FIRST US BANCSHARES, INC. AND SUBSIDIARIES
N
OTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited interim condensed consolidated financial statements include the accounts of First US Bancshares, Inc. (“Bancshares”) and its subsidiaries (collectively, the “Company”). Bancshares is the parent holding company of First US Bank (the “Bank”). The Bank operates a finance company subsidiary, Acceptance Loan Company, Inc. (“ALC”). Management has determined that the Bank and ALC comprise Bancshares’ two reportable operating segments. All significant intercompany transactions and accounts have been eliminated.
The unaudited interim condensed consolidated financial statements, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. The results of operations for any interim period are not necessarily indicative of results expected for the fiscal year ending December 31, 2017
. While certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), management believes that the disclosures herein are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2016.
Summary of Significant Accounting Policies
Certain significant accounting policies followed by the Company are set forth in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2016.
Net Income Per Share and Comprehensive Income
Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Included in basic shares are certain shares that have been accrued as of the balance sheet date as deferred comp
ensation for members of Bancshares’ Board of Directors. Diluted net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period, adjusted for the effect of potentially dilutive stock awards outstanding during the period. The dilutive shares consist of nonqualified stock option grants issued to employees and members of Bancshares’ Board of Directors pursuant to Bancshares’ 2013 Incentive Plan (the “2013 Incentive Plan”) previously approved by Bancshares’ shareholders. The following table reflects weighted average shares used to calculate basic and diluted net income per share for the periods presented.
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Basic shares
|
|
|
6,176,381
|
|
|
|
6,151,701
|
|
|
|
6,170,892
|
|
|
|
6,147,325
|
|
Dilutive shares
|
|
|
320,501
|
|
|
|
272,550
|
|
|
|
320,501
|
|
|
|
272,550
|
|
Diluted shares
|
|
|
6,496,882
|
|
|
|
6,424,251
|
|
|
|
6,491,393
|
|
|
|
6,419,875
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in Thousands, Except Per Share Data)
|
|
Net income
|
|
$
|
635
|
|
|
$
|
550
|
|
|
$
|
1,455
|
|
|
$
|
1,329
|
|
Basic net income per share
|
|
$
|
0.10
|
|
|
$
|
0.09
|
|
|
$
|
0.24
|
|
|
$
|
0.22
|
|
Diluted net income per share
|
|
$
|
0.10
|
|
|
$
|
0.09
|
|
|
$
|
0.22
|
|
|
$
|
0.21
|
|
Comprehensive income consists of net income, as well as unrealized holding gains and losses that arise during the period associated with the Company’
s available-for-sale securities portfolio and the effective portion of cash flow hedge derivatives. In the calculation of comprehensive income, reclassification adjustments are made for gains or losses realized in the statement of operations associated with the sale of available-for-sale securities or changes in the fair value of cash flow derivatives.
Accounting Policies Recently Adopted and Pending Accounting Pronouncements
Accounting Standards Update (“
ASU”) 2016-13
,
"Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.”
Issued in June 2016, ASU 2016-13 removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all current recognition thresholds and will require companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net income; the amount recognized will be based on the current estimate of contractual cash flows not expected to be collected over the financial asset’s contractual term. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities. For public business entities, ASU 2016-13 is effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2019. Institutions will be required to apply the changes through a cumulative-effect adjustment to their retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.
ASU 2016-09, “
Compensation-Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting.”
Issued in March 2016, ASU 2016-09 seeks to reduce complexity in accounting standards by simplifying several aspects of the accounting for share-based payment transactions, including (1) accounting for income taxes; (2) classification of excess tax benefits on the statement of cash flows; (3) forfeitures; (4) minimum statutory tax withholding requirements; (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax withholding purposes; (6) the practical expedient for estimating the expected term; and (7) intrinsic value. ASU 2016-09 became effective for the Company on January 1, 2017. The adoption of ASU 2016-09 did not have a material impact on the Company’s consolidated financial statements.
ASU 2016-05
, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.”
Issued in March 2016, ASU 2016-05
clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815 does not, in and of itself, require de-designation of that hedging relationship, provided that all other hedge accounting criteria continue to be met. ASU 2016-05 became effective for the Company on January 1, 2017. The adoption of ASU 2016-05 did not have a material impact on the Company’s consolidated financial statements.
ASU 2016-02, “
Leases (Topic 842).”
Issued in February 2016, ASU 2016-02 was issued by the FASB to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and by disclosing key information about leasing arrangements. ASU 2016-02 will require organizations that lease assets (lessees) to recognize on the balance sheet the assets and liabilities for the rights and obligations created by the lease for all operating leases under current U.S. GAAP with a term of more than 12 months. The recognition, measurement and presentation of expenses and cash flows arising from a lease are not significantly changed under ASU 2016-02, and there will continue to be differentiation between finance leases and operating leases. The accounting applied by the lessor in a lease transaction remains largely unchanged from previous U.S. GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.
ASU 2016-01, “
Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (An Amendment of FASB ASC 825).”
Issued in January 2016, ASU 2016-01 is intended to enhance the reporting model for financial instruments to provide users of financial statements with improved decision-making information. The amendments of ASU 2016-01 include: (i) requiring equity investments, except those accounted for under the equity method of accounting or those that result in the consolidation of an investee, to be measured at fair value, with changes in fair value recognized in net income; (ii) requiring a qualitative assessment to identify impairment of equity investments without readily determinable fair values; and (iii) clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments of ASU 2016-01 are effective for interim and annual periods beginning after December 15, 2017. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.
ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).”
Issued in May 2014, ASU 2014-09 will add
FASB ASC Topic 606, Revenue from Contracts with Customers,
and will supersede revenue recognition requirements in
FASB ASC Topic 605, Revenue Recognition
and certain cost guidance in
FASB ASC Topic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts.
ASU 2014-09 requires an entity to recognize revenue when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue should be recognized either over time, in a manner that depicts the entity’s performance, or at a point in time, when control of the goods or services is transferred to the customer.
ASU 2015-14,
“Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date,”
issued in August 2015, defers the effective date of ASU 2014-09 by one year. ASU 2015-14 provides that the amendments of ASU 2014-09 become effective for interim and annual periods beginning after December 15, 2017. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements, as well as the most appropriate method of application. However, because this guidance does not apply to revenue associated with financial instruments, including loans and securities accounted for under other U.S. GAAP, the adoption of ASU 2014-09 is not expected to have a material impact on the Company’s consolidated financial statements. Further, management has determined that the adoption of this ASU for revenue streams reported within non-interest income that are within the scope of the accounting standard will not materially impact the Company’s consolidated financial statements.
Details of investment securities available-for-sale and held-to-maturity as of
September 30, 2017 and December 31, 2016 were as follows:
|
|
Available-for-Sale
|
|
|
|
September 30
, 2017
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
83,391
|
|
|
$
|
477
|
|
|
$
|
(318
|
)
|
|
$
|
83,550
|
|
Commercial
|
|
|
67,781
|
|
|
|
62
|
|
|
|
(705
|
)
|
|
|
67,138
|
|
Obligations of states and political subdivisions
|
|
|
5,424
|
|
|
|
231
|
|
|
|
—
|
|
|
|
5,655
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
2,000
|
|
|
|
2
|
|
|
|
—
|
|
|
|
2,002
|
|
U.S. Treasury securities
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
80
|
|
Total
|
|
$
|
158,676
|
|
|
$
|
772
|
|
|
$
|
(1,023
|
)
|
|
$
|
158,425
|
|
|
|
Held-to-Maturity
|
|
|
|
September 30
, 2017
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
15,976
|
|
|
$
|
18
|
|
|
$
|
(61
|
)
|
|
$
|
15,933
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
9,458
|
|
|
|
25
|
|
|
|
(79
|
)
|
|
|
9,404
|
|
Obligations of states and political subdivisions
|
|
|
1,943
|
|
|
|
26
|
|
|
|
(3
|
)
|
|
|
1,966
|
|
Total
|
|
$
|
27,377
|
|
|
$
|
69
|
|
|
$
|
(143
|
)
|
|
$
|
27,303
|
|
|
|
Available-for-Sale
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
99,922
|
|
|
$
|
490
|
|
|
$
|
(2,003
|
)
|
|
$
|
98,409
|
|
Commercial
|
|
|
71,761
|
|
|
|
56
|
|
|
|
(1,287
|
)
|
|
|
70,530
|
|
Obligations of states and political subdivisions
|
|
|
9,759
|
|
|
|
390
|
|
|
|
(7
|
)
|
|
|
10,142
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
2,000
|
|
|
|
—
|
|
|
|
(7
|
)
|
|
|
1,993
|
|
Corporate notes
|
|
|
756
|
|
|
|
—
|
|
|
|
—
|
|
|
|
756
|
|
U.S. Treasury securities
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
80
|
|
Total
|
|
$
|
184,278
|
|
|
$
|
936
|
|
|
$
|
(3,304
|
)
|
|
$
|
181,910
|
|
|
|
Held-to-Maturity
|
|
|
|
December 31, 2016
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
14,684
|
|
|
$
|
5
|
|
|
$
|
(148
|
)
|
|
$
|
14,541
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
9,129
|
|
|
|
13
|
|
|
|
(222
|
)
|
|
|
8,920
|
|
Obligations of states and political subdivisions
|
|
|
2,091
|
|
|
|
2
|
|
|
|
(46
|
)
|
|
|
2,047
|
|
Total
|
|
$
|
25,904
|
|
|
$
|
20
|
|
|
$
|
(416
|
)
|
|
$
|
25,508
|
|
The scheduled maturities of investment securities available-for-sale and held-to-maturity as of September 30
, 2017 are presented in the following table:
|
|
Available-for-Sale
|
|
|
Held-to-Maturity
|
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair
Value
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair
Value
|
|
|
|
(Dollars in Thousands)
|
|
Maturing within one year
|
|
$
|
490
|
|
|
$
|
496
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Maturing after one to five years
|
|
|
8,674
|
|
|
|
8,723
|
|
|
|
2,048
|
|
|
|
2,079
|
|
Maturing after five to ten years
|
|
|
71,462
|
|
|
|
71,596
|
|
|
|
2,904
|
|
|
|
2,899
|
|
Maturing after ten years
|
|
|
78,050
|
|
|
|
77,610
|
|
|
|
22,425
|
|
|
|
22,325
|
|
Total
|
|
$
|
158,676
|
|
|
$
|
158,425
|
|
|
$
|
27,377
|
|
|
$
|
27,303
|
|
For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the weighted-average contractual maturities of underlying collateral. The mortgage-backed securities generally mature earlier than their weighted-average contractual maturities because of principal prepayments.
The following table reflects gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of
September 30, 2017 and December 31, 2016.
|
|
Available-for-Sale
|
|
|
|
September 30
, 2017
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
38,784
|
|
|
$
|
(115
|
)
|
|
$
|
14,350
|
|
|
$
|
(203
|
)
|
Commercial
|
|
|
19,576
|
|
|
|
(145
|
)
|
|
|
37,291
|
|
|
|
(560
|
)
|
U.S. Treasury securities
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
58,440
|
|
|
$
|
(260
|
)
|
|
$
|
51,641
|
|
|
$
|
(763
|
)
|
|
|
Held-to-Maturity
|
|
|
|
September 30
, 2017
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
Commercial
|
|
$
|
9,643
|
|
|
$
|
(58
|
)
|
|
$
|
423
|
|
|
$
|
(3
|
)
|
Obligations of U.S. government-sponsored agencies
|
|
|
3,217
|
|
|
|
(27
|
)
|
|
|
4,345
|
|
|
|
(52
|
)
|
Obligations of states and political subdivisions
|
|
|
—
|
|
|
|
—
|
|
|
|
543
|
|
|
|
(3
|
)
|
Total
|
|
$
|
12,860
|
|
|
$
|
(85
|
)
|
|
$
|
5,311
|
|
|
$
|
(58
|
)
|
|
|
Available-for-Sale
|
|
|
|
December 31, 2016
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
85,741
|
|
|
$
|
(1,976
|
)
|
|
$
|
1,904
|
|
|
$
|
(27
|
)
|
Commercial
|
|
|
54,475
|
|
|
|
(946
|
)
|
|
|
10,721
|
|
|
|
(341
|
)
|
Obligations of U.S. government-sponsored agencies
|
|
|
1,993
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
|
434
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
—
|
|
U.S. Treasury securities
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
142,723
|
|
|
$
|
(2,936
|
)
|
|
$
|
12,625
|
|
|
$
|
(368
|
)
|
|
|
Held-to-Maturity
|
|
|
|
December 31, 2016
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
12,776
|
|
|
$
|
(148
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
7,957
|
|
|
|
(222
|
)
|
|
|
—
|
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
|
1,628
|
|
|
|
(46
|
)
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
22,361
|
|
|
$
|
(416
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Management evaluates securities for other-than-temporary impairment no less frequently than quarterly, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to: (i) the length of time and the extent to which fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, (iii) whether the Company intends to sell securities, and (iv) whether it is more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases.
As of September
30, 2017, 46 debt securities had been in a loss position for more than 12 months, and 75 debt securities had been in a loss position for less than 12 months. As of December 31, 2016, 13 debt securities had been in a loss position for more than 12 months, and 130 debt securities had been in a loss position for less than 12 months. As of both September 30, 2017 and December 31, 2016, the losses for all securities were considered to be a direct result of the effect that the prevailing interest rate environment had on the value of debt securities and were not related to the creditworthiness of the issuers. Further, the Company has the current intent and ability to retain its investments in the issuers for a period of time that management believes to be sufficient to allow for any anticipated recovery in fair value. Therefore, the Company did not recognize any other-than-temporary impairments as of September 30, 2017 and December 31, 2016.
Investment securities available-for-sale with a carrying value of $87.1
million and $87.7 million as of September 30, 2017 and December 31, 2016, respectively, were pledged to secure public deposits and for other purposes.
4.
|
LOANS AND ALLOWANCE FOR LOAN LOSSES
|
Portfolio Segments
The Company has divided the loan portfolio into eight portfolio segments, each with different risk characteristics described as follows:
Construction, land development and other land loans
– Commercial construction, land and land development loans include the development of residential housing projects, loans for the development of commercial and industrial use property and loans for the purchase and improvement of raw land. These loans are secured in whole or in part by the underlying real estate collateral and are generally guaranteed by the principals of the borrowing entity.
Secured by 1-4 family residential properties
– These loans include conventional mortgage loans on one-to-four family residential properties. These properties may serve as the borrower’s primary residence, vacation home or investment property. Also included in this portfolio are home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their homes.
Secured by multi-family residential properties
– This portfolio segment includes mortgage loans secured by apartment buildings.
Secured by non-farm, non-residential properties
– This portfolio segment includes real estate loans secured by commercial and industrial properties, office or mixed-use facilities, strip shopping centers or other commercial property. These loans are generally guaranteed by the principals of the borrowing entity.
Other real estate loans
– Other real estate loans are loans primarily for agricultural production, secured by mortgages on farmland.
Commercial and industrial loans
– This portfolio segment includes loans to commercial customers for use in the normal course of business. These credits may be loans and lines of credit to financially strong borrowers, secured by inventories, equipment or receivables, and are generally guaranteed by the principals of the borrowing entity.
Consumer loans
– This portfolio segment includes a variety of secured and unsecured personal loans, including automobile loans, loans for household and personal purposes and all other direct consumer installment loans.
Indirect sales
– This portfolio segment includes loans secured by collateral that is purchased by consumers at retail stores with whom ALC has an established relationship to provide financing for retail products sold, if applicable underwriting standards are met.
As of
September 30, 2017 and December 31, 2016, the composition of the loan portfolio by reporting segment and portfolio segment was as follows:
|
|
September 30
, 201
7
|
|
|
|
Bank
|
|
|
ALC
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
20,213
|
|
|
$
|
—
|
|
|
$
|
20,213
|
|
Secured by 1-4 family residential properties
|
|
|
35,125
|
|
|
|
11,490
|
|
|
|
46,615
|
|
Secured by multi-family residential properties
|
|
|
16,498
|
|
|
|
—
|
|
|
|
16,498
|
|
Secured by non-farm, non-residential properties
|
|
|
107,679
|
|
|
|
—
|
|
|
|
107,679
|
|
Other
|
|
|
223
|
|
|
|
—
|
|
|
|
223
|
|
Commercial and industrial loans
|
|
|
66,320
|
|
|
|
—
|
|
|
|
66,320
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
5,431
|
|
|
|
35,650
|
|
|
|
41,081
|
|
Indirect sales
|
|
|
—
|
|
|
|
50,553
|
|
|
|
50,553
|
|
Total loans
|
|
|
251,489
|
|
|
|
97,693
|
|
|
|
349,182
|
|
Less: Unearned interest, fees and deferred cost
|
|
|
367
|
|
|
|
5,981
|
|
|
|
6,348
|
|
Allowance for loan losses
|
|
|
2,422
|
|
|
|
2,386
|
|
|
|
4,808
|
|
Net loans
|
|
$
|
248,700
|
|
|
$
|
89,326
|
|
|
$
|
338,026
|
|
|
|
December 31, 201
6
|
|
|
|
Bank
|
|
|
ALC
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
23,772
|
|
|
$
|
—
|
|
|
$
|
23,772
|
|
Secured by 1-4 family residential properties
|
|
|
32,955
|
|
|
|
13,724
|
|
|
|
46,679
|
|
Secured by multi-family residential properties
|
|
|
16,627
|
|
|
|
—
|
|
|
|
16,627
|
|
Secured by non-farm, non-residential properties
|
|
|
102,112
|
|
|
|
—
|
|
|
|
102,112
|
|
Other
|
|
|
234
|
|
|
|
—
|
|
|
|
234
|
|
Commercial and industrial loans
|
|
|
57,963
|
|
|
|
—
|
|
|
|
57,963
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
6,206
|
|
|
|
36,413
|
|
|
|
42,619
|
|
Indirect sales
|
|
|
—
|
|
|
|
44,775
|
|
|
|
44,775
|
|
Total loans
|
|
|
239,869
|
|
|
|
94,912
|
|
|
|
334,781
|
|
Less: Unearned interest, fees and deferred cost
|
|
|
218
|
|
|
|
6,935
|
|
|
|
7,153
|
|
Allowance for loan losses
|
|
|
2,409
|
|
|
|
2,447
|
|
|
|
4,856
|
|
Net loans
|
|
$
|
237,242
|
|
|
$
|
85,530
|
|
|
$
|
322,772
|
|
The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio, 54
.8% and 56.6% of the portfolio was concentrated in loans secured by real estate located primarily within a single geographic region of the United States as of September 30, 2017 and December 31, 2016, respectively.
Related Party Loans
In the ordinary course of business, the Bank makes loans to certain officers and directors of the Company, including companies with which they are associated. These loans are made on the same terms as those prevailing for comparable transactions with
non-related parties. Management believes that such loans do not represent more than a normal risk of collectability, nor do they present other unfavorable features. The aggregate balances of such related party loans and commitments as of September 30, 2017 and December 31, 2016 were $0.5 million and $2.7 million, respectively. During the nine months ended September 30, 2017, there were no new loans to these parties, and repayments by active related parties were $7 thousand. In addition, during the nine months ended September 30, 2017, approximately $2.5 million in related party loans were reclassified as unrelated party loans due to the retirement of certain members of the Company’s Board of Directors. During the year ended December 31, 2016, there was one new loan to a related party, and repayments by active related parties totaled $0.1 million.
Allowance for Loan Losses
The following tables present changes in the allowance for loan losses and the related loan balances by loan portfolio segment and loan type as of September
30, 2017 and December 31, 2016.
|
|
Bank
|
|
|
|
Nine M
onths Ended September 30, 2017
|
|
|
|
Construction,
Land
|
|
|
1-4
Family
|
|
|
Real
Estate
Multi-
Family
|
|
|
|
Non-Farm Non-Residential
|
|
|
|
Other
|
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect
Sales
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
535
|
|
|
$
|
304
|
|
|
$
|
88
|
|
|
$
|
903
|
|
|
$
|
2
|
|
|
$
|
527
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
2,409
|
|
Charge-offs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(16
|
)
|
|
|
(63
|
)
|
|
|
—
|
|
|
|
(79
|
)
|
Recoveries
|
|
|
—
|
|
|
|
85
|
|
|
|
—
|
|
|
|
69
|
|
|
|
—
|
|
|
|
16
|
|
|
|
52
|
|
|
|
—
|
|
|
|
222
|
|
Provision
|
|
|
(328
|
)
|
|
|
(141
|
)
|
|
|
27
|
|
|
|
(142
|
)
|
|
|
—
|
|
|
|
440
|
|
|
|
14
|
|
|
|
—
|
|
|
|
(130
|
)
|
Ending balance
|
|
$
|
207
|
|
|
$
|
248
|
|
|
$
|
115
|
|
|
$
|
830
|
|
|
$
|
2
|
|
|
$
|
967
|
|
|
$
|
53
|
|
|
$
|
—
|
|
|
$
|
2,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance of allowance attributable to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
62
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
55
|
|
|
$
|
—
|
|
|
$
|
72
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
194
|
|
Collectively evaluated for impairment
|
|
|
145
|
|
|
|
243
|
|
|
|
115
|
|
|
|
775
|
|
|
|
2
|
|
|
|
895
|
|
|
|
53
|
|
|
|
—
|
|
|
|
2,228
|
|
Total allowance for loan losses
|
|
$
|
207
|
|
|
$
|
248
|
|
|
$
|
115
|
|
|
$
|
830
|
|
|
$
|
2
|
|
|
$
|
967
|
|
|
$
|
53
|
|
|
$
|
—
|
|
|
$
|
2,422
|
|
Ending balance of loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
86
|
|
|
$
|
189
|
|
|
$
|
—
|
|
|
$
|
535
|
|
|
$
|
—
|
|
|
$
|
70
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
880
|
|
Collectively evaluated for impairment
|
|
|
20,127
|
|
|
|
34,936
|
|
|
|
16,498
|
|
|
|
107,144
|
|
|
|
223
|
|
|
|
66,250
|
|
|
|
5,431
|
|
|
|
—
|
|
|
|
250,609
|
|
Total loans receivable
|
|
$
|
20,213
|
|
|
$
|
35,125
|
|
|
$
|
16,498
|
|
|
$
|
107,679
|
|
|
$
|
223
|
|
|
$
|
66,320
|
|
|
$
|
5,431
|
|
|
$
|
—
|
|
|
$
|
251,489
|
|
|
|
ALC
|
|
|
|
Nine Months Ended September 30, 2017
|
|
|
|
Construction,
Land
|
|
|
1-4
Family
|
|
|
Real
Estate
Multi-
Family
|
|
|
Non-Farm Non-Residential
|
|
|
Other
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect
Sales
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
—
|
|
|
$
|
107
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,717
|
|
|
$
|
623
|
|
|
$
|
2,447
|
|
Charge-offs
|
|
|
—
|
|
|
|
(27
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,721
|
)
|
|
|
(445
|
)
|
|
|
(2,193
|
)
|
Recoveries
|
|
|
—
|
|
|
|
28
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
435
|
|
|
|
75
|
|
|
|
538
|
|
Provision
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,134
|
|
|
|
465
|
|
|
|
1,594
|
|
Ending balance
|
|
$
|
—
|
|
|
$
|
103
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,565
|
|
|
$
|
718
|
|
|
$
|
2,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance of allowance attributable to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collectively evaluated for impairment
|
|
|
—
|
|
|
|
103
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,565
|
|
|
|
718
|
|
|
|
2,386
|
|
Total allowance for loan losses
|
|
$
|
—
|
|
|
$
|
103
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,565
|
|
|
$
|
718
|
|
|
$
|
2,386
|
|
Ending balance of loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collectively evaluated for impairment
|
|
|
—
|
|
|
|
11,490
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,650
|
|
|
|
50,553
|
|
|
|
97,693
|
|
Total loans receivable
|
|
$
|
—
|
|
|
$
|
11,490
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
35,650
|
|
|
$
|
50,553
|
|
|
$
|
97,693
|
|
|
|
Bank and ALC
|
|
|
|
Nine Months Ended September 30, 2017
|
|
|
|
Construction,
Land
|
|
|
1-4
Family
|
|
|
Real
Estate
Multi-
Family
|
|
|
Non-Farm Non-Residential
|
|
|
Other
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect
Sales
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
535
|
|
|
$
|
411
|
|
|
$
|
88
|
|
|
$
|
903
|
|
|
$
|
2
|
|
|
$
|
527
|
|
|
$
|
1,767
|
|
|
$
|
623
|
|
|
$
|
4,856
|
|
Charge-offs
|
|
|
—
|
|
|
|
(27
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(16
|
)
|
|
|
(1,784
|
)
|
|
|
(445
|
)
|
|
|
(2,272
|
)
|
Recoveries
|
|
|
—
|
|
|
|
113
|
|
|
|
—
|
|
|
|
69
|
|
|
|
—
|
|
|
|
16
|
|
|
|
487
|
|
|
|
75
|
|
|
|
760
|
|
Provision
|
|
|
(328
|
)
|
|
|
(146
|
)
|
|
|
27
|
|
|
|
(142
|
)
|
|
|
—
|
|
|
|
440
|
|
|
|
1,148
|
|
|
|
465
|
|
|
|
1,464
|
|
Ending balance
|
|
$
|
207
|
|
|
$
|
351
|
|
|
$
|
115
|
|
|
$
|
830
|
|
|
$
|
2
|
|
|
$
|
967
|
|
|
$
|
1,618
|
|
|
$
|
718
|
|
|
$
|
4,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance of allowance attributable to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
62
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
55
|
|
|
$
|
—
|
|
|
$
|
72
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
194
|
|
Collectively evaluated for impairment
|
|
|
145
|
|
|
|
346
|
|
|
|
115
|
|
|
|
775
|
|
|
|
2
|
|
|
|
895
|
|
|
|
1,618
|
|
|
|
718
|
|
|
|
4,614
|
|
Total allowance for loan losses
|
|
$
|
207
|
|
|
$
|
351
|
|
|
$
|
115
|
|
|
$
|
830
|
|
|
$
|
2
|
|
|
$
|
967
|
|
|
$
|
1,618
|
|
|
$
|
718
|
|
|
$
|
4,808
|
|
Ending balance of loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
86
|
|
|
$
|
189
|
|
|
$
|
—
|
|
|
$
|
535
|
|
|
$
|
—
|
|
|
$
|
70
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
880
|
|
Collectively evaluated for impairment
|
|
|
20,127
|
|
|
|
46,426
|
|
|
|
16,498
|
|
|
|
107,144
|
|
|
|
223
|
|
|
|
66,250
|
|
|
|
41,081
|
|
|
|
50,553
|
|
|
|
348,302
|
|
Total loans receivable
|
|
$
|
20,213
|
|
|
$
|
46,615
|
|
|
$
|
16,498
|
|
|
$
|
107,679
|
|
|
$
|
223
|
|
|
$
|
66,320
|
|
|
$
|
41,081
|
|
|
$
|
50,553
|
|
|
$
|
349,182
|
|
|
|
Bank
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
Construction,
Land
|
|
|
1-4
Family
|
|
|
Real
Estate
Multi-
Family
|
|
|
Non-Farm Non-Residential
|
|
|
Other
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect
Sales
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
110
|
|
|
$
|
138
|
|
|
$
|
29
|
|
|
$
|
351
|
|
|
$
|
1
|
|
|
$
|
659
|
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
1,329
|
|
Charge-offs
|
|
|
—
|
|
|
|
(66
|
)
|
|
|
—
|
|
|
|
(40
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(43
|
)
|
|
|
—
|
|
|
|
(151
|
)
|
Recoveries
|
|
|
200
|
|
|
|
23
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
73
|
|
|
|
50
|
|
|
|
—
|
|
|
|
346
|
|
Provision
|
|
|
225
|
|
|
|
209
|
|
|
|
59
|
|
|
|
592
|
|
|
|
1
|
|
|
|
(203
|
)
|
|
|
2
|
|
|
|
—
|
|
|
|
885
|
|
Ending balance
|
|
$
|
535
|
|
|
$
|
304
|
|
|
$
|
88
|
|
|
$
|
903
|
|
|
$
|
2
|
|
|
$
|
527
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
2,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance of allowance attributable to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
423
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
107
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
535
|
|
Collectively evaluated for impairment
|
|
|
112
|
|
|
|
299
|
|
|
|
88
|
|
|
|
796
|
|
|
|
2
|
|
|
|
527
|
|
|
|
50
|
|
|
|
—
|
|
|
|
1,874
|
|
Total allowance for loan losses
|
|
$
|
535
|
|
|
$
|
304
|
|
|
$
|
88
|
|
|
$
|
903
|
|
|
$
|
2
|
|
|
$
|
527
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
2,409
|
|
Ending balance of loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
1,361
|
|
|
$
|
193
|
|
|
$
|
—
|
|
|
$
|
549
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,103
|
|
Collectively evaluated for impairment
|
|
|
22,411
|
|
|
|
32,762
|
|
|
|
16,627
|
|
|
|
101,563
|
|
|
|
234
|
|
|
|
57,963
|
|
|
|
6,206
|
|
|
|
—
|
|
|
|
237,766
|
|
Total loans receivable
|
|
$
|
23,772
|
|
|
$
|
32,955
|
|
|
$
|
16,627
|
|
|
$
|
102,112
|
|
|
$
|
234
|
|
|
$
|
57,963
|
|
|
$
|
6,206
|
|
|
$
|
—
|
|
|
$
|
239,869
|
|
|
|
ALC
|
|
|
|
Year Ended December
31, 2016
|
|
|
|
Construction,
Land
|
|
|
1-4
Family
|
|
|
Real
Estate
Multi-
Family
|
|
|
Non-Farm Non-Residential
|
|
|
Other
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect
Sales
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,584
|
|
|
$
|
618
|
|
|
$
|
2,452
|
|
Charge-offs
|
|
|
—
|
|
|
|
(56
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,218
|
)
|
|
|
(752
|
)
|
|
|
(3,026
|
)
|
Recoveries
|
|
|
—
|
|
|
|
39
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
451
|
|
|
|
220
|
|
|
|
710
|
|
Provision
|
|
|
—
|
|
|
|
(126
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,900
|
|
|
|
537
|
|
|
|
2,311
|
|
Ending balance
|
|
$
|
—
|
|
|
$
|
107
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,717
|
|
|
$
|
623
|
|
|
$
|
2,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance of allowance attributable to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collectively evaluated for impairment
|
|
|
—
|
|
|
|
107
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,717
|
|
|
|
623
|
|
|
|
2,447
|
|
Total allowance for loan losses
|
|
$
|
—
|
|
|
$
|
107
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,717
|
|
|
$
|
623
|
|
|
$
|
2,447
|
|
Ending balance of loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collectively evaluated for impairment
|
|
|
—
|
|
|
|
13,724
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
36,413
|
|
|
|
44,775
|
|
|
|
94,912
|
|
Total loans receivable
|
|
$
|
—
|
|
|
$
|
13,724
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
36,413
|
|
|
$
|
44,775
|
|
|
$
|
94,912
|
|
|
|
Bank and ALC
|
|
|
|
Year Ended December
31, 2016
|
|
|
|
Construction,
Land
|
|
|
1-4
Family
|
|
|
Real
Estate
Multi-
Family
|
|
|
Non-Farm Non-Residential
|
|
|
Other
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect
Sales
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
110
|
|
|
$
|
388
|
|
|
$
|
29
|
|
|
$
|
351
|
|
|
$
|
1
|
|
|
$
|
659
|
|
|
$
|
1,625
|
|
|
$
|
618
|
|
|
$
|
3,781
|
|
Charge-offs
|
|
|
—
|
|
|
|
(122
|
)
|
|
|
—
|
|
|
|
(40
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(2,261
|
)
|
|
|
(752
|
)
|
|
|
(3,177
|
)
|
Recoveries
|
|
|
200
|
|
|
|
62
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
73
|
|
|
|
501
|
|
|
|
220
|
|
|
|
1,056
|
|
Provision
|
|
|
225
|
|
|
|
83
|
|
|
|
59
|
|
|
|
592
|
|
|
|
1
|
|
|
|
(203
|
)
|
|
|
1,902
|
|
|
|
537
|
|
|
|
3,196
|
|
Ending balance
|
|
$
|
535
|
|
|
$
|
411
|
|
|
$
|
88
|
|
|
$
|
903
|
|
|
$
|
2
|
|
|
$
|
527
|
|
|
$
|
1,767
|
|
|
$
|
623
|
|
|
$
|
4,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance of allowance attributable to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
423
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
107
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
535
|
|
Collectively evaluated for impairment
|
|
|
112
|
|
|
|
406
|
|
|
|
88
|
|
|
|
796
|
|
|
|
2
|
|
|
|
527
|
|
|
|
1,767
|
|
|
|
623
|
|
|
|
4,321
|
|
Total allowance for loan losses
|
|
$
|
535
|
|
|
$
|
411
|
|
|
$
|
88
|
|
|
$
|
903
|
|
|
$
|
2
|
|
|
$
|
527
|
|
|
$
|
1,767
|
|
|
$
|
623
|
|
|
$
|
4,856
|
|
Ending balance of loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
1,361
|
|
|
$
|
193
|
|
|
$
|
—
|
|
|
$
|
549
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,103
|
|
Collectively evaluated for impairment
|
|
|
22,411
|
|
|
|
46,486
|
|
|
|
16,627
|
|
|
|
101,563
|
|
|
|
234
|
|
|
|
57,963
|
|
|
|
42,619
|
|
|
|
44,775
|
|
|
|
332,678
|
|
Total loans receivable
|
|
$
|
23,772
|
|
|
$
|
46,679
|
|
|
$
|
16,627
|
|
|
$
|
102,112
|
|
|
$
|
234
|
|
|
$
|
57,963
|
|
|
$
|
42,619
|
|
|
$
|
44,775
|
|
|
$
|
334,781
|
|
Credit Quality Indicators
The Bank utilizes a
credit grading system that provides a uniform framework for establishing and monitoring credit risk in the loan portfolio. Under this system, each loan is graded based on pre-determined risk metrics and categorized into one of nine risk grades. These risk grades can be summarized into categories described as pass, special mention, substandard, doubtful and loss, as described in further detail below.
|
●
|
Pass (Risk Grades 1-5): Loans in this category include obligations
in which the probability of default is considered low.
|
|
●
|
Special Mention (Risk Grade 6):
Loans in this category exhibit potential credit weaknesses or downward trends deserving Bank management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Although a special mention asset has a higher probability of default than pass-rated categories, its default is not imminent.
|
|
●
|
Substandard (Risk Grade 7):
Loans in this category have defined weaknesses that jeopardize the orderly liquidation of debt. A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. There is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.
|
|
●
|
Doubtful (Risk Grade 8):
Loans classified as doubtful have all of the weaknesses found in substandard loans, with the added characteristic that the weaknesses make collection of debt in full, based on currently existing facts, conditions and values, highly questionable or improbable. Serious problems exist such that partial loss of principal is likely; however, because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined. Such pending factors may include proposed merger, acquisition or liquidation procedures, capital injection, perfection of liens on additional collateral and refinancing plans. Loans classified as doubtful may include loans to borrowers that have demonstrated a history of failing to live up to agreements.
|
|
●
|
Loss (Risk Grade 9):
Loans are classified in this category when borrowers are deemed incapable of repayment of unsecured debt. Loans to such borrowers are considered uncollectable and of such little value that continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not prudent to defer writing off these worthless assets, even though partial recovery may occur in the future.
|
At ALC, because the loan portfolio is more uniform in nature, each loan is categorized into one of two risk grades, depending on whether the loan is considered to be performing or nonperforming. Performing loans are loans that are paying principal and interest in accordance with
a contractual agreement. Nonperforming loans are loans that have demonstrated characteristics that indicate a probability of loss.
The tables below illustrate the carrying amount of loans by credit quality indicator as of September
30, 2017.
|
|
Bank
|
|
|
|
Pass
1-5
|
|
|
Special
Mention
6
|
|
|
Substandard
7
|
|
|
Doubtful
8
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
19,939
|
|
|
$
|
—
|
|
|
$
|
274
|
|
|
$
|
—
|
|
|
$
|
20,213
|
|
Secured by 1-4 family residential properties
|
|
|
34,069
|
|
|
|
201
|
|
|
|
855
|
|
|
|
—
|
|
|
|
35,125
|
|
Secured by multi-family residential properties
|
|
|
16,498
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,498
|
|
Secured by non-farm, non-residential properties
|
|
|
102,264
|
|
|
|
4,884
|
|
|
|
531
|
|
|
|
—
|
|
|
|
107,679
|
|
Other
|
|
|
223
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
223
|
|
Commercial and industrial loans
|
|
|
63,995
|
|
|
|
2,105
|
|
|
|
220
|
|
|
|
—
|
|
|
|
66,320
|
|
Consumer loans
|
|
|
5,366
|
|
|
|
—
|
|
|
|
65
|
|
|
|
—
|
|
|
|
5,431
|
|
Total
|
|
$
|
242,354
|
|
|
$
|
7,190
|
|
|
$
|
1,945
|
|
|
$
|
—
|
|
|
$
|
251,489
|
|
|
|
ALC
|
|
|
|
Performing
|
|
|
Nonperforming
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by 1-4 family residential properties
|
|
$
|
11,292
|
|
|
$
|
198
|
|
|
$
|
11,490
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
34,609
|
|
|
|
1,041
|
|
|
|
35,650
|
|
Indirect sales
|
|
|
50,168
|
|
|
|
385
|
|
|
|
50,553
|
|
Total
|
|
$
|
96,069
|
|
|
$
|
1,624
|
|
|
$
|
97,693
|
|
The tables below illustrate the carrying amount of loans by credit quality indicator as of December
31, 2016.
|
|
Bank
|
|
|
|
Pass
1-5
|
|
|
Special
Mention
6
|
|
|
Substandard
7
|
|
|
Doubtful
8
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
22,240
|
|
|
$
|
—
|
|
|
$
|
1,532
|
|
|
$
|
—
|
|
|
$
|
23,772
|
|
Secured by 1-4 family residential properties
|
|
|
31,995
|
|
|
|
213
|
|
|
|
747
|
|
|
|
—
|
|
|
|
32,955
|
|
Secured by multi-family residential properties
|
|
|
16,627
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,627
|
|
Secured by non-farm, non-residential properties
|
|
|
99,082
|
|
|
|
2,315
|
|
|
|
715
|
|
|
|
—
|
|
|
|
102,112
|
|
Other
|
|
|
234
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
234
|
|
Commercial and industrial loans
|
|
|
55,481
|
|
|
|
2,227
|
|
|
|
255
|
|
|
|
—
|
|
|
|
57,963
|
|
Consumer loans
|
|
|
6,126
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
6,206
|
|
Total
|
|
$
|
231,785
|
|
|
$
|
4,755
|
|
|
$
|
3,329
|
|
|
$
|
—
|
|
|
$
|
239,869
|
|
|
|
ALC
|
|
|
|
Performing
|
|
|
Nonperforming
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by 1-4 family residential properties
|
|
$
|
13,507
|
|
|
$
|
217
|
|
|
$
|
13,724
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
35,278
|
|
|
|
1,135
|
|
|
|
36,413
|
|
Indirect sales
|
|
|
44,228
|
|
|
|
547
|
|
|
|
44,775
|
|
Total
|
|
$
|
93,013
|
|
|
$
|
1,899
|
|
|
$
|
94,912
|
|
The following tables provide an aging analysis of past due loans by class as of September
30, 2017.
|
|
Bank
|
|
|
|
As of September
30
, 2017
|
|
|
|
30-59
Days
Past
Due
|
|
|
60-89
Days
Past
Due
|
|
|
90
Days
Or
Greater
|
|
|
Total
Past
Due
|
|
|
Current
|
|
|
Total
Loans
|
|
|
Recorded
Investment
>
90 Days
And
Accruing
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
20,190
|
|
|
$
|
20,213
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
149
|
|
|
|
—
|
|
|
|
91
|
|
|
|
240
|
|
|
|
34,885
|
|
|
|
35,125
|
|
|
|
—
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,498
|
|
|
|
16,498
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
15
|
|
|
|
117
|
|
|
|
—
|
|
|
|
132
|
|
|
|
107,547
|
|
|
|
107,679
|
|
|
|
—
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
223
|
|
|
|
223
|
|
|
|
—
|
|
Commercial and industrial loans
|
|
|
31
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31
|
|
|
|
66,289
|
|
|
|
66,320
|
|
|
|
—
|
|
Consumer loans
|
|
|
—
|
|
|
|
—
|
|
|
|
23
|
|
|
|
23
|
|
|
|
5,408
|
|
|
|
5,431
|
|
|
|
—
|
|
Total
|
|
$
|
218
|
|
|
$
|
117
|
|
|
$
|
114
|
|
|
$
|
449
|
|
|
$
|
251,040
|
|
|
$
|
251,489
|
|
|
$
|
—
|
|
|
|
ALC
|
|
|
|
As of
September 30
, 2017
|
|
|
|
30-59
Days
Past
Due
|
|
|
60-89
Days
Past
Due
|
|
|
90
Days
Or
Greater
|
|
|
Total
Past
Due
|
|
|
Current
|
|
|
Total
Loans
|
|
|
Recorded
Investment
>
90 Days
And
Accruing
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
73
|
|
|
|
70
|
|
|
|
71
|
|
|
|
214
|
|
|
|
11,276
|
|
|
|
11,490
|
|
|
|
—
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial and industrial loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
506
|
|
|
|
433
|
|
|
|
1,016
|
|
|
|
1,955
|
|
|
|
33,695
|
|
|
|
35,650
|
|
|
|
—
|
|
Indirect sales
|
|
|
214
|
|
|
|
221
|
|
|
|
383
|
|
|
|
818
|
|
|
|
49,735
|
|
|
|
50,553
|
|
|
|
—
|
|
Total
|
|
$
|
793
|
|
|
$
|
724
|
|
|
$
|
1,470
|
|
|
$
|
2,987
|
|
|
$
|
94,706
|
|
|
$
|
97,693
|
|
|
$
|
—
|
|
The following tables provide an aging analysis of past due loans by class as of December 31, 2016
.
|
|
Bank
|
|
|
|
As of December 31, 2016
|
|
|
|
30-59
Days
Past
Due
|
|
|
60-89
Days
Past
Due
|
|
|
90
Days
Or
Greater
|
|
|
Total
Past
Due
|
|
|
Current
|
|
|
Total
Loans
|
|
|
Recorded
Investment
>
90 Days
And
Accruing
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
86
|
|
|
$
|
86
|
|
|
$
|
23,686
|
|
|
$
|
23,772
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
164
|
|
|
|
69
|
|
|
|
145
|
|
|
|
378
|
|
|
|
32,577
|
|
|
|
32,955
|
|
|
|
—
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,627
|
|
|
|
16,627
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
762
|
|
|
|
—
|
|
|
|
—
|
|
|
|
762
|
|
|
|
101,350
|
|
|
|
102,112
|
|
|
|
—
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
234
|
|
|
|
234
|
|
|
|
—
|
|
Commercial and industrial loans
|
|
|
—
|
|
|
|
—
|
|
|
|
14
|
|
|
|
14
|
|
|
|
57,949
|
|
|
|
57,963
|
|
|
|
—
|
|
Consumer loans
|
|
|
—
|
|
|
|
28
|
|
|
|
—
|
|
|
|
28
|
|
|
|
6,178
|
|
|
|
6,206
|
|
|
|
—
|
|
Total
|
|
$
|
926
|
|
|
$
|
97
|
|
|
$
|
245
|
|
|
$
|
1,268
|
|
|
$
|
238,601
|
|
|
$
|
239,869
|
|
|
$
|
—
|
|
|
|
ALC
|
|
|
|
As of December 31, 2016
|
|
|
|
30-59
Days
Past
Due
|
|
|
60-89
Days
Past
Due
|
|
|
90
Days
Or
Greater
|
|
|
Total
Past
Due
|
|
|
Current
|
|
|
Total
Loans
|
|
|
Recorded Investment
>
90 Days
And
Accruing
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
61
|
|
|
|
29
|
|
|
|
213
|
|
|
|
303
|
|
|
|
13,421
|
|
|
|
13,724
|
|
|
|
—
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial and industrial loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
441
|
|
|
|
413
|
|
|
|
1,104
|
|
|
|
1,958
|
|
|
|
34,455
|
|
|
|
36,413
|
|
|
|
—
|
|
Indirect sales
|
|
|
191
|
|
|
|
139
|
|
|
|
489
|
|
|
|
819
|
|
|
|
43,956
|
|
|
|
44,775
|
|
|
|
—
|
|
Total
|
|
$
|
693
|
|
|
$
|
581
|
|
|
$
|
1,806
|
|
|
$
|
3,080
|
|
|
$
|
91,832
|
|
|
$
|
94,912
|
|
|
$
|
—
|
|
The following table provides an analysis of non-accruing loans by class as of September
30, 2017 and December 31, 2016.
|
|
Loans on Non-Accrual Status
|
|
|
|
September 30
,
2017
|
|
|
December 31,
2016
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
—
|
|
|
$
|
86
|
|
Secured by 1-4 family residential properties
|
|
|
418
|
|
|
|
570
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
33
|
|
|
|
53
|
|
Commercial and industrial loans
|
|
|
14
|
|
|
|
32
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
1,106
|
|
|
|
1,676
|
|
Indirect sales
|
|
|
385
|
|
|
|
—
|
|
Total loans
|
|
$
|
1,956
|
|
|
$
|
2,417
|
|
Impaired Loans
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the related loan agreement. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported at the present value of estimated future cash flows using the loan
’s existing rate or at the fair value of collateral if repayment is expected solely from the liquidation of the collateral at the Bank. At management’s discretion, additional loans may be impaired based on homogeneous factors, such as changes in the nature and volume of the portfolio, portfolio quality, adequacy of the underlying collateral value, loan concentrations, historical charge-off trends and economic conditions that may affect a borrower’s ability to pay. At ALC, all real estate loans of $0.1 million or more are identified for impairment analysis. There are currently no loans at ALC that meet that criteria. All loans of $0.5 million or more that have a credit quality risk grade of seven or above are identified for impairment analysis. Impaired loans, or portions thereof, are charged off when deemed uncollectable.
As of September
30, 2017, the carrying amount of impaired loans consisted of the following:
|
|
September 30
, 2017
|
|
Impaired loans with no related allowance recorded
|
|
Carrying
Amount
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowances
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial and industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total loans with no related allowance recorded
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
86
|
|
|
$
|
86
|
|
|
$
|
62
|
|
Secured by 1-4 family residential properties
|
|
|
189
|
|
|
|
189
|
|
|
|
5
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
535
|
|
|
|
535
|
|
|
|
55
|
|
Commercial and industrial
|
|
|
70
|
|
|
|
70
|
|
|
|
72
|
|
Total loans with an allowance recorded
|
|
$
|
880
|
|
|
$
|
880
|
|
|
$
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
86
|
|
|
$
|
86
|
|
|
$
|
62
|
|
Secured by 1-4 family residential properties
|
|
|
189
|
|
|
|
189
|
|
|
|
5
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
535
|
|
|
|
535
|
|
|
|
55
|
|
Commercial and industrial
|
|
|
70
|
|
|
|
70
|
|
|
|
72
|
|
Total impaired loans
|
|
$
|
880
|
|
|
$
|
880
|
|
|
$
|
194
|
|
As of December
31, 2016, the carrying amount of impaired loans consisted of the following:
|
|
December 31, 2016
|
|
Impaired loans with no related allowance recorded
|
|
Carrying
Amount
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowances
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial and industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total loans with no related allowance recorded
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
1,361
|
|
|
$
|
1,361
|
|
|
$
|
423
|
|
Secured by 1-4 family residential properties
|
|
|
193
|
|
|
|
193
|
|
|
|
5
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
549
|
|
|
|
549
|
|
|
|
107
|
|
Commercial and industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total loans with an allowance recorded
|
|
$
|
2,103
|
|
|
$
|
2,103
|
|
|
$
|
535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
1,361
|
|
|
$
|
1,361
|
|
|
$
|
423
|
|
Secured by 1-4 family residential properties
|
|
|
193
|
|
|
|
193
|
|
|
|
5
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
549
|
|
|
|
549
|
|
|
|
107
|
|
Commercial and industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total impaired loans
|
|
$
|
2,103
|
|
|
$
|
2,103
|
|
|
$
|
535
|
|
The average net investment in impaired loans and interest income recognized and received on impaired loans
as of the nine months ended September 30, 2017 and the year ended December 31, 2016 were as follows:
|
|
September 30
, 2017
|
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Interest
Income
Received
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land
loans
|
|
$
|
1,183
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Secured by 1-4 family residential properties
|
|
|
191
|
|
|
|
10
|
|
|
|
11
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
539
|
|
|
|
27
|
|
|
|
25
|
|
Commercial and industrial
|
|
|
55
|
|
|
|
6
|
|
|
|
3
|
|
Total
|
|
$
|
1,968
|
|
|
$
|
44
|
|
|
$
|
40
|
|
|
|
December 31, 2016
|
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Interest
Income
Received
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
1,381
|
|
|
$
|
41
|
|
|
$
|
39
|
|
Secured by 1-4 family residential properties
|
|
|
232
|
|
|
|
14
|
|
|
|
14
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
557
|
|
|
|
33
|
|
|
|
31
|
|
Commercial and industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
2,170
|
|
|
$
|
88
|
|
|
$
|
84
|
|
Loans on which the accrual of interest has been discontinued amounted to $2.0
million and $2.4 million as of September 30, 2017 and December 31, 2016, respectively. If interest on those loans had been accrued, there would have been $5 thousand and $35 thousand of interest accrued for the periods ended September 30, 2017 and December 31, 2016, respectively. Interest income related to these loans as of September 30, 2017 and December 31, 2016 was $3 thousand and $4 thousand, respectively.
Troubled Debt Restructurings
Troubled debt restructurings include loans with respect to which concessions have been granted to borrowers that generally would not have otherwise been considered had the borrowers not been experiencing financial difficulty. The concessions granted may include payment schedule modifications, interest rate reductions, maturity date extensions, modification
s of note structure, principal balance reductions or some combination of these concessions. There were no loans modified with concessions granted during the nine-month period ended September 30, 2017. Restructured loans may involve loans remaining on non-accrual, moving to non-accrual or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Non-accrual restructured loans are included with all other non-accrual loans. In addition, all accruing restructured loans are reported as troubled debt restructurings. Generally, restructured loans remain on non-accrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on non-accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, then the loan remains on non-accrual. As of both September 30, 2017 and December 31, 2016, the Company had $0.1 million of non-accruing loans that were previously restructured and that remained on non-accrual status. For the nine months ended September 30, 2017, the Company had no loans that were restored to accrual status based on a sustained period of repayment performance. For the year ended December 31, 2016, the Company had $0.3 million in restructured loans that were restored to accrual status based on a sustained period of repayment performance.
The following table provides the number of loans
remaining in each loan category as of September 30, 2017 and December 31, 2016 that the Bank had previously modified in a troubled debt restructuring, as well as the pre- and post-modification principal balance as of each date.
|
|
September 30
, 2017
|
|
|
December 31, 2016
|
|
|
|
Number
of
Loans
|
|
|
Pre-
Modification
Outstanding
Principal
Balance
|
|
|
Post-
Modification
Principal
Balance
|
|
|
Number
of
Loans
|
|
|
Pre-
Modification
Outstanding
Principal
Balance
|
|
|
Post-
Modification
Principal
Balance
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
|
1
|
|
|
$
|
107
|
|
|
$
|
84
|
|
|
|
2
|
|
|
$
|
1,960
|
|
|
$
|
1,286
|
|
Secured by 1-4 family residential properties
|
|
|
3
|
|
|
|
318
|
|
|
|
188
|
|
|
|
3
|
|
|
|
318
|
|
|
|
249
|
|
Secured by non-farm, non-residential properties
|
|
|
1
|
|
|
|
53
|
|
|
|
38
|
|
|
|
1
|
|
|
|
53
|
|
|
|
41
|
|
Commercial loans
|
|
|
2
|
|
|
|
116
|
|
|
|
83
|
|
|
|
2
|
|
|
|
116
|
|
|
|
88
|
|
Total
|
|
|
7
|
|
|
$
|
594
|
|
|
$
|
393
|
|
|
|
8
|
|
|
$
|
2,447
|
|
|
$
|
1,664
|
|
As of September 30, 2017 and December 31, 2016, no loans that previously had been modified in a troubled debt restructuring had defaulted subsequent to modification.
Restructured loan modifications primarily included maturity date extensions and payment schedule modifications. There were no modifications to principal balances of the loans that were restructured. Accordingly, there was no impact on the Company
’s allowance for loan losses resulting from the modifications.
All loans with a principal balance of $0.5 million or more that have been modified in a troubled debt restructuring are considered impaired and evaluated individually for impairment. The nature and extent of impairment of restructured loans, including those that have experienced a subsequent payment default, are considered in the determination of an appropriate level of allowance for loan losses. This evaluation resulted in an allowance for loan losses attributable to such restructured loans of
$3 thousand as of September 30, 2017 and $15 thousand as of December 31, 2016.
5.
|
OTHER REAL ESTATE OWNED
|
Other real estate and certain other assets acquired in foreclosure are reported at the lower of the investment in the loan or the fair value of the property, less estimated costs to sell. The following table summarizes foreclosed property activity for the
nine months ended September 30, 2017 and 2016.
|
|
September 30
, 2017
|
|
|
|
Bank
|
|
|
ALC
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Beginning balance
|
|
$
|
4,353
|
|
|
$
|
505
|
|
|
$
|
4,858
|
|
Transfers from loans
|
|
|
—
|
|
|
|
87
|
|
|
|
87
|
|
Sales proceeds
|
|
|
(649
|
)
|
|
|
(199
|
)
|
|
|
(848
|
)
|
Gross gains
|
|
|
14
|
|
|
|
—
|
|
|
|
14
|
|
Gross losses
|
|
|
(20
|
)
|
|
|
(101
|
)
|
|
|
(121
|
)
|
Net gains (losses)
|
|
|
(6
|
)
|
|
|
(101
|
)
|
|
|
(107
|
)
|
Impairment
|
|
|
(171
|
)
|
|
|
—
|
|
|
|
(171
|
)
|
Ending balance
|
|
$
|
3,527
|
|
|
$
|
292
|
|
|
$
|
3,819
|
|
|
|
September 30
, 2016
|
|
|
|
Bank
|
|
|
ALC
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Beginning balance
|
|
$
|
5,327
|
|
|
$
|
711
|
|
|
$
|
6,038
|
|
Transfers from loans
|
|
|
255
|
|
|
|
149
|
|
|
|
404
|
|
Sales proceeds
|
|
|
(655
|
)
|
|
|
(259
|
)
|
|
|
(914
|
)
|
Gross gains
|
|
|
—
|
|
|
|
27
|
|
|
|
27
|
|
Gross losses
|
|
|
(40
|
)
|
|
|
(73
|
)
|
|
|
(113
|
)
|
Net gains (losses)
|
|
|
(40
|
)
|
|
|
(46
|
)
|
|
|
(86
|
)
|
Impairment
|
|
|
—
|
|
|
|
(51
|
)
|
|
|
(51
|
)
|
Ending balance
|
|
$
|
4,887
|
|
|
$
|
504
|
|
|
$
|
5,391
|
|
Valuation adjustments are recorded in other non-interest expense and are primarily post-foreclosure write-downs that are a result of continued declining property values based on updated appraisals or other indications of value, such as offers to purchase.
Fair value less estimated cost to sell of foreclosed residential real estate held by the Company was $0.6 million and $1.1 million as of September 30, 2017 and 2016, respectively. In addition, the Company held $20 thousand and $0.1 million in consumer mortgage loans collateralized by residential real estate that were in the process of foreclosure as of September 30, 2017 and 2016, respectively.
6.
|
INVESTMENT IN LIMITED PARTNERSHIP
|
The Company holds an investment in an affordable housing project for which it provides funding as a limited partner and has received tax credits related to its investment in the project based on its partnership share. The net assets of the partnership consist primarily of apartment complexes
, and the primary liabilities consist of those associated with the operation of the partnership. The Company has determined that this investment requires consolidation as a variable interest entity under
ASC Topic 810, Consolidation.
The Company holds a 99.9% interest in the limited partnership. Assets recorded by the Company as a result of the consolidation were less than $0.1 million as of both September 30, 2017 and December 31, 2016.
Short-term borrowings consist of federal funds purchased, securities sold under repurchase agreements
and short-term Federal Home Loan Bank (“FHLB”) advances with original maturities of one year or less. Short-term borrowings totaled $10.6 million and $10.1 million as of September 30, 2017 and December 31, 2016, respectively.
Federal funds purchased, which represent unsecured lines of credit that generally mature within one to four days, are available to the Bank through arrangements with correspondent banks and the Federal Reserve. As of both September 30, 2017 and December 31, 2016, there were no federal funds purchased outstanding, and the Bank had $18.8 million in available unused lines of credit with correspondent banks and the Federal Reserve.
Securities sold under repurchase agreements, which are secured borrowings, generally are reflected at the amount of cash received in
connection with the transaction. The Bank may be required to provide additional collateral based on the fair value of the underlying securities. The Bank monitors the fair value of the underlying securities on a daily basis. Securities sold under repurchase agreements as of September 30, 2017 and December 31, 2016 totaled $0.6 million and $0.1 million, respectively.
Short-term FHLB advances are secured borrowings available to the Bank as an alternative funding source. As of both September 30, 2017 and December 31, 2016, the Bank
had $10.0 million in outstanding FHLB advances with original maturities of less than one year.
The Company uses
FHLB advances as an alternative to funding sources with similar maturities, such as certificates of deposit or other deposit programs. These advances generally offer more attractive rates than other mid-term financing options. They are also flexible, allowing the Company to quickly obtain the necessary maturities and rates that best suit its overall asset/liability strategy. FHLB advances with an original maturity of more than one year are classified as long-term. The Company had long-term FHLB advances outstanding of $10.0 million and $15.0 million as of September 30, 2017 and December 31, 2016, respectively.
Assets pledged associated with FHLB advances totaled $22.3 million and $28.0 million as of September 30, 2017 and
December 31, 2016, respectively. As of September 30, 2017 and December 31, 2016, the Company had $164.8 million and $155.0 million, respectively, in remaining credit from the FHLB (subject to available collateral).
The provision for income taxes was
$0.4 million for both of the nine-month periods ended September 30, 2017 and 2016. The Company’s effective tax rate was 23.0% and 23.4%, respectively, for the same periods. The effective tax rate is impacted by recurring permanent differences, such as those associated with bank-owned life insurance and tax-exempt investments and loan income.
The Company had a net deferred tax asset of $7.7
million and $8.7 million as of September 30, 2017 and December 31, 2016, respectively. The reduction in the net deferred tax asset resulted primarily from the impact of changes in the fair value of securities available-for-sale, as well as the reduction of federal net operating loss carry-forwards.
10.
|
DEFERRED COMPENSATION PLANS
|
The Bank has entered into supplemental retirement compensation benefits agreements with certain directors and executive officers. The measurement of the liability under these agreements includes estimates involving life expectancy, length of time before retirement and the expected returns on the bank-owned life insurance policies used to fund those agreements. Should these estimates prove to be materially wrong, the cost of these agreements could change accordingly. The
related deferred compensation obligation to these directors and executive officers included in other liabilities was $3.4 million and $3.5 million as of September 30, 2017 and December 31, 2016, respectively.
Non-employee directors may elect to defer payment of all or any
portion of their Bancshares and Bank director fees under Bancshares’ Non-Employee Directors’ Deferred Compensation Plan (the “Deferral Plan”). The Deferral Plan, which was ratified by Bancshares’ shareholders at the annual meeting held on May 11, 2004, permits non-employee directors to invest their directors’ fees and to receive the adjusted value of the deferred amounts in cash and/or shares of Bancshares’ common stock. Neither Bancshares nor the Bank makes any contribution to participants’ accounts under the Deferral Plan. As of September 30, 2017 and December 31, 2016, a total of 100,990 and 114,547 shares of stock, respectively, were deferred in connection with the Deferral Plan. All deferred fees, whether in the form of cash or shares of stock, are reflected as compensation expense in the period earned. The Company classifies all deferred directors' fees allocated to be paid in shares of stock as equity surplus. The Company uses shares of treasury stock to satisfy these obligations when due.
In accordance with the
2013 Incentive Plan, stock awards, including stock options and restricted stock, have been granted to certain employees and non-employee directors. Shares of common stock available for distribution to satisfy the grants may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Stock-based compensation expense related to stock awards totaled $0.2 million and $0.1 million for the nine-month periods ended September 30, 2017 and 2016, respectively.
Stock Options
The stock option awards were granted with an exercise price equal to the market price of Bancshares’ common stock on the date of the grant and have vesting periods ranging from one to three years, with 10-year contractual terms.
The Company recognizes the cost of services received in exchange for stock option awards based on the grant date fair value of the award, with compensation expense recognized on a straight-line b
asis over the award’s vesting period. The fair value of outstanding awards was determined using the Black-Scholes option pricing model based on the assumptions noted in the table below. Expected volatilities are based on historical volatilities of Bancshares’ common stock.
|
|
2017
|
|
|
2016
|
|
Risk-free interest rate
|
|
|
2.23
|
%
|
|
|
1.58
|
%
|
Expected term
|
|
7.5 years
|
|
|
7.5 years
|
|
Expected stock price volatility
|
|
|
25.36
|
%
|
|
|
25.25
|
%
|
Dividend yield
|
|
|
1.50
|
%
|
|
|
1.50
|
%
|
The following table summarizes the Company's stock option activity for the periods presented.
|
|
Nine
Months Ended
|
|
|
|
September 30
, 2017
|
|
|
September 30
, 2016
|
|
|
|
Number of
Shares
|
|
|
Average
Exercise
Price
|
|
|
Number of
Shares
|
|
|
Average
Exercise
Price
|
|
Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, beginning of period
|
|
|
272,550
|
|
|
$
|
8.21
|
|
|
|
175,550
|
|
|
$
|
8.17
|
|
Granted
|
|
|
70,600
|
|
|
|
13.84
|
|
|
|
97,000
|
|
|
|
8.30
|
|
Exercised
|
|
|
19,316
|
|
|
|
8.15
|
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
3,334
|
|
|
|
11.79
|
|
|
|
—
|
|
|
|
—
|
|
Options outstanding, end of period
|
|
|
320,500
|
|
|
$
|
9.42
|
|
|
|
272,550
|
|
|
$
|
8.21
|
|
Options exercisable, end of period
|
|
|
208,633
|
|
|
$
|
8.20
|
|
|
|
175,550
|
|
|
$
|
8.17
|
|
The aggregate intrinsic value of stock options outstanding (calculated as the
amount by which the market value of underlying stock exceeds the exercise price of the option) was approximately $0.8 million and $0.4 million as of September 30, 2017 and 2016, respectively.
Restricted Stock
During the first nine months of 2017, 7,533 shares of restricted stock were granted with vesting periods of either one or three years. No shares of restricted stock were granted during the nine months ended September 30, 2016. The Company recognizes the cost of services received in exchange for restricted stock awards based on the grant date closing price of the stock, with compensation expense recognized on a straight-line basis over the award’s vesting period.
12.
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
On April 1, 2016, the Bank entered into a forward interest rate swap contract on a variable rate FHLB advance (indexed to three-month LIBOR) with a total notional amount
of $10.0 million. The interest rate swap contract was designated as a derivative instrument in a cash flow hedge under
ASC Topic 815, Derivatives and Hedging,
with the objective of protecting the quarterly interest rate payments on the FHLB advance from the risk of variability of those payments resulting from changes in the three-month LIBOR interest rate throughout the seven-year period beginning on April 5, 2016 and ending on April 5, 2023. Under the swap arrangement, which became effective on April 5, 2016, the Bank will pay a fixed interest rate of 1.46% and receive a variable interest rate based on three-month LIBOR on the total notional amount of $10.0 million, with quarterly net settlements.
No ineffectiveness related to the interest rate swap designated as a cash
flow hedge was recognized in the consolidated statements of operations for the three- or nine-month periods ended September 30, 2017. The accumulated net after-tax gain related to the effective cash flow hedge included in accumulated other comprehensive income totaled $0.2 million as of both September 30, 2017 and December 31, 2016.
Under
ASC Topic 280,
Segment Reporting
, certain information is disclosed for the two reportable operating segments of Bancshares: the Bank and ALC. The reportable segments were determined using the internal management reporting system. These segments comprise Bancshares’ and the Bank’s significant subsidiaries. The accounting policies for each segment are the same as those described in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2016. The segment results include certain overhead allocations and intercompany transactions that were recorded at current market prices. All intercompany transactions have been eliminated to determine the consolidated balances. The results for the two reportable segments of the Company are included in the tables below.
|
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
|
ALC
|
|
|
Other
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in Thousands)
|
|
As of and for the three months ended
September 30
, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
4,192
|
|
|
$
|
2,940
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
7,135
|
|
Provision (reduction in reserve) for loan losses
|
|
|
(130
|
)
|
|
|
503
|
|
|
|
—
|
|
|
|
—
|
|
|
|
373
|
|
Total non-interest income
|
|
|
1,005
|
|
|
|
219
|
|
|
|
954
|
|
|
|
(942
|
)
|
|
|
1,236
|
|
Total non-interest expense
|
|
|
4,699
|
|
|
|
2,303
|
|
|
|
336
|
|
|
|
(148
|
)
|
|
|
7,190
|
|
Income before income taxes
|
|
|
628
|
|
|
|
353
|
|
|
|
621
|
|
|
|
(794
|
)
|
|
|
808
|
|
Provision for income taxes
|
|
|
48
|
|
|
|
202
|
|
|
|
(77
|
)
|
|
|
—
|
|
|
|
173
|
|
Net income
|
|
$
|
580
|
|
|
$
|
151
|
|
|
$
|
698
|
|
|
$
|
(794
|
)
|
|
$
|
635
|
|
Other significant items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
616,820
|
|
|
$
|
92,942
|
|
|
$
|
84,170
|
|
|
$
|
(179,333
|
)
|
|
$
|
614,599
|
|
Total investment securities
|
|
|
185,722
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
185,802
|
|
Total loans, net
|
|
|
329,327
|
|
|
|
89,326
|
|
|
|
—
|
|
|
|
(80,627
|
)
|
|
|
338,026
|
|
Investment in subsidiaries
|
|
|
5
|
|
|
|
—
|
|
|
|
78,469
|
|
|
|
(78,469
|
)
|
|
|
5
|
|
Fixed asset additions
|
|
|
818
|
|
|
|
13
|
|
|
|
—
|
|
|
|
—
|
|
|
|
831
|
|
Depreciation and amortization expense
|
|
|
238
|
|
|
|
41
|
|
|
|
—
|
|
|
|
—
|
|
|
|
279
|
|
Total interest income from external customers
|
|
|
3,596
|
|
|
|
4,224
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,820
|
|
Total interest income from affiliates
|
|
|
1,284
|
|
|
|
—
|
|
|
|
3
|
|
|
|
(1,287
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
12,168
|
|
|
$
|
8,933
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
21,111
|
|
Provision (reduction in reserve) for loan losses
|
|
|
(130
|
)
|
|
|
1,594
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,464
|
|
Total non-interest income
|
|
|
2,647
|
|
|
|
700
|
|
|
|
2,451
|
|
|
|
(2,465
|
)
|
|
|
3,333
|
|
Total non-interest expense
|
|
|
13,522
|
|
|
|
6,966
|
|
|
|
1,074
|
|
|
|
(472
|
)
|
|
|
21,090
|
|
Income before income taxes
|
|
|
1,423
|
|
|
|
1,073
|
|
|
|
1,387
|
|
|
|
(1,993
|
)
|
|
|
1,890
|
|
Provision for income taxes
|
|
|
249
|
|
|
|
458
|
|
|
|
(272
|
)
|
|
|
—
|
|
|
|
435
|
|
Net income
|
|
$
|
1,174
|
|
|
$
|
615
|
|
|
$
|
1,659
|
|
|
$
|
(1,993
|
)
|
|
$
|
1,455
|
|
Other significant items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset additions
|
|
|
8,578
|
|
|
|
103
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,681
|
|
Depreciation and amortization expense
|
|
|
657
|
|
|
|
124
|
|
|
|
—
|
|
|
|
—
|
|
|
|
781
|
|
Total interest income from external customers
|
|
|
10,493
|
|
|
|
12,520
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23,013
|
|
Total interest income from affiliates
|
|
|
3,587
|
|
|
|
—
|
|
|
|
9
|
|
|
|
(3,596
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
|
ALC
|
|
|
Other
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in Thousands)
|
|
As of and for the three months ended September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
3,917
|
|
|
$
|
3,253
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
7,173
|
|
Provision for loan losses
|
|
|
100
|
|
|
|
580
|
|
|
|
—
|
|
|
|
—
|
|
|
|
680
|
|
Total non-interest income
|
|
|
1,159
|
|
|
|
316
|
|
|
|
973
|
|
|
|
(881
|
)
|
|
|
1,567
|
|
Total non-interest expense
|
|
|
4,636
|
|
|
|
2,403
|
|
|
|
474
|
|
|
|
(165
|
)
|
|
|
7,348
|
|
Income (loss) before income taxes
|
|
|
340
|
|
|
|
586
|
|
|
|
502
|
|
|
|
(716
|
)
|
|
|
712
|
|
Provision for income taxes
|
|
|
52
|
|
|
|
196
|
|
|
|
(86
|
)
|
|
|
—
|
|
|
|
162
|
|
Net income (loss)
|
|
$
|
288
|
|
|
$
|
390
|
|
|
$
|
588
|
|
|
$
|
(716
|
)
|
|
$
|
550
|
|
Other significant items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
602,123
|
|
|
$
|
89,347
|
|
|
$
|
84,291
|
|
|
$
|
(175,454
|
)
|
|
$
|
600,307
|
|
Total investment securities
|
|
|
209,486
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
209,566
|
|
Total loans, net
|
|
|
308,423
|
|
|
|
85,720
|
|
|
|
—
|
|
|
|
(77,022
|
)
|
|
|
317,121
|
|
Investment in subsidiaries
|
|
|
5
|
|
|
|
—
|
|
|
|
78,737
|
|
|
|
(78,737
|
)
|
|
|
5
|
|
Fixed asset additions
|
|
|
960
|
|
|
|
16
|
|
|
|
—
|
|
|
|
—
|
|
|
|
976
|
|
Depreciation and amortization expense
|
|
|
193
|
|
|
|
54
|
|
|
|
—
|
|
|
|
—
|
|
|
|
247
|
|
Total interest income from external customers
|
|
|
3,415
|
|
|
|
4,345
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,760
|
|
Total interest income from affiliates
|
|
|
1,092
|
|
|
|
—
|
|
|
|
3
|
|
|
|
(1,095
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
11,199
|
|
|
$
|
9,544
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
20,751
|
|
Provision (reduction in reserve) for loan losses
|
|
|
(350
|
)
|
|
|
1,733
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,383
|
|
Total non-interest income
|
|
|
3,002
|
|
|
|
909
|
|
|
|
2,481
|
|
|
|
(2,356
|
)
|
|
|
4,036
|
|
Total non-interest expense
|
|
|
13,435
|
|
|
|
7,306
|
|
|
|
1,373
|
|
|
|
(445
|
)
|
|
|
21,669
|
|
Income (loss) before income taxes
|
|
|
1,116
|
|
|
|
1,414
|
|
|
|
1,116
|
|
|
|
(1,911
|
)
|
|
|
1,735
|
|
Provision for income taxes
|
|
|
224
|
|
|
|
484
|
|
|
|
(302
|
)
|
|
|
—
|
|
|
|
406
|
|
Net income (loss)
|
|
$
|
892
|
|
|
$
|
930
|
|
|
$
|
1,418
|
|
|
$
|
(1,911
|
)
|
|
$
|
1,329
|
|
Other significant items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset additions
|
|
|
4,521
|
|
|
|
33
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,554
|
|
Depreciation and amortization expense
|
|
|
564
|
|
|
|
162
|
|
|
|
—
|
|
|
|
—
|
|
|
|
726
|
|
Total interest income from external customers
|
|
|
9,750
|
|
|
|
12,684
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,434
|
|
Total interest income from affiliates
|
|
|
3,140
|
|
|
|
—
|
|
|
|
8
|
|
|
|
(3,148
|
)
|
|
|
—
|
|
14
.
|
GUARANTEES, COMMITMENTS AND CONTINGENCIES
|
The Bank
’s exposure to credit loss in the event of nonperformance by the other party for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making these commitments as it does for on-balance sheet instruments. For interest rate swap transactions and commitments to purchase or sell securities for forward delivery, the contract or notional amounts do not represent exposure to credit loss. The Bank controls the credit risk of these derivative instruments through credit approvals, limits and monitoring procedures. Certain derivative contracts have credit risk for the carrying value plus the amount to replace such contracts in the event of counterparty default. All of the Bank’s financial instruments are held for risk management and not for trading purposes. During the nine-month periods ended September 30, 2017 and 2016, there were no credit losses associated with derivative contracts.
In the normal course of business, there are outstanding commitments and contingent liabilities, such as commitments to extend credit, letters of credit and others
that are not included in the consolidated financial statements. The financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the financial statements. A summary of these commitments and contingent liabilities is presented below.
|
|
September
30
,
2017
|
|
|
December
31,
2016
|
|
|
|
(Dollars in Thousands)
|
|
Standby letters of credit
|
|
$
|
180
|
|
|
$
|
183
|
|
Commitments to extend credit
|
|
$
|
53,231
|
|
|
$
|
41,267
|
|
Standby letters of credit are contingent commitments issued by the Bank generally to guarantee the performance of a customer to a third-party. The Bank has recourse against the customer for any amount that it is required to pay to a third-party under a standby letter of credit. Revenues are recognized over the lives of the standby letters of credit. As of
September 30, 2017 and December 31, 2016, the potential amount of future payments that the Bank could be required to make under its standby letters of credit, which represent the Bank’s total credit risk in this category, is included in the table above.
A commitment
to extend credit is an agreement to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon the extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.
Commitments to purchase securities for delayed delivery require the Bank to purchase a specified security at a specified price for delivery on a specified date. Similarly, commitments to sell securities for delayed delivery require the Bank to sell a specified security at a specified price for delivery on a specified date. Market risk arises from potential movements in security values and interest rates between the commitment and delivery dates.
As of both September 30, 2017 and December 31, 2016, there were no outstanding commitments to purchase securities for delayed delivery and no outstanding commitments to sell securities for delayed delivery.
The Company is self-insured for a significant portion of employee health benefits. However, the Company maintains stop-loss coverage with third-party insurers to limit the Company’s individual claim and total exposure related to self-insurance. The Company estimates an accrued liability for the ultimate costs to close known claims, as well as claims incurred but not yet reported, as of the balance sheet date. The Company’s recorded estimated liability for self-insurance is based on the insurance companies’ incurred loss estimates and management’s judgment, including assumptions and factors related to the frequency and severity of claims, the Company’s claims development history and the Company’s claims settlement practices. The assessment of loss contingencies and self-insurance reserves is a highly subjective process that requires judgments about future events. Contingencies are reviewed at least quarterly to determine the adequacy of self-insurance accruals. The ultimate settlement of loss contingencies and self-insurance reserves may differ significantly from amounts that the Company has accrued in the consolidated financial statements.
In 2016, the Bank entered into an agreement with a general contractor to manage construction of an office complex on a parcel of land located in the Birmingham, Alabama area that was purchased by the Bank in 2016. As of September 30, 2017, construction of the office complex was substantially complete, and remaining contractual commitments with the general contractor totaled $0.3 million.
Litigation
The Company is party to
certain ordinary course litigation, and the Company intends to vigorously defend itself in all such litigation. In the opinion of the Company, based on review and consultation with legal counsel, the outcome of such ordinary course litigation should not have a material adverse effect on the Company’s consolidated financial statements or results of operations.
15.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
The Company follows the provisions of
ASC Topic 820,
Fair Value Measurements and Disclosures
, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather represent a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.
Fair Value Hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. In determining fair value, the Company uses various methods, including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
|
●
|
Level 1
— Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange or Nasdaq. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
|
|
●
|
Level 2
— Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.
|
|
●
|
Level 3
— Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.
|
The Company rarely transfers assets and liabilities measured at fair value between Level 1 and Level 2 measurements. Trading account assets and securities available-for-sale may be periodically transferred to or from Level 3 valuation based on management
’s conclusion regarding the best method of pricing for an individual security. Such transfers are accounted for as if they occurred at the beginning of a reporting period. There were no such transfers during the nine months ended September 30, 2017 or the year ended December 31, 2016.
Fair Value Measurements on a Recurring Basis
Securities
Available-for-Sale
Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include exchange-traded equities. Level 2 securities include U.S. Treasury and agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset-backed and other securities. Level 2 fair values are obtained from quoted prices of securities with similar characteristics. In certain cases, where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.
Interest Rate Derivative Agreements
Interest rate derivative agreements are used by the Company to mitigate risk associated with changes in interest rates.
The fair value of these agreements is based on information obtained from third-party financial institutions. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party valuations. The Company classifies these derivative assets within Level 2 of the valuation hierarchy.
The following table presents assets measured at fair value on a recurring basis as of
September 30, 2017 and December 31, 2016. There were no liabilities measured at fair value on a recurring basis for either period presented.
|
|
Fair Value Measurements as of
September
30
, 2017
Using
|
|
|
|
Totals
At
September
30
,
2017
|
|
|
Quoted
Prices in
Active
Markets For
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Investment securities, available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
83,550
|
|
|
$
|
—
|
|
|
$
|
83,550
|
|
|
$
|
—
|
|
Commercial
|
|
|
67,138
|
|
|
|
—
|
|
|
|
67,138
|
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
|
5,655
|
|
|
|
—
|
|
|
|
5,655
|
|
|
|
—
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
2,002
|
|
|
|
—
|
|
|
|
2,002
|
|
|
|
—
|
|
U.S. Treasury securities
|
|
|
80
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
Other assets - derivatives
|
|
|
291
|
|
|
|
—
|
|
|
|
291
|
|
|
|
—
|
|
|
|
Fair Value Measurements as of December 31, 2016
Using
|
|
|
|
Totals
At
December
31,
2016
|
|
|
Quoted
Prices in
Active
Markets For
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Investment securities, available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
98,409
|
|
|
$
|
—
|
|
|
$
|
98,409
|
|
|
$
|
—
|
|
Commercial
|
|
|
70,530
|
|
|
|
—
|
|
|
|
70,530
|
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
|
10,142
|
|
|
|
—
|
|
|
|
10,142
|
|
|
|
—
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
1,993
|
|
|
|
—
|
|
|
|
1,993
|
|
|
|
—
|
|
Corporate notes
|
|
|
756
|
|
|
|
—
|
|
|
|
756
|
|
|
|
—
|
|
U.S. Treasury securities
|
|
|
80
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
Other assets - derivatives
|
|
|
346
|
|
|
|
—
|
|
|
|
346
|
|
|
|
—
|
|
Fair Value Measurements on a Non-recurring Basis
Impaired Loans
Loans that are considered impaired are loans for which, based on current information and events, it is probable that the Company will be unable to collect all principal and interest payments due under the contractual terms of the loan agreement. Impaired loans can be measured based on the present value of expected payments using the loan
’s original effective rate as the discount rate, the loan’s observable market price, or the fair value of the collateral less estimated selling cost if the loan is collateral-dependent. For the Company, the fair value of impaired loans is primarily measured based on the value of the collateral securing the loans (typically real estate). The Company determines the fair value of the collateral based on independent appraisals performed by qualified licensed appraisers. The appraisals may include a single valuation approach or a combination of approaches, including comparable sales and income approaches. Appraised values are discounted for estimated costs to sell and may be discounted further based on management’s knowledge of the collateral, changes in market conditions since the most recent appraisal and/or management’s knowledge of the borrower and the borrower’s business. Such discounts by management are subjective and are typically significant unobservable inputs for determining fair value. Impaired loans are evaluated by management for additional impairment at least quarterly and are adjusted accordingly.
Other Real Estate Owned (OREO)
OREO consists of properties obtained through foreclosure or in satisfaction of loans and is recorded at the lower of the loan
’s carrying amount or the fair value of the property, less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically significant unobservable inputs for determining fair value.
Other Assets
Included within other assets are certain assets that were formerly included as premises and equipment but have been removed from service, and as of the balance sheet date, were designated as assets to be disposed of by sale. These include assets associated with branches of the Bank that have been closed. When an asset is designated as held for sale, the Company ceases depreciation of the asset, and the asset is recorded at the lower of its carrying amount or fair value less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically unobservable inputs for determining fair value.
The following table presents the balances of impaired loans, OREO and other assets measured at fair value on a non-recurring basis as of September
30, 2017 and December 31, 2016.
|
|
Fair Value Measurements as of
September
30
, 2017
Using
|
|
|
|
Totals
At
September
30
,
2017
|
|
|
Quoted
Prices in
Active
Markets For
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Impaired loans
|
|
$
|
686
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
686
|
|
OREO
|
|
|
3,819
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,819
|
|
Other assets
|
|
|
228
|
|
|
|
—
|
|
|
|
—
|
|
|
|
228
|
|
|
|
Fair Value Measurements as of December 31, 2016
Using
|
|
|
|
Totals
At
December 31,
2016
|
|
|
Quoted
Prices in
Active
Markets
For Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Impaired loans
|
|
$
|
1,568
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,568
|
|
OREO
|
|
|
4,858
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,858
|
|
Other assets
|
|
|
280
|
|
|
|
—
|
|
|
|
—
|
|
|
|
280
|
|
Non-recurring Fair Value Measurements Using Significant Unobservable Inputs
The following table presents information regarding assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of September
30, 2017. The table includes the valuation techniques and the significant unobservable inputs utilized. The range of each unobservable input and the weighted average within the range utilized as of September 30, 2017 are both included. Following the table is a description of the valuation technique and the sensitivity of the technique to changes in the significant unobservable input.
|
|
Level 3 Significant Unobservable Input Assumptions
|
|
|
Fair Value
September
30
,
2017
|
|
|
Valuation Technique
|
|
Unobservable
Input
|
|
Quantitative
Range
of Unobservable
Inputs
(Weighted
Average)
|
|
|
(Dollars in Thousands)
|
Non-recurring fair value measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
686
|
|
|
Multiple data points, including discount to appraised value of collateral based on recent market activity
|
|
Appraisal comparability adjustment (discount)
|
|
9
% - 10%
(
9.5%)
|
|
|
|
|
|
|
|
|
|
|
|
OREO
|
|
$
|
3,819
|
|
|
Discount to appraised
value of property based on recent market activity for sales of similar properties
|
|
Appraisal comparability
adjustment (discount)
|
|
9
% - 10%
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
$
|
228
|
|
|
Discount to appraised value of property based on recent market activity for sales of similar properties
|
|
Appraisal comparability adjustment (discount)
|
|
9
% - 10%
(9
.5%)
|
Impaired Loans
Impaired loans are valued based on multiple data points indicating the fair value for each loan. The primary data point is the appraisal value of the underlying collateral, to which a discount is applied. Management establishes this discount or comparability adjustment based on recent sales of similar property types. As liquidity in the market increases or decreases, the comparability adjustment and the resulting asset valuation are impacted.
OREO
OREO under a binding contract for sale is valued based on contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.
Other Assets
Assets designated as held for sale that are under a binding contract are valued based on the contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.
Fair Value of Financial Instruments
ASC Topic 825, Financial
Instruments
, requires disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:
Cash, due from banks and federal funds sold:
The carrying amount of cash, due from banks and federal funds sold approximates fair value.
Federal Home Loan Bank stock:
Based on the redemption provision of the FHLB, the stock has no quoted market value and is carried at cost.
Investment securities:
Fair values of investment securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on market prices of comparable instruments.
Derivative instruments:
The fair value of derivative instruments is based on information obtained from a third-party financial institution. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party information.
Accrued interest receivable and payable:
The carrying amount of accrued interest approximates fair value.
Loans, net:
For variable-rate loans, fair values are based on carrying values. Fixed-rate commercial loans, other installment loans and certain real estate mortgage loans are valued using discounted cash flows. The discount rate used to determine the present value of these loans is based on interest rates charged by the Company on comparable loans as to credit risk and term at the determination date.
Demand and savings deposits:
The fair values of demand deposits are equal to the carrying value of such deposits. Demand deposits include non-interest-bearing demand deposits, savings accounts, NOW accounts and money market demand accounts.
Time deposits:
The fair values of relatively short-term time deposits are equal to their carrying values. Discounted cash flows are used to value long-term time deposits. The discount rate used is based on interest rates currently being offered by the Company on comparable deposits as to amount and term.
Short-term borrowings:
These borrowings may consist of federal funds purchased, securities sold under agreements to repurchase and the floating rate borrowings from the FHLB account. Due to the short-term nature of these borrowings, fair values approximate carrying values.
Long-term debt:
The fair value of this debt is estimated using discounted cash flows based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements as of the determination date.
Off-balance sheet instruments:
The carrying amount of commitments to extend credit and standby letters of credit approximates fair value. The carrying amount of the off-balance sheet financial instruments is based on fees currently charged to enter into such agreements.
The estimated fair value and related carrying or notional amounts, as well as the level within the fair value hierarchy, of the Company
’s financial instruments as of September 30, 2017 and December 31, 2016 were as follows:
|
|
September
30
, 2017
|
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
(Dollars in Thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
32,554
|
|
|
$
|
32,554
|
|
|
$
|
32,554
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Investment securities available-for-sale
|
|
|
158,425
|
|
|
|
158,425
|
|
|
|
—
|
|
|
|
158,425
|
|
|
|
—
|
|
Investment securities held-to-maturity
|
|
|
27,377
|
|
|
|
27,303
|
|
|
|
—
|
|
|
|
27,303
|
|
|
|
—
|
|
Federal Home Loan Bank stock
|
|
|
1,396
|
|
|
|
1,396
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,396
|
|
Loans, net of allowance for loan losses
|
|
|
338,026
|
|
|
|
327,251
|
|
|
|
—
|
|
|
|
—
|
|
|
|
327,251
|
|
Other assets - derivatives
|
|
|
291
|
|
|
|
291
|
|
|
|
—
|
|
|
|
291
|
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
508,385
|
|
|
|
507,298
|
|
|
|
—
|
|
|
|
507,298
|
|
|
|
—
|
|
Short-term borrowings
|
|
|
10,635
|
|
|
|
10,634
|
|
|
|
—
|
|
|
|
10,634
|
|
|
|
—
|
|
Long-term debt
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
December 31, 2016
|
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
(Dollars in Thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
23,530
|
|
|
$
|
23,530
|
|
|
$
|
23,530
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Investment securities available-for-sale
|
|
|
181,910
|
|
|
|
181,910
|
|
|
|
—
|
|
|
|
181,910
|
|
|
|
—
|
|
Investment securities held-to-maturity
|
|
|
25,904
|
|
|
|
25,508
|
|
|
|
—
|
|
|
|
25,508
|
|
|
|
—
|
|
Federal Home Loan Bank stock
|
|
|
1,581
|
|
|
|
1,581
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,581
|
|
Loans, net of allowance for loan losses
|
|
|
322,772
|
|
|
|
319,881
|
|
|
|
—
|
|
|
|
—
|
|
|
|
319,881
|
|
Other assets -
derivatives
|
|
|
346
|
|
|
|
346
|
|
|
|
—
|
|
|
|
346
|
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
497,556
|
|
|
|
497,037
|
|
|
|
—
|
|
|
|
497,037
|
|
|
|
—
|
|
Short-term borrowings
|
|
|
10,119
|
|
|
|
10,119
|
|
|
|
—
|
|
|
|
10,119
|
|
|
|
—
|
|
Long-term debt
|
|
|
15,000
|
|
|
|
14,998
|
|
|
|
—
|
|
|
|
14,998
|
|
|
|
—
|
|