NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The accompanying unaudited consolidated
financial statements of Poage Bankshares, Inc. (the “Company” or “Poage”) and its wholly owned subsidiary
Town Square Bank (which was formerly operated under the name “Home Federal Savings and Loan Association”) (the “Bank”)
have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial
information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant
to such rules and regulations.
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Estimates used in the preparation of the financial statements are based on various
factors including the current interest rate environment and the general strength of the local economy. Changes in the overall
interest rate environment can significantly affect the Company’s net interest income and the value of its recorded assets
and liabilities. Actual results could differ from those estimates used in the preparation of the financial statements.
In the opinion of management, the accompanying
unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly
the Company’s financial position as of March 31, 2017 and December 31, 2016 and the results of operations and cash flows
for the interim periods ended March 31, 2017 and 2016. All interim amounts have not been audited, and the results of operations
for the interim periods herein are not necessarily indicative of the results of operations to be expected for the year. These consolidated
financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes
thereto filed as part of the Company’s 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Recently Adopted Accounting Pronouncements
In March 2016, the FASB issued ASU No.
2016-09,
Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting.
This ASU will require
recognition of the income tax effects of share-based awards in the income statement when the awards vest or are settled (i.e.,
Additional Paid-in-Capital pools will be eliminated). The amendments are effective for public companies for annual periods beginning
after December 15, 2016. The guidance in the ASU No. 2016-09 was adopted by the Company and did not have a material impact on its
consolidated financial statements.
Newly Issued Accounting Standards Not
Yet Effective
In May 2014, the FASB issued
Accounting
Standards Update 2014-09
Revenue from Contracts with Customers (Topic 606)
developed as a joint project with the
International Accounting Standards Board to remove inconsistencies in revenue requirements and provide a more robust framework
for addressing revenue issues. The ASU's core principle is that an entity should recognize revenue when it transfers promised goods
or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for
those goods or services. In August 2015, the FASB issued
Accounting Standards Update 2015-14
, which deferred the
effective date by one year (i.e., interim and annual reporting periods beginning after December 15, 2017). The ASU may be adopted
using either a modified retrospective method or a full retrospective method. Poage intends to adopt the ASU during the first quarter
of 2018, as required, using a modified retrospective approach. Poage’s preliminary analysis suggests that the adoption of
this accounting guidance is not expected to have a material impact on the Company's consolidated financial statements as the majority
of its revenue stream is generated from financial instruments which are not within the scope of this ASU. However, Poage is still
evaluating the impact for other fee-based income. The FASB continues to release new accounting guidance related to the adoption
of this ASU and the results of Poage's materiality analysis may change based on conclusions reached as to the application of this
new guidance.
In January 2016, the FASB issued ASU No.
2016-01,
Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities.
The ASU makes several modifications to Subtopic 825-10 including the elimination of the available-for-sale
classification of equity investments, and requires equity investments with readily determinable fair values to be measured at fair
value with changes in fair value recognized in net income. This ASU will become effective for the Company for interim and
annual periods beginning after December 15, 2017. The adoption of ASU No. 2016-01 is not expected to have a material effect on
the Company’s operating results or financial condition.
In February 2016, the FASB issued
Accounting
Standards Update 2016-02 Leases
guidance requiring the recognition in the statement of financial position of lease assets
and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The guidance requires that
a lessee should recognize lease assets and lease liabilities as compared to previous GAAP that did not require lease assets and
lease liabilities to be recognized for most leases. The guidance becomes effective for us on January 1, 2019. The Company
leases two facilities. Upon adoption of this standard, an asset will be recorded to recognize the right of the Company to use the
leased facilities and a liability will be recorded representing the obligation to make all future lease payments on those facilities.
Management is currently evaluating the impact of the new guidance on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13,
Financial
Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments
(the ASU), which introduces the current
expected credit losses methodology. Among other things, the ASU requires the measurement of all expected credit losses for financial
assets, including loans and available-for-sale debt securities, held at the reporting date based on historical experience,
current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The new model
will require institutions to calculate all probable and estimable losses that are expected to be incurred through the loan's entire
life. ASU 2016-13 also requires the allowance for credit losses for purchased financial assets with credit deterioration since
origination to be determined in a manner similar to that of other financial assets measured at amortized cost; however, the initial
allowance will be added to the purchase price rather than recorded as credit loss expense. The disclosure of credit quality indicators
related to the amortized cost of financing receivables will be further disaggregated by year of origination (or vintage). Institutions
are 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 standard is effective. The amendments are effective for fiscal years beginning after December 15, 2019. Early
application will be permitted for fiscal years beginning after December 15, 2018. Poage is currently assessing the impact of the
new guidance on its consolidated financial statements. Upon adoption, an initial increase in the allowance for loan losses is currently
anticipated by management along with a corresponding decrease in capital as permitted by the standard.
In January 2017, FASB issued ASU 2017-4,
Intangible—Goodwill and Other (Topic 350)
, to simplify accounting for goodwill impairment. The new guidance will simplify
financial reporting because it eliminates the need to determine the fair value of individual assets and liabilities of a reporting
unit to measure goodwill impairment. The revised guidance is effective for fiscal years beginning after December 15, 2019. Early
adoption is permitted for any impairment tests performed after January 1, 2017. Poage is currently evaluating the impact of the
new guidance on its consolidated financial statements.
In March 2017, the FASB issued ASU No.
2017-08,
Receivables—Nonrefundable Fee and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt
Securities.
The amendments affect all entities that hold investments in callable debt securities that have an amortized cost
basis in excess of the amount that is repayable by the issuer. The amendments requires the premium for certain callable debt securities
to be amortized to the earliest call date. The amendments are effective for public companies for annual periods beginning after
December 15, 2019. The adoption of ASU No. 2017-08 is not expected to have a material effect on the Company’s operating results
or financial condition.
NOTE 2 - SECURITIES AVAILABLE FOR SALE
The amortized cost and fair value of securities
available for sale at March 31, 2017 and December 31, 2016 and the corresponding amounts of gross unrealized gains and losses recognized
in accumulated other comprehensive income (loss) were as follows (in thousands):
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
19,553
|
|
|
$
|
348
|
|
|
$
|
(85
|
)
|
|
$
|
19,816
|
|
U.S. Government agencies and sponsored entities
|
|
|
3,500
|
|
|
|
-
|
|
|
|
(66
|
)
|
|
|
3,434
|
|
Government sponsored entities residential mortgage-backed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC
|
|
|
11,143
|
|
|
|
88
|
|
|
|
(33
|
)
|
|
|
11,198
|
|
FNMA
|
|
|
11,453
|
|
|
|
47
|
|
|
|
(30
|
)
|
|
|
11,470
|
|
Collateralized mortgage obligations
|
|
|
6,128
|
|
|
|
-
|
|
|
|
(70
|
)
|
|
|
6,058
|
|
SBA loan pools
|
|
|
7,232
|
|
|
|
23
|
|
|
|
(23
|
)
|
|
|
7,232
|
|
Total securities
|
|
$
|
59,009
|
|
|
$
|
506
|
|
|
$
|
(307
|
)
|
|
$
|
59,208
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
19,785
|
|
|
$
|
291
|
|
|
$
|
(184
|
)
|
|
$
|
19,892
|
|
U.S. Government agencies and sponsored entities
|
|
|
3,500
|
|
|
|
-
|
|
|
|
(37
|
)
|
|
|
3,463
|
|
Government sponsored entities residential mortgage-backed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC
|
|
|
10,954
|
|
|
|
29
|
|
|
|
(88
|
)
|
|
|
10,895
|
|
FNMA
|
|
|
11,349
|
|
|
|
19
|
|
|
|
(108
|
)
|
|
|
11,260
|
|
Collateralized mortgage obligations
|
|
|
5,495
|
|
|
|
-
|
|
|
|
(89
|
)
|
|
|
5,406
|
|
SBA loan pools
|
|
|
7,411
|
|
|
|
9
|
|
|
|
(75
|
)
|
|
|
7,345
|
|
Total securities
|
|
$
|
58,494
|
|
|
$
|
348
|
|
|
$
|
(581
|
)
|
|
$
|
58,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no proceeds from sales and calls of securities for
the three months ended March 31, 2017 and 2016.
The amortized cost and fair value of the
securities portfolio at March 31, 2017 are shown in the following table by contractual maturity. Expected maturities may differ
from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Securities not due at a single maturity date are shown separately (in thousands):
|
|
March 31,
|
|
|
|
2017
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
|
|
|
|
|
|
Within one year
|
|
$
|
1,532
|
|
|
$
|
1,541
|
|
One to five years
|
|
|
9,856
|
|
|
|
9,871
|
|
Five to ten years
|
|
|
8,565
|
|
|
|
8,727
|
|
Beyond ten years
|
|
|
3,100
|
|
|
|
3,111
|
|
Mortgage-backed securities and collateralized mortgage obligations
|
|
|
28,724
|
|
|
|
28,726
|
|
SBA loan pools
|
|
|
7,232
|
|
|
|
7,232
|
|
Total
|
|
$
|
59,009
|
|
|
$
|
59,208
|
|
The following table summarizes the securities
with unrealized losses at March 31, 2017 and December 31, 2016, aggregated by major security type and length of time in a continuous
unrealized loss position (in thousands):
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
5,496
|
|
|
$
|
(85
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,496
|
|
|
$
|
(85
|
)
|
U.S. Government agencies and sponsored entities
|
|
|
3,434
|
|
|
|
(66
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
3,434
|
|
|
|
(66
|
)
|
Government sponsored entities residential mortgage
backed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC
|
|
|
4,253
|
|
|
|
(33
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
4,253
|
|
|
|
(33
|
)
|
FNMA
|
|
|
4,608
|
|
|
|
(30
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
4,608
|
|
|
|
(30
|
)
|
Collateralized mortgage obligations
|
|
|
6,058
|
|
|
|
(70
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
6,058
|
|
|
|
(70
|
)
|
SBA loan pools
|
|
|
3,849
|
|
|
|
(23
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
3,849
|
|
|
|
(23
|
)
|
Total available-for-sale securities
|
|
$
|
27,698
|
|
|
$
|
(307
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
27,698
|
|
|
$
|
(307
|
)
|
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
6,952
|
|
|
$
|
(184
|
)
|
|
$
|
296
|
|
|
$
|
-
|
|
|
$
|
7,248
|
|
|
$
|
(184
|
)
|
U.S. Government agencies and sponsored entities
|
|
|
3,463
|
|
|
|
(37
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
3,463
|
|
|
|
(37
|
)
|
Government sponsored entities residential mortgage backed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC
|
|
|
6,479
|
|
|
|
(88
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
6,479
|
|
|
|
(88
|
)
|
FNMA
|
|
|
6,930
|
|
|
|
(108
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
6,930
|
|
|
|
(108
|
)
|
Collateralized mortgage obligations
|
|
|
2,671
|
|
|
|
(33
|
)
|
|
|
2,735
|
|
|
|
(56
|
)
|
|
|
5,406
|
|
|
|
(89
|
)
|
SBA loan pools
|
|
|
5,865
|
|
|
|
(75
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
5,865
|
|
|
|
(75
|
)
|
Total available-for-sale securities
|
|
$
|
32,360
|
|
|
$
|
(525
|
)
|
|
$
|
3,031
|
|
|
$
|
(56
|
)
|
|
$
|
35,391
|
|
|
$
|
(581
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on bonds have not been
recognized into income because the issuers of the bonds are of high credit quality, management does not intend to sell and it is
not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the
decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bonds approach
maturity.
Management evaluates securities for other-than-temporary
impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such
an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized
loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or
it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized
cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost
and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria,
the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the
income statement, and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss
is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.
For equity securities, the entire amount of impairment is recognized through earnings.
NOTE 3 – LOANS
Loans at March 31, 2017 and December 31,
2016 were as follows (in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Real estate:
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
175,745
|
|
|
$
|
177,801
|
|
Multi-family
|
|
|
7,125
|
|
|
|
6,823
|
|
Commercial real estate
|
|
|
81,894
|
|
|
|
83,169
|
|
Construction and land
|
|
|
9,074
|
|
|
|
11,019
|
|
|
|
|
273,838
|
|
|
|
278,812
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
38,483
|
|
|
|
38,747
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
10,521
|
|
|
|
10,655
|
|
Motor vehicle
|
|
|
10,442
|
|
|
|
10,624
|
|
Other
|
|
|
7,781
|
|
|
|
7,877
|
|
|
|
|
28,744
|
|
|
|
29,156
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
341,065
|
|
|
|
346,715
|
|
Less: Net deferred loan fees
|
|
|
442
|
|
|
|
445
|
|
Allowance for loan losses
|
|
|
2,463
|
|
|
|
2,349
|
|
|
|
$
|
338,160
|
|
|
$
|
343,921
|
|
The following tables present the balance
in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of March
31, 2017 and December 31, 2016. Accrued interest receivable and net deferred loan fees are not considered significant and therefore
are not included in the loan balances presented in the table below (in thousands):
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
Loan Balances
|
|
|
|
Individually
|
|
|
Purchased
|
|
|
Collectively
|
|
|
|
|
|
Individually
|
|
|
Purchased
|
|
|
Collectively
|
|
|
|
|
|
|
Evaluated for
|
|
|
Credit-Impaired
|
|
|
Evaluated for
|
|
|
|
|
|
Evaluated for
|
|
|
Credit-Impaired
|
|
|
Evaluated for
|
|
|
|
|
Loan Segment
|
|
Impairment
|
|
|
Loans
|
|
|
Impairment
|
|
|
Total
|
|
|
Impairment
|
|
|
Loans
|
|
|
Impairment
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
$
|
157
|
|
|
$
|
-
|
|
|
$
|
1,878
|
|
|
$
|
2,035
|
|
|
$
|
7,363
|
|
|
$
|
1,852
|
|
|
$
|
264,623
|
|
|
$
|
273,838
|
|
Commercial and industrial
|
|
|
6
|
|
|
|
-
|
|
|
|
225
|
|
|
$
|
231
|
|
|
|
92
|
|
|
|
-
|
|
|
|
38,391
|
|
|
|
38,483
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
197
|
|
|
$
|
197
|
|
|
|
39
|
|
|
|
-
|
|
|
|
28,705
|
|
|
|
28,744
|
|
Unallocated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
163
|
|
|
$
|
-
|
|
|
$
|
2,300
|
|
|
$
|
2,463
|
|
|
$
|
7,494
|
|
|
$
|
1,852
|
|
|
$
|
331,719
|
|
|
$
|
341,065
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
|
|
Loan Balances
|
|
|
|
|
|
Individually
|
|
|
|
Purchased
|
|
|
|
Collectively
|
|
|
|
|
|
|
|
Individually
|
|
|
|
Purchased
|
|
|
|
Collectively
|
|
|
|
|
|
|
|
|
Evaluated for
|
|
|
|
Credit-Impaired
|
|
|
|
Evaluated for
|
|
|
|
|
|
|
|
Evaluated for
|
|
|
|
Credit-Impaired
|
|
|
|
Evaluated for
|
|
|
|
|
|
Loan Segment
|
|
|
Impairment
|
|
|
|
Loans
|
|
|
|
Impairment
|
|
|
|
Total
|
|
|
|
Impairment
|
|
|
|
Loans
|
|
|
|
Impairment
|
|
|
|
Total
|
|
Real estate
|
|
$
|
23
|
|
|
$
|
-
|
|
|
$
|
1,923
|
|
|
$
|
1,946
|
|
|
$
|
4,844
|
|
|
$
|
1,871
|
|
|
$
|
272,097
|
|
|
$
|
278,812
|
|
Commercial and industrial
|
|
|
7
|
|
|
|
-
|
|
|
|
211
|
|
|
|
218
|
|
|
|
89
|
|
|
|
-
|
|
|
|
38,658
|
|
|
|
38,747
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
185
|
|
|
|
185
|
|
|
|
40
|
|
|
|
1
|
|
|
|
29,115
|
|
|
|
29,156
|
|
Unallocated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
30
|
|
|
$
|
-
|
|
|
$
|
2,319
|
|
|
$
|
2,349
|
|
|
$
|
4,973
|
|
|
$
|
1,872
|
|
|
$
|
339,870
|
|
|
$
|
346,715
|
|
The following table presents information related to impaired
loans by class of loans as of March 31, 2017 and December 31, 2016 (in thousands):
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
Allowance
|
|
|
|
|
|
|
|
|
Allowance
|
|
|
|
Unpaid
|
|
|
|
|
|
for Loan
|
|
|
Unpaid
|
|
|
|
|
|
for Loan
|
|
|
|
Principal
|
|
|
Recorded
|
|
|
Losses
|
|
|
Principal
|
|
|
Recorded
|
|
|
Losses
|
|
|
|
Balance
|
|
|
Investment
|
|
|
Allocated
|
|
|
Balance
|
|
|
Investment
|
|
|
Allocated
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
2,015
|
|
|
$
|
2,002
|
|
|
$
|
-
|
|
|
$
|
883
|
|
|
$
|
883
|
|
|
$
|
-
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
4,777
|
|
|
|
4,723
|
|
|
|
-
|
|
|
|
3,780
|
|
|
|
3,726
|
|
|
|
-
|
|
Construction and land
|
|
|
191
|
|
|
|
191
|
|
|
|
-
|
|
|
|
193
|
|
|
|
193
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
274
|
|
|
|
86
|
|
|
|
-
|
|
|
|
270
|
|
|
|
82
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and lines of credit
|
|
|
39
|
|
|
|
39
|
|
|
|
-
|
|
|
|
40
|
|
|
|
40
|
|
|
|
-
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Subtotal
|
|
$
|
7,296
|
|
|
$
|
7,041
|
|
|
$
|
-
|
|
|
$
|
5,166
|
|
|
$
|
4,924
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
604
|
|
|
$
|
447
|
|
|
$
|
157
|
|
|
$
|
42
|
|
|
$
|
42
|
|
|
$
|
23
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Subtotal
|
|
|
610
|
|
|
|
453
|
|
|
|
163
|
|
|
|
49
|
|
|
|
49
|
|
|
|
30
|
|
Total
|
|
$
|
7,906
|
|
|
$
|
7,494
|
|
|
$
|
163
|
|
|
$
|
5,215
|
|
|
$
|
4,973
|
|
|
$
|
30
|
|
The recorded investment in loans excludes accrued interest receivable
and loan origination fees, net, due to immateriality. For purposes of this disclosure, the unpaid balance is not reduced for partial
charge-offs.
The following
tables present the average balance of loans individually evaluated for impairment and interest income recognized on these loans
for the three months ended March 31, 2017 and 2016 (in thousands):
|
|
Three months ended March 31, 2017
|
|
|
Three months ended March 31, 2016
|
|
|
|
Average
|
|
|
Interest
|
|
|
Cash Basis
|
|
|
Average
|
|
|
Interest
|
|
|
Cash Basis
|
|
|
|
Recorded
|
|
|
Income
|
|
|
Interest
|
|
|
Recorded
|
|
|
Income
|
|
|
Interest
|
|
|
|
Investment
|
|
|
Recognized
|
|
|
Recognized
|
|
|
Investment
|
|
|
Recognized
|
|
|
Recognized
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
1,614
|
|
|
$
|
14
|
|
|
$
|
-
|
|
|
$
|
913
|
|
|
$
|
2
|
|
|
$
|
-
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
3,325
|
|
|
|
36
|
|
|
|
-
|
|
|
|
448
|
|
|
|
-
|
|
|
|
-
|
|
Construction and land
|
|
|
119
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
219
|
|
|
|
-
|
|
|
|
-
|
|
|
|
161
|
|
|
|
-
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and lines of credit
|
|
|
33
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23
|
|
|
|
-
|
|
|
|
-
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
5,310
|
|
|
$
|
51
|
|
|
$
|
-
|
|
|
$
|
1,545
|
|
|
$
|
2
|
|
|
$
|
-
|
|
The following tables set forth an analysis of our allowance
for loan losses for the three months ended March 31, 2017 and 2016 (in thousands):
Three months ended
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
Real Estate
|
|
|
and Industrial
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,946
|
|
|
$
|
218
|
|
|
$
|
185
|
|
|
$
|
-
|
|
|
$
|
2,349
|
|
Provision for loan losses
|
|
|
284
|
|
|
|
20
|
|
|
|
49
|
|
|
|
-
|
|
|
|
353
|
|
Loans charged-off
|
|
|
(198
|
)
|
|
|
(21
|
)
|
|
|
(55
|
)
|
|
|
-
|
|
|
|
(274
|
)
|
Recoveries
|
|
|
3
|
|
|
|
14
|
|
|
|
18
|
|
|
|
-
|
|
|
|
35
|
|
Total ending allowance balance
|
|
$
|
2,035
|
|
|
$
|
231
|
|
|
$
|
197
|
|
|
$
|
-
|
|
|
$
|
2,463
|
|
Three months ended
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Real Estate
|
|
|
and Industrial
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,676
|
|
|
$
|
77
|
|
|
$
|
105
|
|
|
$
|
-
|
|
|
$
|
1,858
|
|
Provision for loan losses
|
|
|
298
|
|
|
|
11
|
|
|
|
66
|
|
|
|
-
|
|
|
|
375
|
|
Loans charged-off
|
|
|
(73
|
)
|
|
|
-
|
|
|
|
(70
|
)
|
|
|
-
|
|
|
|
(143
|
)
|
Recoveries
|
|
|
3
|
|
|
|
5
|
|
|
|
37
|
|
|
|
-
|
|
|
|
45
|
|
Total ending allowance balance
|
|
$
|
1,904
|
|
|
$
|
93
|
|
|
$
|
138
|
|
|
$
|
-
|
|
|
$
|
2,135
|
|
Nonaccrual loans, and loans past due 90 days still on accrual
status, consist of smaller balance homogeneous loans that are collectively evaluated for impairment.
The following table presents the recorded
investment in nonaccrual and loans past due over 90 days still on accrual status, by class of loans, as of March 31, 2017 and December
31, 2016 (in thousands):
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
Loans Past Due
|
|
|
|
|
|
|
|
Loans Past Due
|
|
|
|
|
|
|
|
|
Over 90 Days
|
|
|
|
|
|
|
|
Over 90 Days
|
|
|
|
|
Nonaccrual
|
|
|
|
Still Accruing
|
|
|
|
Nonaccrual
|
|
|
|
Still Accruing
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
2,847
|
|
|
$
|
-
|
|
|
$
|
3,428
|
|
|
$
|
-
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
2,086
|
|
|
|
-
|
|
|
|
970
|
|
|
|
-
|
|
Construction and land
|
|
|
92
|
|
|
|
-
|
|
|
|
41
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
98
|
|
|
|
-
|
|
|
|
90
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
149
|
|
|
|
-
|
|
|
|
155
|
|
|
|
-
|
|
Motor vehicle
|
|
|
10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
7
|
|
|
|
-
|
|
|
|
5
|
|
|
|
-
|
|
Total
|
|
$
|
5,289
|
|
|
$
|
-
|
|
|
$
|
4,689
|
|
|
$
|
-
|
|
The following tables present the aging
of the recorded investment in past due loans as of March 31, 2017 and December 31, 2016 by class of loans. Non-accrual loans of
$5.3 million as of March 31, 2017 and $4.7 million at December 31, 2016 are included in the tables below and have been categorized
based on their payment status (in thousands):
|
|
30 - 59
|
|
|
60 - 89
|
|
|
Greater than
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
89 Days
|
|
|
Total
|
|
|
Credit-Impaired
|
|
|
Loans Not
|
|
|
|
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Loans
|
|
|
Past Due
|
|
|
Total
|
|
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
2,820
|
|
|
$
|
345
|
|
|
$
|
906
|
|
|
$
|
4,071
|
|
|
$
|
1,004
|
|
|
$
|
170,670
|
|
|
$
|
175,745
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,125
|
|
|
|
7,125
|
|
Commercial real estate
|
|
|
845
|
|
|
|
358
|
|
|
|
1,756
|
|
|
|
2,959
|
|
|
|
848
|
|
|
|
78,087
|
|
|
|
81,894
|
|
Construction and land
|
|
|
191
|
|
|
|
-
|
|
|
|
52
|
|
|
|
243
|
|
|
|
-
|
|
|
|
8,831
|
|
|
|
9,074
|
|
Commercial and industrial
|
|
|
24
|
|
|
|
67
|
|
|
|
63
|
|
|
|
154
|
|
|
|
-
|
|
|
|
38,329
|
|
|
|
38,483
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
149
|
|
|
|
149
|
|
|
|
-
|
|
|
|
10,372
|
|
|
|
10,521
|
|
Motor vehicle
|
|
|
45
|
|
|
|
4
|
|
|
|
-
|
|
|
|
49
|
|
|
|
-
|
|
|
|
10,393
|
|
|
|
10,442
|
|
Other
|
|
|
28
|
|
|
|
11
|
|
|
|
4
|
|
|
|
43
|
|
|
|
-
|
|
|
|
7,738
|
|
|
|
7,781
|
|
Total
|
|
$
|
3,953
|
|
|
$
|
785
|
|
|
$
|
2,930
|
|
|
$
|
7,668
|
|
|
$
|
1,852
|
|
|
$
|
331,545
|
|
|
$
|
341,065
|
|
|
|
30 - 59
|
|
|
60 - 89
|
|
|
Greater than
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
89 Days
|
|
|
Total
|
|
|
Credit-Impaired
|
|
|
Loans Not
|
|
|
|
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Loans
|
|
|
Past Due
|
|
|
Total
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
899
|
|
|
$
|
454
|
|
|
$
|
1,679
|
|
|
$
|
3,032
|
|
|
$
|
1,013
|
|
|
$
|
173,756
|
|
|
$
|
177,801
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,823
|
|
|
|
6,823
|
|
Commercial real estate
|
|
|
101
|
|
|
|
-
|
|
|
|
465
|
|
|
|
566
|
|
|
|
858
|
|
|
|
81,745
|
|
|
|
83,169
|
|
Construction and land
|
|
|
41
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41
|
|
|
|
-
|
|
|
|
10,978
|
|
|
|
11,019
|
|
Commercial and industrial
|
|
|
1
|
|
|
|
47
|
|
|
|
76
|
|
|
|
124
|
|
|
|
-
|
|
|
|
38,623
|
|
|
|
38,747
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
-
|
|
|
|
1
|
|
|
|
155
|
|
|
|
156
|
|
|
|
-
|
|
|
|
10,499
|
|
|
|
10,655
|
|
Motor vehicle
|
|
|
40
|
|
|
|
15
|
|
|
|
-
|
|
|
|
55
|
|
|
|
-
|
|
|
|
10,569
|
|
|
|
10,624
|
|
Other
|
|
|
2
|
|
|
|
20
|
|
|
|
-
|
|
|
|
22
|
|
|
|
1
|
|
|
|
7,854
|
|
|
|
7,877
|
|
Total
|
|
$
|
1,084
|
|
|
$
|
537
|
|
|
$
|
2,375
|
|
|
$
|
3,996
|
|
|
$
|
1,872
|
|
|
$
|
340,847
|
|
|
$
|
346,715
|
|
Troubled Debt Restructurings
:
As of March 31, 2017, the Company had a recorded investment
in four TDRs which totaled $3.2 million. There were three TDRs which totaled $3.2 million at December 31, 2016. A less than market
rate and extended term was granted as concessions for TDRs. No additional charge-off has been made for the loan relationships.
A provision of $23,000 was made during the three months ended March 31, 2017 for the loan relationships. No additional commitments
to lend have been made to the borrower.
March 31, 2017
|
|
TDRs on
|
|
|
|
|
|
|
|
(in thousands)
|
|
Non-accrual
|
|
|
Other TDRs
|
|
|
Total TDRs
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
114
|
|
|
$
|
17
|
|
|
$
|
131
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
3,044
|
|
|
|
3,044
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
114
|
|
|
$
|
3,061
|
|
|
$
|
3,175
|
|
December 31, 2016
|
|
TDRs on
|
|
|
|
|
|
|
|
(in thousands)
|
|
Non-accrual
|
|
|
Other TDRs
|
|
|
Total TDRs
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
-
|
|
|
$
|
17
|
|
|
$
|
17
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
166
|
|
|
|
3,047
|
|
|
|
3,213
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
19
|
|
|
|
-
|
|
|
|
19
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
185
|
|
|
$
|
3,064
|
|
|
$
|
3,249
|
|
The following table presents TDRs that occurred during the three
months ended March 31, 2017 and March 31, 2016 (dollars in thousands):
|
|
Three months ended March 31, 2017
|
|
|
Three months ended March 31, 2016
|
|
Loan Class
|
|
Number of
Loans
|
|
|
Pre-
Modification
Outstanding
Recorded
Investment
|
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
|
|
Number of
Loans
|
|
|
Pre-
Modification
Outstanding
Recorded
Investment
|
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
|
1
|
|
|
$
|
114
|
|
|
$
|
114
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
1
|
|
|
$
|
114
|
|
|
$
|
114
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
CREDIT QUALITY INDICATORS:
The Company categorizes loans into risk
categories based on relevant information about the ability of borrowers to service their debt such as: current financial information,
historical payment experience, credit documentation, public information, and current economic trends, among other factors. The
Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans,
such as commercial and commercial real estate loans. The analysis for residential real estate and consumer loans primarily includes
review of past due status. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk
ratings:
Special Mention.
Loans
classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected,
these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit
position at some future date.
Substandard.
Loans classified
as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged,
if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized
by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful.
Loans classified
as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses
make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and
improbable.
Loss.
Loans classified
as loss are considered uncollectable and of such little value that continuing to carry them as an asset is not feasible.
Loans will be classified as a loss when it is not practical or desirable to defer writing off or reserving all or a portion of
a basically worthless asset, even though partial recovery may be possible at some time in the future.
Loans not meeting the criteria above that are analyzed individually
as part of the above described process are considered to be pass rated loans.
Based on the most recent analysis performed, the risk category
of loans by class of loans is as follows (in thousands):
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Loss
|
|
|
Total
|
|
One to four family
|
|
$
|
167,948
|
|
|
$
|
2,310
|
|
|
$
|
5,487
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
175,745
|
|
Multi-family
|
|
|
7,125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,125
|
|
Commercial real estate
|
|
|
72,624
|
|
|
|
3,169
|
|
|
|
6,101
|
|
|
|
-
|
|
|
|
-
|
|
|
|
81,894
|
|
Construction and land
|
|
|
8,883
|
|
|
|
-
|
|
|
|
191
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,074
|
|
Commercial and industrial
|
|
|
35,497
|
|
|
|
1,625
|
|
|
|
1,361
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,483
|
|
Home equity loans and lines of credit
|
|
|
10,271
|
|
|
|
36
|
|
|
|
214
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,521
|
|
Motor vehicle
|
|
|
10,411
|
|
|
|
2
|
|
|
|
29
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,442
|
|
Other
|
|
|
7,768
|
|
|
|
10
|
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,781
|
|
Total
|
|
$
|
320,527
|
|
|
$
|
7,152
|
|
|
$
|
13,386
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
341,065
|
|
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Loss
|
|
|
Total
|
|
One to four family
|
|
$
|
171,109
|
|
|
$
|
2,167
|
|
|
$
|
4,525
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
177,801
|
|
Multi-family
|
|
|
6,823
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,823
|
|
Commercial real estate
|
|
|
74,267
|
|
|
|
4,048
|
|
|
|
4,854
|
|
|
|
-
|
|
|
|
-
|
|
|
|
83,169
|
|
Construction and land
|
|
|
10,826
|
|
|
|
-
|
|
|
|
193
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,019
|
|
Commercial and industrial
|
|
|
36,172
|
|
|
|
1,802
|
|
|
|
773
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,747
|
|
Home equity loans and lines of credit
|
|
|
10,478
|
|
|
|
6
|
|
|
|
171
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,655
|
|
Motor vehicle
|
|
|
10,594
|
|
|
|
2
|
|
|
|
28
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,624
|
|
Other
|
|
|
7,872
|
|
|
|
-
|
|
|
|
5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,877
|
|
Total
|
|
$
|
328,141
|
|
|
$
|
8,025
|
|
|
$
|
10,549
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
346,715
|
|
There were $1.8 million and $1.9 million purchased credit impaired
(“PCI”) loans included in substandard loans at March 31, 2017 and December 31, 2016, respectively.
The Company holds purchased loans without
evidence of credit quality deterioration. In addition, the Company holds purchased loans for which there was, at their acquisition
date, evidence of deterioration of credit quality since their origination and it was probable that all contractually required payments
would not be collected. A summary of non-impaired purchased loans and credit-impaired purchased loans with the carrying amount
of those loans is as follows at March 31, 2017 and December 31, 2016 (in thousands):
|
|
Non-impaired
|
|
|
Credit-impaired
|
|
|
|
Purchased
|
|
|
Purchased
|
|
Purchased Loans as of March 31, 2017
|
|
Loans
|
|
|
Loans
|
|
Real estate:
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
29,177
|
|
|
$
|
1,004
|
|
Multi-family
|
|
|
2,079
|
|
|
|
-
|
|
Commercial real estate
|
|
|
18,282
|
|
|
|
848
|
|
Construction and land
|
|
|
625
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
2,507
|
|
|
|
-
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
1,359
|
|
|
|
-
|
|
Motor vehicle
|
|
|
127
|
|
|
|
-
|
|
Other
|
|
|
629
|
|
|
|
-
|
|
Total loans
|
|
$
|
54,785
|
|
|
$
|
1,852
|
|
|
|
Non-impaired
|
|
|
Credit-impaired
|
|
|
|
Purchased
|
|
|
Purchased
|
|
Purchased Loans as of December 31, 2016
|
|
Loans
|
|
|
Loans
|
|
Real estate:
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
30,449
|
|
|
$
|
1,013
|
|
Multi-family
|
|
|
2,115
|
|
|
|
-
|
|
Commercial real estate
|
|
|
19,278
|
|
|
|
858
|
|
Construction and land
|
|
|
652
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
2,783
|
|
|
|
-
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
1,433
|
|
|
|
-
|
|
Motor vehicle
|
|
|
202
|
|
|
|
-
|
|
Other
|
|
|
706
|
|
|
|
1
|
|
Total loans
|
|
$
|
57,618
|
|
|
$
|
1,872
|
|
For the purchased loans disclosed above, the Company did not
increase the allowance for loan losses for the three months ended March 31, 2017 or March 31, 2016.
The following table presents the composition
of the acquired loans at March 31, 2017:
As of March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
|
Remaining
|
|
|
Carrying
|
|
(in thousands)
|
|
Amount
|
|
|
Discount
|
|
|
Amount
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
30,672
|
|
|
$
|
(491
|
)
|
|
$
|
30,181
|
|
Multi-family
|
|
|
2,090
|
|
|
|
(11
|
)
|
|
|
2,079
|
|
Commercial real estate
|
|
|
19,412
|
|
|
|
(282
|
)
|
|
|
19,130
|
|
Construction and land
|
|
|
628
|
|
|
|
(3
|
)
|
|
|
625
|
|
Commercial and industrial
|
|
|
2,520
|
|
|
|
(13
|
)
|
|
|
2,507
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
1,368
|
|
|
|
(9
|
)
|
|
|
1,359
|
|
Motor vehicle
|
|
|
128
|
|
|
|
(1
|
)
|
|
|
127
|
|
Other
|
|
|
634
|
|
|
|
(5
|
)
|
|
|
629
|
|
Total loans
|
|
$
|
57,452
|
|
|
$
|
(815
|
)
|
|
$
|
56,637
|
|
The following tables presents the purchased
loans that are included within the scope of ASC Topic 310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality,
as of March 31, 2017 and December 31, 2016.
(in thousands)
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
Carrying amount
|
|
$
|
1,852
|
|
|
$
|
1,872
|
|
Non-accretable difference
|
|
|
270
|
|
|
|
272
|
|
Accretable yield
|
|
|
134
|
|
|
|
146
|
|
Contractually-required principal and interest payments
|
|
$
|
2,256
|
|
|
$
|
2,290
|
|
The Company adjusted interest income to recognize $12,000, and
$67,000 of accretable yield on credit-impaired purchased loans for the three months ended March 31, 2017 and 2016, respectively.
Accretable yield, or income expected to be collected, is as
follows for the three months ended March 31, 2017 and 2016 (in thousands):
|
|
|
2017
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1,
|
|
$
|
146
|
|
|
$
|
292
|
|
New Loans Purchased
|
|
|
-
|
|
|
|
-
|
|
Accretion of income
|
|
|
(12
|
)
|
|
|
(67
|
)
|
Reclassifications from nonaccretable difference
|
|
|
-
|
|
|
|
-
|
|
Disposals
|
|
|
-
|
|
|
|
-
|
|
Balance at March 31,
|
|
$
|
134
|
|
|
$
|
225
|
|
NOTE 4 – FEDERAL HOME LOAN BANK ADVANCES
Advances from the FHLB at March 31, 2017 and December 31, 2016
were as follows (in thousands):
|
|
|
March 31, 2017
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Maturities June 2017 through January 2029, fixed rate at rates from 0.83% to 4.27%, weighted average rate of 1.73% at March 31, 2017 and 1.80% at December 31, 2016
|
|
$
|
8,794
|
|
|
$
|
9,332
|
|
Payments contractually required over the next five years are
as follows as of March 31, 2017 (in thousands):
March 31,
|
|
|
|
2018
|
|
$
|
6,921
|
|
2019
|
|
|
1,209
|
|
2020
|
|
|
223
|
|
2021
|
|
|
88
|
|
2022
|
|
|
74
|
|
Thereafter
|
|
|
279
|
|
Total
|
|
$
|
8,794
|
|
NOTE 5 – FAIR VALUE
Fair value is the exchange price that would
be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that
may be used to measure fair values:
Level 1 – Quoted prices (unadjusted)
for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2 – Significant other observable
inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable
inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset
or liability.
The Company used the following methods
and significant assumptions to estimate fair value:
Securities
: The fair values for
securities are determined by quoted market prices, if available (Level 1). If quoted market prices are not available, fair values
are based on quoted market prices of similar securities (Level 2). This includes the use of “matrix pricing” used to
value debt securities absent the exclusive use of quoted prices. For securities where quoted prices or market prices of similar
securities are not available, fair values are calculated using discounted cash flows (Level 3).
Impaired Loans
: The fair value of
impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals.
Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable
sales and income data available for similar loans and collateral underlying such loans. Non-real estate collateral may be valued
using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based
on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s
expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans
are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.
Other Real Estate Owned
: Nonrecurring
adjustments to certain commercial and residential real estate properties classified as other real estate owned (OREO) are measured
at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of
the property resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less estimated costs
to sell, an impairment loss is recognized.
Assets and liabilities measured at fair value on a recurring
basis, at March 31, 2017 and December 31, 2016, are as follows (in thousands):
|
|
Fair Value Measurements at
|
|
|
|
March 31, 2017 Using:
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
19,816
|
|
|
$
|
-
|
|
|
$
|
19,816
|
|
|
$
|
-
|
|
U.S. Government agencies and sponsored entities
|
|
|
3,434
|
|
|
|
-
|
|
|
|
3,434
|
|
|
|
-
|
|
Mortgage backed securities: residential
|
|
|
22,668
|
|
|
|
-
|
|
|
|
22,668
|
|
|
|
-
|
|
Collateralized mortgage obligations
|
|
|
6,058
|
|
|
|
-
|
|
|
|
6,058
|
|
|
|
-
|
|
SBA loan pools
|
|
|
7,232
|
|
|
|
-
|
|
|
|
7,232
|
|
|
|
-
|
|
Total securities
|
|
$
|
59,208
|
|
|
$
|
-
|
|
|
$
|
59,208
|
|
|
$
|
-
|
|
|
|
Fair Value Measurements at
|
|
|
|
December 31, 2016 Using:
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
19,892
|
|
|
$
|
-
|
|
|
$
|
19,892
|
|
|
$
|
-
|
|
U.S. Government agencies and sponsored entities
|
|
|
3,463
|
|
|
|
-
|
|
|
|
3,463
|
|
|
|
-
|
|
Mortgage backed securities: residential
|
|
|
22,155
|
|
|
|
-
|
|
|
|
22,155
|
|
|
|
-
|
|
Collateralized mortgage obligations
|
|
|
5,406
|
|
|
|
-
|
|
|
|
5,406
|
|
|
|
-
|
|
SBA loan pools
|
|
|
7,345
|
|
|
|
-
|
|
|
|
7,345
|
|
|
|
-
|
|
Total securities
|
|
$
|
58,261
|
|
|
$
|
-
|
|
|
$
|
58,261
|
|
|
$
|
-
|
|
There were no transfers between Level 1 and Level 2.
Assets measured at fair value on a non-recurring
basis at March 31, 2017 and December 31, 2016 are summarized below (in thousands):
|
|
Fair Value Measurements at
|
|
|
|
March 31, 2017 Using:
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate, net
|
|
$
|
307
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
307
|
|
Commercial real estate, net
|
|
|
250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250
|
|
Commercial and industrial, net
|
|
|
58
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family, net
|
|
$
|
241
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
241
|
|
|
|
Fair Value Measurements at
|
|
|
|
December 31, 2016 Using:
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate, net
|
|
$
|
613
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
613
|
|
Commercial real estate, net
|
|
|
250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250
|
|
Commercial and industrial, net
|
|
|
58
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family, net
|
|
$
|
268
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
268
|
|
Commercial real estate, net
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8
|
|
Commercial and residential real estate
properties classified as OREO are measured at fair value, less estimated costs to sell. Fair values are based on recent real estate
appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and
the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences
between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level
3 classification of the inputs for determining fair value. Appraisals for real estate properties classified as other real estate
owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential
properties) whose qualifications and licenses have been reviewed and verified by the Bank’s management. The appraisal values
are discounted to allow for selling expenses and fees, and the discounts range from 5% to 10%.
At March 31, 2017, impaired loans recorded
at fair value had a net carrying amount of $615,000 equal to the outstanding balance of $778,000, net of a valuation allowance
of $163,000. At December 31, 2016, impaired loans recorded at fair value had a net carrying amount of $921,000 equal to the outstanding
balance of $951,000, net of a valuation allowance of $30,000. There were charge-offs of $13,000 for the three months March 31,
2017. There were no charge-offs for the three months ended March 31, 2016.
At March 31, 2017, other real estate owned
recorded at fair value had a net carrying amount of $241,000 equal to the outstanding balance of $323,000, net of a valuation allowance
of $82,000. There were $10,000 in write-downs for the three months ended March 31, 2017. There were no write-downs for the three
months ended March 31, 2016. At December 31, 2016, other real estate owned recorded at fair value had a net carrying amount of
$276,000, equal to the outstanding balance of $390,000, net of a valuation allowance of $114,000.
The carrying amounts and estimated fair values of financial
instruments at March 31, 2017 and December 31, 2016 are as follows (in thousands):
|
|
|
|
|
Fair Value Measurements
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
31,867
|
|
|
$
|
31,867
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
31,867
|
|
Interest-bearing deposits
|
|
|
1,992
|
|
|
|
-
|
|
|
|
1,992
|
|
|
|
-
|
|
|
|
1,992
|
|
Securities
|
|
|
59,208
|
|
|
|
-
|
|
|
|
59,208
|
|
|
|
-
|
|
|
|
59,208
|
|
Restricted stock
|
|
|
3,276
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Loans held for sale
|
|
|
441
|
|
|
|
-
|
|
|
|
441
|
|
|
|
-
|
|
|
|
441
|
|
Loans, net
|
|
|
338,160
|
|
|
|
-
|
|
|
|
-
|
|
|
|
342,319
|
|
|
|
342,319
|
|
Accrued interest receivable
|
|
|
1,400
|
|
|
|
-
|
|
|
|
324
|
|
|
|
1,076
|
|
|
|
1,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
376,954
|
|
|
$
|
189,681
|
|
|
$
|
171,505
|
|
|
$
|
-
|
|
|
$
|
361,186
|
|
Federal Home Loan Bank advances
|
|
|
8,794
|
|
|
|
4,930
|
|
|
|
3,824
|
|
|
|
-
|
|
|
|
8,754
|
|
Subordinated debenture
|
|
|
2,841
|
|
|
|
-
|
|
|
|
2,841
|
|
|
|
-
|
|
|
|
2,841
|
|
Accrued interest payable
|
|
|
70
|
|
|
|
-
|
|
|
|
70
|
|
|
|
-
|
|
|
|
70
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
24,389
|
|
|
$
|
24,389
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
24,389
|
|
Interest bearing deposits
|
|
|
1,992
|
|
|
|
-
|
|
|
|
1,992
|
|
|
|
-
|
|
|
|
1,992
|
|
Securities
|
|
|
58,261
|
|
|
|
-
|
|
|
|
58,261
|
|
|
|
-
|
|
|
|
58,261
|
|
Restricted stock
|
|
|
3,276
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Loans held for sale
|
|
|
611
|
|
|
|
-
|
|
|
|
611
|
|
|
|
-
|
|
|
|
611
|
|
Loans, net
|
|
|
343,921
|
|
|
|
-
|
|
|
|
-
|
|
|
|
341,288
|
|
|
|
341,288
|
|
Accrued interest receivable
|
|
|
1,397
|
|
|
|
-
|
|
|
|
300
|
|
|
|
1,097
|
|
|
|
1,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
374,708
|
|
|
$
|
164,914
|
|
|
$
|
179,266
|
|
|
$
|
-
|
|
|
$
|
344,180
|
|
Federal Home Loan Bank advances
|
|
|
9,332
|
|
|
|
5,004
|
|
|
|
4,454
|
|
|
|
-
|
|
|
|
9,458
|
|
Subordinated debenture
|
|
|
2,825
|
|
|
|
-
|
|
|
|
2,825
|
|
|
|
-
|
|
|
|
2,825
|
|
Accrued interest payable
|
|
|
52
|
|
|
|
-
|
|
|
|
52
|
|
|
|
-
|
|
|
|
52
|
|
The methods and assumptions, not previously presented, used
to estimate fair values are described as follows:
Cash and Cash Equivalents:
The carrying amounts of cash and short-term instruments approximate
fair values and are classified as Level 1.
Restricted Stock:
It is not practical to determine the fair value of FHLB and
Bankers Bank of Kentucky stock due to restrictions placed on its transferability.
Loans:
Fair values of loans, excluding loans held
for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk,
fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using
discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar
credit quality resulting in a Level 3 classification. The methods utilized to estimate the fair value of loans do not necessarily
represent an exit price.
The fair value of loans held for sale is
estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.
Deposits:
The fair values disclosed for demand deposits
(e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are by definition equal
to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The
carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at
the reporting date resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using
a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated
expected monthly maturities on time deposits resulting in a Level 2 classification.
Federal Home Loan Bank advances and subordinate debenture:
The fair values of the Company’s
long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of
borrowing arrangements resulting in a Level 2 classification.
Accrued Interest Receivable/Payable:
The carrying amounts of accrued interest
approximate fair value and are classified by level consistent with the level of the related assets or liabilities.
NOTE 6 - ESOP
Employees participate in an Employee Stock
Ownership Plan (“ESOP”). The ESOP borrowed from the Company to purchase 269,790 shares of the Company’s common
stock at $10 per share. The Company makes discretionary contributions to the ESOP, and pays dividends on unallocated shares to
the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants
based on relative compensation and expense is recorded. Dividends on allocated shares increase participant accounts. Participants
receive the shares at the end of employment.
There were no contributions to the ESOP
for the three months ended March 31, 2017 and 2016.
Shares held by the ESOP at March 31, 2017 and December 31, 2016
were as follows (dollars in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Allocated to participants
|
|
|
54,165
|
|
|
|
54,165
|
|
Released, but unallocated
|
|
|
16,885
|
|
|
|
13,501
|
|
Unearned
|
|
|
195,574
|
|
|
|
198,958
|
|
Total ESOP shares
|
|
|
266,624
|
|
|
|
266,624
|
|
|
|
|
|
|
|
|
|
|
Fair value of unearned shares
|
|
$
|
3,814
|
|
|
$
|
3,740
|
|
NOTE 7 – EARNINGS PER SHARE
The factors used in the earnings per share
computation for the three months ended March 31, 2017 and 2016, were as follows (dollar amounts in thousands, except per share
data):
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Basic
|
|
|
|
|
|
|
Net income
|
|
$
|
463
|
|
|
$
|
499
|
|
Less: Earnings allocated to participating securities
|
|
|
4
|
|
|
|
12
|
|
Net income available to common shareholders
|
|
$
|
459
|
|
|
$
|
487
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
3,697,374
|
|
|
|
3,847,409
|
|
Less: Average unallocated ESOP shares
|
|
|
197,792
|
|
|
|
211,302
|
|
Average participating shares
|
|
|
30,471
|
|
|
|
50,976
|
|
Average shares
|
|
|
3,469,111
|
|
|
|
3,585,131
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.13
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
459
|
|
|
$
|
487
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic earnings per common share
|
|
|
3,469,111
|
|
|
|
3,585,131
|
|
Add: Dilutive effects of assumed exercises of stock options
|
|
|
31,657
|
|
|
|
17,091
|
|
Average shares and dilutive potential common shares
|
|
|
3,500,768
|
|
|
|
3,602,222
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$
|
0.13
|
|
|
$
|
0.14
|
|
There were 31,657 potentially dilutive
securities outstanding at March 31, 2017. Stock options of 149,900 were considered in computing diluted earnings per common share
for the three months ended March 31, 2017. There were 17,091 potentially dilutive securities outstanding at March 31, 2016. Stock
options of 205,500 shares of common stock were considered in computing diluted earnings per common share for the three months ended
March 31, 2016. All shares of stock options were considered in computing diluted earnings per common share for the three months
ended March 31, 2017 and 2016.
NOTE 8 – STOCK BASED COMPENSATION
On January 8, 2013, the shareholders of
Poage Bankshares, Inc. approved the Poage Bankshares, Inc. 2013 Equity Incentive Plan (the “Plan”) for employees and
directors of the Company. The Plan authorizes the issuance of up to 472,132 shares of the Company’s common stock, with no
more than 134,895 of shares as restricted stock awards and 337,237 as stock options, either incentive stock options or non-qualified
stock options. The exercise price of options granted under the Plan may not be less than the fair market value on the date the
stock option is granted. The compensation committee of the board of directors has sole discretion to determine the amount and to
whom equity incentive awards are granted.
On April 16, 2013, the compensation committee
of the board of directors approved the issuance of 134,895 shares of restricted stock to its directors and officers. In addition,
on May 10, 2013, the compensation committee of the board of directors approved the issuance of 300,000 stock options to its directors
and officers. An additional 20,000 stock option shares were issued on March 19, 2014 as a result of the acquisition of Town Square
Financial Corporation by Poage Bankshares, Inc. An additional 5,000 stock option shares were issued on May 31, 2015 to employees.
All stock options and restricted stock awards vest ratably over five years. Stock options expire ten years after issuance. Apart
from the vesting schedule for both stock options and restricted stock, there are no performance-based conditions or any other material
conditions applicable to the awards issued.
The following table summarizes stock option activity for the
three months ended March 31, 2017:
|
|
|
|
|
Weighted Average
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding -December 31, 2016
|
|
|
179,900
|
|
|
$
|
14.92
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised and settled
|
|
|
(30,000
|
)
|
|
|
14.99
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding -March 31, 2017
|
|
|
149,900
|
|
|
$
|
14.91
|
|
|
|
|
|
|
|
|
|
|
Fully vested and exercisable at March 31, 2017
|
|
|
75,400
|
|
|
|
|
|
Fully vested and exercisable at December 31, 2016
|
|
|
101,400
|
|
|
|
|
|
Expected to vest in future periods
|
|
|
74,500
|
|
|
|
|
|
Stock options are assumed to be earned
ratably over their respective vesting periods and charged to compensation expense based upon their grant date fair value and the
number of options assumed to be earned. At March 31, 2017, 149,900 options were outstanding and 75,400 options were fully vested
and exercisable with intrinsic value of $688,000 and $346,000, respectively. At December 31, 2016, 179,900 options were outstanding
and 101,400 options were fully vested and exercisable with intrinsic value of $698,000 and $393,000, respectively.
During the three months ended March 31,
2017, 4,000 options vested. Stock-based compensation expense for stock options included in salaries and benefits for the three
months ended March 31, 2017 and 2016 was $18,000 and $31,000, respectively. Total unrecognized compensation cost related to non-vested
stock options was $94,000 at March 31, 2017 and $112,000 at December 31, 2016 and is expected to be recognized over a period of
3.2 years. During the three months ended March 31, 2017, the aggregate intrinsic value of the options exercised under the plan
was $132,000 determined as of the date of the option exercise.
The following table summarizes non-vested restricted stock activity
for the three months ended March 31, 2017:
Balance -December 31, 2016
|
|
|
30,471
|
|
Granted
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
Vested
|
|
|
-
|
|
Balance -March 31, 2017
|
|
|
30,471
|
|
The fair value of the restricted stock
awards is amortized to compensation expense over the vesting period (generally five years) and is based on the market price of
the Company’s common stock at the date of the grant multiplied by the number of shares granted that are expected to vest.
Stock-based compensation expense for the restricted stock included in salaries and benefits for the three months ended March 31,
2017 and 2016 was $58,000 and $117,000, respectively. Unrecognized compensation expense for non-vested restricted stock awards
was $241,000 at March 31, 2017 and $299,000 at December 31, 2016 and is expected to be recognized over a weighted-average period
of 1.8 years.
NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table is changes in Accumulated Other Comprehensive
Income by component, net of tax, for the three months ended March 31, 2017 and 2016 (in thousands):
|
|
Unrealized Gains and Losses on Available-
for-Sale Securities
|
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Beginning balance
|
|
$
|
(153
|
)
|
|
$
|
384
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax before reclassification
|
|
|
285
|
|
|
|
259
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive income for gains on sale of securities, net of tax expense of $0 and $0, respectively
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income
|
|
|
285
|
|
|
|
259
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
132
|
|
|
$
|
643
|
|