. Adoption of these amendments did not have a material effect on the Company’s 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.
In
April 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify guidance related to identifying
performance obligations and accounting for licenses of intellectual property. 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
May 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify guidance related to collectability,
noncash consideration, presentation of sales tax, and transition. 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
June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt
securities. The amendments will be effective for the Company for reporting periods beginning after December 15, 2019. 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
August 2016, the FASB amended the Statement of Cash Flows topic of the ASC to clarify how certain cash receipts and cash payments
are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years
beginning after December 15, 2017 including interim periods within those fiscal years. 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.