CITIZENS BANCSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2013 AND 2012
ASSETS
|
|
2013
|
|
2012
|
|
|
|
|
|
Cash and due from banks, including reserve requirements of $286,000 and $242,000 at December 31, 2013 and 2012, respectively
|
|
$
|
6,339,676
|
|
|
$
|
5,383,544
|
|
Interest-bearing deposits with banks
|
|
|
22,826,995
|
|
|
|
34,802,933
|
|
Certificates of deposit
|
|
|
350,000
|
|
|
|
100,000
|
|
Investment securities available for sale, at fair value (amortized cost of $142,683,895 and $125,748,187 at December 31, 2013 and 2012, respectively)
|
|
|
141,045,282
|
|
|
|
129,865,524
|
|
Investment securities held to maturity, at cost (estimated fair value of $240,420 and $1,379,915 at December 31, 2013 and 2012, respectively)
|
|
|
240,000
|
|
|
|
1,356,119
|
|
Other investments
|
|
|
873,850
|
|
|
|
995,450
|
|
Loans receivable—net
|
|
|
182,118,539
|
|
|
|
187,489,181
|
|
Premises and equipment—net
|
|
|
6,589,164
|
|
|
|
6,956,139
|
|
Cash surrender value of life insurance
|
|
|
9,948,016
|
|
|
|
9,619,382
|
|
Other real estate owned
|
|
|
7,404,437
|
|
|
|
8,194,955
|
|
Other assets
|
|
|
9,996,714
|
|
|
|
10,841,502
|
|
|
|
$
|
387,732,673
|
|
|
$
|
395,604,729
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
$
|
71,141,732
|
|
|
$
|
59,342,308
|
|
Interest-bearing deposits
|
|
|
265,820,556
|
|
|
|
281,251,135
|
|
Total deposits
|
|
|
336,962,288
|
|
|
|
340,593,443
|
|
Accrued expenses and other liabilities
|
|
|
4,189,514
|
|
|
|
5,565,484
|
|
Advances from Federal Home Loan Bank
|
|
|
273,079
|
|
|
|
291,697
|
|
Total liabilities
|
|
|
341,424,881
|
|
|
|
346,450,624
|
|
COMMITMENTS AND CONTINGENCIES (Note 9)
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY:
|
|
|
|
|
|
|
|
|
Preferred stock - No par value; 10,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
Series B, 7,462 shares issued and outstanding at December 31, 2013 and 2012
|
|
|
7,462,000
|
|
|
|
7,462,000
|
|
Series C, 4,379 shares issued and outstanding at December 31, 2013 and 2012
|
|
|
4,379,000
|
|
|
|
4,379,000
|
|
Common stock - $1 par value; 20,000,000 shares authorized; 2,292,728 and 2,250,364 shares issued and outstanding at December 31, 2013 and 2012, respectively
|
|
|
2,292,728
|
|
|
|
2,250,364
|
|
Nonvoting common stock - $1 par value; 5,000,000 shares authorized; 90,000 shares issued and outstanding at December 31, 2013 and 2012
|
|
|
90,000
|
|
|
|
90,000
|
|
Nonvested restricted common stock
|
|
|
(16,229
|
)
|
|
|
(56,800
|
)
|
Additional paid-in capital
|
|
|
7,932,710
|
|
|
|
7,941,817
|
|
Retained earnings
|
|
|
27,130,582
|
|
|
|
26,190,373
|
|
Treasury stock, at cost, 235,938 and 220,525 shares at December 31, 2013 and 2012, respectively
|
|
|
(1,881,551
|
)
|
|
|
(1,820,128
|
)
|
Accumulated other comprehensive income (loss), net of income taxes
|
|
|
(1,081,448
|
)
|
|
|
2,717,479
|
|
Total stockholders’ equity
|
|
|
46,307,792
|
|
|
|
49,154,105
|
|
|
|
$
|
387,732,673
|
|
|
$
|
395,604,729
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
CITIZENS BANCSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER
31, 2013, 2012, AND 2011
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees
|
|
$
|
10,487,067
|
|
|
$
|
12,081,649
|
|
|
$
|
11,970,684
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
1,874,286
|
|
|
|
1,836,547
|
|
|
|
2,260,962
|
|
Tax-exempt
|
|
|
1,270,082
|
|
|
|
1,507,882
|
|
|
|
1,764,953
|
|
Dividends
|
|
|
37,771
|
|
|
|
38,481
|
|
|
|
35,198
|
|
Interest-bearing deposits
|
|
|
96,753
|
|
|
|
65,113
|
|
|
|
61,567
|
|
Total interest income
|
|
|
13,765,959
|
|
|
|
15,529,672
|
|
|
|
16,093,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
902,663
|
|
|
|
1,050,460
|
|
|
|
1,526,829
|
|
Other borrowings
|
|
|
604
|
|
|
|
1,070
|
|
|
|
41
|
|
Total interest expense
|
|
|
903,267
|
|
|
|
1,051,530
|
|
|
|
1,526,870
|
|
Net interest income
|
|
|
12,862,692
|
|
|
|
14,478,142
|
|
|
|
14,566,494
|
|
Provision for loan losses
|
|
|
425,000
|
|
|
|
2,400,000
|
|
|
|
3,882,409
|
|
Net interest income after provision for loan losses
|
|
|
12,437,692
|
|
|
|
12,078,142
|
|
|
|
10,684,085
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposits
|
|
|
3,157,140
|
|
|
|
3,219,457
|
|
|
|
3,453,742
|
|
Gains on sales of securities
|
|
|
243,882
|
|
|
|
681,327
|
|
|
|
201,421
|
|
Gains on sales of assets
|
|
|
—
|
|
|
|
—
|
|
|
|
6,162
|
|
Bank owned life insurance
|
|
|
328,634
|
|
|
|
342,395
|
|
|
|
366,431
|
|
ATM surcharges
|
|
|
237,045
|
|
|
|
230,584
|
|
|
|
230,964
|
|
BEA award
|
|
|
—
|
|
|
|
415,000
|
|
|
|
500,000
|
|
Other operating income
|
|
|
514,418
|
|
|
|
1,060,098
|
|
|
|
702,138
|
|
Total noninterest income
|
|
|
4,481,119
|
|
|
|
5,948,861
|
|
|
|
5,460,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
6,504,634
|
|
|
|
6,689,215
|
|
|
|
6,921,594
|
|
Occupancy and equipment
|
|
|
2,127,026
|
|
|
|
2,174,356
|
|
|
|
2,289,583
|
|
Other real estate owned, net
|
|
|
1,120,540
|
|
|
|
3,409,890
|
|
|
|
1,720,440
|
|
Other operating expenses
|
|
|
5,968,644
|
|
|
|
5,885,789
|
|
|
|
6,027,257
|
|
Total noninterest expense
|
|
|
15,720,844
|
|
|
|
18,159,250
|
|
|
|
16,958,874
|
|
Income
(loss) before income taxes benefit
|
|
|
1,197,967
|
|
|
|
(132,247
|
)
|
|
|
(813,931
|
)
|
Income tax benefit
|
|
|
(150,806
|
)
|
|
|
(901,070
|
)
|
|
|
(1,082,557
|
)
|
Net income
|
|
|
1,348,773
|
|
|
|
768,823
|
|
|
|
268,626
|
|
Preferred dividends
|
|
|
236,820
|
|
|
|
236,820
|
|
|
|
236,820
|
|
Net income available to common stockholders
|
|
$
|
1,111,953
|
|
|
$
|
532,003
|
|
|
$
|
31,806
|
|
Net income per common share—basic
|
|
$
|
0.52
|
|
|
$
|
0.25
|
|
|
$
|
0.02
|
|
Net income per common share—diluted
|
|
$
|
0.51
|
|
|
$
|
0.25
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average outstanding shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2,152,780
|
|
|
|
2,157,732
|
|
|
|
2,120,366
|
|
Diluted
|
|
|
2,165,610
|
|
|
|
2,165,396
|
|
|
|
2,134,188
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
CITIZENS BANCSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER
31, 2013, 2012 AND 2011
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
1,348,773
|
|
|
$
|
768,823
|
|
|
$
|
268,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain (loss) on investment securities available for sale, net of tax of $(1,874,103) for 2013, $279,575 for 2012 and $1,530,186 for 2011
|
|
|
(3,637,965
|
)
|
|
|
542,705
|
|
|
|
2,970,361
|
|
Reclassification adjustment for holding gains included in net income, net of tax of $82,920 for 2013, $231,651 for 2012, and $68,483 for 2011
|
|
|
(160,962
|
)
|
|
|
(449,676
|
)
|
|
|
(132,938
|
)
|
Other Comprehensive Income (Loss)
|
|
|
(3,798,927
|
)
|
|
|
93,029
|
|
|
|
2,837,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income (Loss)
|
|
$
|
(2,450,154
|
)
|
|
$
|
861,852
|
|
|
$
|
3,106,049
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
CITIZENS BANCSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER
31, 2013, 2012, AND 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested
|
|
Additional
|
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvoting
|
|
Restricted
|
|
Paid-in
|
|
Retained
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Common Stock
|
|
Stock
|
|
Capital
|
|
Earnings
|
|
Treasury Stock
|
|
Income (Loss)
|
|
Total
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance—December 31, 2010
|
|
|
11,841
|
|
|
$
|
11,841,000
|
|
|
|
2,233,278
|
|
|
$
|
2,233,278
|
|
|
|
90,000
|
|
|
$
|
90,000
|
|
|
$
|
(106,851
|
)
|
|
$
|
7,812,939
|
|
|
$
|
25,964,469
|
|
|
|
(217,531
|
)
|
|
$
|
(1,804,941
|
)
|
|
($
|
212,973
|
)
|
|
$
|
45,816,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
268,626
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
268,626
|
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,837,423
|
|
|
|
2,837,423
|
|
Nonvested restricted stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,063
|
|
|
|
(16,001
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,062
|
|
Purchase of treasury stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,541
|
)
|
|
|
(5,372
|
)
|
|
|
—
|
|
|
|
(5,372
|
)
|
Issuance of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
4,079
|
|
|
|
4,079
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,922
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,001
|
|
Dividends paid on preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(236,820
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(236,820
|
)
|
Dividends paid on common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(168,663
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(168,663
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance—December 31, 2011
|
|
|
11,841
|
|
|
|
11,841,000
|
|
|
|
2,237,357
|
|
|
|
2,237,357
|
|
|
|
90,000
|
|
|
|
90,000
|
|
|
|
(85,788
|
)
|
|
|
7,808,860
|
|
|
|
25,827,612
|
|
|
|
(219,072
|
)
|
|
|
(1,810,313
|
)
|
|
|
2,624,450
|
|
|
$
|
48,533,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
768,823
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
768,823
|
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
93,029
|
|
|
|
93,029
|
|
Nonvested restricted stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
28,988
|
|
|
|
110,074
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
139,062
|
|
Purchase of treasury stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,453
|
)
|
|
|
(9,815
|
)
|
|
|
—
|
|
|
|
(9,815
|
)
|
Issuance of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
13,007
|
|
|
|
13,007
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,883
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,890
|
|
Dividends paid on preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(236,820
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(236,820
|
)
|
Dividends paid on common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(169,242
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(169,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance—December 31, 2012
|
|
|
11,841
|
|
|
$
|
11,841,000
|
|
|
|
2,250,364
|
|
|
$
|
2,250,364
|
|
|
|
90,000
|
|
|
$
|
90,000
|
|
|
($
|
56,800
|
)
|
|
$
|
7,941,817
|
|
|
$
|
26,190,373
|
|
|
|
(220,525
|
)
|
|
$
|
(1,820,128
|
)
|
|
$
|
2,717,479
|
|
|
$
|
49,154,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,348,773
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,348,773
|
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,798,927
|
)
|
|
|
(3,798,927
|
)
|
Nonvested restricted stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
40,571
|
|
|
|
(147,400
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(106,829
|
)
|
Purchase of treasury stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15,413
|
)
|
|
|
(61,423
|
)
|
|
|
—
|
|
|
|
(61,423
|
)
|
Issuance of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
42,364
|
|
|
|
42,364
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
138,293
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
180,657
|
|
Dividends paid on preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(236,820
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(236,820
|
)
|
Dividends paid on common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(171,744
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(171,744
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance—December 31, 2013
|
|
|
11,841
|
|
|
$
|
11,841,000
|
|
|
|
2,292,728
|
|
|
$
|
2,292,728
|
|
|
|
90,000
|
|
|
$
|
90,000
|
|
|
($
|
16,229
|
)
|
|
$
|
7,932,710
|
|
|
$
|
27,130,582
|
|
|
|
(235,938
|
)
|
|
$
|
(1,881,551
|
)
|
|
($
|
1,081,448
|
)
|
|
$
|
46,307,792
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
CITIZENS BANCSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER
31, 2013, 2012 AND 2011
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,348,773
|
|
|
$
|
768,823
|
|
|
$
|
268,626
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
425,000
|
|
|
|
2,400,000
|
|
|
|
3,882,409
|
|
Depreciation
|
|
|
615,694
|
|
|
|
660,440
|
|
|
|
710,092
|
|
Amortization and accretion—net
|
|
|
1,342,645
|
|
|
|
1,438,549
|
|
|
|
993,420
|
|
Provision (benefit) for deferred income taxes
|
|
|
1,433,220
|
|
|
|
(830,384
|
)
|
|
|
(3,027,049
|
)
|
Gains on sales of securities
|
|
|
(243,882
|
)
|
|
|
(681,327
|
)
|
|
|
(201,421
|
)
|
Gains on sales of assets
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,162
|
)
|
Loss on sale of other real estate owned
|
|
|
56,143
|
|
|
|
636,690
|
|
|
|
32,588
|
|
Restricted stock based compensation plan
|
|
|
(106,829
|
)
|
|
|
139,062
|
|
|
|
5,062
|
|
Decrease in carrying value of other real estate owned
|
|
|
615,839
|
|
|
|
2,467,252
|
|
|
|
1,258,602
|
|
Changes in assets and liabilities, net of acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in other assets
|
|
|
493,770
|
|
|
|
1,874,192
|
|
|
|
1,580,054
|
|
Change in accrued expenses and other liabilities
|
|
|
(1,375,971
|
)
|
|
|
279,591
|
|
|
|
1,228,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
4,604,402
|
|
|
|
9,152,888
|
|
|
|
6,725,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in certificates of deposit
|
|
|
(250,000
|
)
|
|
|
—
|
|
|
|
50,000
|
|
Proceeds from the sales, maturities and
paydowns of securities available for sale
|
|
|
30,233,702
|
|
|
|
39,953,870
|
|
|
|
36,591,365
|
|
Proceeds from the maturities and
paydowns of of securities held to maturity
|
|
|
1,119,150
|
|
|
|
1,941,274
|
|
|
|
15,046
|
|
Purchases of securities available for sale
|
|
|
(47,766,287
|
)
|
|
|
(45,717,236
|
)
|
|
|
(29,602,262
|
)
|
Net change in other investments
|
|
|
121,600
|
|
|
|
316,400
|
|
|
|
746,000
|
|
Net change in loans
|
|
|
1,085,325
|
|
|
|
874,155
|
|
|
|
(12,963,368
|
)
|
Purchases of premises and equipment
|
|
|
(248,719
|
)
|
|
|
(388,416
|
)
|
|
|
(421,856
|
)
|
Proceeds from sale of premises and equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
Proceeds from sale of other real estate owned
|
|
|
4,020,124
|
|
|
|
3,437,498
|
|
|
|
3,490,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(11,685,105
|
)
|
|
|
417,545
|
|
|
|
(2,084,829
|
)
|
(Continued)
CITIZENS BANCSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE YEARS ENDED DECEMBER
31, 2013, 2012 AND 2011
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in deposits
|
|
$
|
(3,631,155
|
)
|
|
$
|
(2,437,380
|
)
|
|
$
|
5,426,625
|
|
Net decrease in Federal Home Loan Bank advances
|
|
|
(18,618
|
)
|
|
|
(18,250
|
)
|
|
|
(17,889
|
)
|
Common stock dividend paid
|
|
|
(171,744
|
)
|
|
|
(169,242
|
)
|
|
|
(168,663
|
)
|
Preferred stock dividend paid
|
|
|
(236,820
|
)
|
|
|
(236,820
|
)
|
|
|
(236,820
|
)
|
Net purchase of treasury stock
|
|
|
(61,423
|
)
|
|
|
(9,815
|
)
|
|
|
(5,372
|
)
|
Proceeds from issuance of common stock
|
|
|
180,657
|
|
|
|
35,890
|
|
|
|
16,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(3,939,103
|
)
|
|
|
(2,835,617
|
)
|
|
|
5,013,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
(11,019,806
|
)
|
|
|
6,734,816
|
|
|
|
9,654,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
40,186,477
|
|
|
|
33,451,661
|
|
|
|
23,797,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
$
|
29,166,671
|
|
|
$
|
40,186,477
|
|
|
$
|
33,451,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
939,420
|
|
|
$
|
1,130,336
|
|
|
$
|
1,695,829
|
|
Income taxes
|
|
|
26,000
|
|
|
|
27,615
|
|
|
|
11,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of noncash investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate acquired through foreclosure
|
|
|
3,901,588
|
|
|
|
4,660,558
|
|
|
|
5,747,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investment securities
available for sale—net of tax
|
|
|
(3,798,927
|
)
|
|
|
93,029
|
|
|
|
2,837,423
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
citizens
bancshares corporation and subsidiarY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 2013
|
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Business
—Citizens
Bancshares Corporation and subsidiary (the “Company”) is a holding company that provides a full range of commercial
banking to individual and corporate customers in its primary market areas, metropolitan Atlanta and Columbus, Georgia, and Birmingham
and Eutaw, Alabama through its wholly owned subsidiary, Citizens Trust Bank (the “Bank”). The Bank operates under a
state charter and serves its customers through seven full-service branches in metropolitan Atlanta, one full-service branch in
Columbus, Georgia, one full-service branch in Birmingham, Alabama, and one full-service branch in Eutaw, Alabama. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Basis of
Presentation
—The consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America and with general practices within the banking industry. In preparing the
consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts
in the consolidated financial statements. Actual results could differ significantly from those estimates. Material estimates
common to the banking industry that are particularly susceptible to significant change in the near term are the allowance for
loan losses, the valuation of allowances associated with the recognition of deferred tax assets and the value of foreclosed
real estate and intangible assets.
Troubled Asset Relief
Program
—On August 13, 2010, as part of the U.S. Department of the Treasury (the “Treasury”) Troubled
Asset Relief Program (“TARP”) Community Development Capital Initiative, the Company entered into a Letter Agreement,
and an Exchange Agreement–Standard Terms (“Exchange Agreement”), with the Treasury, pursuant to which the Company
agreed to exchange 7,462 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (“Series
A Preferred Shares”), issued on March 6, 2009, pursuant to the Company’s participation in the TARP Capital Purchase
Program, for 7,462 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B (“Series B Preferred
Shares”), both of which have a liquidation preference of $1,000 (the “Exchange Transaction”). No new monetary
consideration was exchanged in connection with the Exchange Transaction. The Exchange Transaction closed on August 13, 2010 (the
“Closing Date”).
On September 17, 2010, the Company
issued 4,379 shares of its Series C Preferred Shares to the Treasury as part of its TARP Community Development Capital Initiative
for a total of 11,841 shares of Series B and C Preferred Shares issued to the Treasury. The issuance of the Series B and Series
C Preferred Shares was a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended.
The Series B and Series C Preferred
Shares qualify as Tier 1 capital and will pay cumulative dividends at a rate of 2% per annum for the first eight years after
the Closing Date and 9% per annum thereafter. The Company may, subject to consultation with the Federal Reserve Bank of Atlanta,
redeem the Series B and Series C Preferred Shares at any time for its aggregate liquidation amount plus any accrued and unpaid
dividends.
Cash and Cash Equivalents
—Cash
and cash equivalents include cash on hand and amounts due from banks, interest-bearing deposits with banks and federal funds sold.
The Federal Reserve Bank (the “FRB”) requires the Company to maintain a required cash reserve balance on deposit with
the FRB, based on the Company’s daily average balance with the FRB. This reserve requirement represents 3% of the Company’s
daily average demand deposit balance between $12.4 million and $79.5 million and 10% of the Company’s daily average demand
deposit balance above $79.5 million. The required reserve was satisfied by the Company’s vault cash.
Interest-bearing Deposits
with Banks
—Substantially all of the Company’s interest-bearing deposits with banks represent funds maintained
on deposit at the Federal Reserve Bank of Atlanta (the ‘FRB”) and the Federal Home Loan Bank of Atlanta (FHLB). These
funds fluctuate daily and are used to manage the Company’s liquidity and borrowing position. Funds can be withdrawn daily
from this account and accordingly, the carrying amount of this account is at cost which is deemed to be a reasonable estimate of
fair value.
Other Investments
—
Other investments consist of Federal Home Loan Bank stock and Federal Reserve Bank stock which are restricted and have no readily
determinable market value. These investments are carried at cost.
Investment Securities
—The
Company classifies investments in one of three categories based on management’s intent upon purchase: held to maturity securities
which are reported at amortized cost, trading securities which are reported at fair value with unrealized holding gains and losses
included in earnings, and available for sale securities which are recorded at fair value with unrealized holding gains and losses
included as a component of accumulated other comprehensive income (loss). The Company had no investment securities classified as
trading securities during 2013, 2012, or 2011.
Premiums and discounts on available
for sale and held to maturity securities are amortized or accreted using a method which approximates a level yield. Amortization
and accretion of premiums and discounts are presented within investment securities interest income on the Consolidated Statements
of Income.
Gains and losses on sales of
investment securities are recognized upon disposition, based on the adjusted cost of the specific security. A decline in market
value of any security below cost that is deemed other than temporary is charged to earnings resulting in the establishment of a
new cost basis for the security. The determination of whether an other-than-temporary impairment has occurred involves significant
assumptions, estimates, changes in economic conditions and judgment by management. There was no other-than-temporary impairment
for securities recorded during 2013, 2012 or 2011.
Loans Receivable and Allowance
for Loan Losses
—Loans are reported at principal amounts outstanding plus direct origination costs, net of loan fees
and any direct charge-offs. Interest income is recognized over the term of the loan based on the principal amount outstanding.
Loan fees and certain direct origination costs are deferred and amortized over the estimated terms of the loans using the level
yield method. Premiums and discounts on loans purchased are amortized and accreted using the level yield method over the estimated
remaining life of the loan purchased. The accretion and amortization of loan fees, origination costs, and premiums and discounts
are presented as a component of loan interest income on the Consolidated Statements of Income.
Management considers a loan
to be impaired when, based on current information and events, there is a potential that all amounts due according to the contractual
terms of the loan may not be collected. Impaired loans are measured based on the present value of expected future cash flows, discounted
at the loan’s effective interest rate, or at the loan’s observable market price, or the fair value of the collateral
if the loan is collateral dependent.
Loans are generally placed on
nonaccrual status when the full and timely collection of principal or interest becomes uncertain or the loan becomes contractually
in default for 90 days or more as to either principal or interest, unless the loan is well collateralized and in the process of
collection. When a loan is placed on nonaccrual status, current period accrued and uncollected interest is charged-off against
interest income on loans unless management believes the accrued interest is recoverable through the liquidation of collateral.
Loans are returned to accrual status when payment has been made according to the terms and conditions of the loan for a continuous
six month period.
The Company provides for estimated
losses on loans receivable when any significant and permanent decline in value occurs. These estimates for losses are based on
individual assets and their related cash flow forecasts, sales values, independent appraisals, the volatility of certain real estate
markets, and concern for disposing of real estate in distressed markets. For loans that are pooled for purposes of determining
necessary provisions, estimates are based on loan types, history of charge-offs, and other delinquency analyses. Therefore, the
value used to determine the provision for losses is subject to the reasonableness of these estimates. The adequacy of the allowance
for loan losses is reviewed on a monthly basis by management and the Board of Directors. This assessment is made in the context
of historical losses as well as existing economic conditions, performance trends within specific portfolio segments, and individual
concentrations of credit.
Loans are charged-off against
the allowance when, in the opinion of management, such loans are deemed to be uncollectible and subsequent recoveries are added
to the allowance.
Troubled Debt Restructurings
—Loans
to be restructured are identified based on an assessment of the borrower’s credit status, which involves, but is not limited
to, a review of financial statements, payment delinquency, non-accrual status, and risk rating. Determining the borrower’s
credit status is a continual process that is performed by the Company’s staff with periodic participation from an independent
external loan review group.
Troubled debt restructurings (“TDR”)
generally occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near-term and it is
probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement.
The Company seeks to assist these borrowers by working with them to prevent further difficulties, and ultimately to improve the
likelihood of recovery on the loan while ensuring compliance with the Federal Financial Institutions Examination Council (FFIEC)
guidelines. To facilitate this process, a formal concessionary modification that would not otherwise be considered may be granted
resulting in classification of the loan as a TDR.
The modification may include a
change in the interest rate or the payment amount or a combination of both. Substantially all modifications completed under a formal
restructuring agreement are considered TDRs. Modifications can involve loans remaining on nonaccrual, moving to nonaccrual, or
continuing on accruing status, depending on the individual facts and circumstances of the borrower. These restructurings rarely
result in the forgiveness of principal or interest. Nonperforming commercial TDRs may be returned to accrual status based on a
current, well-documented credit evaluation of the borrower’s financial condition and prospects for repayment under the modified
terms. This evaluation must include consideration of the borrower’s sustained historical repayment performance for a reasonable
period (generally a minimum of six months) prior to the date on which the loan is returned to accrual status.
With respect to commercial TDRs,
an analysis of the credit evaluation, in conjunction with an evaluation of the borrower’s performance prior to the restructuring,
are considered when evaluating the borrower’s ability to meet the restructured terms of the loan agreement. Nonperforming
commercial TDRs may be returned to accrual status based on a current, well-documented credit evaluation of the borrower’s
financial condition and prospects for repayment under the modified terms. This evaluation must include consideration of the borrower’s
sustained historical repayment performance for a reasonable period (generally a minimum of six months) prior to the date on which
the loan is returned to accrual status.
In connection with consumer
loan TDRs, a nonperforming loan will be returned to accruing status when current as to principal and interest and upon a sustained
historical repayment performance (generally a minimum of six months).
Premises and Equipment
—Premises
and equipment are stated at cost less accumulated depreciation which is computed using the straight-line method over the estimated
useful lives of the related assets. When assets are retired or otherwise disposed, the cost and related accumulated depreciation
are removed from the accounts, and any resulting gain or loss is reflected in earnings for the period. The costs of maintenance
and repairs, which do not improve or extend the useful life of the respective assets, are charged to earnings as incurred, whereas
significant renewals and improvements are capitalized. The range of estimated useful lives for premises and equipment is as follows:
Buildings and improvements
|
|
|
5-40 years
|
|
Furniture and equipment
|
|
|
3-10 years
|
|
Other Real Estate Owned
—Other
real estate owned is reported at the lower of cost or fair value less estimated disposal costs, determined on the basis of current
appraisals, comparable sales, and other estimates of value obtained principally from independent sources. Any excess of the loan
balance at the time of foreclosure over the fair value of the real estate held as collateral is treated as a charge-off against
the allowance for loan losses. Any subsequent declines in value are charged to earnings. Transactions in other real estate owned
for the years ended December 31, 2013 and 2012 are summarized below:
|
|
Years Ended December 31,
|
|
|
2013
|
|
2012
|
|
|
|
|
|
Balance—beginning of year
|
|
$
|
8,194,955
|
|
|
$
|
10,075,837
|
|
Additions
|
|
|
3,901,588
|
|
|
|
4,660,558
|
|
Sales
|
|
|
(4,076,267
|
)
|
|
|
(4,074,188
|
)
|
Write downs
|
|
|
(615,839
|
)
|
|
|
(2,467,252
|
)
|
|
|
|
|
|
|
|
|
|
Balance—end of year
|
|
$
|
7,404,437
|
|
|
$
|
8,194,955
|
|
Intangible Assets
—Finite
lived intangible assets of the Company represent deposit assumption premiums recorded upon the purchase of certain assets and liabilities
from other financial institutions. Deposit assumption premiums are amortized over seven years, the estimated average lives of the
deposits acquired, using the straight-line method and are included within other assets on the Consolidated Balance Sheets.
The Company reviews the carrying
value of goodwill on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss
may have been incurred. An impairment charge is recognized if the carrying value of the reporting unit’s goodwill exceeds
its implied fair value.
The following table presents
information about our intangible assets:
|
|
December 31, 2013
|
|
December 31, 2012
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
|
|
|
|
|
|
|
|
Unamortized intangible asset:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
362,139
|
|
|
$
|
—
|
|
|
$
|
362,139
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized intangible asset:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles
|
|
$
|
3,303,427
|
|
|
$
|
2,241,611
|
|
|
$
|
3,303,427
|
|
|
$
|
1,769,693
|
|
The following table presents information
about aggregate amortization expense for each of the three succeeding fiscal years as follows:
|
|
For the Years Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Aggregate amortization expense of core deposit intangibles
|
|
$
|
471,918
|
|
|
$
|
471,918
|
|
|
$
|
471,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated aggregate amortization expense of core deposit intangibles for the year ending December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
$
|
471,918
|
|
|
|
|
|
|
|
|
|
2015
|
|
$
|
471,918
|
|
|
|
|
|
|
|
|
|
2016
|
|
$
|
117,980
|
|
|
|
|
|
|
|
|
|
2017 and thereafter
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Income Taxes
—Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense
in the period that includes the enactment date.
In the event the future tax
consequences of differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities
result in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such
assets is required. A valuation allowance is provided for the portion of a deferred tax asset when it is more likely than not that
some portion or all of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets,
management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies.
Net Income Available to
Common Stockholders
—Basic net income per common share (“EPS”) is computed based on net income divided
by the weighted average number of common shares outstanding. Diluted EPS is computed based on net income available to common stockholders
divided by the weighted average number of common and potential common shares. The only potential common share equivalents are those
related to stock options and nonvested restricted stock grants. Common share equivalents which are anti-dilutive are excluded from
the calculation of diluted EPS.
Stock Based Compensation
—The
fair value of each stock option award is estimated on the date of grant using a Black-Scholes valuation model. Expected volatility
is based on the historical volatility of the Company’s stock, using daily price observations over the expected term of the
stock options. The expected term represents the period of time that stock options granted are expected to be outstanding and is
derived from historical data which is used to evaluate patterns such as stock option exercise and employee termination. The expected
dividend yield is based on recent dividend history. The risk-free interest rate is derived from the U.S. Treasury yield curve in
effect at the time of grant based on the expected life of the option.
There were no options granted in
2013,2012, and 2011.
In 2011, 11,000 nonvested restricted
shares of common stock were issued to certain officers at a grant price of $4.20. The 2011 restricted common stock vested 100%
(Cliff vesting) on December 31, 2012.
In 2012, 12,500 nonvested
restricted shares of common stock were issued to certain officers and the Chief Executive Officer (CEO) at a grant price of
$4.05. A total of 4,000 restricted shares were issued to the CEO which vest 50% on December 31, 2012 and 50% on December 31,
2014, subject to TARP guidelines. The remaining 8,500 shares of restricted stock will vest 100% (Cliff vesting) on December
31, 2014. In addition, on February 22, 2012 a special 5,000 nonvested restricted share issuance was made to the interim, and
now permanent, Chief Executive Officer at a grant price of $4.20 which vested 100% on the grant date. Also on February 22,
2012, 5,000 nonvested restricted shares were issued to the former CEO at a grant price of $4.20. These restricted common
stock grants vested 100% on the death of the former CEO, subject to TARP guidelines.
In 2013, 13,500 nonvested restricted
shares of common stock were issued to certain officers and the Chief Executive Officer (CEO) at a grant price of $5.98. The 2013
restricted common stock will vest 100% (Cliff vesting) on January 1, 2016.
Recently Issued Accounting
Standards
—The Comprehensive Income topic of the ASC was amended in June 2011. The amendment eliminated the option
to present other comprehensive income as a part of the statement of changes in stockholders’ equity and required consecutive
presentation of the statement of net income and other comprehensive income. The amendments were applicable to the Company January
1, 2012 and have been applied retrospectively. In December 2011, the topic was further amended to defer the effective date of presenting
reclassification adjustments from other comprehensive income to net income on the face of the financial statements while the FASB
redeliberated the presentation requirements for the reclassification adjustments. In February 2013, the FASB further amended the
Comprehensive Income topic clarifying the conclusions from such redeliberations. Specifically, the amendments do not change the
current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments do
require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component.
In addition, in certain circumstances an entity is required to present, either on the face of the statement where net income is
presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line
items of net income. The amendments were effective for the Company on a prospective basis for reporting periods beginning after
December 15, 2012. These amendments did not have a material effect on the Company’s financial statements.
In July 2012, the Intangibles
topic was amended to permit an entity to consider qualitative factors to determine whether it is more likely than not that indefinite-lived
intangible assets are impaired. If it is determined to be more likely than not that indefinite-lived intangible assets are impaired,
then the entity is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment
test by comparing the fair value with the carrying amount. The amendments are effective for annual and interim impairment tests
performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The amendments did not have a material
effect on the Company’s financial statements.
In April 2013, the FASB issued
guidance addressing application of the liquidation basis of accounting. The guidance is intended to clarify when an entity should
apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of
assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The amendments
will be effective for entities that determine liquidation is imminent during annual reporting periods beginning after December
15, 2013, and interim reporting periods therein and those requirements should be applied prospectively from the day that liquidation
becomes imminent. Early adoption is permitted. The Company does not expect these amendments to have any effect on its financial
statements.
In December 2013, the FASB amended
the Master Glossary of the FASB Codification to define “Public Business Entity” to minimize the inconsistency and complexity
of having multiple definitions of, or a diversity in practice as to what constitutes, a nonpublic entity and public entity within
U.S. GAAP. The amendment does not affect existing requirements, however will be used by the FASB, the Private Company Council (“PCC”),
and the Emerging Issues Task Force (“EITF”) in specifying the scope of future financial accounting and reporting guidance.
The Company does not expect this amendment to have any effect on its financial statements.
In January 2014, the FASB amended
the Receivables—Troubled Debt Restructurings by Creditors subtopic of the Codification to address the reclassification of
consumer mortgage loans collateralized by residential real estate upon foreclosure. The amendments clarify the criteria for concluding
that an in substance repossession or foreclosure has occurred, and a creditor is considered to have received physical possession
of residential real estate property collateralizing a consumer mortgage loan. The amendments also outline interim and annual disclosure
requirements. The amendments will be effective for the Company for interim and annual reporting periods beginning after December
15, 2014. Companies are allowed to use either a modified retrospective transition method or a prospective transition method when
adopting this update. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its
financial statements.
Other accounting standards that
have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s
financial position, results of operations or cash flows.
Reclassifications
—Certain
prior year amounts have been reclassified to conform to the 2013 presentation. Such reclassifications had no impact on net income
or retained earnings as previously reported.
Investment securities available
for sale are summarized as follows:
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
|
|
|
|
|
|
|
|
At December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State, county, and municipal securities
|
|
$
|
33,734,814
|
|
|
$
|
1,096,801
|
|
|
$
|
29,827
|
|
|
$
|
34,801,788
|
|
Mortgage-backed securities
|
|
|
99,142,665
|
|
|
|
347,751
|
|
|
|
3,223,142
|
|
|
|
96,267,274
|
|
Corporate securities
|
|
|
9,806,416
|
|
|
|
179,876
|
|
|
|
10,072
|
|
|
|
9,976,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
142,683,895
|
|
|
$
|
1,624,428
|
|
|
$
|
3,263,041
|
|
|
$
|
141,045,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State, county, and municipal securities
|
|
$
|
36,977,202
|
|
|
$
|
2,886,607
|
|
|
$
|
—
|
|
|
$
|
39,863,809
|
|
Mortgage-backed securities
|
|
|
79,025,394
|
|
|
|
1,356,627
|
|
|
|
134,482
|
|
|
|
80,247,539
|
|
Corporate securities
|
|
|
9,745,591
|
|
|
|
135,093
|
|
|
|
126,508
|
|
|
|
9,754,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
125,748,187
|
|
|
$
|
4,378,327
|
|
|
$
|
260,990
|
|
|
$
|
129,865,524
|
|
Investment securities held to
maturity are summarized as follows:
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
At December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State, county, and municipal securities
|
|
$
|
240,000
|
|
|
$
|
420
|
|
|
$
|
—
|
|
|
$
|
240,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State, county, and municipal securities
|
|
$
|
1,356,119
|
|
|
$
|
23,796
|
|
|
$
|
—
|
|
|
$
|
1,379,915
|
|
The amortized costs and fair
values of investment securities at December 31, 2013, by contractual maturity, are shown below. Mortgage-backed securities are
classified by their contractual maturity, however, expected maturities may differ from contractual maturities because issuers may
have the right to call or prepay obligations with and without call or prepayment penalties.
|
|
Held to Maturity
|
|
Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
Fair
|
|
Amortized
|
|
Fair
|
|
|
Cost
|
|
Value
|
|
Cost
|
|
Value
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Due after one year through five years
|
|
|
240,000
|
|
|
|
240,420
|
|
|
|
12,458,522
|
|
|
|
12,731,378
|
|
Due after five years through ten years
|
|
|
—
|
|
|
|
—
|
|
|
|
29,292,070
|
|
|
|
29,849,470
|
|
Due after ten years
|
|
|
—
|
|
|
|
—
|
|
|
|
100,933,303
|
|
|
|
98,464,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
240,000
|
|
|
$
|
240,420
|
|
|
$
|
142,683,895
|
|
|
$
|
141,045,282
|
|
Proceeds from the sale of
securities were $2,268,000, $7,967,000, and $9,221,000 in 2013, 2012, and 2011, respectively. Gross realized gains on sales
of securities were$243,882, $681,327, and $381,702 in 2013, 2012, and 2011, respectively. There were no gross realized losses
on sales of securities in 2013 and 2012. Gross realized losses on sales of securities were$180,281 in 2011.
Investment securities
with carrying values of approximately $102,728,000 and $82,428,000 at December 31, 2013 and 2012, respectively, were pledged
to secure public funds on deposit and for other purposes as required by law, FHLB advances and a $17.7 million line of credit
at the Federal Reserve Bank discount window.
The following tables show investments’
gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have
been in a continuous unrealized loss position, at December 31, 2013 and December 31, 2012. Except as explicitly identified below,
all unrealized losses on investment securities are considered by management to be temporarily impaired given the credit ratings
on these investment securities and the short duration of the unrealized loss.
At December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities in a loss position for
|
|
Securities in a loss position for
|
|
|
|
|
|
|
less than twelve months
|
|
twelve months or more
|
|
Total
|
|
|
|
|
Unrealized
|
|
|
|
Unrealized
|
|
|
|
Unrealized
|
|
|
Fair value
|
|
losses
|
|
Fair value
|
|
losses
|
|
Fair value
|
|
losses
|
Municipal securities
|
|
$
|
2,774,777
|
|
|
$
|
(29,827
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,774,777
|
|
|
$
|
(29,827
|
)
|
Mortgage-backed securities
|
|
|
68,419,947
|
|
|
|
(2,907,234
|
)
|
|
|
5,135,792
|
|
|
|
(315,908
|
)
|
|
|
73,555,739
|
|
|
|
(3,223,142
|
)
|
Corporate securities
|
|
|
1,989,928
|
|
|
|
(10,072
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,989,928
|
|
|
|
(10,072
|
)
|
Total
|
|
$
|
73,184,652
|
|
|
$
|
(2,947,133
|
)
|
|
$
|
5,135,792
|
|
|
$
|
(315,908
|
)
|
|
$
|
78,320,444
|
|
|
$
|
(3,263,041
|
)
|
There were no held to maturity securities in an unrealized loss
position at December 31, 2013.
At December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities in a loss position for
|
|
Securities in a loss position for
|
|
|
|
|
|
|
less than twelve months
|
|
twelve months or more
|
|
Total
|
|
|
|
|
Unrealized
|
|
|
|
Unrealized
|
|
|
|
Unrealized
|
|
|
Fair value
|
|
losses
|
|
Fair value
|
|
losses
|
|
Fair value
|
|
losses
|
Mortgage-backed securities
|
|
$
|
17,834,180
|
|
|
$
|
(134,482
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,834,180
|
|
|
$
|
(134,482
|
)
|
Corporate securities
|
|
|
1,984,687
|
|
|
|
(15,313
|
)
|
|
|
3,888,804
|
|
|
|
(111,195
|
)
|
|
|
5,873,491
|
|
|
|
(126,508
|
)
|
Total
|
|
$
|
19,818,867
|
|
|
$
|
(149,795
|
)
|
|
$
|
3,888,804
|
|
|
$
|
(111,195
|
)
|
|
$
|
23,707,671
|
|
|
$
|
(260,990
|
)
|
There were no held to maturity securities in an unrealized loss
position at December 31, 2012.
Securities classified as
available for sale are recorded at fair market value and held to maturity securities are recorded at amortized cost. At
December 31, 2013 and 2012, the Company had three and two investment securities, respectively, that were in an unrealized
loss position for more than 12 months. The Company reviews these securities for other-than-temporary impairment on a
quarterly basis by monitoring their credit support and coverage, constant payment of the contractual principal and interest,
loan to value and delinquencies ratios.
We use prices from third party
pricing services and, to a lesser extent, indicative (non-binding) quotes from third party brokers, to measure fair value of our
investment securities. Fair values of the investment securities portfolio could decline in the future if the underlying performance
of the collateral for collateralized mortgage obligations or other securities deteriorates and the levels do not provide sufficient
protection for contractual principal and interest. As a result, there is risk that an other-than-temporary impairment may occur
in the future particularly in light of the current economic environment.
The Company does not intend
to sell these securities and it is more likely than not that the Company will not be required to sell those securities before recovery
of its amortized cost. The Company believes, based on industry analyst reports and credit ratings, that it will continue to receive
scheduled interest payments as well as the entire principal balance, and the deterioration in value is attributable to changes
in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary.
The Company’s investment
portfolio consists principally of obligations of the United States, its agencies or its corporations and general obligation and
revenue municipal securities. In the opinion of management, there is no concentration of credit risk in its investment portfolio.
The Company places its deposits and correspondent accounts with and sells its federal funds to high quality institutions. Management
believes credit risk associated with correspondent accounts is not significant.
|
3.
|
LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES
|
Loans outstanding, by classification,
are summarized as follows (amounts in thousands):
|
|
December 31,
|
|
|
2013
|
|
2012
|
|
|
|
|
|
Commercial, financial, and agricultural
|
|
$
|
20,292
|
|
|
$
|
23,510
|
|
Commercial Real Estate
|
|
|
120,180
|
|
|
|
125,239
|
|
Single-Family Residential
|
|
|
34,864
|
|
|
|
34,523
|
|
Construction and Development
|
|
|
3,626
|
|
|
|
1,813
|
|
Consumer
|
|
|
6,314
|
|
|
|
5,913
|
|
|
|
|
185,276
|
|
|
|
190,998
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
3,157
|
|
|
|
3,509
|
|
|
|
|
|
|
|
|
|
|
Loans receivable –
net
|
|
$
|
182,119
|
|
|
$
|
187,489
|
|
Concentrations
—The
Company’s concentrations of credit risk are as follows:
A substantial portion of the
Company’s loan portfolio is collateralized by real estate in metropolitan Atlanta and Birmingham markets. Accordingly, the
ultimate collectibility of a substantial portion of the Company’s loan portfolio is susceptible to changes in market conditions
in the metropolitan Atlanta and Birmingham areas.
|
·
|
The Company’s loans to area churches were approximately $40.9 million and $49.5 million
at December 31, 2013 and 2012, respectively, which are generally secured by real estate.
|
|
·
|
The Company’s loans to area convenience stores were approximately $9.2 million and $9.3 million
at December 31, 2013 and 2012, respectively. Loans to convenience stores are generally secured by real estate.
|
|
·
|
The Company’s loans to area hotels were approximately $25.7 million and $24.8 million at
December 31, 2013 and 2012, respectively, which are generally secured by real estate.
|
Allowance for Loan Losses
—Activity
in the allowance for loan losses is summarized as follows:
|
|
Years Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
3,509,367
|
|
|
$
|
3,955,731
|
|
|
$
|
4,188,022
|
|
Provision for loan losses
|
|
|
425,000
|
|
|
|
2,400,000
|
|
|
|
3,882,409
|
|
Loans charged off
|
|
|
(1,485,514
|
)
|
|
|
(3,068,905
|
)
|
|
|
(4,301,629
|
)
|
Recoveries on loans previously charged off
|
|
|
707,969
|
|
|
|
222,541
|
|
|
|
186,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance—end of year
|
|
$
|
3,156,822
|
|
|
$
|
3,509,367
|
|
|
$
|
3,955,731
|
|
Activity in the allowance for loan losses by portfolio segment is
summarized as follows (in thousands):
|
|
For the Year Ended December, 2013
|
|
|
Commercial
|
|
Commercial Real Estate
|
|
Single-family Residential
|
|
Construction & Development
|
|
Consumer
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
433
|
|
|
$
|
1,853
|
|
|
$
|
803
|
|
|
$
|
177
|
|
|
$
|
243
|
|
|
$
|
3,509
|
|
Provision for loan losses
|
|
|
(68
|
)
|
|
|
127
|
|
|
|
361
|
|
|
|
(56
|
)
|
|
|
61
|
|
|
|
425
|
|
Loans charged-off
|
|
|
(22
|
)
|
|
|
(710
|
)
|
|
|
(554
|
)
|
|
|
(30
|
)
|
|
|
(169
|
)
|
|
|
(1,485
|
)
|
Recoveries on loans charged-off
|
|
|
41
|
|
|
|
451
|
|
|
|
121
|
|
|
|
35
|
|
|
|
60
|
|
|
|
708
|
|
Ending Balance
|
|
$
|
384
|
|
|
$
|
1,721
|
|
|
$
|
731
|
|
|
$
|
126
|
|
|
$
|
195
|
|
|
$
|
3,157
|
|
|
|
For the Year Ended December, 2012
|
|
|
Commercial
|
|
Commercial Real Estate
|
|
Single-family Residential
|
|
Construction & Development
|
|
Consumer
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
394
|
|
|
$
|
2,206
|
|
|
$
|
696
|
|
|
$
|
449
|
|
|
$
|
211
|
|
|
$
|
3,956
|
|
Provision for loan losses
|
|
|
27
|
|
|
|
1,761
|
|
|
|
646
|
|
|
|
(140
|
)
|
|
|
106
|
|
|
|
2,400
|
|
Loans charged-off
|
|
|
(21
|
)
|
|
|
(2,138
|
)
|
|
|
(625
|
)
|
|
|
(136
|
)
|
|
|
(149
|
)
|
|
|
(3,069
|
)
|
Recoveries on loans charged-off
|
|
|
33
|
|
|
|
24
|
|
|
|
86
|
|
|
|
4
|
|
|
|
75
|
|
|
|
222
|
|
Ending Balance
|
|
$
|
433
|
|
|
$
|
1,853
|
|
|
$
|
803
|
|
|
$
|
177
|
|
|
$
|
243
|
|
|
$
|
3,509
|
|
|
|
For the Year Ended December, 2011
|
|
|
Commercial
|
|
Commercial Real Estate
|
|
Single-family Residential
|
|
Construction & Development
|
|
Consumer
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
365
|
|
|
$
|
2,616
|
|
|
$
|
376
|
|
|
$
|
290
|
|
|
$
|
541
|
|
|
$
|
4,188
|
|
Provision for loan losses
|
|
|
262
|
|
|
|
1,852
|
|
|
|
1,049
|
|
|
|
932
|
|
|
|
(212
|
)
|
|
|
3,883
|
|
Loans charged-off
|
|
|
(262
|
)
|
|
|
(2,302
|
)
|
|
|
(749
|
)
|
|
|
(773
|
)
|
|
|
(216
|
)
|
|
|
(4,302
|
)
|
Recoveries on loans charged-off
|
|
|
29
|
|
|
|
40
|
|
|
|
20
|
|
|
|
—
|
|
|
|
98
|
|
|
|
187
|
|
Ending Balance
|
|
$
|
394
|
|
|
$
|
2,206
|
|
|
$
|
696
|
|
|
$
|
449
|
|
|
$
|
211
|
|
|
$
|
3,956
|
|
Portions of the allowance for loan losses may
be allocated for specific loans or portfolio segments. However, the entire allowance for loan losses is available for any loan
that, in the judgment of management, should be charged-off.
In determining our allowance for loan
losses, we regularly review loans for specific reserves based on the appropriate impairment assessment methodology. Impaired
loans are measured based on the present value of expected future cash flows, discounted at the loan’s effective
interest rate, or at the loan’s observable market price, or the fair value of the collateral if the loan is collateral
dependent. At December 31, 2013 and 2012, substantially all of the total impaired loans were evaluated based on the fair
value of the underlying collateral. General reserves are determined using historical loss trends measured over a rolling four
quarter average for consumer loans, and a three year average loss factor for commercial loans which is applied to risk rated
loans grouped by Federal Financial Examination Council (“FFIEC”) call code. For commercial loans, the general
reserves are calculated by applying the appropriate historical loss factor to the loan pool. Impaired loans greater than a
minimum threshold established by management are excluded from this analysis. The sum of all such amounts
determines our total allowance for loan losses.
The allocation of the allowance for loan losses by portfolio segment
was as follows (in thousands):
|
|
At December 31, 2013
|
|
|
Commercial
|
|
Commercial Real Estate
|
|
Single-family Residential
|
|
Construction & Development
|
|
Consumer
|
|
Total
|
Specific Reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Total specific reserves
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
General reserves
|
|
|
384
|
|
|
|
1,718
|
|
|
|
731
|
|
|
|
126
|
|
|
|
195
|
|
|
|
3,154
|
|
Total
|
|
$
|
384
|
|
|
$
|
1,721
|
|
|
$
|
731
|
|
|
$
|
126
|
|
|
$
|
195
|
|
|
$
|
3,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
10,705
|
|
|
$
|
360
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,065
|
|
Loans collectively evaluated for impairment
|
|
|
20,292
|
|
|
|
109,475
|
|
|
|
34,504
|
|
|
|
3,626
|
|
|
|
6,314
|
|
|
|
174,211
|
|
Total
|
|
$
|
20,292
|
|
|
$
|
120,180
|
|
|
$
|
34,864
|
|
|
$
|
3,626
|
|
|
$
|
6,314
|
|
|
$
|
185,276
|
|
|
|
At December 31, 2012
|
|
|
Commercial
|
|
Commercial Real Estate
|
|
Single-family Residential
|
|
Construction & Development
|
|
Consumer
|
|
Total
|
Specific Reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
—
|
|
|
$
|
319
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
320
|
|
Total specific reserves
|
|
|
—
|
|
|
|
319
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
320
|
|
General reserves
|
|
|
433
|
|
|
|
1,534
|
|
|
|
802
|
|
|
|
177
|
|
|
|
243
|
|
|
|
3,189
|
|
Total
|
|
$
|
433
|
|
|
$
|
1,853
|
|
|
$
|
803
|
|
|
$
|
177
|
|
|
$
|
243
|
|
|
$
|
3,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
17,248
|
|
|
$
|
516
|
|
|
$
|
278
|
|
|
$
|
—
|
|
|
$
|
18,042
|
|
Loans collectively evaluated for impairment
|
|
|
23,510
|
|
|
|
107,991
|
|
|
|
34,007
|
|
|
|
1,535
|
|
|
|
5,913
|
|
|
|
172,956
|
|
Total
|
|
$
|
23,510
|
|
|
$
|
125,239
|
|
|
$
|
34,523
|
|
|
$
|
1,813
|
|
|
$
|
5,913
|
|
|
$
|
190,998
|
|
The following table presents impaired loans by class of loan (in
thousands):
|
|
At December 31, 2013
|
|
|
|
|
|
|
|
|
Impaired Loans - With
|
|
|
|
|
|
|
Impaired Loans - With Allowance
|
|
no Allowance
|
|
|
|
|
|
|
Unpaid Principal
|
|
Recorded Investment
|
|
Allowance for Loan Losses Allocated
|
|
Unpaid Principal
|
|
Recorded Investment
|
|
Average Recorded Investment
|
|
Interest Income Recognized
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
231
|
|
|
$
|
231
|
|
|
$
|
231
|
|
|
$
|
—
|
|
HELOC's and equity
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
129
|
|
|
|
129
|
|
|
|
128
|
|
|
|
2
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Unsecured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,300
|
|
|
|
7,968
|
|
|
|
8,049
|
|
|
|
534
|
|
Non-owner occupied
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,924
|
|
|
|
2,407
|
|
|
|
2,516
|
|
|
|
108
|
|
Multi-family
|
|
|
386
|
|
|
|
330
|
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
359
|
|
|
|
28
|
|
Construction and Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Improved Land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Unimproved Land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer and Other
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
386
|
|
|
$
|
330
|
|
|
$
|
3
|
|
|
$
|
13,584
|
|
|
$
|
10,735
|
|
|
$
|
11,283
|
|
|
$
|
672
|
|
|
|
At December 31, 2012
|
|
|
|
|
|
|
|
|
Impaired Loans - With
|
|
|
|
|
|
|
Impaired Loans - With Allowance
|
|
no Allowance
|
|
|
|
|
|
|
Unpaid Principal
|
|
Recorded Investment
|
|
Allowance for Loan Losses Allocated
|
|
Unpaid Principal
|
|
Recorded Investment
|
|
Average Recorded Investment
|
|
Interest Income Recognized
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
234
|
|
|
$
|
230
|
|
|
$
|
231
|
|
|
$
|
—
|
|
HELOC's and equity
|
|
|
77
|
|
|
|
77
|
|
|
|
1
|
|
|
|
261
|
|
|
|
209
|
|
|
|
210
|
|
|
|
44
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Unsecured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
2,856
|
|
|
|
2,856
|
|
|
|
293
|
|
|
|
7,199
|
|
|
|
7,199
|
|
|
|
10,116
|
|
|
|
480
|
|
Non-owner occupied
|
|
|
492
|
|
|
|
319
|
|
|
|
24
|
|
|
|
7,056
|
|
|
|
5,770
|
|
|
|
6,420
|
|
|
|
673
|
|
Multi-family
|
|
|
388
|
|
|
|
388
|
|
|
|
2
|
|
|
|
716
|
|
|
|
716
|
|
|
|
1,053
|
|
|
|
103
|
|
Construction and Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
120
|
|
|
|
121
|
|
|
|
122
|
|
|
|
55
|
|
Improved Land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
418
|
|
|
|
157
|
|
|
|
169
|
|
|
|
6
|
|
Unimproved Land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer and Other
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
3,813
|
|
|
$
|
3,640
|
|
|
$
|
320
|
|
|
$
|
16,004
|
|
|
$
|
14,402
|
|
|
$
|
18,321
|
|
|
$
|
1,361
|
|
The following table is an aging analysis of our loan portfolio (in
thousands):
|
|
At December 31, 2013
|
|
|
30- 59 Days Past Due
|
|
60- 89 Days Past Due
|
|
Over 90 Days Past Due
|
|
Total Past Due
|
|
Current
|
|
Total Loans Receivable
|
|
Recorded Investment > 90 Days and Accruing
|
|
Nonaccrual
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
1,778
|
|
|
$
|
360
|
|
|
$
|
1,840
|
|
|
$
|
3,978
|
|
|
$
|
22,348
|
|
|
$
|
26,326
|
|
|
$
|
—
|
|
|
$
|
3,334
|
|
HELOC's and equity
|
|
|
444
|
|
|
|
19
|
|
|
|
466
|
|
|
|
929
|
|
|
|
7,609
|
|
|
|
8,538
|
|
|
|
—
|
|
|
|
821
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
125
|
|
|
|
—
|
|
|
|
2
|
|
|
|
127
|
|
|
|
14,906
|
|
|
|
15,033
|
|
|
|
—
|
|
|
|
2
|
|
Unsecured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,259
|
|
|
|
5,259
|
|
|
|
—
|
|
|
|
—
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
715
|
|
|
|
753
|
|
|
|
81
|
|
|
|
1,549
|
|
|
|
60,090
|
|
|
|
61,639
|
|
|
|
—
|
|
|
|
1,038
|
|
Non-owner occupied
|
|
|
38
|
|
|
|
199
|
|
|
|
286
|
|
|
|
523
|
|
|
|
43,287
|
|
|
|
43,810
|
|
|
|
—
|
|
|
|
1,550
|
|
Multi-family
|
|
|
747
|
|
|
|
—
|
|
|
|
—
|
|
|
|
747
|
|
|
|
13,984
|
|
|
|
14,731
|
|
|
|
—
|
|
|
|
330
|
|
Construction and Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
477
|
|
|
|
—
|
|
|
|
—
|
|
|
|
477
|
|
|
|
2,542
|
|
|
|
3,019
|
|
|
|
—
|
|
|
|
—
|
|
Improved Land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
242
|
|
|
|
242
|
|
|
|
—
|
|
|
|
—
|
|
Unimproved Land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
365
|
|
|
|
365
|
|
|
|
—
|
|
|
|
—
|
|
Consumer and Other
|
|
|
6
|
|
|
|
30
|
|
|
|
45
|
|
|
|
81
|
|
|
|
6,233
|
|
|
|
6,314
|
|
|
|
—
|
|
|
|
45
|
|
Total
|
|
$
|
4,330
|
|
|
$
|
1,361
|
|
|
$
|
2,720
|
|
|
$
|
8,411
|
|
|
$
|
176,865
|
|
|
$
|
185,276
|
|
|
$
|
—
|
|
|
$
|
7,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012
|
|
|
30- 59 Days Past Due
|
|
60- 89 Days Past Due
|
|
Over 90 Days Past Due
|
|
Total Past Due
|
|
Current
|
|
Total Loans Receivable
|
|
Recorded Investment > 90 Days and Accruing
|
|
Nonaccrual
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
1,550
|
|
|
$
|
957
|
|
|
$
|
3,116
|
|
|
$
|
5,623
|
|
|
$
|
20,106
|
|
|
$
|
25,729
|
|
|
$
|
—
|
|
|
$
|
3,721
|
|
HELOC's and equity
|
|
|
218
|
|
|
|
32
|
|
|
|
291
|
|
|
|
541
|
|
|
|
8,253
|
|
|
|
8,794
|
|
|
|
—
|
|
|
|
321
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
24
|
|
|
|
—
|
|
|
|
5
|
|
|
|
29
|
|
|
|
16,827
|
|
|
|
16,856
|
|
|
|
—
|
|
|
|
5
|
|
Unsecured
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
6,649
|
|
|
|
6,654
|
|
|
|
—
|
|
|
|
—
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
1,463
|
|
|
|
188
|
|
|
|
394
|
|
|
|
2,045
|
|
|
|
55,603
|
|
|
|
57,648
|
|
|
|
—
|
|
|
|
2,029
|
|
Non-owner occupied
|
|
|
353
|
|
|
|
634
|
|
|
|
3,613
|
|
|
|
4,600
|
|
|
|
50,486
|
|
|
|
55,086
|
|
|
|
—
|
|
|
|
4,355
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,505
|
|
|
|
12,505
|
|
|
|
—
|
|
|
|
—
|
|
Construction and Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
767
|
|
|
|
—
|
|
|
|
—
|
|
|
|
767
|
|
|
|
222
|
|
|
|
989
|
|
|
|
—
|
|
|
|
—
|
|
Improved Land
|
|
|
—
|
|
|
|
—
|
|
|
|
120
|
|
|
|
120
|
|
|
|
331
|
|
|
|
451
|
|
|
|
—
|
|
|
|
120
|
|
Unimproved Land
|
|
|
—
|
|
|
|
—
|
|
|
|
157
|
|
|
|
157
|
|
|
|
216
|
|
|
|
373
|
|
|
|
—
|
|
|
|
157
|
|
Consumer and Other
|
|
|
49
|
|
|
|
43
|
|
|
|
87
|
|
|
|
179
|
|
|
|
5,734
|
|
|
|
5,913
|
|
|
|
—
|
|
|
|
87
|
|
Total
|
|
$
|
4,429
|
|
|
$
|
1,854
|
|
|
$
|
7,783
|
|
|
$
|
14,066
|
|
|
$
|
176,932
|
|
|
$
|
190,998
|
|
|
$
|
—
|
|
|
$
|
10,795
|
|
Each of our portfolio segments and the classes
within those segments are subject to risks that could have an adverse impact on the credit quality of our loan and lease portfolio.
Management has identified the most significant risks as described below which are generally similar among our segments and classes.
While the list in not exhaustive, it provides a description of the risks that management has determined are the most significant.
Commercial, financial and agricultural
loans
—We centrally underwrite each of our commercial loans based primarily upon the customer’s ability to generate
the required cash flow to service the debt in accordance with the contractual terms and conditions of the loan agreement. We endeavor
to gain a complete understanding of our borrower’s businesses including the experience and background of the principals.
To the extent that the loan is secured by collateral, which is a predominant feature of the majority of our commercial loans, we
gain an understanding of the likely value of the collateral and what level of strength the collateral brings to the loan transaction.
To the extent that the principals or other parties provide personal guarantees, we analyze the relative financial strength and
liquidity of each guarantor. Common risks to each class of commercial loans include risks that are not specific to individual transactions
such as general economic conditions within our markets, as well as risks that are specific to each transaction including demand
for products and services, personal events such as disability or change in marital status, and reductions in the value of our collateral.
Due to the concentration of loans in the metro Atlanta and Birmingham areas, we are susceptible to changes in market and economic
conditions of these areas.
Consumer
—The installment
loan portfolio includes loans secured by personal property such as automobiles, marketable securities, other titled recreational
vehicles and motorcycles, as well as unsecured consumer debt. The value of underlying collateral within this class is especially
volatile due to potential rapid depreciation in values since date of loan origination in excess of principal repayment.
Commercial Real Estate
—Real
estate commercial loans consist of loans secured by multifamily housing, commercial non-owner and owner occupied and other commercial
real estate loans. The primary risk associated with multifamily loans is the ability of the income-producing property that collateralizes
the loan to produce adequate cash flow to service the debt. High unemployment or generally weak economic conditions may result
in our customer having to provide rental rate concessions to achieve adequate occupancy rates. Commercial owner-occupied and other
commercial real estate loans are primarily dependent on the ability of our customers to achieve business results consistent with
those projected at loan origination resulting in cash flow sufficient to service the debt. To the extent that a customer’s
business results are significantly unfavorable versus the original projections, the ability for our loan to be serviced on a basis
consistent with the contractual terms may be at risk. These loans are primarily secured by real property and can include other
collateral such as personal guarantees, personal property, or business assets such as inventory or accounts receivable, it is possible
that the liquidation of the collateral will not fully satisfy the obligation. Also, due to the concentration of loans in the metro
Atlanta and Birmingham areas, we are susceptible to changes in market and economic conditions of these areas.
Single-Family Residential
—Real
estate residential loans are to individuals and are secured by 1-4 family residential property. Significant and rapid declines
in real estate values can result in residential mortgage loan borrowers having debt levels in excess of the current market value
of the collateral. Such a decline in values has led to unprecedented levels of foreclosures and losses during 2008-2012 within
the banking industry.
Construction and Development
—Real
estate construction loans are highly dependent on the supply and demand for residential and commercial real estate in the markets
we serve as well as the demand for newly constructed commercial space and residential homes and lots that our customers are developing.
Continuing deterioration in demand could result in significant decreases in the underlying collateral values and make repayment
of the outstanding loans more difficult for our customers. Real estate construction loans can experience delays in completion and
cost overruns that exceed the borrower’s financial ability to complete the project. Such cost overruns can routinely result
in foreclosure of partially completed and unmarketable collateral.
Risk categories
—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. Loans classified
as substandard or special mention are reviewed quarterly by the Company for further deterioration or improvement to determine if
appropriately classified and impairment, if any. All other loan relationships greater than $750,000 are reviewed at least annually
to determine the appropriate loan grading. In addition, during the renewal process of any loan, as well as if a loan becomes past
due, the Company will evaluate the loan grade.
Loans excluded from the scope of the annual
review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes
aware of deterioration in the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification.
In these circumstances, the loan is specifically evaluated for potential classification as to special mention, substandard or even
charged off. 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 payment 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.
The following table presents our loan portfolio by risk rating (in
thousands):
|
|
At December 31, 2013
|
|
|
Total
|
|
Pass Credits
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
Single-Family Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
26,326
|
|
|
$
|
24,126
|
|
|
$
|
—
|
|
|
$
|
2,200
|
|
|
$
|
—
|
|
HELOC's and equity
|
|
|
8,538
|
|
|
|
7,686
|
|
|
|
22
|
|
|
|
728
|
|
|
|
102
|
|
Commercial, financial, and agricultural:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
15,033
|
|
|
|
15,009
|
|
|
|
—
|
|
|
|
24
|
|
|
|
—
|
|
Unsecured
|
|
|
5,259
|
|
|
|
5,259
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
61,639
|
|
|
|
50,921
|
|
|
|
5,929
|
|
|
|
4,789
|
|
|
|
—
|
|
Non-owner occupied
|
|
|
43,810
|
|
|
|
40,482
|
|
|
|
819
|
|
|
|
2,509
|
|
|
|
—
|
|
Multi-family
|
|
|
14,731
|
|
|
|
13,704
|
|
|
|
647
|
|
|
|
380
|
|
|
|
—
|
|
Construction and Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
3,019
|
|
|
|
3,019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Improved Land
|
|
|
242
|
|
|
|
197
|
|
|
|
—
|
|
|
|
45
|
|
|
|
—
|
|
Unimproved Land
|
|
|
365
|
|
|
|
—
|
|
|
|
—
|
|
|
|
365
|
|
|
|
—
|
|
Consumer
|
|
|
6,314
|
|
|
|
6,224
|
|
|
|
—
|
|
|
|
90
|
|
|
|
—
|
|
Total
|
|
$
|
185,276
|
|
|
$
|
166,627
|
|
|
$
|
7,417
|
|
|
$
|
11,130
|
|
|
$
|
102
|
|
|
|
At December 31, 2012
|
|
|
Total
|
|
Pass Credits
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
Single-Family Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
25,729
|
|
|
$
|
21,656
|
|
|
$
|
—
|
|
|
$
|
4,073
|
|
|
$
|
—
|
|
HELOC's and equity
|
|
|
8,794
|
|
|
|
7,745
|
|
|
|
583
|
|
|
|
466
|
|
|
|
—
|
|
Commercial, financial, and agricultural:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
16,856
|
|
|
|
16,788
|
|
|
|
37
|
|
|
|
31
|
|
|
|
—
|
|
Unsecured
|
|
|
6,654
|
|
|
|
5,456
|
|
|
|
1,185
|
|
|
|
13
|
|
|
|
—
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
57,648
|
|
|
|
44,252
|
|
|
|
9,551
|
|
|
|
3,845
|
|
|
|
—
|
|
Non-owner occupied
|
|
|
55,086
|
|
|
|
45,127
|
|
|
|
3,248
|
|
|
|
6,711
|
|
|
|
—
|
|
Multi-family
|
|
|
12,505
|
|
|
|
10,636
|
|
|
|
1,413
|
|
|
|
456
|
|
|
|
—
|
|
Construction and Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
989
|
|
|
|
869
|
|
|
|
120
|
|
|
|
—
|
|
|
|
—
|
|
Improved Land
|
|
|
451
|
|
|
|
245
|
|
|
|
—
|
|
|
|
206
|
|
|
|
—
|
|
Unimproved Land
|
|
|
373
|
|
|
|
—
|
|
|
|
—
|
|
|
|
373
|
|
|
|
—
|
|
Consumer
|
|
|
5,913
|
|
|
|
5,801
|
|
|
|
—
|
|
|
|
87
|
|
|
|
25
|
|
Total
|
|
$
|
190,998
|
|
|
$
|
158,575
|
|
|
$
|
16,137
|
|
|
$
|
16,261
|
|
|
$
|
25
|
|
As a result of adopting the amendments in
ASU 2011-02, the Bank reassessed all restructurings that occurred on or after the beginning of the year of adoption
(January 1, 2011) to determine whether they are considered TDRs under the amended guidance. The Bank identified as
TDRs certain loans for which the allowance for loan losses had previously been measured under a general allowance
methodology. Upon identifying those loans as TDRs, the Bank identified them as impaired under the guidance in ASC 310-10-35.
The amendments in ASU 2011-02 require prospective application of the impairment measurement guidance in ASC 310-10-35 for
those loans newly identified as impaired. As of December 31, 2013, the Company did not identify any loans as TDRs under the
amended guidance for which the loan was previously measured under a general allowance methodology.
During the year ended December 31, 2013,
the Bank modified 11 loans that were considered to be troubled debt restructurings. We extended the terms on 4 loans and
decreased the interest rate on 7 loans (dollar in thousands).
|
|
December 31, 2013
|
|
|
Number of Loans
|
|
Pre-Modification Recorded Investment
|
|
Post-Modification Recorded Investment
|
Troubled Debt Restructurings
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC's and equity
|
|
|
5
|
|
|
$
|
339
|
|
|
$
|
340
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
3
|
|
|
|
408
|
|
|
|
414
|
|
Non-owner occupied
|
|
|
3
|
|
|
|
766
|
|
|
|
740
|
|
Total
|
|
|
11
|
|
|
$
|
1,513
|
|
|
$
|
1,494
|
|
During the year ended December 31, 2012, the
Bank modified 8 loans that were considered to be troubled debt restructurings. We extended the terms and decreased the interest
rate on 8 loans (dollar in thousands).
|
|
December 31, 2012
|
|
|
Number of Loans
|
|
Pre-Modification Recorded Investment
|
|
Post-Modification Recorded Investment
|
Troubled Debt Restructurings
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
2
|
|
|
$
|
412
|
|
|
$
|
424
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
5
|
|
|
|
4,442
|
|
|
|
4,428
|
|
Non-owner occupied
|
|
|
1
|
|
|
|
114
|
|
|
|
113
|
|
Total
|
|
|
8
|
|
|
$
|
4,968
|
|
|
$
|
4,965
|
|
During 2013 and 2012, one
loan that had previously been restructured within the previous twelve months was in default.
In the determination of
the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these
restructurings by performing the usual process for all loans in determining the allowance for loan loss. The Company
considers a default as failure to comply with the restructured loan agreement. This would include the restructured loan being
past due greater than 90 days, failure to comply with financial covenants, or failure to maintain current insurance coverage
or real estate taxes after the loan restructured date.
4. PREMISES
AND EQUIPMENT
Premises and equipment are summarized
as follows:
|
|
December 31,
|
|
|
2013
|
|
2012
|
|
|
|
|
|
Land
|
|
$
|
2,250,250
|
|
|
$
|
2,250,250
|
|
Buildings and improvements
|
|
|
7,672,526
|
|
|
|
7,606,772
|
|
Furniture and equipment
|
|
|
9,101,730
|
|
|
|
9,000,496
|
|
|
|
|
19,024,506
|
|
|
|
18,857,518
|
|
Less accumulated depreciation
|
|
|
12,435,342
|
|
|
|
11,901,379
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,589,164
|
|
|
$
|
6,956,139
|
|
Depreciation expense amounted to
$616,000, $660,000 and $710,000 for the years ended December 31, 2013, 2012, and 2011, respectively.
5. DEPOSITS
The following is a summary of
interest-bearing deposits:
|
|
December 31,
|
|
|
2013
|
|
2012
|
|
|
|
|
|
NOW and money market accounts
|
|
$
|
92,793,796
|
|
|
$
|
92,671,544
|
|
Savings accounts
|
|
|
31,947,780
|
|
|
|
32,770,028
|
|
Time deposits of $100,000 or more
|
|
|
107,489,990
|
|
|
|
121,223,645
|
|
Other time deposits
|
|
|
33,588,990
|
|
|
|
34,585,918
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
265,820,556
|
|
|
$
|
281,251,135
|
|
The Company participates in
the Certificate of Deposit Account Registry Services (“CDARS”), a program that allows its customers the ability to
benefit from the FDIC insurance coverage on their time deposits over the $250,000 limit. The Company had $22,374,841 and $14,963,966
in CDARS deposits at December 31, 2013 and 2012, respectively.
At December 31, 2013, maturities
of time deposits are approximately as follows:
2014
|
|
$
|
97,657,485
|
|
2015
|
|
|
6,694,099
|
|
2016
|
|
|
6,773,570
|
|
2017
|
|
|
19,125,750
|
|
2018 and thereafter
|
|
|
10,828,076
|
|
|
|
$
|
141,078,980
|
|
Federal Home Loan
Bank Advances
— In August 2006, the Company received an Affordable Housing Program Award in the amount of
$400,000. The AHP is a principal reducing credit with an interest rate of zero, and at December 31, 2013 and 2012 had a
remaining balance of approximately $273,000 and $292,000, respectively. These
advances
are collateralized by FHLB stock, a blanket lien on the Bank’s 1-4 family mortgages, and certain commercial real estate
loans and investment securities. As of December 31, 2013 and 2012, total loans pledged as collateral were$33,186,000 and
$25,087,000, respectively.
As of December 31, 2013 and 2012,
maturities of the Company's Federal Home Loan Bank Advances are approximately as follows:
|
|
|
|
|
December 31,
|
Maturity
|
|
Rate
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
August-2026
|
(1)
|
N/A
|
|
$
|
273,079
|
$
|
291,697
|
(1) Represents an Affordable Housing
Program (AHP) award used to subsidize loans for homeownership or rental initiatives. The AHP is a principal reducing credit, scheduled
to mature on August 17, 2026 with an interest rate of zero.
At
December 31, 2013, the Company has a $78.3 million line of credit facility at the FHLB of which $20.3 million was outstanding
consisting of an advance of $273,000 and a letter of credit to secure public deposits in the amount of $20.0 million. The
Company also had $17.7 million of borrowing capacity at the Federal Reserve Bank discount window.
7. INCOME
TAXES
The
components of income tax expense consist of:
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Current tax expense (benefit)
|
|
$
|
49,090
|
|
|
$
|
(86,388
|
)
|
|
$
|
675,212
|
|
Deferred tax expense (benefit)
|
|
|
(199,896
|
)
|
|
|
(814,682
|
)
|
|
|
(1,757,769
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax (benefit)
|
|
$
|
(150,806
|
)
|
|
$
|
(901,070
|
)
|
|
$
|
(1,082,557
|
)
|
Income
tax expense for the years ended December 31, 2013, 2012, and 2011 differed from the amounts computed by applying the statutory
federal income tax rate of 34% to earnings before income taxes as follows:
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Income tax expense at statutory rate
|
|
$
|
407,309
|
|
|
$
|
(44,963
|
)
|
|
$
|
(276,737
|
)
|
Tax-exempt interest income—net of disallowed interest expense
|
|
|
(515,458
|
)
|
|
|
(593,130
|
)
|
|
|
(593,502
|
)
|
Cash surrender value of life insurance income
|
|
|
(111,736
|
)
|
|
|
(205,634
|
)
|
|
|
(125,420
|
)
|
Other—net
|
|
|
69,079
|
|
|
|
(57,343
|
)
|
|
|
(86,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
|
|
$
|
(150,806
|
)
|
|
$
|
(901,070
|
)
|
|
$
|
(1,082,557
|
)
|
In
2013, the valuation allowance increased by $39,760.
The tax effects
of temporary differences that give rise to significant amounts of deferred tax assets and deferred tax liabilities are presented
below:
|
|
2013
|
|
2012
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating losses and credits
|
|
$
|
3,249,677
|
|
|
$
|
1,114,223
|
|
Loans, principally due to difference in allowance for loan losses and deferred loan fees
|
|
|
826,499
|
|
|
|
1,207,696
|
|
Nonaccrual loan interest
|
|
|
55,364
|
|
|
|
1,096,904
|
|
Postretirement benefit accrual, deferred compensation
|
|
|
1,140,791
|
|
|
|
1,073,002
|
|
Net unrealized loss on securities available for sale
|
|
|
557,165
|
|
|
|
—
|
|
Other real estate owned
|
|
|
610,821
|
|
|
|
808,479
|
|
Other
|
|
|
685,120
|
|
|
|
1,213,850
|
|
Gross deferred tax asset
|
|
|
7,125,437
|
|
|
|
6,514,154
|
|
Valuation allowance
|
|
|
(168,234
|
)
|
|
|
(128,474
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
6,957,203
|
|
|
|
6,385,680
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Net unrealized gain on securities available for sale
|
|
|
—
|
|
|
|
1,399,858
|
|
Purchased loan discount
|
|
|
34,209
|
|
|
|
68,417
|
|
Premises and equipment
|
|
|
165,493
|
|
|
|
364,990
|
|
Other
|
|
|
121,217
|
|
|
|
73,050
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
320,919
|
|
|
|
1,906,315
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
6,636,284
|
|
|
$
|
4,479,365
|
|
The Company has,
at December 31, 2013, net operating loss carryforwards of approximately $7,097,849 for federal income tax purposes and
$5,042,011 for state income tax purposes, which begin to expire in the year 2016. The Company also has certain state income
tax credits of $387,313 at December 31, 2013 which begins to expire in the year 2014. Due to the uncertainty relating to the
realizability of all the carryforwards and credits, management currently considers it more likely than not that all related
deferred tax assets will not be realized; thus, a $168,234 valuation allowance has been provided against state tax carry
forwards totaling $4,248,345.
Tax
returns for 2010 and subsequent years are subject to examination by taxing authorities.
The
Company believes that its income tax filing positions taken or expected to be taken in its tax returns will more likely than not
be sustained upon audit by the taxing authorities and does not anticipate any adjustments that will result in a material adverse
impact on the Company’s financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income
tax positions have been recorded.
Defined Contribution Plan
—The
Company sponsors a defined contribution 401(k) plan covering substantially all full-time employees. Employee contributions are
voluntary. The Company matches 50% of the employee contributions up to a maximum of 6% of compensation. During the years ended
December 31, 2013, 2012 and 2011, the Company recognized$96,000, $98,000 and$105,000, respectively, in expenses related to this
plan. The Bank previously had Post Retirement Benefit Plans that provide retirement benefits to certain officers, board members,
certain former officers and former board members. The Bank also has a Life Insurance Endorsement Method Split Dollar Plan (“Split
Dollar Life Insurance Plan”) for the same participants which provide death benefits for their designated beneficiaries through
an endorsement of a portion of the death benefit otherwise payable to the Bank. Under the Post Retirement Benefit and Split Dollar
Life Insurance Plans ("The Plans"), the Board purchased life insurance contracts on certain participants. During 2008,
the Bank discontinued participation in The Plans and converted certain key officers and active board members into a defined Supplemental
Retirement Benefit Plans (“SERP”) and certain key officers into a Life Insurance Bonus Plan. Certain other participants
were paid-out with eight participants remaining in The Plans.
The increase in cash surrender
value for the contracts on those participants remaining in the Post Retirement Benefit Plan, less the Bank’s premiums, constitutes
the Bank’s contribution to the Post Retirement Benefit Plans each year. In the event the insurance contracts fail to produce
positive returns, the Bank has no obligation to contribute to the Post Retirement Benefit Plan. At December 31, 2013 and 2012,
the cash surrender value of these insurance contracts was$9,948,000 and $9,619,000, respectively.
During 2009, the
Company converted the Post Retirement Benefit Plan for its key officers and active Board members into the SERP. For the SERP
and the Post Retirement Benefit Plans, the Company recognized $336,000, $365,000, and $376,000 in 2013, 2012 and 2011,
respectively, in noninterest expenses. The Company recognized $329,000, $342,000, and $366,000 in 2013, 2012 and 2011,
respectively, in noninterest income related to the insurance contracts. Upon completion of the conversion, most key officers
and active Board members participating in the Split Dollar Life Insurance Plan surrendered their interest in the death
benefit portion of the plan. In exchange for relinquishing the postretirement death benefit, the Company implemented a Life
Insurance Bonus Plan ("The Bonus Plan") for most key officers to provide death benefits for their designated
beneficiaries. The Company pays the participating officers an annual compensation amount to pay the annual premiums on the
insurance policies. The Company incurred $46,000,$65,000, and $78,000 in expenses related to the Bonus Plan in 2013, 2012 and
2011, respectively.
|
9.
|
COMMITMENTS AND CONTINGENCIES
|
Credit Commitments and
Commercial Letters
—The Company, in the normal course of business, is a party to financial instruments with off-balance
sheet risk used to meet the financing needs of its customers. These financial instruments include commitments to extend credit
and commercial letters of credit.
Commitments to extend credit
are agreements 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.
Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and residential and commercial
real estate. Commercial letters of credit are commitments issued by the Company to guarantee funding to a third party on behalf
of a customer. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the
Company has in particular classes of financial instruments.
The Company’s exposure
to credit loss in the event of nonperformance by the other party of the financial instrument for commitments to extend credit and
commercial letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies
in making commitments and conditional obligations related to off-balance sheet financial instruments as it does for the financial
instruments recorded in the Consolidated Balance Sheets.
|
|
Approximate
|
|
|
Contractual Amount
|
|
|
2013
|
|
2012
|
|
|
|
|
|
Financial instruments whose contract amounts represent credit risk:
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
|
$
|
26,313,000
|
|
|
$
|
24,335,000
|
|
Commercial letters of credit
|
|
|
2,125,000
|
|
|
|
2,218,000
|
|
Leases
—The
Company leases its main office and a branch location. The main office lease commenced on October 26, 2006 and has a 10 year
term. The lease requires monthly payments starting at $29,466 for the first year, increasing 3% per year thereafter. The
lease is renewable at the bank’s option for one five year term. The branch lease commenced on June 1, 2007 and has a 7
year term. The lease requires monthly payments of $5,500 for four years and monthly lease payments of $6,000 for three years.
The lease is renewable at the bank’s option for two five year terms. In October 2013, the Company exercised its first
option to renew the branch lease for five years. The renewed lease requires monthly payments of $6,300 for three years and
monthly lease payments of $6,772 for two years commencing on June 1, 2014. As of December 31, 2013, future minimum lease
payments under all noncancelable lease agreements inclusive of sales tax and maintenance costs for the next five years and
thereafter are as follows:
2014
|
|
$
|
541,972
|
|
2015
|
|
|
551,831
|
|
2016
|
|
|
440,869
|
|
2017
|
|
|
78,908
|
|
2018 and Thereafter
|
|
|
162,540
|
|
|
|
|
|
|
|
|
$
|
1,776,120
|
|
Rent expense in 2013, 2012, and 2011
was approximately $542,000, $523,000, and $495,000, respectively.
Legal
—During
2007, legal fees were awarded in the amount of $200,000 related to a case brought to conclusion in 2006 in which a $100,000
judgment was levied against the Company. The Company accrued for these losses in the respective year of the judgments. On
March 14, 2008, the Court of Appeals of Georgia reversed the trial court and granted the Company a new trial on the
compensatory damages. During August 2013, a bench trial was held on the compensatory damages. As of March 31, 2014, the Court
has not rendered a judgment. Other than that discussed above, the Company and the Bank are
involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, based
in part on the advice of counsel, the ultimate disposition of these matters will not have a material adverse impact on the
Company’s Consolidated Financial Statements.
The Company has a Stock Incentive
Plan which was approved in 1999. Under the 1999 Stock Incentive Plan, options are periodically granted to employees at a price
not less than fair market value of the shares at the date of grant (or less than 110% of the fair market value if the participant
owns more than 10% of the Company’s outstanding Common Stock). The term of the stock incentive option may not exceed ten
years from the date of grant; however, any stock incentive option granted to a participant who owns more than 10% of the Common
Stock will not be exercisable after the expiration of five (5) years after the date the option is granted.
A summary of the status of the Company’s stock
options as of December 31, 2013, 2012, and 2011, and changes during the years ended on those dates is presented below:
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
|
Exercise
|
|
|
|
Exercise
|
|
|
Shares
|
|
Price
|
|
Life
|
|
Value
|
|
Shares
|
|
Price
|
|
Shares
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding—beginning of year
|
|
|
89,877
|
|
|
$
|
10.58
|
|
|
|
3.97
|
|
|
|
|
|
|
|
103,553
|
|
|
$
|
10.20
|
|
|
|
110,053
|
|
|
$
|
10.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired/Terminated
|
|
|
(40,600
|
)
|
|
|
10.71
|
|
|
|
|
|
|
|
|
|
|
|
(13,676
|
)
|
|
|
7.74
|
|
|
|
(6,500
|
)
|
|
|
9.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding—end of year
|
|
|
49,277
|
|
|
$
|
10.47
|
|
|
|
3.18
|
|
|
$
|
—
|
|
|
|
89,877
|
|
|
$
|
10.58
|
|
|
|
103,553
|
|
|
$
|
10.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at year-end
|
|
|
49,277
|
|
|
$
|
10.47
|
|
|
|
3.18
|
|
|
$
|
—
|
|
|
|
89,877
|
|
|
$
|
10.58
|
|
|
|
103,553
|
|
|
$
|
10.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares available for grant
|
|
|
266,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229,209
|
|
|
|
|
|
|
|
219,033
|
|
|
|
|
|
The Company’s unvested
options vested in 2011. The total fair value of the options vested during 2011 was $26,000. There was no compensation cost recognized
during 2013,2012, and 2011.
|
11.
|
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
|
Basic
and diluted net income per common and potential common share has been calculated based on the weighted average number
of shares outstanding. Options that are potentially dilutive are deemed not to be dilutive for 2013, 2012 and 2011 due to
the exercise price of all options being greater than the average market price of the Company’s stock during those
years. As of December 31, 2013, 2012, and 2011 there were 49,277, 89,877, and 103,553 potentially dilutive options outstanding,
respectively. The following schedule reconciles the numerators and denominator of the basic and diluted net income per common
and potential common share for the years ended December 31, 2013, 2012, and 2011.
|
|
Net Income
|
|
Shares
|
|
Per Share
|
|
|
(Numerator)
|
|
(Denominator)
|
|
Amount
|
|
|
|
|
|
|
|
Year ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share available to common stockholders
|
|
$
|
1,111,953
|
|
|
|
2,152,780
|
|
|
$
|
0.52
|
|
Nonvested restricted stock grant
|
|
|
—
|
|
|
|
12,830
|
|
|
|
(0.01
|
)
|
Effect of dilutive securities: options to purchase common shares
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Diluted earnings per share
|
|
$
|
1,111,953
|
|
|
|
2,165,610
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share available to common stockholders
|
|
$
|
532,003
|
|
|
|
2,157,732
|
|
|
$
|
0.25
|
|
Nonvested restricted stock grant
|
|
|
—
|
|
|
|
7,664
|
|
|
|
—
|
|
Effect of dilutive securities: options to purchase common shares
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Diluted earnings per share
|
|
$
|
532,003
|
|
|
|
2,165,396
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share available to common stockholders
|
|
$
|
31,806
|
|
|
|
2,120,366
|
|
|
$
|
0.02
|
|
Nonvested restricted stock grant
|
|
|
—
|
|
|
|
13,822
|
|
|
|
—
|
|
Effect of dilutive securities: options to purchase common shares
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Diluted earnings per share
|
|
$
|
31,806
|
|
|
|
2,134,188
|
|
|
$
|
0.02
|
|
|
12.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
The Company measures or monitors certain of
its assets and liabilities on a fair value basis. Fair value is used on a recurring basis for assets and liabilities that are elected
to be accounted for under ASC guidance as well as certain assets and liabilities in which fair value is the primary basis of accounting.
Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating
fair value, which are in accordance with the guidance for determining the fair value of a financial asset when the market for that
asset is not active.
In accordance with ASC guidance, the Company
applied the following fair value hierarchy:
Level 1—Quoted prices in active markets
for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts
that are traded in an active exchange market, as well as U.S. Treasury and other highly liquid investments that are actively traded
in over-the-counter markets.
Level 2—Observable inputs other than
Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded
instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market
or can be derived principally from or corroborated by observable market data. This category generally includes U.S. Government
and agency mortgage-backed debt securities, certain derivative contracts and impaired loans.
Level 3—Unobservable inputs that are
supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets
and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies,
or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment
or estimation. For example, this category generally includes certain private equity investments, retained residual interests in
securitizations, residential mortgage servicing rights, and highly structured or long-term derivative contracts.
Investment Securities Available for Sale—Investment
securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices,
if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based
valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment
assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such
as the New York Stock Exchange, Treasury securities that are traded by dealers or brokers in active over-the counter markets and
money market funds. Level 2 securities include mortgage backed securities issued by government sponsored entities, municipal bonds
and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.
Other Real Estate Owned— Assets acquired
through or instead of loan foreclosure are initially recorded at fair value less estimated costs to sell when acquired, establishing
a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. The
fair value of other real estate owned is generally based on recent real estate appraisals. These appraisals may utilize 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 appraisers to adjust for differences between the comparable sales and income data available.
Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. In
addition, the Company may further adjust an appraised amount given its knowledge of a specific property or market.
Loans—The Company does not record loans
at fair value on a recurring basis, however, from time to time, a loan is considered impaired and an allowance for loan loss is
established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual
terms of the loan are considered impaired. Once a loan is identified as individually impaired, management determines the amount
of the impairment. The fair value of impaired loans is estimated using one of several methods, including the collateral value,
market value of similar debt, and discounted cash flows. Those impaired loans not requiring a specific allowance represent loans
for which the fair value of expected repayments or collateral exceed the recorded investment in such loans. At December 31, 2013
and December 31, 2012, substantially all of the impaired loans were evaluated based upon the fair value of the collateral.
Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value
hierarchy. The fair value of collateral dependent impaired loans is generally based on recent real estate appraisals. These appraisals
may utilize 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 appraisers to adjust for differences between the comparable sales and income
data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining
fair value. In addition, the Company may further adjust an appraised amount given its knowledge of a specific property or market.
Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.
The following tables present financial assets
measured at fair value on a recurring and nonrecurring basis and the change in fair value for those specific financial instruments
in which fair value has been elected. There were no financial liabilities measured at fair value for the periods being reported
(in thousands):
|
|
Fair Value Measurements at December 31, 2013
|
|
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
In Active
|
|
Significant
|
|
|
|
|
|
|
Markets for
|
|
Other
|
|
Significant
|
|
|
Assets
|
|
Identical
|
|
Observable
|
|
Unobservable
|
|
|
Measured at
|
|
Assets
|
|
Inputs
|
|
Inputs
|
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
Recurring Basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State, county, and municipal securities
|
|
$
|
34,802
|
|
|
$
|
—
|
|
|
$
|
34,802
|
|
|
$
|
—
|
|
Mortgage-backed securities
|
|
|
96,267
|
|
|
|
—
|
|
|
|
96,267
|
|
|
|
—
|
|
Corporate securities
|
|
|
9,976
|
|
|
|
—
|
|
|
|
9,976
|
|
|
|
—
|
|
|
|
|
141,045
|
|
|
|
|
|
|
|
141,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonrecurring Basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate
|
|
$
|
10,702
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,702
|
|
Single-family Residential
|
|
|
360
|
|
|
|
—
|
|
|
|
—
|
|
|
|
360
|
|
Other real estate owned
|
|
|
7,404
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,404
|
|
|
|
|
18,466
|
|
|
|
|
|
|
|
|
|
|
|
18,466
|
|
|
|
Fair Value Measurements at December 31, 2012
|
|
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
In Active
|
|
Significant
|
|
|
|
|
|
|
Markets for
|
|
Other
|
|
Significant
|
|
|
Assets
|
|
Identical
|
|
Observable
|
|
Unobservable
|
|
|
Measured at
|
|
Assets
|
|
Inputs
|
|
Inputs
|
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
Recurring Basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State, county, and municipal securities
|
|
$
|
39,864
|
|
|
$
|
—
|
|
|
$
|
39,864
|
|
|
$
|
—
|
|
Mortgage-backed securities
|
|
|
80,248
|
|
|
|
—
|
|
|
|
80,248
|
|
|
|
—
|
|
Corporate securities
|
|
|
9,754
|
|
|
|
—
|
|
|
|
9,754
|
|
|
|
—
|
|
|
|
|
129,866
|
|
|
|
|
|
|
|
129,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonrecurring Basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate
|
|
$
|
16,929
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,929
|
|
Single-family Residential
|
|
|
515
|
|
|
|
—
|
|
|
|
—
|
|
|
|
515
|
|
Construction and Development
|
|
|
278
|
|
|
|
—
|
|
|
|
—
|
|
|
|
278
|
|
Other real estate owned
|
|
|
8,195
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,195
|
|
|
|
|
25,917
|
|
|
|
|
|
|
|
|
|
|
|
25,917
|
|
For Level 3 assets and liabilities measured
at fair value on a recurring or non-recurring basis as of December 31, 2013, the significant unobservable inputs used in the fair
value measurements were as follows (dollars in thousands):
|
Fair Value at
|
|
Valuation
|
|
Unobservable
|
|
|
(dollars in thousands)
|
December 31, 2013
|
|
Technique
|
|
Inputs
|
|
Range
|
Collateral dependent impaired Loans:
|
|
|
|
|
|
|
|
Commercial Real Estate
|
$ 10,702
|
|
Appraised Value
|
|
Negative adjustment for selling costs and changes in market conditions since appraisal
|
|
5% - 20%
|
|
|
|
|
|
|
|
|
Single-family Residential
|
$ 360
|
|
Appraised Value
|
|
Negative adjustment for selling costs and changes in market conditions since appraisal
|
|
5% - 20%
|
|
|
|
|
|
|
|
|
OREO
|
$ 7,404
|
|
Appraised Value
|
|
Negative adjustment for selling costs and changes in market conditions since appraisal
|
|
5% - 20%
|
Following are disclosures of fair value information
about financial instruments, whether or not recognized on the balance sheet, for which it is practicable to estimate that value.
The assumptions used in the estimation of the fair values are based on estimates using discounted cash flows and other valuation
techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. The following disclosures should not be considered an estimate of the liquidation value of
the Company, but rather a good-faith estimate of the increase or decrease in the value of financial instruments held by the Company
since purchase, origination, or issuance.
Cash, Due from Banks, Federal Funds Sold,
Interest-Bearing Deposits with Banks and Certificates of Deposits
—Fair value equals the carrying value of such assets
due to their nature and is classified as Level 1.
Investment Securities
—Fair
value of investment securities is based on quoted market prices and is classified as Level 2.
Other Investments
—The carrying
amount of other investments approximates its fair value and is classified as Level 1.
Loans
—The fair value of
fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made
to borrowers with similar credit ratings resulting in a Level 3 classification. For variable rate loans, the carrying amount is
a reasonable estimate of fair value. The methods utilized to estimate the fair values of loans do not necessarily represent an
exit price. The carrying amount of related accrued interest receivable, due to its short-term nature, approximates its fair value,
is not significant and is not disclosed.
Cash Surrender Value of Life Insurance
—Cash
values of life insurance policies are carried at the value for which such policies may be redeemed for cash and are classified
as Level 1.
Deposits
—The fair value
of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date.
The fair value of fixed rate certificates of deposit is estimated by discounting the future cash flows using the rates currently
offered for deposits of similar remaining maturities and is classified as Level 2.
Advances from Federal Home Loan Bank
—The
fair values of advances from the Federal Home Loan Bank are estimated by discounting the future cash flows using the rates currently
available to the Bank for debt with similar remaining maturities and terms and are classified as Level 2.
Commitments to Extend Credit and Commercial
Letters of Credit
—Because commitments to extend credit and commercial letters of credit are made using variable rates,
or are recently executed, the contract value is a reasonable estimate of fair value.
Limitations
—
Fair value
estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s
entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s
financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly
affect the estimates. Fair value estimates are based on existing on and off-balance-sheet financial instruments without attempting
to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial
instruments; for example, premises and equipment. In addition, the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
The following presents the carrying
amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of December 31, 2013
(in thousands):
|
|
December 31, 2013
|
|
|
Carrying
|
|
Fair Value Measurements
|
|
|
Amount
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
6,340
|
|
|
|
6,340
|
|
|
|
6,340
|
|
|
|
—
|
|
|
|
—
|
|
Interest-bearing deposits with banks
|
|
|
22,827
|
|
|
|
22,827
|
|
|
|
22,827
|
|
|
|
—
|
|
|
|
—
|
|
Certificates of deposit
|
|
|
350
|
|
|
|
350
|
|
|
|
350
|
|
|
|
—
|
|
|
|
—
|
|
Investment securities
|
|
|
141,285
|
|
|
|
141,285
|
|
|
|
—
|
|
|
|
141,285
|
|
|
|
—
|
|
Other investments
|
|
|
874
|
|
|
|
874
|
|
|
|
874
|
|
|
|
—
|
|
|
|
—
|
|
Loans—net
|
|
|
182,119
|
|
|
|
183,150
|
|
|
|
—
|
|
|
|
—
|
|
|
|
183,150
|
|
Cash surrender value of life insurance
|
|
|
9,948
|
|
|
|
9,948
|
|
|
|
9,948
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
336,962
|
|
|
|
337,768
|
|
|
|
195,884
|
|
|
|
141,884
|
|
|
|
—
|
|
Advances from Federal Home Loan Bank
|
|
|
273
|
|
|
|
273
|
|
|
|
—
|
|
|
|
273
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance-sheet financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
|
|
26,313
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial letters of credit
|
|
|
2,125
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying values and estimated fair
values of the Company’s financial instruments at December 31, 2012 are as follows:
|
|
December 31, 2012
|
|
|
Carrying
|
|
Fair Value Measurements
|
|
|
Amount
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
5,384
|
|
|
|
5,384
|
|
|
|
5,384
|
|
|
|
—
|
|
|
|
—
|
|
Interest-bearing deposits with banks
|
|
|
34,803
|
|
|
|
34,803
|
|
|
|
34,803
|
|
|
|
—
|
|
|
|
—
|
|
Certificates of deposit
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
—
|
|
|
|
—
|
|
Investment securities
|
|
|
131,222
|
|
|
|
131,245
|
|
|
|
—
|
|
|
|
131,245
|
|
|
|
—
|
|
Other investments
|
|
|
995
|
|
|
|
995
|
|
|
|
995
|
|
|
|
—
|
|
|
|
—
|
|
Loans—net
|
|
|
187,489
|
|
|
|
188,233
|
|
|
|
—
|
|
|
|
—
|
|
|
|
188,233
|
|
Cash surrender value of life insurance
|
|
|
9,619
|
|
|
|
9,619
|
|
|
|
9,619
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
340,593
|
|
|
|
341,032
|
|
|
|
184,784
|
|
|
|
156,248
|
|
|
|
—
|
|
Advances from Federal Home Loan Bank
|
|
|
292
|
|
|
|
292
|
|
|
|
—
|
|
|
|
292
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance-sheet financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
|
|
24,335
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial letters of credit
|
|
|
2,218
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Adequacy
—
The
Company and the Bank are subject to various regulatory capital requirements administered by state and federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative
measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting
practices. The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative
measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier
I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2013, the Company meets all capital
adequacy requirements to which it is subject.
As
of December 31, 2013, the Bank was considered “well capitalized” under the regulatory framework for prompt corrective
action. To be categorized as “well capitalized,” the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table.
The
Company’s and the Bank’s actual capital amounts and ratios are also presented in the table below (in thousands):
|
|
|
|
|
|
|
|
|
|
To Be Well
|
|
|
|
|
|
|
For Capital
|
|
Capitalized Under
|
|
|
|
|
|
|
Adequacy
|
|
Prompt Corrective
|
|
|
Actual
|
|
Purposes
|
|
Action Provisions
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk weighted assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
44,601
|
|
|
|
19
|
%
|
|
$
|
18,768
|
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
44,376
|
|
|
|
19
|
%
|
|
|
18,779
|
|
|
|
8
|
%
|
|
$
|
23,473
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I capital (to risk weighted assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
41,665
|
|
|
|
18
|
%
|
|
|
9,384
|
|
|
|
4
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
41,441
|
|
|
|
18
|
%
|
|
|
9,389
|
|
|
|
4
|
%
|
|
|
14,084
|
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I capital (to average assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
41,665
|
|
|
|
11
|
%
|
|
|
15,600
|
|
|
|
4
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
41,441
|
|
|
|
11
|
%
|
|
|
15,634
|
|
|
|
4
|
%
|
|
|
19,543
|
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk weighted assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
44,422
|
|
|
|
19
|
%
|
|
$
|
19,038
|
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
44,099
|
|
|
|
19
|
%
|
|
|
19,019
|
|
|
|
8
|
%
|
|
$
|
23,774
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I capital (to risk weighted assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
41,441
|
|
|
|
17
|
%
|
|
|
9,519
|
|
|
|
4
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
41,121
|
|
|
|
17
|
%
|
|
|
9,510
|
|
|
|
4
|
%
|
|
|
14,265
|
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I capital (to average assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
41,441
|
|
|
|
11
|
%
|
|
|
15,455
|
|
|
|
4
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
41,121
|
|
|
|
11
|
%
|
|
|
15,447
|
|
|
|
4
|
%
|
|
|
19,309
|
|
|
|
5
|
%
|
Dividend Limitation
—The
amount of dividends paid by the Bank to the Company or paid by the Company to its shareholders is limited by various banking regulatory
agencies. Any such dividends will be subject to maintenance of required capital levels. The Georgia Department of Banking and Finance
must approve dividend payments that would exceed 50% of the Bank’s net income for the prior year to the Company.
When the Company received a
capital investment from the United States Department of the Treasury in exchange for Preferred Stock under the Troubled Assets
Relief Program (“TARP”) Capital Purchase Program on March 6, 2009, the Company became subject to additional limitations
on the payment of dividends. These limitations require, among other things, that for as long as the Preferred Stock is outstanding,
no dividends may be declared or paid on the Company’s common stock until all accrued and unpaid dividends on the Preferred
Stock are fully paid. In addition, the U.S. Treasury’s consent is required for any increase in dividends on common stock
before the third anniversary of issuance of the Preferred Stock.
The Company paid dividends
of $172,000 and $169,000 on its common stock in 2013 and 2012, respectively. The annual dividend payout rate was $0.08
per common share in 2013 and 2012. In addition, the Company paid cash dividends totaling $237,000 in 2013 and 2012,
respectively, on its preferred stock issued to the Treasury.
|
14.
|
RELATED-PARTY TRANSACTIONS
|
Certain of the Company’s
directors, officers, principal stockholders, and their associates were customers of, or had transactions with, the Company or the
Bank in the ordinary course of business during 2013 and 2012. Some of the Company’s directors are directors, officers, trustees,
or principal securities holders of corporations or other organizations that also were customers of, or had transactions with, the
Company or the Bank in the ordinary course of business during 2013 and 2012.
All outstanding loans and other
transactions with the Company’s directors, officers, and principal shareholders were made in the ordinary course of business
on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions
with other persons and, when made, did not involve more than the normal risk of collectibility or present other unfavorable features.
The following table summarizes
the activity in these loans during 2013 and 2012:
|
|
Years Ended December 31,
|
|
|
2013
|
|
2012
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
11,799,716
|
|
|
$
|
12,073,831
|
|
New loans
|
|
|
6,517,864
|
|
|
|
1,339,485
|
|
Repayments
|
|
|
(3,795,396
|
)
|
|
|
(1,613,600
|
)
|
|
|
|
|
|
|
|
|
|
Balance—end of year
|
|
$
|
14,522,184
|
|
|
$
|
11,799,716
|
|
Deposits by directors and executive officers of
the Company and the Bank, and associates of such persons, totaled $6,294,099 and $6,487,889 at December 31, 2013 and 2012,
respectively.
|
15.
|
SUPPLEMENTARY INCOME STATEMENT INFORMATION
|
Components of other operating
expenses in excess of 1% of total interest income and other income in any of the respective years are approximately as follows:
|
|
For the years ended
|
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Professional services—legal
|
|
$
|
438,208
|
|
|
$
|
457,422
|
|
|
$
|
596,841
|
|
Professional services—other
|
|
|
723,505
|
|
|
|
537,527
|
|
|
|
561,831
|
|
Stationery and supplies
|
|
|
200,116
|
|
|
|
229,104
|
|
|
|
204,082
|
|
Advertising
|
|
|
154,389
|
|
|
|
132,700
|
|
|
|
151,765
|
|
Data processing
|
|
|
664,240
|
|
|
|
623,156
|
|
|
|
529,359
|
|
ATM charges
|
|
|
167,728
|
|
|
|
200,314
|
|
|
|
219,069
|
|
Telephone
|
|
|
305,279
|
|
|
|
307,374
|
|
|
|
304,156
|
|
FDIC insurance premium
|
|
|
533,447
|
|
|
|
652,515
|
|
|
|
647,804
|
|
Amortization of core deposit intangible
|
|
|
471,918
|
|
|
|
471,918
|
|
|
|
471,918
|
|
Security and protection expense
|
|
|
389,614
|
|
|
|
420,707
|
|
|
|
469,576
|
|
Other benefit expenses
|
|
|
336,066
|
|
|
|
365,409
|
|
|
|
375,548
|
|
Other miscellaneous expenses
|
|
|
1,584,134
|
|
|
|
1,487,643
|
|
|
|
1,495,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,968,644
|
|
|
$
|
5,885,789
|
|
|
$
|
6,027,257
|
|
|
16.
|
CONDENSED FINANCIAL INFORMATION OF CITIZENS BANCSHARES CORPORATION (PARENT ONLY)
|
|
|
December 31,
|
|
December 31,
|
|
|
2013
|
|
2012
|
Balance Sheets
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
9,837
|
|
|
$
|
204,166
|
|
Investment in Bank
|
|
|
46,083,430
|
|
|
|
48,834,169
|
|
Other assets
|
|
|
321,609
|
|
|
|
229,252
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,414,876
|
|
|
$
|
49,267,587
|
|
Liabilities and stockholders’ equity:
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
107,084
|
|
|
$
|
113,482
|
|
Stockholders’ equity
|
|
|
46,307,792
|
|
|
|
49,154,105
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,414,876
|
|
|
$
|
49,267,587
|
|
|
|
For the Years Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from subsidiary
|
|
$
|
500,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other revenue
|
|
|
—
|
|
|
|
3,113
|
|
|
|
—
|
|
Total revenue
|
|
$
|
500,000
|
|
|
$
|
3,113
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
291,771
|
|
|
|
412,512
|
|
|
|
249,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax benefit and equity in undistributed earnings of the subsidiary
|
|
|
208,229
|
|
|
|
(409,399
|
)
|
|
|
(249,311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
|
|
92,356
|
|
|
|
143,314
|
|
|
|
84,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in undistributed earnings of the subsidiary
|
|
|
300,585
|
|
|
|
(266,085
|
)
|
|
|
(164,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed earnings of the subsidiary
|
|
|
1,048,188
|
|
|
|
1,034,908
|
|
|
|
433,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1,348,773
|
|
|
|
768,823
|
|
|
|
268,626
|
|
|
|
Years Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,348,773
|
|
|
$
|
768,823
|
|
|
$
|
268,626
|
|
Adjustments to reconcile net income to
|
|
|
|
|
|
|
|
|
|
|
|
|
net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed earnings of the subsidiary
|
|
|
(1,048,188
|
)
|
|
|
(1,034,908
|
)
|
|
|
(433,168
|
)
|
Restricted stock based compensation plan
|
|
|
(106,829
|
)
|
|
|
139,062
|
|
|
|
5,062
|
|
Change in other assets
|
|
|
(92,357
|
)
|
|
|
(143,313
|
)
|
|
|
(21,895
|
)
|
Change in other liabilities
|
|
|
(6,398
|
)
|
|
|
86,636
|
|
|
|
(22,585
|
)
|
Net cash provided by (used in) operating activities
|
|
|
95,001
|
|
|
|
(183,700
|
)
|
|
|
(203,960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividend paid
|
|
|
(171,744
|
)
|
|
|
(169,242
|
)
|
|
|
(168,663
|
)
|
Preferred stock dividend paid
|
|
|
(236,820
|
)
|
|
|
(236,820
|
)
|
|
|
(236,820
|
)
|
Net purchase of treasury stock
|
|
|
(61,423
|
)
|
|
|
(9,815
|
)
|
|
|
(5,372
|
)
|
Proceeds from issuance of common stock
|
|
|
180,657
|
|
|
|
35,890
|
|
|
|
16,001
|
|
Net cash used in financing activities
|
|
|
(289,330
|
)
|
|
|
(379,987
|
)
|
|
|
(394,854
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
(194,329
|
)
|
|
|
(563,687
|
)
|
|
|
(598,814
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
204,166
|
|
|
|
767,853
|
|
|
|
1,366,667
|
|
End of year
|
|
$
|
9,837
|
|
|
$
|
204,166
|
|
|
$
|
767,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Income taxes
|
|
$
|
26,000
|
|
|
$
|
27,615
|
|
|
$
|
8,000
|
|
|
17.
|
QUARTERLY FINANCIAL DATA (UNAUDITED)
|
The following table presents the Company’s quarterly
financial data for the years ended December 31, 2013 and 2012 (amounts in thousands, except per share amounts):
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
|
2013
|
|
2013
|
|
2013
|
|
2013
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
$
|
3,273
|
|
|
$
|
3,429
|
|
|
$
|
3,482
|
|
|
$
|
3,582
|
|
Interest expense
|
|
|
235
|
|
|
|
232
|
|
|
|
224
|
|
|
|
212
|
|
Net Interest income
|
|
|
3,038
|
|
|
|
3,197
|
|
|
|
3,258
|
|
|
|
3,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
225
|
|
|
|
50
|
|
|
|
175
|
|
|
|
(25
|
)
|
Non-interest income
|
|
|
1,237
|
|
|
|
1,199
|
|
|
|
1,059
|
|
|
|
986
|
|
Non-interest expense
|
|
|
3,813
|
|
|
|
4,101
|
|
|
|
3,801
|
|
|
|
4,006
|
|
Income before income taxes
|
|
|
237
|
|
|
|
245
|
|
|
|
341
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
(35
|
)
|
|
|
(26
|
)
|
|
|
11
|
|
|
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
272
|
|
|
|
271
|
|
|
|
330
|
|
|
|
476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends
|
|
|
59
|
|
|
|
59
|
|
|
|
59
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
213
|
|
|
$
|
212
|
|
|
$
|
271
|
|
|
$
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share - basic
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.13
|
|
|
$
|
0.19
|
|
Net income per common share - diluted
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.13
|
|
|
$
|
0.18
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
|
2012
|
|
2012
|
|
2012
|
|
2012
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
$
|
3,935
|
|
|
$
|
4,136
|
|
|
$
|
3,984
|
|
|
$
|
3,475
|
|
Interest expense
|
|
|
297
|
|
|
|
272
|
|
|
|
248
|
|
|
|
235
|
|
Net Interest income
|
|
|
3,638
|
|
|
|
3,864
|
|
|
|
3,736
|
|
|
|
3,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
750
|
|
|
|
750
|
|
|
|
525
|
|
|
|
375
|
|
Non-interest income
|
|
|
1,472
|
|
|
|
1,565
|
|
|
|
1,305
|
|
|
|
1,607
|
|
Non-interest expense
|
|
|
4,376
|
|
|
|
5,387
|
|
|
|
4,298
|
|
|
|
4,098
|
|
Income (loss) before income taxes
|
|
|
(16
|
)
|
|
|
(708
|
)
|
|
|
218
|
|
|
|
374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
|
|
|
(149
|
)
|
|
|
(461
|
)
|
|
|
(50
|
)
|
|
|
(241
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
133
|
|
|
|
(247
|
)
|
|
|
268
|
|
|
|
615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends
|
|
|
59
|
|
|
|
59
|
|
|
|
59
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
74
|
|
|
$
|
(306
|
)
|
|
$
|
209
|
|
|
$
|
555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share - basic and
diluted
|
|
$
|
0.03
|
|
|
$
|
(0.14
|
)
|
|
$
|
0.10
|
|
|
$
|
0.26
|
|
In preparing these financial statements, subsequent events were
evaluated through the time the financial statements were issued. Financial statements are considered issued when they are widely
distributed to all shareholders and other financial statement users, or filed with the Securities and Exchange Commission. In conjunction
with applicable accounting standards, all material subsequent events have been either recognized in the financial statements or
disclosed in the notes to the financial statements.